Beck v. Fed. Nat'l Mortg. Ass'n
| Decision Date | 27 June 2013 |
| Docket Number | 2:13-cv-00090-JAW |
| Parties | ALLAN BECK, et al., Plaintiffs v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants |
| Court | U.S. District Court — District of Maine |
Allan and Sheri Beck, self-described as "lawful owners of a parcel of Real Property" located in Nobleboro, Maine, have brought suit against the Federal National Mortgage Association ("Fannie Mae"), CitiMortgage, Inc. ("CMI"), and Mortgage Electronic Registration Systems, Inc. ("MERS"). (Complaint ¶¶ 1-4.) Fannie Mae and MERS have not yet responded to the lawsuit, but CMI has filed a motion to dismiss count one, breach of contract; count three, action to quiet title; and count four, an action for declaratory relief regarding the enforceability of the mortgage. If CMI's motion were granted, the only count remaining against it would be count two, which alleges a violation of 12 U.S.C. § 2601, et. seq., the Real Estate Settlement Procedures Act. I now recommend that the court grant the motion.
On May 20, 2009, the plaintiffs executed a note and mortgage to Provident Funding Associates, L.P. (Complaint ¶¶ 9-11.) Soon after the loan's origination it was sold, bundled into a group of notes, and resold to investors as a mortgage-backed security by a Fannie Maesecuritized trust. Fannie Mae is the current trustee for the trust, CMI is the servicer of the loan, and MERS is the nominee mortgagee of the mortgage. (Id. ¶¶ 12-15.)
According to the plaintiffs, Fannie Mae alleges it is the holder and owner of the note and the beneficiary of the mortgage, but there is "no perfected chain of title" between Provident and Fannie Mae and therefore no legal assignment from the originator to the other defendants. (Id. ¶¶ 16-17.) The plaintiffs believe that Provident sold its interest in the loan and was paid in full, but that Provident did not properly transfer or endorse the note to "Defendants." (Id. ¶¶ 18-19.) They allege unspecified legal violations during the processing of their loan. (Id. ¶ 21.)
The plaintiffs allege that "slanders of title" have arisen regarding unrecorded claims due to MERS being involved in the process. They claim they are unable to obtain "full title insurance" rendering the sale of their home difficult, and that their action "is to determine the validity of the MORTGAGE as to any unrecorded assignees over a period of years." (Id. ¶ 22.) There is no assignment of the loan or mortgage in the official records of Lincoln County.2 (Id. ¶ 25.) The plaintiffs "believe" that the use of MERS as a nominee mortgagee to avoid recording every transfer of beneficial interest in the note and mortgage means that "the party with the interest in the loan has either abandoned the MORTGAGE" or that "the MORTGAGE was never assigned to the new lender, making the MORTGAGE a nullity." (Id. ¶ 26.) The plaintiffs acknowledge that paragraph 20 of the mortgage provides that the note and mortgage may be sold, but they maintain the two documents were to be transferred together and that the failure to record assignment of the mortgage in the Lincoln County Registry of Deeds to reflect the transfer amounts to a breach of the terms of the mortgage that voids both the mortgage and thenote. (Id. ¶ 27.) The mortgage is governed by Maine law. (Id. ¶ 28.) The plaintiffs allege that unrecorded assignments are fraudulent and void. (Id. ¶¶ 29-34.)
The plaintiffs allege that their note and their mortgage were separated since the closing date because MERS was nominated as mortgagee but did not hold the note and that the separation of "ownership" of the note and the mortgage, including by means of sale and securitization or pooling of their note, precludes any holder of the resulting investment security from claiming status as "a real party in interest" and prevents the note and mortgage from ever being "reattached" through "adhesion." (Id. ¶¶ 38-39.) Separation of the note and the mortgage, they say, makes the mortgage unenforceable. (Id. ¶ 40.)
The plaintiffs state that MERS cannot assign an enforceable mortgage when neither the original note holder nor MERS possesses the note any longer. They also maintain that MERS does not qualify as a mortgagee. (Id. ¶¶ 41-42.) They say, among other things, that there is no statutory definition of a nominee mortgagee, that such status is not disclosed or defined in the mortgage, that there can be no assignment of a mortgage without an accompanying assignment of the note, and that any attempt to make such an assignment is a fraud. (Id. ¶¶ 49-54.) They maintain that their note has now been paid in full by the holders of whatever mortgage-back security their mortgage loan was bundled into. Because it has been paid in full, they say the mortgage is no longer necessary and that neither the defendants nor the holders of the mortgage-backed securities have suffered any loss related to the plaintiffs' loan. (Id. ¶¶ 55-58.)
The plaintiffs further allege that none of the defendants has standing to enforce the mortgage and thus a "null" mortgage clouds their title. (Id. ¶¶ 59-61.) They offer an assessment of the "significance of MERS," alleging that its mere existence is unfair and deceptive, that itwas designed to mislead borrowers, and that MERS can neither enforce the mortgage nor convey an enforceable right to any of its successors. (Id. ¶¶ 62-64.)
The plaintiffs' substantive claims are for breach of contract, violation of the Real Estate Settlement Procedures Act (RESPA), quiet title, and declaratory judgment. (Id. ¶¶ 65-74, 94-111.) The plaintiffs' prayer for relief is targeted entirely toward nullification of the mortgage. The prayer does not request an order declaring the promissory note satisfied, though the Becks appear to believe that their note has been paid in full by third parties.
Rule 12 of the Federal Rules of Civil Procedure provides that a complaint can be dismissed for, among other things, "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). To state a claim, a plaintiff must set forth (1) "a short and plain statement of the grounds for the court's jurisdiction"; (2) "a short and plain statement of the claim showing that the pleader is entitled to relief"; and (3) "a demand for the relief sought." Fed. R. Civ. P. 8(a). In deciding a motion to dismiss, the court accepts as true the factual allegations of the complaint, draws all reasonable inferences in favor of the plaintiff that are supported by the factual allegations, and determines whether the complaint, so read, sets forth a claim for recovery that is "plausible on its face." Eldredge v. Town of Falmouth, 662 F.3d 100, 104 (1st Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009)). "A claim is facially plausible if supported by 'factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Id. (quoting Iqbal, 129 S. Ct. at 1949). A plaintiff's complaint need not provide an exhaustive factual account, only "a short and plain statement." However, the allegations must be sufficient to identify the mannerby which the defendant subjected the plaintiff to harm and the harm alleged must be one for which the law affords a remedy. Iqbal, 129 S. Ct. at 1949.
When the plaintiff is a pro se litigant, the Court will review his or her complaint subject to "less stringent standards than formal pleadings drafted by lawyers." Haines v. Kerner, 404 U.S. 519, 520 (1972). Additionally, the pleadings of pro se plaintiffs are generally interpreted in light of supplemental submissions, such as any response to a motion to dismiss. Wall v. Dion, 257 F. Supp. 2d 316, 318 (D. Me. 2003). In some circumstances, if it appears that a pro se litigant might be able to plead adequate facts if he or she better understood the applicable law, the Court may provide some opportunity to understand what the law requires, along with an opportunity to supplement the pleadings. Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 20 (1st Cir. 2004); Cote v. Maloney, 152 Fed. App'x 6, 8 (1st Cir. 2005) (unpublished).
A motion to dismiss for failure to state a claim is ordinarily evaluated in light of the allegations contained within the four corners of the plaintiff's complaint. Young v. Lepone, 305 F.3d 1, 10-11 (1st Cir. 2012). An exception to the four-corner rule exists when the complaint's allegations "revolve around a document whose authenticity is unchallenged," in which case the document in question "effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6)." Id. at 11 (quoting Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 17 (1st Cir. 1998)). In this case CMI has filed four documents in support of its motion, including an affidavit as to authenticity and three documents referenced in the complaint. (ECF Nos. 16-1, "Mortgage"; 16-2, "Note"; and 16-3, "Assignment of Mortgage by MERS.") In their reply the plaintiffs do not dispute the authenticity of these three documents, only their legal significance. Of these three documents, the Assignment is the only one not identified in the complaint.
A complaint is also subject to summary dismissal based on a plaintiff's failure to demonstrate that the Court has jurisdiction over the subject matter of the case. Fed. R. Civ. P. 12(b)(1). A plaintiff's lack of standing to sue will support dismissal based on lack of subject matter jurisdiction. United Seniors Ass'n v. Philip Morris USA, 500 F.3d 19, 23 (1st Cir. 2003). If the plaintiff's pleading is challenged on this ground, the plaintiff bears the burden of demonstrating that subject matter jurisdiction exists and the court may consider evidence outside of the pleadings to determine the jurisdictional question. Aversa v. United States, 99 F.3d 1200, 1209-10 (1st Cir. 1996). The Court should endeavor to resolve challenges to its exercise of jurisdiction before...
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