McCoy v. BNC Mortgage Inc., MERS, U.S. Bank, Finance America LLC, et al

8/7/2019 McCoy v. BNC Mortgage Inc., MERS, U.S. Bank, Finance America LLC, et al

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234

B an kru ptcy C aseNo. 1O-63814-fra13

Case 10-06224-fra Doc42 Filed02/07/11

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56789

UN ITED STATES BAN KRUPTCY COURTFOR THE DISTRICT OF OREGON

P laintiff filed a co mplaint w ith claim s fo r w rongful fo reclo sure and to quiet title in real pro perty.I! D efendants M ortgage E lectronic R egistrations System s, Inc. (M ER S) and U .S. B ank N .A . filed a m otion to

1 . dism iss the complaint unde r Fed.R .C iv .P . 12(b)(6)1. For the reaso ns that fo llo w, Defen dan ts' m o tio n will begranted in part and denied in part.

.unn4 /1/11/56

INRE )))_ __ __ __ __ __ __ __ __ __ __ __ __ __ __ _ ~D~e= b= to =r~ . )2 i )

I DONALD E. M cCOY, III, )I Plaintiff, 5

))BNC MORTGAGE, INC; MORTGAGE )ELECTRON IC REGISTRA nONS SYSTEMS, ),IN C; US BANK , NA ; FINANCE AMERICA, LLC; ): LEHMAN BROTHERS HOLDINGS,. INC; and )7 ! IMPACT ONE M ORTGAGE SVCS, ))Defendants. )

DON ALD E. M cCOY, III,

4 vs.5

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IMade app lic ab le by F ed .R .B an kr.P . 7 01 2.Page 1 - M em orandum Opinion

Adve rs ary P ro ce ed in gNo. 10-6224-fra

M em oran dum O pinio n


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1 BACKGROUND2 Plaintiff received a loan in 20.0.5 from Defendant BNC Mortgage in the amount of $320.,0.0.0., secured3 by a deed of trust against real property in Central Point, Oregon, in Jackson County, which the Plaintiff and4 his wife were purchasing as their residence. BNC Mortgage was listed on the trust deed as "Lender" and5 Defendant MERS was listed as "Grantee" of the security instrument. Page 2 of the deed of trust document6 defines MERS as a "separate corporation that is acting solely as a nominee for Lender and Lender's7 successors and assigns." Page 3 of the document describes the "Beneficiary" of the deed of trust as "MERS8 (solely as nominee for Lender and Lender's successors and assigns) and the successors and assigns of9 MERS." The "Trustee" is designated as First American Title Insurance Co. The adjustable rate promissory0. note disclosed BNC Mortgage as the "Lender," and did not name any other party other than the borrowers.1 The Complaint alleges that BNC Mortgage received funds from Defendant Lehman Brothers2 Holdings, which had obtained the funds from investors, to make the loan to the Plaintiff. After the loan was

funded, the Complaint further alleges that the beneficial interest in the loan was sold to Lehman Brothers4 Holdingswhich in tum sold it to its subsidiary StructuredAsset Securities Corp, which in tum sold the loan

to the Structured Asset Securities Corporation Loan Trust Mortgage Pass-Through Certificates, Series 20.0.510 . (DefendantUS Bank NA Trustee), which then transferred the loan and others it had acquired into a loanpool. All these transfers, the Complaint alleges, were madewithout recording any documents in the official

8 records of Jackson County, Oregon.9 On September 11, 20.07, MERS, through Vice President Kathy Taggart, executed and filed in the0. Jackson County records: I) An Appointment of Successor Trustee, narning Northwest Trustee Services, Inc

as successor trustee, and 2) An Assignment of Trust Deed, assigning the beneficial interest in the Trust Dee2 fromMERS to US Bank NA. Also on that same day, Northwest Trustee Services, Inc., Trustee, executed3 and filed a Notice of Default and Election to Sell the Plaintiff's Central Point property. It was also signed b.4 KathyTaggart.5 On February 6 , 20.08, a Rescission of Notice of Default was executed and filed by Northwest Trustee

Services, Inc. and a second Notice of Election to Sell was executed and filed. Thereafter, Northwest Trustee

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4 Plaintiff filed a chapter 7 bankruptcy petition on March 5, 2010, thereby activating the automatic stay5 under 11U.S.C. 362(a)2, preventing any action by Defendants to foreclose their interest in the trust deed.6 Defendant US Bank NA obtained a default order granting relief from the automatic stay on May 6, 2010 to7 foreclose its interest in the trust deed. On June 28, 2010, Plaintiff was granted a discharge of debts. On8 June 24, 2010, Plaintiff filed a chapter 13 bankruptcy petition and maintains the chapter 13 bankruptcy even9 though informed by the court that he is ineligible for a discharge of debts due to the discharge received in th

previously filed chapter 7 case. See 1328(f)(1). The automatic stay was again in place. US Bank NA filed1 an objection to confirmation of Plaintiff's chapter 13 Plan and again filed a motion for relief from the2 automatic stay which was granted at a hearing on August 26, 2010. The lawsuit originally filed by Plaintiff

for wrongful foreclosure and to quiet title in Jackson County Circuit Court was removed to the U.S. District4 Court on September 17, 2010, and thereafter transferred to Bankruptcy Court to be litigated in this forum.5 MOTION TO DISMISS

Review ofa complaint under Fed.R.Civ.P. 12(b)(6) is based on the contents of the complaint, theallegations of which are accepted as true and construed in the light most favorable to the plaintiff. North

8 Slope Borough v. Rogstad (In R e R og sta d), 126 F.3d 1224, 1228 (9th Cir. 1997)(citations omitted). "[O]ncea claim has been adequately stated, it may be supported by showing any set of facts consistent with the

0 allegations in the complaint." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007)(intemal citationomitted). This standard requires "enough fact to raise a reasonable expectation that discovery will reveal

2 evidence [supporting the cause of action]." Id. at 556. However, the court need not accept as true3 unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. Naert v. Daff,45

Case'10-06224-fra Doc42 Filed 02/07/11

1 Services, Inc. executed and filed documents required under Oregon's Trust Deed Statutes found in ORS2 Chapter 86, including an Affidavit of Mailing, a Trustee's Notice of Sale, Proof of Service, and an Affidavit3 of Publication.

2Unless otherwise specified, all statutory references herein refer to the Bankruptcy Code, 11 U.S.C.1 01 et seq.Page 3 - Memorandum Opinion


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1 (In R e W ashin gton Tru st D eed Service C orp.), 224 B .R . 109, 112 (9th C ir. BA P 1998). "[O ]n .ly a com plaint2 that states a plausib le claim fo r re lief surv ives a m otio n to dism iss .." A shcro ft v. Iqbal, 129 S.C t. 1937, 1953 (2009). "D eterm ining w hether a co mplain t states a plausib le c laim fo r relief w ill ... b e a co ntext-specific4 task that requires the review ing co urt to draw o n its jud ic ial experience and co mm on sense." Id .5 In co nsidering the m otio n, the co urt m ay no t co nsider any m aterial "b eyo nd the pleadings ....H al6 R oach S tu dio s. In c. y. R ichard Feiner and C o. Inc . ., 896 F .2d 15 42, 15 55 n.19 (9th Cir. 1990 ). However ,7 m aterial w hich is pro perly sub mitted as part o f the co mplain t m ay b e co nsidered . Id, Exh ib its su bm itte d w ith8 the com plain t m ay also be considered. D urning v. The First Boston Com ., 815 F.2d 1265 , 1267 (9 th Cir,9 1 98 7). F urth er, a document who se c on te nts are alleged in the co mplaint, o r w hich is crucial to the co mplaint,0 and w hose authenticity no party questio ns, b ut w hich is no t physically attached to the pleading , m ay b e

co nsidered ..B ranch v. T unnell, 14 F .3d 4 4 9, 4 5 3-4 5 4 (9th C ir. 1994 ), cert. den . 1 19 S. C t. 510(1998)( contents2 alleged in, b ut no t a ttached to , co mplain t}; P arrino v . F UP , Inc ..14 6 F.3d 699, 705 -706 (9th C ir . . 1998)(no t

sp ecific ally alleg ed an d u na ttach ed , b ut in teg ral to p lain tiffs claim s). F inally, m atters tha t m ay b e jud icially4 no ticed m ay be considered , M ack v. So uth B ay B eer D istribu to rs. Inc., 798 F .2d 1279, 1282 (9 th C ir. 1 98 6),

ab ro gated on o ther gro unds. A sto ria Federal Savings and L oan A ss'n v . So lim ino , 5 01 U .S . 104 (1991).in clud ing co urt reco rd s in related o r un derly ing cases. In re A merican C ontinental C orp} Linculn Sav . .&

7 L oan Securities L itigatio n, 102 F.3d 15 24 , 15 37 (9 1 h C ir. 1996). rey'd o n o ther gro unds sub no m., L execo n8 Inc. v . M ilberg W eiss B ershad H ynes and L erach , 5 23 U .S . 26 (1998).

DISCUSSION0 A. C laim to Q uiet T itle

The C om plaint alleges that the only entities who w ere ever owed m oney w ere the investo rs o f the2 Structured A sset Investm ent Loan Trust, Series 2005 -10 and that those investo rs have all b een paid in fulL

They w ere paid, accord ing to the Com plain t, by one o r m ore of the fo llow ing: incom e from the trust, credit4 default sw aps. T AR P m oney, o r federa l b ailo ut funds .. A ccordingly, since no party is ow ed any m oney, title5 to the real property should rest exclusively in the Plaintiff, free of any encum brances.

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1 The Complaint alleges that there were one or more assignments of the Lender's interest that were not2 recorded. If the Lender is the beneficiary, it follows that foreclosure by advertisement and sale is not3 authorized under ORS 86.735. On the other hand, non-judicial foreclosure may be authorized if (a) MERS i4 the beneficiary, and (b) there have been no unrecorded assignments ofMERS's interest.5 MERS claims to be the beneficiary because the Trust Deed declares it the beneficiary. The term

"Beneficiary," however, is defined at ORS 86.705(1) not merely as the person named as such, but as "the7 person named or otherwise designated in the trust deed as the person for whose benefit a trust deed is given,

or the person's successor in interest .... " [italics added]. In the deed of trust described in and attached to9 the Complaint, that person is not MERS, but BNC Mortgage, the Lender. BNC Mortgage is the entity that0 loaned the money to Plaintiff and to whom the Plaintiff was obligated under the promissory note. Moreover,

the deed of trust provides that MERS is acting solely as the nominee of the Lender.2 A deed of trust may authorize delegation of the beneficiary'S powers to a separate nominee, as3 appears to have been the case here. However, the powers accorded to MERS by the Lender - with the

borrowers' consent - cannot exceed the powers of the beneficiary. The beneficiary's right to require a non-5 judicial sale is limited by ORS 86.735. A non-judicial sale may take place only ifany assignment by BNC6 Mortgage has been recorded. As the Complaint sets out a plausible claim that one or more assignments from

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Case 10-06224-fra Doc42 Filed02107/11

1 The Complaint fails to assert "enough facts to state a claim for relief that is plausible on its face."2 Twombly, 550 U.S. at 555. It merely asserts, without any actual assertion of fact, that the debt has been3 paid from one or more sources. The allegation that nobody is owed any money based on Plaintiffs4 promissory note and deed of trust is a conclusory legal allegation which the court is not required to accept.5 Accordingly, Defendants' motion to dismiss the claim to quiet title in Plaintiff will be granted.6 B. Wrongful Foreclosure7 ORS 86.735 Foreclosure by advertisement and sale. The trustee may foreclose a trust deedby advertisement and sale in the manner provided in ORS 86.740 to 86.755 if:

(1) The trust deed, any assigrunents of the trust deed by the trustee or thebeneficiary and any appointment of a successor trustee are recorded in themortgage records in the counties inwhich the property described in the deed issituated; ...

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1 BN C M ortgage w ere unreco rded . the D efendants' m otion to dism iss the cla im fo r w rongful fo reclosure w ill2 be denied.'3 It sho uld b e no ted that O RS 86.735 applies o nly to no n-judicial fo reclo sures and do es no t act to limit4 judicial fo reclo sures. Judic ial fo reclo sure o f trust deeds is autho rized b y O RS 86,.710; w hen fo reclo sed5 ju dic ia lly , tru st d ee ds a re tre ate d as m ortgages, R ead to gether, the tw o pro visio ns m ake it c le ar th at O re go n6 law perm its fo reclo sure w itho ut the b enefit o f a ju dicial p ro ceed ing o nly w hen th e interest o f th e b en eficiary7 is clearly d oc um ented in a pub lic reco rd . W hen the pub lic reco rd is lacking , the fo reclo sing b eneficiary m us8 p ro ve its in te rest in a ju d ic ia l p ro c eed ing ,

Case 10-06224-fra Doc 42 Filed 02/07/1.1

6 FRAN K R. ALLEY, IIIC hief B an kru ptcy Ju dge

9 CONCLUSION0 For the reasons given , the m otion to dism iss filed by Defendants M ERS and U S Bank NA w ill b e

denied as to C la im 1 fo r w ro ngful fo reclo sure and granted as to Claim 2 to quiet title, w ith leave to replead .An order will b e entered b y the co urt co nsistent w ith th is M em orandum O pinio n.

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"T he C om plaint also alleges that any actio ns taken by M ER S in O rego n are a legal nullity becauseM ER S is no t authorized to do b usiness in the state. H ow ever, as D efendant po in ts out, even ifM ER S'sactiv ities in the state w ere no t excepted at O RS 60,701(2) fro m the requirem ent that an entity b e autho rizedb y the Secretary of S tate to do business in the O rego n (altho ugh it appears that they are in th is case), O RS60.704 (5 ) pro vides that "the failure o f a fo reign co rpo ratio n to o bta in autho rity to transact b usiness in thisstate does no t im pair the valid ity of its co rpo rate acts o r prevent it fro m defending any pro ceeding in th isstate,"5

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Documents

McCoy v. BNC Mortgage Inc., MERS, U.S. Bank, Finance America LLC, et al