Bruce v. Recontrust Co.
| Decision Date | 26 January 2016 |
| Docket Number | CASE NO. 15-5866 RJB |
| Court | U.S. District Court — Western District of Washington |
| Parties | LEONARD and BONNIE BRUCE, husband and wife, Plaintiff, v. RECONTRUST COMPANY, N.A., a Washington corporation, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, Inc., a Delaware corporation, BANK OF AMERICA, N.A. a North Carolina corporation, and FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendants. |
This matter comes before the Court on the Defendants' Motion to Dismiss. Dkt. 8. The Court has considered the pleadings filed regarding the motion and the remaining file.
Plaintiffs filed this mortgage case, pro se, on July 22, 2015 in Pierce County, Washington Superior Court. Dkt. 1-2, at2. It was removed to this Court on November 30, 2015, pursuant to 28 U.S.C. § 1332(a)(1), diversity jurisdiction. Dkt. 1. On December 7, 2015, Defendants filed a Motion to Dismiss Plaintiffs' Complaint. Dkt. 8. For the reasons set forth below, the motion should be granted.
The following background facts are taken from Plaintiffs' Second Amended Complaint or from documents referred to therein. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) ()(internal quotations and citations omitted). In this case, the documents cited are referred to in the Second Amended Complaint, are central to Plaintiffs' claims, and no party questions their authenticity.
On May 4, 2007, Plaintiffs' borrowed $417,000 from Webster Bank, N.A., evidenced by a Promissory Note ("Note"), to purchase property located at 17413 NE 167th Avenue, Brush Prairie, Washington ("property"). Dkt. 1-1, at 22-23. The Note was secured against the property by a Deed of Trust. Dkt. 1-1, at 23. The Deed of Trust identifies Plaintiffs as "Borrowers," Webster Bank as "Lender," and William L. Bishop Jr., of Bishop, Lynch & White, P.S. as "trustee." Dkt. 9, at 6-20. Mortgage Electronic Registration Systems, Inc. ("MERS") was designated as the beneficiary, "(solely as nominee for Lender and the Lender's successors and assigns) and the successors and assigns of MERS." Dkt. 9, at 8. The Deed of Trust secured "to Lender (i) the repayment of the loan . . . and (ii) the performance of Borrowers' covenants and agreements" under the Deed of Trust and the Note. Id.
Plaintiffs allege in their Second Amended Complaint that the Deed of Trust "does not secure repayment of the debt to MERS, the beneficiary." Dkt. 1-1, at 24. They maintain that the "party secured by most [deeds of trust] - and the [Deed of Trust] under consideration in this case- is the 'Lender' or the Lender's 'successor in interest' or 'assign.'" Dkt. 1-1, at 24. They argue that "the Lender, by virtue of having lent the money that created the debt; is, by definition, the 'owner' of the debt." Id. (emphasis and punctuation in original).
The Second Amended Complaint asserts that Webster Bank, N.A. notified them that the loan had been sold to Bank of America ("BOA") on June 11, 2007. Dkt. 1-1, at 30.
In any event, MERS assigned its interest as beneficiary under the Deed of Trust to BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing ("BAC Home Loans") on October 28, 2010. Dkt. 9, at 22. That same day, BAC Home Loans appointed ReconTrust Company N.A. ("ReconTrust") as successor trustee. Dkt. 9, at 24. Both instruments were recorded in the Clark County, Washington Recorder's Office on November 4, 2010. Id., at 22 and 24.
On January 27, 2011, ReconTrust executed a "Notice of Trustee's Sale," which was recorded in the Clark County, Washington Recorder's Office on January 31, 2011. Dkt. 9, at 27-31. The notice indicated that the property was to be sold at public auction. Id.
In July 2011, BAC Home Loans merged into BOA. BAC Home Loans Servicing, LP v. Fulbright, 180 Wash. 2d 754, 757 n. 2 (2014). As a result, BAC Home Loans' rights and interests "transferred to and vested in" BOA. Id.
The property was sold on July 22, 2011 to the Federal National Mortgage Association ("Fannie Mae"). Dkt. 9, at 34. On July 28, 2011, ReconTrust, as trustee, executed a Trustee's Deed, conveying the subject property to Fannie Mae. Dkt. 9, at 33-34.
Plaintiffs assert in their Second Amended Complaint that because MERS was not the "Lender" or "owner of the debt," it could not lawfully assign its interest in the Deed of Trust. Dkt. 1-1. They reason that "BOA," then, couldn't have lawfully acted, because BOA "was not the 'Lender' or 'owner of the debt.'" Dkt. 1-1, at 24. They also assert that BOA only had the "right to enforce the Note" as holder of the Note. Dkt. 1-1, at 26. Plaintiffs maintain that the Deed of Trust "secures repayment of the debt to only the "owner of the note," not the holder of the note. Dkt. 1-1, at 27. Plaintiffs assert that Fannie Mae owned their note. Dkt. 1-1, at 30.
Plaintiffs also maintain that ReconTrust was also not properly appointed successor trustee. Dkt. 1-1, at 28. Plaintiffs assert that ReconTrust did not have authority to act as it did and that it violated its "duty of good faith" to "cancel or discontinue a foreclosure proceeding, if in its independent judgment, ReconTrust determined the proceeding should be canceled or discontinued." Id. They allege that ReconTrust had an agreement with BOA that prohibited ReconTrust from canceling or discontinuing a foreclosure proceeding without BOA's permission in violation of RCW 61.24.040 et seq. Id. Plaintiffs also allege that ReconTrust violated a "duty of good faith" to them. Id.
Plaintiffs filed this case, pro se, on July 22, 2015. Dkt. 1-2. They filed their Second Amended Complaint on October 7, 2015. Dkt. 1-1, at 21. Plaintiffs make claims for breach of contract, fraud, and violation of Washington's Consumer Protection Act ("CPA"). Dkt. 1-1, at 30-38. The Second Amended Complaint also alleges Defendant ReconTrust violated Washington's Deed of Trust Act's ("DTA"), "RCW 61.24.010(4), duty of good faith." Id., at 28. The Second Amended Complaint also lists a "Fifth Cause of Action - Declaratory Judgment" and then provides "add substance here," but nothing further was added. Id. Plaintiffs seek damages, restoration of the property to Plaintiffs' possession, attorney's fees and costs. Id., at 38-39.
Defendants now move to dismiss the Second Amended Complaint, arguing that Plaintiffs' breach of contract claim was waived as a result of their failure to file suit prior to the foreclosure, and their claims for fraud, and for violations of the DTA and CPA are time-barred. Dkt. 8. Defendants further argue that Plaintiffs' challenge to the chain of title or the foreclosure sale also fails because: (1) Plaintiffs' MERS' allegations cannot support a claim for violation of the CPA, (2) the Plaintiffs lack standing to challenge the validity of assignment of the Deed of Trust, (3) ReconTrust was a valid trustee and did not violate a duty of good faith, and (4) the chain of title was unbroken and the foreclosure was proper. Id.
After Defendants' Motion to Dismiss was filed, a notice of appearance by counsel on behalf of Plaintiffs was filed. Dkt. 11.
Plaintiffs responded to the Motion to Dismiss via counsel, and argue the motion should be denied. Dkt. 10. Plaintiffs argue that their claims have not been waived and that their claims are not time barred. Id. They assert that even if the claims are time barred, the statute of limitations should be tolled. Id.
Plaintiffs also assert that the Washington State Supreme Court case Brown v. Washington Dept. of Commerce, 359 P.3d 771 (2015), was "wrongly decided." Dkt. 10.
In Brown, the court held that in Washington, a note comes with at least two rights: the holder of the note has the right to enforce the note and the owner of the note has the right to the economic benefits - like receiving payments. Brown, at 778. The initial lender has both rights on the outset, but, can sell those rights separately. Id. The Brown Court held that the holder of the note is considered the beneficiary under the deed of trust. Id., at 784.
Plaintiffs here argue that the Washington Supreme Court improperly held that the deed of trust in that case followed the transfer of the right to enforce the note. Dkt. 10 and 10-1. They argue that the case should have held that the "holder of the note (who does not own the note or underlying mortgage debt obligation for which the note was taken as payment) also is not entitled to enforce the underlying mortgage debt obligation." Dkt. 10-1, at 5. Accordingly, as it is relevant to this case, they assert that BOA only held the note, and therefore, did not have "the right to foreclose." Id., at 5-6.
In their Reply, Defendants assert that Plaintiffs' claims are waived or time barred and that there is no basis to toll the statutes of limitation. Dkt. 13. Defendants also argue that Plaintiffs' claims would still fail because Plaintiffs do not have standing to challenge the assignment of their Deed of Trust, holders of notes in Washington are permitted to foreclose, and need not be owners of the note under Brown, Plaintiffs' arguments regarding MERS are not supported by Washington case law, and Plaintiffs' arguments regarding ReconTrust do not support their claims. Id.
Under the rule of Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), "federal courts sitting in diversity jurisdiction apply state substantive law and federal procedural law." Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996)...
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