United States District Court, D. Minnesota
REPORT AND RECOMMENDATION
JANIE S. MAYERON, Magistrate Judge.
This matter came before the undersigned on defendants' Motion to Dismiss [Docket No. 7]. 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), Local Rule 72.1, and the Amended Administrative Order issued by Chief Judge Michael Davis on October 23, 2013 [Docket No. 4]. Pursuant to this Court's Order of November 1, 2013 [Docket No. 13], this matter was decided on the parties' written submissions.
Plaintiffs seek to invalidate the foreclosure of the mortgage on their home. Plaintiffs asserts three claims against defendants Bank of New York Mellon f/k/a The Bank of New York as Trustee for the Certificateholders CWMBS, Inc., CHL Mortgage Pass Through Trust 2006-HYB-2 Mortgage Pass Through Certificates, Series 2006-HYB2 ("BONYM") and Bank of America, NA ("BOA"): (1) quiet title to determine adverse claims under Minn. Stat. §599.01; (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 or about September 26, 2013, plaintiffs sued BONYM and BOA ("defendants") in state court. Notice of Removal, Ex. A (Summons and Complaint) [Docket No. 1-1]. Defendants removed the suit to Federal District Court on October 23, 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. On November 23, 2005, Millissa Tatro entered into a Note and Mortgage ("Mortgage") with American Brokers Conduit ("ABC") for property located in Ham Lake, Minnesota ("Property"). Complaint, ¶¶ 1, 5 [Docket No. 1-1]. Mortgage Electronic Registration System, Inc. ("MERS") was named as the nominee for ABC. Id . Tatro "did not borrow any money from the named Defendant." Id., ¶6. Plaintiffs alleged that they acquired their interest in the Property from Tatro through a quit claim deed executed and delivered on December 17, 2011, and a second quit claim deed executed and delivered on September 10, 2013. Id., ¶2.
ABC and BONYM's predecessors in interest securitized the mortgage loan into a mortgage-backed security trust entitled "CHL Mortgage Pass Through Trust 2006-HYB-2 Mortgage Pass Through Certificates, Series 2006-HYB2." ("Series HYB2 Trust"). Id., ¶7. The securitization process was governed by a Pooling and Service Agreement ("PSA") and a Mortgage Loan Purchase Agreement. Id . The PSA required that the parties to the securitization documents create and deliver documents creating a complete chain of title, including assignments of mortgage and properly endorsed promissory notes to and from the following entities: (1) from Countrywide Home Loans, Inc. to CWMBS, Inc.; and (2) from CWMBS, Inc. to Bank of New York, the Trustee of the Series 2006-HYB2 Trust. Id., ¶8. The PSA required that the Trustee acknowledge receipt of these documents. Id., ¶10. The closing date of the 2006-HYB2 Trust was February 8, 2006. Id., ¶12.
On July 16, 2010, Steven H. Bruns executed an Assignment of Mortgage from MERS (as nominee for ABC) to BONYM, as Vice President of MERS. Id., ¶24, Ex. 8 (Assignment of Mortgage). The Assignment was recorded in the Anoka County Recorder's office on August 30, 2010. Id . When Bruns signed the Assignment of Mortgage, he was an attorney employed by the Peterson, Fram & Bergman, P.A. law firm. Id.
On August 12, 2010, Lance Bell, as Vice President for BONYM, signed a Notice of Pendency & Power of Attorney to Foreclose regarding the Property. Id., ¶25, Ex. 9 (Notice of Pendency & Power of Attorney to Foreclose). The Notice of Pendency & Power of Attorney was recorded in the Anoka County Recorder's office on August 30, 2010. Id . The Notice of Pendency & Power of Attorney authorized the Peterson, Fram & Bergman law firm to foreclose on the Mortgage by advertisement on behalf of BONYM. Id.
A sheriff's sale of the Property was conducted on July 18, 2011. Id., ¶26, Ex. 10 (Sheriff's Certificate of Sale and Foreclosure Record). Peterson, Fram & Bergman appeared at the sale on behalf of BONYM and bid the amount allegedly due on the note, $609, 718.23. Id . Plaintiffs specifically denied that BONYM had the right to exercise the power of sale in the Mortgage or was entitled to enforce the note on the day of the sale. Id.
On or about August 28, 2013, BOA offered plaintiffs a "Move Out Agreement" in which BOA claimed that it acquired the Property through "foreclosure sale and subsequent Trustee's Deed...." and was owner of the Property. Id., ¶27, Ex. 11 (Move Out Agreement).
Plaintiffs alleged the foreclosure was void because the Assignment of Mortgage from MERS to BONYM violated the terms of the securitization documents and New York law. Id., ¶33. Alternatively, if the terms of the securitization documents were followed, the foreclosure is void because the PSA required BONYM to certify receipt of assignments of mortgage, and those assignments were not recorded before the foreclosure. Id., ¶34.
Plaintiffs further alleged that Bell has been identified as an unauthorized "robosigner" by McDonnell Property Analytics, which was hired by the Southern Essex District Registry of Deeds, Salem, Massachusetts, to audit its files. Id., ¶35; Ex. 14 ("Forensic Examination of Assignments of Mortgage Recorded During 2010 in the Essex Southern District Registry of Deeds" showing the name "Lance Bell" on a list of robo-signers). Plaintiffs alleged the foreclosure was void because the Notice of Pendency & Power of Attorney was executed by a "known" unauthorized signer (i.e. Bell). Id., ¶36.
Plaintiffs 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 in a quiet title action, defendant has the burden of proof, and consequently, defendants must prove their interest in the Property by a preponderance of evidence. Id., ¶¶38-47.
Count II sought a declaratory judgment pursuant to Minn. Stat. §551.01 et. seq. that "[BONYM's] interest in the Property and/or Mortgage is void and that the foreclosure is void" and that "[p]laintiffs remain the fee owners of the [P]roperty." Id., ¶¶49-50.
Count III alleged slander of title based on defendant's drafting and recording of documents that plaintiffs claimed were false and not executed by legally authorized persons, which evidenced a reckless disregard for the truth and that ...