United States District Court, D. Minnesota
JAMES B. WOLFF and CHERYL A. WOLFF, Plaintiffs,
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.
REPORT AND RECOMMENDATION
JANIE S. MAYERON, 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) 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.
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 , 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 County Office of the Recorder. Id., ¶ 22, Ex. 4 (October 23, 2009 Assignment of Mortgage). Plaintiffs alleged that Geske is an attorney employed by Wilford & Geske. Id., ¶ 22.
On April 29, 2010, Lawrence Wilford, on behalf of Wilford & Geske, as the attorney-in-fact for BAC Home Loans Servicing, LP, executed an Assignment of Mortgage from BAC Home Loans Servicing, LP to BNYM as the trustee for CWMBS, Inc., CHL Mortgage Pass-Through Trust 2007-18, CHL Mortgage Pass-Through Certificates, Series 2007-18, which was recorded with the Wright County Office of the Recorder on May 25, 2010. Id., ¶ 23, Ex. 5 (April 29, 2010 Assignment of Mortgage).
On May 11, 2010, David Perez, Assistant Vice President of BAC GP LLC, General Partner of BAC Home Loan Servicing LP, as the attorney-in-fact for trustee BNYM, executed a Notice of Pendency & Power of Attorney to Foreclose Mortgage, which authorized the law firm of Wilford & Geske to foreclose on the Mortgage by advertisement and "to do all things necessary and incident thereto." Id., ¶ 24, Ex. 6 (May 11, 2010 Notice of Pendency & Power of Attorney to Foreclose Mortgage). The Notice of Pendency & Power of Attorney to Foreclose Mortgage was recorded with the Wright County Office of the Recorder on May 25, 2010. Id.
On July 30, 2012, Geske, President of Wilford & Geske, as the attorney-in-fact for Bank of America, N.A. ("BOA"), successor by merger to BAC Home Loans Servicing, LP, and as the attorney-in-fact of BNYM (trustee for CWMBS), executed a Notice of Pendency of Proceeding & Power of Attorney to Foreclose Mortgage, which authorized the law firm of Wilford & Geske to foreclose on the Mortgage by advertisement and "to do all things necessary and incident thereto." Id., ¶ 25, Ex. 7 (July 30, 2012 Notice of Pendency & Power of Attorney to Foreclose Mortgage). This Notice of Pendency & Power of Attorney was recorded with the Wright County Office of the Recorder on July 31, 2012. Id.
On January 22, 2013, Wilford & Geske, on behalf of BNYM, appeared at the sheriff's sale and exercised the power of sale clause in the Mortgage by bidding the debt owed. Id., ¶ 26. The Certificate of Sale and Foreclosure Record was recorded in the Wright County Office of the Recorder. Id., Ex. 8 (Sheriff's Certificate of Sale and Foreclosure Record). Plaintiffs denied that BNYM had any right to make a credit bid or exercise the power of sale at the ...