Opinion
CASE NO.2:14-cv-872-TFM [WO]
09-24-2015
WAYNE MCKAY and SHONDRA MCKAY, Plaintiffs, v. U.S. BANK, NATIONAL ASSOCIATON, as trustee for the Certificate Holders of the LXS 2007-15N Trust Fund, Defendant.
MEMORANDUM OPINION and ORDER
I. Introduction
Plaintiffs filed this declaratory judgment action against Defendant U.S. Bank, National Association, as trustee for the Certificate Holders of the LXZ 2007-15N Trust Fund ("U.S. Bank") asking this Court to declare "that Defendant is not a party in interest as against Plaintiffs and or Plaintiff's [sic] real property." and seeking "a declaration to quiet title in favor of Plaintiffs and against Defendants [sic]." (Doc. 1 p. 2). The defendant filed a Motion to Dismiss and Brief in Support (Docs. 12 and 13) to which it attached as exhibits the following: a copy of the Plaintiffs' Mortgage on the property identified as 2722 Albemarle Road Montgomery, Alabama 36107 (Doc. 13-1); a copy of the Adjustable Rate Note for the property identified above (Doc. 13-2); and a copy of the Assignment of Mortgage from MERS as nominee for Bayrock Mortgage Corporation to Defendant U.S Bank. (Doc. 13-3). The plaintiffs filed a Response to the Motion to Dismiss (Doc. 17) to which they attached an affidavit from Rosemary A. Parks, "the substitute of the holder of the power of Attorney" for Plaintiffs. (Doc. 17-1).
The Lender identified in the Mortgage is Bayrock Mortgage Corporation for whom Mortgage Electronic Registration Systems, Inc. ("MERS") acts as nominee. (Doc. 13-1 pp. 2-3).
II. Standard of Review
When considering the appropriate standard to apply on a motion to dismiss where parties have filed documents outside the complaint with the Court, the Eleventh Circuit has held that
"the court may consider a document attached to a motion to dismiss without converting the motion into one for summary judgment if the attached document is (1) central to the plaintiff's claim and (2) undisputed. In this context, 'undisputed' means that the authenticity of the document is not challenged."D.L. Day, v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005) citing Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002). Further, "[a] Rule 12(b)(6) motion tests the legal sufficiency of the complaint. . . .[I]n order to survive a motion to dismiss for failure to state a claim, the plaintiff must allege 'enough facts to state a claim to relief that is plausible on its face.'" Coggins v. Abbett, 2008 WL 2476759 *4 citing Bell Atlantic Corp., v. Twombly, 550 U.S. 544, 127 S.Ct. 1955) (2007).
The standard for a motion to dismiss under Rule 12(b)(6) was explained in Twombly and refined in Ashcroft v. Iqbal, 129 S.Ct.1937, 1949 (2009) as follows:
Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Rule 8 marks a notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief.Iqbal, 129 S.Ct. at 1949-50 (citations and internal edits omitted).
The Twombly-Iqbal two-step analysis begins "by identifying the allegations in the complaint that are not entitled to the assumption of truth" because they are conclusory. Id., at 195; Mamani v. Berzain, 2011 U.S. App. Lexis 17999, at *12 (11th Cir. Aug. 29, 2011) ("Following the Supreme Court's approach in Iqbal, we begin by identifying conclusory allegations in the Complaint."). After conclusory statements are set aside, the Twombly-Iqbal analysis requires the Court to assume the veracity of well-pleaded factual allegations, and then to determine whether they "possess enough heft to set forth 'a plausible entitlement to relief.'" Mack v. City of High Springs, 486 Fed. App'x 3, 6 (11th Cir. 2012) (quotation omitted.) "To survive a motion to dismiss, a complaint need not contain 'detailed factual allegations' but instead the complaint must contain 'only enough facts to state a claim to relief that is plausible on its face.'" Maddox v. Auburn Univ. Fed. Credit Union, 2010 U.S. Dist. Lexis 127043 at *4. Establishing facial plausibility, however, requires more than stating facts that establish mere possibility. Mamani,, 2011 U.S. App. Lexis 17999, at *22-*23 ("The possibility that -if even a possibility has been alleged effectively - these defendants acted unlawfully is not enough for a plausible claim."). Plaintiff is required to "allege more by way of factual content to nudge [her] claim . . . across the line from conceivable to plausible." Iqbal, 129 S. Ct. at 1952 (internal editing and citation omitted.)
III. Discussion
The claims in this case arise from U.S. Bank's status as mortgagee of Plaintiffs' Mortgage. (Doc. 1 para. 2). On December 12, 2006, Plaintiffs executed a Mortgage in favor of MERS, as nominee for Bayrock Mortgage Corporation ("Bayrock") to secure a Note evidencing an $82,400.00 home loan from Bayrock to Plaintiffs. The defendant has filed with the Court a copy of the Mortgage, the Note and the Assignment at issue in this case (Docs. 13-1, 13-2, 13-3). The Plaintiffs have not objected to the authenticity of these documents; nor does the Court have any reason to doubt that these documents are anything other than what they appear to be on their face. Thus, the authenticity of these documents is "undisputed". Furthermore, these documents form the basis of Plaintiffs' claim and as such are "central" to Plaintiffs' claim. D.L. Day, 400 F.3d at 1276. Accordingly, the Court concludes that these documents are properly before the Court for its consideration on the Motion to Dismiss. Id.
Plaintiffs allegedly mailed U.S. Bank a "notarial presentment" on July 17, 2014, which U.S. Bank allegedly received on July 21, 2014. (Doc. 1 para. 4). This "notarial presentment" purportedly asserted that U.S. Bank was not the party of interest to enforce Plaintiff's Mortgage, and apparently requested that U.S. Bank produce the original Note and Mortgage. (Id. at para. 5). Plaintiffs also allegedly mailed U.S. Bank a "notarial notice of Dishonor" on August 4, 2014, which was allegedly received by U.S. Bank on August 11, 2014. (Id. at para. 7). Plaintiffs alleged that U.S. Bank has not responded to either the "notarial presentment" or the "notarial notice of dishonor." (Id. paras. 6, 8). Plaintiffs claim that U.S. Bank is not in possession of the original Note or original Mortgage - notwithstanding that U.S. Bank has attached copies of the same to this motion. (Id. para. 9); see (Doc. 13-1 and 13-2). Plaintiffs' Note and Mortgage are now part of a securitized pool, of which U.S. Bank is Trustee. (Doc. 1, paras. 2, 10); see (Doc. 13-3). Plaintiffs now seek a declaratory judgment (1) against U.S. Bank declaring that U.S. Bank is not a party in interest as to Plaintiffs or Plaintiffs' property, and (2) to quiet title in favor of Plaintiffs and against U.S. Bank. (Id. at p.2).
It is undisputed that Plaintiffs have not made a mortgage payment since June 2013, yet are still living in their house. Defendant argues that the Plaintiffs' Complaint is due to be dismissed for three reasons. First, Plaintiffs incorrectly argue that the principles of presentment and dishonor of negotiable instruments apply to this case. Second, Plaintiffs incorrectly argue that U.S. Bank is not a party in interest to this case. Third, Plaintiffs fail to adequately plead a quiet title claim. The Court will address each of these arguments below. The Court notes that Plaintiffs' response to Defendant's Motion to Dismiss is simply a restatement, almost verbatim, of the claims in their complaint and offers no factual or legal argument to rebut those arguments presented by Defendant . (Doc. 17). The Court will address each of Defendants arguments in turn below.
(1) Ala. Code §§ 7-3-501 to 503 do not apply to this case.
Plaintiffs claim that U.S. Bank has "admitted that it is not the party to enforce the note and mortgage on Plaintiffs' property and [U.S. Bank] is not in possession of the original note." (Doc. 1, paras 4-8). This claim is not supported by any relevant law or fact. First, Plaintiffs claim that they mailed U.S. Bank a "notarial presentment alleging that [U.S. Bank] was not the party of interest to enforce the mortgage and that for [U.S. Bank] to produce the original mortgage and note under Code of Alabama 7-3-501." (Doc. 1, para. 4). This section defines "presentment" as follows:
"a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or party obliged to pay the instrument, or in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee."Ala. Code 7-3-501 (emphasis added). By the clear terms of the statute, presentment is a power to be exercised "by or on behalf of a person entitled to enforce the instrument," and against "a party obliged to pay the instrument". Id. Plaintiffs appear to claim that they are entitled to make a demand for presentment, and that they are entitled to demand payment from U.S. Bank. This is a backwards reading and interpretation of the statute. As the parties indebted under their home loan and obliged to pay the Note, Plaintiffs are the parties to whom presentment could be made. There is no allegation that U.S. Bank, as the party entitled to enforce the Note, has made any demand for presentment on Plaintiffs. Thus the doctrine of presentment is inapplicable to the facts of this case and is not a basis for this Court to conclude that U.S. Bank has "admitted" anything related to Plaintiffs' Mortgage as Plaintiffs claim. (Doc. 1, paras 4-8).
Similarly, Plaintiffs' contentions related to dishonor are inapplicable and without merit. (Doc. 1 paras. 6-8). Ala. Code 7-3-502(a)(1)-(3) provides generally that a note is dishonored if the note is not paid on the day of presentment (if necessary) or on the day it becomes payable. For the concept of dishonor to apply, the party obligated to pay it, must fail to pay it. Thus, Plaintiffs, as the parties obligated to pay the amount of the Note, are the only parties who could dishonor the Note. Thus the doctrine of dishonor is inapplicable to the facts of this case and is not a basis for this Court to conclude that U.S. Bank has "admitted" anything related to Plaintiffs' Mortgage as Plaintiffs claim. (Doc. 1, paras 4-8).
Further, Ala. Code 7-3-503 which relates to notice of dishonor, is similarly inapplicable to this case. --------
(2) 12 U.S.C. § 2605(k)(1)(d) does not apply.
Plaintiffs cite 12 U.S.C. § 2605(k)(1)(d) for the proposition that U.S. Bank had "ten (10) business days to rebut the Notarial Presentment of Plaintiffs or the same is deemed admitted as presented. " (Doc. 1, para. 5). This Section states as follows:
(k) Servicer prohibitionsBy its clear terms, this statute applies to a "servicer of a federally related mortgage". Plaintiffs have not alleged that U.S. Bank is the servicer of their Mortgage; nor do Plaintiffs allege in their Complaint that they ever actually requested identity and contact information about the owner or assignee of the loan. Rather they assert that their "Notarial Presentment alleg[ed] that [U.S. Bank] was not the party of interest to enforce the mortgage and that for [U.S. Bank] to produce the original mortgage or note." (Doc. 1, para. 4). The information sought by Plaintiff is clearly not contemplated by this Code section. Thus, this Code section is inapplicable to the facts of this case and is not a basis for this Court to conclude that U.S. Bank has "admitted" anything related to Plaintiffs' Mortgage as Plaintiffs claim. (Doc. 1, paras. 4-8).
(1) In general
A servicer of a federally related mortgage shall not -
(D) fail to respond within 10 business days to a request from a borrower to provide the identity, address, and other relevant contact information about the owner or assignee of the loan.
(3) U.S. Bank is a party in interest as to Plaintiffs' Mortgage
Plaintiffs seek declaratory relief that U.S. Bank "is not a party in interest as against Plaintiffs and or Plaintiff's [sic] real property." (Doc. 1, p. 2). Plaintiffs first theory to support this argument is that U.S. Bank failed to comply with the statutory requirements relating to presentment, dishonor, and information requests. For the reasons stated in sections (1) and (2) above, the Court concludes this theory has no merit.
Plaintiffs' second theory to support their request for declaratory relief is based partly upon their claim that U.S. Bank "must possess both [the Note and Mortgage] to be the party in interest to enforce the mortgage." (Doc. 1 para. 9). The law is clear; this "split the note" theory has been consistently rejected by Alabama courts. See, e.g., Coleman v. BAC Servicing, 104 So. 3d 195, 205 (Ala. Civ. App. 2012) (holding that "Alabama law specifically contemplates that there can be a separation" of the note and mortgage); See, also, Orton v. Matthews, 2013 WL 5890167 * 4 (N.D. Ala. Nov 1, 2013) (granting motion to dismiss on basis that the "'split the note' theory has been roundly rejected by Alabama courts"). Thus, the Court concludes that this theory does not support the conclusion that U.S. Bank is not a party in interest to Plaintiffs' mortgage, as Plaintiffs claim.
Further, the Court recognizes Plaintiffs acknowledge that U.S. Bank is Trustee of the Trust (Doc. 1 para. 2). Under the law, if a trustee possesses "customary powers to hold, manage, and dispose of assets," then that trustee is a real party in interest. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 464 (1980). Section Q of the Mortgage provides as follows:
"MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the property . . . [or] releasing and cancelling this Security Instrument."
(Doc. 13-1 p. 4). Additionally, the Mortgage provides that
"[t[he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to [Plaintiffs]."(Doc. 13-1 p. 16 para. 20). Also, the recorded U.S. Bank assignment provides that the Mortgage was assigned to U.S. Bank, as trustee. (Doc. 13-3). Thus, the facts are undisputed that U.S. Bank is now the mortgagee of Plaintiffs' Mortgage, and Plaintiffs agreed to terms in the Mortgage establishing that the mortgagee has the power to exercise enforcement rights granted in the Mortgage. Thus, the Court concludes that Plaintiffs claim that U.S. Bank is not a real party in interest fails; and thus no declaratory relief is due on this claim.
(4) Plaintiffs' Quiet Title claim is due to be dismissed.
Plaintiffs also seek "a declaration to quiet title in favor of Plaintiffs and against Defendants." (Doc. 1 p.2). An action to quiet title is the appropriate test to determine which among the parties claiming right of title and possession holds superior title. Gardner v. Key, 594 So. 2d 43, 44 (Ala. 1991). Plaintiffs quiet title claim is based, in whole or in part, on the arguments made pursuant to Alabama and federal law as discussed above in sections (1), (2) and (3). To the extent that these arguments serve as the basis for Plaintiffs' quiet title claim, the Court concludes that the quiet title claim is due to be dismissed.
Furthermore, the Court concludes that Plaintiffs' quiet title claim should be dismissed because it does not meet the required pleading standards for a quiet title action. Under Alabama law, any person "in peaceable possession of lands [and] . . . claiming to own the same, . . . [whose] title thereto, or any party thereof, is . . . disputed . . . , may commence an action to settle the title to such land and to clear up all doubts or disputes concerning the same." Ala. Code § 6-6-540. A plaintiff establishes a prima facie case to quiet title when "it is shown that [the plaintiff] is in peaceable possession of the land, either actual or constructive, at the time of the filing of the bill and that there was no suit pending to test the validity of the title. Woodland Grove Baptist Church, v. Woodland Grove Cmty. Cemetery Ass'n, Inc., 947 So. 2d 1031, 1036 (Ala. 2006) (citations omitted.)
Indeed, in order to meet the "plausibility" pleading standard articulated by Twombly and Iqbal, a plaintiff's complaint must include enough factual allegations to lift the stated claim out of the realm of mere speculation. Twombly, 550 U.S. at 555. Here, Plaintiffs fail to identify or attempt to connect factual allegations to any of the elements of a quiet title cause of action. Indeed, the only part of the Complaint that remotely relates to such a claim is the factual allegation that Plaintiff's "own a home". (Doc. 1 para. 1). Thus, the Court concludes that under the "plausibility" standard of Twombly and Iqbal, Plaintiffs fail to adequately plead a cause of action to quiet title.
IV. Conclusion
Accordingly, the Court concludes that Defendant U.S. Bank's Motion to Dismiss the Complaint (Doc. 12) is GRANTED and that this case is due to be dismissed with prejudice. A separate Order will be issued.
DONE this 24th day of September, 2015.
/s/Terry F. Moorer
TERRY F. MOORER
UNITED STATES MAGISTRATE JUDGE