Salgado-Fuentes v. Great Southern Bank, 0:13-cv-02814

Background

Plaintiff Javier Salgado‑Fuentes executed a 2006 mortgage to Prime Mortgage Corp. with MERS named as nominee; loan later involved in several recorded assignments and power‑of‑attorney/foreclosure notices.
On Feb. 22, 2012, an Assignment of Mortgage from MERS to Inter Savings Bank was recorded, signed by Tori Mock as “Assistant Secretary of MERS.”
Inter Savings Bank failed in April 2012; Great Southern Bank acquired certain assets from the FDIC and later recorded an assignment from the FDIC and authorized foreclosure actions beginning in 2013.
A sheriff’s sale occurred; Plaintiff sued in state court seeking to invalidate the non‑judicial foreclosure and for damages; case removed to federal court on diversity grounds.
Plaintiff’s theories: (1) the MERS assignment was invalid (signatory lacked authority and MERS had limited its authority post‑2011), causing all downstream assignments and Great Southern’s interest to be void; (2) Great Southern was not a holder in due course (acquired via insolvency) and thus lacked the right to accelerate and exercise the power‑of‑sale.
Defendants moved to dismiss for failure to state a claim; Magistrate Judge Keyes recommended dismissal with prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of MERS assignment / standing to challenge assignment	Assignment invalid because signatory (T. Mock) actually worked for assignee and MERS revoked foreclosure authority; therefore downstream transfers invalid	Plaintiff lacks standing to challenge inter‑party assignments; MERS practice authorized members’ employees to sign as MERS officers; statutory prima facie validity of representative acknowledgments	Court: Plaintiff lacks standing to attack assignment; even on merits assignment is prima facie valid under Minn. Stat. §358.50 and Jackson practice supports MERS signings; claim implausible
Effect of MERS rule changes on ability to assign	MERS rule change (post‑July 2011) revoked authority to initiate foreclosures, so assignments or actions after that were void	MERS rule change only limited initiation of foreclosures in MERS' name, not the execution of assignments; rule does not invalidate assignments	Court: Rule change does not nullify assignments; plaintiff misreads MERS rules; claim fails
Holder in due course / right to foreclose	Great Southern acquired the loan via FDIC/insolvency, so isn’t a holder in due course and lacked authority to declare default, accelerate, and credit‑bid at sale	Holder‑in‑due‑course status is irrelevant to authority to foreclose; show‑me‑the‑note theory rejected; UCC provision cited does not control foreclosure rights	Court: Holder‑in‑due‑course argument is legally irrelevant to foreclosure authority; claim is a rehash of rejected "show‑me‑the‑note" theory; fails
Slander of title / Declaratory relief	Title clouded by false filings and improper foreclosure; seeks damages and declaratory relief	Plaintiff failed to plead falsity, publication, malice, or special damages with particularity as required by Rule 9(b); declaratory claim depends on substantive claims	Court: Slander‑of‑title dismissed for failure to plead elements with specificity; declaratory claim fails for same reasons as quiet‑title/invalidity claims

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (court sets plausibility standard for pleadings)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility and pleading standards)
Jackson v. Mortgage Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn. 2009) (MERS practice of appointing member employees as MERS officers explained)
Stein v. Chase Home Fin., LLC, 622 F.3d 976 (8th Cir. 2011) (rejecting "show‑me‑the‑note" theories)
Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027 (9th Cir.) (Rule 9(b) pleading standard applies to slander‑of‑title claims)
Paidar v. Hughes, 615 N.W.2d 276 (Minn. 2000) (elements of slander of title claim)