Robertson v. Gmac Mortg. LLC

982 F.Supp.2d 1202

Duncan K. ROBERTSON, Plaintiff,

v.GMAC MORTGAGE LLC, et. al, Defendants.

Case No. C12–2017–MJP.

United States District Court,

W.D. Washington,

at Seattle.

Nov. 14, 2013.

Scott E. Stafne, Stafne Law Firm, Arlington, WA, for Plaintiff.

William G. Fig, Sussman Shank, Portland, OR, Fred B. Burnside, Davis Wright Tremaine, Seattle, WA, for Defendants.

ORDER GRANTING MOTIONS

MARSHA J. PECHMAN, Chief Judge.

This matter comes before the Court on Defendants J.P. Morgan Chase and BankOne National Association's motion to dismiss.¹ ( Dkt. No. 114) Defendants GMAC Mortgage, LLC, Executive Trustee Services, LLC, Residential Funding Real Estate Holdings, LLC, Residential Funding Corporation, Residential Funding Company, LLC, and Homecomings Financial, LLC (collectively, the “GMAC Defendants”) join in the motion and also move for summary judgment on two of Plaintiff's claims. ( Dkt. No. 115.) Having reviewed the motions, Plaintiff's responses (Dkt. Nos. 118, 120), the replies (Dkt. Nos. 119, 124), and all related papers, the Court GRANTS the motions.

Background

This case concerns a piece of property in Seattle, Washington, currently owned by Plaintiff Duncan Robertson. (Dkt. No. 4–1 at 4.) The relevant facts of this case begin in 1999 when the property's prior owner, Linda Nicholls, executed an adjustable rate note for $100,000 from Old Kent Mortgage Company. (Dkt. No. 64–1 at 4.) Ms. Nicholls inherited the property from her mother. To secure the note, Nicholls executed a Deed of Trust against the property in favor of Old Kent Mortgage. (Dkt. No. 51–1 at 15.) The Nicholls Deed of Trust was recorded in King County. ( Id. at 2.) Since 1999, the Nicholls' Note and Deed of Trust have been assigned several times. Plaintiff has never been a party to those instruments.

In 2006, Nicholls borrowed money from Plaintiff. The loan was secured by a third-position deed of trust, which was junior to the Nicholls' Deed of Trust. (Dkt. Nos. 51–3, 51–4). Nicholls defaulted on the loan from Robertson. Robertson then foreclosed on his deed of trust. In the resulting non-judicial foreclosure sale, Robertson purchased the property. (Dkt. No. 51–2 at 2.) The Nicholls' Deed of Trust continued to encumber the property, even after Robertson's foreclosure on the junior obligation.

Robertson wanted to pay off the Nicholls' senior deed of trust obligation. Most of his claims asserted in this case involve these alleged attempts. (Dkt. No. 4–1 at 11.) Defendant Homecomings for example, told him the Nicholls' Deed of Trust and Note were not assumable. He made several offers to satisfy Nicholls' obligation, but he alleges none were accepted by Homecomings or other Defendants. (Dkt. No. 4–1 at 11.) At least two non-judicial trustee sales were scheduled, but eventually cancelled. (Dkt. No. 4–1 at 22.) Robertson is still in possession of the property.

Plaintiff initiated this case in King County asserting 12 causes of action against various parties who had dealings with the Nicholls' Deed of Trust. (Dkt. No. 4–1.) Defendants removed the case to this Court. (Dkt. No. 1) Trial is scheduled for January 2014. All but two claims against GMAC remain stayed however, due to its Bankruptcy filing. (Dkt. No. 55.)

Defendant Chase moves for dismissal because even if the allegations in the complaint are taken as true, Robertson fails to state a claim. (Dkt. No. 114.) GMAC Defendants join in that motion as to two of the claims asserted by Plaintiff: declaratory judgment and quiet title.² GMAC Defendants also move for summary judgment on these two claims.

Discussion

A. Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir.1988). Material allegations are taken as admitted and the complaint is construed in the plaintiff's favor. Keniston v. Roberts, 717 F.2d 1295 (9th Cir.1983). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted).

1. Declaratory Judgment

Under Washington's Declaratory Judgment Act, courts are authorized to “declare rights, status and other legal relations.” Nollette v. Christianson, 115 Wash.2d 594, 598, 800 P.2d 359 (1990). Absent major issues of public importance, a justiciable controversy must exist before a court's jurisdiction may be invoked under the act. Kitsap County v. Smith, 143 Wash.App. 893, 902–903, 180 P.3d 834 (2008). For a declaratory judgment, a justiciable controversy is “... an actual, present and existing dispute, or the mature seeds of one, as distinguished from a possible, dormant, hypothetical, speculative or moot disagreement ...” Id., quoting Nollette, 115 Wash.2d at 599, 800 P.2d 359.

Here, Robertson asks for a declaratory judgment that (1) Defendants have violated the laws of the State of Washington in their efforts to hold foreclosure sales of the property, (2) Defendants are not entitled to conduct a foreclosure sale of the property, (3) the Nicholls' Deed of Trust is and should be declared void, invalid, and of no further force or effect as a lien against the Property records. (Dkt. No. 4–2 at 2.) Because Robertson is a stranger to the Nicholls' Deed of Trust, which precludes his challenge to any procedural irregularities with the foreclosure process under the Deed of Trust Act (DTA), and because he fails to establish the Nicholls' Deed of Trust is invalid, the Court dismisses the Declaratory Judgment claim against Chase and GMAC Defendants.

a. Deed of Trust Act related claims

First, Plaintiff is under the mistaken belief that he has standing to challenge any aspect of Defendants' past efforts to foreclose on the property. The point of the Deed of Trust Act is to protect borrowers from harsh practices by lenders during non-judicial foreclosures. Walker v. Quality Loan Serv. Corp., 176 Wash.App. 294, 308 P.3d 716 (Div.1, 2013). When in the course of a non-judicial foreclosure sale, a lender violates the terms of the DTA, in some instances, a borrower may sue for damages.³Id. Notably, the class of persons entitled to bring suit under the DTA for damages is limited to those persons with a financial stake in the loan transaction—the borrower or grantor. RCW 61.24.127(1). It is in the latter category—grantor—that Robertson claims to belong. (Dkt. No. 118 at 11.) His argument is entirely based on his current ownership of the property. ( Id. at 12) Under Robertson's theory, anyone who purchases property subject to a senior lien or deed of trust obligation automatically obtains “grantor” status under the DTA. Robertson offers no authority to support his theory. And, in the context of the DTA, Washington courts have exclusively used the term “grantor” for those parties who have a financial stake in the deed of trust. See e.g. Rucker v. Novastar Mortg., Inc., 177 Wash.App. 1, 311 P.3d 31 (Div.1, 2013)(party to deed of trust is the grantor); Umpqua Bank v. Santwire, 175 Wash.App. 1068 at *3, 2013 WL 4000917 (Div.1, Aug. 5, 2013) (explaining the relationship between parties in the note and deed of trust as “the borrower becomes the grantor of the deed of trust and the lender is the beneficiary.”); Barnhart v. Fidelity Nat. Title Ins. Co., 2013 WL 5739023 *2 (Oct. 2, 2013, E.D.Wash.)(holding daughter of borrower had no claim under the DTA where she was not a party to the loan agreement.)

Nor does the statute itself support the theory that Robertson is a “grantor.” The DTA defines grantor as: “a person, or its successors, who executes a deed of trust to encumber the person's interest in property as security for the performance of all or part of the borrower's obligations.” RCW 61.24.005(7). From the plain language of that provision, it cannot be inferred that a “grantor” is any person with an interest in the property. Robertson never executed the Nicholls' Deed of Trust nor is he a successor to Ms. Nicholls. (Dkt. 118 at 12.) Robertson also attempts to use the “successor” definition in the Nicholls' Deed of Trust to piggyback his way into rights under the DTA. He ignores, however, the entirety of the provision, which requires a person, who has an ownership interests in the property and who seeks to enjoin a foreclosure sale to assume the borrowers' obligations under the security instrument in writing and for that proposal to be approved by the lender. (Dkt. Nos. 51–1 at 65.) Here, Robertson has not assumed those obligations; Defendants have no duty to him. Consequently, there is no controversy for this Court to resolve.

The only limited standing Robertson may have is to cure the default on the Nicholls' Deed of Trust if a sale were pending:

the borrower, grantor, any guarantor, any beneficiary under a subordinate deed of trust, or any person having a subordinate lien or encumbrance of record on the trust property or any part thereof, shall be entitled to cause a discontinuance of the sale proceedings by curing the default or defaults set forth in the notice, which in the case of a default by failure to pay, shall be by paying to the trustee

RCW 61.24.090. But no sale is pending and this is not the issue before the Court.

Instead, Robertson asks the Court to declare has rights under a statute that simply does not recognize any duty owed to him by Chase or GMAC Defendants. Plaintiff bought a piece of property encumbered by a Deed of Trust, his current ownership of the property does not serve as a basis for a declaratory judgment under the DTA.

In response to this motion, Plaintiff for the first time argues that the DTA is unconstitutional....