PHILIP A. BRIMMER, District Judge.
This matter is before the Court on the Recommendation of United States Magistrate Judge (the "Recommendation") [Docket No. 30] filed on August 3, 2012.
The undisputed facts are as follows. On June 26, 2006, plaintiffs Michelle and Richard L. Garrett refinanced their home mortgage loan with defendant BNC Mortgage, Inc. ("BNC"). Docket No. 1 at 5, ¶¶ 12-13; Docket No. 22 at 2. In early 2009, plaintiffs defaulted on the loan. Docket No. 1 at 8, ¶ 32. In May 2011, Mr. Garrett filed for bankruptcy. Docket No. 1 at 11, ¶ 50; Docket No. 22 at 2. U.S. Bank, N.A. ("U.S.Bank") filed a motion for relief from the automatic stay, which the bankruptcy court granted in September 2011.
On December 12, 2011, plaintiffs, acting pro se, brought this case against BNC, Mortgage Electronic Registration Systems, Inc. ("MERS"), U.S. Bank, Wells Fargo Home Mortgage, Inc. ("Wells Fargo"),
Defendants U.S. Bank, Wells Fargo, and MERS
In the absence of an objection, the Court may review a magistrate judge's recommendation under any standard it deems appropriate. See Summers v. Utah, 927 F.2d 1165, 1167 (10th Cir.1991); see also Thomas v. Arn, 474 U.S. 140, 150, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985) ("[i]t does not appear that Congress intended to require district court review of a magistrate's factual or legal conclusions, under a de novo or any other standard, when neither party objects to those findings"). However, the district court must review de novo any part of a magistrate judge's recommendation that has been properly objected to. Fed.R.Civ.P. 72(b)(3).
The moving defendants challenge plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6). Dismissal of a claim under Rule 12(b)(6) is appropriate where the plaintiff fails to state a claim upon which relief can be granted. For a complaint to state a claim, it must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. (8)(a)(2). Rule 8(a)'s "short and plain statement" language requires that a plaintiff allege enough factual matter that, taken as true, makes her "claim to relief ... plausible on its face." Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir.2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). This "plausibility" standard requires that relief must plausibly follow from the facts alleged, not that the facts themselves be plausible. Bryson, 534 F.3d at 1286. In considering a plaintiff's claims, the Court "must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir.2007).
Because plaintiffs are proceeding pro se, the Court construes their pleadings liberally. Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972); Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991).
Plaintiffs allege that defendants violated § 1692f of the Fair Debt Collection Practices Act ("FDCPA"), which prohibits "[t]aking or threatening to take any nonjudicial action to effect dispossession or disablement of property if — (A) there is no present right to possession of the property claimed as collateral through an enforceable security interest." 15 U.S.C. § 1692f(6)(A). Plaintiffs also allege that defendants U.S. Bank and Wells Fargo violated the Colorado FDCPA ("CFDCPA"), which is patterned on federal law, Flood v. Mercantile Adjustment Bureau, LLC, 176 P.3d 769, 772 (Colo. 2008), by failing to provide a written notice outlining the amount owed and the name of the secured creditor and by failing to
The magistrate judge recommended denying the motion to dismiss with respect to plaintiffs' federal and state debt collection claims against defendants U.S. Bank and Wells Fargo. Docket No. 30 at 10-13. U.S. Bank objects on the grounds that plaintiffs' claims are precluded by the bankruptcy court's grant of relief from the automatic stay and that non-judicial foreclosure is not debt collection activity subject to the FDCPA. Docket No. 32 at 6-9. Wells Fargo objects on the ground that, in this case, it did not act as a debt collector within the meaning of the FDCPA or the CFDCPA. Docket No. 32 at 8-10.
Defendant U.S. Bank argues that plaintiffs' first and second claims for relief, pursuant to the FDCPA and CFDCPA, are precluded because they are premised on the underlying assertion that U.S. Bank lacked standing to foreclose, which, U.S. Bank argues, was determined by the bankruptcy court when it granted relief from the automatic stay and denied Mr. Garrett's motion for reconsideration of that order.
Issue preclusion bars relitigation of specific issues when (1) there has been a final adjudication on the merits of (2) an issue identical to one in the current proceeding, and (3) the party against whom the doctrine is invoked was a party, or in privity with a party, to the previous adjudication in which he or she had (4) a full and fair opportunity to litigate the issue. Moss v. Kopp, 559 F.3d 1155, 1161 (10th Cir.2009). An issue is actually litigated when it is "properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined." RESTATEMENT (SECOND) OF JUDGMENTS § 27, cmt. d.
Relief from the automatic stay is not a final adjudication of a party's ownership interest in property because it requires a party to show only a colorable claim of a lien on estate property in order to prevail. See, e.g., In re Mullarkey, 536 F.3d 215, 226 (3d Cir.2008) ("relief from a stay is obtained by a simple motion, Fed. R. Bankr. P. 4001, and it is a `contested matter,' rather than an adversary proceeding"); Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 32 (1st Cir.1994) ("The limited grounds set forth in the statutory language, read in the context of the overall scheme of § 362, and combined with the preliminary, summary nature of the relief from stay proceedings, have led most courts to find that such hearings do not involve a full adjudication on the merits of claims, defenses, or counterclaims, but simply a determination as to whether a creditor has a colorable claim to property of the estate."); Estate Const. Co. v. Miller & Smith Holding Co., Inc., 14 F.3d 213, 219 (4th Cir.1994) ("Hearings to determine whether the stay should be lifted are meant to be summary in character. Thus, as the district court held, counterclaims such as fraud are not precluded later if not raised at this stage."); In re Rexotech Cal., Inc., 968 F.2d 1224 (Table), 1992 WL 168932, at *2 (10th Cir.1992) ("a decision on relief from stay would not be a full adjudication of the merits of the lien interest"); Matter of Vitreous Steel Prods. Co., 911 F.2d 1223, 1234 (7th Cir.1990) ("Collateral
In contrast, under Colorado law, a party has standing to foreclose only if it is the "holder of an evidence of debt" with respect to the property, i.e., the "person in actual possession of or person entitled to enforce an evidence of debt." Colo.Rev. Stat. §§ 38-38-100.3(10), 38-38-101; see Niederquell v. Bank of Am., N.A., No. 11-cv-03185-MSK-MJW, 2012 WL 1578060, at *5 (D.Colo. May 4, 2012). Although Colorado law permits a party, referred to as a "qualified holder," to foreclose on real property without producing the original evidence of debt or proper assignment thereof, Colo.Rev.Stat. § 38-38-101(2)(b), foreclosure proceedings do not extinguish claims that other parties may have against the qualified holder regarding its standing to foreclose. Colo.Rev.Stat. § 38-38-101(2)(c) ("In the event that a foreclosure is conducted where the original evidence of debt, proper indorsement or assignment, or original recorded deed of trust or certified copy thereof has not been produced, the only claims shall be against the" qualified holder).
Here, plaintiffs allege that U.S. Bank, by virtue of its role as trustee of the loan pool containing plaintiffs' loan, lacked standing to foreclose. Docket No. 1 at 13, ¶ 64. They further allege that the note was never assigned to U.S. Bank and thus that U.S. Bank was never in actual possession of or entitled to enforce the evidence of debt. Docket No. 1 at 14-15, ¶¶ 70, 74, 76, 77. These are questions of state law beyond the scope of whether U.S. Bank had a "colorable claim" of a lien on the property. See In re Roberts, 367 B.R. at 687. Moreover, the bankruptcy court did not issue any findings of fact or conclusions of law regarding U.S. Bank's standing under state law to foreclose. See Docket Nos. 22-3, 22-7 ("The Court has reviewed the request to reconsider and the within [sic] case file, and finds that cause has not been shown to grant the Debtor/Respondent's late-filed request to reconsider this Court's Orders vacating the evidentiary hearing and granting Movant relief from the automatic stay"). Thus, the issue of U.S. Bank's standing to foreclose was not decided by the bankruptcy court and is not precluded by that court's order granting relief from the automatic stay.
Defendant U.S. Bank argues that it is not subject to the fair debt collection statutes because a non-judicial foreclosure proceeding is not a debt collection activity. Docket No. 32 at 9. Defendant Wells Fargo argues that it is not a debt collector because the fair debt collection statutes do not apply to mortgage loan servicers. Docket No. 32 at 9-10.
The FDCPA defines a debt collector as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects ... debts owed or due or asserted to be owed or due another."
The Tenth Circuit has not resolved the question of whether non-judicial foreclosure is debt collection under the meaning of the fair debt collection laws. See Maynard v. Cannon, 401 Fed.Appx. 389, 395 (10th Cir.2010) ("We need not resolve this debate here. For the purposes of this case, we assume non-judicial foreclosures are covered by the FDCPA."); see also Huckfeldt v. BAC Home Loans Serv., LP, No. 10-cv-01072-MSK-CBS, 2011 WL 4502036, at *5 (D.Colo. Sept. 29, 2011) ("Because Maynard does nothing more than highlight the issue without resolving it, it is of little assistance. However, its framing of the issue is helpful to this Court's resolution of the issue. Maynard notes that the primary justification for treating non-judicial foreclosures as falling outside of FDCPA protection is that such proceedings do not result in an in personam judgment against the debtor. This Court finds that justification to be unnecessarily semantic.... no reasonable argument can be made that the creditor can receive proceeds from the foreclosure yet refuse to credit them against the debtor's balance.").
Regardless of whether non-judicial foreclosure constitutes debt collection, a party who initiates non-judicial foreclosure without standing to do so may be found in violation of § 1692f, which prohibits "[t]aking or threatening to take any nonjudicial action to effect dispossession or disablement of property if — (A) there is no present right to possession of the property claimed as collateral through an enforceable security interest." 15 U.S.C. § 1692f(6); see Rousseau v. Bank of N.Y., No. 08-cv-00205-PAB-BNB, 2009 WL 3162153, at *8 (D.Colo. Sept. 29, 2009) (a claim alleging defendant violated § 1692f(6) by foreclosing without a present right to possess plaintiff's property is plausible); Mayhew v. Cherry Creek Mortg. Co., Inc., No. 09-cv-00219-PAB-CBS, 2010 WL 935674, at *12 (D.Colo. Mar. 10, 2010); see also Colo.Rev.Stat. § 12-14-108(1)(f)(i).
In addition, an attempt to collect money in conjunction with a non-judicial foreclosure proceeding may fall within the terms of the FDCPA. See McDaniel v. S. & Assocs., P.C., 325 F.Supp.2d 1210
However, the fact that an entity identifies itself as a debt collector,
Here, plaintiffs allege that, because "there has never been any indication that the foreclosing entity had a right to possession of the property claimed as collateral through an enforceable security interest," defendants violated § 1692f(6). Docket No. 1 at 18, ¶ 91. In support of this assertion, they allege that U.S. Bank's status as trustee of the pool containing plaintiff's loan deprived it of standing to foreclose, that public records do not disclose any assignment of plaintiffs' loan to U.S. Bank, that U.S. Bank has no other evidence of assignment, and that U.S. Bank is not in possession of documents evidencing the chain of title. Docket No. 1 at 13-15, ¶¶ 64, 66, 68, 74-77. These allegations are sufficient to state a claim under the FDCPA against U.S. Bank, which executed the non-judicial foreclosure on plaintiffs' property. See Niederquell, 2012 WL 1578060, at *5-*6 ("The Plaintiffs have alleged that Mellon had no interest in the promissory note because it was never properly assigned by Countrywide. The Plaintiffs further allege that Bank of America represented that it held the promissory note, and that the record beneficiary of the deed of trust is neither Countrywide nor Bank of America. These facts, if true, plausibly challenge whether Mellon held evidence of the indebtedness sufficient to have standing to request a public trustee's sale and obtain a Rule 120 Order."); Rousseau, 2009 WL 3162153, at *8.
Thus, plaintiffs' debt collection claims survive as to defendant U.S. Bank but not as to defendant Wells Fargo.
The magistrate judge recommended denying the motion to dismiss with respect to claims seven through thirteen, to the extent they assert violations of Colo.Rev. Stat. §§ 38-40-105, 12-61-904.5, and 12-61-911. Docket No. 30 at 15. The moving defendants object, arguing that plaintiffs' complaint does not assert any allegations under these statutes and that, if it does, such claims should be dismissed because the cited statutes apply only to mortgage loan originators. Docket No. 32 at 3-4.
Claims seven through thirteen are phrased similarly and thus may be considered together. As an example, plaintiffs' seventh claim for relief is headed:
Docket No. 1 at 22. The claim states in pertinent part:
Docket No. 1 at 23, ¶ 119. The moving defendants argue that this claim only alleges a violation of the CCPA. Docket No. 32 at 4 (the moving defendants "believed that this articulated a cause of action under the CCPA that relied on an alleged statutory violation for the `deceptive trade practice' that has to be established as an element of a CCPA claim."). This argument ignores the heading of the claim, which includes both statutes. Their argument also reads the language of the claim too narrowly. Plaintiffs state that defendants acted "in violation of § 38-40-105(1)(b)." Docket No. 1 at 23, ¶ 119. Construing the complaint liberally in light of plaintiffs' pro se status, see Haines, 404 U.S. at 520-21, 92 S.Ct. 594, the Court finds that plaintiffs allege violations of Colo.Rev.Stat. §§ 38-40-105, 12-61-904.5, and 12-61-911, in addition to violations of the CCPA.
The moving defendants did not address these state law claims in their motion to dismiss, instead raising for the first time in their objections to the Recommendation the argument that the cited statutes do not apply to them. Docket No. 22; Docket No. 32 at 3 ("The Magistrate Judge correctly noted that the Moving Defendants did not address the alleged statutory violations contained in claims seven through thirteen in their Motion to Dismiss.... The Moving Defendants, however,
"Issues raised for the first time in objections to the magistrate judge's recommendation are deemed waived." Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir. 1996). As the moving defendants did not include these arguments in their motion to dismiss, depriving plaintiffs of an opportunity to respond, the Court will not consider these arguments at this juncture.
Thus, defendants' motion to dismiss is denied with respect to plaintiffs' non-CCPA state law claims.
The Court has reviewed the parts of the Recommendation to which defendants did not object and determined that there is "no clear error on the face of the record."
