Olmstead v. Recontrust Co., N.A.

• Decision Date: 09 February 2012
• Docket Number: Case No. 3:11–CV–964–HA.
• Citation: 852 F.Supp.2d 1318
• Parties: Rodney D. OLMSTEAD and Tracy L. Olmstead, Plaintiffs, v. RECONTRUST COMPANY, N.A., a California-headquartered National Association, and BAC Home Loans Servicing, LP, a Texas Limited Partnership, Defendants.
• Court: U.S. District Court — District of Oregon

852 F.Supp.2d 1318

Rodney D. OLMSTEAD and Tracy L. Olmstead, Plaintiffs,

v.RECONTRUST COMPANY, N.A., a California-headquartered National Association, and BAC Home Loans Servicing, LP, a Texas Limited Partnership, Defendants.

Case No. 3:11–CV–964–HA.

United States District Court, D. Oregon.

Feb. 9, 2012.

David W. Venables, Terrance J. Slominski, Slominski & Associates, Tigard, OR, for Plaintiffs.

William D. Miner, III, Davis Wright Tremaine, LLP, Portland, OR, for Defendants.

OPINION AND ORDER

ANCER L. HAGGERTY, District Judge:

Plaintiffs own a home in Hood River, Oregon that is currently scheduled for a trustee's sale. Plaintiffs filed suit against defendants BAC Home Loans Servicing, LP ¹ (BAC) and ReconTrust Company, N.A. (ReconTrust) for breach of contract and declaratory relief. Defendants seek dismissal of plaintiffs' Complaint on the grounds that plaintiffs cannot state a claim for breach of contract and no actionable controversy supports plaintiffs' request for declaratory relief. The court held oral argument on this motion on January 30, 2012. For the following reasons, defendants' Motion to Dismiss [9] is GRANTED IN PART AND DENIED IN PART.

STANDARDS

Under the Federal Rules of Civil Procedure, a complaint must contain a short and plain statement of the plaintiff's claims showing that he or she is entitled to relief. Fed.R.Civ.P. 8(a). To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege sufficient facts to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). When considering a motion to dismiss under this rule, the court must determine whether the plaintiff has made factual allegations that are “enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Dismissal under Rule 12(b)(6) is proper only where there is no cognizable legal theory, or an absence of sufficient facts alleged to support a cognizable legal theory. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir.2010).

The reviewing court must treat all facts alleged in the complaint as true and resolve all doubts in favor of the nonmoving party. Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1098 n. 1 (9th Cir.2009) (citation omitted). The court need not accept any legal conclusions set forth in a plaintiff's pleading. Ashcroft, 129 S.Ct. at 1949–50.

FACTUAL ALLEGATIONS

In accordance with these standards, the following facts are taken from plaintiffs' Complaint, accepted as true, and construed in a light most favorable to plaintiffs.

In 2007, plaintiffs refinanced their home in Hood River, Oregon. They executed a note for $335,000 to Wilmington Finance, Inc. along with a Deed of Trust (DOT) securing the note with the property. The DOT lists Wilmington Finance, Inc. as the lender, Amerititle as the trustee, plaintiffs as the borrowers, and Mortgage Electronic Registration Systems (MERS) as the beneficiary.

In October 2009, plaintiffs' loan servicer, Wilshire Credit, contacted plaintiffs about a possible loan modification. Plaintiffs were current on their mortgage at that time. The loan modification agreement provided that if plaintiffs made three trial period payments at the reduced amount of $2,265.16, the modification would be accepted. Plaintiffs made those payments as directed.

Five months later, defendant BAC began servicing plaintiffs' mortgage. Plaintiffs continued to make their monthly mortgage payments to BAC at the trial period amount. In their monthly statements, BAC directed plaintiffs to make their monthly payments at the reduced amount and not at the original amount listed on the statement. When plaintiffs reviewed their online account with BAC, the website indicated that their modification had been “approved [and plaintiffs] should not call back before 5/10/2010 as that may delay the process.” Plaintiffs did not contact BAC, and continued to make their monthly payments at the reduced amount.

In October 2010, BAC rejected plaintiff's mortgage payment for the first time. Around the same time, defendants recorded an Appointment of Successor Trustee and an Assignment of Deed of Trust in the Hood River County records. The Appointment of Successor Trustee did not name a successor trustee. The Assignment of Deed of Trust transferred all of MERS's beneficial interest in the DOT to U.S. Bank.

On April 4, 2011, ReconTrust signed a Notice of Default as to plaintiffs' mortgage. The Notice of Default was subsequently recorded in the county records on April 7, 2011. That same day, defendants recorded a second Appointment of Successor Trustee in the county records appointing ReconTrust as the successor trustee. Defendants then advertised a trustee's sale of plaintiffs' property.

Plaintiffs continue to live in their home at this time. They have not made any payments to BAC since October 2010.

DISCUSSION

Plaintiffs contend that they are not in default under the terms of the note or the DOT. Plaintiffs contend that BAC failed to comply with the Oregon Trust Deed Act while pursuing foreclosure and breached its duty under the DOT. Plaintiffs also seek a declaratory judgment that their DOT violates Oregon Revised Statute (ORS) 86.705–.795 because MERS was improperly named as a beneficiary, the assignments of beneficial interest were not recorded, and no present default exists based on the loan modification agreement.

1. Judicial Notice

As an initial matter, defendants ask the court to take judicial notice of the DOT in the amount of $335,000 that secures plaintiff's property, the Assignment of Deed of Trust, and the Appointment of Successor Trustee. ² This court generally may not consider material outside of the pleadings when ruling on a Rule 12(b)(6) motion to dismiss. United States v. Corinthian Colls., 655 F.3d 984, 998–99 (9th Cir.2011) (citations omitted). However, this court may take judicial notice of evidence that is not subject to reasonable dispute. Id. at 999;see also MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.1986) (holding that the district court may take “judicial notice of matters of public record outside the pleadings” when deciding a Rule 12(b)(6) motion).

Federal Rule of Evidence 201 gives the court the power to take judicial notice of facts that are not subject to reasonable dispute because they “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b)(2). Public records are appropriate subjects for judicial notice. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir.2001).

The DOT is a public document that was recorded in Hood River County under Recorder No. 2007–00227. Miner Decl. at Ex. A. The Assignment of Deed of Trust was recorded in Hood River County on October 15, 2010 with Recorder No. 2010–03556, and the Appointment of Successor Trustee was recorded on April 7, 2011 with Recorder No. 2011–01025. Second Miner Decl. at Ex. A, B. As public records, these documents are easily verifiable and their accuracy cannot reasonably be questioned Accordingly, the court grants defendants' Request for Judicial Notice [12] and Supplemental Request for Judicial Notice [22].

2. Breach of Contract

Plaintiffs' First Claim for Relief asserts breach of contract against BAC based upon the provision in the DOT that requires foreclosures to be conducted according to applicable law, which plaintiffs contend is the Oregon Trust Deed Act. To properly state a claim for breach of contract under Oregon law, plaintiffs must allege (1) the existence of a contract, (2) the relevant terms of the contract, (3) plaintiffs' full performance and lack of breach, and (4) defendant's breach resulting in damage to plaintiffs. Slover v. Or. State Bd. of Clinical Social Workers, 144 Or.App. 565, 927 P.2d 1098, 1101–02 (1996).

Plaintiffs clarified during oral argument that their breach of contract claim is solely based on the DOT.³ Plaintiffs contend that BAC breached its contractual obligation in the DOT to comply with the Oregon Trust Deed Act while pursuing a non judicial foreclosure. Compl. at ¶¶ 23–28. Plaintiffs allege that BAC lacked the authority to foreclose on the DOT because plaintiffs were not in default when BAC sought that remedy. Id.

Following plaintiffs' concession during oral argument that they do not allege a breach of the loan modification agreement, the parties seem to agree that plaintiffs have pled the existence of a contract, its relevant terms, defendant's breach, and damages flowing from the breach. The remaining issues are whether plaintiffs have fully performed under the DOT, and whether the loan modification offered by Wilshire Credit became binding on BAC such that plaintiffs were not in default when the foreclosure proceedings began. At this stage in the proceeding, plaintiffs have pled enough facts to survive dismissal.

Defendants admitted during oral argument that BAC, as the successor of Wilshire Credit, could be bound by the loan modification offered by its predecessor. Moreover, plaintiffs have alleged that BAC directed them in writing to submit their monthly mortgage payments at the reduced amount, and that BAC accepted those payments until October 2010. Plaintiffs also pled that BAC notified them through their online account that their mortgage was current under the modified terms.

Defendants contend, however, that plaintiffs' failure to tender payments between November 2010 and April 2011 constitutes a breach under the DOT that defeats their own breach of contract claim. This court disagrees. Although plaintiffs stopped submitting their mortgage payments after October 2010, plaintiffs allege that BAC refused to accept payments and returned the October 2010 payment to plaintiffs. Plaintiffs argued that making additional payments would have been futile because BAC would have rejected any subsequent payment. It is unlikely...