Streater v. Federal National Mortgage Association et al
ORDER: Granting in Part Denying in Part Motion to Dismiss 5 . Plaintiff's First and Second Claims for Relief against FATC are dismissed. The motion is DENIED in all other respects. See, formal Opinion. Signed on 11/30/2016 by Judge Ann L. Aiken. (rr)
UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
KENNETH STREATER, an individual,
Case No. 6:16-cv-01611-AA
OPINION AND ORDER
FEDERAL NATIONAL MORTGAGE
ASSOCIATION and FIRST
AMERICAN TITLE COMPANY, as
Plaintiff brought suit alleging violations of the Oregon Trust Deed Act. See Or. Rev. Stat.
§ 86.705, et seq. Plaintiff contends that the foreclosure and trustee sale of his property was
without legal authority and is void. Plaintiff seeks a declaration restoring his interest in the
prope1iy, costs and attorney fees. Defendant First American Title Company (FATC) moves to
dismiss plaintiffs' claims against it for failure to state a claim. The motion is granted in part and
denied in part.
- OPINION AND ORDER
Plaintiff alleges the following facts in his Complaint.
In 2002, plaintiff purchased propetiy located on the McKenzie Highway in Vida, Oregon,
pursuant to a promissory note issued by Homecomings Financial Network, Inc. The note was
secured by a deed of trust. The deed of trust identified the beneficiary as Mo1igage Electronic
Registration Systems, Inc. (MERS) as nominee for the lender, Homecomings Financial Network.
In 2011 and 2012, plaintiff experienced financial hardship and missed several monthly
mo1igage payments on the note. Ultimately, GMAC Mortgage, LLC, (GMAC) initiated judicial
foreclosure proceedings, allegedly on behalf of then-beneficiary and defendant Federal National
M01igage Association (Fannie Mae).
In July 2013, plaintiff and GMAC reached a settlement agreement in lieu of foreclosure.
During negotiations, plaintiff informed GMAC that he did not receive mail at the property's
address, and the relevant Settlement Agreement identifies plaintiffs mailing address as P.O. Box
1716, Redmond, Oregon.
In August 2015, Fannie Mae, acting through FATC as successor trustee, initiated nonjudicial foreclosure proceedings by recording a Notice of Default and Election to Sell. FATC
also issued a Trustee's Notice of Sale and indicated a sale date of December 15, 2015. The
Notices of Default and of Sale identify MERS as the beneficiary, as indicated on the original
deed of trust. Certificates of Compliance, filed in accordance with Oregon foreclosure avoidance
statutes, identify either Green Tree Servicing, LLC, or DiTech Financial, LLC, as the
beneficiary. Plaintiff alleges that at the time, Fannie Mae had acquired the note and was the
actual beneficiary of the deed of trust.
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The Notice of Default includes addresses to which the Notices were sent; plaintiffs
Redmond post office address was not included.
On December 15, 2015, plaintiffs prope1iy was sold pursuant to a trustee's sale and a
deed was recorded in favor of Fannie Mae on March 4, 2016. Plaintiff alleges he had no actual
notice or knowledge of the trustee sale until May 2016, when he attempted to sell the property to
a bona fide purchaser. Plaintiff then filed this suit.
Defendant FATC moves to dismiss plaintiffs claims against it, arguing that plaintiffs
allegations fail to state a claim under the Oregon Trust Deed Act (OTDA). When reviewing a
motion dismiss under Fed. R. Civ. P. 12(b)(6), the co mi construes a complaint in favor of the
plaintiff, and its well-pleaded factual allegations are taken as true. Daniels-Hall v. Nat'! Educ.
Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). However, the court need not accept "conclusory"
allegations, "unwarranted deductions of fact, or umeasonable inferences." Id Instead, "for a
complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable
inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to
relief." }.Joss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). "A claim has facial
plausibility when the plaintiff pleads factual content that allows the co1ui to draw the reasonable
inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
In his First Claim for Relief, plaintiff alleges that Fannie Mae and FATC failed to comply
with the OTDA, in that the Notice of Sale failed to identify the true beneficiary, Fannie Mae, and
instead identified MERS, an entity with no beneficial interest in the trust deed. See Or. Rev. Stat.
§ 86.771(1) (the notice of sale must "list the names of the grantor, trustee and beneficiary in the
- OPINION AND ORDER
trust deed"); Brandrup v. ReconTrust Co., 353 Or. 668, 689, 303 P.3d 301 (2013) ("[T]he
'beneficiary' is the lender to whom the obligation that the trust deed secures is owed or the
lender's successor in interest. Thus, an entity like MERS, which is not a lender, may not be a
trust deed's 'beneficiary,' unless it is a lender's successor in interest."); Fed. Nat 'l lv!ortg. Ass 'n
v. Goodrich, 275 Or. App. 77, 87, 364 P.3d 696 (2015) (MERS "had no beneficial interest in the
trust deed and could not validly transfer legal title to the trust deed") (citing Brandrup, 353 Or. at
704-05). FATC argues that the OTDA requires only that the Notice of Sale identify the original
beneficiary identified in the initial deed of trust - in this case, MERS - and need not identify any
successor beneficiary. As a result, FATC argues that the notice in this case complied with the
OTDA, regardless of whether MERS could have acted as a beneficiary.
I find that Oregon law precludes plaintiff from challenging the trustee sale based on the
alleged misidentification of the beneficiary in the Notice of Sale. Granted,§ 86.771(1) provides
that a notice of sale must identify the "beneficiary," and language in Brandrup suggests that the
notice should identify the actual beneficiary at the time of sale. Brandrup, 353 Or. at 700, 303
P .3d 301 ("[T]he OTDA is laced with provisions that indicate that the grantor is entitled to know
the identity of the [true] beneficiary .... [U]nder ORS 86.745(1), a notice of sale must include the
name of the 'beneficiary."'). Further, plaintiff is conect that MERS cannot be a beneficiary for
purposes of the OTDA, unless it is a successor in interest to the lender and is the party to whom
the grantor's obligation is owed. Brandrup, 353 Or. at 689, 303 P.3d 301.
Regardless, the fact that a notice of sale incorrectly identifies the beneficiary is not
grounds to invalidate a trustee sale. The Oregon Comi of Appeals has ruled that "ORS 86.797
does not mandate strict compliance with every provision of the OTDA for a trustee's sale to be
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valid." DiGregorio v. Bayview Loan Serv., LLC, 281 Or. App. 484, 490, 381 P.3d 961 (2015). 1
The court noted that the OTDA "specifically carves out provision ofnotice ... as a requirement to
the finality of foreclosure." Id at 491, 381 P.3d 961. The court thus reasoned that the
"legislature's decision to specifically carve out the provision of notice ... as affecting the validity
of a trustee's sale implicitly undermines the notion ... that any defect in the foreclosure process
undermines the foreclosure sale at a later date." Id. Accordingly, the comt held that a plaintiff
who receives notice of a trustee sale "cannot bring a post-sale challenge based on her assertion
that the trustee's notice of sale does not correctly identify the beneficiary." Id. at 489, 494, 381
Rather, the plaintiff must assert a "fundamental" flaw in the trustee sale, such as lack of
notice or the absence of a validly appointed trustee, to assert a post-sale challenge. Id. at 493-94,
381 P.3d 961; see also Woods v. US. Bank, N.A., 831 F.3d 1159, 1166 (9th Cir. 2016)
("Technical defects that do not have a substantial impact on grantors' rights - as in this case,
where the trustee's sale notice lists the wrong beneficiary- are not significant enough to warrant
upsetting the finality of a trustee's sale. In contrast, violations of subsections that grant
substantive rights - such as the right to personal service and advance notice - can support postsale challenges.") (footnote omitted); lYJikityuk v. Nw. Trustee Servs., Inc., 952 F. Supp. 2d 958,
969-70 (D. Or. 2013); Angels Alliance Group, LLC v. ReconTrust Co., NA, 617 Fed. App'x 740,
742 (9th Cir. July 6, 2015) ("[A] post-sale challenge must be based on lack of notice or on some
other fundamental flaw in the foreclosure proceedings, such as the sale being completed without
the borrower actually being in default.").
"ORS§ 86.797 'establishes the legal effect ofa trust deed foreclosure sale on those to
whom notice' of the sale has been given." DiGregorio, 281 Or. App. at 490, 381 P.3d 961
(quoting NW Property Wholesalers, LLC v. Spitz, 252 Or. App. 29, 34, 287 P.3d 1106 (2012)).
5 - OPINION AND ORDER
Here, while plaintiff alleges lack of notice in his Third Claim for Relief, his First Claim
for Relief is a post-sale challenge based on the argument that the Notice of Sale does not identify
the true beneficiary. Therefore, the reasoning of DiGregorio precludes this claim.
In his Second Claim for Relief, plaintiff alleges that Certificates of Compliance required
by Oregon foreclosure avoidance statutes likewise failed to identify the proper beneficiary and
rendered the subsequent trustee sale invalid. FATC moves for dismissal of this claim on grounds
that the foreclosure avoidance requirements do not apply to trustees. In response, plaintiff does
not dispute FATC's assertion but maintains that FATC must be joined as a necessary patiy.
In 2013, the Oregon legislature enacted several foreclosure avoidance provisions with
which a beneficiary must comply before pursuing foreclosure through a trustee sale. Generally, a
beneficiary must "request a resolution conference with the grantor before the beneficiary or the
trustee files a notice of default." Or. Rev. Stat. § 86.726(1)(a). After the conference, the "service
provider" is required to issue a "certificate of compliance" to a beneficiary who complied with
certain foreclosure avoidance requirements, submitted necessary materials to the service
provider, appeared at a foreclosure resolution conference, and signed a document with terms of
agreed foreclosure avoidance measures. Id. § 86.736(1)(a). A trustee may not proceed with
foreclosure through advertisement and sale unless the beneficiary has recorded a "valid and
unexpired" certificate of compliance. Id. § 86.752(4)(a) ("A trustee may not foreclose a trust
deed by adve1iisement and sale ... unless ... [t]he beneficiary has filed for recording ... [a]
certificate of compliance that a service provider issued to the beneficiary under ORS 86.736 that
is valid and unexpired at the time the notice of default is recorded").
Here, plaintiff maintains that the recorded Certificates of Compliance were invalid
because they misidentified the beneficiary as either Green Tree Servicing, LLC or DiTech
- OPINION AND ORDER
Financial, LLC. However, if misidentification of the beneficiary in a notice of sale cannot
support a post-sale challenge to a trustee's sale, I fail to understand how a similar
misidentification in a Certificate of Compliance can suppoti such a claim under the reasoning in
DiGregorio. Moreover, plaintiff identifies no authority allowing him to bring a post-sale
challenge on this ground. Accordingly, the motion to dismiss is granted on this claim.
Finally, in his Third Claim for Relief, plaintiff alleges that service of the Notice of Sale
was invalid and that he did not receive actual notice of the trustee sale. Under the OTDA, a
trustee sale must comply with two unconditional requirements: 1) notice of the sale to interested
parties, and 2) execution of the sale by a trustee. DiGregorio, 281 Or. App. at 492-93, 381 P.3d
961; Wolf v. Gi\IAC Mortg., LLC, 276 Or. App. 541, 546, 370 P.3d 1254 (2016). Here, plaintiff
alleges that the Notice of Sale was sent to the incorrect address after he provided an updated
mailing address. As a result, plaintiff maintains that he did not receive actual notice of the trustee
sale until he tried to sell the propeiiy in May 2016, and that the lack of notice renders the trustee
sale invalid. See Or. Rev. Stat. § 86.756(1) (trustee must give notice of sale and potential
remedies "to the grantor by both first class and certified mail with return receipt requested"); id.
§ 86.764(1),(2)(a) (a trustee must serve or mail the notice of sale "by both first class and certified
mail with return receipt requested" to "the last-known address" of the grantor).
FATC moves for dismissal of this claim on grounds that plaintiff fails to present
affidavits showing that: 1) the trustee did not give him the required notice; 2) plaintiff could have
and would have cured the default on the mortgage loan; and 3) plaintiff sustained actual damages
as a result of the lost opportunity to cure the default. See Or. Rev. Stat. § 86.767(2) (a person
entitled to notice "under ORS 86.764(c)(2)" may bring an action against the trustee ifthe person
did not receive notice, "could have and would have cured the default," and sustained damages
- OPINION AND ORDER
from the loss of oppo1iunity to do so). Consequently, in the absence of such evidence, FATC
argues that plaintiffs claim must be dismissed. Id § 86.767(3) (to avoid summary dismissal of a
claim against a trustee, the person entitled to notice "under ORS 86. 764(c)(2)" must present
"affidavits or other evidence" showing that the person "had the financial ability to cure the
default" before the trustee sale and would have done so ifthe required notice had been given).
Plaintiff responds that his remedy is not limited to damages and that the trustee sale "may
be set aside and voided" if he did not receive actual notice of the sale, citing NW Wholesalers,
LLC v. Spitz, 252 Or. App. 29, 287 P.3d 1106 (2012). Pl.'s Response at 13. However, in that
case, the Oregon Comi of Appeals simply held that a trustee sale did not te1minate or foreclose
the grantor's interest in the property when the grantor was not served with notice of sale. Id. at
41, 287 P.3d 1106. As expressly set forth by statute, a grantor's interest, while not foreclosed, is
nevertheless limited. Under§ 86.671, a grantor who does not receive notice has "the same rights
possessed by the holder of a junior lien or interest who was omitted as a pmiy defendant in a
judicial foreclosure proceeding." Or. Rev. Stat. § 86.761(1). In other words, the grantor "only
has the same rights as those of a junior lien holder who had an interest in the prope1iy and who
did not receive notice of the sale. These rights do not include the right to void the sale[.]" Woods,
831 F.3d at 1165; Afikityuk, 952 F. Supp. 2d at 967 ("For example, although the legislature
included the notice provisions to protect the grantor from wrongful foreclosure, a failure to give
notice to the grantor does not result in a void sale."). Fmiher, a junior lien holder - and by
extension, a grantor - generally must show the ability to redeem the propetiy. Woods, 831 F.3d
at 1166; Baricevic v. lvfortg. Elec. Registration Sys., 2014 WL 297091, at *3 (D. Or. Jan. 24,
- OPINION AND ORDER
With that said, it is unclear whether the requirements and remedies under § 86.767 apply
to grantors who do not receive notice of a trustee sale. This statute expressly applies to the failure
to give notice "to a person entitled to notice under ORS 86. 764(2)(c)." Id § 86.767(1)-(3),(6)
(emphasis added). A person entitled to notice under § 86.764(2)(c) is one who "has a lien or
interest subsequent to the trust deed if the lien or interest appears of record or the beneficiary has
actual notice of the lien or interest." Id. § 86.764(2)(c). In contrast, the grantor in the trust deed is
identified as a person entitled to notice under § 86.764(2)(a). This Cou1i recognized the
distinction in lvfikityuk, explaining:
The right to redeem and the right to pursue a claim for damages against the trustee
are the sole rights available to an omitted party (other than the grantor) entitled to
notice. ORS 86.742(6). Although the OTDA expressly allows one other than the
grantor to bring an action against the trustee, ORS 86.742(2), the OTDA does not
grant that same right to a grantor who fails to receive notice, ORS 86.739.
J\1ikityuk, 952 F. Supp. 2d at 967-68 (discussing former ORS§§ 86.742 and 86.739, renumbered
as§§ 86.767 and 86.761, respectively); see also Vida v. One West Bank, 2010 WL 5148473, at *8
(D. Or. Dec. 13, 2010) ("Section 6 [of ORS 86.742], as Vida points out, refers specifically to
persons entitled to notice under ORS 86.740(l)(c), which mandates notice to junior or
subsequent lien holders. Vida is the grantor in the trust deed and is not a junior or subsequent
lien holder. Therefore, ORS 86.742(6) does not provide that her sole remedy is under that
statute.") (discussing former ORS §§ 86.742 and 86.740, renumbered as§§ 86.767 and 86.764,
respectively). Likewise, in Baricevic, this Comi noted that a grantor's rights were limited to
those of a junior lienholder, who "would be required to exercise their right of redemption within
60 days after the date of sale," citing §§ 18.964 and 88.080 rather than § 86.767 or former §
86.742. Baricevic, 2014 WL297091, at *3.
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At the same time, the decisions in Woods and in other District of Oregon cases suggest
that the requirements and remedies of§ 86.767, formerly § 86.742, apply to a grantor who did
not receive notice. See Woods, 531 F.3d at 1165 (a grantor who did not receive notice has "the
right to sue the trustee for damages," citing ORS § 86.742); Jvloreno v. Bank of Am., 2012 WL
1462338, at *5-6 (D. Or. Apr. 27, 2012); Stations West, LLC v. Pinnacle Bank, 2007 WL
1219952, at *6-7 (D. Or. Apr. 23, 2007). The patiies in this case did not raise or address the issue
of whether § 86. 767 is applicable to grantors who do not receive notice of a trustee sale.
Even if§ 86.767 applies in this case, plaintiff alleges that he had a bona fide buyer and
was in the process of completing a sale of the prope1iy in the spring of 2016. Construing the
alleged facts in plaintiffs favor, they raise an inference that plaintiff could have arranged an
earlier sale to redeem the property had he received notice of the trustee sale. Further, I will not
require affidavits or other evidence at this early stage of the proceedings. Instead, FATC may
renew its motion after initial discovery and explain why § 86. 767 applies in this case.
Defendant FATC's Motion to Dismiss (doc. 5) is GRANTED in part. Plaintiffs First and
Second Claims for Relief against FATC are dismissed. The motion is DENIED in all other
IT IS SO ORDERED.
United States District Judge
- OPINION AND ORDER
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