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Breinholt v. Ocwen Loan Services, LLC

United States District Court, D. Idaho

August 23, 2017

RICHARD WILLIAM BREINHOLT AND SUSAN LYN BREINHOLT Plaintiffs,
v.
OCWEN LOAN SERVICES, LLC, A FINANCIAL INSTITUTION UNREGISTERED IN IDAHO; UNKNOWN OCWEN AGENTS AND COUNSELS JOHN AND JANE DOES I-XX; Defendants.

         REPORT AND RECOMMENDATION RE: DEFENDANT'S MOTION TO DISMISS (DOCKET NO. 13) MEMORANDUM DECISION AND ORDER RE: PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION (DOCKET NO. 4) PLAINTIFFS' MOTION TO STRIKE DEFENDANT'S REQUEST TO TAKE JUDICIAL NOTICE FOR LACK OF RELEVANCY (DOCKET NO. 17)

          Honorable Ronald E. Bush Chief U.S., Magistrate Judge.

         Now pending before the Court are the following motions: (1) Defendant's Motion to Dismiss (Docket No. 13); (2) Plaintiffs' Motion for Preliminary Injunction (Docket No. 4); and (3) Plaintiffs' Motion to Strike Defendant's Request to Take Judicial Notice for Lack of Relevancy (Docket No. 17). Having carefully considered the record and otherwise being fully advised, the undersigned enters the following Report and Recommendation as to Defendant's Motion to Dismiss, and Memorandum Decision and Order as to Plaintiffs' Motion for Preliminary Injunction and Motion to Strike:

         BACKGROUND[1]

         1. On or around August 30, 2005, in consideration for a mortgage loan, Plaintiffs Richard William Breinholt and Susan Lyn Breinholt (“Breinholts” or “Plaintiffs”) executed a promissory note (“Note”). The Note was secured by a Deed of Trust on the real property located at 1976 East Star Lane, Meridian, Idaho 83642 (“Property”). Plaintiffs defaulted on their Note and Deed of Trust, and the Property was subsequently sold at a non-judicial foreclosure sale on or about May 21, 2009. See Tait Aff. at ¶¶ 2-3, attached as Ex. A to Request for Judicial Notice (“RFJN”) (Docket No. 11, Att. 1).[2]

         2. On June 17, 2009, Plaintiffs (represented by an attorney) brought suit in Idaho state court, contesting the validity of the non-judicial foreclosure (“2009 State Court Action”).[3] Pursuant to a September 13, 2010 stipulation, the 2009 State Court Action was ultimately dismissed with prejudice on or around October 5, 2010. See Order of Dismissal with Prejudice, attached as Ex. B to RFJN (Docket No. 11, Att. 2).

         3. On September 10, 2010, Plaintiffs (now representing themselves) filed a similar action in this Court, also contesting the validity of the non-judicial foreclosure (“2010 Federal Action”).[4] On February 18, 2011, U.S. District Judge Edward J. Lodge[5] dismissed the 2010 Federal Action based, primarily, on the doctrine of res judicata. See 2/18/11 MDO, p. 7, attached as Ex. D to RFJN (Docket No. 11, Att. 4) (“The Court finds the three requirements of res judicata are satisfied in this action: party identity, identity of issues, and a final judgment. Any new allegations or claims of recovery could have and should have been raised by Plaintiffs in their state court action [(the 2009 State Court Action)].”) (internal citations omitted). Judge Lodge also dismissed Plaintiffs' TILA claims as barred by the applicable statute of limitations, and dismissed Plaintiffs' fraud, breach of fiduciary duty, and Fair Dept Collection Practices Act (“FDCPA”) claims because the Plaintiffs' default on the underlying Note was undisputed. See id. (“Further, any claims pursuant to TILA are barred by the applicable statute of limitations. As to any claims in the Complaint for fraud, breach of fiduciary duty, or violation of Fair Debt Collections Act, the Court finds Plaintiffs have not provided legal authority to be able to recover on these claims since the TILA claims are time barred and the Breinholts' default on the underlying note for the Star Lane property is undisputed.”) (internal citation omitted).[6]

         4. The Trustee's Deed on the Property was recorded on April 11, 2011 in the Ada County Recorder's Office. See Tait Aff. at ¶ 4, attached as Ex. A to RFJN (Docket No. 11, Att. 1). A Notice to Quit was served on Plaintiffs on May 3, 2011. See id. Because Plaintiffs failed to vacate the Property within three days as directed in the Notice to Quit, on May 27, 2011, Deutsche Bank National Trust Company (as Trustee for the Residential Asset Securitization Trust 2005-A15, Mortgage Pass-Through Certificates, Series 2005-O Under the Pooling and Servicing Agreement Dated December 1, 2005) (“Trust”) brought a civil action in Idaho state court to evict Plaintiffs from the Property (“2011 Eviction Action”).[7] See id. at ¶¶ 4-5; see also Docket for Case No. CV-OC-2011-10414, attached as Ex. E to RFJN (Docket No. 11, Att. 5). On November 29, 2011, Fourth Judicial District Magistrate Judge Christopher Bieter granted the Trust's Motion for Summary Judgment in the state court 2011 Eviction Action, and later entered a Judgment and Order of Eviction on October 1, 2012. See Tait Aff. at ¶ 6, attached as Ex. A to RFJN (Docket No. 11, Att. 1) (citing to 10/1/12 J. and Order, attached as Ex. B thereto).

         5. Plaintiffs appealed Judge Bieter's decision to the state district court and, on October 1, 2012, filed a Notice of Lis Pendens. See id. at ¶ 7.[8] On February 13, 2012, District Judge Kathryn A. Sticklin of the state court upheld Judge Bieter's Judgment and Order of Eviction. See id. (citing to 2/13/12 Mem. Dec. and Order, attached as Ex. D thereto) (though striking Plaintiffs' brief, concluding nonetheless: “The magistrate did not err in concluding that the Breinholts are barred by the doctrine of res judicata from relitigating their claims in this case. As noted by [(the Trust)], ‘[i]n the related state court [(2009 State Court Action)] and federal court [(2010 Federal Action)] actions, the Breinholts asserted claims that are identical to the arguments and/or claims raised in their Answer to [(the Trust's)] Complaint [in this case [(2011 Eviction Action)]] and again raised here on appeal. The courts have dismissed all of the claims contained in the prior actions with prejudice.'”)).

         6. On August 8, 2012, Plaintiffs filed a Notice of Appeal with the Ninth Circuit Court of Appeals, appealing the 2010 Federal Action. See Not. of Appeal, attached as Ex. H to RFJN (Docket No. 11, Att. 8). On November 7, 2016, the Ninth Circuit affirmed Judge Lodge's dismissal of Plaintiffs' claims in the 2010 Federal Action, reasoning:

The district court properly dismissed the Breinholts' claims against Aegis Wholesale Corporation, OneWest Bank, FSB, Tri-County Process Serving LLC . . ., Regional Trustee Services Corporation, and Pioneer Lender Trustee Services, LLC, as barred by the doctrine of res judicata because the Breinholts' claims were raised, or could have been raised, in a prior state court action between the parties or their privies that resulted in a final judgment on the merits.
The district court properly dismissed the Breinholts' claims against Mortgage Electronic Registration Systems, Inc. . . ., TitleOne Corporation, Jennifer Tait, and Robinson Tait, P.S. because the Breinholts failed to allege facts sufficient to state any plausible claim for relief.

11/7/16 Mem., pp. 2-3, attached as Ex. I to RFJN (Docket No. 11, Att. 9).[9]

         7. In the meantime, Plaintiffs appealed Judge Sticklin's February 13, 2012 decision in the 2011 Eviction Action. See Tait Aff. at ¶ 8, attached as Ex. A to RFJN (Docket No. 11, Att. 1).[10], [11] On December 3, 2014 (following the resolution of several procedural/jurisdictional issues (see id. at ¶¶ 8-11)), the Idaho Court of Appeals affirmed Judge Sticklin's order affirming Judge Bieter's grant of summary judgment in favor of the Trust. See Deutsche Bank Nat. Trust Co. v. Breinholt, 2014 WL 6804502 (Id. Ct. App. 2014).

         8. On June 16, 2016, the Trust filed motions in the 2011 Eviction Action to lift the January 30, 2012 (renewed on May 15, 2013) stay on eviction proceedings, to disburse funds in the Court's registry to the Trust, to issue a writ of restitution, and to expunge the Lis Pendens recorded with the Ada County Recorder. See Mot., attached as Ex. F to RFJN (Docket No. 11, Att. 6).[12] On August 17, 2016, Judge Bieter lifted the May 15, 2013 stay, ordered that all monies deposited in the Court's registry be released to the Trust, and that a writ of restitution of restitution be issued restoring possession of the Property to the Trust. See 8/17/16 Order, attached as Ex. G to RFJN (Docket No. 11, Att. 7).

         9. On August 25, 2016, Plaintiffs appealed Judge Bieter's August 17, 2016 order to the state district court. See Ex. J to RFJN (Docket No. 11, Att. 10).[13]

         10. On October 11, 2016, Plaintiffs filed the instant action in this Court against Defendant Ocwen Loan Services, LLC (“Ocwen” or “Defendant”).[14] Within their Complaint, Plaintiffs again generally challenge the validity of the non-judicial foreclosure sale of the Property, alongside oblique allegations that they have attempted “to bring the house into honor but that [Ocwen] ha[s] gone through the motions of modifying, not holding the papered sale, and bad faith bargaining to modify/REO [(real estate owned)]/DPO [(discounted payoff)] only to have the deal changed time and time again and having the attorneys changed every time the deal seems to be finalized.” Compl., ¶ 48 (Docket No. 1). Plaintiffs then assert the following claims against Ocwen: (1) Violations of the Truth in Lending Action (First Cause of Action); (2) Violations of the Real Estate Settlement Procedures Action (mistakenly identified as the Third Cause of Action); (3) Violations of the Consumer Protection Act (mistakenly identified as the Fourth Cause of Action); and (4) Intentional Infliction of Emotional Distress (mistakenly identified as the Fifth Cause of Action). See id. at ¶¶ 57-72.

         11. In the pending Motion to Dismiss, Ocwen seeks to dismiss each of these claims and, correspondingly, this action - specifically, Ocwen argues that each of Plaintiffs' claims (1) is barred by the doctrine of res judicata or, alternatively, (2) fails as a matter of law. See generally Mem. in Supp. of MTD (Docket No. 13, Att. 1).

         REPORT/DISCUSSION

         A. Motion to Dismiss Standard

         FRCP 8(a)(2) requires “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 attached 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. See 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.

         The Supreme Court has 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. “[FRCP] 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. See 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.

         Somewhat paradoxically, providing too much in the complaint may also be fatal to a plaintiff. For instance, dismissal may be appropriate when the plaintiff's allegations disclose some absolute defense or other bar to recovery. See Weisbuch v. Cnty. of LA, 119 F.3d 778, 783, n.1 (9th Cir. 1997) (stating that “[i]f the pleadings establish facts compelling a decision one way, that ...


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