Schmitt v. Stearns Lending et al, No. 2:2011cv00381 - Document 53 (D. Utah 2011)
Court Description: MEMORANDUM DECISION AND ORDER ADDRESSING MOTION TO DISMISSOF CITIMORTGAGE, INC. AND MORTGAGE ELECTRONICREGISTRATION SYSTEMS, INC.- granting 19 Motion to Dismiss. Signed by Judge David Sam on 8/31/11. (jmr)
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THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * NEIL M. SCHMITT, ) Plaintiff, Case No. 2:11CV00381 DS ) vs. ) ) STEARNS LENDING, INC., ET AL., Defendants. ) MEMORANDUM DECISION AND ORDER ADDRESSING MOTION TO DISMISS OF CITIMORTGAGE, INC. AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. ) * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * I. INTRODUCTION Plaintiff defaulted under the terms of a Trust Deed and Note securing the repayment of a loan obtained to purchase a home located in Herriman, Utah. Non-judicial foreclosure proceedings ensued. Plaintiff filed this action purporting to assert claims for Declaratory Judgment, Intentional Misrepresentation, Negligent Misrepresentation, Quiet Title, and Breach of Covenant of Good Faith and Fair Dealing. that CitiMortgage, The essence of Plaintiff s position is Inc. ( Citi ) and Mortgage Electronic Registration Systems, Inc. ( MERS ) did not have the authority to initiate foreclosure proceedings on the Trust Deed because the sale or assignment of the Note divested MERS of its right to assign its interest to Citi. Citi and MERS move to dismiss the Complaint with prejudice pursuant to Fed. R. Civ. P. 12(b)(6) (Doc. #19). II. STANDARD OF REVIEW In reviewing the Complaint the Court accepts as true all well pleaded allegations of the complaint and views them in the light most favorable to the non-moving party. F.3d 910, 913 (10th Cir. 2006). opinions couched presumption. as facts Anderson v. Blake, 469 Legal conclusions, deductions, and are, however, not given such a Mitchell v. King, 537 F.2d 385 (10th Cir. 1976); Swanson v. Bixler, 750 F.2d 810 (10th Cir. 1984). The complaint must plead sufficient facts, that when taken as true, provide plausible grounds that discovery support plaintiff s allegations. 127 S. Ct. 1955, 1965 (2007). will reveal evidence to Bell Atlantic Corp. V. Twombly, The burden is on the plaintiff to frame a complaint with enough factual matter (taken as true) to suggest that he or she is entitled to relief. Id. Factual allegations must be enough to raise a right to relief above the speculative level. assumed to be Id. true, The allegations must be enough that, if the plaintiff speculatively) has a claim for relief. F.3d 1242, 1247-48 (10th Cir. 2008). 2 plausibly (not just Robbins v. Oklahoma, 519 III. A. DISCUSSION Intentional & Negligent Misrepresentation Against Citi (Second & Third Claims) Because Plaintiff does not contest these claims, as well as for the reasons outlined by Citi and MERS in their pleadings, their Motion to Dismiss with respect to the Second and Third claims is granted. B. Quiet Title (Fourth Claim) The Court agrees with Citi and MERS that the Complaint fails to state a claim for quiet title. A plaintiff must prevail on the strength of his own claim to title and not on the weakness of a defendant s title or even its total lack of title. Church v. Meadow Springs Ranch Corp., Inc., 659 P.2d 1045, 1048-49 (Utah 1983). Plaintiff fails to assert his own claim to title. He does not allege that he holds clear title to the subject property, or even that he is not in default under the Note. He admits executing the Deed of Trust and to conveying his interest in the property for the purpose of securing the loan. Additionally, the Court agrees with Defendants that Plaintiff s quiet title claim is based on the oft-rejected split the note theory. Deed and The Complaint plainly asserts that Plaintiff s Trust Note were intentionally 3 separated ... during the securitization process and as a result of the securitization Defendants have no interest in the Subject Property . Comp. ¶¶ 150-51" Reply at 10. As noted by Defendants, Courts in this jurisdiction have repeatedly held that the mortgage follows the note and rejected the split the note theory. C. Declaratory Relief (First Claim) In his claim for declaratory judgment, Plaintiff essentially alleges that Defendants lack authority to foreclose on the subject property. As set forth in Defendants pleadings, Plaintiff s position has been rejected by courts of this district. Plaintiff agreed in the Trust Deed that MERS was the beneficiary and that MERS and its successors and assigns had the authority to foreclose on the subject property in the event of default by Plaintiff. Courts of this district have consistently held that the trust deed language at issue here, confers on MERS authority to foreclose on property on behalf of a lender. cited therein). Plaintiff See Mem. Supp. at 6 9 (and cases admits that Citi became a party to the Trust Deed through assignment. Compl. ¶ 157. As a result of that assignment, Citi had the authority to initiate foreclosure and appoint Halliday as successor trustee to conduct the foreclosure sale. Plaintiff raises for the first time in his Reply the position that the Notice of Default is invalid and that the successor trustee, Halliday, lacked proper authority. 4 Plaintiff s position, that the Notice of Default is invalid because at the time Halliday executed and recorded the Notice of Default he was not a properly appointed trustee, is rejected. Consistent with Utah Code Ann. § 57-1-22(1)©, of the Substitution Trustee appointing Halliday contains a provision ratifying and confirming action taken on the beneficiary s behalf prior to the recording of the substitution of trustee. D. Breach of Covenant of Good Faith and Fair Dealing (Fifth Claim)( pled in the alternative) In the alternative, Plaintiff asserts that Defendants breached the implied covenant of good faith and fair dealing by, among other things, making misrepresentations regarding Plaintiff s ability to modify the terms of his Notes, failing to present evidence regarding the authority to foreclose, and by failing to provide proof as to the true holder of the Notes or as to authority as the agent of the investors for purposes of foreclosure. Compl. ¶ 161. An implied covenant of good faith and fair dealing is inherent in every contract. (Utah 2008). Oman v. Davis School Dist., 194 P.3d 956, 968 To prevail, Plaintiff must prove breach of this implied covenant through evidence showing an intentional effort to injure the other party s right to receive the benefits of the contract. Simplot v. Chevron Pipeline Co., 563 F.3d 1102,1113 (10th Cir. 2009). The covenant, however, does not establish new rights and duties to which the parties did not agree. 5 Id. This claim fails because the Complaint contains no factual allegations which show any deprivation by Defendants of any contractual benefits owed to Plaintiff under the Trust Deed and Note. There are no factual Plaintiff was contractually allegations which allege that entitled to a loan modification, or which requires Citi to prove its authority to foreclose. For these and similar reasons set forth by Defendant s in their pleadings, Defendants Motion must be granted. IV. CONCLUSION For the reasons stated, as well as generally for the reasons set forth by Defendants in their pleadings, Defendants Motion to Dismiss the Complaint with prejudice (Doc. #19) is granted. DATED this 31st day of August, 2011. BY THE COURT: DAVID SAM SENIOR JUDGE UNITED STATES DISTRICT COURT 6
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