BROWN, Judge.
This matter comes before the Court on the Motion (#59) to Dismiss by Defendants Mortgage Electronic Registration System (MERS), CitiMortgage (CM), and Cal-Western Reconveyance Corporation (CWRC)
The following facts are drawn from Plaintiffs' First Amended Verified Complaint (#55).
On approximately January 24, 2007, Plaintiffs entered into a refinance loan on their home, which is located at 401 Cherry Avenue, Oregon City, Oregon 97045. In exchange for their promise to repay the loan secured by a Deed of Trust in their home (which appears to have been recorded on January 31, 2007), Plaintiffs accepted a loan of approximately $333,000. The loan named MortgageIt, Inc. (MIT) as the Lender and Western Title and Escrow as Trustee and appointed MERS as nominee of the Lender and as beneficiary of the Deed of Trust. Although MIT is designated as the Lender in the loan documents, Plaintiffs allege MIT did not fund the loan, is not the lender in fact, and was instead a loan broker.
Plaintiffs allege they do not owe any obligation to the named Defendants and have not defaulted on the loan at issue.
In August 2010 Plaintiffs sought a loan modification with CM. During that process the parties failed to reach an agreement to restructure the loan, and Plaintiffs assert CM instructed them to stop making payments on their mortgage.
On March 15, 2011, MERS assigned the Deed of Trust to CM and CM appointed CWRC as Trustee. Both actions were recorded in the Clackamas County records. On April 7, 2011, Plaintiffs received the Notice of Default and Election of Sale and the Trustee Notice of Sale from CWRC. These documents also were recorded in the Clackamas County records. Plaintiffs allege these recorded documents reflect unlawful or potentially fraudulent acts. Paragraphs 15-17 of the Amended Complaint set out Plaintiffs' specific allegations in this regard:
In their Amended Complaint Plaintiffs seek declaratory relief "as to the legal duties of the parties and their agents, especially those claiming Plaintiffs to be in
Plaintiffs seek the following specific declaratory relief and an award of costs in their Amended Complaint:
Am. Compl. at 10-11.
Although the nonjudicial sale of Plaintiffs' home was originally scheduled for August 1, 2011, the parties reached an agreement to postpone the sale to September 1, 2011. Plaintiffs filed their original Complaint for Emergency Declaratory Relief on August 17, 2011. After a hearing, the Court enjoined the sale of Plaintiffs' home by issuing a Temporary Restraining Order (TRO)(#7) on August 31, 2011. At the hearing on August 31, 2011, the Court ordered Plaintiffs to post security in the amount of $500.00, which Plaintiffs paid on September 8, 2011.
On September 30, 2011, CM and MERS filed their Motion (#20) to Modify Security for the TRO seeking a monthly security amount equal to the monthly payment owed on the balance of Plaintiffs' mortgage.
Defendants each subsequently filed their initial Motions to Dismiss. On November 10, 2011, CM and MERS filed their Motion (#38) to Vacate the TRO.
At the hearing on November 10, 2011, the Court granted the Motion by Defendants to modify Plaintiffs' security and set a briefing schedule for the parties to state their positions as to the fair rental value of the home. On November 15, 2011, 2011 WL 5592392, the Court issued an Opinion and Order (#42) in which the Court (1) granted the Motion to Dismiss by DB and MIT on the ground that there is not any justiciable legal dispute between Plaintiffs and DB or MIT; (2) denied the Motion to Dismiss by CWRC on the ground that there is a legal dispute between Plaintiffs and CWRC, the Trustee of the Deed of
In its Order (#52) issued December 12, 2011, the Court modified Plaintiffs' security requirement for maintaining the TRO to $2,000 per month (the amount determined by the Court to represent the fair rental value of Plaintiffs' home) to be paid on the fourth of each month.
Plaintiffs filed their Amended Complaint on December 15, 2011, in which they seek a declaratory judgment as set out above and allege violations of Oregon Revised Statute § 86.735 against CM, MERS, and CWRC. Plaintiffs again include MIT and DB as Defendants in their Amended Complaint and allege almost the identical facts and claims as in their original Complaint.
On December 30, 2011, CM and MERS filed a Motion (#59) to Dismiss the Amended Complaint. On January 3, 2012, Defendants MIT and DB also filed a Motion (#63) to Dismiss the Amended Complaint.
At the hearing on January 4, 2012, the Court heard argument on the Motion to Vacate the TRO and the Motions to Dismiss. Plaintiffs stated they could not afford and did not intend to pay the modified security amount to maintain the TRO. At the hearing and in its Opinion and Order (#67) issued on January 5, 2012, the Court granted the Motion to Dismiss filed by Defendants MIT and DB for failure to state a claim. The Court took under advisement the remaining Motion (#59) to Dismiss and the still-pending Motion (#38) to Vacate the TRO by MERS, CM, and CWRC.
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). See also Bell Atlantic v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
The Supreme Court further clarified in Iqbal the requirements for a pleading to survive a motion to dismiss:
129 S.Ct. at 1949-50.
"[A] complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to `state a claim to relief that is plausible on its face.'" Hebbe v. Pliler, 627 F.3d 338, 341-42 (9th Cir.2010)(quoting Iqbal, 129 S.Ct. at 1949 (2009), and Twombly, 550 U.S. at 570, 127 S.Ct. 1955). A pro se plaintiff's complaint "must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007)(per curiam). Thus, the court must construe pro se filings liberally. If a plaintiff fails to state a claim, "[l]eave to amend should be granted unless the pleading `could not possibly be cured by the allegation of other facts,' and should be granted more liberally to pro se plaintiffs." Ramirez v. Galaza, 334 F.3d 850, 861 (9th Cir.2003)(quoting Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir.2000)).
The Declaratory Judgment Act provides in relevant part that "[i]n a case of actual controversy within its jurisdiction,... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). "The limitations that Article III imposes upon federal court jurisdiction are not relaxed in the declaratory-judgment context. Indeed, the case-or-controversy requirement is incorporated into the language of the very statute that authorizes federal courts to issue declaratory relief." Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1129 (9th Cir.2005). As the Supreme Court held in MedImmune Inc. v. Genentech Inc.:
549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007). The Supreme Court has emphasized the district court's "unique and substantial" discretion as to whether to issue declaratory judgments. Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). The Court underscored "[i]f a district court, in the sound exercise of its judgment, determines after a complaint is filed that a declaratory judgment will serve no useful purpose, it cannot be incumbent upon that court to proceed to the merits before staying or dismissing the action." Id. at 288,
Defendants CM, MERS, and CWRC move the Court to Dismiss Plaintiffs' Amended Complaint under Federal Rule of Civil Procedure 12 for failure to state a claim. Specifically, Defendants contend they have met the requirements under Oregon Revised Statute § 86.735 that permits CWRC, as trustee of the Deed of Trust on Plaintiffs' home, to proceed with a nonjudicial foreclosure. In support of their Motion, Defendants provide a copy of the executed and recorded Deed of Trust with the Declaration (#60) of Leta E. Gorman.
Oregon Revised Statute § 86.735, a part of the Oregon Trust Deed Act, provides in relevant part:
In its Opinion and Order (#67), the Court stated:
Opin. and Order (#67) at 6-7.
Viewed in its most liberal terms, Plaintiffs' Amended Complaint sets out five sets of facts that they contend entitle them to the declarations they seek from this Court: (1) MIT was not the lender-in-fact in the original loan transaction, which nullifies each of the legal documents stemming from the original mortgage transaction; (2) MERS is not the beneficiary of the Deed of Trust under Oregon law; (3) Plaintiffs are not in default, and, in any event, Defendants have not provided sufficient proof that they are entitled to payments under Plaintiffs' mortgage; (4) there are unrecorded assignments of Plaintiffs' mortgage, and Defendants, therefore, are not in compliance with § 86.735 and cannot proceed with a nonjudicial foreclosure; and (5) irregularities with the documents related to Plaintiffs' mortgage that have been recorded in the Clackamas County records preclude nonjudicial foreclosure.
Plaintiffs allege MIT did not actually fund the loan even though MIT was designated as the lender in the original lending documents, the Promissory Note, and the Deed of Trust. Thus, Plaintiffs allege MIT was not the lender in the original transaction but was instead a mortgage broker.
As noted, the Court dismissed MIT as a party to this matter for the reasons explained in the Court's Opinion and Order (#42) issued on November 15, 2011; at the hearing on January 4, 2012; and in its Opinion and Order (#67) issued on January 5, 2012. Although Plaintiffs maintain they have not alleged and do not intend to allege a claim of fraud or wrongdoing against MIT, Plaintiffs, nevertheless, assert the following in their Amended Complaint: "If MIT was not the Lender, all transactions and the attendant documents based on that fact are a nullity, not the least of which is the following: 1) Promissory Note, 2) Deed of Trust, 3) Assignments, 4) Substitution of Trustee, 5) Notice of Default and Election to Sell, and 6) Notice of Trustee Sale."
Plaintiffs admit they received the proceeds of the loan in the sum of $333,000 for which they bargained in the original mortgage transaction. Plaintiffs, however, assert those funds were provided by a third party rather than by MIT. Assuming at this stage that MIT received funding from some external "lender" to fund Plaintiffs' loan, the Court must determine whether this fact would entitle Plaintiffs to the declaratory relief sought by Plaintiffs.
As noted, the Court has instructed Plaintiffs numerous times to explain the legal basis for this cause of action. The Note and the Deed submitted with Plaintiffs' Amended Complaint appoint MIT the "Lender" that Plaintiffs promised to pay. The Court remains unaware of any case, statute, or regulation that requires a party to a mortgage transaction to be the entity from which the funds for the loan originate in order for that party to be designated the lender in the mortgage documents. Thus, Plaintiffs have not shown a plausible basis for relief based on the alleged fact
Accordingly, the Court grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
To the extent that Plaintiffs continue to maintain MERS is a sham beneficiary or that MERS cannot be a beneficiary of the Trust Deed, the Court has already addressed those arguments in its Opinion and Order (#42) issued on November 15, 2011, and similar arguments in its recent opinion in Reeves v. Recontrust Co., N.A., No. 11-CV-1278-BR, Docket No. 12, 846 F.Supp.2d 1149, 2012 WL 652681 (D.Or. Feb. 28, 2012)(citing James v. Recontrust Co., No. 11-CV-324-ST, 2011 WL 3841558, at *6-9 (D.Or. Aug. 26, 2011)(assesses recent federal and state judicial opinions in Oregon with respect to the involvement of MERS as nominee of a lender and beneficiary of a deed of trust in a mortgage transaction and reaches the same conclusion as this Court)). The Court need not repeat those arguments here.
Although District Judge Michael H. Simon recently issued an Opinion and Order declining to adopt some of Magistrate Judge Janice M. Stewart's rationale in James on which this Court relied in Reeves, the Court respectfully adheres to the Magistrate Judge's reasoning and to the analysis of District Judge Michael Mosman in Beyer v. Bank of America in which he concluded language similar to that in the Deed of Trust at issue renders MERS a beneficiary of the Deed under Oregon law. See Beyer v. Bank of Am., N.A., 800 F.Supp.2d 1157, 1159-62 (D.Or. Aug. 2, 2011).
In summary, the Court reiterates its conclusion that Plaintiffs have not stated a claim based on the involvement of MERS or on a lack of authority for MERS to act as a beneficiary of the Deed and to transfer the mortgage in accordance with the express provisions of the Deed.
Plaintiffs assert they are not in default, and, in any event, Defendants have not proven they are entitled to payment on the Note. Accordingly, Plaintiffs allege Defendants have failed to comply with Oregon Revised Statute § 86.735(2).
Plaintiffs' assertion that they are not in default is an implausible one. Plaintiffs have provided the Court with the Note and the Deed for their mortgage. The Note requires monthly payments on the loan until February 1, 2037; Plaintiffs have admitted to this Court that they stopped making payments on their loan on or about September 2010 without paying off the balance of the loan; and the Notice of Default and Election to Sell indicates Plaintiffs have failed to make their monthly payments on an outstanding principal balance of $321,016.56. Plaintiffs do not explain why their failure to make the loan payments does not constitute a default on their loan.
In addition, Plaintiffs' assertion that they are not in default to any Defendant is similarly implausible in light of the fact that Plaintiffs negotiated with CM in an effort to modify the terms of their mortgage loan to make it more affordable. To enter into such negotiations, Plaintiffs must have believed CM had the authority to make modifications to their loan. In any event, CM is not the party responsible for the foreclosure in this matter. CWRC is the appointed Trustee under the Trust
As noted, to invoke a nonjudicial foreclosure under the Oregon Trust Deed Act, § 86.735(2) requires:
Thus, the statute requires only a default on an obligation secured by a deed of trust that authorizes a sale in the event of a default; i.e., it does not, as Plaintiffs contend, require identification of the entity entitled to payment of the obligation. As the Court stated at the hearing on January 4, 2012, and in its Opinion and Order (#67) issued on January 5, 2012, Defendants do not bear the burden of proof as to any matter at this stage of the proceedings despite Plaintiffs' repeated demands in their Amended Complaint and briefing for Defendants to "prove" by "evidence admissible at trial" that Plaintiff is in default and to whom their obligation is owed. The fact that Defendants have not "proved" Plaintiffs are in default or that one of Defendants is the holder of the Note does not bear on whether Plaintiffs have stated a claim for relief in their Amended Complaint. See Stewart v. Mortgage Elec. Registration Sys., No. 09-CV-687-PK, 2010 WL 1055131, at *12 (D.Or. Feb. 9, 2010)(The Oregon Trust Deed Act "does not require presentment of the Note or any other proof of `real party in interest' or `standing,' other than the Deed of Trust."). Thus, Plaintiffs' alternate contention that Defendants have not demonstrated they have "standing" to file a Motion to Dismiss is merely another attempt to place a burden on Defendants that does not exist at this stage of the proceedings.
The Court is satisfied on this record that the conditions set out in § 86.735(2) have been met and that Plaintiffs cannot state a claim based on their allegations that they are not in default or that Defendants have not shown to whom the obligation is owed. Accordingly, the Court grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
Plaintiffs also contend Defendants have failed to meet the requirements of § 86.735(1) because they have failed to record each of the assignments of Plaintiffs' mortgage. Specifically, Plaintiffs contend their mortgage is governed by a Pooling and Servicing Agreement that securitized their mortgage and resulted in numerous assignments of their mortgage that have not been properly recorded in the Clackamas County records. Accordingly, Plaintiffs contend Defendants are not entitled to proceed with a nonjudicial foreclosure.
Beyond their general assertion that their mortgage has been assigned and transferred as a part of a pool of securitized mortgages, Plaintiffs' only specific allegation of an unrecorded assignment of their mortgage stems from their research on the internet that revealed Fannie Mae may have an interest in their mortgage. Nevertheless, the Court will assume at this stage that there have been transfers of the mortgage beyond those plainly indicated in the documents submitted with Plaintiffs' Amended Complaint.
Section 86.735(1) requires:
As noted, this record reflects the original Deed of Trust, the assignment of the Deed of Trust from MERS to CM, the appointment by CM of CWRC as the substitute Trustee, and the Notice of Default and Election to Sell have each been recorded in the Clackamas County records.
The only question before the Court raised by Plaintiffs' allegation of unrecorded transfers is whether § 86.735(1) requires any and all assignments of the mortgage to be recorded as a prerequisite to a nonjudicial foreclosure. By its plain language, § 86.735(1) applies only to transfers of a trust deed by the trustee or the beneficiary. The Oregon Trust Deed Act does not regulate transfers of promissory notes, which are themselves negotiable instruments and not conveyances of real property. The statute controls the power of foreclosure by requiring public disclosure of deeds of trust, their appointed trustees, and the transfers of those instruments. Under similar circumstances, Magistrate Judge Janice M. Stewart addressed the application of § 86.735(1) in James when analyzing the plaintiffs' contention that an assignment of their promissory note constituted an assignment of the mortgage that must be recorded:
James v. Recontrust Co., No. 11-CV-324-ST, 2011 WL 3841558, *10-11 (D.Or. Aug. 26, 2011). As noted, the Court finds Magistrate Judge Stewart's reasoning to be sound and respectfully concludes Judge Simon's later opinion does not foreclose the Magistrate Judge's interpretation of Oregon law adopted by this Court in Reeves and herein.
Plaintiffs assert their mortgage was transferred or assigned as a part of a securitization pool, but they do not allege MERS, CWRC (the present Trustee), or any prior Trustee (such as the original Trustee, Western Title and Escrow) made transfers of the Deed that have not been recorded. To the extent that Plaintiffs' allegations could be so construed, the lack of any underlying factual development renders them insufficient under Iqbal to state a legal basis for a claim. See 129 S.Ct. at 1949-50. As the Court concluded in its Opinion and Order (#67) issued on January 5, 2012, "Plaintiffs' factual allegations concerning their suspicions about transactions involving their mortgage between its origination and the issuance of the Notice of Default and Election to Sell are alone insufficient to state a legal basis for such relief." Plaintiffs rely only on conjecture as the basis for their assertion that Defendants have not recorded each of the required transactions.
Accordingly, the Court grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
Finally, Plaintiffs contend the assignment of the Deed from MERS to CM, the appointment by CM of CWRC as substitute Trustee, the Notice of Default and Election to Sell, and the Trustee's Notice of Sale each are the result of unlawful actions by Defendants or otherwise do not constitute valid recordings that satisfy § 86.735(1). Accordingly, Plaintiffs contend Defendants cannot proceed with nonjudicial foreclosure.
Plaintiffs appear to allege the Assignment of Deed of Trust (recorded in the Clackamas County records, Exhibit 9 to Plaintiffs' Amended Complaint) and the Substitution of Trustee (also recorded, Exhibit 10 to Plaintiffs' Amended Complaint) are invalid because both were executed by one person, Scott Scheiner, who purports to be both the Assistant Secretary of MERS on the Assignment and a Vice President of CM on the Substitution of Trustee.
At the hearing on January 4, 2012, the Court noted the mere fact that one person signed the Assignment and the Substitution of Trustee in a dual capacity is not enough to nullify those documents or to warrant declaratory relief. See James, 2011 WL 3841558, at *12. In order for this claim to survive the Motion to Dismiss by Defendants, the Court instructed Plaintiffs that they would need to provide some legal authority to support their theory that such a practice is illegitimate and renders the Assignment or Substitution invalid. Plaintiffs have failed to do so.
Accordingly, the Court grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
Plaintiffs also assert the Notice of Default and Election to Sell (recorded in
As the Court pointed out to Plaintiffs at the hearing on January 4, 2011, the mere fact that the Notice bears a printed date of March 23, 2011, below Wheeler's signature does not demonstrate any fraud or illegal act by the Notary who attested on March 29, 2011, that she witnessed Wheeler's signature. The time disparity that Plaintiffs seize on is insufficient to form the basis for this claim under these circumstances.
In addition, Plaintiffs' assertion that Wheeler is a "known robo-signer," coupled with the lack of any authority to support Plaintiffs' position that such a fact creates an actionable claim, is insufficient to form the basis of this claim. Plaintiffs acknowledge they are not advancing a claim for fraud and are not making any specific allegations of intentional wrong-doing by Defendants.
Accordingly, the Court grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
Plaintiffs also contend the Notice of Sale (recorded in the Clackamas County records, Exhibit 12 to Plaintiffs' Amended Complaint) is legally insufficient because the signature of Naomi Feistel on the first and second pages "is different" and the document lacks an "acknowledgement or jurat notorization." The Court's review of the signatures does not bear out Plaintiffs' assertion that they are different. They appear to be the same signature.
In addition, Plaintiffs assert the lack of an "acknowledgment" or "jurat notification" nullifies the Notice of Sale. Again Plaintiffs' allegation lacks any legal authority that requires such an acknowledgment. The Court instructed Plaintiffs at the hearing on January 4, 2012, and in its Opinion and Order (#67) issued on January 5, 2012, that Plaintiffs must provide legal authority to show their factual assertions entitle them to some form of legal relief. The Court has reviewed the detailed requirements of Oregon law for Notices of Sale, and they do not require the acknowledgment that Plaintiffs assert is mandatory. See Or.Rev.Stat. § 86.745. Thus, the Court does not find any deficiency in the Notice of Sale under § 86.745 and, therefore, grants Defendants' Motion to Dismiss as to this basis for declaratory relief.
In summary, the Court has again reviewed each of Plaintiffs' alleged bases for declaratory relief and has concluded Plaintiffs have failed to state factual and legal grounds on which relief could be granted. Accordingly, the Court
As noted, the Court has "unique and substantial discretion in deciding whether to declare the rights of litigants" under the Declaratory Judgments Act even when there is an actual justiciable dispute between the parties. Wilton, 515 U.S. at 286-87, 115 S.Ct. 2137. Based on the foregoing and on the record as a whole, the Court concludes there is not any basis nor compelling reason for the Court to declare the rights of the parties in this matter. Thus, the Court declines to do so and, in
Defendants move the Court to vacate the TRO (#7) in effect since August 31, 2011.
A party seeking a temporary restraining order or preliminary injunction must demonstrate (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 129 S.Ct. 365, 374, 172 L.Ed.2d 249 (2008). "The elements of [this] test are balanced, so that a stronger showing of one element may offset a weaker showing of another. For example, a stronger showing of irreparable harm to plaintiff might offset a lesser showing of likelihood of success on the merits." Alliance For The Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir.2011) (citing Winter, 129 S.Ct. at 392).
The Court's analysis of the second and fourth factors are unchanged from the Court's original analysis in its TRO (#7) issued on August 31, 2011. In addition, the Court addressed the balance of the equities in this matter in its Opinion and Order (#67) issued on January 5, 2012:
Opin. and Order (#67) at 2-3.
In light of the foregoing, the fact that Plaintiffs have lived in their home since approximately September 2010 without paying their mortgage, and the costs to Defendants associated with this litigation, the Court now concludes the equities favor Defendants. Accordingly, the final factor the Court must weigh is Plaintiffs' likelihood of success on the merits.
The Court's initial determination that Plaintiffs had shown a likelihood of success on the merits rested on several factors: the impending nature of the nonjudicial foreclosure and scheduled sale of Plaintiffs' home, the recent unsettled state of the law in this area, and the nature and extent of the allegations in the original Complaint filed by pro se Plaintiffs. In light of the Court's assessment of the equities, the irreparable nature of the loss of Plaintiffs' home, and the Court's perception that there would only be a "short delay" of the foreclosure while determining whether Plaintiffs' Complaint had merit, the Court found on August 31, 2011, that Plaintiffs had demonstrated a sufficient likelihood of success to sustain a temporary intervention by the Court.
For these reasons, the Court
The Court
IT IS SO ORDERED.
