797 F. Supp. 2d 1085
D. Or.2011Background
- Plaintiff and his late wife executed a note secured by a Deed of Trust on real property in Estacada, Oregon in 2003, with Mortgage Market, Inc. as lender and MERS named as beneficiary.
- Assignments and trustee arrangements: MERS assigned to Chase; NWTS appointed as successor trustee, on or about December 6, 2006.
- NWTS recorded a Notice of Default and Election to Sell around March 2009; plaintiff entered a loan modification in August 2009 and began paying.
- Foreclosure sale occurred August 27, 2009, with FNMA as purchaser for stated consideration of $217,147.87; plaintiff contends there were unrecorded assignments and no default.
- Plaintiff asserts a wrongful foreclosure theory against all defendants and a separate breach of contract claim against Chase; NWTS moves to dismiss the wrongful foreclosure claim.
- Court analyzes whether a tort-based wrongful foreclosure claim or a contract-based claim applies, and whether damages for reputation, emotional distress, punitive damages, or conversion are viable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether wrongful foreclosure claim against NWTS is viable | Rapacki asserts improper foreclosure due to authority defects and unrecorded assignments. | NWTS contends no viable tort theory against a trustee not alleged to have acted improperly. | Wrongful foreclosure claim against NWTS dismissed |
| Whether Harper-based duty creates an independent tort duty against the trustee | Harper imposes a general duty to act in good faith and with diligence to obtain best price. | Harper is contract-based, not a standalone tort against NWTS; trustee duties are constrained. | No independent tort duty; Harper does not support the claim against NWTS |
| Whether conversion claim lies for real property or possessions | Damages include possessions; conversion could apply to chattels. | Real property cannot be converted; possible limited conversion for possessions only. | Conversion claim allowed prospectively for possessions if pleaded |
| Whether punitive and emotional distress damages are recoverable on a contract-based claim | Damages for reputation, emotional distress, and punitive damages may be pled | These damages are unavailable for breach of implied covenant of good faith in Oregon | Damages unavailable under contract theory; conversion remains potential relief |
Key Cases Cited
- Harper v. Interstate Brewery Co., 120 P.2d 757 (Or. 1942) (duty to use best efforts to obtain highest sale price in sale of property)
- Cardinal Enterprises v. Far West Federal Bank (In re Cardinal Enterprises), 68 B.R. 460 (9th Cir. BAP 1986) (Harper described as contract-based good faith duty, not a fiduciary duty)
- Wright v. Associates Fin. Servs. Co. of Or., 651 P.2d 1368 (Or. App. 1982) (describes Harper-inspired good faith duty in mortgage context)
- Cascade Steel Fabricators, Inc. v. Citizens Bank of Or., 612 P.2d 332 (Or. App. 1980) (Harper duty limited to manner of sale)