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Woodard v. Bank of New York Mellon

United States District Court, D. Oregon, Eugene Division

January 6, 2020

THE BANK OF NEW YORK MELLON; et al., Defendants.


          Ann Aiken United States District Judge

         Plaintiff Cristina Woodard brings this action challenging the foreclosure sale of real property in La Pine, Oregon, following the judicial foreclosure of the property. Defendants are the Bank of New York Mellon fka The Bank of New York, as Trustee for the Certificateholders of the CWABS, Inc., Asset-Backed Certificates, Series 2006-26 ("BNYM"), Specialized Loan Servicing, LLC ("SLS"), and Malcom Cisneros, A Law Corporation ("MC"). Defendants move to dismiss the Complaint. For the following reasons, Defendants' BNYM and SLS's motion is GRANTED and MC's motion is GRANTED in part and DENIED in part.


         In 2006, plaintiff executed a Note for $220, 000 secured by a Deed of Trust on real property located in La Pine, Oregon. Compl. Ex 3.[1] Plaintiff defaulted on the loan, and in April 2014 BNYM filed a foreclosure action on the Note and Deed of Trust in state court, No. 14CV0239FC, (the "Foreclosure Action"). See Foreclosure Action Docket, Doc. 18 Ex A. SLS was servicing the loan for BNYM at the time, and MC is the law firm that initiated the Foreclosure Action on behalf of BNYM.

         Plaintiff was personally served with the Complaint in the foreclosure action in April 2014, received mail service of a Motion for Default in May 2014, and mail service of a Motion for Judgment of Default in November 2015. Doc. 18 Ex C, D, F. She failed to appear in the action and was defaulted. The court entered a General Judgment of Foreclosure on November 25, 2015. See Foreclosure Action Docket, Doc. 18 Ex A; General Judgment of Foreclosure, Doc. 18, Ex. G. The Sheriffs Return Writ of Execution filed the foreclosure action states that Plaintiff was served by mail with the Notice of Sale in June 2018. Doc. 18 Ex. H. The judgment was executed and the property sold to BNYM on August 2, 2018. Id.

         Plaintiff filed this action in December 2018, asserting claims for a declaratory judgment (claim 1); unjust enrichment, fraud, and conversion (claim 2); violations of the Fair Debt Collection Practice Act ("FDCPA"), 15 U.S.C. §1692 et seq., (claim 3); conversion (claim 4); and breach of good faith and duties of care (claim 5). Plaintiff alleges that she sent letters, beginning in April 2018, and made phone calls in an attempt to work out a loan modification and determine whether BNYM and SLS had the right to foreclose on the loan, but never received a response. She also alleges that she did not receive notice of the foreclosure sale. Plaintiff asserts that the foreclosure sale was illegal because she did not receive notice of the sale and that defendants had no standing to initiate foreclosure under the Uniform Commercial Code and FDCPA.


         I. Motion to Dismiss for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

         Motions to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) "can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency, and in so doing rely on affidavits or any other evidence properly before the court." St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989). The court "accept[s] as true the factual allegations in the complaint." Terbush v. United States, 516 F.3d 1125, 1128 (9th Cir. 2008).

         II. Motion to Dismiss for Improper Service Under Rule 12(b)(5)

         Rule 12(b)(5) provides that a defendant may move to dismiss an action for insufficient service of process. Fed.R.Civ.P. 12(b)(5). "A federal court does not have jurisdiction over a defendant unless the defendant has been served properly under Fed.R.Civ.P. A." Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988). "Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint." United Food & Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). But "without substantial compliance with Rule 4, neither actual notice nor simply naming the defendant in the complaint will provide personal jurisdiction." Direct Mail Specialists, 840 F.2d at 688 (internal quotation marks removed).

         Once service of process is challenged, "[i]t is plaintiffs burden to establish the validity of service of process." Roller v. Herrera, No. 3:18-CV-00057-HZ, 2018 WL 2946395, at *2 (D. Or. June 11, 2018). The court may consider evidence outside the pleadings in resolving a Rule 12(b)(5) motion. See Lachick v. McMonagle, No. CIV. A. 97-7369, 1998 WL 800325, at *2 (E.D. Pa. Nov. 16, 1998) ("Factual contentions regarding the manner in which service was executed may be made through affidavits, depositions, and oral testimony.").

         If a court concludes that service was improper, "[t]he choice between dismissal and quashing service of process is in the district court's discretion." Stevens v. Sec. Pac. Nat'l Bank, 538 F.2d 1387, 1389 (9th Cir. 1976). "Service will ordinarily be quashed and the action preserved where 'there is a reasonable prospect that plaintiff ultimately will be able to serve defendant properly."' Roller, 2018 WL 2946395, at *2 (quoting Bravo v. Cty. of San Diego, No. C 12-06460 JSP, 2014 WL 555195, at * 1 (N.D. Cal. Feb. 10, 2014)). The district court also has the discretion to extend the time for service outside of the 90-day period provided for in Rule 4. Id. (citing Fed.R.Civ.P. 4(m)).

         III. Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6)

         A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer u. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept all material facts alleged in the complaint as true and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). However, the court need not accept unsupported conclusory allegations as truthful. Hololen v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992).


         Before turning to the motions to dismiss, the Court will summarize plaintiffs five claims for relief.

         Plaintiffs first claim, "Declaratory Judgment-Standing," asserts that defendants had no standing or right to initiate or hold the foreclosure sale, and appears to argue that defendant had no standing because they were not the Lender or acting on the Lender's behalf and, therefore had "no economic or beneficial interest in any Note, mortgage, or deed of trust." Plaintiff also asserts that "[e]ven if one of the listed Defendants can claim to be the 'Lender/ . . . Defendant no longer owns or has full dominion over Plaintiffs Note." Compl. at ¶ 55. Finally, plaintiff appears to assert that any transfers of the loan were invalid. Plaintiff asks for a declaratory judgment identifying the "lawful holder of the Note and proper beneficiary/Owner under the Deed of Trust." Id. at ¶ 64. Plaintiff also "asks the Court to unwind the judicial foreclosure sale until the Defendant can substantiate that it has the right to enforce the operative security instruments in this case." Id.

         Plaintiffs second claim, "Unjust Enrichment and Fraud and Conversion," alleges that because defendants lacked authority or the right to enforce the note or deed of trust, they were unjustly enriched through the foreclosure and purchase of the property. Plaintiff also alleges that, through the foreclosure sale, defendants converted the property "for [their] improper and unlawful benefit." Id. at ¶ 66.

         Finally, plaintiff alleges

If and [sic] it is a strong possibility that Defendant cannot show its right to enforce said Note and Deed of trust then the actions is more than fraudulent in this case and depending on discovery there are these claims and other claims that would illuminate a plan and motivation and a scheme on part of the Defendants to operate and attempt to collect assets THAT IT HAS NO LEGAL RIGHT TO COLLECT OR ACQUIRE.

Id. at ¶ 68 (emphasis in original).

         Plaintiffs third claim, "Violation of Fair Debt Collection Practices Act," alleges that SLS and MC engaged in unfair debt collection practices by foreclosing without proper legal authority and ...

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