Stilp v. HSBC Bank USA, N.A.
| Decision Date | 20 March 2013 |
| Docket Number | Civil No. 12-3098 ADM/JJK |
| Court | U.S. District Court — District of Minnesota |
| Parties | Cory Stilp and Laura Stilp, Plaintiffs, v. HSBC Bank USA, N.A. as Trustee for Wells Fargo Asset Securities Corp.; Wells Fargo Bank, N.A.; Shapiro & Zielke, LLP; and Reiter & Schiller P.A., Defendants. |
William B. Butler, Esq., Butler Liberty Law, LLC, Minneapolis, MN, on behalf of Plaintiffs.
Charles F. Webber, Esq., and Elizabeth A. Walker, Esq., Faegre Baker Daniels LLP, Minneapolis, MN, on behalf of Defendants HSBC Bank USA, N.A., Wells Fargo Asset Securities Corp., and Wells Fargo Bank, N.A.
Kalli L. Ostlie, Esq., and Amanda M. Govze, Esq., Shapiro & Zielke, LLP, Burnsville, MN, on behalf of Defendant Shapiro & Zielke, LLP.
Curt N. Trisko, Esq., and Rebecca F. Schiller, Esq., Reiter & Schiller, P.A., St. Paul, MN, on behalf of Defendant Reiter & Schiller, P.A.
On February 22, 2013, the undersigned United States District Judge heard oral argument on Defendants' Motions to Dismiss [Docket Nos. 4, 6, and 11] and on Plaintiffs' Motion to Remand to State Court [Docket No. 23]. For the reasons set forth below, the motions to dismiss are granted and the motion to remand is denied.
Plaintiffs Cory and Laura Stilp reside in a home they purchased in January 2005, in Lindstrom, Minnesota. Compl. [Docket No. 1] ¶ 2. On October 27, 2006, Plaintiffs signed a 30-year mortgage, borrowing $543,000 from Central Bank, a Minnesota Banking Corporation ("Central Bank"). Compl. ¶ 8, Ex. 2. The mortgage named Mortgage Electronic Registration Systems, Inc. ("MERS") as the initial mortgagee, as nominee for Central Bank. Id. at Ex. 2. By April 2008, the Plaintiffs defaulted on their loan.2
The Mortgage Note anticipates the possibility of its assignment and the transfer of rights in property, including the right to foreclose if Plaintiffs fail to pay their mortgage:
This Security Instrument secures to Lender (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower [the Stilps] does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors and assigns of MERS, with power of sale, the following described property . . . .
Id. (emphasis added). The Note then describes Plaintiffs' home in Lindstrom, Minnesota.
Defendant law firms, Shapiro & Zielke, LLP ("Shapiro") and Reiter & Schiller P.A. ("Reiter") (collectively, the "Law Firms") provide legal services for MERS and for Defendant banks, HSBC Bank USA, N.A. as Trustee for Wells Fargo Asset Securities Corp. ("HSBC") and Wells Fargo Bank, N.A. ("Wells Fargo") (collectively, the "Banks"). On April 28, 2008, theReiter firm drafted and recorded, in the Chisago County property records, a Notice of Pendency and Power of Attorney to Foreclose Mortgage, executed by Yolanda Williams as "Assistant Secretary" of MERS. Compl. Ex. 3. Over the next four years, Defendant law firms filed at least five separate Notices of Pendency and Power of Attorney ("POA") documents in the Chisago County property records. For each POA, Plaintiffs claim, "upon information and belief, [named attorney] did not have legal authority to execute" the POA, on the recorded date. Also during this four year period, MERS used duplicative filings to twice assign the mortgage ("AOM") to HSBC, with Wells Fargo acting as attorney-in-fact on behalf of HSBC. Compl. ¶¶ 10-24. Plaintiffs challenge, "upon information and belief, the legal authority of the individuals who executed the AOMs." Id. It is not clear from the Complaint or the parties' Memoranda, what efforts were made to modify the loan or actually foreclose the mortgage prior to the final POA on December 23, 2011. Compl. ¶ 23.
On March 7, 2012, the Shapiro firm proceeded with foreclosure by advertisement. Shapiro gave Plaintiffs notice of the pending Sheriff's sale and prepared a Sheriff's Certificate stating that HSBC had the legal authority to "bid" debt at the sale. Id. ¶ 25. On March 23, 2012, Plaintiffs submitted a Postponement Affidavit as they attempted to obtain a loan modification. Id. ¶¶ 26, 28. The Sheriff's sale was rescheduled for and completed on September 25, 2012; HSBC had the winning bid of $601,380 and a certificate of sale was recorded in the Chisago County property records on October 2, 2012. Id. ¶¶ 27, 31.
Since it challenges the jurisdiction of this Court, Plaintiffs' Motion to Remand will be addressed first.
Plaintiffs filed their lawsuit in State Court in Chisago County on November 11, 2012. In the Complaint, the Plaintiffs assert claims of slander of title and negligence per se against the Reiter and Shapiro Law Firms. Both law firms are residents of Minnesota. Defendants, the Banks and the Law Firms, removed the case to federal court on December 12, 2012. Plaintiffs' Motion to Remand followed, arguing that the Law Firms' Minnesota residency defeats the Court's diversity jurisdiction under 28 U.S.C. § 1332. Defendants assert the Law Firms were fraudulently joined for the purpose of defeating diversity jurisdiction.
Plaintiffs' attorney knows from his own prior experience that law firms representing diverse Defendant Banks cannot be fraudulently joined to defeat diversity jurisdiction. Courts have rejected counsel's similar attempts to defeat diversity jurisdiction on multiple occasions. Karnatcheva v. JPMorgan Chase Bank, N.A., 871 F. Supp. 2d 834, 838-39 (D. Minn. 2012), aff'd, 704 F.3d 545 (8th Cir. 2013); Nelson v. Bank of N.Y. Mellon, No. 12-1096, 2012 U.S. Dist. LEXIS 141277, *11-12 (D. Minn. Oct. 1, 2012); Dunbar v. Wells Fargo Bank, N.A., 853 F. Supp. 2d 839, 844 (D. Minn. 2012), sanctions awarded in Dunbar v. Wells Fargo Bank, N.A., No. 11-3683, 2012 U.S. Dist. LEXIS 56168 (D. Minn. Apr. 23, 2012) (listing cases).4
Turning to the specifics of Plaintiffs' claims, the slander of title claim against the Law Firms is without basis. A law firm acting within the scope of its employment as counsel is "immune from liability to third persons for actions arising out of that professional relationship." Karnatcheva, 871 F. Supp. 2d at 839 (citing McDonald v. Stewart, 182 N.W.2d 437, 440 (Minn. 1970)). Furthermore, attorneys are not liable to their clients' adversary absent evidence of an affirmative misrepresentation. Id. The slander of title claim against the Law Firms arises directly from their actions representing the Banks during the foreclosure proceedings and Plaintiffs have offered no evidence of affirmative misrepresentation.
Plaintiffs next assert the Law Firms are negligent per se for violation of Minn. Stat. §§ 580.02 and 580.05. This negligence per se claim is more "smoke and mirrors." See Welk v. GMAC Mortg., 850 F. Supp. 2d 976, 1003 (D. Minn. 2012); see also Karnatcheva, 871 F. Supp. 2d at 839 (). No state or federal court has ever found a violation of Minn. Stat. §§ 580.02 or 580.05 to be negligence per se. When negligence per se is appropriate, showing a violation of a statute substitutes for plaintiff's required showing of duty and breach. Compl. ¶ 51 ). But here, there is no indication that §§ 580.02 and 580.05 are negligence per se statutes. If the Minnesota Legislature ever intended §§ 580.02 and 580.05 as per se waivers of law firm immunity, Plaintiffs have offered nothing to show it. The claims Plaintiffs raise against the resident law firms have "no chance of success." Nelson, 2012 U.S.Dist. LEXIS 141277 at *12.
Based on Plaintiffs' attorney's own prior experience and the unfounded claim of negligence per se, Plaintiffs' attorney is clearly attempting to fraudulently join resident Law Firms to defeat diversity jurisdiction. Lacking a basis for claiming slander of title and negligence per se Plaintiffs' motion to remand is denied and the claims against the Law Firms are dismissed.
Plaintiffs argue federal rules of pleading are more strict than state rules of pleading and that as a matter of due process, the Court should allow Plaintiffs to amend their Complaint. Mem. Opp. Mot. to Dismiss [Docket No. 27] 1. Rule 15(a)(1)(B) of the Federal Rules of Civil Procedure allows plaintiffs 21 days after the filing of a motion to dismiss to amend their Complaint without leave of the Court. Despite an extensive history of amending his filed complaints in other cases, Plaintiffs' attorney failed to amend the Complaint here. Furthermore, counsel has not filed a motion to amend the Complaint and his briefing in opposition to dismissal offers no proposals for amendment. Perhaps the explanation for failure to amend is recognition that the Eighth Circuit has already considered and rejected Plaintiffs' attorney's legal arguments in previous cases with regard to pleading standards. See Karnatcheva, 704 F.3d at 545 ().
A motion to dismiss a complaint for failure to state a claim is governed by Rule 12(b)(6) of the Federal Rules of Civil Procedure. In considering a Rule 12(b)(6) motion, the court views the pleadings in the light most favorable to the nonmoving party and treats the alleged facts astrue. See Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Conclusions of law made by the nonmoving party, however, are not "blindly accept[ed]." Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A Rule 12(b)(6) motion to dismiss is granted when the factual allegations, even...
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