Domingo v. Direct Mortgage et al
Filing
16
MEMORANDUM DECISION granting 5 Motion to Dismiss for Failure to State a Claim ; Plaintiff is ordered to release the lis pendens filed in connection with this case. Signed by Judge Ted Stewart on 09/21/2011. (asp)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
DEBBIE DOMINGO,
Plaintiff,
MEMORANDUM DECISION AND
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS AND
ORDERING RELEASE OF LIS
PENDENS
vs.
Case No. 2:11-CV-00464- TS
DIRECT MORTGAGE CORPORATION;
CITIMORTGAGE, INC; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; THE FEDERAL HOME
LOAN MORTGAGE CORPORATION; and
JOHN DOES I-X;,
Defendants.
This matter is before the Court on Defendants CitiMortgage, Inc.’s (“CitiMortgage”),
Mortgage Electronic Registration Systems, Inc.’s (“MERS”), and Federal Home Loan Mortgage
Corporation’s (“Freddie Mac”) Motion to Dismiss Plaintiff’s Complaint pursuant to Federal
Rules of Civil Procedure 12(b)(6).1 For the reasons set forth below, the Court will grant the
motion.
1
Docket No. 5.
1
I. STANDARD OF REVIEW
In considering a motion to dismiss under Rule 12(b)(6), all well-pleaded factual
allegations, as distinguished from conclusory allegations, are accepted as true and viewed in the
light most favorable to Plaintiff as the nonmoving party.2 Plaintiff must provide “enough facts to
state a claim to relief that is plausible on its face.”3 All well-pleaded factual allegations in the
complaint are accepted as true and viewed in the light most favorable to the nonmoving party.4
But, the court “need not accept . . . conclusory allegations without supporting factual
averments.”5 “The court’s function on a Rule 12(b)(6) motion is not to weigh potential evidence
that the parties might present at trial, but to assess whether the plaintiff’s complaint alone is
legally sufficient to state a claim for which relief may be granted.”6 The Supreme Court has
explained that a plaintiff must “nudge[ ] [his] claims across the line from conceivable to
plausible” to survive a motion to dismiss.7
Thus, the mere metaphysical possibility that some plaintiff could prove some set
of facts in support of the pleaded claims is insufficient; the complaint must give
the court reason to believe that this plaintiff has a reasonable likelihood of
mustering factual support for these claims.8
2
Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002).
3
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007).
4
GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.
1997).
S. Disposal, Inc., v. Tex. Waste, 161 F.3d 1259, 1262 (10th Cir. 1998); Hall v. Bellmon,
935 F.2d 1106, 1110 (10th Cir. 1991).
5
6
Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991).
Twombly, 550 U.S. at 547.
The Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007)
(emphasis in original).
7
8
2
The Supreme Court recently provided greater explanation of the standard set out in
Twombly in Ashcroft v. Iqbal.9 In Iqbal, the Court reiterated that, while Fed.R.Civ.P. 8 does not
require detailed factual allegations, it nonetheless requires “more than unadorned, the-defendantunlawfully harmed-me accusation[s].”10 “A pleading that offers ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action will not do.’”11 “Nor does a complaint
suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”12
The Court in Iqbal stated:
Two working principles underlie our decision in Twombly. First, the tenet
that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice. Rule 8 marks a
notable and generous departure from the hyper-technical, code-pleading regime of
a prior era, but it does not unlock the doors of discovery for a plaintiff armed with
nothing more than conclusions. Second, only a complaint that states a plausible
claim for relief survives a motion to dismiss. Determining whether a complaint
states a plausible claim for relief will . . . be a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense. But
where the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not show[n]—that
the pleader is entitled to relief.
In keeping with these principles a court considering a motion to dismiss
can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions
can provide the framework of a complaint, they must be supported by factual
allegations. When there are well-pleaded factual allegations, a court should
9
129 S.Ct. 1937 (2009).
10
Id. at 1949.
11
Id. (quoting Twombly, 550 U.S. at 555).
12
Id. (quoting Twombly, 550 U.S. at 557).
3
assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief.13
In considering the adequacy of a plaintiff’s allegations in a complaint subject to a motion
to dismiss, a district court not only considers the complaint, but also “documents incorporated
into the complaint by reference, and matters of which a court may take judicial notice.”14 Thus,
“notwithstanding the usual rule that a court should consider no evidence beyond the pleadings on
a Rule 12(b)(6) motion to dismiss, ‘[a] district court may consider documents referred to in the
complaint if the documents are central to the plaintiff’s claim and the parties do not dispute the
documents’ authenticity.’”15
II. FACTUAL BACKGROUND
Plaintiff’s Complaint alleges that, on or about February 4, 2004, Plaintiff’s father
obtained a refinance loan in the amount of $118,500.00 through Direct Mortgage Corporation.16
The loan was secured by a Deed of Trust recorded against real property located in Midvale, Utah
(“the Property”).17 The Deed of Trust designates Defendant MERS as the beneficiary to act as
13
Id. at 1949-50 (internal quotation marks and citations omitted).
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (citing 5B
Wright & Miller § 1357 (3d ed. 2004 & Supp. 2007)).
14
Alvarado v. KOBTV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007) (quoting Jacobsen v.
Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002)).
15
16
Docket No. 2-1, at 9.
17
Docket No. 2-1, Ex. A, at 1.
4
“nominee for Lender and Lender’s successors and assigns.”18 In defining MERS authority under
the Deed of Trust, the Deed provides:
Borrower understands and agrees that MERS holds only legal title to the interests
granted by Borrower in this Security Instrument; but if necessary to comply with
law or custom, MERS (as nominee for Lender and Lender’s successors and
assigns) has the right: to exercise any or all of those interests, including but not
limited to, the right to foreclose and sell the Property, and to take any action
required of Lender including, but not limited to, releasing or canceling this
Security Instrument.19
After Plaintiff’s father’s death, his Estate executed a Personal Representative’s Deed
transferring the Property to Plaintiff.20 In early 2010, Plaintiff defaulted on the loan by failing to
make payments as required by the loan. Plaintiff contacted CitiMortgage regarding assistance
with the loan. CitMortage informed Plaintiff that she may qualify for government assistance.
Plaintiff provided the documentation CitiMortgage requested and submitted an application.
After review, CitiMortgage informed Plaintiff that the loan modification under the Make Home
Affordable program was denied. Plaintiff was also denied an “in-house” modification.
Following Plaintiff’s default, MERS initiated foreclosure proceedings.
On June 17, 2010, Direct Mortgage Corporation assigned the Trust Deed to
CitiMortgage.21 Shortly thereafter, CitiMortgage recorded a Substitution of Trustee appointing
eTitle Insurance Agency as Successor Trustee.22 On the same day, eTitle recorded a notice of
18
Id.
19
Id. at 3.
20
Docket No. 2-1, Ex. C.
21
Id. at Ex. G.
22
Id. at Ex. H
5
default indicating that Plaintiff was in default on her obligations under the Deed of Trust.23 The
Property was sold to Freddie Mac at a foreclosure sale on March 21, 2011.24
On April 13, 2011, Plaintiff filed suit in state court, seeking both monetary and
declaratory relief. This action is brought before this Court on removal from state court. On May
31, 2011, Defendants moved this Court to dismiss the Complaint for failure to state a claim.
III. DISCUSSION
Plaintiff’s Complaint alleges claims for quiet title, declaratory judgment, injunctive
relief, breach of contract, breach of covenant of good faith and fair dealing, promissory estoppel,
and wrongful foreclosure. Each of these claims will be discussed below.
A. QUIET TITLE/DECLARATORY JUDGMENT
Plaintiff’s first claim for relief alleges that foreclosure of the Property violated Utah law
because the Defendants did not have authority to foreclose and sell the Property. Plaintiff’s
claim is premised on the argument that MERS cannot be named as a beneficiary in the Trust
Deed, or, in the alternative, the action of naming MERS as a beneficiary converted the Trust
Deed into a mortgage that could not be non-judicially foreclosed and sold. The Court agrees
with Defendants that Plaintiff’s quiet title claim is based on the oft-rejected argument that MERS
lacks standing to authorize the assignment and resulting foreclosure.25
23
Id. at Ex. I.
24
Docket No. 2-1, ¶ 57.
See Foster v. BAC Home Loan Servicing, L.P., 2010 WL 3791976, at *3 (D. Utah Sept.
22, 2010); Burnett v. Mort. Elec. Registration Sys., Inc., 2009 WL 3582294, at *4 (D. Utah Oct.
27, 2009).
25
6
In Burnett, this Court interpreted an identical provision, naming MERS as beneficiary,
and found that “MERS had the authority to initiate foreclosure proceedings, appoint a trustee,
and to foreclose and sell the property.”26 This case requires the same result.
This conclusion is not changed by Plaintiff’s argument that Defendants are no longer
parties in interest because the underlying note was securitized. Plaintiff’s securitization claim
has similarly been repeatedly rejected by this Court.27
A quiet title claim seeks to extinguish interests in the property in favor of the interest of
the plaintiff. Here, Plaintiff is seeking to extinguish the Trust Deed. “To succeed in an action to
quiet title to real estate, a plaintiff must prevail on the strength of his own claim to title and not
the weakness of a defendant’s title or even its total lack of title.”28 Plaintiff fails to assert her
own claim to title. She does not allege that the Deed of Trust was not validly executed or that
she is not in default under the note. Accordingly, the court rejects Plaintiff’s argument and
dismisses this claim.
26
Burnett, 2009 WL 3582294, at *4.
Foster, 2010 WL 3791976, at *3; West v. Mort. Elec. Registration Sys., Inc., 2011 WL
1321404, at *5-6 (D. Utah April 6, 2011).
27
Collard v. Nagle Constr., 57 P.3d 603, 607 (Utah 2002) (quoting Church v. Meadow
Springs Ranch Corp., 659 P.2d 1045, 1048-49 (Utah 1983)).
28
7
B. BREACH OF CONTRACT
Plaintiff’s claim for breach of contract asserts that she relied on Defendant’s
representation that a loan modification agreement would be reached or handled in a reasonable
manner and that a contract was thereby formed.29
As an initial matter, the Court notes that there is no private right of action under the
Home Affordable Mortgage Program (“HAMP”). The Complaint shows that the loan
modification Plaintiff applied for was through the HAMP program.30 To the extent Plaintiff
argues that she is entitled to modification under HAMP, her claim must be rejected.31
Utah law states that parties seeking to modify a contract must reach a meeting of the
minds on the modification.32 “A binding contract exists where it can be shown that the parties
had a meeting of the minds as to the integral features of [the] agreement and that the terms are
sufficiently definite as to be capable of being enforced.”33 Plaintiff’s Complaint does not suggest
what these terms were. It is not possible to create an enforceable contract in which the parties
generally agree to modify another contract that has definite terms. No allegations reflect that the
29
Docket No. 2-1, ¶ 101.
30
Docket No. 2-1, Ex. F.
Shurtliff v. Wells Fargo Bank, N.A., 2010 WL 4609307, at *3 (D. Utah Nov. 5, 2010);
Marks v. Bank of Am., N.A., 2010 WL 2572988, at *5-6 (D. Ariz. June 22, 2010).
31
See Osmond v. Litton Loan Servicing, LLC, 2011 WL 1988403, at *2 (D. Utah May 20,
2011); Nielsen v. Gold’s Gym, 78 P.3d 600, 602 (Utah 2003) (internal quotations omitted).
32
LD III, LLC v. BBRD, LC, 221 P.3d 867, 872 (Utah Ct.App. 2009) (quotation marks
and citations omitted).
33
8
Trust Deed documents of the loan were modified in writing relative to a loan modification or that
the terms of such modification were sufficiently certain. For these reasons, this claim fails.
C. BREACH OF GOOD FAITH AND FAIR DEALING
Plaintiff alleges CitiMortgage breached the covenant of good faith and fair dealing during
the loan modification process by “purposely or intentionally destroying or injuring the Plaintiff’s
right to receive the fruits of that contract.”34 Plaintiff alleges such actions include moving
forward with foreclosure, and failing to communicate and provide clear information during the
loan modification process.
Every contract is subject to an implied covenant of good faith.35 Plaintiff asserts a valid
contract existed, namely, the “agreement that Plaintiff would apply for and cooperate with, and
CitiMortgage would consider, Plaintiff’s application for a modification of the loan”36 In Strupat
v. Aurora Loan Services LLC,37 the court found that, although the plaintiff claimed the defendant
acted in bad faith with respect to a purported new contract in connection with his loan
modification, the claim failed because plaintiff failed to show either the existence, or the
creation, of any such contract.38 As discussed above, the Court has not found an existing
contract. Absent a contract, there can be no breach of any implied duty. Therefore, this cause of
action fails.
34
Docket No. 2-1, ¶ 114.
35
Brehany v. Nordstrom, 812 P.2d 49, 66 (Utah 1991).
36
Docket No. 2-1, ¶ 112.
37
2011 WL 2359842 (D. Utah June 9, 2011).
38
Id. at *10.
9
D. PROMISSORY ESTOPPEL
Plaintiff’s allegations regarding promissory estoppel appear to be that she reasonably
relied on CitiMortgage’s promise to properly consider her application for a loan modification,
which she asserts they did not do. Plaintiff alleges that she did what was required of her, but that
CitiMortgage failed and refused to consider her loan modification application in a commercially
reasonable manner.39
Promissory estoppel requires a showing of the following elements:
(1) the plaintiff acted with prudence and in reasonable reliance on a promise made by the
defendant; (2) the defendant knew that the plaintiff had relied on the promise which the
defendant should reasonably expect to induce action or forbearance on the part of the plaintiff or
a third person; (3) the defendant was aware of all material facts; and (4) the plaintiff relied on the
promise and the reliance resulted in a loss to the plaintiff.40
Plaintiff cannot meet the reasonable reliance requirement of her promissory estoppel
claim. This Court agrees with Defendants that the Plaintiff failed to allege she relied on any
such promise or that she suffered a loss. Plaintiff was in default on her loan. The well-pleaded
facts alleged simply reflect that CitiMortgage considered, and ultimately denied, Plaintiff’s
application for loan modification.41 Therefore, this claim fails.
39
Docket No. 2-1, ¶ 105-109.
40
Youngblood v. Auto-Owners Ins. Co., 158 P.3d 1088, 1092 (Utah 2007).
41
Docket No. 2-1, ¶ 37-39.
10
E. INJUNCTIVE RELIEF
Plaintiff seeks injunctive relief. However, this claim is dependent on Plaintiff’s
substantive claims which, as discussed above, fail to state a claim upon which relief can be
granted. Therefore, Plaintiff’s request for injunctive relief will be denied.
F. WRONGFUL FORECLOSURE
Plaintiff also brings a claim for wrongful foreclosure against the Defendants. Utah law,
however, does not recognize a cognizable claim for wrongful foreclosure.42 Even if Utah law
recognized such a claim, this claim is premised on Plaintiff’s previously rejected arguments.
Therefore, this claim fails.
G. LIS PENDENS
As part of their motion to dismiss, Defendants request that the Court order the release of
the lis pendens filed by Plaintiff in connection with this action. A court should order a release of
lis pendens if it “finds that [Plaintiff] has not established by a preponderance of the evidence the
probable validity of the real property claim that is the subject of the notice.”43 The Court has
concluded that all of Plaintiff's claims in this case fail. Accordingly, Plaintiff has no basis for a
lis pendens, and any such lis pendens filed in connection with this action shall be released.
IV. CONCLUSION
It is therefore ORDERED that Defendants’ Motion to Dismiss (Docket No. 5) is
GRANTED. Plaintiff is ordered to release the lis pendens filed in connection with this case.
The clerk of Court is directed to close this case forthwith.
42
Cannon v. Countrywide Bank, 2010 WL 3938246, at *2 (D. Utah Oct. 5, 2010).
43
U.C.A. § 78B–6–1304(2)(b).
11
DATED September 21, 2011.
BY THE COURT:
_____________________________________
TED STEWART
United States District Judge
12
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