United States District Court, D. Oregon
STEPHEN P. ARNOT, Trustee for the Estate of Robert W. Christensen and Marlene J. Christensen, Plaintiff,
DAVID A. WEIBEL, an individual; and U.S. BANK, NA, as Trustee, Defendants.
OPINION AND ORDER
MICHAEL W. MOSMAN, CHIEF UNITED STATES DISTRICT JUDGE
October 17, 2019, 1 heard oral argument in two companion
cases-Arnot v. ServiceLink Title Company of Oregon
(3:17-cv-00591-MO) and Arnotv. Weibel et al.
(3:17-cv-00592-MO)-regarding multiple motions for summary
judgment filed by the various defendants. Min. of Proceedings
[ECF 45].As stated on the record, I granted the
motions for summary judgment and dismissed both cases with
prejudice. In both cases, I granted summary judgment on two
independent grounds: 1) that Plaintiff failed to join
required parties, and 2) that Plaintiffs claims are barred by
the two-year statute of limitations for avoidance actions
under bankruptcy law. In Arnot v. Weibel et al.
only, I granted summary judgment for a third reason: that
Plaintiffs claims are barred by the five-year statute of
limitations under Oregon Revised Statute ("ORS")
86.767(6). The following opinion supplements my comments made
at oral argument and further explains my decision.
cases arise out of a similar set of facts. In both cases,
Plaintiff is the chapter 7 trustee of the bankruptcy estate
of a married couple. Years ago, each couple financed the
purchase of a home by signing a "trust deed" with a
lender, pursuant to the Oregon Trust Deed Act
("OTDA"). See, e.g., Notice of Removal
[ECF 1 - Attach. 1] Ex. A ("Compl") at ¶ 6.
Under the OTDA, a debtor secures a home loan with a trust
deed by granting a legal interest to a "trustee"
and a beneficial interest to a "beneficiary."
See Brandrup v. ReconTrust Co., 353 Or. 668, 676
(2013). Should the debtor default on the loan, the trustee
has the right to initiate a nonjudicial foreclosure sale (the
legal interest), the proceeds of which would go to the
beneficiary to satisfy the loan obligation (the beneficial
accordance with a common practice in the Oregon mortgage
industry at the time, each of the couples' trust deeds
named the Mortgage Electronic Registration System
("MERS") as the beneficiary to the trust deed-but
solely as the "nominee" for the lender. Compl.
[1-1] at ¶ 6; Decl. of MERS, Arnot v.
ServiceLink, No. 3:17-cv-00591-MO [ECF 34 - Attach. 1]
Ex. A at 2; see generally Brandrup, 353 Or. at
675-83 (2013) (describing the OTDA and the practice of naming
MERS as the beneficiary to a trust deed). Generally speaking,
in its capacity as beneficiary/nominee, MERS would handle the
transfer of rights in a trust deed by appointing successors
in interest and recording the assignment. See
Brandrup, 353 Or. at 675-83. For example, when a
transaction called for assigning the legal interest of the
"trustee" to a new entity, MERS would appoint the
"successor trustee" and record the assignment.
See Id. Thus, in Oregon, it was frequently the case
that a non-judicial foreclosure sale would be initiated by a
"successor trustee" that had been appointed by
MERS. See Id. However, in June 2013, the Oregon
Supreme Court held that MERS was ineligible to serve as a
"beneficiary" to a trust deed under the OTDA.
Brandrup, 353 Or. at 674 ("[A]n entity like
MERS, which is not a lender, may not be a trust deed's
'beneficiary,' unless it is a lender's successor
in interest."); see also Niday v. GMAC, 353 Or.
648 (2013). That holding cast serious doubt upon the validity
of non-judicial foreclosure sales that had been initiated by
a "successor trustee" appointed by MERS.
the couples here eventually defaulted on their loan
obligations and went into bankruptcy. Sure enough, each of their
homes was sold-years ago-in a non-judicial foreclosure sale
initiated by a MERS-appointed successor trustee. Since then,
purported ownership of these homes has changed hands multiple
times and the homes are currently resided in by individuals
who assuredly believe they lawfully purchased and own the
homes. Plaintiff- the trustee of both couples' bankruptcy
estates-now asks this court to declare that these nonjudicial
foreclosure sales are void and that any purported subsequent
conveyance is therefore invalid, thus reestablishing the
couples' (or their bankruptcy estates') ownership
interest in the properties. See PL's Resp. to
Mot. for Summ. J. [ECF 37] at 5.
Case-Specific Factual Background A.
Arnot v. Servicelink
August 12, 2005, Jason and Connie Neel ("the
Neels") purchased a home financed by a trust deed (as
described above). First Am. Compl. ¶¶ 5-7,
Arnot v. ServiceLink et al., No. 16-03044-DWH
(Bankr. D. Or. Aug. 15, 2016) [ECF 52] ("ServiceLink
FAC"). They eventually stopped making payments on their
loan. See Id. ¶ 10. On January 19,
2010, MERS appointed Defendant ServiceLink as the
"successor trustee" of the Neel's trust deed.
Id. On August 6, 2010, a non-judicial foreclosure
sale, initiated by ServiceLink, was conducted and the home
was purchased by GMAC Mortgage, LLC ("GMAC").
Id. On October 18, 2010, Philip and Marianne
Prodehl, a married couple, along with Joseph Prodehl, an
unmarried man, jointly purchased the home from GMAC.
Cleverley Am. Deck [ECF 45] Ex. 14 at 1. On December 12,
2014, Phillip and Marianne Prodehl conveyed their interest in
the property to Joseph Prodehl. Id. Ex. 20 at 1.
Joseph Prodehl is the current occupant of the home and has
encumbered the property with a new deed of trust and other
lines of credit. Def Mot. Summ. J. [ECF 23] at 6; Cleverley
Am. Deck  Ex. 21, 23.
Arnot v. Weibel et al (3:17-cv-592-MO)
December 1, 2000, Robert and Marlene Christensen ("the
Christensens") purchased a home financed by a trust deed
(as described above). Rosenberg Decl. [ECF 34 - Attach. 1]
Ex. 1 ("Weibel FAC") at ¶¶ 5-7. On August
1, 2009, the Christensens defaulted on their home
loan. Capital One Decl. [ECF 26 - Attach. 1] at
¶ 11. On December 11, 2009, MERS appointed Defendant
David Weibel as the "successor trustee" of the
Christensen's trust deed. Weibel FAC ¶ 8. On June
30, 2010, Weibel conducted a non-judicial foreclosure sale
where the home was purchased by LaSalle Bank National
Association, who eventually conveyed the property to
Defendant U.S. Bank. Id. ¶ 12. On March 16,
2011, U.S. Bank sold the property Michael Kennedy and Eva
Thanheiser, who financed the purchase by executing a new
trust deed with Wells Fargo. Compl. [1-1] at ¶¶
March 17, 2016, Plaintiff commenced these cases by filing
three claims for relief in state court: declaratory relief
(declaring the foreclosure sales void), trespass, and invalid
encumbrance. See, e.g., Compl. [1-1] at 4, 6, 7. The
original complaints, in addition to naming the present
Defendants, also named and asserted claims against the
Prodehls, Mr. Kennedy and Ms. Thanheiser. Id. at 1;
Bankr. Doc, ServiceLink, No. 3:17-cv-00591-MO [ECF 1
- Attach. 1] at 8 ("ServiceLink
Compl."). The action was removed to Bankruptcy
Court where Plaintiff moved to remand the case back to state
court. See Def. U.S. Bank's Resp. [ECF 36] at
2-3. Judge Randall Dunn denied Plaintiffs motion, holding
that Plaintiff's claim for declaratory relief was really
an avoidance action under bankruptcy law:
[A]lthough the complaints in the Adversaries purport to raise
only state law issues, ultimately seeking damages for alleged
trespasses and invalid encumbrances, the first, foundation
claim for relief in each of the Adversaries seeks a
declaratory judgment that the subject foreclosure sales are
void, effectively nullifying any transfers resulting from or
subsequent to the foreclosure sales. As defendants have
pointed out, Mr. Arnot effectively seeks declaratory relief
avoiding all such transfers to support his further claims.
However, § 546(a)(1) establishes a two-year statute of
limitations from the petition date in the main case for the
exercise of a trustee's avoidance powers under the
Bankruptcy Code. The question as to whether a trustee, ...