Cutler v. U.S. Bank Nat'Lass'N

STEPHEN CUTLER, Plaintiff, v. U.S. BANK NATIONAL ASSOCIATION, Defendant.

Case No. 3:18-cv-01045-YY

UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

December 3, 2018

FINDINGS AND RECOMMENDATIONS

YOU, Magistrate Judge:

Plaintiff Stephen Cutler has brought an action against defendant U.S. Bank National Association ("US Bank") alleging claims of wrongful foreclosure (Claim One), breach of contract (Claim Two), and declaratory relief to quiet title (Claim Three).¹ Compl., ECF #1-1. The claims arise out of the non-judicial foreclosure of plaintiff's residence located at 5304 SE Steele Street, Portland, Oregon ("the property"), due to his alleged default on a line of credit secured by the property. This court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1).²

US Bank has filed a motion to dismiss pursuant to FRCP 12(b)(6). ECF #5. For the reasons discussed below, the motion should be GRANTED IN PART and DENIED IN PART in that: (1) with respect to plaintiff's claim for wrongful foreclosure (Claim One), the motion should be granted and the claim should be dismissed with prejudice; (2) with respect to plaintiff's claim for breach of contract (Claim Two), the motion should be denied; and (3) with respect to plaintiff's claim for declaratory relief to quiet title (Claim Three), the motion should be granted and the claim should be dismissed, but without prejudice and with leave to replead.

ALLEGED FACTS

The Complaint alleges the following facts:

On February 10, 2005, plaintiff executed a Trust Deed for a home equity line of credit with a maximum limit of $37,390, using his residence at 5304 SE Steele Street ("the property") to secure the loan. Compl. ¶¶ 1, 3, ECF #1-1. Sometime thereafter, plaintiff temporarily lost his employment and stopped making payments. Id. ¶¶ 4-5.

On or about June 28, 2017, Clear Recon Corp. ("Clear Recon") executed a Notice of Default and Election to Sell ("Notice of Default") and accompanying Trustee's Notice of Sale ("Notice of Sale"). Id. ¶ 4. These documents alleged that plaintiff was in arrears on his payment and in default of the Trust Deed. Id. They further gave notice that the property would be auctioned at a trustee sale on November 9, 2017, with Clear Recon as the trustee, unless the entire amount then "due" was paid to US Bank. Id.

Plaintiff became employed again, and saved most of his earnings over the next few months to make a lump sum payment prior to the auction date. Id. ¶ 5. On November 3, 2017, six days prior to the trustee sale, plaintiff personally tendered a cashier's check in the amount of $13,189.70 to US Bank, and a US Bank representative "unequivocally, and without objection, reservation, or further instruction or request of any kind, accepted the reinstatement payment on behalf of US Bank and provided [him] with an 'official receipt[.]'" Id. Without further communication or notice to plaintiff, and "despite all contrary assurances," US Bank either wrongfully instructed Clear Recon to proceed with the trustee sale or failed to instruct Clear Recon to cancel the auction, and on November 9, 2017, the property was sold to the highest bidder, Breckenridge Property Fund 2016, LLC ("Breckenridge"). Id. ¶ 6.

Plaintiff further contends that after US Bank originated the loan and Trust Deed, the loan was purchased on the secondary loan market, transferred multiple times, and ultimately attempted to be securitized. Id. ¶ 7. As such, plaintiff asserts that US Bank has long since sold and assigned all interests it may have had in the note and Trust Deed. Id. Plaintiff further contends that none of these assignments were recorded in Multnomah County property records, and similarly no valid appointment of successor trustee was ever recorded. Id. at ¶ 8. Thus, plaintiff alleges that US Bank was not the current beneficiary, and Clear Recon was not a trustee with any power to sell the property at auction or otherwise. Id.

FINDINGS

US Bank has filed a motion to dismiss pursuant to FRCP 12(b)(6) for "failure to state a claim upon which relief can be granted." ECF #5. It contends that plaintiff's wrongful foreclosure claim fails because Oregon does not recognize such a tort; his breach of contract claim fails because evidence shows that plaintiff did not fully perform under the terms of the Trust Deed and did not cure the default; and his claim for declaratory relief to quiet title fails because he has not tendered the full amount owed under the loan and has not named Breckenridge, which is the current owner of the property and a necessary party.

I. Judicial Notice

As a preliminary matter, this court considers US Bank's Request for Judicial Notice. ECF #5-1. In resolving a Rule 12(b)(6) motion, review is generally limited to the contents of the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.), op. am. on den. of reh'g, 275 F.3d 1187 (9th Cir. 2001). However, the Ninth Circuit has identified two exceptions to this general rule: (1) "a court may consider material which is properly submitted as part of the complaint," and "[i]f the documents are not physically attached to the complaint, they may be considered if the documents' authenticity . . . is not contested and the plaintiffs' complaint necessarily relies on them"; and (2) "under Fed. R. Evid. 201, a court may take judicial notice of matters of public record," but "a court may not take judicial notice of a fact that is subject to reasonable dispute."³ Allshouse v. Caliber Home Loans, Inc., No. CV1401287DMGJCX, 2014 WL 12594210, at *2 (C.D. Cal. Oct. 29, 2014) (quoting Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001) (internal quotations and citations omitted)).

US Bank asks the court to take judicial notice of five documents: (1) Trust Deed; (2) Appointment of Successor Trustee; (3) Notice of Default; (4) Notice of Sale; and (5) Trustee's Deed. ECF #5-1, Exs. A-D. "Courts routinely take judicial notice of assignments of deed of trust and similar recorded documents." Allshouse, 2014 WL 12594210, at *3 (citing Rosal v. First Federal Bank of California, 671 F. Supp. 2d 1120-21 (N.D. Cal. 2009) (deed of trust); Paulhus v. Fay Servicing, LLC, No. 2:14-736 WBS AC, 2014 WL 3845051, at *1, n.2 (E.D. Cal. Aug. 6, 2014) (deed of trust, assignment of deed of trust, notice of default, rescission of default, and substitution of trustee); Valasquez v. Mortgage Electronic Registration Systems, Inc., No. C 08-3818 PJH, 2008 WL 4938162, at *2-3 (N.D. Cal. Nov. 17, 2008) (same)); see also Lavine v. Aames Funding Corp., No. 3:16-CV-01489-MO, 2017 WL 944216, at *3 (D. Or. Mar. 9, 2017) (taking judicial notice of Adjustable Rate Balloon Note, recorded Deed of Trust, Assignments of the Deed of Trust, and court documents from the state foreclosure proceeding). Plaintiff does not contest the authenticity of the documents, and relies on some of them in the complaint. Compl. ¶¶ 4-5, ECF #1-1.

US Bank also offers Exhibit 2, which is a copy of plaintiff's October 10, 2017 mortgage statement. Plaintiff does not contest the authenticity of this exhibit, and also relies on it in his complaint. ECF #5-2. Specifically, plaintiff alleges that he "personally tendered" to US Bank a cashier's check in the amount of $13,189.70, which he asserts is the "exact figure US Bank had indicated to him was due and owing, provided he make the payment on or before November 10, 2017." Compl. ¶ 5, ECF #1-1. Clearly, in making this statement, plaintiff was referring to the October 10, 2017 mortgage statement, which states that the "total amount due" is $13,189.70 and indicates a "cutoff" date of November 10, 2017. ECF #5-6, Ex. 2, at 1-3.

Plaintiff's only objection to Exhibit 2 is that when US Bank recently provided a copy of the mortgage statement to him, it was labeled a "confidential settlement communication." FRE 408 governs the admissibility of compromise offers and negotiations, and provides:

Evidence of the following is not admissible—on behalf of any party— either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:

(1) furnishing, promising, or offering—or accepting, promising to accept, or offering to accept—a valuable consideration in compromising or attempting to compromise the claim; and

(2) conduct or a statement made during compromise negotiations about the claim—except when offered in a criminal case and when the negotiations related to a claim by a public office in the exercise of its regulatory, investigative, or enforcement authority.

The mortgage statement does not fall within the parameters of FRE 408—it is not a promise or an attempt to compromise a claim. Moreover, the document was originally sent by US Bank to plaintiff in October 2017. The fact that it was thereafter referred to in confidential settlement negotiations does not render it confidential.

II. Relevant Law Regarding Rule 12(b)(6)

The purpose of a motion to dismiss for failure to state a claim under Rule 12(b)(6) "is to test the legal sufficiency of the complaint." N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). "A complaint may be dismissed as a matter of law for one of two reasons: (1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim." Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

To state a claim for relief, a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" FRCP 8(a)(2). This standard "does not require 'detailed factual allegations,'" but does demand "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 555). "A ...