KRISTEN L. MIX, Magistrate Judge.
This matter is before the Court on the
On August 18, 2006, Plaintiffs executed a Deed of Trust and initial mortgage note (the "Note") in connection with purchasing a piece of real property situated in Larimer County, Colorado at 245 W. 4th St, Loveland CO 80537 (the "Property"). Compl. [#1] ¶ 28. Chase was the lender on the mortgage. Id.
Chase recorded the Deed of Trust on August 22, 2006, with the county recorder. Id.; Ex. A to Compl. [#1-1] at 1-21; Ex. B to Compl. [#1-1] at 22-24. The Deed of Trust designated the lender, Chase, as the beneficiary of the Deed of Trust. Ex. A to Compl. [#1-1] at 2 ¶ C, 3 ¶ D, 13 ¶ 20. The Deed of Trust states in part:
Id. at 13 ¶ 20. The Deed of Trust further specifies that payments by the borrowers were to be made to the lender. Id. at 5 ¶ 1.
The Note is in the amount of $238,000.00 and includes an initial interest rate of 7.625%. Ex. B to Compl. [#1-1] at 23 ¶¶ 1-2. The Note provides that Plaintiffs' first payment was due on October 1, 2006, and that the last payment is due on September 1, 2021, in the form of a balloon payment of the remainder of the principal and interest due and owing at that time. Id. at 23 ¶ 3.
On the original execution date of the Deed of Trust and Note, i.e., August 18, 2006, Chase executed a document transferring the servicing rights to JPMorgan Bank, c/o Chase Home Finance LLC. Ex. C to Compl. [#1-1] at 25-27. Despite the fact that Chase was the lender on the Note and Deed of Trust, Plaintiffs assert that Chase also had to be designated as the loan servicer in order to transfer servicing to JPMorgan Bank.
On February 5, 2007, JPMorgan Chase aka Chase Home Finance LLC executed a document transferring servicing rights to Defendant Litton. Ex. D to Compl. [#1-1] at 28-30. Plaintiffs assert that because "JPMorgan Chase did not legally receive the servicing rights from Chase, it could not legally transfer those rights to Litton." Compl. [#1] ¶ 38. In April 2007, Plaintiffs discovered that they had been and were continuing to be charged "forced insurance" and escrow for tax payments by Defendant Litton. Id. ¶ 42. They wrote to Defendant Litton to stop the escrow collection and to get a refund of unnecessary payments already collected by Defendant Litton. Id.; Ex. E to Compl. [#1-1] at 31-41. In June 2007, Plaintiffs received two letters from Defendant Litton. Compl. [#1] ¶ 43; Ex. F to Compl. [#1-1] at 42-44. The first letter, dated June 19, 2007, acknowledged receipt of Plaintiffs "recent communication." Id. at 43. The second letter, dated June 26, 2007, acknowledged Defendant Litton's receipt of a letter Plaintiffs had sent over a month-and-a-half earlier and removed the insurance and tax escrow account, but did nothing to resolve the escrow payments Defendant Litton had allegedly incorrectly collected previously. Id. at 44.
In December 2007, Goldman Sachs purchased Litton from C-Bass. Id. ¶ 39. In June 2011, Goldman Sachs sold Litton to Ocwen Financial Corp. ("Ocwen Corp."). Id. Ocwen Corp. renamed Litton as "Ocwen Loan Servicing LLC," i.e., Defendant Ocwen in this lawsuit. Id. Plaintiffs assert that "[t]here is no document transferring servicing from Litton to Ocwen." Id. ¶ 40.
Plaintiffs assert that the original Note was packaged into a derivative mortgage trust established by C-BASS, and that the trustee of the derivative mortgage trust was Defendant U.S. Bank. Id. ¶ 41. Plaintiffs allege that the original Note has disappeared, and that the alleged current Note holder, Defendant U.S. Bank as Trustee, does not have the Note. Id. Plaintiffs further allege that no party to this lawsuit can produce the original Note. Id. They assert, in short, that there is no document transferring beneficial interest in the Property from Chase to any party, and there is no document transferring beneficial interest to Defendant U.S. Bank as Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-MX1. Id.
On December 18, 2012, Plaintiffs created the Leland R. Sharpes and Jocelyn B. Sharpes Living Trust. Ex. G to Compl. [#1-1] at 45-46. On March 19, 2013, the plaintiffs quit-claimed the Property into the Leland R. Sharpes and Jocelyn B. Sharpes Living Trust. Ex. H to Compl. [#1-1] at 47-48. In mid-July 2013, Plaintiffs received an undated demand-for-payment letter from Defendant Ocwen. Ex. I to Compl. [#1-1] at 49-50. In late October 2013, Plaintiffs received four letters from Defendant Ocwen. The first letter contained a request from Defendant Ocwen for more financial information. Compl. [#1] ¶ 47.
Plaintiffs assert that they communicated with Defendant Ocwen repeatedly by phone and email in connection with the HAMP loan process, but experienced the following: (1) they were placed on hold and left there interminably; (2) they were told that the person they had called would not be available or had left the company; (3) they were told their application papers had been misplaced and that they needed to resubmit them; (4) they were repeatedly told that they needed to submit additional information which they had previously submitted but which could not be found by Defendant Ocwen. Compl. [#1] ¶ 51. In short, Plaintiffs allege that "[th]ey were continuously stonewalled in their attempts to establish a dialogue" with Defendant Ocwen. Id. Plaintiffs assert that "[t]he end result of this stonewalling was that [Plaintiffs were] never able to complete the HAMP transaction for which they were qualified." Id.; Ex. N to Compl. [#1-1] at 59-61.
In mid-December 2013, Defendant Ocwen sent Plaintiffs another undated demand letter. Ex. O to Compl. [#1-1] at 62-63. On January 6, 2014, Defendant Ocwen again returned a payment made by Plaintiffs despite their having agreed to this payment by telephone. Ex. P to Compl. [#1-1] at 64-65. Between December 16, 2013, and February 4, 2014, Plaintiffs corresponded by email with Defendant Ocwen, attempting to resolve the escrow situation whereby Defendant Litton first and later Defendant Ocwen continued to collect payments for a forced insurance policy and tax payments, despite the fact that Plaintiffs had informed Defendants Litton and Ocwen that Plaintiffs had their own insurance and that they were making these payments on their own. Compl. [#1] ¶ 54. Plaintiffs attempted to get accounting information, escrow balance information, payoff information, and HAMP refinancing information from Defendant Ocwen, but there was "always a reason" why there was no progress. Ex. Q to Compl. [#1-1] at 66-73.
On February 4, 2014, Plaintiffs sent a Qualified Written Request ("QWR") to Defendant Ocwen pursuant to the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) ("RESPA"). Ex. R to Compl. [#1-1] at 74-78. The QWR contained thirty-five specific requests for information. Id. On March 1, 2014, Ocwen responded to the QWR with an "entirely inadequate" seven-page response. Compl. [#1] ¶ 56. Plaintiffs assert that only a small number of their requests received an adequate response. Id. On May 12, 2014, Defendant U.S. Bank as Trustee generated a Notice of Election and Demand for Sale by Public Trustee. Ex. S to Compl. [#1-1] at 79-80.
Ultimately, Plaintiffs assert that the original Deed of Trust and Note should have remained in the custody of Chase, and that the original documents should have been transferred to U.S. Bank as Trustee when the Deed of Trust and Note were incorporated into the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-MXl (the "C-BASS Certificates"). Id. at 14 ¶ 36. Plaintiffs assert that, instead, Chase did not retain the original Deed of Trust and Note, and that U.S. Bank as Trustee did not receive the original documents when they were incorporated into the C-BASS Certificates. Plaintiffs assert that Defendants' alleged misconduct with respect to these documents is part of a pattern and practice of predatory lending, in which Defendants made loans they knew or should have known could not be repaid, thereby exposing financially unsophisticated borrowers to unwarranted risk of default and foreclosure. Compl. [#1] ¶ 58. Plaintiffs assert that the purpose of entering into the above-described mortgage loan transaction was for Plaintiffs to eventually own the Property in fee simple, but that this purpose was knowingly and intentionally thwarted and made impossible by Defendants' actions. Id. ¶ 59.
Based on the alleged foregoing conduct, Plaintiffs assert six claims: (1) slander of title, against all Defendants, id. ¶¶ 60-67; (2) fraud, against all Defendants, id. ¶¶ 68-83; (3) wrongful foreclosure, against Defendants Ocwen and U.S. Bank as Trustee, id. ¶¶ 84-112; (4) breach of the covenant of good faith and fair dealing, against all Defendants, id. ¶¶ 113-22; (5) quiet title, against Defendant U.S. Bank as Trustee, id. ¶¶ 123-28; and (6) declaratory relief "in the form of a postponement of the mandated Rule 120 hearing until this matter has been adjudicated in federal court," against all Defendants, id. ¶¶ 129-34. Plaintiffs seek compensatory damages, punitive damages, restitution, an order quieting title, declaratory relief, attorney's fees, costs, and pre-judgment interest. Id. at 28-30. In the Motions [#13, #14], Defendants seek dismissal of all claims pursuant to Fed. R. Civ. P. 12(b)(6).
The Rule 12(b)(6) standard tests "the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true." Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). To survive a Rule 12(b)(6) motion, "[t]he complaint must plead sufficient facts, taken as true, to provide `plausible grounds' that discovery will reveal evidence to support plaintiff's allegations." Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[P]lausibility refers to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiff[ has] not nudged [his] claims across the line from conceivable to plausible." Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (internal quotations and citations omitted).
"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the alleged misconduct." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, "[a] pleading that offers `labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do. Nor does the complaint suffice if it tenders `naked assertion[s]' devoid of `further factual enhancement.'" Id. (citation omitted). That said, "[s]pecific facts are not necessary[. Instead,] the statement need only give the defendant fair notice of what the. . . claim is and the grounds upon which it rests[, and is not required to] include all facts necessary to carry the plaintiff's burden." Khalik, 671 F.3d at 1192 (internal citation and quotation omitted).
"The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (citation omitted). As the Tenth Circuit has explained, "the mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims." Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). "Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of entitlement to relief.'" Iqbal, 556 U.S. at 678 (citation omitted).
The parties appear to agree that Colorado law applies to this lawsuit. The Deed of Trust provides that "[t]his Security Instrument shall be governed by federal law and the law of the jurisdiction in which the Property is located." Ex. A to Compl. [#1-1] at 12. The Property is located in Colorado. Compl. [#1] ¶ 28.
A claim for slander of title must allege four elements: (1) slanderous words, (2) falsity, (3) malice, and (4) special damages. Mackall v. JPMorgan Chase Bank, N.A., ___ P.3d ___, ___, 2014 WL 4459624, at *7 (Colo. App. Sept. 11, 2014). "Special damages exist when there was some effect on the owner's ability to sell the property." Id. "To show special damages, `[a]t a minimum, the property must be on the market for sale, and the tort must create a cloud upon the title; then the expense of legal proceedings to remove the cloud on title satisfies the damages requirement.'" Id. (quoting Skyland Metro. Dist. v. Mountain W. Enter., LLC, 184 P.3d 106, 131 (Colo. App. 2007)).
The Complaint alleges that Defendants "affect[ed] the marketability of the Property" by recording certain documents that were "the proximate cause of pecuniary loss or damage" to Plaintiffs. [#1] ¶¶ 62, 67. However, as in Mackall v. JPMorgan Chase Bank, N.A., 2014 WL 445624, at *7, "[i]mportantly, the [C]omplaint fails to allege that the property was on the market for sale. Therefore, the [C]omplaint fails to allege special damages," and this claim is properly dismissed.
Accordingly, the Court
Defendant Chase asserts that this claim is barred by the statute of limitations. Motion [#14] at 9-10. Under Colorado law, a three-year statute of limitations applies to claims for fraud and concealment. Colo. Rev. Stat. § 13-80-101(1)(c). This lawsuit was filed on October 3, 2014. Compl. [#1]. The last action alleged by Plaintiffs that is attributable to Defendant Chase occurred on February 5, 2007, i.e., much longer than three years before the Complaint was filed on October 3, 2014. See Ex. D to Compl. [#1-1] at 28-30; Compl. [#1]. Thus, the statute of limitations applies here to bar Plaintiffs' claim.
Plaintiffs argue, however, that the statute of limitations was equitably tolled until March 18, 2014.
Accordingly, the Court
Plaintiffs assert that Defendant Chase "breached the implied covenant of good faith and fair dealing by not stating its servicing rights in the Deed of Trust and Note, and by transferring the servicing rights to JPMorgan Bank without the apparent standing to do so." Response [#16] at 10.
"Every contract in Colorado contains an implied duty of good faith and fair dealing." McDonald v. Zions First Nat'l Bank, N.A., 348 P.3d 957, 967 (Colo. App. 2015) (citation omitted). "A violation of the duty of good faith and fair dealing gives rise to a claim for breach of contract." Id. (quoting City of Golden v. Parker, 138 P.3d 285, 292 (Colo. 2006)). A plaintiff is only permitted to rely on this duty "when the manner of performance under a specific contract term allows for discretion on the part of either party." McDonald, 348 P.3d at 967 (citation omitted). "Discretion in performance occurs `when the parties, at formation [of the contract], defer a decision regarding performance terms of the contract' leaving one party with the power to set or control the terms of performance after formation." Id. (quoting City of Golden, 138 P.3d at 292 (citation omitted)).
"Good faith performance of a contract involves `faithfulness to an agreed common purpose and consistency with the justified expectations of the other party.'" McDonald, 348 P.3d at 967 (quoting Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995) (citation omitted)). "Each party to a contract has a justified expectation that the other will act in a reasonable manner in its performance." McDonald, 348 P.3d at 967 (citation omitted). "When one party uses discretion conferred by the contract to act dishonestly or to act outside of accepted commercial practices to deprive the other party of the benefit of the contract, the contract is breached." Id. (citation omitted). The implied duty of good faith and fair dealing cannot, "[h]owever, . . . contradict terms or conditions for which a party has bargained." Id. (quoting Amoco Oil Co., 908 P.2d at 498 (citation omitted)). "Nor does the duty . . . inject substantive terms into the parties' contract." McDonald, 348 P.3d at 967 (quoting Amoco Oil Co., 908 P.2d at 507 n.6 (internal quotation marks omitted)). "Rather, it requires only that the parties perform in good faith the obligations imposed by their agreement." McDonald, 348 P.3d at 967 (quoting Amoco Oil Co., 908 P.2d at 507 n.6 (internal quotation marks omitted)).
Plaintiffs argue that Defendant Chase did not state its servicing rights in the Deed of Trust or Note, and that Chase therefore did not have standing to transfer servicing rights to another entity. Id. at 10. In other words, Plaintiffs appear to be arguing that in order for Chase to transfer servicing rights, the contract had to explicitly allow it to do so. Plaintiffs assert that the contract did not explicitly give Chase this right. However, the language of the contract belies this assertion: "There also might be one or more changes of the Loan Servicer unrelated to a sale of the Note." Ex. A to Compl. [#1-1] at 13 ¶ 20. This language explicitly encompasses Chase's contractual right to transfer servicing of the loan. Indeed, Chase immediately exercised this right by transferring the loan servicing rights to JPMorgan on the same day when the Deed of Trust and Note were executed. Ex. C to Compl. [#1-1] at 25-27.
Plaintiffs argue that the Deed of Trust "is ambiguous as to whom the Lender received the payments from; the instruments and payments could have been received by the Lender directly or through a servicer." Response [#17] at 7.
Furthermore, a claim for breach of the implied duty of good faith and fair dealing requires that the allegedly breaching party exercise a contractual right of discretion. McDonald, 348 P.3d at 967 (citation omitted). Because Plaintiffs have not directed the Court's attention to any contractual right of discretion that was allegedly misused by Defendant Chase, their argument is inconsistent with a claim for breach of the covenant of good faith and fair dealing. In other words, to the extent Plaintiffs allege that Defendant Chase had no discretion to convey the servicing rights,
Accordingly, the Court
In the Complaint, Plaintiffs request declaratory relief on two issues. First, Plaintiffs seek "declaratory relief in the form of a postponement of the mandated Rule 120 hearing until this matter has been adjudicated in federal court." Response [#16] at 11 (quoting Compl. [#1] ¶ 133). Plaintiffs concede that this request is moot. See Response [#16] at 11. Accordingly, the Court
Second, Plaintiffs seek "a declaration of rights and duties of the parties herein by the Court . . . to determine the actual status and validity of the mortgage loan transaction and any rights, duties, and/or obligations as to the enforcement of it." Response [#16] at 11 (quoting Compl. [#1] ¶ 132). Plaintiffs assert that this claim applies to Defendant Chase because Defendant Chase "misrepresented itself as the initial servicer of the loan without a substantiating clause in the Deed of Trust or a separate documents [sic] so stating. The plaintiffs are requesting that the court make a declaratory statement to this effect." Response [#16] at 11.
Defendant Chase disclaims any present interest in the loan and states that it has not been involved in any foreclosure proceedings against the Property. Reply [#28] at 11. Regarding the latter statement, Plaintiffs have not alleged any facts to establish that Defendant Chase was involved in any foreclosure proceedings against the Property. Regarding the former statement, Plaintiffs do not appear to explicitly argue that Defendant Chase has a present interest in the Property. However, they do argue that Defendant Chase never had the right to transfer the servicing of Plaintiffs' loan. This argument is irrefutably contradicted by the terms of the Deed of Trust and Note. See Ex. A to Compl. [#1-1] at 1-21; Ex. B to Compl. [#1-1] at 22-24. The Deed of Trust defines "Loan Servicer" as "the entity . . . that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law."
Given that Defendant Chase disclaims any interest in the loan or Property, and given the lack of non-conclusory allegations that Defendant Chase has any interest in the loan or Property, the Court finds that Plaintiff's request for declaratory judgment with respect to Defendant Chase fails to state a viable claim for relief.
Accordingly, the Court
For the same reasons discussed in Section III.A.1. above, i.e., lack of any allegation of special damages, the Court finds that Plaintiffs' claim against the Ocwen Defendants fails as well.
Accordingly, the Court
Plaintiffs' fraud claim is subject to dismissal pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b). To state a claim of fraud under Colorado law, Plaintiff must allege: "(1) a false representation of a material existing fact; (2) knowledge on the part of the one making the representation that it is false; (3) ignorance on the part of the one to whom the representation is made of falsity; (4) representation made with intention that it be acted upon; [and] (5) representation resulting in damages." Navigators Specialty Ins. Co. v. Beltman, No. 11-cv-00715-RPM, 2012 WL 5378750, at *6 (D. Colo. Nov. 1, 2012) (quoting Kinsey v. Preeson, 746 P.2d 542, 550 (Colo. 1987)). Further, pursuant to Fed. R. Civ. P. 9(b), "the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b).
The basis for Plaintiffs' fraud claim is unclear. To the extent Plaintiffs are attempting to allege fraud in the foreclosure process, they fail to allege many of the legal elements quoted above, and certainly do not allege that anyone knowingly made a false representation upon which they relied. In addition, Plaintiffs fail to "set forth the who, what, when, where and how of the alleged fraud" and do not "set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof." United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir. 2006) (citations omitted). As a result, Plaintiff's fraud claim should be dismissed pursuant to both Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 9(b). To the extent Plaintiffs are attempting to allege fraud in connection with their efforts to obtain a loan modification or to correct the escrow for tax and insurance payments, see Compl. [#1] ¶ 79, their claim suffers from the same defects. Although they allege that certain actions by Defendants may have been unfair, they have not sufficiently described how these actions were fraudulent.
Accordingly, the Court
In connection with this claim, Plaintiff seeks "[r]estitution by the return of all mortgage payments [Plaintiffs] made to [Defendants] beginning with the first payment made to them in 2006. . . ." Compl. [#1] at 29. However, Colorado does not recognize a claim for damages based on wrongful foreclosure. Fick v. U.S. Bank Nat'l Ass'n, No. 11-cv-03184-WYD-KLM, 2012 WL 5464592, at *6 n.9 (D. Colo. Sept. 10, 2012) (citing Schwartz v. Bank of Am., No. 10-cv-01225-WYD-MJW, 2011 WL 1135001, at *4 (D. Colo. Mar. 28, 2011)).
Accordingly, the Court
Plaintiffs' argument in support of this claim is meager and essentially simply refers the Court back to the Complaint. See Response [#17] at 11 (citing Compl. [#1] ¶¶ 113-122) (citing id. ¶¶ 47-54)). Plaintiffs assert that Defendant Litton breached the covenant of good faith and fair dealing "by allegedly transferring the servicing rights to Ocwen without (1) recording any such transfer, and (2) without apparent standing to do so." Compl. [#1] ¶ 118. Plaintiffs further assert that Litton breached the covenant of good faith and fair dealing "by using its `power position' in its relationship with the plaintiffs to hold them in a captive position regarding a loan modification and `forced insurance.'" Id. ¶ 119 (citing id. ¶¶ 47-54). Defendant U.S. Bank as Trustee is not mentioned anywhere in the portions of the Complaint to which Plaintiffs direct the Court's attention in connection with this claim, except that Plaintiffs mention that "there is no document transferring beneficiary interest to U.S. Bank as Trustee, and consequently no authority to initiate the foreclosure sale." Id. ¶ 121.
Plaintiffs' claim against these Defendants suffers from the same defect discussed with respect to Plaintiffs' good faith and fair dealing claim against Defendant Chase. See § III.A.3. Plaintiffs cite to no applicable case law demonstrating how Defendants Litton, Ocwen, and U.S. Bank as Trustee breached the implied duty of good faith and fair dealing. See Response [#17] at 11. Rather, Plaintiffs merely rely on Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995), for the proposition that Plaintiffs were "weaker" parties and that Defendants were "stronger" parties with respect to the contract. See Response [#17] at 11; Compl. [31] at 26 nn. 2-3. However, this general proposition does not provide support for or help explain how the implied duty of good faith and fair dealing was actually breached in these circumstances.
Plaintiffs argue that no party had the standing to transfer servicing rights to another entity, and that any such transfer should have been recorded.
In addition, to the extent Plaintiffs allege that these Defendants had no discretion over whether they were required to record any such transfer(s) between themselves, the Court notes that these allegations are inconsistent with a breach of the covenant of good faith and fair dealing. See Cockriel v. Allstate Ins. Co., No. 14-cv-01064-KLM, 2015 WL 3826790, at *7 (D. Colo. June 18, 2015). Similarly, Plaintiffs' argument that a document should have been created evidencing the transfer of interest to Defendant U.S. Bank as Trustee also fails for the same reason. Plaintiffs do not articulate how the alleged failure of Defendants to create such a document stems from a contractually-created right of discretion. In other words, there is no indication that any contractual right of discretion was misused by Defendants.
Finally, the Court returns to Plaintiffs' argument regarding the alleged loan modification and "forced insurance." See Compl. [#1] ¶¶ 47-54, 119. In part, Plaintiffs state that "[f]or 51 days, the plaintiffs attempted to resolve the escrow situation wherein Litton and subsequently Ocwen continued to collect insurance payments for a forced insurance policy and tax payments, when the plaintiffs had informed Litton and subsequently Ocwen that they had their own insurance and that they were making these payments on their own." Id. ¶ 54. However, Plaintiffs do not direct the Court's attention to any contractual provision providing Defendants with a right to exercise discretion in connection with these actions, and the implied duty of good faith and fair dealing cannot contradict terms or conditions of the contract or inject substantive terms into the contract.
Accordingly, the Court
Plaintiff's quiet title claim is asserted only as to Defendant U.S. Bank as Trustee. Compl. [#1] ¶ 128. Plaintiff asserts that Defendant U.S. Bank as Trustee does not have any right, title, estate, lien, or interest in the Property. Id. ¶ 124. However, nowhere in this claim do they assert that title to the Property should be quieted in Plaintiffs' names.
Quiet title actions are governed by Colo. R. Civ. P. 105. Hinojos v. Lohmann, 182 P.3d 692, 696 (Colo. App. 2008). Colo. R. Civ. P. 105(a) authorizes "[a]n action . . . brought for the purpose of obtaining a complete adjudication of the rights of all parties thereto, with respect to any real property and for damages, if any, for the withholding of possession." "The plaintiff in a quiet title action has the burden of establishing title superior to that claimed by the defendant." Hinojos, 182 P.3d at 697 (citing Hutson v. Agric. Ditch & Reservoir Co., 723 P.2d 736, 738 (Colo. 1986)). "Thus, the plaintiff may not capitalize on the weakness of the defendant's claim to title, but can succeed only by establishing the strength of his or her own claim to title." Hinojos, 182 P.3d at 697 (citing Sch. Dist. No. Six v. Russell, 396 P.2d 929, 932 (Colo. 1964); Fastenau v. Engel, 270 P.2d 1019, 1020-21 (Colo. 1954); Webermeier v. Pace, 552 P.2d 1021, 1025 (Colo. App. 1976), aff'd, 563 P.2d 950 (Colo. 1977)). "Accordingly, if the facts fail to show that the plaintiff has title, he or she may not attack the sufficiency of the evidence on which the court adjudged title to be in the defendant." Hinojos, 182 P.3d at 697.
Plaintiffs allege that Defendant U.S. Bank as Trustee has no claim on the property, and request that the Court affirm this allegation. Response [#17] at 11. However, as Hinojos v. Lohmann makes clear, Plaintiffs must allege a factual predicate demonstrating that they are entitled to title to the Property, and not merely allege that Defendant U.S. Bank as Trustee is not entitled any rights to the Property. Here, the allegations make clear that the quitclaim deed to the Property is subject to the prior-recorded Deed of Trust, i.e., the Deed of Trust is superior to Plaintiffs' claim. There are no allegations that the Note underlying the Deed of Trust has been paid in full, that the Deed of Trust has therefore been extinguished and that title should therefore be quieted in Plaintiffs' name. See Ex A to Compl. [#1-1] at 14 ¶ 23 ("Upon payment of all sums secured by this Security Instrument, Lender shall request that Trustee release this Security Instrument [i.e., the Deed of Trust] and shall produce for Trustee, duly canceled, all notes evidencing debts secured by this Security Instrument."); In re Estate of McCreath, 240 P.3d 413, 422 (Colo. App. 2009) (stating that "a quitclaim deed is ineffective to transfer a title not vested in the transferor at the time of its execution"); Willis v. Neilson, 507 P.2d 1106, 1108 (Colo. App. 1973) (stating that "title under the quitclaim deed is subject to [a] previously perfected and recorded lien").
Accordingly, the Court
Defendants Ocwen, Litton, and U.S. Bank as Trustee argue that the declaratory relief and legal implications of this case are similar to those in Fick v. U.S. Bank National Association, No. 11-cv-03184-WYD-KLM, 2012 WL 5464592 (D. Colo. Sept. 10, 2012). Motion [#13] at 31; Reply [#29] at 15. Plaintiffs concede that "[t]here are, arguably, similarities between Fick and the within matter, but in substance they differ a great deal." Response [#17] at 12. However, Plaintiffs do not explain what any of those differences might be or how they distinguish the present case from Fick. See id. In Fick, as here, the plaintiff "challenge[d] Defendants' standing to foreclose on a mortgage lien secured by a Deed of Trust" on the plaintiff's property. Fick, 2012 WL 5464592, at *1. In both this case and that one, the plaintiffs asserted that the defendants have no interest in the mortgage, and a declaratory judgment to that effect is appropriate. See id. at *1, 4; Compl. [#1] at ¶¶ 129-34; Response [#17] at 12.
Here, Plaintiffs appear to argue in part that any valid assignment must be recorded in order for the assignee to initiate foreclosure proceedings. See, e.g., Compl. [#1] ¶ 118. However, contrary to Plaintiffs' assertions, Colo. Rev. Stat. § 38-38-101(6) requires only that proper indorsement or assignment be provided either by (1) the "qualified holder present[ing] the original evidence of debt or a copy thereof to the officer together with a statement in the certification of the qualified holder or [a] statement of the attorney for the qualified holder" or (2) "a certified copy of an indorsement or assignment recorded in the county where the property being foreclosed is located." Colo. Rev. Stat. § 38-38-101(6). A plain reading of the statute indicates that an assignment need not be recorded in order to be "valid;" thus, Plaintiffs' argument lacks merit. Moreover, to the extent that Plaintiffs argue that the chain of assignment between Defendant Chase and the other Defendants is invalid, there is case authority holding that Plaintiffs lack standing to assert this challenge because Plaintiffs were not parties to the assignments at issue. See, e.g., Cingolani v. BAC Home Loans Servicing, L.P., No. 11-15159, 2012 WL 3029829, at *3 (E.D. Mich. July 25, 2012) (citing Livonia Props. Holdings, LLC v. 12840-12976 Farmington Rd. Holdings, LLC, 399 Fed. App'x 97, 102 (6th Cir. 2010)). Regardless, Plaintiffs' first argument that lack of recording dooms the validity of any assignment is without merit.
Plaintiffs further argue that Defendants have not demonstrated how each entity in the chain of assignment came to be legal holders of the Note as the Note was transferred between various loan servicing entities. The law does not require Defendants to do so. "Under Colorado law, a party . . . can establish standing to foreclose simply by complying with the requirements of Colo. Rev. Stat 38-38-101(1)(b)(II). . . ." Rader v. Citibank, N.A., No. 14-cv-00784-CMA-BNB, 2014 WL 5152357, at *4 (D. Colo. Oct. 14, 2014). "Colorado foreclosure law allows a holder of evidence of a debt to foreclose upon breach of the terms of the deed of trust." Id. at *3. "Under Colorado law, a promissory note is a negotiable instrument that is freely assignable." See Colo. Rev. Stat. § 4-3-104. Here, the Note was reassigned. The Deed of Trust itself contemplated this scenario, stating that:
Ex. A to Compl. [#1-1] at 13.
In addition, if an instrument is payable to the bearer, it may be negotiated to a holder by transfer of possession alone. Colo. Rev. Stat. § 4-3-201. The term "holder" also includes a "person in possession of a negotiable instrument evidencing a debt, which has been duly negotiated to such person or to bearer or indorsed in blank." Colo. Rev. State. § 38-38-100.3(10)(c). Here, the Note was executed on Plaintiffs' behalf payable to the original lender. See Ex. B to Compl. [#1-1] at 23. The Note is endorsed in blank. See id. at 23 ("The Lender and anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the `Note Holder.'").
Thus, to the extent Plaintiffs have attempted to argue that Defendants must produce the original Note before they have standing to foreclose on the Property, this is incorrect. See Compl. [#1] ¶¶ 81, 126. Plaintiffs do not allege that they did not sign the Note or that they were not in default for failure to make payments under the terms of the Note. Instead, Plaintiffs claim that no Defendant may foreclose on the Property until they have been shown the original promissory note. However, as described above, Colorado does not require production of the original promissory note to initiate or complete a non-judicial foreclosure proceeding. See Colo. Rev. Stat. § 38-38-101(1)(b)(II). Rather, a qualified holder may initiate foreclosure proceedings by producing a certified copy of the promissory note so long as the qualified holder agrees to certain indemnity language and conditions. See Colo. Rev. Stat. § 38-38-101(1)(b)(II), (2)(a). Plaintiffs' Complaint contains no allegation that the holder failed to produce a certified copy of the promissory note (only that U.S. Bank as Trustee does not have the original Note, see Compl. [#1] ¶ 41) or that the proper procedure for initiating foreclosure proceedings was otherwise not followed. See Sneed v. PNC Bank, Nat'l Ass'n, No. 10-cv-03016-REB-MJW, 2011 WL 7429423, at *4 (D. Colo. Sept. 7, 2011) (finding no merit to the plaintiff's argument on similar facts). Therefore, the Court finds that this argument is without merit.
Accordingly, the Court
For the foregoing reasons, the Court respectfully
IT IS HEREBY
