Newman v. JP Morgan Chase Bank, N.A.

81 F.Supp.3d 735

Thomas J. NEWMAN, Plaintiff

v.JP MORGAN CHASE BANK, N.A., Federal National Mortgage Association, Defendants.

Civ. No. 14–2944 MJD/JSM.

United States District Court, D. Minnesota.

Signed Jan. 26, 2015.

Caitlin Guilford, Jonathan L.R. Drewes, Drewes Law PLLC, Minneapolis, MN, for Plaintiff.

Curtis D. Ripley, Minneapolis, MN, for Defendants.

ORDER

MICHAEL J. DAVIS, Chief Judge.

The above matter came before the Court on the Report and Recommendation of United States Magistrate Judge Janie S. Mayeron dated November 17, 2014. Plaintiff objects to the recommendation that this Court grant Defendants' motion to dismiss.

Pursuant to statute, the Court has conducted a de novo review of the record. 28 U.S.C. § 636(b)(1) ; Local Rule 72.2(b). Based on the Court's de novo review and upon all of the files, records and proceedings herein, the Court will adopt the Report and Recommendation.

IT IS HEREBY ORDERED that:

1. Defendants' Motion to Dismiss [Docket No. 3] is GRANTED;

2. This matter is dismissed with prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.

REPORT AND RECOMMENDATION

JANIE S. MAYERON, United States Magistrate Judge.

The above matter came before the undersigned on defendants' Motion to Dismiss [Docket No. 3]. Jonathan L.R. Drewes, Esq. appeared on plaintiff's behalf. Curtis D. Ripley, Esq. appeared on defendants' behalf. This matter has been referred to the undersigned Magistrate Judge for a Report and Recommendation by the District Court pursuant to 28 U.S.C. § 636(b)(1)(A), (B), and Local Rule 72.1.

I. BACKGROUND

Plaintiff seeks to invalidate the foreclosure of the mortgage on his home. Plaintiff asserts two claims against defendants: failure to comply with Minn.Stat. § 580.02 and an injunction to prevent defendant JP Morgan Chase from proceeding with an eviction it initiated against plaintiff in Hennepin County, Minnesota.

For the reasons described below, the Court recommends that defendants' Motion to Dismiss be granted and plaintiff's claims be dismissed with prejudice.

A. Plaintiff's Complaint

Plaintiff sued JP Morgan Chase Bank, N.A. (“Chase”) and Federal National Mortgage Association (“Fannie Mae”) (collectively, “defendants”) in state district court on June 18, 2014. Notice of Removal, Ex. 1 (Summons and Complaint) [Docket No. 1–1]. Based on diversity jurisdiction, defendants removed the suit to Federal District Court pursuant to 28 U.S.C. 1332(a). Notice of Removal [Docket No. 1]. Defendants moved to dismiss the Complaint in lieu of answering. Motion to Dismiss [Docket No. 3].

The facts bearing on defendants' motion to dismiss are as follows. Plaintiff executed a mortgage in favor of Washington Mutual Bank, FA (“WAMU”) on November 28, 2006, for property located in Hennepin County, Minnesota (“Property”). Complaint, ¶¶ 1, 6. The mortgage was recorded with the Hennepin County Registrar of Titles on January 5, 2007. Id., ¶ 6. On September 25, 2008, the Federal Deposit Insurance Corporation (“FDIC”) was appointed as WAMU's receiver. Id., ¶ 7. That same day, Chase and the FDIC entered into a Purchase and Assumption Agreement (“PAA”). Affidavit of Curtis Ripley in Support of Motion to Dismiss (“Ripley Aff.”), Ex. 1(PAA) [Docket No. 6–1]. Pursuant to the PAA, the FDIC transferred WAMU's mortgage assets to Chase. Id. On October 29, 2008, Chase recorded an affidavit from the FDIC with the Hennepin County Registrar of Titles. Complaint, ¶ 7, Ripley Aff., Ex. 2 (recorded Affidavit of Robert C. Schoppe, Receiver in Charge for FDIC as Receiver for Washington Mutual Bank). This Affidavit stated “[a]s authorized by Section 11(d)(2)(G)(i)(II) of the Federal Deposit Insurance Act, 12 U.S.C. § 1821(d)(2)(G)(i)(II),¹ the FDIC, as receiver of Washington Mutual, may transfer any asset or liability of Washington Mutual without any approval, assignment or consent with respect to such transfer.” Ripley Aff., Ex. 2, ¶ 3. “As a result, on September 25, 2008, JP Morgan Chase became the owner of the loans and loan commitments of Washington Mutual by operation of law.” Id., ¶ 5.

Plaintiff defaulted on his mortgage payments² and Chase, “a party with no registered interest in the Subject Property,” foreclosed on the mortgage by advertisement. Complaint, ¶ 9. A sheriff's sale of the Property was held on April 15, 2014. Id. The Sheriff's Certificate of Sale and Foreclosure Record was recorded with the Hennepin County Registrar of Titles on April 23, 2014. Id.; see also Ripley Aff., Ex. 3 (Sheriff's Certificate of Sale and Foreclosure Record) [Docket No. 6–1]. The Property was sold to Chase at the sheriff's sale for $352,075.33. Ripley Aff., Ex. 3. After the sheriff's sale, Chase transferred title of the Property to Fannie Mae by warranty deed. Ripley Aff., Ex. 4 (warranty deed).

Plaintiff did not redeem the Property during the statutory redemption period and failed to vacate the Property, claiming that he was the “rightful owner of the Subject Property.” Complaint, ¶ 24. In June, 2014, Chase commenced an eviction action in Hennepin County Housing Court. Id., ¶ 25. Plaintiff contended that Chase failed to comply with Minnesota's foreclosure-by-advertisement statute, Minn.Stat. § 580.02, because there is no recorded assignment of the mortgage to Chase. Complaint, ¶¶ 16, 20. Consequently, Chase was not entitled to foreclose. Id., ¶ 13. As relief, plaintiff sought a judgment declaring the sheriff's sale void and an injunction, enjoining “defendants and their successors-in-interest, from asserting claims of ownership, pursuing eviction, or purporting to transfer rights in the Subject property to third parties to which Defendants are not presently entitled.” Id., Prayer for Relief, ¶¶ 1, 2.

B. Defendants' Motion to Dismiss and Plaintiff's Response

Defendants moved to dismiss the Complaint, contending that plaintiff's sole theory regarding the alleged violation of Minn.Stat. § 580.02 —that Chase foreclosed without recording an assignment from the FDIC—was meritless and rejected by the district court in Luzaich v. JP Morgan Chase, Civ. No. 13–1869 (DWF/JSM), 2014 WL 300824 (D.Minn. Jan. 28, 2014) (Order Adopting Report and Recommendation). Defendants' Memorandum in Support of Motion to Dismiss (“Defs.' Mem.”), pp. 5–6 [Docket No. 5]. In Luzaich, the district court concluded that even if the FDIC's recording of an affidavit documenting Chase's acquisition of “all loans and all loan commitments” of WAMU did not fulfill the requirement of Minn.Stat. § 580.02,

the Court is persuaded that Chase was not obligated to record an assignment. Pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the mortgage was assigned to Chase by operation of federal law, which specifically authorizes the FDIC to transfer assets of a failed financial institution “without ... assignment.” 12 U.S.C. § 1821(d)(2)(G)(i)(II). Through operation of the Supremacy Clause, U.S. Const. art. VI, cl. 2, “a transfer of a mortgage, authorized by federal law, obviates the need for the specific written assignment that state law would otherwise require.” Demelo v. U.S. Bank Nat'l Ass'n, 727 F.3d 117, 125 (1st Cir.2013). If no assignment was required to effectuate the transfer of plaintiffs' mortgage to Chase, then it follows that no assignment was required to be recorded prior to the foreclosure sale of the Property.

Id., p. 5 (quoting Luzaich, 2014 WL 300824, at *7 ). Defendants also submitted that the same conclusion was reached in Robinson v. Federal Nat'l Mortg. Ass'n, Civ. No. 13–1868 (JNE/JSM), 2014 WL 258644 (D.Minn. Jan. 23, 2014) (Order Adopting Report and Recommendation). Moreover, courts in other jurisdictions have reached the same conclusion based on complaints following WAMU's collapse and the FDIC's transfer of WAMU's assets to Chase through the PAA. Id., pp. 7–8 (citing Drobny v. JP Morgan Chase Bank, N.A., 929 F.Supp.2d 839, 841 (N.D.Ill.2013) ; Beka Realty, LLC v. JP Morgan Chase Bank, N.A., 41 Misc.3d 1213(A), Civ. No. 503666–12, 2013 WL 5629590, at *3 (N.Y.Sup.Ct. Sept. 25, 2013) ).

Plaintiff did not address the holdings of Luzaich or Robinson in his opposition to Chase's motion. Plaintiff's Memorandum in Opposition to Motion to Dismiss (“Pl. Mem. in Opp.”), pp. 4–12 [Docket No. 10]. Plaintiff argued that the PAA was an assignment and was required to be recorded before Chase could foreclose. Id., pp. 5–6. Plaintiff cited no cases to support this characterization of the PAA and instead relied on the definitions of “assignment” and “instrument” from Black's Law Dictionary. Id., p. 5. Plaintiff submitted that while it “may potentially be technically possible for the FDIC to transfer the assets of Washington Mutual Bank to JPMorgan—pursuant to 12 U.S.C. § 1821(d)(2)(G)(i)(II) —without ‘a written legal document’ ‘of transfer,’ such an event is practically unlikely and nevertheless did not happen here.” Id., p. 6.

Plaintiff further contended that the Minnesota Supreme Court's statement in Ruiz v. 1st Fid. Loan Serv., LLC, 829 N.W.2d 53, 54 (Minn.2013), that all assignments had to be recorded “before the mortgagee has the right to engage in the process of foreclosure by advertisement,” was dispositive. To comply with Minn.Stat. § 580.02(3), plaintiff maintained that Chase was required to record an assignment from the FDIC, without exception. Id., pp. 7–12. Plaintiff submitted a print-out of results from a search plaintiff's counsel conducted at the Hennepin County Registrar of Title's office, which showed hundreds of assignments of mortgage recorded by the FDIC. Declaration of Jonathan L.R. Drewes (“Drewes Decl.”), Exs. A–L [Docket No. 11, 11–1]. According to plaintiff, this showed that the FDIC assigned its interests in many other cases, and if it was true that it was unnecessary to record the assignment in this case, then “all of these other banks are wasting time and money actually doing what Chase insists is unnecessary.” Pl. Mem. in Opp., p. 11. Plaintiff argued that Chase could have conducted a judicial foreclosure, which would have relieved it...