Wolfson v. Bank of America National Association et al

Filing 52

ORDER Granting MERS Parent Corporations' 39 Motion to Dismiss; and Granting in part and Denying in part Bank of America, Merscorp, and MERS 40 Motion to Dismiss; signed by Judge Benjamin H. Settle. The Clerk shall terminate Intercontinental Exchange, Inc., Maroon Holding, LLC, and Merscorp. (GMR)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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JEREMY WOLFSON,

CASE NO. C17-6064 BHS
Plaintiff,

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v.
BANK OF AMERICA NATIONAL
ASSOCIATION, et al.,

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Defendants.

ORDER GRANTING
DEFENDANTS’ MOTION TO
DISMISS AND GRANTING IN
PART AND DENYING IN PART
DEFENDANTS’ MOTION TO
DISMISS

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This matter comes before the Court on Defendants Intercontinental Exchange,

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Inc., and Maroon Holding, LLC (“MERS Parent Corporations”) motion to dismiss, Dkt.

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39, and Defendants Bank of America National Association (“Bank of America”),

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Merscorp Holdings, Inc. (“Merscorp”), and Mortgage Electronic Registration Systems,

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Inc.’s (“MERS”) motion to dismiss, Dkt. 40. The Court has considered the pleadings

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filed in support of and in opposition to the motions and the remainder of the file and
hereby rules as follows:

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ORDER - 1

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I.

PROCEDURAL HISTORY

On December 21, 2017, Wolfson filed a complaint against MERS Parent

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Corporations, Bank of America, Merscorp, and MERS asserting causes of action for quiet

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title, violations of the Federal Debt Collection Practices Act (“FDCPA”), defamation,

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declaratory judgment, cancellation of instrument, replevin, breach of the implied duty of

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good faith and fair dealing, violations of Washington Deed of Trusts Act (“DTA”), and

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violations of the Washington Consumer Protection Act (“CPA”). Dkt. 1.

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On February 20, 2018, MERS Parent Corporations filed a motion to dismiss. Dkt.

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12. On February 28, 2018, Bank of America, Merscorp, and MERS (“Loan Defendants”)

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filed a motion to dismiss. Dkt. 14. On May 31, 2018, the Court granted the motions and

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granted Wolfson leave to amend. Dkt. 35.

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On June 22, 2018, Wolfson filed an amended complaint asserting similar claims

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against the same defendants. Dkt. 36. On July 6, 2018, MERS Parent Corporations filed

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a motion to dismiss. Dkt. 39. On July 9, 2018, the Loan Defendants filed a motion to

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dismiss. Dkt. 40. On August 30, 2018, the Court granted Wolfson’s motion for an

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extension of time to respond. Dkt. 46. On September 4, 2018, Wolfson responded. Dkt.

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49. On September 7, 2018, MERS Parent Corporations and the Loan Defendants replied.

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Dkts. 50, 51.
II. FACTUAL BACKGROUND

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On January 10, 2007, Wolfson and Erin D. Huffman (“Huffman”) signed a note

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(the “Note”) in the amount of $279,000.00 in favor of First Magnus Corporation (“First

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Magnus”). To secure the Note, Wolfson and Huffman executed a deed of trust (“Deed”)

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ORDER - 2

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against the property located at 16208 132nd Avenue East, Puyallup, Washington 98374

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(the “Property”). Dkt. 12-2. The Deed named MERS as beneficiary for First Magnus.

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Id. at 3.

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On or about June 21, 2013, MERS assigned its interest in the Deed to Bank of

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America. Dkt. 12-3. On November 8, 2013, Huffman signed a Quitclaim Deed to

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Wolfson. Dkt. 15-3. The Quitclaim was recorded on November 20, 2013. Id.

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On March 30, 2017, Defendant MTC Financial Inc. d/b/a Trustee Corps recorded

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a Notice of Trustee’s Sale against the Property asserting that Wolfson was over 8 months

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behind on payments and setting a trustee’s sale for the Property on August 4, 2017. Dkt.

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15-4.

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On August 4, 2017, Wolfson filed a bankruptcy case seeking relief under Chapter

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13. On September 20, 2017, the bankruptcy court dismissed his case for failure to

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comply with orders.

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III. DISCUSSION
A.

Standard
Motions to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil

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Procedure may be based on either the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under such a theory. Balistreri v. Pacifica Police Department,

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901 F.2d 696, 699 (9th Cir. 1990). Material allegations are taken as admitted and the

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complaint is construed in the plaintiff’s favor. Keniston v. Roberts, 717 F.2d 1295, 1301

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(9th Cir. 1983). To survive a motion to dismiss, the complaint does not require detailed

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factual allegations but must provide the grounds for entitlement to relief and not merely a

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ORDER - 3

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“formulaic recitation” of the elements of a cause of action. Bell Atlantic Corp. v.

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Twombly, 550 U.S. 544, 555 (2007). Plaintiffs must allege “enough facts to state a claim

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to relief that is plausible on its face.” Id. at 570.

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B.

MERS Parent Corporations

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Similar to their first motion to dismiss, the MERS Parent Corporations argue that

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Wolfson fails to provide factual allegations sufficient to establish that he may pierce the

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corporate veil. Dkt. 39 at 15–20. “It is a general principle of corporate law deeply

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ingrained in our economic and legal systems that a parent corporation (so called because

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of control through ownership of another corporation’s stock) is not liable for the acts of

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its subsidiaries.” United States v. Bestfoods, 524 U.S. 51, 61 (1998). The “doctrine of

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piercing the corporate veil . . . is the rare exception, applied in the case of fraud or certain

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other exceptional circumstances.” Dole Food Co. v. Patrickson, 538 U.S. 468, 475

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(2003). “[C]ourts are reluctant to disregard the separate existence of related corporations

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by piercing the corporate veil, and have consistently given substantial weight to the

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presumption of separateness.” McKesson HBOC, Inc. v. N.Y. State Common Ret. Fund,

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Inc., 339 F.3d 1087, 1094 (9th Cir. 2003).

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In this case, the Court agrees with the MERS Parent Corporations that Wolfson

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has failed to provide sufficient allegations to support a claim for piercing the corporate

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veil. Wolfson directs the Court to his new allegations at paragraphs 54–56 and 58–61,

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Dkt. 49 at 4, but these paragraphs are merely conclusory allegations that the parent

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corporations controlled, directed, authorized, or ratified the acts of the child corporations.

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ORDER - 4

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Such conclusory allegations are insufficient to state a claim for piercing the corporate

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veil. Therefore, the Court grants the MERS Parent Corporations’ motion to dismiss.

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The remaining question is whether to grant leave to amend, which Wolfson

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requests in his response. Dkt. 49 at 6. “A district court’s discretion to deny leave to

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amend is ‘particularly broad’ where the plaintiff has previously amended.” Salameh v.

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Tarsadia Hotel, 726 F.3d 1124, 1133 (9th Cir. 2013) (citing Sisseton–Wahpeton Sioux

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Tribe v. United States, 90 F.3d 351, 355 (9th Cir. 1996)).

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In this case, the Court declines to grant Wolfson leave to amend a second time and
dismisses his claims against MERS Parent Corporations with prejudice. The Court

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specifically identified the errors in his prior complaint and Wolfson failed to correct these

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errors. Instead, he merely added more conclusory allegations, which are insufficient to

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state a claim for relief. Therefore, the Court grants the MERS Parent Corporations’

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motion.

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C.

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Loan Defendants
The Loan Defendants move to dismiss all of Wolfson’s claims with prejudice.

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Dkt. 40. First, Merscorp moves to dismiss because it appears that Wolfson failed to

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assert any claims against it even though he included it as a party. Id. at 5–6. Wolfson

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concedes that Merscorp “has been eliminated.” Dkt. 49 at 3. Therefore, the Court grants

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the Loan Defendants’ motion as to Merscorp.

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Second, the Loan Defendants systematically attack all of Wolfson’s claims and

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cite authority for their position that his claims fail. Dkt. 40 at 8–17. Similar to his

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complaint, Wolfson responds with conclusory allegations and arguments. Dkt. 49 at 5–7.

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ORDER - 5

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Wolfson appears to contest the Loan Defendants’ arguments as to his claims for quiet

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title, violation of the FDCPA, defamation, and replevin. Id. To the extent that Wolfson

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does not contest the Loan Defendants’ motion as to his claims for declaratory judgment,

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cancellation of instrument, breach of the implied duty of good faith and fair dealing,

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violations of the DTA, and violations of the CPA, the Court considers the failure to

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respond as an admission that the motion has merit. Local Rules W.D. Wash. LCR

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7(b)(2). Reviewing the merits and the Loans Defendants’ motion, the Court concludes

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that Wolfson fails to state valid claims and grants the motion to dismiss these claims.

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The Court will address the remaining claims in more detail.

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1.

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“An action to quiet title allows a person in peaceable possession or claiming the

Quiet Title

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right to possession of real property to compel others who assert a hostile right or claim to

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come forward and assert their right or claim and submit it to judicial determination.”

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Kobza v. Tripp, 105 Wn. App. 90, 95 (2001). “[I]n order to bring an action to quiet title,

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a plaintiff must allege that they are the rightful owners of the property, i.e., that they have

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satisfied their obligations under the Deed of Trust.” Evans v. BAC Home Loans Servicing

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LP, C10-0656 RSM, 2010 WL 5138394, at *4 (W.D. Wash. Dec. 10, 2010) (internal

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quotation omitted).

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The logic of such a rule is overwhelming. Under a deed of trust, a
borrower’s lender is entitled to invoke a power of sale if the borrower
defaults on its loan obligations. As a result, the borrower’s right to the
subject property is contingent upon the borrower’s satisfaction of loan
obligations. Under these circumstances, it would be unreasonable to allow a
borrower to bring an action to quiet title against its lender without alleging
satisfaction of those loan obligations.

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ORDER - 6

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Id.
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In this case, the Loan Defendants move to dismiss Wolfson’s claim because he
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“does not allege that he has paid the amounts owed under his Loan . . . .” Dkt. 51 at 5.
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The Court agrees with the Loan Defendants. While Wolfson alleges that the loans have
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been paid by the Federal Housing Authority, private mortgage insurances, and otherwise
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discharged, Dkt. 36, ¶¶ 242–44, he fails to allege that he has paid the loan and is in
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peaceful possession of the property. Therefore, the Court grants the Loan Defendants’
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motion on this claim.
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2.
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FDCPA

The FDCPA regulates the act of “debt collection” which is defined as “any act or
practice in connection with the collection of consumer debts.” 15 U.S.C. § 1692a. The

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case law is clear that a mortgage servicer is not a debt collector. See Lal v. American
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Home Serv., Inc., 680 F.Supp.2d 1218, 1224 (E.D. Cal. 2010) (“The law is well settled
that FDCPA’s definition of debt collector does not include the consumer’s creditors, a
mortgage servicing company, or any assignee of the debt.”).
In this case, Bank of America moves to dismiss Wolfson’s FDCPA claim because,
as Wolfson’s loan servicer, it is not a debt collector under the FDCPA. Dkt. 40 at 9–10.

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Wolfson responds that he has alleged sufficient allegations to establish that Bank of
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America is a debt collector. Dkt. 49 at 6 (citing Dkt. 35, ¶¶ 268–74). Wolfson, however,
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may not overcome a rule of law by merely asserting allegations to the contrary.
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Moreover, Wolfson clearly alleges that Bank of America “is a mortgage servicer, and at

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ORDER - 7

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all relevant times (and certainly since 06/25/2013) was and is the servicer for the disputed

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loan.” Dkt. 35, ¶ 263. This allegation alone dooms his claim because a mortgage

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servicer is not a debt collector. Therefore, the Court grants Bank of America’s motion on

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this claim.

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3.

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To state a claim for defamation, the plaintiff must allege (1) that the defendant’s

Defamation

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statement was false, (2) that the statement was unprivileged, (3) that the defendant was at

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fault, and (4) that the statement proximately caused damages. Alpine Indus. Computers,

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Inc. v. Cowles Pub. Co., 114 Wn. App. 371, 378 (2002) (citing Caruso v. Local Union

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No. 690, 107 Wn.2d 524, 529 (1987)).
In this case, Bank of America moves to dismiss Wolfson’s defamation claim

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because (1) he “has no real claim to assert” and (2) “there appears to be no actual cause

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of action in Washington for defamation of credit.” Dkt. 40 at 11. The Court concludes

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that these are not sufficient reasons to dismiss a general claim for defamation. Wolfson

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has alleged that Bank of America made an unprivileged false statement that caused

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damages. Dkt. 35, ¶¶ 315–320. While Bank of America may have a good defense that it

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must publish a notice of trustee’s sale or that nothing it published was false, it has not

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established that Wolfson has failed to assert an allegation for each element of his

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defamation claim. Therefore, the Court denies Bank of America’s motion on this claim.

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ORDER - 8

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4.

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“The plaintiff in an action to recover the possession of personal property may

Replevin

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claim and obtain the immediate delivery of such property, after a hearing, as provided in

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this chapter.” RCW 7.64.010.

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In this case, Wolfson asserts a claim for replevin on the Note. Dkt. 35, ¶¶ 358–

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366. The Loan Defendants move to dismiss this claim because (1) replevin only applies

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to personal property, (2) Wolfson fails to show that he is the owner of the Note, and (3)

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Wolfson has failed to post a bond as required by RCW 7.64.035. Dkt. 40 at 13–14.

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While the Court is doubtful that replevin applies to notes promising to pay a debt, Bank

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of America fails to provide any authority to support its position, and the Court declines to

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sua sponte research the issue. Moreover, Wolfson alleges that he is the owner of the

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note, which is sufficient to overcome the Loan Defendants’ second argument. Finally,

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Wolfson is correct that a bond is only required when a court orders the defendant to

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return the property to the plaintiff. Therefore, the Court denies the Loan Defendants’

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motion on this claim.

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5.

Remedy

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The remaining question is whether the Court should grant Wolfson leave to amend

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the dismissed claims. Similar to the other motion to dismiss, the Court finds that

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Wolfson is not entitled to leave to amend. Wolfson failed to properly amend his claims

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the first time the Court granted leave to amend, and he failed to adequately oppose the

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Loan Defendants’ motion as to the majority of his claims. Therefore, the Court denies

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ORDER - 9

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Wolfson’s request for leave to amend and dismisses the majority of his claims with

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prejudice.

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IV. ORDER
Therefore, it is hereby ORDERED that MERS Parent Corporations’ motion to

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dismiss, Dkt. 39, is GRANTED and Bank of America, Merscorp, and MERS motion to

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dismiss, Dkt. 40, is GRANTED in part and DENIED in part. All of Wolfson’s claims

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against MERS Parent Corporations’ and Bank of America, Merscorp, and MERS are

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DISMISSED with prejudice, except Wolfson’s claim for defamation against Bank of

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America and claim for replevin against Bank of America and MERS.

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The Clerk shall terminate Intercontinental Exchange, Inc., Maroon Holding, LLC,
and Merscorp.
Dated this 13th day of December, 2018.

A

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BENJAMIN H. SETTLE
United States District Judge

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ORDER - 10