Woods v. U.S. Bank N.A.

• Decision Date: 03 August 2016
• Docket Number: No. 13-36037,13-36037
• Citation: 831 F.3d 1159
• Parties: Dennis O. Woods; Golda J. Woods, Plaintiffs–Appellants, v. U.S. Bank N.A., as Trustee for Harborview Mortgage pass through certificates, Series 2006-4; Recontrust Company, NA, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

831 F.3d 1159

Dennis O. Woods; Golda J. Woods, Plaintiffs–Appellants,

v.U.S. Bank N.A., as Trustee for Harborview Mortgage pass through certificates, Series 2006-4; Recontrust Company, NA, Defendants–Appellees.

No. 13-36037

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 6, 2015 Portland, Oregon

Filed August 3, 2016

Jeffrey A. Myers (argued) and John Patrick Bowles, Bowles Fernandez Law LLC, Lake Oswego, Oregon, for Plaintiffs–Appellants.

Steven Andrew Ellis (argued), Goodwin Procter LLP, Los Angeles, California; Peter D. Hawkes and Pilar C. French, Lane Powell PC, Portland, Oregon; for Defendants–Appellees.

Before: Marsha S. Berzon, and Paul J. Watford, Circuit Judges, and James Alan Soto,^** District Judge.

OPINION

SOTO, District Judge:

In this case, two borrowers allege that the notice of nonjudicial foreclosure sale required by the Oregon Trust Deed Act (“OTDA”) failed to identify the proper beneficiary, and, therefore, the sale of their home was invalid. The district court dismissed the complaint, and we affirm.

A.

I.

In 2006, Dennis Woods and Golda Woods (hereinafter referred to collectively as “Woods”) executed a promissory note (“Note”) with Homefield Financial, Inc. (“Homefield”). Pursuant to the Note, Homefield loaned Woods $359,500 to purchase residential real property in Clackamas, Oregon (“Property”). The Note was secured by a deed of trust (“Trust Deed”) granting Homefield a security interest in the Property, and the Note was subsequently recorded in Clackamas County. The Trust Deed identifies the following parties: Woods as the borrowers; Homefield as the lender; Mortgage Electronic Systems (“MERS”) as the beneficiary; and Fidelity National Title as the trustee.

Woods defaulted on the Note in 2008. In September of 2010, MERS executed an assignment of the Trust Deed to U.S. Bank National Association (“USB”), and recorded the assignment in Clackamas County. Thereafter, USB appointed ReconTrust Company (“Recon”) as successor trustee. USB executed an assignment of the Trust Deed to BAC Home Loans Servicing, L.P. (“BAC”) in May of 2011, recording the assignment in Clackamas County; BAC serviced the loan on behalf of USB. Later in May of 2011, Recon executed a Notice of Default and Election to Sell, which was recorded, and a Trustee's Notice of Sale, which was published.¹ The trustee's sale occurred on February 14, 2012, and Recon issued a trustee's deed on the property to Bank of America (for the benefit of the Harborview 2006-4 Trust Fund) which was recorded in Clackamas County on February 24, 2012.

II.

Approximately four months later, on June 12, 2012, Plaintiffs filed this action against USB and Recon challenging the completed foreclosure sale. In their initial complaint, Plaintiffs sought a declaratory judgment that the trustee's sale was invalid under the OTDA because several assignments of the Trust Deed that took place prior to the 2010 assignment to USB were never recorded. Those assignments occurred by operation of law when the underlying promissory note was sold between entities. However, subsequent to the filing of Plaintiffs' initial Complaint, the Oregon Supreme Court rejected the argument that the OTDA requires recording of assignments of a trust deed that result by operation of law from the transfer of a secured obligation.² Plaintiffs, therefore, filed an Amended Complaint arguing instead that the completed trustee's sale was void because the Notice of Sale Plaintiffs received did not contain the name of the proper beneficiary. Defendants moved to dismiss the Amended Complaint for failure to state a claim. The District Court granted Defendants' motion, holding that ORS 86.770(1)³ barred Plaintiffs' claims.⁴ Plaintiffs filed a timely appeal challenging the dismissal.

B.

I.

The District Court had jurisdiction in this case pursuant to 28 U.S.C. § 1332(a), because the parties were citizens of different states, and the amount in controversy exceeded $75,000. This Court has jurisdiction pursuant to 28 U.S.C. § 1291 because the timely appeal was taken from a final judgment of the district court.

This Court reviews de novo a district court's dismissal for failure to state a claim. See Pride v. Correa , 719 F.3d 1130, 1133 (9th Cir. 2013). The Court determines whether Plaintiffs pled “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Fed. R. Civ. P. 12(b)(6). “[A] formulaic recitation of the elements of a cause of action will not do,” id. at 555, 127 S.Ct. 1955 ; “[n]or does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ ” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). A complaint may fail to show a right to relief either by lacking a cognizable legal theory or by lacking sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990).

II.

“As we are construing a state statute, our role is to interpret the law as would the [Oregon] Supreme Court.” Planned Parenthood of Idaho, Inc. v. Wasden , 376 F.3d 908, 925 (9th Cir. 2004), cert. denied , 544 U.S. 948, 125 S.Ct. 1694, 161 L.Ed.2d 524 (2005). A recent decision by that Court provides a roadmap for interpreting the OTDA provisions at issue in this case. See Brandrup , 353 Or. at 682–713, 303 P.3d 301. “We focus first on the text, context, and any legislative history brought to our attention by the parties that we find useful, and proceed to general maxims of statutory construction if the legislature's intent remains obscure.” Id. at 682–83, 303 P.3d 301.

Oregon Revised Statutes 86.770(1) provides that “[i]f, under ORS 86.705 to 86.795, a trustee sells property covered by a trust deed, the trustee's sale forecloses and terminates the interest in the property that belongs to a person to which notice of the sale was given.” This case requires us to determine whether—as Appellants argue—the prefatory clause “if, under ORS 86.705 to 86.795 ” requires strict compliance with all provisions of the OTDA before terminating grantors' interest in the property sold at a trustee's sale. Certainly, Appellant's interpretation is possible; however, “there are several other reasonable interpretations of when a trustee's sale is ‘under ORS 86.705 to 86.795.’ ” Mikityuk v. Nw. Tr. Servs., Inc. , 952 F.Supp.2d 958, 964 (D. Or. 2013). For example, “[a]nother interpretation is that if a trustee utilizes the OTDA to conduct a trustee's sale, the trustee's sale ‘forecloses and terminates' the interest of the party receiving notice, despite any errors alleged after-the-fact.” Id. at 963. “Indeed, there are several other reasonable interpretations [that] fall somewhere in between the interpretations noted above.” Id. at 964. Because the text of ORS 86.770(1) is ambiguous, we turn next to the context of the provision in the statute as a whole.

Oregon Revised Statutes 86.705 to 86.795 covers the entire OTDA, including substantive provisions and technical provisions with little impact on grantors' rights. For example, ORS 86.755(3) provides that within 10 days of a purchase of real property at a foreclosure sale, the trustee shall execute and deliver the deed to the purchaser. Under an interpretation requiring strict compliance with all provisions, if the deed was delivered eleven days after purchase, the grantor's interest in the property would not be foreclosed and terminated. Likewise, if the trustee received compensation in excess of “50 percent of the compensation allowable to an ... administrator under ORS 116.173 or a minimum charge of $100,” ORS 86.795, the grantor's interest in the property would not be foreclosed and terminated because the trustee failed strictly to comply with a provision of the OTDA.

However, the OTDA also includes more substantial provisions with greater effect on a grantor's rights. For example, ORS 86.740 details the parties that must receive notice of a trustee's sale, and ORS 86.750 details the process by which those parties must be served. These provisions together play an important part in ensuring that an interested party receives sufficient notice before his interest in a property is terminated. Likewise, ORS 86.735(2) sets an absolute requirement “that there must be a default on an obligation secured by a deed of trust in order for the trustee to conduct a non-judicial foreclos[ure] sale.” Mikityuk , 952 F.Supp.2d at 964.

Comparing the range of impact these provisions have on grantors' rights suggests a more nuanced approach to understanding the OTDA. For example, allowing a grantor who did not receive notice of a trustee's sale pursuant to ORS 86.750 to challenge that sale after it has occurred protects important rights, while allowing a post-sale challenge because a trustee received faulty compensation in violation of ORS 86.795 undercuts the benefit of finality while not vindicating important rights. A uniform strict compliance approach would treat alike violations of substantive and of technical provisions.

Additionally, reading ORS 86.770(1) in the context of the OTDA suggests that the drafters used the phrase “ORS 86.705 to 86.795 ” throughout the statute to refer to the OTDA provisions as a whole rather than to require strict compliance with each particular provision. For example, ORS 86.705 provides definitions of terms “[a]s used in ORS 86.705 to 86.795.” Likewise, ORS 86.710 provides in full that

Transfers in trust of an interest in real property may be made to secure the performance of an obligation of a grantor, or any other person named in the deed, to a beneficiary. Where any transfer in trust of an interest in real property is made pursuant to the provisions of ORS 86.705 to 86.795 to secure the performance of an obligation, a power of sale is conferred upon the trustee. The power of sale may

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