Jensen-Edwards v. Nationstar Mortg., LLC (In re Jensen-Edwards)

Decision Date13 August 2015
Docket NumberAdv. No. 14–07025–TLM,Case No. 14–20942–TLM
Citation535 B.R. 336
PartiesIn re Leslie Ann Jensen–Edwards, Debtor. Leslie Ann Jensen–Edwards, Plaintiff, v. Nationstar Mortgage, LLC, Lehman Brothers FSB, GS Trust, Northwest Trustee Services, Inc., and Does I–X, Defendants.
CourtU.S. Bankruptcy Court — District of Idaho

Leslie Ann Jensen–Edwards, pro se.

Matthew K. Shriver, Lewis Nishioka Stoddard, Routh Crabtree Olsen, P.S., Boise, ID, Wesley W. Hoyt, Kooskia, ID, for Defendant.

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
TERRY L. MYERS, CHIEF U. S. BANKRUPTCY JUDGE

Leslie Ann Jensen–Edwards (Debtor) filed a voluntary chapter 13 petition on November 6, 2014, commencing Case No. 14–20942–TLM.1 Debtor is the owner of real estate located at 17287 W. Summerfield Rd., in Post Falls, Idaho (the “Property”). On December 5, 2014, Debtor, appearing pro se, filed a complaint against Nationstar Mortgage, LLC (Nationstar), Northwest Trustee Services, Inc. (“NTS”), Lehman Brothers FSB (Lehman Brothers), and GS Trust, initiating this adversary proceeding, Adv. No. 14–07025–TLM. Nationstar and NTS (collectively Defendants) filed an amended motion for summary judgment against Debtor, Doc. No. 37 (“Motion”). Debtor responded with an “answer” and “amended answer” to the Motion, Doc. Nos. 43, 46.2 The Motion came on for hearing on June 29, 2015, and it was taken under advisement following oral argument by Debtor and Defendants' counsel.3

This Decision addresses the arguments made, and disposes of the Motion.

BACKGROUND AND FACTS4

On May 18, 2005, Debtor executed a deed of trust on the Property, which was then recorded on May 25, 2005. It secured repayment of $345,000 borrowed by Debtor. The deed of trust stated that Lehman Brothers was the lender;5 Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for the lender, was the beneficiary; and Alliance Title was the trustee.6

On November 30, 2009, MERS as nominee for Lehman Brothers appointed Pioneer Lender Trustee Services as successor trustee, and that appointment was recorded on December 3, 2009.

On February 8, 2011, an assignment of the deed of trust to Federal National Mortgage Association (“FNMA”) was recorded. On January 8, 2013, a further assignment of the deed of trust to Northwest Lehman Brothers 2005 Corporate Pass–Through Certificates Series 2005 was recorded, but then a corrective assignment to Aurora Loan Services, LLC (“Aurora”) was recorded February 27, 2014. Then, also on February 27, Aurora assigned the deed of trust to Nationstar. The same day, Nationstar executed and recorded an appointment of NTS as successor trustee.7

During the course of these events, a notice of default and election to sell under the deed of trust was recorded on December 3, 2009, alleging defaults from and after August 2009. Sale was set for April 8, 2010.

Debtor filed a state court lawsuit on April 1, 2010. Edwards v. Lehman Brothers Bank, et al., Case No. CV10–2745, First Judicial District, Kootenai County, Idaho (the State Court Case).8 Debtor later amended the complaint in June 2010. Debtor argued that the various defendants lacked standing and had no interest in the note or deed of trust; that securitization made the loan unenforceable, cured her default, or satisfied the loan obligation; and that the note and deed of trust were “split.” She sought declaratory judgment that the defendants lacked any legal or equitable rights in the note or deed of trust and permanent injunctive relief barring any of them from seeking to foreclose on the Property.

On November 16, 2010, by a written decision and order, the State Court Case was dismissed with prejudice for failure to state a claim. Debtor appealed to the Idaho Supreme Court which, on April 25, 2013, affirmed the district court in Edwards v. Mortgage Electronic Registration Systems, Inc., 154 Idaho 511, 300 P.3d 43 (2013).

The Idaho Supreme Court addressed several issues.9 Significant here is its conclusion that the defendants in that case had standing and authority to foreclose the subject deed of trust.

The Supreme Court recognized that the “beneficiary” under the deed of trust is the person named or otherwise designated in the deed of trust as the person for whose benefit the deed of trust is given. Id. at 48 (citing Idaho Code § 451502(1)). In this case, that beneficiary was initially Lehman Brothers. It found that MERS was not the beneficiary but, instead, by definition in the deed of trust, was the “nominee” of the lender and its successors and assigns. Thus, it was an “agent” of Lehman Brothers. “Designating MERS as the beneficiary in its representative capacity as nominee of Lehman Brothers and its successors and assigns was legally no different from designating Lehman Brothers and its successors and assigns as the beneficiary.” Id. at 49. The deed of trust was found to conform to Idaho law.10

As noted, Alliance Title was the initial trustee under the deed of trust. MERS, as nominee of the lender, replaced Alliance Title with Pioneer Lender Trustee Services, LLC (“Pioneer”), and the substitution was recorded by Quality Loan Service Corp. of Washington (“Quality Loan”) as attorney in fact for Pioneer. Id. at 46. The Supreme Court found that the recording of the notice of default required under Idaho Code § 45–1505(3) by Quality Loan was with proper authority. Id. at 49. It stated:

[U]nder the law, any instructions by MERS that the trustee proceed with foreclosing the deed of trust constituted the actions of the lender.
The trustee, not the beneficiary, is the one who forecloses the deed of trust. I.C. § 45–1505. The beneficiary has the authority to appoint a successor trustee, I.C. § 45–1504(2), and MERS, as nominee of the lender, had the authority to appoint Pioneer as successor trustee. Therefore, Pioneer had the authority to institute foreclosure proceedings.

Id.

The Supreme Court disposed of several of Debtor's other attacks, including claims and arguments about who owned the original note; whether ownership of the note had been “severed” from the ownership of the deed of trust; whether MERS or any other defendant had ownership of the note; and so on. Those claims, the Supreme Court held, were properly rejected given Debtor's failure to submit admissible evidence on any of the allegations. Id. at 51.11 Thus the district court decision was affirmed.

The foreclosure sale occurred in January 2011. But the beneficiary decided to rescind the sale, and a rescission of the trustee's deed was recorded in August 2011. Id. at 47.12

When Debtor filed her chapter 13 case, she listed the Property as her residence. Her plan and amended plan, Doc. Nos. 27 and 33, propose to pay GS Trust as a lien creditor on the Property13 but to “avoid” Nationstar's security interest.14 Nationstar objected to confirmation of the plan. It noted, among other things, a lack of provision of payment of an arrearage of almost $169,000.15 The chapter 13 process has come to a standstill as this adversary proceeding has been litigated.

DISCUSSION AND DISPOSITION

There are two fundamental reasons why Defendants' Motion must be granted. First, the instant complaint is barred in multiple regards by the RookerFeldman doctrine. Second, Debtor's claims that were not expressly and directly answered in Edwards v. MERS are nonetheless barred by the principles of claim preclusion.

A. Rooker Feldman

The RookerFeldman doctrine16 prohibits a federal court from exercising jurisdiction over a lawsuit that is a de facto appeal of a state court judgment. Carmona v. Carmona, 603 F.3d 1041, 1050–51 (9th Cir.2010) ; Reusser v. Wachovia Bank, N.A., 525 F.3d 855, 858–59 (9th Cir.2008) ; Kougasian v. TMSL, Inc., 359 F.3d 1136, 1139 (9th Cir.2004) ; Noel v. Hall, 341 F.3d 1148, 1164 (9th Cir.2003).

[The RookerFeldman doctrine] stands for the relatively straightforward principle that federal district courts do not have jurisdiction to hear de facto appeals from state court judgments. Noel, 341 F.3d at 1155. The jurisdictional prohibition arises from a negative inference drawn from 28 U.S.C. § 1257 which grants jurisdiction to review state court decisions in the United States Supreme Court. Kougasian v. TMSL, Inc., 359 F.3d 1136, 1139 (9th Cir.2004) (citation omitted). Because it grants jurisdiction to the Supreme Court, section 1257 impliedly prohibits lower federal courts from reviewing state court decisions. Id.
Stated simply, the RookerFeldman doctrine bars suits “brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Exxon Mobil Corp. v. Saudi Basic Indust. Corp., 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). In practice, the RookerFeldman doctrine is a fairly narrow preclusion doctrine, separate and distinct from res judicata and collateral estoppel. See Noel, 341 F.3d at 1162–64.
We have previously explained how federal courts should distinguish a forbidden de facto appeal of a state court decision that is barred by RookerFeldman from a suit that is barred by other preclusion principles. A suit brought in federal district court is a “de facto appeal” forbidden by RookerFeldman when “a federal plaintiff asserts as a legal wrong an allegedly erroneous decision by a state court, and seeks relief from a state court judgment based on that decision.” Id. at 1164. In contrast, if a plaintiff “asserts as a legal wrong an allegedly illegal act or omission by an adverse party, RookerFeldman does not bar jurisdiction.” Id.

Carmona, 603 F.3d at 1050. Additionally:

RookerFeldman is a powerful doctrine that prevents federal courts from second-guessing state court decisions by barring the lower federal courts from hearing de facto appeals from state-court judgments: If claims raised in the federal court action are “inextricably intertwined” with the state court's decision such that the adjudication of the
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