ANNA J. BROWN, District Judge.
This matter comes before the Court on the Motion (#15) of Defendant Northwest Trustee Services, Inc. (NWTS) for Summary Judgment and the Motion (#13) of Defendant Federal National Mortgage Association (Fannie Mae) for Summary Judgment.
For the reasons that follow, the Court
The facts in this matter are undisputed unless otherwise noted:
On April 20, 2005, Plaintiffs Randy Liu and Monica Chen signed a Promissory Note with Homecomings Financial Network, Inc. (HFN) secured by property located at 7145 S.W. 142
The Trust Deed was recorded in Washington County, Oregon, on April 27, 2005.
Plaintiffs allege HFN "immediately" sold Plaintiffs' "Loan"
On July 25, 2005, an Assignment of Deed of Trust was recorded in Washington County in which HFN "grant[ed], [sold], assign[ed], transfer[red], and convey[ed] to GMAC Mortgage Corporation" the Plaintiffs' Trust Deed.
On August 4, 2011, GMAC executed an Appointment of Successor Trustee in which GMAC appointed Defendant NWTS as successor trustee of the Plaintiff's Trust Deed.
On August 10, 2011, the Appointment of Successor Trustee was recorded in Washington County. Also on August 10, 2011, NWTS executed a Notice of Default and Election to Sell against Plaintiffs' property in which NWTS alleged a default on the Note and initiated a nonjudicial foreclosure of Plaintiffs' property.
On August 11, 2011, the Notice of Default and Election to Sell was recorded in Washington County.
On December 6, 2011, NWTS sold Plaintiffs' property to Fannie Mae.
On March 16, 2012, Plaintiffs filed in this Court a Complaint for Declaratory Relief Invalidating Nonjudicial Foreclosure for Failure to Comply with ORS 86.705 to ORS 86.795 and Permanent Injunctive Relief in which they seek a declaratory judgment setting aside, voiding, and invalidating the foreclosure; a permanent injunction enjoining Defendants from conducting a subsequent nonjudicial foreclosure without recording any assignments of the Trust Deed; and costs and attorneys' fees.
On April 2, 2012, this Court certified four questions to the Oregon Supreme Court pursuant to Oregon Revised Statute § 28.200 related to nonjudicial foreclosures in Oregon including the following question: Does the transfer of a promissory note from the lender to a successor result in an automatic assignment of the securing trust deed that must be recorded prior to the commencement of nonjudicial foreclosure proceedings under Oregon Revised Statute § 86.735(1)? See Brandrup v. ReconTrust Co., No. 3:11-CV-1390-HZ (D. Or. Apr. 2, 2012). On July 19, 2012, the Oregon Supreme Court accepted certification.
On September 25, 2012, Fannie Mae filed a Motion for Summary Judgment as to all of Plaintiffs' claims. On October 4, 2012, NWTS filed a Motion for Summary Judgment as to all of Plaintiffs' claims.
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Washington Mut. Ins. v. United States, 636 F.3d 1207, 1216 (9
A dispute as to a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9
"A non-movant's bald assertions or a mere scintilla of evidence in his favor are both insufficient to withstand summary judgment." F.T.C. v. Stefanchik, 559 F.3d 924, 929 (9
The substantive law governing a claim or a defense determines whether a fact is material. Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 987 (9
In its Motion NWTS asserts, among other things, that Plaintiffs do not have a cause of action against it for wrongful foreclosure because under Oregon Revised Statute § 86.790(7) "[t]he trustee or successor trustee shall have no fiduciary duty or fiduciary obligation to the grantor or other persons having an interest in the property subject to the trust deed." Plaintiff did not respond to NWTS's assertion in their Response to NWTS's Motion for Summary Judgment.
The Court concludes NWTS's argument is well taken. In a number of cases in this District, the court has dismissed the plaintiffs' claims for wrongful foreclosure against trustees on the ground that under Oregon Revised Statute § 86.790(7) trustees do not have any fiduciary duty to grantors of trust deeds. For example, in Rapacki v. Chase Home Finance, LLC, the court dismissed the plaintiff's wrongful foreclosure claim as to NWTS on the ground that
797 F.Supp.2d 1085, 1091-92 (D. Or. 2011). The court pointed out that
Id. In Medici v. JPMorgan Chase Bank, N.A., the court dismissed the plaintiff's wrongful foreclosure claim as to NWTS on the grounds that
No. 3:11-CV-00959-HA, 2012 WL 929785, at *6 (D. Or. Mar. 16, 2012) (quoting Or. Rev. Stat. § 86.790(7)).
The Court adopts the reasoning of Rapacki and Medici and concludes Plaintiffs may not bring a claim for wrongful foreclosure against NWTS in this matter. Accordingly, the Court grants NWTS's Motion for Summary Judgment and dismisses this action as to NWTS.
Under Oregon law "`[t]rust deed' means a deed executed in conformity with ORS 86.705 to 86.795, and conveying an interest in real property to a trustee . . . to secure the performance of an obligation owed by the grantor . . . to a beneficiary." Or. Rev. Stat. § 86.705(5). A trustee is "a person, other than the beneficiary, to whom an interest in real property is conveyed by a trust deed, or such person's successor in interest." Or. Rev. Stat. § 86.705(6). A beneficiary is "the person named or otherwise designated in a trust deed as the person for whose benefit a trust deed is given, or the person's successor in interest . . . ." Or. Rev. Stat. § 86.705(1).
In Oregon there are two methods of foreclosing on a property: judicial and nonjudicial. When judicial foreclosure is pursued, the beneficiary of the trust deed initiates the foreclosure process under the law for foreclosure of mortgages found in Oregon Revised Statute § 86.710. When nonjudicial foreclosure is pursued, the trustee named in the trust deed initiates the foreclosure process. Under the Oregon Trust Deed Act (OTDA), nonjudicial foreclosure is only available when all of the requirements of Oregon Revised Statute § 86.735 are met.
Of particular relevance to this matter, Oregon Revised Statute § 86.735(1) requires the trust deed and any assignments thereof to be recorded in the county records before the trustee may initiate a nonjudicial foreclosure. As noted, the Oregon Supreme Court has accepted certification on the issue as to whether the transfer of a promissory note from the lender to a successor also results in an automatic assignment of the securing trust deed that must be recorded prior to the commencement of nonjudicial foreclosure proceedings under Oregon Revised Statute § 86.735(1).
In their Complaint Plaintiffs assert the nonjudicial foreclosure of their property was invalid because Fannie Mae was "the owner of the loan and the beneficiary of an unrecorded assignment of the [Trust Deed] . . . before initiation of the non-judicial foreclosure" by NWTS, but there was never a recorded assignment of the Trust Deed to Fannie Mae in violation of Oregon Revised Statute § 86.735(1). In essence, Plaintiffs contend when HFN sold Plaintiffs' note to Fannie Mae, HFN also, by default, assigned the trust deed to Fannie Mae because under Oregon law as set out in Niday v. GMAC Mortgage, LLC, 251 Or.App. 278 (2012), and other cases, the trust deed must follow the loan. According to Plaintiffs, therefore, there was an unrecorded transfer of the trust deed to Fannie Mae at the time the nonjudicial foreclosure proceedings were initiated in violation of Oregon Revised Statute § 86.735(1).
Defendants move for summary judgment as to Plaintiffs' claim on the grounds that (1) Judge Owen Panner in Sharpe v. Wells Fargo Home Mortgage, No. Civ. 11-3020-PA, 2011 WL 5825927 (D. Or. Nov. 16, 2011), rejected arguments similar to Plaintiffs' arguments under virtually identical circumstances and (2) the only way Plaintiffs can challenge Fannie Mae's failure to comply with its statutory obligations in this nonjudicial foreclosure is through an action under Oregon Revised Statute § 86.742, and Plaintiffs have not met the requirements of that statute.
As noted, Defendants assert Judge Panner rejected arguments in Sharpe similar to Plaintiffs' arguments under virtually identical circumstances.
In Sharpe the plaintiffs signed a promissory note in favor of Washington Mutual secured by a Trust Deed. The Trust Deed named Washington Mutual as the lender and beneficiary. Washington Mutual was also the servicer of the promissory note. Washington Mutual sold the note to Fannie Mae in 2004, but it remained the beneficiary of the Trust Deed and continued to service the promissory note. 2011 WL 5825927, at *2. On February 1, 2007, Washington Mutual transferred servicing of the note to Wells Fargo Home Mortgage. On February 21, 2007, Washington Mutual assigned the Trust Deed to Wells Fargo Home Mortgage. At some point Wells Fargo recorded the assignment of the Trust Deed. In August 2010 the plaintiffs defaulted on the promissory note. On October 28, 2010, Wells Fargo appointed NWTS as successor trustee. On October 28, 2010, NWTS recorded a Notice of Default and Election to Sell. 2011 WL 5825927, at *2. The plaintiffs filed a complaint in this district asserting several theories as to why Wells Fargo's nonjudicial foreclosure proceedings were unlawful. Ultimately the court granted summary judgment to Wells Fargo as to the plaintiffs' claim for violation of the OTDA and concluded Wells Fargo complied with all the requirements of the OTDA. 2011 WL 5825927, at *1. The court noted the requirements of Oregon Revised Statute § 86.735(1) and agreed with the premise that "Oregon law permits foreclosure without the benefit of a judicial proceeding only when the interest of the beneficiary is clearly documented in a public record." 2011 WL 5825927, at *2 (quoting Hooker v. N.W. Trustee Svc., Inc., No. 10-CV-3111-PA, 2011 WL 2119103, at *3-4 (D. Or. May 25, 2011)). The court noted the requirement was "consistent with the longstanding rule that the trust deed . . . generally follows the note." Id. (citation omitted). The court concluded, "[t]herefore, Washington Mutual's 2004 sale of plaintiffs' loan [note] to Fannie Mae was [also] an assignment of the beneficial interest in the trust deed." Id. Finally, the court held "[b]ecause under Oregon law, a servicer can proceed in its own name on behalf of the note holder, Wells Fargo's appearance in the county land records, which [Wells Fargo] recorded prior to initiating non-judicial foreclosure proceedings, satisfies ORS 86.735(1)." Id.
Id., at *3.
Even though the Sharpe court concluded servicers may proceed with nonjudicial foreclosures in their own names, a point with which this Court agrees generally, the court also concluded "Washington Mutual's 2004 sale of plaintiff's loan [note] to Fannie Mae was [also] an assignment of the beneficial interest in the trust deed," and, therefore, the servicer in that case complied with the requirements of § 86.735. Thus, the court included in its analysis the underlying assumption that the lender's sale of the plaintiffs' note to Fannie Mae was also an assignment of the beneficial interest in the trust deed by operation of law. As noted, this issue has been accepted for certification by the Oregon Supreme Court.
As Plaintiffs note, although
Pls.' Resp. at 9-10.
The Court, therefore, declines to grant Summary Judgment to Fannie Mae at this time because the basis of the court's decision in Sharpe is currently before the Oregon Supreme Court.
Former Oregon Revised Statute § 86.742 provided in pertinent part:
Former Oregon Revised Statute § 86.740(1) provided in pertinent part:
As noted, Defendants contend the only way Plaintiffs can challenge Fannie Mae's failure to comply with statutory obligations in a nonjudicial foreclosure is through an action under Oregon Revised Statute § 86.742, and Plaintiffs here have not satisfied the requirements of that statute. Defendants rely on Stations West, LLC v. Pinnacle Bank of Oregon, Civil No. 06-1419-KI, 2007 WL 1219952 (D. Or. Apr. 23, 2007), to support their contention.
In Stations West the defendant provided the plaintiff with a construction loan, and the plaintiff and the defendant entered into a Construction Loan Agreement and Promissory Note. The plaintiff defaulted on the Note, and the defendant sent a notice of delinquency to the plaintiff. Months later the defendant began the nonjudicial foreclosure process by filing and recording a Notice of Default and Election to Sell in Yamhill County. The plaintiff filed an action in state court to enjoin the trustee's sale. 2007 WL 1219952, at *1. The state court ordered the plaintiff to pay a bond by October 2, 2006, but the plaintiff failed to post the bond. Accordingly, the substitute trustee sold the property at public auction. The plaintiff brought an action in federal court alleging, among other things, wrongful foreclosure. In particular, the plaintiff alleged "there were flaws in following the notice requirements of ORS 86.735 and 86.745 . . . [and] ask[ed] the court to enjoin the sale of the property and declare the sale void." Id., at *6. The defendant moved to dismiss the plaintiff's wrongful foreclosure claim on the grounds that
Id., at *6. The court noted the plaintiff did not allege in the complaint that it did not receive proper notice of the sale or include either of the other allegations suggested by the defendant. The plaintiff, in turn, asserted "ORS 86.742 is irrelevant to its case. Instead, plaintiff alleged the trustee did not comply with his statutory obligations under ORS 86.735." Id. The court concluded:
Id., at *7.
Defendants here assert Plaintiffs have not established by clear and convincing evidence that they had the financial ability to cure the default before the trustee's sale. Defendants point out that Plaintiffs also do not allege they did not receive proper notice of the foreclosure as required before bringing an action under § 86.742.
Plaintiffs assert Defendants' arguments fail because § 86.742 does not apply to Plaintiffs by its express terms because Fannie Mae did not met the express terms of § 86.735.
As noted, former § 86.742 provides: "(1) If the trustee fails to give notice of the sale to any person entitled to notice under ORS 86.740 (1)(c), . . . such omitted person shall have the same rights possessed by the holder of a junior lien or interest who was omitted as a party defendant in a judicial foreclosure proceeding." Emphasis added. Oregon Revised Statute § 86.742(6) provides: "The remed[y] described in subsection[] (1) . . . of this section shall be the sole remed[y] available to a person entitled to notice of foreclosure by advertisement and sale under ORS 86.740 (1) (c), who failed to receive such notice." Emphasis added. In addition, former Oregon Revised Statute § 86.740(1)(c) applied only to "[a]ny person . . . having a lien or interest subsequent to the trust deed if the lien or interest appears of record or the beneficiary has actual notice of the lien or interest." Grantors of trust deeds were not included in this definition, but instead were specifically referenced in § 86.740(1)(a).
Under the statutory scheme of the former OTDA, § 86.742 only limited actions by individuals described in § 86.770(1)(c) (i.e., "[a]ny person[s] . . . having a lien or interest subsequent to the trust deed if the lien or interest appears of record or the beneficiary has actual notice of the lien or interest."). By its terms, § 86.742 did not limit actions by individuals set out in § 86.740(1)(1).
Accordingly, because Plaintiffs were grantors of a trust deed and notice to them was required under § 86.740(1)(a) and because the limitation on actions for violation of § 86.735 (as set out in § 86.742(6)) applies only to persons entitled to notice under § 86.740(1)(c), Plaintiffs are not limited to an action under § 86.742 to challenge Defendants' alleged failure to comply with § 86.735 nor are Plaintiffs required to plead or to prove the requirements of § 86.742 such as the ability to cure a default.
Although Stations West appears to support Defendants' interpretation of § 86.742, the court in that case did not examine the specific language in § 86.742. It does not appear that either party in Stations West made any argument based on the fact that § 86.742 applies only to persons entitled to notice under § 86.740(1)(c). Moreover, although the Ninth Circuit affirmed Stations West, it specifically "[a]ssum[ed] Stations West may proceed on . . . a claim" for violation of § 86.735. Accordingly, the Ninth Circuit did not address or analyze whether the district court properly decided the plaintiff could proceed with its claim only under § 86.742.
In contrast, in Celestino v. Recontrust Company, N.A., Chief Judge Ann Aiken rejected the defendant's assertion that the plaintiff's failure to comply with the provisions of § 86.742 was an insufficient basis to dismiss the plaintiff's action for wrongful foreclosure.
No. 6:11-CV-6367-AA, 2012 WL 1805495, at *4 (D. Or. May 16, 2012).
In summary, § 86.742 on its face does not support Defendants' assertion that Plaintiffs are limited to challenging Defendants' alleged failure to comply with the requirements of § 86.735 through § 86.742 and that Plaintiffs must satisfy the requirements of § 86.742 before doing so. In addition, Stations West does not resolve the issue for the reasons noted above.
Plaintiffs also assert § 86.742 does not limit them to an action under § 86.742 because the right and ability to send the notice required by § 86.740 is expressly conditioned on compliance with § 86.735, which provides that a trustee may foreclose by advertisement and sale only after it has satisfied the requirements set forth in § 86.735(1-4). According to Plaintiffs, Defendants did not have the authority to conduct a nonjudicial foreclosure or to send the Notice of Sale pursuant to § 86.740 because Defendants failed to comply with § 86.735. Plaintiffs rely on Celestino and Staffordshire Investments, Inc. v. Cal-Western Reconveyance Corp., 209 Or.App. 528 (2006), to support their assertion.
In Celestino the plaintiff brought an action for wrongful foreclosure against the defendants on the ground that the trustee's sale of her property was unauthorized because the defendants did not comply with the conditions of § 86.735 before conducting the sale. In particular, the plaintiff alleged, among other things, that the defendants failed to record all transfers of the trust deed because the defendants transferred the note, and, therefore, by operation of law, the trust deed was also transferred, but that transfer of the trust deed was unrecorded. 2012 WL 1805495, at *1. Judge Aiken noted this Court had certified that issue, among others, to the Oregon Supreme Court, and, "absent compliance with the preconditions set forth in § 86.735, there is no authority to foreclose by advertisement and sale under the OTDA and § 86.770(1) is inapplicable." Id., at *3. Judge Aiken concluded:
Id., at *5. The Court agrees with Judge Aiken's analysis and concludes stay of this issue is appropriate in light of the issues certified to the Oregon Supreme Court.
In summary, the Court concludes Plaintiffs' claim against Fannie Mae and Fannie Mae's Motion for Summary Judgment involve an issue that the Oregon Supreme Court has accepted for certification. The Court, therefore, finds it appropriate to stay Plaintiffs' claim as to Fannie Mae as well as Fannie Mae's Motion for Summary Judgment pending a decision by the Oregon Supreme Court as to the issues certified.
For these reasons, the Court
IT IS SO ORDERED.
