Rajamin v. Deutsche Bank Nat'l Trust Co.

Citation757 F.3d 79
Decision Date30 June 2014
Docket NumberDocket No. 13–1614.
PartiesDavid RAJAMIN, Edith Gonzalez Larios, Jesus Valdez, Maurice Nunez, Elias Estrada, Irma Estrada, Theresa Doty, Robert Basel, Larry Myron Kegel, on behalf of themselves and a class of similarly situated individuals, Plaintiffs–Appellants, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, individually and as Trustee of FFMLT Trust 2005–FF8; FFMLT Trust 2006–FF3; FFML Trust 2006–FF11; and FFMLT Trust 2006–FF13, New York common law trusts, Defendants–Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)


James B. Sheinbaum, New York, NY (Borstein & Sheinbaum, New York, NY; Lawrence H. Nagler, Nagler & Associates, Los Angeles, CA; Law Office of Henry Bushkin, Los Angeles, CA, on the brief), for PlaintiffsAppellants.

Bernard J. Garbutt III, New York, NY (Michael S. Kraut, Morgan, Lewis & Bockius, New York, NY, on the brief), for DefendantsAppellees.

Before: KEARSE, JACOBS, and B.D. PARKER, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiffs David Rajamin et al., who mortgaged their homes in 2005 or 2006, appeal from a judgment of the United States District Court for the Southern District of New York, Laura Taylor Swain, Judge, dismissing their claims against four trusts (the Defendant Trusts”) to which their loans and mortgages were assigned in transactions involving the mortgagee bank, and against those trusts' trustee, defendant Deutsche Bank National Trust Company (“Deutsche Bank” or the Trustee). Plaintiffs sought, on behalf of themselves and others similarly situated (the alleged “Class Members”), monetary and equitable relief and a judgment declaring that defendants do not own plaintiffs' loans and mortgages, on the ground, inter alia,that parties to the assignment agreements failed to comply with certain terms of those agreements. No class action was certified. The district court, finding that plaintiffs were neither parties to nor third-party beneficiaries of the assignment agreements, and hence lacked standing to pursue these claims, granted defendants' motion to dismiss the complaint for failure to state a claim. On appeal, plaintiffs contend that they plausibly asserted standing and asserted plausible claims for relief. For the reasons that follow, we conclude that the facts alleged by plaintiffs do not give them standing to pursue the claims they asserted, and we affirm the judgment of dismissal.


We accept the factual allegations in plaintiffs' Third Amended Complaint (or “Complaint”)—which incorporated certain factual assertions, declarations, and attached exhibits submitted by defendants at earlier stages of this action—as true for purposes of reviewing the district court's dismissal for failure to state a claim on which relief can be granted, see, e.g., Rothstein v. UBS AG, 708 F.3d 82, 90 (2d Cir.2013), or for lack of standing, to the extent that the dismissal was based on the pleadings, see, e.g., id.; Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 594 (2d Cir.1993). The principal factual allegations were as follows.

A. The Third Amended Complaint

Plaintiffs are five individuals and two married couples who had homes in California and who, in 2005 or 2006, borrowed sums ranging from $240,000 to $1,008,000, totaling $3,776,000, from a bank called First Franklin, a division of National City Bank of Indiana (“First Franklin”). Each plaintiff executed a promissory note secured by a deed of trust on the home—“equivalent to a mortgage” under California law, Monterey S.P. Partnership v. W.L. Bangham, Inc., 49 Cal.3d 454, 461, 261 Cal.Rptr. 587, 777 P.2d 623, 627 (1989)—in favor of First Franklin.

The notes signed by plaintiffs stated that plaintiffs “promise[d] to pay [the stated amounts of principal, plus interest] to the order of First Franklin (Third Amended Complaint ¶ 25 (emphasis added)). See generallyU.C.C. §§ 3–104, 3–109 (2002) (a note “payable to order” is a type of negotiable instrument). The deeds of trust signed by plaintiffs, samples of which were attached to the Complaint, provided in part, in sections titled “UNIFORM COVENANTS,” that the parties agreed that

[t]he 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....

(Third Amended Complaint Exhibit E ¶ 20; id. Exhibit G ¶ 20.)

Deutsche Bank is the trustee of the four Defendant Trusts, which were created under the laws of New York. ( See Third Amended Complaint ¶¶ 12, 13.) The Defendant Trusts—whose names begin with “First Franklin Mortgage Loan Trust” or the initials “FFMLT”—maintain that they were created in connection with securitization transactions involving mortgage loans originated by First Franklin between January 1, 2004, and January 1, 2007. ( See id. ¶ 11.) See generally BlackRock Financial Management Inc. v. Segregated Account of Ambac Assurance Corp., 673 F.3d 169, 173 (2d Cir.2012) (Residential mortgage loans, rather than being retained by the original mortgagee, may be pooled and sold “into trusts created to receive the stream of interest and principal payments from the mortgage borrowers. The right to receive trust income is parceled into certificates and sold to investors, called certificateholders. The trustee hires a mortgage servicer to administer the mortgages by enforcing the mortgage terms and administering the payments. The terms of the securitization trusts as well as the rights, duties, and obligations of the trustee, seller, and servicer are set forth in a Pooling and Servicing Agreement....”)

The Complaint alleged that defendants claim to have purchased plaintiffs' loans and mortgages, through intermediaries, from First Franklin ( see Third Amended Complaint ¶ 28) and to have “the right to collect and receive payment on [plaintiffs'] loans ... pursuant to written agreements” ( id. ¶¶ 30–31). Each securitization transaction involved written agreements (the “assignment agreements”), one of which was called a Pooling and Servicing Agreement (“PSA”). The PSAs, which by their terms are to be governed by New York law ( see id. ¶ 29), “provided, inter alia, for the formation of the relevant Trust, the conveyance of a pool of mortgages to [Deutsche Bank],[ ]as trustee, the issuance of mortgage-backed securities representing interests in the pooled loans, and the servicing of the pooled loans by a loan servicer” ( id. ¶ 28 (internal quotation marks omitted)). Defendants claim that in each such transaction, First Franklin sold a pool of mortgage loans “to a sponsor ... which, at closing, sold the loans through its affiliate, a depositor ..., to a trust.” ( Id. ¶ 63 (internal quotation marks omitted).) Thus, the intention of the parties to the sales and securitization transactions was that Deutsche Bank would become, “as Trustee, ... the legal owner and holder of [the] Notes and [deeds of trust] originated by First Franklin ( id. ¶ 28 (internal quotation marks omitted)).

1. Plaintiffs' Challenges to the Assignments

The Complaint challenged defendants' (a) ownership of plaintiffs' loans and mortgages, (b) right to collect and receive payment on the loans, and (c) right to commence or authorize the commencement of foreclosure proceedings where payments have not been made or received ( see, e.g., Third Amended Complaint ¶¶ 32, 80, 120, 122, 123, 126), on the ground, inter alia, that there was a lack of compliance with provisions of the assignment agreements. First, the Complaint alleged that the assignments were defective because plaintiffs' mortgage loans were “not specifically list[ed] in mortgage loan schedules or other attachments to the assignment agreements. ( Id. ¶¶ 36, 52; see also id. ¶ 66.) Indeed, according to the Complaint, the assignment agreements did “not specifically list any promissory note, mortgage or deed of trust” that was allegedly sold, transferred, assigned, or conveyed to defendants. ( Id. ¶¶ 37, 53 (emphasis added); see also id. ¶¶ 54, 59, 65.)

The Complaint also alleged that assignments by First Franklin to Deutsche Bank of four of plaintiffs' deeds of trust were executed and publicly recorded in 2009 or 2010, after First Franklin had ceased operations and years after the securitization transactions took place. ( See id. ¶¶ 74–79.) Plaintiffs argue that the execution and recordation of these mortgage assignments after the securitization transactions that created the Defendant Trusts indicate that these mortgages were not included in the mortgage loan pools that were sold to those trusts.

In addition, the Complaint alleged that two PSA provisions as to documents that were to accompany the conveyance of loans and mortgages to the trusts were not complied with at the time of the securitization transactions. These were (a) a provision stating that an affiliate of the sponsor “has delivered or caused to be delivered to” a named custodian “the original Mortgage Note bearing all intervening endorsements necessary to show a complete chain of endorsements from the original payee” (Third Amended Complaint ¶ 38 (internal quotation marks omitted); see id. ¶¶ 40–42), and (b) a similar provision as to delivery of “the originals of all intervening assignments of Mortgage with evidence of recording thereon evidencing a complete chain of ownership from the originator of the Mortgage Loan to the last assignee” ( id. ¶ 43 (internal quotation marks omitted); see id. ¶¶ 46–48; see also id. ¶¶ 69–73).

2. Alleged Injury to Plaintiffs

The Complaint implied that plaintiffs made their loan payments to Deutsche Bank and the Defendant Trusts. It alleged that Defendants claim[ed] and assert[ed] that payments [we]re due to them monthly” (Third Amended Complaint ¶ 119), and that defendants “received and collected money from payments made by ...

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