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Robinson v. Federal National Mortgage Association

United States District Court, Eighth Circuit

December 27, 2013

JEFFREY ROBINSON and DEBRA ROBINSON, Plaintiffs,
v.
FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendant.

REPORT AND RECOMMENDATION

JANIE S. MAYERON, Magistrate Judge.

This matter came before the undersigned on defendant Federal National Mortgage Association's Motion to Dismiss [Docket No. 15]. 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). Pursuant to this Court's Order dated September 9, 2013 [Docket No. 22], 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 defendant: (1) quiet-title, to determine adverse claims under Minn. Stat. § 559.01; (2) declaratory judgment; and (3) slander of title. For the reasons stated below, the Court recommends that defendant's Motion to Dismiss be granted and plaintiffs' claims be dismissed with prejudice.

I. BACKGROUND

A. Plaintiffs' Complaint

The facts bearing on this motion to dismiss are as follows: On August 26, 2002, plaintiffs executed and delivered a note to Washington Mutual Bank, FA ("WAMU") on property located in Ramsey, Plymouth, Minnesota ("Property"). See Complaint [Docket No. 1], ¶¶ 1, 4. On the same day, plaintiffs executed a Mortgage in favor WAMU. Id., ¶ 4, Ex. 1 (Mortgage). The Mortgage lists the Mortgage Electronic Registration Systems, Inc. ("MERS") as the mortgagee and WAMU as the lender. Id., Ex.1. The Mortgage was recorded with the Hennepin County Recorder on September 30, 2002. Id.

On May 12, 2008, Usset Weingarden & Liebo ("Usset") drafted an Assignment of Mortgage from MERS to WAMU. Id., ¶ 27, Ex. 10 (Assignment of Mortgage). Rick Wilken, as the Vice President at MERS, executed the Assignment of Mortgage and it was recorded with the Hennepin County Recorder on May 21, 2008. Id . Plaintiffs claimed that Wilken was not a Vice President of MERS at the time he executed the Assignment of Mortgage because he worked for Lender Processing Services ("LPS") and there is no record of Wilken's authority to sign documents on behalf of MERS. Id., ¶¶ 28, 39 Ex. 11 (internet printout on Wilken as of February 9, 2013 from www.zoominfo.com). In addition, plaintiffs attached to their Complaint a forensic examination of assignment of mortgages of Chase, Wells Fargo and Bank of America prepared by McDonnell Property Analytics, Inc. in 2010 for the Register of Deeds for the Essex Southern District Registry of Deeds. Id., ¶ 45, Exs. 20 (McDonnell Property Analytics Forensic Examination), 21 (Affidavit of John L. Obrien, Register of Deeds Southern Essex District). According to plaintiffs, Wilken was listed in the report, along with numerous others, as an "alleged robo or surrogate signer, " whose task it was to sign documents affecting title without reading the documents or verifying the facts in the documents, and who "regularly" failed to establish that they had the authority to execute the documents on whose behalf they purport to act. Id., ¶¶ 45, 46, Exs. 20, 21.

On September 25, 2008, the United States seized WAMU, placed it into receivership with the Federal Deposit Insurance Corporation ("FDIC"), and JPMorgan Chase ("Chase") acquired the bulk of WAMU's assets from the FDIC. Id., ¶ 18, Exs. 6 (Failed Bank Information Summary), 7 (September 26, 2008 Wall Street Journal article), 8 (Affidavit of FDIC-R in Support of Summary Judgment submitted in Hayes v. J.P. Morgan Chase Bank, et al., 09-cv-3015 (JNE/JJG) (D. Minn. Apr. 15, 2010)), 9 (Purchase and Assumption Agreement ("PAA") among FDIC as Receiver of WAMU and Chase). Plaintiffs alleged that the PAA is silent as to whether Chase acquired WAMU's interest in the Property. Id., ¶¶ 19, 21. Plaintiffs further alleged that if Chase purchased plaintiffs' loan, assignments from WAMU to the FDIC and from the FDIC to Chase, along with the powers of attorney to execute these documents, were required. Id., ¶ 22. No such documents were recorded as to the subject Property. Id.

On August 17, 2010, Usset noticed a mortgage foreclosure sale. Id., ¶ 29. On October 20, 2010, plaintiffs signed a Corrective Mortgage that listed MERS as the mortgagee and WAMU as the lender, despite the fact that MERS assigned its interest in the Mortgage years earlier and that WAMU ceased to exist in 2008. Id., ¶ 43, Ex. 19 (October 20, 2010 Corrective Mortgage). The correction to the original mortgage related to the legal description of the Property. Id., Ex. 19.[1] On October 26, 2010, the Corrective Mortgage was filed with the Hennepin County Recorder. Id.

On November 5, 2010, Usset, acting as the attorney-in-fact for Chase, signed a Notice of Pendency of Proceeding and Power of Attorney to Foreclose Mortgage, which was recorded with the Hennepin County Recorder on November 10, 2010.[2] Id., ¶ 29, Ex. 12 (November 5, 2010 Notice of Pendency of Proceeding and Power of Attorney). This document stated that the mortgagee was MERS and the Assignment of Mortgage had been assigned to Chase, as the successor-in-interest to WAMU. Id., Ex. 12. Plaintiffs claimed that there is no recorded power of attorney authorizing Usset to act on behalf of Chase as it relates to the Property. Id., ¶ 30.

On June 14, 2011, Usset appeared on Chase's behalf at the sheriff's sale, and exercised the power of sale clause by bidding the debt owed to Chase. Id., ¶ 31. On June 15, 2011, the Sheriff's Certificate of Sale and the foreclosure record were recorded with the Hennepin County Recorder. Id., Ex. 13 (Sheriff's Certificate of Sale and Foreclosure Record).

On June 10, 2013, Chase quit claimed its interest in the Property to Fannie Mae. Id., ¶ 33, Ex. 14 (June 10, 2013 Quit Claim Deed). Plaintiffs alleged that this quit claim deed was void since Chase had no interest to quit claim. Id., ¶ 44.

Plaintiffs alleged that Fannie Mae acquired its interest in the Mortgage close in time to its origination, as evidenced by a MERS look-up sheet that lists Fannie Mae as an investor, Fannie Mae's Custodial Agreement and Fannie Mae's Seller/Servicer Guides, and therefore, Chase conducted an invalid foreclosure on behalf of Fannie Mae. Id., ¶¶ 8, 9, 16, 17, Exs. 2 (screen shot dated June 25, 2013, listing the name "Robinson, " Chase as the "Servicer, " and Fannie Mae as the "Investor"), [3] Ex. 4. (form Custodial Agreement), Ex. 5 (October 30, 2009 Seller/Servicer Guide).

According to plaintiffs, Fannie Mae is a government-sponsored enterprise that purchases mortgages on the secondary market, pools the mortgages, and sells them as mortgage-backed securities to investors. Id., ¶ 11. Fannie Mae's Custodial Agreement requires that the lender deliver to the custodian a completed and executed assignment to Fannie Mae of the mortgage in a recordable but not recorded format, and an executed power of attorney to Fannie Mae to assign the mortgage. Id., ¶ 12, Ex. 4 (form Custodial Agreement).

Plaintiffs asserted that Fannie Mae's Seller/Servicer Guides require that when a servicer assigns a MERS-registered loan to Fannie Mae, the servicer must execute an assignment of the mortgage to Fannie Mae. Id., ¶¶ 14, 15, Ex. 5 (October 30, 2009 Seller/Servicer Guide).

Plaintiffs claimed that on or about April 13, 2011, Chase entered into a Consent Order with the Officer of Comptroller of the Currency ("OCC") in which Chase admitted that it had engaged in a variety of "unsafe and unsound" banking practices in conducting foreclosures. Id., ¶¶ 36, 37, Ex. 15 (Chase Consent Order).

Plaintiffs also alleged that the OCC obtained a Consent Order against LPS on April 13, 2011, for deficient practices in mortgage loan servicing and foreclosure processing. Id., ¶ 39, Ex. 17 (LPS Consent Order). Pursuant to this Order, LPS agreed that its employees had executed assignments of mortgage and other mortgage-related documents without the authority to execute the mortgage documents on behalf of servicers. Id., ¶ 39, Ex. 17 (LPS Consent Order).

Plaintiffs alleged that MERS, WAMU and Chase at all times knew, or had reason to know, that the May 12, 2008 Assignment of Mortgage, the November 5, 2010 Notice of Pendency of Proceeding and Power of Attorney, and the June 10, 2013 Quit Claim Deed were all void. Id., ¶ 47.

Based on the unrecorded assignment of the Mortgage from MERS to Fannie Mae in violation of Minn. Stat. § 580.02, the invalid May 12, 2008 Assignment of Mortgage from MERS to Chase, the missing power of attorney from Chase to Usset in violation of Minn. Stat. § 580.05, and the void quit claim deed, plaintiffs maintained they are the owners of the Property, the Sheriff's Certificate is void, and the foreclosure sale is void. Id., ¶¶ 31, 32, 34, 35, 41, 48.

Plaintiffs asserted the following causes of action:

In Count I, Determination of Adverse Claims, Minn. Stat. § 559.01, plaintiffs plead a quiet title action seeking a determination regarding Fannie Mae's adverse interests in the Property. Id., ¶¶ 50-56. According to plaintiffs, in a quiet title action, the burden of proof is on Fannie Mae, the mortgagee asserting an adverse interest in the property, to prove its title to the Mortgage by preponderance of the evidence. Id., ¶¶ 53, 54. Fannie Mae's claim to an interest in the Property is void because there is an unrecorded assignment of the mortgage from MERS to Fannie Mae; there are no of recorded assignments of mortgages and powers of attorney from WAMU to the FDIC and from the FDIC to Chase, in violation of Minn. Stat. §§ 580.02 and 580.05; the May 12, 2008 Assignment of Mortgage is invalid and corrupted the chain of title; the November 5, 2010 Notice of Pendency of Proceeding and Power of Attorney is void; there is no of record power of attorney from Chase to Usset, in violation of Minn. Stat. § 580.05; Chase did not possess the mortgagee's power of sale; and the June 10, 2013 quit claim deed is void because the chain of title had already been corrupted and because Chase had no interest to assign. Id., ¶ 55.

In Count II, plaintiffs seek a declaratory judgment under Minn. Stat. § 555.02 that the Sheriff's Certificate of Sale, and the June 10, 2013 quit claim deed are all void; and that plaintiffs remain the owner of the Property in fee title. Id., ¶¶ 57-59.

In Count III, alleging slander of title, plaintiffs asserted that where Chase drafted and recorded documents that were false, as Chase was not the real party in interest, and Chase had no authority to act on Fannie Mae's behalf, Fannie Mae knew or should have known that the documents were false, and ...


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