UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO ORDER

Transcription

1 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 1 of 14 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO GREGORY NEMITZ, v. Plaintiff, FIRST HORIZON HOME LOAN CORPORATION; MORTGAGE REGISTRATION SYSTEMS INC. ( MERS ); SETERUS, INC.; ALL PERSONS CLAIMING BY, THROUGH OR UNDER SUCH PERSON, ALL PERSONS UNKNOWN CLAIMING ANY TITLE, ESTATE, LIEN OR INTEREST IN THE PROPERTY DESCRIBED IN THE COMPLAINT ADVERSE TO THE PLAINTIFFS TITLE THERETO; and DOES1-20, Case No. 1:12-cv LMB ORDER Defendants. This action is before the Court on Defendants Motions to Dismiss. (Dkts. 17 & 21). Defendant First Horizon is represented by Kipp Manwaring, and the remaining defendants are represented by Brian Langford. Plaintiff appears pro se. The defending parties have filed separate motions to dismiss. (Id.) However, because the alleged bases for dismissal overlap, this Order will pertain to all defendants unless otherwise specified. 1 1 All parties have consented to proceed before a United States Magistrate Judge. (Dkt. 22). ORDER - 1

2 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 2 of 14 In the interest of avoiding delay, and because the Court conclusively finds that the decisional process would not be significantly aided by further oral argument, the Court will address and resolve these motions without a hearing. After carefully reviewing the record, the briefing of the parties, and being otherwise fully advised, the Court enters the following Order granting Defendants motions and dismissing Plaintiff s Amended Complaint with prejudice. Background On October 24, 2007, Plaintiff obtained a mortgage loan to finance the purchase of real property located at 729 Maurice Street, Twin Falls, Idaho (the Property ). (Amended Complaint, 12, 21). The $127,300 loan was memorialized in a promissory note ( Note ) and secured by a Deed of Trust, which names First Horizon Home Loans ( First Horizon ) as the lender, Twin Falls Title and Escrow Company as the trustee, and MERS as nominee for Lender and Lender s successors and assigns and the beneficiary. (See Exhibits 1-4 to Manwaring Request for Judicial Notice, Dkt. 17-2). 2 In August 2011, Plaintiff ceased making his mortgage payments of $ per month, thereby defaulting on his loan obligation. (Notice of Default, Dkt. 17-3). However, prior to foreclosing on the property and executing a foreclosure sale, on May 2 The Court takes judicial notice of Manwaring Exhibits 1-4 representing: 1) A true and correct copy of the Deed of Trust executed by Gregory Nemitz on October 24, 2007; 2) A true and correct copy of the Note executed by Gregory Nemitz on October 24, 2007; 3) A true and correct copy of the Notice of Default recorded in the official records of Twin Falls County on June 15, 2012; and 4) A true and correct copy of the Appointment of Successor Trustee recorded in the official records of Twin Falls County on June 15, Fed. R. Evid. 201; see also Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987) ( facts subject to judicial notice may be considered on a motion to dismiss. ). ORDER - 2

3 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 3 of 14 22, 2012, Plaintiff initiated this action claiming that the named defendants were improperly trying to foreclose on the property. (Amended Complaint, Dkt. 4) Plaintiff asserts claims for (1) Wrongful Foreclosure, (2) Fraud (3) Quiet Title, (4) Declaratory Relief, (5) Violations of the Real Estate Settlement Procedures Act ( RESPA ), and (6) Violations of the Truth in Lending Act ( TILA ). (Amended Complaint, Dkt. 4). Analysis Defendants move for dismissal under Federal Rule of Civil Procedure 12(b)(6), arguing that all of Plaintiff s claims should be dismissed because they are factually and legally insufficient. A. Motion to Dismiss Standard Federal Rule of Civil Procedure 8(a)(2) requires a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the... claim is and the grounds upon which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). Although a complaint attacked by a motion to dismiss for failure to state a claim does not need detailed factual allegations, it must set forth more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Id. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. at 570. 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 misconduct alleged. Ashcroft v. ORDER - 3

4 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 4 of 14 Iqbal, 556 U.S. 662, 678 (2009). This plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Id. (internal quotation marks omitted). Where a plaintiff asserts facts that are merely consistent with a defendant s liability, it stops short of the line between possibility and plausibility of entitlement to relief. Twombly, 550 U.S. at 557 (internal quotation marks and alteration omitted). The Supreme Court has identified two working principles that underlie this dismissal standard. Iqbal, 556 U.S. at 678. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Id. Rule 8 marks a notable and generous departure from the hyper-technical, codepleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Id. at Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 679. Determining whether a complaint states a plausible claim for relief [is]... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Id. Providing too much in a complaint may also be fatal to the plaintiff. Dismissal is appropriate when the plaintiff has included sufficient allegations disclosing some absolute defense or bar to recovery. See Weisbuch v. Cnty. of Los Angeles, 119 F.3d 778, 783, n.1 (9th Cir. 1997) ( If the pleadings establish facts compelling a decision one way, that is as good as if depositions and other... evidence on summary judgment establishes the identical facts. ). ORDER - 4

5 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 5 of Wrongful Foreclosure Standing A foundational basis of Plaintiffs complaint is that no Defendant has the right to foreclose on the Property because they have not proven they have standing to do so. (Amended Complaint, Dtk. 4 at 15). Plaintiff argues that pursuant to state law, to perfect the transfer of mortgage paper as collateral, the owner should physically deliver the note Without physical transfer, the sale of the note is invalid. (Id. at 16). In sum, because the Defendants have not produced the original wet ink Note, Plaintiffs contend, they cannot establish the power necessary to enforce the Deed of Trust, and do not have standing to undertake the non-judicial foreclosure. Plaintiffs argument is referred to as the show me the Note theory, which has been thoroughly analyzed and squarely rejected by the Supreme Court of Idaho as a tactic to avoid an otherwise legal non-judicial foreclosure in Idaho. Trotter v. Bank of N.Y. Mellon et al., 2012 WL (Idaho 2012); see also Meyer v. Bank of America, N.A., 2011 WL , *3 (D. Idaho 2011). In Trotter, the Court explained: While it is true that a party must have standing before it may invoke the jurisdiction of a court, the foreclosure process in the [Idaho Trust Deeds] Act is not a judicial proceeding.... Instead, the procedures to foreclose on trust deeds outside of the judicial process provide the express-lane alternative to foreclosure in the judicial system and strip borrowers of protections embedded in the judicial foreclosure.... Thus, as an alternative that is outside the judicial process, the [Idaho Trust Deeds] Act sets forth all of the requirements to foreclose on a deed of trust. Id. at *3 (citing and quoting Fed. Home Loan Mortg. Corp. v. Appel, 137 P.3d 429, 433 n.1 (Idaho 2006)). Thus, to the extent Plaintiffs claims are generally premised on the ORDER - 5

6 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 6 of 14 argument that the Trustee must produce the original wet-ink Note and Deed of Trust to undertake a non-judicial foreclosure on the Property, this action must fail. Accordingly, Plaintiff s claim for wrongful foreclosure must be dismissed. 2. Fraud It is well established under Idaho law that [i]n order to prevail on a fraud claim, a plaintiff must show: (1) a statement or a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker s knowledge of its falsity; (5) the speaker s intent that there be reliance; (6) the hearer s ignorance of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant injury. King v. Lang, 136 Idaho 905, (2002) (citing Carl H. Christensen Family Trust v. Christensen, 133 Idaho 866, 872 (1999)). Additionally, under the Federal Rules of Civil Procedure, fraud claims must be plead with particularity. Fed. R. Civ. P. 9. In this action, Plaintiff claims that every defendant named here misrepresented that they were the holder of the loan. (Amended Complaint, Dkt. 4 at 19.) Plaintiff also claims that third parties unknown to Plaintiff paid off the loan, though Plaintiff kept making payments to different entities that represented to him that they owned the note. (Id.) To be precise, Plaintiff claims that loan was paid off twice, once by DOE 2 when it purchased the Note and then again when the Note was paid off by default insurance taken out by DOE 4. (Id.) As with his wrongful foreclosure claim, Plaintiff s fraud claim relies on the assumption that the various defendants were not entitled to receive mortgage payments [because they] did not have equitable, or actual beneficial interest in the Note or the property. (Id.) ORDER - 6

7 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 7 of 14 A claim for fraud requires: (1) a statement or a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker s knowledge of its falsity; (5) the speaker s intent that there be reliance; (6) the hearer s ignorance of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant injury. Lettunich v. Key Bank Nat. Ass n, 109 P.3d 1104, 1110 (Idaho 2005) (citing Lindberg v. Roseth, 46 P.3d 518, 522 (Idaho 2002). The factual circumstances of each element of fraud must be plead with particularity. Fed. R. Civ. P. 9(b). Here, Plaintiff s Amended Complaint fails to state a claim for fraud. The Amended Complaint is entirely unclear what entity is foreclosing on the Property and which Defendant held itself out improperly as having an interest in the Note. Plaintiff has also failed to allege any facts showing any Defendant s intent and knowledge of the alleged misrepresentation. Simply put, the Amended Complaint fails to satisfy Rule 9(b) s who, what, when, where and how requirements.... [Plaintiff] makes bare reference to a general misrepresentation with no required details. [He] makes no effort to allege names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. Saldate v. Wilshire Credit Corp., 686 F.Supp.2d 1051, 1065 (E.D. Cal 2010). In this action, Plaintiff s Amended Complaint fails to set forth any facts attributable to any Defendant, and thus it lacks sufficient factual support regarding every fraud element. Moreover, Plaintiff s allegations are contradicted by record evidence, of which the Court has taken judicial notice. (Exhibts 1-4 to Manwaring Affidavit, Dkt. 17-3). After ORDER - 7

8 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 8 of 14 examining each document of which the Court has taken judicial notice, no deficiency in the assignments of the Deed of Trust, substitutions of Trustee, or notices required in Idaho statute can be found. Instead, the evidence shows that each defendant that acted was authorized to take the actions that they did by the Deed of Trust, the Note, and by state statute. Plaintiff, on the other hand, has failed to allege or submit any evidence that he paid the amount due on the mortgage. See Washburn v. Bank of America, 2012 WL , at *2 (D. Idaho 2011). Accordingly, this claim will be dismissed. 3. Quiet Title and Declaratory Relief Claims Plaintiff makes a claim for quiet title and for declaratory relief. The claims both seek a determination of the validity of the Notice of Default, and whether any Defendant had authority to foreclose on the Property. These claims are claims to quiet title and both fail as a matter of law. In Idaho, a quiet title action may be brought by any person against another who claims an estate or interest in real or personal property adverse to him, for the purpose of determining such adverse claim. Idaho Code The purpose of a quiet title action is to establish the security of title. Roselle v. Heirs and Devisees of Grover, 789 P.2d 526, 529 (Idaho Ct.App.1990). As an initial matter, Plaintiff s quiet title claim fails because the record does not reflect that any foreclosure sale has occurred. Further, nothing in the record suggests that the Plaintiff is not still the Property s owners of record. Regardless, Plaintiff s quiet title claim must fail because he has failed to plead tender. A mortgagor cannot without paying his debt quiet title as against the mortgagee. Trusty v. Ray, 73 Idaho 232 (1952). ORDER - 8

9 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 9 of 14 Plaintiff has not pleaded that he tendered payment of his debt obligation. Without evidence, or even an assertion, that he has tendered payment on the loan, he cannot succeed on the quiet title action, as a matter of law. As Plaintiff has not alleged tender, Defendants motions to dismiss the quiet title claim is granted. See Gilbert v. Bank of America, N.A., et. al., Case No. 1:11 cv BLW. The tender rule has been applied in quiet title suits for nearly a century. In Power & Irrigation Co. of Clear Lake, the Ninth Circuit Court of Appeals has explained that regardless of possession by the grantee of the mortgage, the grantor of the mortgage could remove the cloud on the title upon doing equity by redemption and payment of the mortgage debt,... and that he must do equity by payment of the balance of the debt, as a condition of removing the cloud, even if the lien of the mortgage was extinguished. 226 F. 634 at 639 (1915); see also Kelley v. Clark, 23 Idaho 1 (1913) (stating that one who asks equity must do equity and, upon a showing that plaintiff owed the debt, plaintiff was required to pay the amount due upon the mortgage foreclosure decree before the court, in equity, would quiet title for the plaintiff.). In sum, absent the money necessary to pay the debt, a court of equity will not quiet title against the mortgagee. Saldate v. Wilshire Credit Corp., 686 F.Supp.2d 1051, 1060 (E.D. Cal. 2010). Further, Plaintiff has not pleaded that he has paid the debt. This pleading defect is fatal to his quiet title claim and precludes the quiet title action. The fact that the Note may have been transferred does not somehow relieve Plaintiff from making payments. Plaintiff cannot establish a cloud on the title to the property just because Plaintiff has not ORDER - 9

10 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 10 of 14 been provided proof of which entity holds the original promissory note. Meyer v. Bank of Am., Case No. 1:10 cv 632 EJL-REB, 2011 WL , at *3 (D. Idaho 2011). Under these circumstances, the Court has no alternative but to reject Plaintiff s quiet title claim. There is no allegation in the pleadings that Plaintiff has tendered or has a meaningful ability to tender his indebtedness under the Note. Thus, Plaintiff cannot maintain his quiet title claim. Accordingly, Defendants motions to dismiss Plaintiff s claims for quiet title will be granted and Plaintiff s quiet title claim will be dismissed. 4. Real Estate Settlement Procedures Act Claim The Real Estate Settlement Procedures Act (RESPA) protects home buyers from unnecessarily high settlement charges by certain abusive practices. 12 U.S.C. 2601(a). This law provides plaintiffs with a private right of action for three types of wrongful acts: (1) payment of a kickback and unearned fees for real estate settlement services, 12 U.S.C. 2607(a), (b); (2) requiring a buyer to use a title insurer selected by a seller, 12 U.S.C. 2608(b); and (3) the failure by a loan servicer to give proper notice of a transfer of servicing rights or to respond to a qualified written request for information about a loan. Choudhuri v. Wells Fargo Bank, N.A., 2011 WL , at *8 (N.D. Cal. Oct. 25, 2011). In this action, Plaintiff alleges that Defendants committed the first type of RESPA violation. Specifically, he alleges that each [Defendant] engaged in goods/services that were not actually performed and where the payments were not actually related to the value of the goods/services because Defendants... paid to Defendants DOE 6 a YSP on ORDER - 10

11 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 11 of 14 Plaintiff s loans and no Defendant offered Plaintiff lower upfront fees for this YSP payment. (Amended Complaint, Dkt. 4 at 24). Defendants argue that Plaintiff s RESPA claim is time-barred. The Court agrees. Under RESPA, claims brought under 2607 are subject to a one-year statute of limitation. 12 U.S.C Thus, where a plaintiff alleges that a defendant charged unlawful yield spread fees, she must initiate suit within one year of the alleged violation. Id. Based on the promissory note and deed of trust, Plaintiff s home loan closed on October 24, (See Manwaring Exhibits 1-4, Dkt. 17-3). This is the date when the allegedly unlawful yield spread fees would have been charged, but Plaintiff did not file suit until May 2012, roughly five years later. Thus, from the face of Plaintiff s Amended Complaint and the promissory note and deed of trust, Plaintiff s RESPA claim under 2607 indeed is time-barred. Plaintiff does not dispute this point in his response to Defendants motions. Accordingly, Plaintiff s RESPA claim must be dismissed. 5. TILA Claim The Truth in Lending Act (TILA) aims to avoid the uninformed use of credit. 15 U.S.C. 1601(a). It has the broad purpose of promoting the informed use of credit by assuring meaningful disclosure of credit terms to consumers. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559 (1980) (quoting 15 U.S.C. 1601). The Act requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower s rights. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). ORDER - 11

12 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 12 of 14 ORDER - 12 Plaintiff claims that Defendants and each of them have failed to property notify [him] of each respective transfer of ownership of the original promissory note in violation of 15 U.S.C. 1641(g). (Amended Complaint, Dkt. 4 at 26). TILA subsection (g) provides in relevant part: In addition to other disclosures required by this subchapter, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including (A) the identity, address, telephone number of the new creditor; (B) the date of transfer; (C) how to reach an agent or party having authority to act on behalf of the new creditor; (D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor. 15 U.S.C. 1641(g)(1) (emphasis added). As the statutory language makes clear, 1641(g) only applies to creditors who are new owners or assignees of mortgage loan. Here, Plaintiff alleges that Defendant First Horizon is the original owner of the mortgage loan, (see Amended Complaint, Dkt. 4 at 3). Likewise, 1641(g) does not apply to First Horizon. See Nicosia v. Wells Fargo Bank, 2010 WL , at *2 (N.D. Cal. 2010) ( As defendant notes, however, 15 U.S.C. 1641(g) requires notice to be provided to the mortgagee by any new owners or assignees of debt. Defendants are the original owners of the note, and so are not implicated by the statute. ). Moreover, Plaintiff alleges that MERS is the beneficiary of the deed of trust, (see Amended Complaint, at 3-4). Thus,

13 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 13 of (g) does not apply to it, either. Plaintiff s TILA claims have no connection to the remaining defendants. Accordingly, Plaintiff s TILA claim under 1641(g), along with every claim contained in his Amended Complaint, cannot stand. Amendment A court should freely give leave to amend when there is no undue delay, bad faith or dilatory motive on the part of the movant... undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment. Fed.R.Civ.P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.1992). Plaintiff has already amended his pleadings in this action. The Court will not allow another amended complaint based on futility. As discussed above, Defendants properly foreclosed on the property and, thus, Plaintiff fails to state a proper claim for relief relating to the foreclosure on the property. As such, the Court finds that further amendment would be futile. Accordingly, Plaintiff s Amended Complaint will be dismissed with prejudice. Order It is hereby ORDERED: 1. Defendant First Horizon Home Loan Corporation s Request for Judicial Notice (Dkt. 17-3) is GRANTED; 2. Defendant First Horizon Home Loan Corporation s Motion to Dismiss (Dkt. 17) is GRANTED; ORDER - 13

14 Case 1:12-cv LMB Document 35 Filed 02/21/13 Page 14 of Defendants Seterus, Inc. and MERS s Motion to Dismiss (Dkt. 21) is GRANTED; 4. Plaintiff s Motion to Stay (Dkt. 33) is DENIED AS MOOT; 5. Plaintiff s Amended Complaint (Dkt. 4) is DISMISSED WITH PREJUDICE; and 6. This action is CLOSED. DATED: February 21, 2013 Honorable Larry M. Boyle U. S. Magistrate Judge ORDER - 14