Karnatcheva v. JPMorgan Chase Bank, N.A.

Decision Date12 March 2013
Docket NumberNo. 12–2375.,12–2375.
Citation704 F.3d 545
PartiesNatalia KARNATCHEVA and Kevin R. Gurule, Appellants, v. JPMORGAN CHASE BANK, N.A., Chase Home Finance LLC, Mortgage Electronic Registration Systems, Inc., Federal National Mortgage Association, MERSCORP, Inc., and Usset, Weingarden and Liebo, P.L.L.P., Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

OPINION TEXT STARTS HERE

William Bernard Butler, Minneapolis, MN, for Appellants.

Bryant D. Tchida, Peter Joseph Schwingler, Gerald G. Workinger, Benjamin Pulitzer Freedland, Minneapolis, MN, for Appellees.

Before MURPHY, ARNOLD and COLLOTON, Circuit Judges.

ARNOLD, Circuit Judge.

Mortgagors filed suit in Minnesota state court against Fannie Mae; MERSCORP, Inc., and its subsidiary, Mortgage Electronic Registration Systems, Inc.; two financial institutions; and one non-diverse party (a law firm), alleging numerous deficiencies in the assignment of their mortgages and in their foreclosures. Asserting that the plaintiffs had fraudulently joined the law firm, the defendants removed the case to federal court. After moving to remand, the plaintiffs filed an amended complaint seeking to quiet title under Minn.Stat. § 559.01, asserting a claim for slander of title, and requesting declaratory judgments as to whether the defendants had a “true interest in or right to foreclose on their properties” and whether the notes were properly accelerated by the correct party; the defendants moved to dismiss for failure to state a claim, seeFed.R.Civ.P. 12(b)(6). The district court 1 denied the motion to remand because it concluded that the plaintiffs had fraudulently joined the non-diverse law firm, and it granted the motion to dismiss all claims against the remaining defendants under Rule 12(b)(6). See Karnatcheva v. JPMorgan Chase Bank, N.A., 871 F.Supp.2d 834 (D.Minn.2012).

The plaintiffs appeal, asserting that the district court erred in denying their motion to remand, in concluding that they failed to make out claims for slander of title, declaratory judgment, and quiet title, and in mistakenly relying on Jackson v. Mortgage Electronic Registration Sys., 770 N.W.2d 487, 500–501 (Minn.2009), which rejected the so-called “show-me-the-note” theory under which an entity seeking foreclosure must present the original promissory note.

We must first determine whether the district court erred in denying the motion to remand to the state court since that issue relates to jurisdiction. The district court denied remand, concluding that it had jurisdiction over the case based on the diversity of the parties, see28 U.S.C. § 1332(a), because the plaintiffs had fraudulently joined the only resident defendant. “Joinder is fraudulent and removal is proper when there exists no reasonable basis in fact and law supporting a claim against the resident defendants.” Wiles v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir.2002). Because we recently concluded that nearly identical claims against a resident law firm had no reasonable basis in law and fact under Minnesota law and constituted fraudulent joinder, see Murphy v. Aurora Loan Servs., LLC., 699 F.3d 1027, 1031–1032 (8th Cir.2012), we reject the plaintiffs' contention that the district court erred by dismissing the claims against the law firm and denying remand.

We next address the claims against the other defendants. We can easily dispose of the plaintiffs' slander-of-title claim because we recently upheld the dismissal of a virtually identical claim in Butler v. Bank of America,N.A., 690 F.3d 959, 961, 962–63 & 962 n. 3 (8th Cir.2012). See also Murphy, 699 F.3d at 1032. In Butler, 690 F.3d at 961, 962, we concluded that the slander-of-title claim, along with other claims in the complaint, was “simply an attempt to invalidate the foreclosure ... based on the flawed [show-me-the-note] theory” that the Minnesota Supreme Court had rejected in Jackson.See also Stein v. Chase Home Fin., LLC, 662 F.3d 976, 979–80 (8th Cir.2011).

We can deal with equal dispatch with the dismissal of the plaintiffs' request for a declaratory judgment to determine whether the defendants had “any true interest in or right to foreclose on their properties.” The plaintiffs base this request for declaratory relief on allegations that their notes and mortgages were transferred to trusts underlying mortgage-backed securities and that their foreclosures violated the terms of the trust agreements relating to these mortgage-backed securities. But district courts in Minnesota have recently addressed this issue and have uniformly held that mortgagors do not have standing to request declaratory judgments regarding these types of trust agreements because the mortgagors are not parties to or beneficiaries of the agreements. See, e.g., Novak v. JP Morgan Chase Bank, N.A., No. 12–589, 2012 WL 3638513, at *6 (D.Minn. August 23, 2012); Greene v. Home Loan Servs., Inc., No. 09–719, 2010 WL 3749243, at *4 (D.Minn. Sept. 21, 2010); see also Karnatcheva, 871 F.Supp.2d at 842. We believe that the reasoning in these cases is sound, and we adopt it.

The plaintiffs also ask for a declaratory judgment to determine whether the notes were properly accelerated by the correct party. The Federal Rules of Civil Procedure apply to declaratory judgment actions, seeFed.R.Civ.P. 57, and thus the plaintiffs must comply with the pleading requirements of Rule 8(a), see, e.g., National Union Fire Ins. Co. of Pittsburgh, Pa. v. Karp, 108 F.3d 17, 21 (2d Cir.1997). See also10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2768 (2012). We conclude that the relevant pleadings here fail to meet the Rule 8(a) standards because they lack “sufficient factual matter, accepted as true,” that raise plausible questions as to the rights of parties to accelerate the mortgages, Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), but instead offer only legally insufficient conjecture and “labels and conclusions,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

The plaintiffs also appeal the dismissal of their quiet title claim. Our rejection of an identical theory in Murphy requires us to affirm the district court's dismissal on one of the plaintiffs' five grounds for quiet title—that the [m]ortgages are not properly perfected”—because, as our decision in Murphy held, it is a “regurgitation of the ‘show-me-the-note’ theory” and precluded by Jackson.See Murphy, 699 F.3d at 1033. We also conclude that another quiet title ground pleaded here but not considered in Murphy—that the Defendants are not Note Holders as defined in the Original Notes”—would require acceptance of the “show-me-the-note” theory to state a claim and so is likewise barred by Jackson.

Our decision in Murphy held, however, that two quiet title theories relating to allegations of invalid mortgage assignments that were laid substantially the same as two theories pleaded here did “not rely on the failure of the foreclosing party to produce the note” and were thus not barred by Jackson.See Murphy, 699 F.3d at 1033. As pleaded here, the two theories that Murphy sustained are that [t]he Notices of Pendency, Powers of Attorney, and...

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