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Tadros v. Wilmington Trust, National Association

United States District Court, D. Oregon, Portland Division

May 16, 2018



          Ann Aiken United States District Judge.

         In this action, plaintiffs Ashraf Tadros and Shaun Tadros assert a variety of claims related to the foreclosure of the loan secured by their residential property. Defendant Wilmington Trust, National Association, as Successor Trustee to Citibank, N.A. as Trustee of Structured Asset Mortgage Investments II Inc., Bear Stearns ARM Trust, Mortgage Pass-Through Certificates, Series 2006-4 ("Wilmington"), [1] now moves to dismiss all plaintiffs' claims. For the reasons set forth below, Wilmington's motion is granted and this action is dismissed. If plaintiffs wish to file an amended complaint, they must file a motion requesting leave to do so within thirty days of the date of this opinion and order.


         On August 17, 2006, plaintiffs took out a $570, 000 loan from Countrywide Home Loans, Inc. ("Countrywide"), to finance the purchase of real property located at 4671 SW Trail Road in Tualatin, Oregon. Defendant Bank of America, N.A, ("Bank of America"), was Countrywide's loan servicer. The loan was secured by a promissory note and deed of trust. The deed of trust was recorded on August 25, 2006, in Clackamas County, Oregon. Clackamas County records also contain two assignments of the beneficial interest in the deed of trust. The first assignment, to Citibank, N.A. as Trustee for the Holders of the SAMIII Inc. Bear Steams Trust, Mortgage Pass-Through Certificates, Series 2006-4 ("Citibank"), was executed December 13, 2011 and recorded December 19, 2011. The second assignment, to Wilmington, was executed May 23, 2017 and recorded June 5, 2017.

         In June 2012, Ashraf Tadros filed for Chapter 13 bankruptcy. Bank of America filed a proof of claim on behalf of Citibank, dated October 2012, listing a secured claim in the amount of $630, 443.27 and stating that plaintiffs had last made a payment on the loan in March 2011, leading to a pre-petition default of $87, 750.73. On December 18, 2013, defendant Specialized Loan Servicing, LLC ("SLS"), the loan servicer for Wilmington, filed a transfer of claim in the bankruptcy court stating that Citibank had assigned its beneficial interest in the promissory note and deed of trust to Wilmington.[2] The next day, SLS served Ashraf Tadros, his attorney, the Chapter 13 Trustee, and the U.S. trustee with notice of the transfer of claim. That notice specified that any objection to the transfer was to be filed within twenty-one days. No. one objected.

         In June 2017, SLS, on behalf of Wilmington, filed a motion in the bankruptcy court seeking relief from the automatic stay in order to foreclose on the deed of trust, Plaintiffs filed no objection to that motion, and the bankruptcy court granted relief from stay on July 14, 2017. On September 26, 2017, the bankruptcy court entered its order of discharge and closed the bankruptcy case.

         Two and a half weeks later, plaintiffs filed this lawsuit, alleging-apparently for the first time-that Wilmington had no beneficial interest in the promissory note or deed of trust. Plaintiffs asserted various claims, including claims under the Internal Revenue Code and the Fail-Debt Collection Practices Act. In addition to money damages, plaintiffs sought to quiet title to their property and requested a declaratory judgment as to who actually owned the note and deed of trust.

         In November 2017, defendant Quality Loan Servicing Corporation ("Quality") filed and recorded a notice of trustee's sale. Although the parties dispute whether they reached any form of agreement, settlement discussions apparently took place up to the date of the foreclosure sale. When those negotiations fell through, the property was sold at auction to defendant Rose City Ventures, Inc, ("Rose City"), March 20, 2018. Plaintiffs filed a motion for a temporary restraining order and preliminary injunction on March 22, 2018, seeking to prevent Wilmington, SLS, and Quality from transferring title to Rose City. I entered a temporary restraining order on March 23, 2018. Following a hearing and full briefing, however, I determined that plaintiffs had failed to show serious questions going to the merits of their claim that Wilmington Trust lacked authority to foreclose at the time of the sale. I therefore denied the motion for a preliminary injunction. On April 9, 2018, the first business day after the temporary restraining order dissolved, the trustee's deed transferring the property to Rose City was recorded in Clackamas County.

         In its response to the motion for a preliminary injunction, Wilmington moved to dismiss all plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6).


         When considering a motion to dismiss, a court construes a complaint in favor of the plaintiff and takes all factual allegations as true. "[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content, 5 and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "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." Iqbal, 556 U.S. at 678. "Dismissal under Rule 12(b)(6) is proper only when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory." Zixicmg Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013).


         Before proceeding to the merits of the parties' arguments, I first must address the effect of my opinion and order denying plaintiffs' motion for a preliminary injunction, Tadros v. Wilmington Trust, Nat'l, Ass's, 2018 WL 1924464 (D. Or. Apr. 23, 2018). In that order, I made factual findings about the evidence submitted by the parties. In its reply in support of the motion to dismiss, Wilmington relies on several of those findings. But I have not taken those factual findings into account in resolving this motion. When a motion to dismiss is filed after a preliminary injunction dispute, the court has two choices. One option is to ignore the evidence in the preliminary injunction record (as well as any findings made on the basis of that evidence) and constrain review to the complaint, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (summarizing the documents a court generally may consider when adjudicating a 12(b)(6) motion). Alternatively, the court may-with notice to the parties- consider the evidence in the preliminary injunction record, thereby converting the motion to dismiss into a motion for summary judgment. See Fed. R. Civ. P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.").

         Here, it is appropriate to take the first approach. Because "haste ... is often necessary" in deciding whether to grant a preliminary injunction, such relief "is customarily granted [or denied] on the basis of procedures that are less formal and evidence that is less complete then in a trial on the merits[.]" Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). Critically, discovery in this case is not yet complete and plaintiffs vigorously contend that Wilmington has refused to turn over relevant evidence; thus, converting the motion to one for summary judgment risks prejudicing plaintiffs, who do not have access to defendants' files. Accordingly, I have considered only the following documents in making this decision: the Corrected Amended Complaint; the deed of trust on the property, first recorded in Clackamas County on August 25, 2006; the first assignment of that deed of trust, recorded in Clackamas County on December 19, 2011; the second assignment of that deed of trust, recorded in Clackamas County on June 5, 2017; and all filings in the bankruptcy proceeding In re Tadros, No. 12-34441-dwh 13 (Bankr. D. Or.). The deed of trust, two assignments, and bankruptcy court filings are all appropriate subjects of judicial notice under Federal Rule of Evidence 201(b)(2), See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) ("We may take judicial notice of court filings and other matters of public record."). In addition, the Corrected Amended Complaint incorporates and relies upon the deed of trust and the two assignments.

         I. Res Judicata Effect of the Bankruptcy Court's Orders

         Defendants argue that all plaintiffs claims must be dismissed with prejudice under the doctrine of res judicata. That doctrine, also known as claim preclusion, "bars all grounds for recovery that could have been asserted, whether they were or not, in a prior suit between the same parties on the same cause of action." Siegel v. Fed. Home Loan Mortg, Corp.,143 F.3d 525, 528-29 (9th Cir. 1998) (alterations normalized) (emphasis in original). Res judicata applies to matters decided in bankruptcy, ...

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