Sovereign v. Deutsche Bank
856 F. Supp. 2d 1203
D. Or.2012Background
- Plaintiffs refinanced their home on Jan 24, 2007, obtaining a $333,000 loan secured by a Deed of Trust; MIT named as Lender, Western Title and Escrow as Trustee, and MERS as lender’s nominee and Deed of Trust beneficiary.
- Plaintiffs allege MIT did not fund the loan and was a broker, not the actual lender, and that Defendants have no defaulted obligation to them.
- Plaintiffs contend their mortgage was part of a securitization pool with numerous unrecorded transfers; they allege improper recording of assignments.
- In Aug 2010, Plaintiffs sought a loan modification; CM and Plaintiffs failed to reach an agreement, and Plaintiffs allege CM instructed them to stop paying.
- On Mar 15, 2011 MERS assigned the Deed of Trust to CM and CWRC was appointed Trustee; Notice of Default and Notice of Trustee’s Sale were issued in Apr 2011; Plaintiffs allege improper or fraudulent acts in these recordings.
- Plaintiffs filed an Amended Complaint seeking declaratory relief on several theories, including lack of authority, improper recording, and invalid default claims; the case led to TRO and multiple motions to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Lender-in-fact status and document validity | MIT was not the actual lender; documents should be nullities. | Lender identity is not required to validate the Deed of Trust; recorded documents suffice. | MIT funding not necessary; no plausible basis for relief; claim dismissed. |
| MERS as beneficiary authority | MERS is a sham beneficiary and cannot act as beneficiary. | MERS validly acts as beneficiary under Oregon law; authority to transfer is present. | MERS properly functioning as beneficiary; declaratory relief denied on this basis. |
| Existence of default and entitlement to payment | Plaintiffs are not in default; Defendants have not shown who is entitled to payment. | Default occurred; debt owed and holder of the obligation need not be proven at this stage. | Default proven by admitted nonpayment; no state claim to relief; dismissible. |
| Unrecorded assignments under ORS 86.735(1) | Unrecorded assignments prevent nonjudicial foreclosure. | Recording requirements apply to trustee/beneficiary; transfers of the note do not require mortgage recording. | Recording of all assignments not required for foreclosure; § 86.735(1) limited to trustee/beneficiary; dismiss claim about unrecorded assignments. |
| Irregularities in recorded documents | Notices and Trustee's Sale documents were signed by robo-signers or lack proper notarization, rendering recordings invalid. | No authority requiring the asserted notarization; signatures and recordings valid under Oregon law. | Challenged documents (assignment, substitution, notices) held invalid for lack of authority not shown; court dismisses these theories. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must be plausible, not just possible)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading requires more than naked allegations)
- Erickson v. Pardus, 551 U.S. 89 (U.S. 2007) (pro se pleadings liberally construed)
- Beyer v. Bank of Am., N.A., 800 F. Supp. 2d 1157 (D. Or. 2011) (MERS as beneficiary; Oregon law analysis)
- Barringer v. Loder, 81 P.2d 778 (Or. 1905) (note transfer mechanics and security interest follow note transfer)