Bell v. Countrywide Bank, N.A.

• Citation: 860 F.Supp.2d 1290
• Decision Date: 15 March 2012
• Docket Number: Civil No. 2:11–CV–00271–BSJ.
• Parties: Timothy R. BELL, an individual; and Jennifer Bell, an individual, Plaintiffs, v. COUNTRYWIDE BANK, N.A. d/b/a Bank of America Corporation, a Delaware corporation; BAC Home Loans Servicing, LP, a Texas limited partnership; Recontrust Company, N.A., a national association; and Does 1–5, Defendants.
• Court: U.S. District Court — District of Utah

860 F.Supp.2d 1290

Timothy R. BELL, an individual; and Jennifer Bell, an individual, Plaintiffs,
v.
COUNTRYWIDE BANK, N.A. d/b/a Bank of America Corporation, a Delaware corporation; BAC Home Loans Servicing, LP, a Texas limited partnership; Recontrust Company, N.A., a national association; and Does 1–5, Defendants.

Civil No. 2:11–CV–00271–BSJ.

United States District Court,
D. Utah,
Central Division.

March 15, 2012.

[860 F.Supp.2d 1292]

Abraham C. Bates, Nariman Noursalehi, Wasatch Advocates, Salt Lake City, UT, Steven D. Crawley, Sandy, UT, for Plaintiffs.

Philip D. Dracht, Fabian & Clendenin, Salt Lake City, UT, Amy Miller, Philip C. Chang, McGuire Woods LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION & ORDER (Fed. R. Civ. P. 12(b)(6))
BRUCE S. JENKINS, Senior District Judge.
I. INTRODUCTION

This matter arises out of plaintiffs' alleged default on a promissory note secured by a deed of trust on their primary residence. On October 8, 2009, defendant ReconTrust, a successor trustee, recorded with the Salt Lake County Recorder a notice of default and election to sell plaintiffs' property to collect on the note.¹ Plaintiffs filed a complaint challenging the prospective sale in Third District Court, Salt Lake County, Utah. Defendants subsequently removed the case to this court, alleging diversity.

At a hearing on August 30, 2011, plaintiffs represented that they “would like to bring an amended complaint seeking judicial determination about the right of ReconTrust [the successor trustee] to foreclose this trust deed.” ² Plaintiffs also requested leave to amend the complaint to state a cause of action for promissory estoppel on the loan modification issues.³ At that time, plaintiffs stated that “as to those two items, we'd like the Court's leave to file an amended complaint and continue on our way.” ⁴ The court granted leave to amend,⁵ ordering that plaintiffs file their amended complaint by September 16, 2011.⁶

Plaintiffs filed an amended complaint on September 15, 2011,⁷ which asserted the following among other things: (1) absence of authority of ReconTrust and “preliminary injunction” (as against all defendants), (2) breach of an alleged modified contract (as against BAC and BAC Servicing), and (3) promissory estoppel (as against BAC and BAC Servicing).

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On September 30, 2011, defendants filed a Rule 12(b)(6) motion to dismiss for failure to state a claim,⁸ arguing that the complaint exceeded the authorization to amend. Although defendants assert that plaintiffs' claim for preliminary injunction “is not a claim at all but rather a form of relief that cannot constitute an independent cause of action,” ⁹ paragraphs 52–56 of the amended pleading adequately raise the question as to whether ReconTrust has authority to conduct nonjudicial foreclosures on real property in Utah.

The question is of continuing importance because Utah Code Ann. § 57–1–23.5(2) (Supp.2011) ¹⁰ provides a private cause of action to a trustor whose real property has been the subject of an unauthorized sale by an unauthorized person. Plaintiffs assert ReconTrust is unauthorized to “foreclose.”

Defendants may have a point that plaintiffs may have exceeded the scope of the court's leave to amend,¹¹ but the court need not address the promissory estoppel claim nor the breach of contract issue at this time. The immediate and substantive question before the court is whether ReconTrust has authority to sell real property at a nonjudicial foreclosure sale in Utah.

On November 10, 2011, defendants' motion came on for hearing and was argued to the court, at which time the court reserved on the matter and requested supplemental briefing from both parties as to the legislative history of 12 U.S.C. § 92a. Curiously, at the hearing, defendants notified the court for the first time that on November 2, 2011, ReconTrust had been succeeded as trustee by an attorney named Armand J. Howell.¹² Defendants then asserted that plaintiffs' claim as to ReconTrust had become moot.¹³ In light of Mr. Howell's recent appointment as successor trustee, the court also requested the parties to brief whether the ReconTrust issue was capable of repetition. ¹⁴

II. DISCUSSION

At this point, the court need only determine whether to grant or deny defendants' motion to dismiss.

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not

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do.” ¹⁵ While “the pleading standard Rule 8 announces does not require detailed factual allegations, ... it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” ¹⁶

Prior to dealing with the substantive question, the court must first determine whether plaintiffs' claim is now moot.

A. Plaintiffs' claim against ReconTrust is not moot

This court's jurisdiction and constitutional authority under Article III of the Constitution do not extend to moot cases, but only to actual cases or controversies.¹⁷ The mootness doctrine is grounded in the idea that “ ‘federal courts only decide actual, ongoing cases or controversies,’ ” ¹⁸ and that “a case or controversy no longer exists when it is impossible to grant any effectual relief.” ¹⁹

However, a case is not moot if it “falls within a special category of disputes that are ‘capable of repetition’ while ‘evading review.’ ” ²⁰ Two elements must be present for a case to fall within this exception: “(1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there was a reasonable expectation that the same complaining party would be subjected to the same action again.” ²¹

The Supreme Court has stated that a federal court's “concern in these cases, as in all others involving potentially moot claims, [is] whether the controversy [is] capable of repetition and not ... whether the claimant ha[s] demonstrated that a recurrence of the dispute was more probable than not.” ²² Indeed, the possibility of recurrence need not be “established with mathematical precision,” but rather the court need only find a “reasonable expectation” of repetition.²³ Certainly, the bar is not high for a party to withstand a challenge for mootness.

When presented with a question of mootness the court also has an “interest in ‘preventing litigants from attempting to manipulate the Court's jurisdiction.’ ” ²⁴ “The concern is that a party's change in

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position may be temporary and thus abandoned once the litigation ends.” ²⁵ Therefore, it is “well settled that a defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.” ²⁶ In cases where the court is concerned with a party's potential manipulation of the court's jurisdiction, the Tenth Circuit looks at two additional factors: (1) whether “it is not ‘absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur[,]’ ” ²⁷ and (2) whether the litigant is attempting to seal a favorable decision from review.²⁸

Additionally, there are certain matters that come before a court that are too important to be denied effective review; for example, when the nature of the issue is sufficiently compelling in relation to the enforcement of the laws and the private rights involved.²⁹

Here, defendants assert that “Plaintiffs cannot allege a live case or controversy vis-à-vis ReconTrust and this Court cannot grant Plaintiffs any effectual relief as to the preliminary injunction claim” ³⁰ because ReconTrust is no longer the trustee on the plaintiffs' deed of trust, and “in fact, ReconTrust ceased operations in Utah in October 2011.” ³¹

This court disagrees. The question of mootness arose on November 2, 2011, when defendants substituted a licensed Utah attorney as trustee in the place of ReconTrust. However, plaintiffs and others are certainly capable of being subjected to ReconTrust's actions once again. Plaintiffs correctly assert that the “beneficiary may appoint a successor trustee at any time,” ³² meaning that there is nothing prohibiting defendants from again substituting ReconTrust as successor trustee at a later date.

Although defendants represent that ReconTrust ceased operations in Utah in October 2011, they have supplied this court with one order and one memorandum decision and order from cases in the District of Utah wherein ReconTrust continued to

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prosecute actions against Utah homeowners as late as December 2011 and February 2012.³³ There was no specific representation that ReconTrust would comply with the Utah statutes in the future. It is of course curious that ReconTrust later provided to the court supplemental authority and further argued that ReconTrust did not have to comply with the Utah statutes. Thus, it is not absolutely clear to this court that ReconTrust's future compliance with Utah statutes can reasonably be expected.

ReconTrust relies on two decisions which apply Texas law to a national bank's fiduciary activities in Utah.³⁴ The cases on this issue within the District of Utah are evenly split.³⁵ One of them was appealed. ³⁶ The Tenth Circuit did not have opportunity to pass on the matter because the plaintiff voluntarily dismissed her complaint in the underlying action prior to the Tenth Circuit having opportunity to issue an opinion. ³⁷

The substitution of an attorney as successor trustee occurred on November 2, 2011. The hearing on the motion to dismiss was set for November 10, 2011. Despite having eight days (four days, not including weekends and the dates of substitution and hearing) to notify the court of the substitution—and possibly submit a supplemental brief as to the potential mootness issue—defendants did not notify the court of the substitution until...