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Gail Ann Van Kirk v. Bank of America Corporation; A Corporation of Unknown Origin

August 15, 2012

GAIL ANN VAN KIRK,
PLAINTIFF,
v.
BANK OF AMERICA CORPORATION; A CORPORATION OF UNKNOWN ORIGIN; BANK OF AMERICA, N.A. AS SUCCESSOR TO COUNTRYWIDE HOME LOANS, INC., A DELAWARE CORPORATION;
BAC HOME LOANS SERVICING, L.P., A LIMITED PARTNERSHIP OF UNKNOWN ORIGIN AND A WHOLLY-OWNED SUBSIDIARY OF BANK OF AMERICA, N.A.;
NORTHWEST TRUSTEE SERVICES, INC., AN IDAHO CORPORATION;
MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., A DELAWARE CORPORATION;
FEDERAL NATIONAL MORTGAGE ASSOCIATION, A FEDERALLY CHARTERED CORPORATION; AND
DOES 1-10 AS INDIVIDUALS OR ENTITIES WITH AN INTEREST IN THE PROPERTY COMMONLY KNOWN AS: 11061 WEST WAGON PASS STREET, BOISE, IDAHO 83709, DEFENDANTS.



The opinion of the court was delivered by: Honorable Ronald E. Bush U. S. Magistrate Judge

MEMORANDUM DECISION AND ORDER RE: DEFENDANTS' MOTION FOR JUDICIAL NOTICE IN SUPPORT OF MOTION TO DISMISS COMPLAINT (Docket No. 5) REPORT AND RECOMMENDATION RE: DEFENDANTS' MOTION TO DISMISS COMPLAINT (Docket No. 4)

Currently pending before the Court are Defendants'*fn1 (1) Motion to Dismiss Complaint (Docket No. 4), and (2) Motion for Judicial Notice in Support of Motion to Dismiss Complaint (Docket No. 5). The Court finds that the decisional process would not be significantly aided by oral argument and, thus, the Court will decide this matter on the written motions, briefs, and record without oral argument. See D. Idaho L. Civ. R. 7.1(d). Having reviewed the record, and for the reasons discussed herein, the Court hereby enters a Memorandum Decision and Order as to Defendants' Motion for Judicial Notice in Support of Motion to Dismiss Complaint (Docket No. 5); the Court also hereby enters a Report and Recommendation as to Defendants' Motion to Dismiss Complaint (Docket No. 4).

I. BACKGROUND

Plaintiff alleges that, on or around June 13, 2007, she financed the purchase of real property located at 11061 West Wagon Pass Street, Boise, Idaho 83709 (the "Property") with a $308,000 loan originated by Mountain West Bank (who had the loan underwritten by Aegis Wholesale Corporation ("Aegis"), according to Plaintiff) memorialized in a promissory note (the "Note") and secured by a Deed of Trust. See Pl.'s Compl., ¶¶ 1, 10-12 (Docket No. 1).*fn2

The Deed of Trust names Aegis as the lender (later assigned to Countrywide Home Loans, Inc. ("Countrywide) which was later acquired by Bank of America Corporation ("BOFA CORP") and/or Bank of America, N.A. ("BOFA"), according to Plaintiff (see id. at ¶ 10)), Title One as the trustee, and the Mortgage Electronic Registration Systems, Inc. ("MERS") as "nominee for Lender and Lender's successors and assigns" and the beneficiary. See Ex. B to Dina Aff. (Docket No. 5, Att. 3).

On August 8, 2011, MERS assigned its interest in the Deed of Trust to BOFA. See Ex. C to Pl.'s Compl. (Docket No. 1, Att. 3). On August 24, 2011, BOFA recorded an Appointment of Successor Trustee, appointing Northwest Trustee Services, Inc. ("Northwest") as successor trustee in place of Title One. See Ex. B to Pl.'s Compl. (Docket No. 1, Att. 2).

After defaulting on her mortgage payments, Plaintiff received a Notice of Default on or around August 24, 2011. See Pl.'s Compl., ¶ 15 (Docket No. 1); see also Ex. A to Pl.'s Compl. (Docket No. 1, Att. 1). As of the date of the Notice of Default, Plaintiff had not made any payments since March/April 2011 and was approximately $4,434.82 in arrears. See Ex. A to Pl.'s Compl. (Docket No. 1, Att. 1). Plaintiff's failure to cure her default led to the issuance of a Notice of Trustee's Sale on September 6, 2011. See Ex. F to Pl.'s Compl. (Docket No. 1, Att. 6). To date, no sale has occurred.

On December 12, 2011, Plaintiff initiated the instant action, asserting claims (and seeking damages) for (1) violation of Fair Debt Collection Practices Act ("FDCPA"), (2) declaratory relief, (2) mail fraud, (4) fraud, (5) breach of fiduciary duty and good faith and fair dealing, and (6) intentional infliction of emotional distress. See Pl.'s Compl. (Docket No. 1). Additionally, Plaintiff requests that the Court (1) require certain Defendants to produce the original Note in Court, (2) determine the Defendants' interest in the Property, and (3) award Plaintiff her costs and attorneys' fees. See id. Generally, Plaintiff contends that Defendants lacked the authority to foreclose on the Property, owing to alleged failures within the process by which the debt was securitized. Defendants now move to dismiss under FRCP 12(b)(6).

II. REPORT

The gist of Plaintiff's Complaint seems to be that Defendants' alleged fraud, coupled with the improper securitization of her mortgage, clouded title to the Property. More particularly, part and parcel with her identified causes of action, Plaintiff alleges that (1) MERS did not have any valid interest in the Deed of Trust and, thus, lacked any authority to assign its interest, and (2) BOFA did not have the authority to appoint Northwest as successor trustee or to carry out a non-judicial foreclosure sale. See Pl.'s Compl. ¶¶ 17-23 (Docket No. 1). Plaintiff also points to other alleged irregularities that she believes "cast serious doubt on the legitimacy and legal effectiveness of the pre-foreclosure documents." See id. at ¶ 33 (referring to Pl.'s Compl. at ¶¶ 30-32). Plaintiff filed this action "to determine the interests of BOFA and [Federal National Mortgage Association] ("Fannie Mae")*fn3 in the Property, while also requesting that certain Defendants be required to produce the original Note. See id. at ¶¶ 24, 34, & 1 (at p. 27).

A. Legal Standard for Motions to Dismiss

FRCP 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While a complaint attacked by an FRCP 12(b)(6) motion to dismiss "does not need detailed factual allegations," it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Id. at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'" Id. at 557.

In a more recent case, the Supreme Court identified two "working principles" that underlie the decision in Twombly. See Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. See id. "Rule 8 marks a notable and generous departure from the hyper-technical, 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." Id. at 678-79. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 679.

"Determining whether a complaint 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." Id.

Providing too much in the complaint may also be fatal to a plaintiff. Dismissal may be appropriate when the plaintiff has included sufficient allegations disclosing some absolute defense or bar to recovery. See Weisbuch v. County of L.A., 119 F.3d 778, 783, n.1 (9th Cir. 1997) (stating that "[i]f the pleadings establish facts compelling a decision one way, that is as good as if depositions and other . . . evidence on summary judgment establishes the identical facts.").

A dismissal without leave to amend is improper unless it is beyond doubt that the complaint "could not be saved by any amendment." Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009) (issued two months after Iqbal).*fn4 The Ninth Circuit has held that "in dismissals for failure to state a claim, a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Cook, Perkiss and Liehe, Inc. v. Northern California Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir. 1990). The issue is not whether the plaintiff will prevail but whether he "is entitled to offer evidence to support the claims." Diaz v. Int'l Longshore and Warehouse Union, Local 13, 474 F.3d 1202, 1205 (9th Cir. 2008) (citations omitted).

B. Plaintiff's FDCPA Claim

Congress enacted the FDCPA "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C.A. § 1692. In furtherance of this goal, the FDCPA requires and prohibits certain activities by "debt collectors" that are done "in connection with the collection of any debt." 15 U.S.C. §§ 1692c (prohibits certain communications), 1692d (prohibits harassment or abuse), 1692e (prohibits false or misleading representations), 1692f (prohibits unfair practices) & 1692(g) (requiring validation of debts).

Generally, non-judicial foreclosure actions do not constitute "debt collection activity" under the FDCPA. See Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002) ("[The] activity of foreclosing on [a] property pursuant to a deed of trust is not the collection of a debt within the meaning of the" FDCPA). However, in Armacost v. HSBC Bank USA, 2011 WL 825151 (D. Idaho 2011), this Court's U.S. Magistrate Judge Larry M. Boyle found a narrow exception to the general rule within section 1692f(6) of the FDCPA. See id at *6 ("Accordingly, to the extent Plaintiff's Complaint attempts to make a claim under the FDCPA other than under section 1692f(6), Defendant's motion to dismiss should be granted."). Section 1692f(6) of the FDCPA reads:

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section . . . .

(6) Taking or threatening to take any non-judicial action to effect dispossession or disablement of property if --

(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;

(B) there is no present intention to take possession of the property; or

(C) the property is exempt by law from such dispossession or disablement.

15 U.S.C.A. § 1692f(6).

Plaintiff does not specify which part of section 1692f she claims Defendants violated; indeed, she lists only section 1692 generally. See Pl.'s Compl. at p. 7 (Docket No. 1). Broadly construing both the allegations of her Complaint and the FDCPA (while recognizing Plaintiff's explicit reference within her Complaint to Armacost and the "exception" identified therein (see id at ¶ 37)), the Court is of the view that Plaintiff's general allegations concerning Defendants' standing to enforce the Note, could equate to a claim that Defendants took "non-judicial action to effect dispossession or disablement of property . . . [with] no present right to possession of the [P]roperty claimed as collateral through an enforceable security interest . . . ." Accord Armacost, 2011 WL 825151 at *7; see also 15 U.S.C.A. § 1692f(6)(A); Pl.'s Compl., ¶ 43(e) (Docket No. 1).*fn5

Responding to Plaintiff's allegations that they violated the FDCPA, Defendants argue that (1) Defendants are not "debt collectors" under the FDCPA and, regardless, (2) Plaintiff fails to allege any conduct in violation of the FDCPA. See Defs.' Mem. in Supp. of Mot. to Dismiss, pp. 4-7 (Docket No. 4, Att. 1). The undersigned agrees with Defendants in these respects and, therefore, recommends the dismissal of Plaintiff's FDCPA claim.

1. Defendants Arguably Are Not Debt Collectors Under the FDCPA According to Plaintiff, "Defendants have been, and are, debt collectors as the term is defined in 15 U.S.C. section 1692a(6)." See Pl.'s Compl., ¶ 38 (Docket No. 1).*fn6 However, under the FDCPA, a debt collector is a person who uses an instrumentality of interstate commerce or the mails in a business which has the principal purpose of collecting debts, or who regularly collects debts owed to another. Fitzgerald v. PNC Bank, 2011 WL 1542138, *3 (D. Idaho 2011) (citing 15 U.S.C. § 1692a(6)). Importantly, however, a debt collector does not include "any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person." Fitzgerald, 2011 WL 1542138 at *3 (quoting 15 U.S.C. § 1692a(6)(F)). To this end, courts -- including this Court -- have concluded that "lenders and mortgage companies are not 'debt collectors' within the meaning of the FDCPA." Cherian v. Countywide Home Loans, Inc., 2012 WL 2865979, *4 (D. Idaho 2012) (citing Ines v. Countrywide Home Loans, Inc., 2008 WL 2795875, *3 (S.D. Cal. 2008) (citing Williams v. Countrywide, 504 F. Supp. 2d 176, 190 (S.D. Tex. 2007) ("Mortgage companies collecting debts are not 'debt collectors.'"))).

With this definition of debt collector in mind, Plaintiff alleges that before her default on the debt, Fannie Mae "owned the loan." See Pl.'s Compl., ¶ 26 (Docket No. 1); compare with 15 U.S.C. § 1692a(6)(F). BAC and its successor, BOFA, operated as the loan servicer (see Exs. E & F to Pl.'s Compl. (Docket No. 1, Atts. 5 & 6)), thus exempting them from the FDCPA. See Cherian, 2012 WL 2865979 at *4 ("Countrywide is the lender, U.S. Bank is the lender's successor, and Bank of America is the loan servicer -- none of which qualify as 'debt collectors' under the FDCPA.") (citing Caballero v. Ocwen Loan Serv., 2009 WL 1528128, at *1 (N.D. Cal. 2009)); see also Fitzgerald, 2011 WL 1542138 at *3 (stating that FDCPA's legislative history "suggests that a mortgagee and its assignee, including mortgage servicing companies, are not debt collectors under the FDCPA when the debt is not in default at the time the mortgage-holder acquires the debt."); but see Ex. E to Pl.'s Compl. (Docket No. 1, Att. 5) (noting that BOFA "is considered a debt collector" under FDCPA).

Furthermore, Northwest, as the successor trustee, has no ownership interest in the Note and, therefore, is otherwise exempt from the FDCPA. See Cherian 2012 WL 2865979 at *4 ("ReconTrust, as the successor, has no ownership interest in the Note and no claim be stated against it under the FDCPA."); see also Jacobson v. Balboa Arms Drive Trust No. 5402 HSBC Financial Trustee, 2011 WL 3328487, *5 (S.D. Cal. 2011) (defining trustees as "merely 'middlemen' in the foreclosure process" while dismissing FDCPA claim); but see Ex. F to Pl.'s Compl. (Docket No. 1, Att. 6) (identifying September 6, 2011 letter as "Notice Under Fair Debt Collection Practices Act" and noting that "[p]ursuant ...


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