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Mondragon v. Federal National Mortgage Association

United States District Court, Eighth Circuit

December 30, 2013

PEDRO MONDRAGON, Plaintiff,
v.
Federal National Mortgage Association, et. al. Defendants.

REPORT AND RECOMMENDATION

JANIE S. MAYERON, Magistrate Judge.

The above matter came before the undersigned on Defendants' Motion to Dismiss [Docket No. 4]. This matter was decided on the parties' written submissions. 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) and the Amended Administrative Order issued by Chief Judge Michael J. Davis on October 16, 2013 [Docket No. 14].

Plaintiff seeks to invalidate the foreclosure of the mortgage on his home. Plaintiff asserts three claims against defendants: (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'[1] Motion to Dismiss be granted and plaintiff's claims be dismissed with prejudice.

I. BACKGROUND

Plaintiff sued defendants Federal National Mortgage Association ("Fannie Mae"), Mortgage Electronic Registration System, Inc. ("MERS"), and MERSCORP, Inc. (collectively "defendants") in Minnesota state district court on April 22, 2013. Notice of Removal, p. 1 [Docket No. 1]. Defendants removed the matter to Federal District Court on May 21, 2013. Id., p. 2. Defendants moved to dismiss plaintiff's Complaint in lieu of answering.

The facts bearing on defendants' motion to dismiss are as follows. Plaintiff acquired his interest in property in Minneapolis, Minnesota ("Property') on June 26, 2007, by Warranty Deed. Complaint, ¶¶ 1, 2 [Docket No. 1-1]. Also on June 26, 2007, plaintiff executed and delivered a promissory note to Countrywide, Inc., and a mortgage in favor of MERS as nominee for Countrywide. Id., ¶ 6, Ex. 1 (Mortgage).

On October 12, 2011, Fannie Mae executed a Limited Power of Attorney authorizing Seterus, Inc. ("Seterus") to perform a variety of duties associated with the foreclosure of mortgages including the issuance of assignments of mortgages. Unsworn Declaration of Jeffrey D. Klobucar in Support of Motion to Dismiss ("Klobucar Decl.") [Docket No. 7], Ex. 1, ¶ 6. This Limited Power of Attorney was recorded in the Hennepin County Recorder's office on December 16, 2011. Id.

On April 6, 2012, Seterus drafted an Assignment of Mortgage from MERS to Fannie Mae. Complaint, ¶ 9. Tiffany Bitsoi, Assistant Secretary for MERS, signed the Assignment of Mortgage to Fannie Mae. Id . The Assignment was recorded in the Hennepin County Recorder's office on June 26, 2012. Id., Ex. 2 (Assignment of Mortgage). Plaintiff alleged "on information and belief" that Bitsoi lacked authority to sign the Assignment for MERS because at the time, she resided in Idaho and was employed by CTX Mortgage, also located in Idaho, and she was not an Assistant Secretary for MERS. Id., ¶ 10, Ex. 3 (Affidavit of Private Investigator). Plaintiff also alleged that because there was no recording of the power of Bitsoi, as an employee of CTX, to execute foreclosure documents for MERS, this amounted to a violation of Minn. Stat. § 580.05. Id., ¶ 10.

On July 2, 2012, attorney Steven R. Pennock, with the law firm of Reiter & Schiller, on behalf of Fannie Mae, signed a Notice of Pendency empowering Reiter & Schiller to foreclose on the Property and bid for the Property at a foreclosure sale. Id., ¶¶ 12, 13. The Notice of Pendency was recorded in the Hennepin County Recorder's office on July 3, 2012. Id .; Ex. 5 (Notice of Pendency). Plaintiff pled "on information and belief" that Pennock lacked legal authority to execute the Notice of Pendency because when he signed it, there was no recorded power of attorney from Fannie Mae to Reiter & Schiller empowering the firm to act on its behalf. Id., ¶ 14.

On July 10, 2012, Fannie Mae, through Reiter & Schiller, noticed a sheriff's sale for August 29, 2012. Id., ¶ 17. The first date of publication of the notice of sale was July 12, 2012. Id., Ex. 8 (Sheriff's Certificate of Sale and Foreclosure Record).

On July 24, 2012, Rebecca Graves, Loan Administration Vice President of Seterus and attorney-in-fact for Fannie Mae, signed a Power of Attorney empowering Reiter & Schiller to foreclose on the Property. Id., ¶¶ 14, 15, Ex. 6 (Power of Attorney). The Power of Attorney was recorded in the Hennepin County Recorder's office on August 7, 2012. Id., Ex. 6. Plaintiff pled "on information and belief" that Graves lacked the legal authority to execute the Power of Attorney because there was no recorded power of attorney from Fannie Mae to Seterus authorizing Seretus to act on its behalf. Id., ¶ 16.

Plaintiff executed an Affidavit of Postponement pursuant to Minn. Stat. § 580.07 and recorded the Affidavit on August 14, 2012. Id., ¶ 18. A foreclosure sale was held on January 29, 2013, and Reiter & Schiller, on Fannie Mae's behalf, bid in the debt allegedly owed to Fannie Mae. Id., ¶ 19. The Sheriff's Certificate of Sale was recorded in the Hennepin County Recorder's Office on February 4, 2013. Id., ¶ 19; Ex. 8 (Sheriff's Certificate of Sale and Foreclosure Record). According to plaintiff, Fannie Mae "and/or" Reiter & Schiller knew that the Assignment of Mortgage, Notice of Pendency and the Power of Attorney were void, and as a result, the foreclosure was void, and plaintiff remained the owner in fee title of the Property. Id., ¶¶ 20-22.

Plaintiff pled the following causes of action:

Count I sought a determination of adverse claims under Minn. Stat. § 599.01, et seq. This Count alleged that defendants' claim to an interest in the Property was void because: (1) Fannie Mae did not have the mortgagee's power of sale on the date of the sheriff's sale; and (2) the foreclosure was void because (a) individuals executing the foreclosure documents did not have the legal authority to execute the documents when signed, and (b) defendants did not record the necessary powers of attorney authorizing the foreclosure. Id., ¶ 29. Count I further alleged that in a quiet title action, ...


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