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Armitage v. Caliber Home Loans Inc.

United States District Court, D. Montana, Billings Division

January 22, 2018

ALEXANDRA ARMITAGE, Plaintiff,
v.
CALIBER HOME LOANS INC., LSF9 MASTER PARTICIPATION TRUST, BANK OF AMERICA, NA and FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., as Trustee, Defendants.

          OPINION AND ORDER

          SUSAN P. WAITERS United States District Judge

         Before the Court are Defendants Caliber Home Loans and LSF9 Master Participation Trust's Motion for Summary Judgment (Doc. 22), Defendant Bank of America, N.A.'s Motion for Summary Judgment and Alternative Motion for Judgment on the Pleadings, (Doc. 30), and Plaintiff Alexandra Armitage's cross Motion for Summary Judgment Vacating the State Court Default Judgment. (Doc. 34). For the foregoing reasons, the Court GRANTS Defendants' motions and DENIES Armitage's motion.

         I. Undisputed facts

         In early July 2007, Plaintiff Alexandra Armitage obtained a loan from Mann Mortgage, LLC, in the amount of $189, 000, to purchase a house in Red Lodge, Montana, ("the Property"). (Doc. 26 at ¶ 2). In order to get the loan, Armitage executed a Note in favor of Mann Mortgage, LLC, which was secured by a Deed of Trust on the Property. The Deed of Trust designated Mortgage Electronic Registration System, Inc., ("MERS") as the nominee beneficiary for the Lender.[1](Id.). Countrywide Homes Servicing took over as the loan servicer later that month. (Doc. 45 at ¶ 3).

         Armitage began renting out the house in 2008. (Doc. 26 at ¶ 4). By March 2008, she had defaulted on the loan repayment terms. (Id. at ¶ 5). Countrywide sent Armitage a letter in April 2008 regarding the default. (Id. at ¶ 6).

         By December 2009, Armitage had failed to cure the default on her loan. As a result, on December 4, 2009, an Assignment of Deed of Trust was recorded in the official records of Carbon County, Montana, noticing the public that MERS assigned the Deed of Trust to the Property to Countrywide. (Doc. 25-1 at 24). The same day, a Substitution of Trustee was also recorded against the property, substituting ReconTrust Company, N.A. for Countrywide as the Trustee, and a Notice of Trustee's Sale to occur on April 19, 2010, was recorded in the official records of Carbon County. (Doc. 25-1 at 28).

         On April 19, 2010, ReconTrust, as substitute trustee, sold the property at a foreclosure sale to the Federal National Mortgage Association. (Doc. 25-1 at 28). A Trustee's Deed Upon Sale and an Assignment of Deed of Trust were recorded on April 26, 2010, noticing the public that ReconTrust assigned the Deed of Trust to the Federal National Mortgage Association. (Id. at 31-37). Almost two years later, on January 31, 2012, Federal National Mortgage Association assigned the Deed of Trust to defendant Bank of America, and another Assignment of Deed of Trust was recorded in Carbon County. (Id. at 38-39).

         At some point after the April 19, 2010, sale, Bank of America learned that the April 19, 2010, Trustee's Sale and Deed were invalid due to ReconTrust's failure to record the Notice of Trustee's Sale with the Affidavit of Mailing prior to the sale, as required under Montana law. (Doc. 32-9 at 5). Accordingly, on March 22, 2012, Bank of America sued Armitage to rescind the Trustee's Deed, vacate the 2010 foreclosure sale, and reinstate Bank of America's lien upon the property. (Id.; Doc. 32 at ¶ 9). After attempting to find Armitage in the state, Bank of America moved the state district court to allow service by publication. The state district court granted Bank of America's motion and Armitage was served by publication, but never appeared in the lawsuit. (Doc. 32-8 at 1). The state district court entered default judgment against Armitage on October 12, 2012. (Doc. 32 at ¶17). As a result of the default judgment, the 2010 foreclosure sale was rescinded, Armitage was reinstated as owner of the Property, and Bank of America held the lien on the Property. (Id.).

         Knowing default judgment had been entered against her, Armitage resumed leasing the property in 2013. (Doc. 46 at ¶¶ 14-15). She received rental payments and work in exchange for leasing the property. (Id. at ¶ 16). In May 2013, Armitage submitted a loan modification application to Bank of America. (Id. at ¶ 17). Bank of America denied the loan modification and the loan remained in default. (Id. at¶ 18).

         Over a year later, on November 16, 2014, Caliber Home Loans, Inc., took over servicing the loan from Bank of America. (Doc. 26 at ¶ 20). On November 17, 2014, Caliber notified Armitage via regular mail that Caliber was the new loan servicer and LSF9 Master Participation Trust was the new loan owner. (Doc. 24-1 at 9, 14). The loan remained in default and due. (Doc. 24 at ¶ 9). Twice in December 2014, Caliber sent Armitage default letters, advising her that the loan remained in default and that if she did not cure her default, her entire loan could become due, foreclosure by judicial proceeding could occur, and her property could be sold. (Doc. 23-1 at 15-21).

         From January to May 2015, Caliber tried to contact Armitage on the number she listed on her loan modification application, but did not reach her. (Doc. 24 at ¶¶ 12-13). While Armitage disputes receiving any calls, she admits that she probably gave her telephone number to Caliber and Bank of America. (Doc. 46 at ¶ 27). Throughout this period, Armitage continued renting the property for $850.00 per month. (Doc. 26 at ¶ 26).

         On April 8, 2015, Bank of America assigned the Deed of Trust to LSF9 and recorded an Assignment of Deed of Trust in the official records of Carbon County. (Doc. 26 at ¶ 27). On September 8, 2015, First American Title Company of Montana, Inc., was substituted as Trustee under the Deed of Trust. A Substitution of Trustee was recorded in Carbon County. (Doc. 25-1 at 48). Because Armitage had yet to cure the default on the loan, a Notice of Trustee's Sale was recorded in Carbon County on September 11, 2015. (Doc. 25-1 at 57-59). The unpaid principal of the loan is $188, 101.93. (Id. at 58). The Trustee's sale was cancelled and Cancellation of the Notice of Trustee's Sale was recorded on September 22, 2015. (Id. at 60).

         Armitage filed a complaint in state court in November 2015, challenging the foreclosure and seeking money damages. (Doc. 3). LSF9 removed the case to federal court as a diversity action. (Doc. 1). In her Amended Complaint, Armitage advances the following claims against the Defendants under federal and state law:

1. Breach of the Trust Indenture and Damages for Wrongful Exercise of Power of Sale and Attempted Wrongful Exercise of Power of Sale (Count I): Armitage alleges that because the default judgment and the deed transfers were illegal, Defendants attempted sale of the Property violated the Trust Indenture and the Small Tract Financing Act. She argues that because it didn't own the property, Bank of America's demands for payment in January 2013, breached the Deed of Trust. (Doc. 32-5 at 13).
2. Violation of the Fair Debt Collection Practices Act (Count II): Armitage alleges that because the 2010 sale was invalid, Bank of America's requests for accumulated costs, fees, interest, principal, and other charges, constituted demands for debts Armitage did not owe and constitute unfair and deceptive debt collection practices. (Doc. 32-5 at 13).
3. Negligence (Count III): Armitage alleges the Defendants wrongfully sought an illegal default judgment against her, wrongfully alleged an illegal obligation, and wrongfully attempted to induce her to pay that debt. She also alleges the Defendants failed to convey the Property back to her, to ...

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