ANN AIKEN, Chief District Judge.
Defendants BAC Home Loans Servicing, L. P., Mortgage Electronic Registration Systems, and ReconTrust Company, N.A. move to dismiss plaintiff Pamela Staton's claims pursuant to Fed. R. Civ. P. 12(b) (6) and Fed. R. Civ. P. 9(b). For the reasons set forth below, defendants' motion is granted in part and denied in part.
In 2005, plaintiff took out a loan from Countrywide Home Loans, Inc. ("Countrywide"), in the amount of $735,500, to purchase a home. Pursuant to this transaction, plaintiff executed a promissory note (the "Note") in favor of Countrywide. The Note was secured by a trust deed (the "Deed of Trust"), which lists Countrywide as the lender, Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary, "acting solely as nominee for Lender and Lender's successors and assigns," and Fidelity National Title Insurance ("Fidelity") as the trustee. The Deed of Trust was filed in Lane County, Oregon on November 29, 2005.
Pursuant to the Deed of Trust, plaintiff agreed to make monthly mortgage payments as required under the Note; plaintiff also agreed that she would be in default, and subject to foreclosure, if she failed to make such payments. In addition, the Deed of Trust stipulated that Countrywide could appoint a loan servicer; accordingly, at some point after the loan was originated, BAC Home Loans Servicing, L.P. ("BAC") began servicing plaintiff's loan. As such, BAC became responsible for collecting loan repayments and enforcing the terms of the parties' agreements.
In September 2009, plaintiff stopped making the requisite loan repayments, thereby materially defaulting. During the next three months, BAC provided plaintiff with opportunities to cure this default; plaintiff, however, did not do so.
Sometime prior to initiating foreclosure proceedings, Countrywide securitized, bundled, and sold, or "tranched," plaintiff's Note. As a result, CWALT, Inc.
On January 6, 2010, BNYM by BAC appointed ReconTrust to serve as successor trustee for the Deed of Trust. This appointment was recorded in the official records of Lane County on January 11, 2010.
On January 6, 2010, ReconTrust executed a Notice of Default and Election to Sell the disputed property. On January 11, 2010, the Notice of Default and Election to Sell was recorded in the official records of Lane County. On June 1, 2010, ReconTrust recorded the following documents in the official records of Lane County: Affidavit of Mailing of Notice of Sale, Affidavit of Publication of Notice of Sale, Affidavit of Service, and a copy of the Notice of Sale.
On September 17, 2010, plaintiff filed a complaint against defendants in Lane County Circuit Court. On September 25, 2010, plaintiff filed an amended complaint, alleging: 1) declaratory judgment that defendants' actions are void pursuant to Oregon's Trust Deed Act ("OTDA") and enjoining defendants from foreclosing; 2) fraud; 3) breach of the covenant of good faith and fair dealing; 4) breach of fiduciary duty; 5) declaratory judgment defining the rights and duties between plaintiff, defendants, and CWALT; 6) quiet title; 7) remove cloud on title; and 8) statutory claim for invalid encumbrance. On October 20, 2010, defendants removed plaintiff's claims, on the basis of diversity jurisdiction, to this Court.
On November 1, 2010, ReconTrust executed a new Notice of Default and Election to Sell. On November 4, 2010, the Notice of Default and Election to Sell was recorded in the official records of Lane County. A foreclosure sale has not yet occurred.
On November 24, 2010, defendants filed a motion to dismiss plaintiff's first amended complaint. On March 18, 2011, plaintiff filed a motion for partial summary judgment, seeking to permanently enjoin defendants from foreclosing on the property. In its June 1, 2011 Opinion and Order (the "Opinion"), this Court granted defendants' motion in regard to plaintiff's claims for fraud, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fifth claim for declaratory judgment, quiet title, remove cloud on title, and invalid encumbrance; however, defendants' motion was denied in regard to plaintiff's first claim for declaratory judgment. The Opinion, however, denied plaintiff's motion for partial summary judgment. Plaintiff was granted leave to file a second amended complaint; as such, defendants were enjoined from completing foreclosure proceedings until this action was fully resolved.
Plaintiff filed a second amended complaint on September 26, 2011, alleging: 1) declaratory judgment that the actions of defendants are void pursuant to the OTDA and enjoining defendants from foreclosing; 2) fraud; 3) declaratory judgment defining the rights and duties between plaintiff, defendants, and CWALT; 4) quiet title; 5) remove cloud on title; 6) statutory claim for invalid encumbrance; and 7) knowingly false affidavit and perjury. Plaintiff seeks $2,245,000 in damages and a permanent injunction preventing defendants from foreclosing. Defendants now move to dismiss plaintiff's second amended complaint.
Where the plaintiff "fails to state a claim upon which relief can be granted," the court must dismiss the action. Fed. R. Civ. P. 12(b) (6). To survive a motion to dismiss, the complaint must allege "enough facts to state a claim to relief that is plausible on its face."
Despite leave to amend, plaintiff's second amended complaint remains incomprehensible and conclusory, making it difficult to discern the allegations. Defendants assert that plaintiff's complaint fails to state plausible claims for relief; and, alternatively, contend that plaintiff's claims fail as a matter of law. In addition, defendants argue that plaintiff's second amended complaint is substantively identical to her first amended complaint; and because this Court has previously addressed and dismissed these claims, defendants now request dismissal with prejudice.
Plaintiff's status must be addressed before reaching the merits of defendants' motion. Plaintiff has asserted throughout this action that she is proceeding pro se. Because pro se plaintiffs do not have the benefit of legal counsel, their pleadings are ftheld to less stringent standards" than those drafted by lawyers.
Nevertheless, it is undisputed that plaintiff has had the benefit of legal counsel throughout this litigation. When plaintiff initially filed this action in state court, she was represented by Russell Baldwin, an active member of both the Oregon State and Federal Bars.
Accordingly, regardless of how plaintiff refers to her representational status, the record reveals that Mr. Baldwin has acted and continues to act as plaintiff's legal counsel. Therefore, because she has the advantage of legal assistance, this Court finds that plaintiff is represented for the purposes of addressing the motion at bar.
The issue at this stage in the proceedings is whether plaintiff can allege any plausible claims for relief relating to defendants' attempted foreclosure of the property.
Plaintiff's first claim is virtually unchanged from her previous complaint.
Defendants make a number of arguments in support of dismissal. First, defendants contend that plaintiff is not entitled to declaratory relief because she has unclean hands, as she has not alleged an ability to cure the default. Second, defendants assert that plaintiff's claim should be dismissed because she cannot allege a justiciable controversy. Third, defendants argue that plaintiff cannot state a claim as a matter of law.
This Court finds the final issue dispositive and therefore declines to address defendants' first two arguments. Nevertheless, it should be noted this District recently rejected the same arguments in an analogous context.
As discussed in the Opinion, ReconTrust is not required to register as a debt collector in order to initiate non-judicial foreclosure. Opinion at 10-11 (citing
Plaintiff next repeats her allegations challenging the propriety of defendants' actions under the OTDA. Specifically, plaintiff contends that defendants' actions are void because "MERS has no standing to assign the trust deed." SAC' 10, 20. While not explicitly stated, it appears as though plaintiff is alleging that, despite the fact that the Deed of Trust designates MERS as the beneficiary, MERS is not a legitimate beneficiary under the OTDA because it has no beneficial interest in the Note. As a result of the allegedly invalid assignments and appointments that MERS made pursuant to its improper role as beneficiary, plaintiff also asserts that defendants are not qualified to act as trustees under the OTDA.
The OTDA was enacted to "`counterbalance the foreclosure advantages given [to] the creditor.'"
Thus, under the OTDA, all assignments of the deed of trust from one beneficiary to another, as well as any appointment of successor trustee, must be recorded before the beneficiary, or one of its agents, initiates nonjudicial foreclosure. Or. Rev. Stat. § 86.735(1). The OTDA defines "beneficiary" as "the person named or otherwise designated in a trust as the person for whose benefit a trust deed is given." Or. Rev. Stat. § 86.705(1).
There are, to date, no Oregon Court of Appeals or Oregon Supreme Court decisions addressing whether MERS is a true beneficiary under the OTDA. Without guidance from the state's highest courts, this District has attempted to resolve these issues; however, no consensus has been reached.
Further, independent of whether MERS is a legitimate beneficiary within the meaning of the OTDA, MERS' designation as both nominee and beneficiary in the trust deed raises two key issues. First, MERS cannot operate as the beneficiary and the lender's agent at the same time: "[t]hat a company cannot be both agent and principal with respect to the same right is axiomatic." Christopher L. Peterson,
In order to generate a solution, this Court has certified the issue of whether MERS has the authority, under the OTDA, to make assignments and appointments initiating nonj udicial foreclosure when designated as both beneficiary and nominee in the trust deed. Therefore, plaintiff's first claim is stayed to the extent that it challenges defendants' actions under the OTDA. This Court awaits acceptance of certification and resolution of these issues.
Accordingly, defendants' motion to dismiss is granted to the extent that plaintiff's first claim for declaratory judgment is premised on ReconTrust's role as debt collector and a show-me-the-note theory; the motion is denied as to plaintiff's allegations regarding the impropriety of defendants' actions under the OTDA.
Plaintiff next seeks a declaration that defendants cannot foreclose until the Roriginal promissory note, with any and all allonges, [is] presented to this court." SAC ¶ 12. Plaintiff cannot state a plausible claim for relief on this basis; presentation of the original promissory note is not required under Oregon law.
Therefore, to the extent that plaintiff's first claim is premised on a show-me-the-note theory, defendants' motion is granted.
Plaintiff's second amended complaint acknowledges that "plaintiff and her counsel lack sufficient information to meet the heightened pleading requirements imposed by FRCP 9 (b) and the certification requirements imposed by FRCP 11." SAC ¶ 21. Therefore, plaintiff seeks to withdraw her fraud claim until the parties have completed pre-trial discovery.
Here, plaintiff commenced this lawsuit in September 2010. Since that time, she has filed three complaints and has had more than one year to engage in discovery. Further, since defaulting in September 2009, plaintiff has been permitted to stay in her home without providing any loan repayments or posting a bond.
Moreover, since almost all of plaintiff's claims are premised, in part, on defendants' fraudulent acts, the Court again suggests that plaintiff include these allegations as part of her fraud claim and plead them in accordance with the heightened standards set forth in Fed. R. Civ. P. 9(b).
Plaintiff next seeks a declaratory judgment defining the rights of the parties; plaintiff's third claim is substantively similar to her fifth claim in her first amended complaint, except that she added paragraphs regarding the allegedly fraudulent actions of Ms. Balandran and Janet Koch.
Thus, plaintiff again seems to allege that the securitization of her loan was in direct violation of the parties' lending agreement. Plaintiff also seeks a declaration that defendants' actions are void because they "sought to foreclose plaintiff's interest without written authority from the minimum proportion of voting rights represented by such Investors for the certificate holders of the CWALT Trust." SAC ¶¶ 27-29. In addition, plaintiff contends that, because "defendants cannot show that any of them own the underlying note," and "cannot trace the assignments of the note," they are not entitled to foreclose. Id. at ¶¶ 30, 32. Finally, plaintiff seeks a declaration that defendants' actions were invalid because they "have self-proclaimed their interest and ownership without any legally verified documentary evidence [of] ownership or authority to execute the foreclosure of plaintiff's residence."
Moreover, plaintiff cannot state a claim in regard to CWALT's alleged lack of authorization of the foreclosure. Since CWALT is not a party
The remainder of plaintiff's declaratory judgment claim is contingent upon the conclusion that any loan within the MERS system is unenforceable. Therefore, plaintiff's third claim is also stayed pending disposition of this issue by the Oregon Supreme Court.
Plaintiff's fourth claim seeks a decree from this Court that the disputed property is free and clear of all encumbrances, including the Deed of Trust. Plaintiff's amended quiet title claim is identical to that claim in her previous complaint, except that plaintiff adds a paragraph stating that defendants' interest "in plaintiff's real property is without merit because plaintiff's note was split from plaintiff's deed of trust by defendants, tranched, and sold to divergent investors." SAC ¶ 44.
The factual allegations supporting the complaint are once again conclusory. With the exception of the additional paragraph, the entirety of plaintiff's fourth claim states that "[p]laintiff is the owner in possession of real property .. [defendants are] not in possession of plaintiff's real property [defendants] claim a right [which] . is adverse to plaintiff's interest."
Accordingly, in order to state a claim to quiet title, plaintiff must assert the requisite strength of her own title.
As stated in the Opinion, plaintiff is unable to allege the supremacy of her own title because she no longer has any ownership interest in the disputed property:
Opinion at 19;
Plaintiff's second amended complaint alleges no new facts relating to her ability to cure the default or defendants' right to foreclose; as such, plaintiff does not provide a basis upon which she is entitled to quiet title. Rather, because plaintiff was legitimately in default, she no longer has an ownership interest in the disputed property. Thus, the fact that defendants allegedly impermissibly split the Note from the Deed of Trust does not advance plaintiff's claim. Therefore, defendants' motion to dismiss is granted in regard to plaintiff's fourth claim.
Plaintiff's fifth claim seeks the removal of cloud on title and is substantively the same claim as alleged in her first amended complaint.
Although unclear, plaintiff seems to challenge again the propriety of defendants' actions based on the premise that MERS is an invalid beneficiary under the Deed of Trust and that MERS' actions split the Note from the Deed of Trust.
As a preliminary matter, it should be noted that an action to remove cloud on title is distinct from an action to quiet title.
As such, unlike a claim to quiet title, a claim to remove cloud on title is not contingent upon the strength of plaintiff's own title. Accordingly, a claim to remove cloud can be sustained where the plaintiff merely alleges that the defendant has filed latently invalid encumbrances.
That is precisely what occurred here; plaintiff expressly alleges that MERS' involvement in the foreclosure process renders defendants' seemingly valid encumbrances "fictitious" or "fraulent" and, as such, invalid.
Plaintiff's invalid encumbrance claim, pursuant to Or. Rev. Stat. § 205.470,
Plaintiff misconstrues the nature of this statutory claim; while there are no published cases discussing invalid claims of encumbrance brought under Chapter 205 of the Oregon Revised Statutes, the plain language makes clear that the statute was not intended to protect privates citizens. Rather, Chapter 205 governs county clerks. As such, the statute prohibits county clerks from "accept [ing] for filing an invalid claim of encumbrance," such as "a claim of encumbrance against the property of a federal official or employee or a state or local official or employee based on the performance or nonperformance of the official duties of the official or employee." Or. Rev. Stat. §§ 205.455 (1), (2);
Thus, statutory invalid encumbrance claims seek to prevent citizens from filing encumbrances against the public or private property of a government employee as retribution for the perceived damage that employee committed pursuant to the exercise of his or her official duties.
Because plaintiff is not a government official or employee, and because defendants did not file encumbrances against the disputed property as retribution for official governmental duties, plaintiff cannot state a statutory claim for invalid encumbrance.
Even if plaintiff could sustain such a claim, however, her pleadings still fail, as her allegations are vague and conclusory. As stated in the Opinion, the fact that these documents were recorded in Lane County does not establish that they were in anyway invalid. Opinion at 21. Plaintiff does not explain how these documents are "defective"; as such, plaintiff cannot state a claim for relief because she does not allege "sufficient . . . underlying facts" in support of her claim.
Moreover, plaintiff's assertion that defendants had knowledge of the allegedly invalid encumbrances "because they each had persons in their employ who . . . create[d] fictitious documents" is similarly vague and conclusory. Thus, plaintiff is again merely asserting the elements of a claim, without identifying any particular facts entitling her to relief.
Further, because the underlying basis of this claim is defendants' alleged fraud in creating and recording the allegedly "defective" documents, plaintiff must meet the heightened pleading requirements outlined in Fed. R. Civ. P. 9(b). As such, plaintiff's claim fails for this additional reason. Defendants' motion is therefore granted as to plaintiff's sixth claim.
Plaintiff's final claim is for civil perj ury. Plaintiff alleges that Stacy Blouin, an employee of BNYM, lied in her affidavit by testifying that she had not received a request for a meeting or loan modification. SAC ¶ 62. In addition, plaintiff contends that "[tlhe assertion that Stacy L. Blouin was acting for BNYM was knowingly false [because] Ms. Blouin was acting for [BAC and ReconTrust]."
First, plaintiff has not cited to, and this Court is not aware of, any authority which supports a civil cause of action for perjury. The Oregon statutes that govern perjury are all criminal in nature.
Second, even if perjury was a cognizable civil claim, plaintiff has not alleged any facts, beyond mere conclusory allegations, that Ms. Blouin lied in her affidavit or was acting improperly in regard to BNYM. In support of her claim, plaintiff attaches a copy of a "declaration of hardship" letter she sent to the Bank of America Home Loans program and a loan modification request form that she sent to "BAC — Home Retention Division — (Any Agent)." SAC Ex. B, at 3-5. These documents, however, fail to demonstrate that Ms. Blouin actually received or had knowledge of these documents, especially since they were not addressed to her. As such, plaintiff fails to state a claim for civil perj ury; accordingly, defendants' motion is granted in that regard.
Defendants' motion to dismiss (doc. 55) is GRANTED in part and DENIED in part as follows: defendants' motion is GRANTED as to plaintiff's claims for fraud, quiet title, invalid incumbrance, and civil perjury; defendants' motion is DENIED, with leave to renew, as to plaintiff's first claim for declaratory judgment, third claim for declaratory judgment, and claim to remove cloud on title, as those claims are stayed pending the Oregon Supreme Court's resolution, upon certification, of issues relating to MERS' role in the nonjudicial foreclosure process.
Plaintiff, however, is GRANTED leave to replead her fraud claim within twenty days of the date of this opinion. Defendants are enjoined from foreclosing until all issues regarding the disputed property are resolved. Finally, defendants' request for oral argument is DENIED as unnecessary.
IT IS SO ORDERED.
