Lynott v. Mortgage Electronic Registration Systems Inc et al

Filing 44

ORDER granting 24 Defendant JP Morgan Chase's Motion to Dismiss; finding as moot 33 Defendant Wells Fargo's Motion to Dismiss for Failure to State a Claim; this matter is DISMISSED WITH PREJUDICE. Signed by Judge Ronald B. Leighton.(DN)

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HONORABLE RONALD B. LEIGHTON 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 No. 12-cv-5572-RBL JUDY LYNOTT, 9 ORDER Plaintiff, 10 (Dkt. #24) v. 11 MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., et al., 12 13 Defendants. 14 15 Plaintiff brought suit against Defendants U.S. Bank, N.A., JPMorgan Chase, N.A., and 16 17 18 19 Mortgage Electronic Registration Systems, Inc. (“MERS”) arising from certain alleged improprieties in the foreclosure process. Defendants have moved to dismiss. For the reasons stated below, the motion is granted. I. 20 In 2007, Plaintiff borrowed $290,500 to purchase residential property, executing both a 21 22 23 24 BACKGROUND promissory note and deed of trust in the process. (Pl.’s Resp. at 2, Dkt. #31.) The deed named American Brokers Conduit as the lender and MERS as the beneficiary, “acting solely as nominee” for the lender and its assigns. (Def.’s Req. for Judicial Notice, Ex. 3, Dkt. #25.)1 25 1 26 27 28 The Court may properly consider the promissory note, deed of trust, assignment of the deed of trust, and other exhibits because they are referenced in the Complaint, integral to the proceedings, and their authenticity undisputed. Dent v. Cox Comm. Las Vegas, Inc., 502 F.3d 1141, 1143 (9th Cir. 2007) (expressly permitting district court to consider an integral and authentic document outside the pleadings) (citing Parrino v. FHP, Inc., 146 F.3d 699, 705– 06 (9th Cir. 1998) ("[A] district court ruling on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiffs complaint necessarily relies." Id, superseded by statute on other grounds as noted in Abrego v. The Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006)). Order - 1 1 Plaintiff took out a second and third mortgage on the property, but those loans are not at issue 2 here. 3 American Brokers endorsed the note in blank, and it is currently held by U.S. Bank as 4 trustee for the JPMorgan Alternative Loan Trust 2007-A2. (Def.’s Mot. to Dismiss at 4, Dkt. 5 #24.) U.S. Bank contracted JPMorgan Chase to act as servicer for Plaintiff’s loan. (Def.’s Reply 6 at 3, Dkt. #37.) 7 In May 2011, Plaintiff defaulted on the note. (Def.’s Mot. to Dismiss at 4, Dkt. #24.) 8 U.S. Bank took no action until February 2012, when Chase sent Plaintiff a “Notice of Pre- 9 Foreclosure Options,” which identified U.S. Bank as the beneficiary of the deed and Chase as its 10 11 agent. (Def.’s Req. for Judicial Notice, Ex. 10–11.) In May 2012, MERS assigned the deed to U.S. Bank and recorded the assignment with 12 the Pierce County Auditor. (Id., Ex. 12.) It is this fact that gives rise to Plaintiff’s claims. 13 Plaintiff stresses that at the time MERS assigned the deed, American Brokers did not exist 14 (having filed bankruptcy in 2007). (Pl.’s Resp. at 3, Dkt. #31.) Thus, argues Plaintiff, U.S. Bank 15 could not have been the beneficiary and lacked authority to foreclose. Further, Plaintiff faults 16 the foreclosure proceeding because “Chase has no recorded interest” in the deed. (Id.) 17 18 19 20 21 22 In June 2012, U.S. Bank issued notices of default to Plaintiff. (Def.’s Req. for Judicial Notice, Ex. 7–8.) Based on these facts, Plaintiff asserts claims for slander of title and violation of the Washington Consumer Protection Act, Wash. Rev. Code § 19.86. II. DISCUSSION Dismissal under Rule 12(b)(6) may be based on either the lack of a cognizable legal 23 theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. 24 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint must allege facts to state 25 a claim for relief that is plausible on its face. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 26 (2009). A claim has “facial plausibility” when the party seeking relief “pleads factual content 27 that allows the court to draw the reasonable inference that the defendant is liable for the 28 misconduct alleged.” Id. Although the Court must accept as true a complaint’s well-pled facts, Order - 2 1 conclusory allegations of law and unwarranted inferences will not defeat an otherwise proper 2 Rule 12(b)(6) motion. Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell v. 3 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to provide 4 the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a 5 formulaic recitation of the elements of a cause of action will not do. Factual allegations must be 6 enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 7 U.S. 544, 555 (2007) (citations and footnote omitted). This requires a plaintiff to plead “more 8 than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 129 S. Ct. at 1949 9 (citing Twombly ). 10 Here, Plaintiff’s claims arise from a fundamental misunderstanding of the law. U.S. 11 Bank is the beneficiary of the deed because it holds Plaintiff’s note, not because MERS assigned 12 it the deed. Under Washington law, a beneficiary is by definition the party holding the note: 13 “’Beneficiary’ means the holder of the instrument or document evidencing the obligations 14 secured by the deed of trust.” Wash. Rev. Code § 61.24.005(2). This rule, however, is merely 15 the codification of the longstanding principle that “the deed follows the debt.” See Restatement 16 (Third) of Property (Mortgages) § 5.4(a) (“A transfer in full of the obligation automatically 17 transfers the mortgage as well . . . .”); see also Carpenter v. Longan, 83 U.S. 271 (1872) (“The 18 transfer of the note carries with it the security, without any formal assignment or delivery, or 19 even mention of the latter.”). The Washington Supreme Court reiterated this principle in Bain v. 20 Metropolitan Mortgage Group, Inc., 175 Wash. 2d 83, 104 (2012), stating “Washington's deed 21 of trust act contemplates that the security instrument will follow the note, not the other way 22 around.” In sum, possession of the note makes U.S. Bank the beneficiary; the assignment merely 23 publicly records that fact. Because U.S. Bank is the proper beneficiary, it is empowered to 24 initiate foreclosure following Plaintiff’s default. 25 Plaintiff relies heavily on Bain in arguing that MERS’s assignment renders U.S. Bank 26 incapable of foreclosing. In Bain, the court held that MERS could not act as a beneficiary unless 27 it actually held a borrower’s note. Id. at 110. Bain did not, however, create a per se cause-of- 28 action based solely on MERS’s involvement. See Mickelson v. Chase Home Finance, LLC, No. Order - 3 1 11-cv-1445, 2012 WL 5377905 at *2 (W.D. Wash. Oct. 31, 2012). In this case, Plaintiff has 2 alleged no injury arising from MERS’s actions, and she cannot therefore sustain a CPA claim. 3 Lastly, Plaintiff argues that Chase improperly issued foreclosure notices because it has 4 “no recorded interest” in the property. But, it is abundantly clear that Chase was acting as an 5 agent for U.S. Bank, the proper beneficiary. The Washington Deed of Trust Act expressly 6 authorizes the use of agents. See, e.g., Wash. Rev. Code § 61.24.031(1)(a); Bain, 175 Wash. 2d 7 at 106 (“noting in this opinion should be construed to suggest an agent cannot represent the 8 holder of a note”). Chase thus acted properly as an agent for U.S. Bank. 9 III. CONCLUSION 10 For the foregoing reasons, JPMorgan Chase’s Motion to Dismiss (Dkt. #24) is 11 GRANTED, and the case is DISMISSED WITH PREJUDICE. Defendant Wells Fargo’s 12 Motion to Dismiss (Dkt. #33) is STRICKEN AS MOOT. 13 14 15 16 17 18 Dated this 30th day of November 2012. A Ronald B. Leighton United States District Judge 19 20 21 22 23 24 25 26 27 28 Order - 4

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