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Knoedler v. Wilford, Geske & Cook, P.A.

United States District Court, Eighth Circuit

January 2, 2014

Timothy Edward Knoedler and Candace Lynn Knoedler, Plaintiffs,
v.
Wilford, Geske & Cook, P.A., Ocwen Loan Servicing, LLC, U.S. Bank National Association, and Credit Based Asset Servicing and Securitization, LLC, Defendants.

MEMORANDUM AND ORDER

PAUL A. MAGNUSON, District Judge.

This matter is before the Court on Defendants' Motion to Dismiss and Plaintiffs' Motion to Remand and Motion for Default. For the reasons that follow, the Motion to Remand and the Motion for Default are denied and the Motion to Dismiss is granted.

BACKGROUND

In October 2012, Defendant law firm Wilford, Geske & Cook, P.A., instituted foreclosure-by-advertisement proceedings against the home of Plaintiffs Timothy and Candace Knoedler in Saginaw, Minnesota. The sheriff's sale of the property was originally scheduled for December 2012, but the Knoedlers opted to postpone the scheduled sale for 11 months under Minn. Stat. ยง 580.07.[1] The Knoedlers filed this lawsuit in September 2013, just as the 11-month postponement period was about to end. The sheriff's sale had been rescheduled for December 2013, but in November the parties agreed to postpone the sale pending the outcome of these Motions.

Although the allegations in the Knoedlers' pro se Complaint are difficult to parse, it appears that they are claiming that Defendants failed to record an assignment of the mortgage, rendering the foreclosure-by-advertisement process invalid under Ruiz v. 1st Fidelity Loan Serv., LLC , 829 N.W.2d 53 (Minn. 2013). The Ruiz case stands for the proposition that lenders must strictly comply with the foreclosure-by-advertisement statute in order to take advantage of that statute's streamlined mortgage foreclosure proceedings.

The Knoedlers bought their home in 1989, taking out a $65, 134.00 mortgage in favor of Margaretten & Co., Inc. The mortgage was assigned many times, and each assignment was duly recorded save one: a 1999 assignment from Wells Fargo (then known as Norwest Bank) to Credit Based Asset Servicing and Securitization LLC ("CBASS"). This assignment was not recorded until September 20, 2012. However, between 1999 and 2012, the mortgage had been assigned several more times: from CBASS to Bank of New York, then from Bank of New York back to CBASS, and finally from CBASS to U.S. Bank in 2007. The Knoedlers appear to be claiming that the failure to record the 1999 assignment to CBASS until 2012 means that all subsequent assignments were invalid and that the lenders did not strictly comply with the foreclosure-by-advertisement statute.

In addition, the Knoedlers contend that the Notice of Foreclosure for their home erroneously lists U.S. Bank as a trustee of CBASS, further rendering that Notice faulty under the statute. The Knoedlers point to a decision from the Bankruptcy Court for the Southern District of New York that they say conclusively determined that U.S. Bank was not a creditor of CBASS. According to the Knoedlers, this decision means that U.S. Bank could not have been the trustee of CBASS, even though the Notice of Foreclosure lists U.S. Bank as such. Thus, they argue that the Notice of Foreclosure contained inaccurate information and did not strictly comply with statutory requirements. They do not explain why a decision that an entity is not a creditor of a bankrupt company necessarily means that that entity is also not a trustee of the company.

In response to the Motion to Dismiss, the Knoedlers filed a Motion to Remand and a Motion for Default. The Motion to Remand contends that the law firm is a Minnesota citizen and is not fraudulently joined.

DISCUSSION

As an initial matter, Plaintiffs appear to challenge the application of the Federal Rules of Civil Procedure to this matter, claiming that because the Complaint was originally filed in state court, Minnesota's Rules should apply. But as the Eighth Circuit recently noted, federal pleading standards apply to actions removed to federal court. Karnatcheva v. JPMorgan Chase Bank, N.A. , 704 F.3d 545, 547 (8th Cir. 2013). Plaintiffs' contention to the contrary is without merit.

A. Default

Plaintiffs have sought default in two ways. The first is an application for Clerk's Office entry of default at Docket No. 25. The second is a "Motion for Judicial Notice of the Motion for Clerk's Entry of Default" at Docket No. 26. Plaintiffs claim that they served Defendants with the Complaint as required under Minnesota law and that Defendants failed to file an answer in the time permitted under the Minnesota Rules.

Putting aside the fact that Defendants challenge the effectiveness of the service here, Defendants filed a Motion to Dismiss the Complaint, which constitutes a responsive pleading under Rule 55. The Motion is timely under the ...


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