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Roisland v. Flagstar Bank, FSB

United States District Court, D. Oregon, Portland Division

November 15, 2013

JOAN F. ROISLAND, Plaintiff,
v.
FLAGSTAR BANK, FSB, NORTHWEST TRUSTEE SERVICES, INC., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., and FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendants

As Amended November 26, 2013.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Joan F. Roisland, Plaintiff: Lance R. Clark, LEAD ATTORNEY, Lake Oswego, OR.

For Flagstar Bank, FSB, Mortgage Electronic Registration Systems (MERS), Federal Home Loan Mortgage Corporation, Defendants: Frederick B. Burnside, LEAD ATTORNEY, Davis Wright Tremaine, LLP (Seattle), Seattle, WA; Kevin H. Kono, LEAD ATTORNEY, Davis Wright Tremaine, LLP, Portland, OR; Blake J. Robinson, Davis Wright Tremaine LLP, Portland, OR.

For Northwest Trustee Services, Inc., Defendant: John M. Thomas, LEAD ATTORNEY, RCO Legal, P.C., Portland, OR.

OPINION

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AMENDED OPINION AND ORDER

MICHAEL W. MOSMAN, United States District Judge.

Plaintiff Joan Roisland filed suit in Multnomah County Court in November 2012, seeking to unwind the nonjudicial foreclosure of her residence and to recover for other damages. Defendants removed to this court under 28 U.S.C. § 1441 and moved to dismiss [11, 15] the complaint under Federal Rule of Civil Procedure 12(b)(6). I have considered Defendants' motions and the evidence appended to Ms. Roisland's complaint and submitted by Defendants. As discussed further below, I dismiss Ms. Roisland's first, second, third, fourth, fifth and seventh claims with prejudice. I dismiss Ms. Roisland's sixth claim with prejudice as to Defendants MERS and Freddie Mac and without prejudice as to Defendant Flagstar.[1]

BACKGROUND

Ms. Roisland alleges that she first purchased the property at issue " over [twenty] years ago" and that she executed the deed of trust at issue in this case in 2009. (Compl. [1-1] ¶ 1-2.) Ms. Roisland does not dispute that she went into default on the loan in 2011. The property was nonjudicially foreclosed upon in 2012. The property was purchased at the trustee's sale by Federal Home Loan Mortgage Corporation, and Ms. Roisland remains in possession. (Compl. [1-1] ¶ 1, 7.) Ms. Roisland brought suit in Multnomah County Court against Flagstar Bank, FSB (" Flagstar" ); Northwest Trustee Services, Inc.; (" Northwest" ); Mortgage Electronic Registration Systems, Inc. (" MERS" ); and " Federal Home Loan Mortgage Corporation" (" Freddie Mac" ). Her suit challenges the nonjudicial foreclosure proceedings as improper and seeks to unwind the trustee's sale. (Compl. [1-1] at 8.)

The gravamen of the complaint is that Defendants " knew or should have known that the preconditions for initiating a non-judicial foreclosure of Plaintiff's real property were not met . . . the recorded assignment [from MERS] to Flagstar was false . . . [and] that MERS did not have authority to act on behalf of the beneficiary." (Compl. [1-1] ¶ 8.)

The complaint was filed on November 27, 2012, but Ms. Roisland did not serve any of the defendants until March 8, 2013.

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Only Defendant MERS was served on that date. Defendants MERS and Flagstar then removed the suit to this court under 28 U.S.C. § 1441. No other Defendant has been served.

In Oregon, a loan secured by the borrower's real property is most often secured using a deed of trust, which functions as a mortgage. See Brandrup v. ReconTrust Co., N.A., 353 Or. 668, 675-77, 303 P.3d 301, 305-06 (2013). In this case, the deed of trust secures a promissory note embodying Ms. Roisland's obligation to repay the loan for $110,000 from First Priority Financial, Inc., the lender.[2] (Def.'s Mem. [12] Ex. A.) The promissory note bears an endorsement from First Priority to Defendant Flagstar. (Def.'s Mem. [12] Ex. A.) The endorsement shows that Defendant Flagstar is the holder of the promissory note. As noted, the promissory note is secured by the deed of trust granted by Ms. Roisland.

The deed of trust named Defendant MERS as beneficiary and Fidelity National Title[3] as trustee. (Compl. [1-1] ¶ 2 & Ex. 1 at 1.) Ms. Roisland submitted the deed of trust along with her complaint. (Compl. [1-1] Ex. 1.) The deed of trust, which was recorded on March 26, 2009, includes a notation directing return of the deed to " Flagstar Bank" after recording. (Compl. [1-1] Ex. 1 at 1). Ms. Roisland alleges that Defendant Flagstar " serviced Plaintiff's loan secured through Plaintiff's deed of trust" and that she made all loan payments to Flagstar. (Compl. [1-1] ¶ ¶ 2, 5.) Defendant Flagstar argues that because this notation already appeared on the deed of trust when it was recorded on March 26, 2009, it is clear that at that time Flagstar " would immediately acquire" the promissory note from First Priority. (Def.'s Mem. [12] at 2-3.) Plaintiff has pointed to no alternative explanation for this notation on the deed of trust, and my examination of the documents has revealed none.

Ms. Roisland does not dispute that she defaulted on the promissory note in 2011. Defendants argue that at that time Defendant Flagstar, as holder of the note, was already entitled to enforce the deed of trust notwithstanding that Defendant MERS was nominally the beneficiary of the deed of trust.[4] (Def.'s Mem. [12] at 3.)

On December 29, 2011, MERS assigned its nominal beneficial interest in the deed of trust to Defendant Flagstar, which then appointed Defendant Northwest as successor trustee. Both the assignment and appointment were recorded on January 11, 2012. (Compl. [1-1] Ex. 2; Def.'s Mem. [12] Ex. B.) Defendant Northwest recorded a Notice of Default and Election to Sell on the same day and held a trustee's sale on May 18, 2012. (Compl. [1-1] ¶ 7 & Ex. 3, 4.) The property was purchased by Defendant Freddie Mac. (Compl. [1-1] ¶ 7.) The Trustee's Deed was recorded on May 23, 2012. (Compl. [1-1] Ex. 4.)

The complaint includes some allegations that negotiations had been or were occurring after Ms. Roisland's default and prior

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to the foreclosure. (Compl. [1-1] ¶ 7.) Ms. Roisland alleges:

From March 2012 to Mid-May 2012, and as late as the morning of May 18, 2012, Flagstar negotiated with Plaintiff's authorized representatives to postpone or rescind the foreclosure sale, suggested the prospects of postponement were encouraging, and yet took no action to stop the sale or communicate further with Plaintiff or her representatives.

(Compl. [1-1] ΒΆ 7.) Ms. Roisland does not, however, contend that she ever actually entered into a forbearance ...


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