Wang Xang Xiong v. Bank of Am., N.A.
| Decision Date | 10 August 2012 |
| Docket Number | CIVIL NO. 11-3377 (JRT/JSM) |
| Parties | WANG XANG XIONG et. al., Plaintiffs, v. BANK OF AMERICA, N.A. et. al., Defendants. |
| Court | U.S. District Court — District of Minnesota |
This matter is before the Court on Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., the Bank of New York Mellon, and Federal Home Loan Mortgage Corporation's Motion to Dismiss the Complaint [Docket No. 4]; Peterson, Fram and Bergman, P.A.'s Motion to Dismiss [Docket No. 9]; plaintiff's Motion to Remand [Docket No. 20]; and plaintiff's Motion to Amend [Docket No. 22]. William Butler, Esq., appeared on plaintiffs' behalf; Mark G. Schroeder, Esq., appeared on behalf of Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., the Bank of New York Mellon, and Federal Home Loan Mortgage Corporation; and Jared M. Goerlitz, Esq., appeared on behalf of defendant Peterson, Fram and Bergman, P.A.
Defendants' motions to dismiss and plaintiff's motion to remand were referred to the undersigned Magistrate Judge for a Report and Recommendation pursuant to28 U.S.C. § 636(b)(1)(B) and Local Rule 72.1 by the Honorable John R. Tunheim, United States District Judge [Docket Nos. 17, 32].1
Plaintiffs commenced this action in state district court on or about October 28, 2011. Notice of Removal [Docket No. 1]. Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., the Bank of New York Mellon, Federal Home Loan Mortgage Corporation (collectively, the "Lender/Servicer defendants") removed the matter to the United States District Court on November 17, 2011, claiming diversity of citizenship pursuant to 28 U.S.C. § 1332(a), and an amount in controversy in excess of the $75,000 threshold described by 28 U.S.C. § 1332(b). Id., ¶¶16-27. Although the Peterson, Fram & Bergman law firm ("PFB") is a citizen of Minnesota, the Lender/Servicer defendants alleged that PFB was fraudulently joined and its citizenship must be disregarded for the purposes of federal court jurisdiction. Id., ¶¶17-20.
The facts as alleged in plaintiffs' 206 paragraph, thirteen2 count Complaint are as follows: plaintiffs are individual homeowners whose real properties are currently subject to non-judicial (foreclosure by advertisement) foreclosure proceedings. Complaint, ¶¶1-124 [Docket No. 1-1]. The Lender/Servicer defendants all "falsely" claim an interest in the plaintiffs' properties in their various roles as mortgage lenders, servicers, trustees ofa securities trust or mortgage assignees in which another lender or servicer claims an interest. Id., ¶¶27-124.
According to the Complaint, plaintiffs executed promissory notes and mortgages "in favor of an entity different from Defendants who now claim the legal right to foreclose on Plaintiffs' homes." Id., ¶28. Plaintiffs claimed that defendants are not now in possession of the original promissory notes and are not otherwise entitled to enforce plaintiffs' original notes. Id., ¶29. Further, "[d]efendants and others securitized and sold Plaintiffs' Original Notes into a 'pooling and service agreement ('PSA'),' in which at least 100 percent of the present value of the total payments due on Plaintiffs' Original Notes were sold to third-party purchasers ('Certificate Holders') of mortgage backed securities." Id., ¶41. Plaintiffs alleged that the Lender/Servicer defendants lacked "valid, clear legal title to the Original Notes" and cannot foreclose on the properties. Id., ¶40.
Plaintiffs claimed that the mortgages are invalid under several theories, almost all of which focus on the notion that the Lender/Servicer defendants were not in possession of the owners' promissory notes at the time of foreclosure. Id., ¶128.
Count I (Quiet Title) alleged that the Lender/Servicer defendants' mortgage liens were invalid because they did not hold the original promissory notes or that the mortgage assignments were invalid. Id., ¶¶125-128.
Count II (Defendants Are Not the Real Parties in Interest) alleged that the Lender/Servicer defendants were not the holders in due course of the promissory notes and as a result would receive no benefit from the foreclosure of plaintiffs' properties. Id., ¶¶ 129-134.
Count III (Defendants Have No Legal Standing to Foreclose the Mortgages) alleged that the Lender/Servicer defendants have "no material stake" in the enforcement of the plaintiffs' mortgages because they are not the holders in due course of the promissory notes. Id., ¶¶135-137.
Count IV (Slander of Title) alleged slander of title against both the Lender/Servicer defendants and PFB, stating that the defendants "maliciously published" documents regarding the properties in connection with the foreclosures. Id., ¶¶138-141.
Count V (Conversion) alleged that both the Lender/Servicer defendants and PFB were not entitled to enforce the original promissory notes and were not entitled to receive mortgage payments from the plaintiffs. Id., ¶¶142-146. Plaintiffs claimed that PFB acted as the Lender/Servicer defendants' "agent," thereby "abetting" the conversion. Id., ¶145.
Count VI (Unjust Enrichment) alleged the Lender/Servicer defendants were unjustly enriched based on the plaintiffs' mortgage payments to the Lender/Servicer defendants, to which the Lender/Servicer defendants were not entitled. Id., ¶¶147-150.
Count VII (Civil Conspiracy) claimed that the Lender/Servicer defendants engaged in a civil conspiracy to fraudulently and intentionally misrepresent their status as holders in due course of the original promissory notes, entitling them to foreclose on plaintiffs' properties. Id., ¶¶151-155.
Count VIII (Breach of Fiduciary Duty) alleged that the Lender/Servicer defendants had a fiduciary duty to plaintiffs, which they breached by "failing to dealhonestly and fairly with plaintiffs and by failing to disclose material information." Id., ¶¶156-161.
Count IX (Fraud) alleged that the Lender/Servicer defendants falsely represented to the plaintiffs that they had standing to pursue foreclosure and by recording the assignments of mortgages, notices of pendency of foreclosure and by publishing foreclosure sales notices containing false information. Id., ¶¶162-186.
Count X (Negligent Misrepresentation) alleged that the Lender/Servicer defendants and PFB misrepresented to plaintiffs that they had the right to foreclose and that plaintiffs reasonably relied on defendants' misrepresentations to "forebear from asserting their legal rights to challenge Defendants' ability to enforce the Original Notes and foreclose the Mortgages. . . ." Id., ¶¶187-191.
Count XII3 (Equitable Estoppel) alleged that the Lender/Servicer defendants and PFB induced the plaintiffs to "forebear from pursuing their legal right to challenge the standing of [ ] 4 to foreclose on their homes by representing that Defendants had clear, valid title to Plaintiff's [sic] original notes." Id., ¶200.
Count XIII (Accounting) sought an accounting by the Lender/Servicer defendants "to determine the amount of debt owed, if any, to the [Pooling Service Agreement] and Certificate Holders." Id., ¶206.
Count XIV alleged fraud against PFB, contending that PFB conducted "false and fraudulent foreclosures" against some of the plaintiffs and acted with "reckless disregardas to the truth of the representation[s]" PFB made to the plaintiffs by stating that their clients (apparently some or all of the Lender/Servicer defendants) owned the debt on plaintiffs' properties or held the promissory notes. Id., ¶¶194-196.
As relief, plaintiffs sought an order quieting title to the properties, "removing Defendants' invalid liens and determining that Defendants have no estate, interest, or lien on the premises." Complaint, Prayer for Relief, ¶A. Plaintiffs sought a declaratory judgment without describing the judgment sought and a refund of their mortgage payments. Id., ¶¶B, F.
Following removal of this case to federal court, the Lender/Servicer defendants and PFB immediately moved to dismiss the Complaint, arguing that plaintiffs' Complaint is based on a legal theory, or variation of a legal theory, that has been rejected by every court in this District to consider it. Lender/Servicer Defendants' Memorandum in Support of Motion to Dismiss ("Lender/Servicer Mem."), pp. 8-12 [Docket No. 6]; Peterson Fram and Bergman's Memorandum in Support of Motion to Dismiss, ("PFB Mem.") pp. 7-10 [Docket No. 11]. Plaintiffs' counsel, William Butler, has brought dozens of cases in this District alleging that the mortgagees' failure to prove ownership of or an interest in the borrowers' original promissory notes precluded them from pursuing non-judicial foreclosure. Lender/Servicer Mem. pp. 1-3; PFB Mem., pp. 7-8. In each case, Butler's theories have been rejected as contrary to the holdings of Jackson v. Mortgage Elec. Reg. Sys., Inc., 770 N.W.2d 487 (Minn. 2009) and Stein v. Chase Home Fin., LLC, 662 F.3d 976 (8th Cir. 2011), which hold that the mortgagee or its assignee need not possess the original promissory note to foreclose a mortgage when a borrower defaults.See e.g. Blaylock v. Wells Fargo Bank, N.A., Civ. No. 12-693 (ADM/LIB), 2012 WL 2529197 at *8-9 (D. Minn. June 29, 2012) (); Peterson v. CitiMortgage, Inc., Civ. No. 11-2385 (SRN/JJG), 2012 WL 1971138 at *2 (D. Minn. June 1, 2012) ...
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