Jaakola v. Bank of N.Y. Mellon
| Decision Date | 24 July 2014 |
| Docket Number | Civ. No. 13-2919(DSD/JSM) |
| Parties | MATTHEW JAAKOLA, KRISTEN JAAKOLA, Plaintiffs, v. THE BANK OF NEW YORK MELLON, f/k/a THE BANK OF NEW YORK as TRUSTEE for CERTIFICATE HOLDERS of CWMBS, INC., CHL MORTGAGE PASS THROUGH TRUST 2006-HYB-2 MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2006-HYB2, et. al. Defendants. |
| Court | U.S. District Court — District of Minnesota |
This matter came before the undersigned on defendants' Motion to Dismiss [Docket No. 7]. This matter has been referred to the undersigned Magistrate Judge for a Report and Recommendation by the District Court pursuant to 28 U.S.C. §636(b)(1)(A), (B), Local Rule 72.1, and the Amended Administrative Order issued by Chief Judge Michael Davis on October 23, 2013 [Docket No. 4]. Pursuant to this Court's Order of November 1, 2013 [Docket No. 13], this matter was decided on the parties' written submissions.
Plaintiffs seek to invalidate the foreclosure of the mortgage on their home. Plaintiffs asserts three claims against defendants Bank of New York Mellon f/k/a The Bank of New York as Trustee for the Certificateholders CWMBS, Inc., CHL Mortgage Pass Through Trust 2006-HYB-2 Mortgage Pass Through Certificates, Series 2006-HYB2 ("BONYM") and Bank of America, NA ("BOA"): (1) quiet title to determine adverse claims under Minn. Stat. §599.01; (2) declaratory judgment; and (3) slander of title. Forthe reasons below, the Court recommends that defendants'1 Motion to Dismiss be granted and plaintiffs' claims be dismissed with prejudice.
On or about September 26, 2013, plaintiffs sued BONYM and BOA ("defendants") in state court. Notice of Removal, Ex. A (Summons and Complaint) [Docket No. 1-1]. Defendants removed the suit to Federal District Court on October 23, 2013, pursuant to 28 U.S.C. §1332(a). Notice of Removal [Docket No. 1]. The facts bearing on the motion to dismiss are as follows. On November 23, 2005, Millissa Tatro entered into a Note and Mortgage ("Mortgage") with American Brokers Conduit ("ABC") for property located in Ham Lake, Minnesota ("Property"). Complaint, ¶¶1, 5 [Docket No. 1-1]. Mortgage Electronic Registration System, Inc. ("MERS") was named as the nominee for ABC. Id. Tatro "did not borrow any money from the named Defendant." Id., ¶6. Plaintiffs alleged that they acquired their interest in the Property from Tatro through a quit claim deed executed and delivered on December 17, 2011, and a second quit claim deed executed and delivered on September 10, 2013. Id., ¶2.2
ABC and BONYM's predecessors in interest securitized the mortgage loan into a mortgage-backed security trust entitled "CHL Mortgage Pass Through Trust 2006-HYB-2 Mortgage Pass Through Certificates, Series 2006-HYB2." ("Series HYB2 Trust"). Id., ¶7. The securitization process was governed by a Pooling and Service Agreement ("PSA") and a Mortgage Loan Purchase Agreement. Id. The PSA required that the parties to the securitization documents create and deliver documents creating a complete chain of title, including assignments of mortgage and properly endorsed promissory notes to and from the following entities: (1) from Countrywide Home Loans, Inc. to CWMBS, Inc.; and (2) from CWMBS, Inc. to Bank of New York, the Trustee of the Series 2006-HYB2 Trust. Id., ¶8. The PSA required that the Trustee acknowledge receipt of these documents. Id., ¶10. The closing date of the 2006-HYB2 Trust was February 8, 2006. Id., ¶12.
On July 16, 2010, Steven H. Bruns executed an Assignment of Mortgage from MERS (as nominee for ABC) to BONYM, as Vice President of MERS. Id., ¶24, Ex. 8 (Assignment of Mortgage). The Assignment was recorded in the Anoka County Recorder's office on August 30, 2010. Id. When Bruns signed the Assignment of Mortgage, he was an attorney employed by the Peterson, Fram & Bergman, P.A. law firm. Id.
On August 12, 2010, Lance Bell, as Vice President for BONYM, signed a Notice of Pendency & Power of Attorney to Foreclose regarding the Property. Id., ¶25, Ex. 9 (Notice of Pendency & Power of Attorney to Foreclose). The Notice of Pendency & Power of Attorney was recorded in the Anoka County Recorder's office on August 30, 2010. Id. The Notice of Pendency & Power of Attorney authorized the Peterson, Fram& Bergman law firm to foreclose on the Mortgage by advertisement on behalf of BONYM. Id.
A sheriff's sale of the Property was conducted on July 18, 2011. Id., ¶26, Ex. 10 (Sheriff's Certificate of Sale and Foreclosure Record). Peterson, Fram & Bergman appeared at the sale on behalf of BONYM and bid the amount allegedly due on the note, $609,718.23. Id. Plaintiffs specifically denied that BONYM had the right to exercise the power of sale in the Mortgage or was entitled to enforce the note on the day of the sale. Id.
On or about August 28, 2013, BOA offered plaintiffs a "Move Out Agreement" in which BOA claimed that it acquired the Property through "foreclosure sale and subsequent Trustee's Deed . . . ." and was owner of the Property. Id., ¶27, Ex. 11 (Move Out Agreement).
Plaintiffs alleged the foreclosure was void because the Assignment of Mortgage from MERS to BONYM violated the terms of the securitization documents and New York law. Id., ¶33. Alternatively, if the terms of the securitization documents were followed, the foreclosure is void because the PSA required BONYM to certify receipt of assignments of mortgage, and those assignments were not recorded before the foreclosure. Id., ¶34.
Plaintiffs further alleged that Bell has been identified as an unauthorized "robo-signer" by McDonnell Property Analytics, which was hired by the Southern Essex District Registry of Deeds, Salem, Massachusetts, to audit its files. Id., ¶35; Ex. 14 (). Plaintiffs alleged the foreclosure was void because the Notice of Pendency & Power of Attorney was executed by a "known" unauthorized signer (i.e. Bell). Id., ¶36.
Plaintiffs pled the following causes of action:
Count I sought a determination of adverse claims under Minn. Stat. §599.01, et. seq. This Count alleged that in a quiet title action, defendant has the burden of proof, and consequently, defendants must prove their interest in the Property by a preponderance of evidence. Id., ¶¶38-47.
Count II sought a declaratory judgment pursuant to Minn. Stat. §551.01 et seq. that "[BONYM's] interest in the Property and/or Mortgage is void and that the foreclosure is void" and that "[p]laintiffs remain the fee owners of the [P]roperty." Id., ¶¶49-50.
Count III alleged slander of title based on defendant's drafting and recording of documents3 that plaintiffs claimed were false and not executed by legally authorized persons, which evidenced a reckless disregard for the truth and that created a cloud on plaintiffs' title to the Property. Id., ¶¶52-54.
As relief, plaintiffs sought a determination of the alleged adverse interests in the Property; a declaratory judgment that the Mortgage, Sheriff's Certificate of Sale, Assignment of Mortgage, and Notice of Pendency & Power of Attorney were void; and an order that plaintiffs are the fee owners of the Property. Complaint, Prayer for Relief, ¶¶I, II.
Defendants moved to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, first arguing that plaintiffs were barred by the preclusion doctrines of res judicata and collateral estoppel because plaintiffs' claims were raised and resolved in prior litigation involving the mortgage borrowers, Milissa and Anthony Tatro, in Wang Xang Xiong v. Bank of America, N.A., Civ. No. 11-03377 (JRT/JSM), 2012 WL 4470281 (D. Minn. Aug. 10, 2012), aff'd sub nom., Welk v. Bank of Amer., N.A., 515 Fed. Appx. 640 (8th Cir. 2012). Defendants' Memorandum of Law in Support of Motion to Dismiss ("Defs' Mem."), pp. 1-2, 7-14 [Docket No. 9].
Defendants also maintained that plaintiffs lacked standing to sue because they have no interest in the Property. Id., p. 15. BONYM acquired the Property at the foreclosure sale and holds title to the Property. Id. The Property was not redeemed within the statutory six-month period and, therefore, BONYM is the owner. Id. Accordingly, the purported conveyance from Tatro to the Jaakolas did not convey an interest in the Property and they have no legal rights or interest to assert. Id.
Third, defendants moved to dismiss the Complaint on grounds that it failed to state a claim as a matter of law. Id., pp. 16-28. As to plaintiffs' quiet title claim, defendants contended that plaintiffs were simply wrong that all they needed to allege were conclusory statements that they were in possession of the Property and that defendants claimed an adverse interest. Id., pp. 16-19. According to defendants, this "burden shifting" argument is "wholly contrary" to established precedent and has been rejected by every court to consider it. Id.; Defendants' Reply Memorandum ("Defs' Reply"), pp. 8-10 [Docket No. 16]. Defendants also asserted that plaintiffs' claims of unrecorded assignments of the Mortgage were purely speculative and unrecordedassignments cannot be inferred on the basis of securitization contracts. Defs' Mem., pp. 19-20; Defs' Reply, pp. 11-12. Further, the public record shows an unbroken chain of title from MERS to BONYM. Defs' Mem., p. 20.
Defendants rejected plaintiffs' theory that Bruns was not legally authorized to sign the Assignment of Mortgage. Id., pp. 20-21. Defendants contended that this allegation was wholly speculative and conclusory and, at any rate, plaintiffs lacked standing to challenge the Assignment because they were not parties to the Assignment. Id., pp. 22-23.
Defendants also maintained that plaintiffs' reliance on the PSA to invalidate the foreclosure should be rejected, arguing that plaintiffs could not invoke the PSA or New York law to void the foreclosure because they were not parties or third-party...
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