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Marchetti v. U.S. Bank, N.A.

United States District Court, D. Minnesota

February 19, 2015

James R. Marchetti, et al., Plaintiffs,
v.
U.S. Bank, N.A., et al., Defendants.

REPORT AND RECOMMENDATION

LEO I. BRISBOIS, Magistrate Judge.

This matter comes before the undersigned United States Magistrate Judge upon Defendant U.S. Bank, N.A.'s Motion for Summary Judgment, [Docket No. 50]; and Defendant Klatt, Odekirk, Augustine, Sayer, Treinen & Rastede, P.C.'s Motion for Summary Judgment, [Docket No. 62]. On August 28, 2013, the Honorable Patrick J. Schiltz, United States District Judge for the District of Minnesota, referred all dispositive motions in the present case to the undersigned Magistrate Judge for report and recommendation, pursuant to 28 U.S.C. § 636(b)(1). (Order of Reference [Docket No. 11]). The Court held a motions hearing on January 22, 2015, and the Court took Defendants' motions for summary judgment under advisement. For reasons discussed herein, the Court recommends GRANTING Defendant U.S. Bank, N.A.'s Motion for Summary Judgment, [Docket No. 50]; and GRANTING Defendant Klatt, Odekirk, Augustine, Sayer, Treinen & Rastede, P.C.'s Motion for Summary Judgment, [Docket No. 62].

I. BACKGROUND

A. Plaintiffs' Complaint

Plaintiffs James R. Marchetti and Nancy J. Marchetti (collectively, "Plaintiffs") initiated the present action in response to Defendant U.S. Bank, N.A.'s ("U.S. Bank") efforts to foreclose on Plaintiffs' residence, located at 4963 E. Pike Lake Road, Duluth, Minnesota ("the residence"). On or about June 26, 2013, Plaintiffs, proceeding pro se, filed a "Complaint for Emergency Injunctive and Declaratory Relief and to Stay Foreclosure Sale" in Minnesota state court, effectively staying the foreclosure sale of Plaintiffs' residence, scheduled to take place on June 27, 2013. (Summons and Compl. [Docket No. 1-1]), at 3). Defendant U.S. Bank removed the action to the United States District Court for the District of Minnesota on July 23, 2013. (Notice of Removal [Docket No. 1]).[1]

In the Complaint, Plaintiffs allege that Defendants[2] initiated a "non-judicial foreclosure" on Plaintiffs' residence on December 15, 2011. (Id. ¶ B1). Plaintiffs filed for bankruptcy one day prior, on December 14, 2011, "to temporarily protect their home from foreclosure after the Mortgagee denied a request for a mortgage modification through the federal HAMP process[.]" (Id.) Since December 2011, Plaintiffs have managed to postpone the foreclosure sale several times, ostensibly to allow Plaintiffs the opportunity to "explore their options." (Id.) Plaintiffs "seek[] to remain in their home, to modify their home mortgage to an affordable rate at the lowest interest rate available." (Id. ¶ B3). Plaintiffs conclusorily allege that the mortgage documents contain false statements and request the Court "void" the loan as predatory. (Id. ¶ B4). Plaintiffs further allege that the mortgage documents do not "meet the minimum requirements of being legally notarized" and, accordingly, were not properly recorded. (Id.)

Plaintiffs generally allege violations of Minn. Stat. § 325F.69, subd. 1 (fraud, misrepresentation, deceptive practices); Minn. Stat. § 58.13, subd 1(a)(9), (18), (24), (25); and Minn. Stat. § 358.42. (Id. at Count I). Plaintiffs request the Court:

1. Declare the mortgage documents void;
2. Require U.S. Bank to provide a "real" contract and "make good on their offer to allow for a loan modification that will be affordable for the Plaintiffs"; and
3. Declare that all "requirements for any bonds" be waived.

(Id. at Count II).

B. Material Facts[3]

On or about March 16, 2006, Plaintiffs applied for a 30-year, fixed-rate home loan with U.S. Bank. (Gunderson Decl. [Docket No. 55], Ex. A). Plaintiffs did not qualify for the fixed-rate loan for which they originally applied. (Klobucar Decl. [Docket No. 61], Ex. K at 107:2-8). Accordingly, U.S. Bank referred Plaintiffs to a department that handled loans other than traditional 30-year, fixed-rate mortgages, including adjustable-rate notes. (Id. at 107:9-17).

In April 2006, Plaintiffs sent pay stubs, W2s, and other documents regarding their income and investment portfolio to U.S. Bank, accompanied by a letter stating that receiving a loan was important to Plaintiffs because they were seeking additional funds to consolidate their unsecured debt. (Gunderson Decl. [Docket No. 55], Ex. B). Plaintiffs applied for an adjustable-rate loan in the amount of $500, 000. (Id. at Ex. C). U.S. Bank approved Plaintiffs for the loan. At his deposition, Plaintiff James Marchetti recognized and admitted that at the time of closing (on April 24, 2006), he understood that by signing the subject mortgage, Plaintiffs intended to grant U.S. Bank an adjustable-rate mortgage on their home in exchange for a loan in the amount of $500, 000. (Klobucar Decl. [Docket No. 61], Ex. K at 56:4-20, 58:1-2).

Plaintiff James Marchetti lost his job in 2008, and thereafter, in 2009, Plaintiffs began to fall behind on their mortgage payments. (Wells Decl. [Docket No. 56], Ex. A). In July 2009, U.S. Bank and Plaintiffs entered into an agreement to defer two past due payments to the back of the loan. (Id.) In 2010, U.S. Bank and Plaintiffs again agreed to defer another ten past due payments to the back of the loan. (Id. at Ex. B). Despite the deferments, Plaintiffs could not stay current on the mortgage, and U.S. Bank initiated foreclosure proceedings in October 2011. (Denson Decl. [Docket No. 57], Ex. A).

Also in late 2011, Plaintiffs sought a modification of their mortgage pursuant to the Home Affordable Mortgage Protection (HAMP) program. (Wells Decl. [Docket No. 56], Ex. C). U.S. Bank contacted Plaintiffs and informed them that they would need to submit a completed HAMP application package seven days prior to the scheduled foreclosure sale, scheduled for December 15, 2011. (Id.) Plaintiffs did not submit a complete application in time, and U.S. Bank sent a letter informing Plaintiffs of the same on December 13, 2011. (Id.)

On December 14, 2011, Plaintiffs filed for Chapter 7 bankruptcy. (Klobucar Decl. [Docket No. 61], Ex. B). On April 24, 2012, the United States Bankruptcy Court for the District of Minnesota entered an order modifying the automatic stay to allow U.S. Bank to proceed with foreclosure or "any other action to preserve and enforce ...


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