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Reff v. Bank of New York Mellon

United States District Court, D. Minnesota

July 24, 2014

ANGELA REFF, SIMON REFF, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON, f/k/a THE BANK OF NEW YORK, as TRUSTEES FOR THE CERTIFICATE HOLDERS OF CWABS, INC., ASSET-BACKED CERTIFICATES, SERIES 2007-BC1, et. al. Defendants.

REPORT AND RECOMMENDATION

JANIE S. MAYERON, Magistrate Judge.

This matter came before the undersigned on defendant Bank of New York Mellon's 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), Local Rule 72.1, and the Amended Administrative Order issued by Chief Judge Michael Davis on December 11, 2013 [Docket No. 3]. Pursuant to this Court's Order of December 19, 2013 [Docket No. 12], 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 defendant Bank of New York Mellon f/k/a The Bank of New York as Trustee for the Certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2007-BC1, et. al. ("BONYM"): (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 BONYM's[1] Motion to Dismiss be granted and plaintiffs' claims be dismissed with prejudice.

I. BACKGROUND

On or about September 18, 2013, plaintiffs sued BONYM in state court. Notice of Removal, Ex. A (Summons and Complaint) [Docket No. 1-1]. BONYM removed the suit to Federal District Court on December 11, 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 September 18, 2006, plaintiffs entered into a Note and Mortgage ("Mortgage") with First National Bank of Arizona ("FNB") for property located in Minneapolis, Minnesota ("Property"). Complaint, ¶¶1, 4. Mortgage Electronic Registration System ("MERS") was named as the nominee for FNB. Id., ¶4. Plaintiffs specifically denied that the named defendant or its predecessor-in-interest had the legal right to declare a default on the Note. Id., ¶5. The Complaint alleged that "plaintiffs did not borrow money from any named defendant." Id.

FNB and BONYM's predecessors-in-interest securitized the mortgage loan into a mortgage-backed security trust entitled "Asset-Backed Certificates, Series 2007 BC-1 Trust ("2007 BC-1 Trust"). Id., ¶6. The securitization process was governed by a Pooling and Service Agreement ("PSA"). Id . The PSA required that the parties to the securitization documents create and deliver documents creating a complete chain of title, including executed assignments of mortgage and properly endorsed promissory notes to and from the following entities: (1) from Countrywide Home Loans, Inc. to CWABS, Inc.; and (2) from CWABS, Inc. to Bank of New York as Trustee of the 2007-BC 1 Trust. Id., ¶7. The PSA required the Bank of New York to certify, as of the closing date of the trust, that it had received these documents. Id., ¶7. The closing date of the trust was February 28, 2007. Id., ¶11. The PSA provided that the rights of the parties to the PSA were governed by New York law, and that pursuant to Wells Fargo Bank, N.A. v. Erobobo , 972 N.Y.S.2d 147 (N.Y. Sup. Ct. 2013), if a trust 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. Id., ¶14.

On September 30, 2009, William Herrmann, as Vice President of BONYM, and Melissa J. Adelson, as Managing Director of BONYM, signed a Power of Attorney empowering BAC Home Loan Servicing LP f/k/a Countrywide Home Loans Servicing LP as BONYM's attorney-in-fact to foreclose on the Mortgage. Id., ¶20, Ex. 7 (Power of Attorney). The Power of Attorney was filed with the Hennepin County, Minnesota Registrar of Titles office on January 5, 2010. Id . The Power of Attorney did not provide a legal description of the real estate and did not identify the PSA to which it allegedly applied. Id.

On August 13, 2010, Jeanette Grodsky signed a Limited Power of Attorney as "[Senior Vice President] of BAC Home Loans Servicing LP." Id., ¶21, Ex. 8 (Limited Power of Attorney). This Limited Power of Attorney empowered the Wilford, Geske & Cook law firm to foreclose the Property on behalf of BONYM. Id . The Limited Power of Attorney was filed with the Hennepin County Registrar of Titles office on April 4, 2011. Id.

On September 21, 2011, Alice Rowe, as Assistant Secretary of MERS, signed an Assignment of Mortgage assigning the Mortgage from MERS to BONYM. Id., ¶22, Ex. 9. When she signed the Assignment, Rowe was employed by Bank of America. Id . The Assignment was filed in the Hennepin County Registrar of Titles office on September 29, 2011. Id., Ex. 9.

On August 20, 2012, Eric Cook, a partner at Wilford, Geske & Cook signed a Notice of Pendency & Power of Attorney to Foreclose as "Vice President of Wilford, Geske & Cook, P.A., attorney-in-fact for Bank of America, successor by merger to BAC Home Loans Servicing, L f/k/a Countrywide Home Loans Servicing, LP, attorney-in-fact for the Bank of New York Mellon, " authorizing Wilford, Geske & Cook to foreclose on the mortgage on behalf of BONYM. Id., ¶23. This Notice of Pendency & Power of Attorney was filed with the Hennepin County Registrar of Titles office on August 21, 2012. Id., Ex. 10.

A sheriff's sale of the Property was conducted on January 4, 2013. Id., ¶24. Wilford, Geske & Cook appeared at the sale on BONYM's behalf and bid the amount allegedly due on the note, $252, 714.89. Id .; Ex. 11 (Sheriff's Certificate of Sale and Foreclosure Record). Plaintiffs specifically denied that BONYM had the right to exercise the power of sale in the mortgage or that it held the note on the date of the sheriff's sale. Id.

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, "which required execution and delivery of all assignments of mortgage prior to February 28, 2007." Id., ¶32. Alternatively, if the terms of the PSA were followed, the foreclosure was void because the PSA required that BONYM certify receipt of assignments of mortgage, and those assignments were not recorded before the foreclosure. Id., ¶33.

Plaintiffs also alleged that the foreclosure was void for the following additional reasons: (1) the September 30, 2009, Power of Attorney was "patently void" due to lack of specificity and lack of recorded evidence of BONYM's rights in the Property as of that date; (2) because the September 30, 2009, Power of Attorney was void, BOA had no legal right to sign the Notice of Pendency & Power of Attorney dated August 20, 2012, and as a result, the Sheriff's Certificate of Sale and foreclosure sale were void. Id., ¶34.

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, defendant must prove its interest in the Property by a preponderance of evidence. Id., ¶¶36-45.

Count II sought a declaratory judgment pursuant to Minn. Stat. §555.02 that "[BONYM's ] interest in the Property and/or Mortgage is void, " the foreclosure is void, and that plaintiffs remained the fee owner of the Property. Id., ¶¶47, 48.

Count III alleged slander of title based on defendant's drafting and recording of documents[2] that plaintiff claimed were false and not executed by legally authorized persons, which evidenced a reckless disregard for the truth and created a cloud on plaintiffs' title to the Property. Id., ¶¶50-52.

As relief, plaintiffs sought a determination of the alleged adverse interests in the Property; a declaratory judgment that the Mortgage, Sheriff's Certificate of Sale, Assignment of Mortgage, and Notice of Pendency & Power of Attorney were void; and an order that plaintiffs ...


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