United States District Court, D. Minnesota
MEMORANDUM AND ORDER
PAUL A. MAGNUSON, District Judge.
This matter is before the Court on the Motion to Dismiss filed by Kodi Acquisitions LLC, Utah Loan Servicing LLC, and Mortgage Electronic Registration Systems, Inc. (collectively "Defendants"). For the reasons that follow, the Court grants the Motion.
In 1997, John and Mary Fairbairn bought the property at 19560 Patrick Place, Corcoran, Minnesota 55340. (Compl. (Docket No. 1) ¶¶ 3, 11-12.) The Fairbairns subsequently mortgaged the property twice. In 2003, they granted Wells Fargo Home Mortgage, Inc. a first mortgage to secure a $164, 000 loan. (Id. ¶¶ 13-14.) And in 2005, they granted J.P. Morgan Chase Bank, N.A. a second mortgage to secure a $120, 000 loan. (Id. ¶ 15.) Three years later, the Fairbairns filed for Chapter 7 bankruptcy. (Id. ¶ 16.) They eventually obtained a discharge of the loan secured by the second mortgage, but the mortgage obligation stayed subordinate to the first mortgage. (Id. ¶¶ 17-19.)
The ensuing mortgage assignments and foreclosure are the focus of this case. On April 27, 2010, Chase assigned its interest in the second mortgage to Mortgage First, LLC. (Id. ¶ 20.) A month later, on May 25, Mortgage First requested that Chase's interest be recorded as assigned to MERS. (Id. ¶¶ 21, 23.) A month after that, on June 29, the Fairbairns received notice that the second mortgage had been transferred to Mortgage First and would be serviced by ULS. (Id. ¶¶ 24, 26.) The Fairbairns were also told that they defaulted on the mortgage, owed the outstanding balance of the discharged debt, and would be foreclosed on unless they brought the account current. (Id. ¶¶ 29-30.)
Over a year later, the Fairbairns remained in default. (Id. ¶ 33.) On August 18, 2011, MERS assigned its interest in the second mortgage to ULS, who then initiated foreclosure proceedings. (Id. ¶¶ 32, 35.) ULS executed two notices of pendency for a sheriff's sale of the property, after the Fairbairns recorded two affidavits of postponement, and finally scheduled the sale for August 9, 2012. (Id. ¶¶ 33-35, 37-38.)
A week before the sale, however, the Fairbairns sued Mortgage First and ULS in Minnesota state court. Fairbairn v. Mortg. First, LLC, No. 27-cv-12-16117 (Hennepin Cty. Dist. Ct.). They asserted claims for unlicensed mortgage loan servicing under the Minnesota Residential Mortgage Originator and Servicer Licensing Act ("SLA"), continued and fraudulent collection efforts under the Fair Debt Collection Practices Act ("FDCPA"), inadequate disclosure of an assignment under the Truth in Lending Act ("TILA"), untimely scheduling of a sheriff's sale under Minn. Stat. § 580.07, common-law negligence, and negligent misrepresentation. (Compl. ¶ 39.) They also moved for a temporary restraining order enjoining further foreclosure activity, which the district court granted. (Id. ¶¶ 40-42.)
Following cross motions for summary judgment, the district court granted summary judgment to the Fairbairns on their SLA, TILA, and § 580.07 claims, and to Mortgage First and ULS on the FDCPA, common-law negligence, and negligent-misrepresentation claims. (Id. ¶ 43.) The court also dissolved the injunction, allowing ULS to continue with the foreclosure. (Id.)
After the state-court proceedings, ULS notified the Fairbairns of the sheriff's sale, which occurred on April 11, 2014. (Id. ¶¶ 45-46.) The sale was subject to a five-week redemption period; the redemption period expired on May 16. (Id. ¶ 46.)
The Fairbairns then brought the current lawsuit in federal court. They alleged many of the same facts that they alleged in the previous lawsuit, but they added MERS and Kodi as parties and asserted three new claims: a quiet-title action resolving that ULS and MERS have no adverse claims against the property because the assignments were improperly recorded and giving the Fairbairns the property in fee simple (id. ¶¶ 41-55); a declaratory-judgment action stating that ULS's foreclosure was defective due to an unlawful assignment and an inadequate redemption period, and thus is void (id. ¶¶ 55-61); and a defamation-of-title action determining that MERS allowed Kodi to enter the second mortgage into its database even though ULS never assigned its servicing rights to Kodi and awarding the Fairbairns any resulting damages (id. ¶¶ 61-73).
Defendants now move to dismiss on the grounds of res judicata, collateral estoppel, failure to state a claim, and failure to plead fraud with particularity. (Mot. to Dismiss (Docket No. 16).)
Although Defendants raise multiple grounds for dismissal, the Court need only address two of them: res judicata and failure to state a claim. Those two grounds fully ...