Mickelson et al v. Chase Home Finance LLC et al

Filing 58

ORDER granting 43 Defendants Motion to Dismiss. The Court DISMISSES all of the waived claims with prejudice as to all Defendants. The DTA claims against all defendants except Chicago and NTS are also DISMISSED with prejudice. The Court also DISMISSES the CPA claims against MERS, Chase, JPMorgan, and Freddie Mac without prejudice. The Court does not rule on whether the CPA claims against the other defendants who joined in the motion are adequately pleaded by Judge Marsha J. Pechman.(MD)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 TRAVIS MICKELSON and DANIELLE H. MICKELSON, 11 Plaintiffs, CASE NO. C11-1445MJP ORDER GRANTING MOTION TO DISMISS 12 v. 13 CHASE HOME FINANCE LLC, et al., 14 Defendants. 15 16 This matter comes before the Court on a motion to dismiss Defendants Chase Home 17 Finance LLC, Mortgage Electronic Recording Systems, Inc., JPMorgan Chase Bank, N.A., and 18 the Federal Home Loan Mortgage Corporation filed, in which the remaining defendants have 19 joined. (Dkt. Nos. 43, 45, 47, 49.) Having reviewed the motion, the response (Dkt. No. 55), the 20 reply (Dkt. No. 56), the supplemental authority (Dkt. No. 57), and all related papers, the Court 21 GRANTS the motion to dismiss. The Court finds this matter suitable for decision without oral 22 argument. 23 \\ 24 ORDER GRANTING MOTION TO DISMISS- 1 1 2 Background Plaintiffs Travis and Danielle Mickelson filed suit against several defendants alleging 3 various improper and illegal acts related to the foreclosure and trustee‟s sale of their home in 4 Island County. The named Defendants are: (1) JPMorgan Chase Bank N.A. (“JPMorgan”); (2) 5 Chase Home Finance LLC (“Chase”) (which has allegedly merged into JPMorgan); (3) Federal 6 Home Loan Mortgage Corporation (“Freddie Mac”); (4) Mortgage Electronic Recording 7 Systems, Inc. (“MERS”); (5) Routh Crabtree Olsen, P.S.; (6) Chicago Title Insurance Company 8 (“Chicago”); (7) Northwest Trustee Services (“NTS”); and (8) six individuals. The Court 9 reviews the allegations regarding the loan and the foreclosure which are relevant to the motion to 10 dismiss. 11 Plaintiffs obtained a loan from MHL Funding Corp on November 22, 2005, to purchase a 12 home in Island County. (Amended Complaint (“AC”) ¶ 3.3.) Plaintiffs signed a promissory 13 note and a deed of trust that secured the loan. The deed of trust named MERS as the nominee 14 and beneficiary and Chicago as the trustee. (Dkt. No. 29-1 at 7.) At an unspecified time, Chase 15 purported to become the holder of the promissory note, which was endorsed in blank. Roughly 16 three years later on September 19, 2008, Chase recorded an assignment of the deed of trust from 17 MERS to Chase. (Dkt. No. 29-1 at 27.) The same day, NTS recorded an appointment of 18 successor trustee on behalf of Chase, which appointed NTS the successor trustee to Chicago. 19 (Dkt. No. 29-1 at 29.) 20 Starting in August of 2008, Plaintiffs fell behind on their mortgage payments and were 21 threatened with foreclosure by Chase and NTS. (AC ¶ 3.23.) Plaintiffs tried to enter into a loan 22 modification program beginning in late 2008. (AC ¶¶ 3.25-3.28.) Plaintiffs refer in their 23 complaint to a letter from Chase dated February 9, 2009, indicating to Plaintiffs that they could 24 ORDER GRANTING MOTION TO DISMISS- 2 1 qualify for a loan modification. (AC ¶¶ 3.32.13.) Chase has provided a copy of this letter in its 2 pleadings, which is properly considered on the motion to dismiss as it was referenced in the 3 complaint. (Dkt. No. 43-4 at 13.) This letter is an offer to Plaintiffs to enter into a loan 4 modification subject to several clearly disclosed requirements. The letter states in bold and 5 underline: “Failure to return this Loan Modification Agreement and the money by the stipulated 6 date will cause the modification agreement to be cancelled and the collections and/or foreclosure 7 process to continue immediately.” (Id. (emphasis removed).) The letter also stated Plaintiffs had 8 to return the signed agreement and their first payment within 72 hours. (Id.) There is no 9 allegation that Plaintiffs complied with the terms of the letter, though they do allege they did not 10 receive the letter until February 13, 2009. (AC ¶ 3.32.13.) 11 A letter dated February 20, 2009, from Chase (also referenced in Plaintiffs‟ complaint) 12 states that Plaintiffs failed to return the modification agreement or any payment, and the deadline 13 was extended to February 26, 2009. (Dkt. No. 43-4 at 21; AC ¶ 3.32.16 (referencing the letter).) 14 Plaintiffs do not allege they made the payments required of the first letter in the time allotted. A 15 letter dated July 20, 2010, informed Plaintiffs that they had failed to qualify for the modification 16 program because they had failed to make the required payments within the designated time. 17 (Dkt. No. 43-4 at 33.) After NTS provided notices of the default and the foreclosure sale to 18 Plaintiffs, it oversaw the sale of Plaintiffs‟ home at a non-judicial foreclosure on March 25, 2011. 19 (AC ¶ 3.28.) Plaintiffs allege on information and belief that Freddie Mac was the purchaser, but 20 they disclaim any actual knowledge. (AC ¶ 3.29.) 21 In their sprawling amended complaint, Plaintiffs allege the appointment of MERS as the 22 beneficiary to the first deed of trust was impermissible because MERS is not legally capable of 23 being the beneficiary. (AC ¶¶ 6.4-6.21.) Plaintiffs claim the assignment of the deed of trust to 24 ORDER GRANTING MOTION TO DISMISS- 3 1 Chase was invalid because MERS was not a proper beneficiary. (AC ¶ 6.22.) They also allege 2 Chase did not hold a “wet ink” signature version of the promissory note, but admit that Chase 3 held at least a “copy” of the note. (AC ¶ 5.5.) They also allege that assignment executed by 4 MERS to Chase of the deed of trust was invalid because the signer is a “robo signer” who 5 “lacked authority, knowledge or training to perform the transaction” on behalf of MERS. (AC ¶ 6 6.23.) As to Freddie Mac, Plaintiffs claimed it was not a “bona fide” purchaser. 7 In their hard-to-follow complaint Plaintiffs appear to pursue the following claims or 8 causes of action against Chase, JPMorgan, MERS, and Freddie Mac: (1) quiet title; (2) injunctive 9 relief related to the ownership of the home; (3) breach of contract; (4) unenforceability of the 10 deed of trust based on a theory of unconscionability; (5) criminal profiteering in violation of 11 RCW 9A.82 et seq.; (6) violations of the Deed of Trust Act; and (7) violations of the Consumer 12 Protection Act (“CPA”). Defendants move for dismissal of all of these claims, while leaving 13 untouched the claims Plaintiffs pursue under the Fair Debt Collection Practices Act. The 14 remaining Defendants join in the motion, but provide no substantive briefing as issues distinct to 15 them. 16 Analysis 17 A. Standard 18 On a motion to dismiss, the Court must accept the material allegations in the complaint as 19 true and construe them in the light most favorable to Plaintiff. NL Indus., Inc. v. Kaplan, 792 20 F.2d 896, 898 (9th Cir. 1986). A motion to dismiss filed pursuant to Rule 12(b)(6) tests the 21 sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). “To survive a 22 motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to „state a 23 claim to relief that is plausible on its face.‟” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) 24 ORDER GRANTING MOTION TO DISMISS- 4 1 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007)). The plaintiff must provide 2 “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action 3 will not do.” Twombly, 550 U.S. at 555. 4 B. Waiver 5 Because Plaintiffs failed to challenge the non-judicial foreclosure, most of their claims 6 are forever waived. 7 A borrower waives any claims challenging the validity of a non-judicial foreclosure if: 8 the “party (1) received notice of the right to enjoin the sale, (2) had actual or constructive 9 knowledge of a defense to foreclosure prior to the sale, and (3) failed to bring an action to obtain 10 a court order enjoining the sale.” Plein v. Lackey, 149 Wn.2d 214, 227 (2003). Amendments to 11 the Deed of Trust Act (“DTA”) made after Plein have attempted to carve out certain post-sale 12 claims that would otherwise by waived under Plein‟s rule. Relevant to this case, the DTA 13 preserves claims of violations of RCW Title 19 and claims the trustee failed to materially comply 14 with the DTA. RCW 61.24.127(1). These non-waived claims do not allow the Plaintiff to “seek 15 any remedy at law or in equity other than monetary damages” or “affect in any way the validity 16 or finality of the foreclosure sale or a subsequent transfer of the property.” RCW 17 61.24.127(2)(b), 61.24.127(2)(c). 18 By failing to challenge the foreclosure and trustee‟s sale, the Plaintiffs waived any claims 19 of: (1) quiet title; (2) injunctive relief; (3) breach of contract; (4) unenforceability of the deed of 20 trust based on unconscionability; and (5) criminal profiteering. All three elements required by 21 Plein for waiver to apply are alleged in the complaint. Plaintiffs received notice of the 22 foreclosure sale, had knowledge of it, and failed to enjoin the sale. Plein, 149 Wn.2d at 227. As 23 the Court understands and construes the five claims noted above, each attacks the validity of the 24 ORDER GRANTING MOTION TO DISMISS- 5 1 foreclosure and trustee‟s sale and thus cannot be brought. Moreover, the exceptions to Plein the 2 Deed of Trust Act carves out do not permit Plaintiffs to pursue any of the five claims. Nowhere 3 in the DTA are these claims expressly permitted. Allowing any of these claims to move forward 4 would run contrary to the DTA‟s intent to limit post-sale remedies and to promote the stability of 5 land titles. See Plein, 149 Wn.2d at 228. Plaintiffs have therefore waived these five claims by 6 failing to bring them before the foreclosure sale. The Court finds that these must be 7 DISMISSED as to all Defendants, including as to the Defendants who merely joined in the 8 motion to dismiss. The claims are dismissed with prejudice. 9 The Deed of Trust Act permits only two claims to potentially go forward: (1) the CPA 10 claims; and (2) the claims brought under the Deed of Trust Act. However, the Deed of Trust Act 11 specifies that any post-sale claims premised on violations of the Act may only be brought against 12 the trustee. Except for Chicago and NTS, none of the other Defendants is alleged to be a trustee. 13 As such, the claims premised on DTA violations are DISMISSED as to all defendants except 14 Chicago and NTS. Although both Chicago and NTS joined in the motion to dismiss, they have 15 not provided any argument specific to claims against them sufficient for the Court to rule on 16 whether any claims premised on compliance with the Deed of Trust Act can move forward. 17 B. CPA Claims 18 Plaintiffs‟ CPA claims against MERS, Chase, JPMorgan, and Freddie Mac fail because 19 they do not include sufficient allegations of unfair or deceptive acts. 20 1. 21 To prevail on their CPA claim, Plaintiffs must establish five distinct elements: “(1) unfair Standard 22 or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) 23 injury to plaintiff in his or her business or property; [and] (5) causation.” Hangman Ridge 24 ORDER GRANTING MOTION TO DISMISS- 6 1 Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780 (1986). Whether a practice is 2 unfair or deceptive is a question of law for the court to decide if the parties do not dispute what 3 the parties did. Indoor Billboard/Washington, Inc. v. Integra Telecom of Wash., Inc., 162 Wn.2d 4 59, 74 (2007). To satisfy the first element, Plaintiffs must show that the act or practice either has 5 a capacity to deceive a substantial portion of the public or that it constitutes an unfair trade or 6 practice. Plaintiffs have failed to provide sufficient allegations as required by Iqbal and Rule 8 7 to show an unfair or deceptive act or practice. 8 2. 9 Plaintiffs alleged Chase, JPMorgan, MERS, and Freddie Mac engaged in four similar CPA Claims Against Chase, MERS, JPMorgan, and Freddie Mac 10 unfair or deceptive acts: (1) failing to comply with the Deed of Trust Act; (2) using an 11 unconscionable agreement to facilitate non-judicial foreclosures; (3) preventing borrowers from 12 knowing who the true beneficiaries of the deed of trust was; and (4) engaging in robo-signing. 13 (AC ¶ 13.2). These allegations are not sufficient to state a claim. 14 Plaintiffs‟ first claim is misguided as to MERS. Plaintiffs seem to contend that MERS 15 cannot be a beneficiary to the deed of trust because it cannot be the nominee and beneficiary. 16 This argument is flawed. There is no legal reason why MERS cannot be the beneficiary, as that 17 term is defined in the DTA. The beneficiary is the holder of the promissory note, and there is no 18 legal reason why MERS cannot be the note holder. RCW 64.21.005(2). Even if MERS was not 19 properly appointed as nominee and beneficiary, Plaintiffs have not identified any harm that arose 20 from MERS‟s role or from the purported deception. The deed of trust discloses MERS as the 21 nominee and beneficiary and Plaintiffs have not identified any provision of DTA that would 22 preclude MERS from being both nominee and beneficiary. Although certain issues related to 23 MERS‟s role remain pending before the Washington Supreme Court, the Ninth Circuit has 24 ORDER GRANTING MOTION TO DISMISS- 7 1 rejected the argument that MERS cannot serve as a nominee on a deed of trust where the lender 2 still holds the note. Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041-42 (9th 3 Cir. 2011) (applying Arizona law). Plaintiffs have failed to identify any violation of the Deed of 4 Trust Act related to MERS and they have not alleged any cognizable deceptive or unfair trade or 5 practice arising out of MERS‟s role. They have also failed to identify any damages arising out of 6 this specific alleged DTA violation. The CPA claim related to MERS cannot proceed. 7 Plaintiffs have also failed to identify any specific conduct Chase, JPMorgan, or Freddie 8 Mac engaged in that violated the DTA that might constitute a CPA claim. Freddie Mac is only 9 alleged to have purchased the home at the trustee‟s sale, and Plaintiffs have not provided 10 sufficient factual detail to understand how this violated the Deed of Trust Act or might in any 11 way constitute an unfair or deceptive act. The Court similarly cannot find sufficient factual 12 details showing any violation of the DTA Chase or JPMorgan perpetrated. Chase has explained 13 that it was permitted to initiate foreclosure on the property by virtue of holding the note that was 14 indorsed in blank. See RCW 61.24.005(2); RCW 62A.3-205, -3-301. Plaintiffs have not 15 provided any valid argument or allegation as to why Chase was not a proper beneficiary with 16 authority to foreclose. As such, the Court finds no properly alleged violation of the DTA. The 17 Court is similarly at a loss to find any allegations to sustain a claim against JPMorgan having 18 violated the DTA. These claims are DISMISSED. 19 Plaintiffs‟ second claim, that the deed of trust was unconscionable, is not adequately 20 pleaded. The Court cannot accept Plaintiffs‟ argument the deed of trust violated the CPA 21 because it contained boilerplate. First, the deed of trust disclosed MERS‟s role and did so in a 22 clear manner. Second, the mere presence of boilerplate language is not sufficient to state a claim 23 under the CPA. Only “[g]rossly unfair or unconscionable contracts” where the material terms 24 ORDER GRANTING MOTION TO DISMISS- 8 1 were “hidden in a maze of fine print” are properly found to be unfair or deceptive. See State v. 2 Kaiser, 161 Wn. App. 705, 722 (2011). Here, there is no allegation or evidence that the deed of 3 trust hid any terms or was a grossly unfair contract. Moreover, the case Plaintiffs rely on, 4 Kaiser, turned on the fact the defendant had “purposefully withheld material information.” Id. 5 There is no similar allegation here. The Court finds no basis on which to permit a CPA claim to 6 move forward on the theory the deed of trust was unconscionable. 7 The third and fourth allegations supporting the CPA claims are nothing more than legal 8 conclusions unsupported by factual allegations. These theories fail to demonstrate how Plaintiffs 9 suffered damages from this conduct, and the Court is unable to comprehend the nature of the 10 claims. 11 The Court DISMISSES these four CPA claims against MERS, JPMorgan, Chase, and 12 Freddie Mac. Although Defendants assert the claims are barred by the statute of limitations, the 13 Court does not reach the issue. The Court is not in a proper position to determine the issue of 14 timeliness given the lack of factual detail on the CPA claims. 15 3. 16 As to MERS alone, Plaintiffs contend that it violated the CPA by “misrepresenting to CPA Claims Against MERS 17 investors the characteristics and therefore the riskiness of the mortgages managed by their 18 secondary marker.” (AC ¶ 13.2(A).) This allegation is difficult to understand. From what the 19 Court is able to glean, the allegation references conduct unrelated to Plaintiffs. There is no 20 allegation showing that this conduct, even if deceptive, caused Plaintiffs to suffer any damages. 21 As such, the Court finds the claim fails to satisfy the elements of the CPA and is inadequately 22 pleaded to meet Iqbal. The Court also dismisses this claim to the extent Plaintiffs argue the 23 securitization of their loan was an unfair or deceptive act. They have yet to identify anything 24 ORDER GRANTING MOTION TO DISMISS- 9 1 deceptive about any securitization, particularly where the deed of trust they signed disclosed the 2 possibility of sales of interests in the mortgage. The securitization does not change the 3 relationship of the parties or create any obvious unfair or deceptive act. See Lamb v. Mortg. 4 Elec. Registration Sys., Inc. No. C10-5856RJB, 2011 WL 5827813, at *6 (W.D. Wash. Nov. 18, 5 2011). The foreclosure of their home was not made invalid merely because of securitization. 6 The Court is unable to find any intelligible CPA violation in this theory. The Court DISMISSES 7 this claim. 8 4. 9 Plaintiffs‟ CPA claims against Chase premised on deceptive conduct related to loan CPA Claims Against Chase and JPMorgan 10 modifications are flawed. Plaintiffs allege a theory of “dual tracking” whereby they were 11 unfairly deceived into believing they had obtained a loan modification while Chase was actually 12 still foreclosing on the home. 13 Plaintiffs misguidedly base their claim on the notion that Chase and JPMorgan deceived 14 them into thinking that a loan modification would halt the foreclosure. The documents Plaintiffs 15 rely on actually show that Chase clearly disclosed the fact that until Plaintiffs made payments 16 towards modification and submitted the loan modification agreement in a timely manner Chase 17 would not halt any foreclosure process. (Dkt. No. 43-4 at 13 (language put in bold and 18 underline).) Similarly, any claim that Plaintiffs were falsely promised a loan modification is 19 betrayed by the letters Chase actually sent that showed the offer was conditional. (Id.) The 20 Court is at a loss to find any adequate factual allegations showing unfair or deceptive conduct 21 with regards to Plaintiffs‟ dual tracking claim. The Court DISMISSES this claim. 22 The Court also finds no CPA violation can lie in Plaintiffs‟ allegation that JPMorgan 23 injured Plaintiffs by “buying structured mortgage loans that relied on deceptive terms and 24 ORDER GRANTING MOTION TO DISMISS- 10 1 underwriting to artificially lower borrowers‟ [soc] initial loan payments.” As best the Court can 2 understand, this allegation implies that JPMorgan acquired mortgages based on inadequate 3 information about the true nature of the loans. This would seem to suggest that JPMorgan was 4 deceived, not Plaintiffs. Such an unintelligible allegation cannot survive dismissal. 5 5. 6 The one CPA claims against Freddie Mac that Court has yet to address is simply a legal CPA Claims Against Freddie Mac 7 conclusion unsupported by any facts. Plaintiffs allege Freddie Mac used unconscionable 8 agreements to allow for foreclosure. (AC ¶ 13.9(B).) Yet there are no allegations about any 9 contracts between Plaintiffs and Freddie Mac that could be unconscionable. (AC ¶ 13.9(B).) 10 This errant statement is not sufficient to state a claim under the CPA. 11 6. 12 The Court is unable to determine whether the CPA claims made against the joining CPA Claims as to the Defendants Joinding in the Motion 13 defendants can proceed. None of the joining defendants presented substantive argument. In the 14 absence of such briefing, the Court will not pass judgment on the CPA claims against these 15 defendants. Should Plaintiffs chose to replead their CPA claims, they must a substantial effort to 16 explain with greater precision the factual allegations that support the claimed CPA violations. 17 Shotgun-style pleadings are not a means of meeting Rule 8 and Iqbal. 18 19 Conclusion The majority of Plaintiffs‟ complaint fails to present any tenable claims. The Court finds 20 the claims for: (1) quiet title; (2) injunctive relief; (3) breach of contract; (4) unenforceability of 21 the deed of trust based on unconscionability; and (5) criminal profiteering are all waived. The 22 Court DISMISSES all of the waived claims with prejudice as to all Defendants. The DTA 23 claims against all defendants except Chicago and NTS are also DISMISSED with prejudice. The 24 ORDER GRANTING MOTION TO DISMISS- 11 1 Court also DISMISSES the CPA claims against MERS, Chase, JPMorgan, and Freddie Mac 2 without prejudice. The Court does not rule on whether the CPA claims against the other 3 defendants who joined in the motion are adequately pleaded. 4 The clerk is ordered to provide copies of this order to all counsel. 5 Dated this 16th day of April, 2012. 6 A 7 8 Marsha J. Pechman United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ORDER GRANTING MOTION TO DISMISS- 12

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