Nordeen v. Bank of Am., N.A. (In re Nordeen)

• Decision Date: 09 August 2013
• Docket Number: Bankruptcy No. 09–21273–LED.,Adversary No. 11–01076–LED.,BAP No. NV–12–1441–DKiCo.
• Citation: 495 B.R. 468
• Parties: In re William F. NORDEEN and Carol A. Nordeen, Debtors. William F. Nordeen; Carol A. Nordeen, Appellants, v. Bank of America, N.A., as successor by merger to BAC Home Loans Servicing, LP; Recontrust Company, N.A., Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

495 B.R. 468

In re William F. NORDEEN and Carol A. Nordeen, Debtors.William F. Nordeen; Carol A. Nordeen, Appellants,

v.Bank of America, N.A., as successor by merger to BAC Home Loans Servicing, LP; Recontrust Company, N.A., Appellees.

BAP No. NV–12–1441–DKiCo.

Bankruptcy No. 09–21273–LED.

Adversary No. 11–01076–LED.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted July 19, 2013.

Decided Aug. 9, 2013.

Appellant Carol A. Nordeen argued pro se; David J. de Jesus, Esq. of Reed Smith LLP, argued, San Francisco, CA, for appellees Bank of America, N.A., and ReconTrust Company, N.A.

Before DUNN, KIRSCHER and COLLINS,¹Bankruptcy Judges.

OPINION

DUNN, Bankruptcy Judge.

The appellants William F. and Carol A. Nordeen (the “Nordeens”) appeal the dismissal of their Second Amended Complaint against BAC Home Loans Servicing, LP, fka Countrywide Home Loans Servicing LP (“BAC”), and ReconTrust Company, N.A. (“ReconTrust”), without leave to amend. Hereafter, BAC and ReconTrust are referred to collectively as “appellees.” ² We AFFIRM.

I. FACTUAL BACKGROUND

The following factual narrative is derived from factual statements in the Nordeens' Second Amended Complaint and the exhibits thereto, and the bankruptcy court's Memorandum Decision Dismissing Complaint (“Memorandum Decision”) basing its background discussion on facts alleged in the Second Amended Complaint.

A. Loan History

On October 21, 2005, the Nordeens signed a promissory note for $140,000 (the “Note”), payable to Countrywide Home Loans, Inc. (“Countrywide”). The Note provides that: “[The Nordeens] understand that [Countrywide] may transfer this Note. [Countrywide] or anyone who takes this Note by transfer and who is entitled to receive payment under this Note is called the ‘Note Holder.’ ”

To secure their payment obligations under the Note, on October 21, 2005, the Nordeens also signed a deed of trust (the “Trust Deed”) against their rental property in Surprise, Arizona (the “Property”). ReconTrust is the trustee named in the Trust Deed, under which the Nordeens “irrevocably grant[ed] and convey[ed]” the Property “in trust, with power of sale.” The named Trust Deed beneficiary was Mortgage Electronic Registration Systems,Inc. (“MERS”), which was identified as “acting solely as a nominee for [Countrywide] and [Countrywide's] successors and assigns.”

The Trust Deed expressly provides:

Borrower [the Nordeens] understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender [Countrywide] and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, releasing and canceling this Security Instrument.

The Trust Deed further provides:

The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower. A sale might result in a change in the entity (known as the “Loan Servicer”) that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law. There also might be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given written notice of the change which will state the name and address of the new Loan Servicer, the address to which payments should be made and any other information RESPA requires in connection with a notice of transfer of servicing. If the Note is sold and thereafter the Loan is serviced by a Loan Servicer other than the purchaser of the Note, the mortgage loan servicing obligations to Borrower will remain with the Loan Servicer or be transferred to a successor Loan Servicer and are not assumed by the Note purchaser unless otherwise provided by the Note purchaser.

On October 30, 2005, the Note was sold to the CWALT 2005–73CB REMIC Trust (“CWALT”).

In December 2008, the Nordeens were unable to make their monthly Note payment, apparently as a result of defaulting tenants leaving the Property in such bad shape that significant, costly repairs were required. The Nordeens contacted Countrywide to see “if they could work anything out,” but Countrywide's representative “said they could do nothing.” On January 16, 2009, BAC mailed the Nordeens a notice of intent to accelerate the Nordeens' payment obligations under the Note. The Nordeens have not made a payment on the Note obligation since December 2008.

On March 23, 2009, ReconTrust initiated foreclosure proceedings with respect to the Property. On May 29, 2009, the Nordeens sent what they characterized as a Qualified Written Request under RESPA ³ to BAC and ReconTrust.

ReconTrust initially responded to the Nordeens' request for information. In its response, ReconTrust apparently included copies of the Note and Trust Deed and a payment history corresponding to the Nordeens' account. ReconTrust also explained that, despite the Nordeens' apparent assertions to the contrary, the Note and Trust Deed remained enforceable as written. Ultimately, in response to further communications from the Nordeens over a number of months, BAC apparently advised the Nordeens that payments on the Note were due and owing for December 2008 through April 2010, and a foreclosure sale was scheduled for May 18, 2010. No foreclosure sale of the Property has occurred to date.

B. Bankruptcy Proceedings

On June 28, 2009, the Nordeens filed for protection under chapter 13 of the Bankruptcy Code.⁴ On August 7, 2009, BAC filed a proof of secured claim in the Nordeens' bankruptcy case.

On March 3, 2011, the Nordeens, acting pro se, filed an adversary proceeding complaint (“Initial Complaint”) against the appellees. In the Initial Complaint, the Nordeens asserted claims for declaratory relief, fraud, quiet title, and violations of RESPA, the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601–1667f, and the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p. A prominent feature of the Initial Complaint was the Nordeens' theory (the “Securitization Theory”) that the securitization of the Note and sale to CWALT constituted a “true sale” of the Note that vitiated its effectiveness as to them and rendered the Trust Deed unenforceable as to the Property. The Nordeens also argued that the appellees had somehow fabricated the version of the Note that they were trying to enforce against the Nordeens.

On June 6, 2011, the appellees moved to dismiss the Initial Complaint with prejudice under Civil Rule 12(b)(6). After a hearing on the motion on July 26, 2011 (“July 26th Hearing”), the bankruptcy court granted the motion to dismiss in part but granted the Nordeens leave to amend their complaint. At the July 26th Hearing, after hearing argument from the parties, the bankruptcy court rejected the Nordeens' Securitization Theory but granted the Nordeens leave to amend their claim for declaratory relief “so you can sort out who's got what note.” The Nordeens' other claims were dismissed without leave to amend. On August 8, 2011, the bankruptcy court entered its order on the appellees' motion to dismiss the Initial Complaint, providing that “Defendants' Motion is GRANTED; IT IS FURTHER ORDERED that the Plaintiffs shall have leave until August 26, 2011 to file an amended complaint to assert a declaratory relief action;....”

On August 8, 2011, the Nordeens moved for reconsideration of the bankruptcy court's order on appellees' motion to dismiss and filed a “disapproval to order on motion to dismiss that attorneys have done for the court.” The Nordeens further filed a first amended complaint (“First Amended Complaint”) on August 26, 2011.

The bankruptcy court held a hearing on September 13, 2011 (“September 13th Hearing”), to consider outstanding issues between the parties, including the Nordeens' motion for reconsideration of the prior dismissal order. At the September 13th Hearing, the bankruptcy court reiterated to the Nordeens that claims based on their Securitization Theory were not viable. They could replead a more limited declaratory relief claim based upon their allegations that the appellees were trying to collect on the wrong Note. However, if the Nordeens wanted to assert additional claims for relief, they would need to file a motion to amend their complaint. But, the bankruptcy court cautioned, “You [the Nordeens] can't bring back the causes of action I've already dismissed.” Ultimately, the bankruptcy court granted the Nordeens leave to file a second amended complaint.

The bankruptcy court entered an order denying the Nordeens' motion for reconsideration of the order on appellees' original motion to dismiss (the “Reconsideration Order”) on September 21, 2011. In the Reconsideration Order, the bankruptcy court granted the Nordeens until October 11, 2011 to file their second amended complaint but further ordered that “no further leave to file additional amended complaints shall be granted.”

On October 11, 2011, the Nordeens filed their second amended complaint (“Second Amended Complaint”). In the Second Amended Complaint, the Nordeens again focused on their Securitization Theory, asserting claims under that umbrella for declaratory relief, fraud, perjury, “material facts as to contracts, securities, and as to pleading, and practice,” “federal laws UCC–3 [and] UCC–9,” “possible collusion, RICO Act ⁵ and possible counterfeiting,” and “housing laws.”

The appellees filed an answer to the Second Amended Complaint on November 8, 2011. Following substantial discovery, on May 8, 2012, the appellees moved for judgment on the pleadings (“Pleadings Judgment Motion”) under Civil Rule 12(c). The Nordeens filed an opposition to the Pleadings Judgment Motion on May 29, 2012, to which the appellees replied on June 5, 2012.

The...