United States District Court, District of Montana, Missoula Division
OLIVER M. WHIPPLE III, and KELLY WARE, Plaintiffs,
MANN MORTGAGE, LLC; GOVERNMENT NATIONAL MORTGAGE ASSOCIATION AS TRUSTEE FOR SECURITIZED TRUST GINNIE MAE REMIC TRUST 2011-019; UNKNOWN SPONSOR; UNKNOWN DEPOSITOR; BANK OF AMERICAN, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEM, aka “MERS”; and DOES 1 THROUGH 100, Defendants.
FINDINGS AND RECOMMENDATION
Jeremiah C. Lynch, United States Magistrate Judge
Plaintiff Oliver M. Whipple III, appearing pro se, commenced this action alleging the Defendants violated both federal and state law in relation to the origination and execution of a real estate loan transaction and a deed of trust pertaining to his residence at 601 4th Ave. E., Polson, Montana (the Residence). Whipple also challenges Defendants’ conduct, after the closing on the loan, in converting the loan transaction into an investment vehicle. Further, he contests Defendants’ authority to pursue foreclosure remedies with respect to the Residence, and he asserts he is entitled to a quiet title judgment granting him clear title to, and exclusive possession of, the Residence.
Presently before the Court are the following two motions filed by the various Defendants: (1) Defendants Bank of America, N.A., Government National Mortgage Association as Trustee for Securitized Trust Ginnie Mae REMIC Trust 2011-019 (Ginnie Mae Trust), and Mortgage Electronic Registration Systems, Inc.’s (MERS) Fed.R.Civ.P. 12(b)(6) motion to dismiss, and (2) Defendant Mann Mortgage, LLC’s Fed.R.Civ.P. 12(b)(6) motion to dismiss. For the reasons discussed, the Court recommends the motions be granted.
On February 28, 2011, Whipple obtained a mortgage loan in the amount of $198, 247.00 as evidenced by a promissory note (the Note) executed by Whipple. The Note was secured by a Deed of Trust to Whipple’s Residence granted in favor of Mann Mortgage. The Deed of Trust identifies Mann Mortgage as the original lender, names Lake County Abstract and Title Company as the trustee, and states that MERS is a beneficiary under the Deed of Trust. But the Deed of Trust clarifies that MERS “is acting solely as a nominee for the Lender, and Lender’s successors and assigns.” (Doc. 9-1 at 1.) The Deed of Trust was executed under the Small Tract Financing Act of Montana, Mont. Code Ann. § 71-1-301 et seq.
Whipple’s Complaint, in part, challenges the events, conduct, and representations that occurred surrounding the origination, execution, and finalization of his loan transaction. He contends the final terms of his transaction are improper in various ways resulting in a fraudulent and unenforceable loan. Whipple contends Mann Mortgage failed to properly assess his financial ability to service the terms of the Note he signed. He asserts Mann Mortgage improperly found him qualified for the loan product he received.
Whipple also alleges the loan was improperly sold, “securitized”, and placed in a real estate mortgage investment conduit trust, and ultimately transferred to the Ginnie Mae Trust to be sold to investors as a secured investment. He contends that because the transfers were not in compliance with either the provisions of the trust or the pooling and servicing agreement governing the securitization of his loan transaction, they are void. Specifically, he asserts that because the ownership interests in both the Note and Deed of Trust were not transferred together, thus separating or splitting ownership of the interests in those two documents, no Defendant possesses perfected and enforceable interests in either the Note or the Deed of Trust.
Whipple advances nine separate causes of action against the Defendants under federal and state law:
1. Lack of Standing/Wrongful Foreclosure, (Count I): Whipple alleges that none of the Defendants have an enforceable right or interest in his Residence and, thus, they lack standing to foreclose on the Residence. Whipple also alleges MERS does not have any interest in the Note, and does not have authority to serve in any capacity relative to the Deed of Trust and possible foreclosure proceedings;
2. Fraud in the Concealment, (Count II): Whipple alleges Defendants fraudulently concealed from him the subsequent sale and securitization of his loan transaction;
3. Fraud in the Inducement, (Count III): Whipple alleges Defendants fraudulently represented to him that they are a “holder and owner” of the Note, and that they have authority to exercise the power of sale for the Residence granted in the Deed of Trust;
4. Intentional Infliction of Emotional Distress, (Count IV): Whipple alleges Defendants inflicted emotional distress upon him by wrongfully asserting a right to exercise the power of sale granted in the Deed of Trust;
5. Slander of Title, (Count V): Whipple alleges Defendants are liable for slander of title to his Residence based on default and foreclosure documents filed relative to the Residence;
6. Quiet Title, (Count VI): Whipple asserts he is entitled to a quiet title judgment granting him clear title to the Residence, and granting him the exclusive possession of, and quiet enjoyment of, the Residence on the ground that Defendants have no right or interest in his Residence;
7. Declaratory Relief, (Count VII): Whipple requests a judicial determination of the rights and obligations of the respective parties relative to ownership rights and interests, or lack thereof, in the Residence. He also requests a judicial determination as to the validity of the various documents involved in the loan transaction, his alleged default, and the foreclosure;
8. Violations of the Home Ownership Equity Preservation Act, 15 U.S.C. § 1639 (“HOEPA”), and the Truth In Lending Act, 15 U.S.C. § 1601 through § 1667f (“TILA”), (Count VIII): Whipple contends Defendants failed to provide him with the various material disclosures required under the HOEPA and TILA relative to his loan transaction;
9. Rescission, (Count IX): Whipple requests rescission of the entire loan transaction relative to his Residence based on all of the violations and liabilities alleged in his Complaint.
Whipple seeks to recover compensatory and punitive damage, as well as his costs and attorneys’ fees. Additionally, he seeks rescission of the loan transaction documents, and a judgment granting him clear title to the Residence.
Defendants Bank of America, Ginnie Mae Trust, MERS, and Mann Mortgage move to dismiss Whipple’s Complaint. They argue that Whipple’s claims should be dismissed because the allegations fail to set forth sufficient facts to state any legal claim on which relief could be granted.
II. Applicable Law
A. Fed. R. Civ. P. 12(b)(6) - Motion to Dismiss Standards
A motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal for failure to state a claim under Rule 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). To survive a motion to dismiss, a plaintiff’s complaint must have sufficient facts “to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Services, Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). The court accepts all factual allegations in the complaint as true and construes the pleadings in the light most favorable to Green. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). Conclusory allegations and unwarranted inferences, however, are insufficient to defeat a motion to dismiss. Johnson v. Lucent Techs. Inc., 653 F.3d 1000, 1010 (9th Cir. 2011).
B. Application of Montana Law
In view of Whipple’s claims under federal law, jurisdiction over his other claims advanced under Montana law is founded upon the Court’s supplemental jurisdiction under 28 U.S.C. § 1367(a). “[A] federal court exercising supplemental jurisdiction over state law claims is bound to apply the law of the forum state to the same extent as if it were exercising its diversity jurisdiction.” Bass v. First Pacific Networks, Inc., 219 F.3d 1052, 1055 n.2 (9th Cir. 2000). “The task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum.” Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980).
When an issue of state law arises and “the state’s highest court has not adjudicated the issue, a federal court must make a reasonable determination of the result the highest state court would reach if it were deciding the case.” Medical Laboratory Mgmt. Consultants v. American Broadcasting Companies, Inc., 306 F.3d 806, 812 (9th Cir. 2002) (citations omitted). In doing so, the court must “look to existing state law without predicting potential changes in that law.” Ticknor v. Choice Hotels International, Inc., 265 F.3d 931, 939 (9th Cir. 2001) (citation omitted). The court should also rely on other persuasive authorities including treatises and decisions from other jurisdictions, as guidance. Strother v. Southern California Permanente Medical Group, 79 F.3d 859, 865 (9th Cir. 1996).
C. Pro Se Pleadings
Because Whipple is proceeding pro se, the Court must construe his pleadings liberally, and his allegations, “however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers[.]” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citation ...