Wolff v. Bank of N.Y. Mellon

997 F.Supp.2d 964

James B. WOLFF and Cheryl A. Wolff, Plaintiffs,

v.The BANK OF NEW YORK MELLON f/k/a The Bank of New York, as Trustee for CWMBS, Inc., CHL Mortgage Pass–Through Trust 2007–18, Mortgage Pass–Through Certificates, Series 2007–18; Mortgage Electronic Registration System, Inc.; MERSCORP, Inc.; and also all other persons, unknown claiming any right, title, estate, interest, or lien in the real estate described in the complaint herein, Defendants.

Case No. 13–CV–2175 (PJS/JSM).

United States District Court, D. Minnesota.

Signed Feb. 19, 2014.

Susanne M. Glasser, Butler Liberty Law, LLC, for plaintiffs.

Mark G. Schroeder, Briggs & Morgan, P.A., for defendants.

ORDER

PATRICK J. SCHILTZ, District Judge.

Plaintiffs James and Cheryl Wolff bring this action seeking to void the foreclosure of their mortgage and the subsequent sheriff's sale of their home. This matter is before the Court on the January 24, 2014 Report and Recommendation (“R & R”) of Magistrate Judge Janie S. Mayeron. Judge Mayeron recommends granting defendants' motion to dismiss plaintiffs' complaint.

Plaintiffs did not file an objection to the R & R. Instead, they filed a “Request for Judicial Notice Pursuant to Fed.R.Evid. 201.” Plaintiffs request that the Court take judicial notice of various documents, including the warranty deed by which they acquired their property; various excerpts from the Pooling and Servicing Agreement (“PSA”) governing the securitization process under which the note secured by their mortgage was transferred to a securitized trust; and the April 29, 2010 assignment of their mortgage to the trustee. Plaintiffs offer these documents to demonstrate that their mortgage was not transferred to the trust until after the closing date of the trust, which, plaintiffs allege, means that the transfer was void and the trustee (defendant Bank of New York Mellon) did not have the right to foreclose on the mortgage.

With the exception of the warranty deed—which simply demonstrates that plaintiffs acquired the property in 1999, a fact alleged in the complaint and not in dispute—all of these documents were attached to plaintiffs' complaint and carefully considered by Judge Mayeron. As Judge Mayeron explained, defendant Mortgage Electronic Registration System, Inc. (“MERS”) was the original mortgagee on plaintiffs' mortgage. As to mortgages originally held by MERS, the PSA requires only that a copy of the mortgage be delivered to the trustee by a particular date; it does not require that those mortgages be assigned to the trustee by a particular date. Setting that aside, the Eighth Circuit has held that parties in plaintiffs' position do not have standing to raise this type of argument:

The plaintiffs base this request for declaratory relief on allegations that their notes and mortgages were transferred to trusts underlying mortgage-backed securities and that their foreclosures violated the terms of the trust agreements relating to these mortgage-backed securities. But district courts in Minnesota have recently addressed this issue and have uniformly held that mortgagors do not have standing to request declaratory judgments regarding these types of trust agreements because the mortgagors are not parties to or beneficiaries of the agreements. We believe that the reasoning in these cases is sound, and we adopt it.

Karnatcheva v. JPMorgan Chase Bank, N.A., 704 F.3d 545, 547 (8th Cir.2013). Therefore, construing plaintiffs' request as an objection and reviewing it de novo, see28 U.S.C. § 636(b)(1), Fed.R.Civ.P. 72(b), the Court overrules it and adopts the R & R.

ORDER

Based on the foregoing, and on all of the files, records, and proceedings herein, the Court ADOPTS the R & R [ECF No. 20]. Accordingly, IT IS HEREBY ORDERED THAT:

1. Defendants' motion to dismiss [ECF No. 4] is GRANTED.

2. Plaintiffs' complaint [ECF No. 1–1] is DISMISSED WITH PREJUDICE AND ON THE MERITS.

LET JUDGMENT BE ENTERED ACCORDINGLY.

REPORT AND RECOMMENDATION

JANIE S. MAYERON, United States Magistrate Judge.

This matter came before the undersigned on defendants' Motion to Dismiss [Docket No. 4]. 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(c). This Report and Recommendation is being issued based on the parties' written submissions.

Plaintiffs seek to invalidate the foreclosure of the mortgage on their home. Plaintiffs assert three claims against defendants the Bank of New York Mellon (“BNYM”), Mortgage Electronic Registration System, Inc. (“MERS”), and MERSCORP Holdings, Inc.: ¹ (1) quiet-title, to determine adverse claims under Minn.Stat. § 559.01; (2) declaratory judgment; and (3) slander of title. For the reasons below, the Court recommends that defendants' Motion to Dismiss be granted and plaintiffs' claims be dismissed with prejudice.

I. BACKGROUND

On July 22, 2013, plaintiffs sued defendants in state court. Notice of Removal, Ex. A (Complaint) [Docket No. 1–1]. Defendants removed the suit to Federal District Court on August 12, 2013, pursuant to 28 U.S.C. § 1332(a). Notice of Removal [Docket No. 1].

The facts bearing on the motion to dismiss are as follows. Plaintiffs entered into a Note and Mortgage with Countrywide Bank FSB (“Countrywide”) on August 20, 2007, for property located in Buffalo, Minnesota (“Property”). Complaint, ¶ 6, Ex. 1 (Mortgage). MERS is the original Mortgagee under the Mortgage. Complaint, Ex. 1. The Mortgage was recorded on August 30, 2007, with the Wright County Office of the Recorder. Id.

Plaintiffs alleged that Countrywide and BNYM's predecessors in interest securitized their Mortgage into a mortgage-backed security trust entitled “CWMBS, Inc., CHL Mortgage Pass–Through Trust 2007–18, Mortgage Pass–Through Certificates, Series 2007–18.” Id., ¶ 8. The closing date of the purported trust was listed as September 28, 2007. See Complaint, ¶ 14; Declaration of William Butler [Docket No. 13] (“Butler Decl.”), Ex. 3 (Definitions Section of the Pooling and Servicing Agreement). According to plaintiffs, the securitization process was governed by a Pooling and Servicing Agreement (“PSA”). See Complaint, ¶ 8, Ex. 2 (excerpts from the PSA).

Pursuant to Section 2.01 of PSA, within 30 days following the closing date of the trust, the depositor was required to deliver to the trustee, for the benefit of the certificateholders, the original mortgage note along with “intervening endorsements showing a complete chain of endorsement from the originator to the Person endorsing the Mortgage Note....” Id., ¶ 10, Ex. 2. In addition, as to mortgages where MERS is the original mortgagee, Section 2.01 required that either the original mortgage or a copy of the mortgage, with recording information, be delivered to the trustee. Id., Section 2.01(c)(ii); Butler Decl., Ex. 1 (same). “In the case of each Mortgage Loan that is not a MERS Mortgage Loan, a duly executed assignment of the Mortgage, or a copy of such assignment, with recording information ... together with, except as provided below, all interim recorded assignments of such a mortgage or a copy of such assignment” was to be delivered to the trustee. Id., Section 2.01(c)(iii) (emphasis added); Butler Decl., Ex. 1 (same). Plaintiffs maintained that the PSA required that assignments of the mortgage be prepared and delivered to and from: (1) Countrywide, as the originator of the loan, to Countrywide Home Loan Inc. (“CHLI”), as the seller; (2) from CHLI to CWMABS, Inc., as depositor; and (3) from CWMABS, Inc. to BNYM, as trustee. Complaint, ¶ 11.

Section 2.04 of the PSA provides in relevant part:

The Depositior hereby represents and warrants to the Trustee with respect to each Mortgage Loan ..., that as of the Closing Date, and following the transfer of the Mortgage Loans to it by each Seller, the Depositor had good title to the Mortgage Loans and the Mortgage Notes were subject to no offsets, defenses or counterclaims.

The Depositor hereby assigns, transfers and conveys to the Trustee all of its rights with respect to the Mortgage Loans ...

Id., Ex. 2; Butler Decl., Ex. 4 (PSA Section 2.04). Plaintiffs claimed that the language of Section 2.04 of the PSA means that BNYM, as Trustee, received the delivery of the Mortgage, the Note and all necessary assignments of the Mortgage. Complaint, ¶ 15. In addition, pursuant to Section 2.01, and Exhibit F–1 of the PSA, plaintiffs claimed that BNYM was required to certify as of the closing date of the trust, that it received all duly endorsed notes and assignments of the Mortgage. Id., ¶ 16. Section 2.01 of the PSA provides that “[e]ach Seller, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns ... and otherwise conveys to the Depositor, ... all of its respective right, title and interest in and to the related Initial Mortgage....” Id., Ex. 2 (PSA Section 2.01(a)). The PSA then requires the depositor to transfer, assign or otherwise convey to the trustee for the benefit of the certificateholder all right and interest of the depositor. Id. (Section 2.01(b)). A form “Initial Certification of Trustee Form (Initial Mortgage Loans)” allows the Trustee to represent, as to each mortgage listed in the Mortgage Loan Schedule, that it has received the original note and an executed assignment of the mortgage. Id. (PSA, Exhibit F–1).

Plaintiffs claimed that the PSA is governed by New York law, and that pursuant to the decision in Wells Fargo Bank, N.A. v. Erobobo, 39 Misc.3d 1220(A), 972 N.Y.S.2d 147 (N.Y.Sup.Ct.2013), if a trust's asset is not actually transferred into a trust in accordance with the terms and timing indicated by the trust, then the trust's claim to that asset is void. Complaint, ¶¶ 13, 17.

On October 23, 2009, James Geske, as Vice President of MERS, executed an Assignment of Mortgage from MERS to BAC Home Loans Servicing, LP, which was recorded on October 30, 2009 with Wright...