Dolores-Rose DAUENHAUER; Helen E. Chamberlain, Plaintiffs-Appellants, v. The BANK OF NEW YORK MELLON, as Trustee for the Certificate-Holders, Cwalt, Inc., Alternative Loan Trust 2007-12T1 Mortgage Pass Through Certificates, Series 2007-12T1, fka The Bank of New York; Bank of America, N.A.; Mortgage Electronic Registration Systems, Inc., (MERS) and its parent company Merscrop, Inc.; Recontrust Company, N.A., as Alleged Successor Trustee; John and Jane Does 1-100, as Unknown Claimants in interest in 514 Neilwood Drive, Nashville, TN 37205; Merscrop Holdings, Inc., fka Merscrop, Inc. Defendants-Appellees.
No. 13-5810.
United States Court of Appeals, Sixth Circuit.
April 15, 2014.
562 Fed. Appx. 473
v.
The BANK OF NEW YORK MELLON, as Trustee for the Certificate-Holders, Cwalt, Inc., Alternative Loan Trust 2007-12T1 Mortgage Pass Through Certificates, Series 2007-12T1, fka The Bank of New York; Bank of America, N.A.; Mortgage Electronic Registration Systems, Inc., (MERS) and its parent company Merscrop, Inc.; Recontrust Company, N.A., as Alleged Successor Trustee; John and Jane Does 1-100, as Unknown Claimants in interest in 514 Neilwood Drive, Nashville, TN 37205; Merscrop Holdings, Inc., fka Merscrop, Inc. Defendants-Appellees.
No. 13-5810.
United States Court of Appeals, Sixth Circuit.
April 15, 2014.
PER CURIAM.
This is a civil case concerning claims against five institutions challenging foreclosure on residential property. Plaintiff-Appellants Dauenhauer and Chamberlain (collectively “Borrowers“) brought the underlying action against Defendant-Appellees The Bank of New York Mellon (“BNYM“), Bank of America, N.A. (“BANA“), Mortgage Electronic Registration Systems, Inc. (“MERS“), MERSCORP Holdings, Inc. (“MERSCORP“), and ReconTrust Company, N.A. (“ReconTrust“) (collectively “Defendants“) after BNYM foreclosed on property Borrowers owned, bringing claims for quiet title, fraudulent misrepresentation, violation of the
I. BACKGROUND
i. Facts
Dauenhauer and Chamberlain own property located at 514 Neilwood Drive in Nashville, Tennessee. Dauenhauer entered into a loan to finance the purchase of the Property, executing a promissory note (“Note“). Both Borrowers executed a Deed of Trust (“DOT“) 1 in favor of America‘s Wholesale Lender Company (“America‘s Wholesale“) with MERS—an electronic mortgage recordation database—as beneficiary and nominee for the amount of $555,000.00. Borrowers subsequently received letters indicating they were in default on their loan transaction, and that Defendants would conduct a non-judicial foreclosure sale of the Property.
Borrowers sought to challenge Defendants’ foreclosure on their Property. Borrowers allege that their loan was securitized in that it was sold, along with other loans, to a pool of investors represented by BNYM, acting as the Trustee for the Securitized Trust. Borrowers claim that, due to the securitization of the loan, title to the Property had been clouded and that none of the Defendants hold any interest in the Property. Borrowers also maintain that the assignments of the Deed of Trust were invalid.
In turn, Borrowers allege six causes of action: (1) quiet title; (2) fraudulent misrepresentation; (3) violation of the
ii. Procedure
Borrowers filed a complaint in the Davidson County Circuit Court, and later filed for a temporary restraining order, seeking to challenge Defendants’ planned non-judicial foreclosure sale of their property on October 15, 2012. A state court judge issued a restraining order preventing the sale, pending a state court hearing.
Defendants removed the complaint to the U.S. District Court for the Middle District of Tennessee. Borrowers moved for a temporary restraining order, alleging that BNYM and ReconTrust had rescheduled the non-judicial foreclosure sale of their property for October 29, 2012. The district court denied the motion and dissolved the state court temporary restraining order. Borrowers filed a Motion to Reconsider, and Defendants filed a Response in Opposition.
Defendants filed a Motion to Dismiss along with supporting memorandum. Borrowers filed a Response in Opposition, and
I. JURISDICTION
The district court had federal question jurisdiction under
II. STANDARD OF REVIEW
We review de novo a district court‘s grant of a motion to dismiss based on
A complaint fails to state a claim where it fails to comply with the pleading requirements of
III. ANALYSIS
1) Motion to Strike Borrowers’ Addendum
Borrowers attach to their brief, and rely on therein, a document entitled “Addendum: Fannie Mae Report.” Defendants move us to strike this document because it was not part of the record before the district court. Under
2) Considering Evidence
Borrowers assert that the district court erred in granting the motion to dismiss “without requiring one shred of evidence.” Borrowers’ argument has two components. First, they dispute the district court‘s denial of their Motion to Realign the Parties. Second, Borrowers allege that the district court erred in failing to impose an evidentiary production burden on, and shift the burden of proof to, Defendants. Both arguments fail.
Borrowers filed a “Motion to Realign the Parties” below, asking the district court to rearrange Defendants to the positions of plaintiffs in the case. Borrowers sought to shift the burden of proof to Defendants, requiring them to provide affirmative evidence of an actionable loss and their right to foreclose. The district court denied that motion. Defendants claim that we lack jurisdiction over this issue because in their Notice of Appeal, Borrowers did not specifically identify that order. Defendants are incorrect. See Caudill v. Hollan, 431 F.3d 900, 904-05 (6th Cir. 2005) (noting an appeal to the order directing entry of final judgment suffices to appeal all non-final orders and rulings).
Nevertheless, Borrowers’ assertions are without merit. Specifically, Borrowers maintain that Defendants did not produce evidence to establish a complete chain of title, failed to “provide[] any evidence that the Note was transferred to [Defendant] BNYM pursuant to the terms of the Pooling and Servicing Agreement,” and offered no “evidence that [Defendants] have the original note.” As noted above, the standard for dismissal under Rule 12(b)(6) is whether the plaintiff has “state[d] a claim upon which relief can be granted,” not whether a defendant has evidence to defend the claims.
3) Securitization Arguments
Borrowers further argue that the district court erred in analyzing the effects of securitization, assignment, and pooling of their mortgage. Borrowers claim that the district court “oversimplified some very complex principles” and failed “to actually apply the law to the very specific set of facts in this case.” Borrowers argue that dismissal was inappropriate because Defendants have not shown that the trust was properly established, that the trust properly acquired the Loan, or that the trust still exists. We find that the district court properly analyzed Borrowers’ securitization arguments.
a) Validity of MERS as Nominee
Borrowers first argue that the MERS assignment of the Deed of Trust was invalid, challenging the assignment of the Deed of Trust from MERS to the BNYM and the validity of MERS as nominee. The district court did not err in finding the assignment to MERS valid, and in dismissing Borrowers’ claims to the extent those claims were based on this theory.
MERS is a company that provides mortgage recording services to lenders and “allows the lenders to trade the mortgage
Courts nationally, including Tennessee‘s, have consistently approved MERS’ role in loans when designated as the nominee and beneficiary under a deed of trust. See Samples v. Bank of Am., N.A., No. 3:12-CV-44, 2012 WL 1309135, at *3-4 (E.D.Tenn. April 16, 2012) (finding claims based on invalid assignment or the role of MERS in mortgage transaction—where the deed of trust named MERS as the beneficiary and nominee for the lender and its assigns—failed as a matter of law); Golliday v. Chase Home Fin., LLC, No. 1:10-cv-532, 2011 WL 4352554, at *7 (W.D.Mich. Aug. 23, 2011) (“Over the twenty years that MERS has existed, borrowers who have defaulted on their loan obligations have attempted, without success, to attack the validity of the mortgage based on the involvement of MERS.“).
Here, the Deed of Trust names MERS as “nominee for Lender and Lender‘s successors and assigns” and as “the beneficiary under this Security Instrument.” Courts have held that this identical language grants MERS the authority “to act as the agent of any valid note holder, including assigning a deed of trust and enforcing a note.” Samples, 2012 WL 1309135, at *4. The Deed of Trust also provides that “the Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower.” Further, the Note states, “I understand that the Lender may transfer the Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the ‘Note Holder.‘” Consequently, the instruments Borrowers signed to enter into the loan agreement expressly permitted sale or assignment.
The district court correctly found that MERS’ role was valid and that MERS could validly assign the Note. Thus, it did not err in dismissing claims based on those allegations.
b) Securitization and Separating the Deed of Transfer and Note
Borrowers next argue that any assignment or transfer of the Note was invalid based on the separation of the Note from the Deed of Trust and failure to record the assignments. Further, Borrowers claim that securitization of the Note resulted in their debt being satisfied by third parties. The district court properly rejected those arguments, finding that under Tennessee law the deed of trust follows the note, and that securitization did not alter Borrowers’ obligation to pay back their loan.
It is well-settled under Tennessee law that the transfer of a note automatically carries with it the lien created by the accompanying deed of trust or other instrument securing it. See, e.g., W.C. Early Co. v. Williams, 135 Tenn. 249, 186 S.W. 102, 103–04 (1916) (“It is a well-settled rule with us that the lien of a mortgage or trust deed passes, without a special assignment thereof, to the indorsee of a note or transferee of the debt secured by the instrument.“); Clark v. Jones, 93 Tenn. 639, 27 S.W. 1009, 1010 (1894) (“The transfer of the note, without more, carried with it the lien created by the deed of trust.“); Samples, 2012 WL 1309135, at *4 (“[p]laintiffs’ argument that the deed of trust is defective because it was split or severed from the note is without merit.“). Further, Tennessee law does not require note as-
We are aware of no authority for the proposition that a loan becomes unenforceable because it was securitized. The district court appropriately noted that, as a matter of law, securitization alone does not render a note or deed of trust unenforceable and does not alter a borrower‘s obligation to pay back his loan. Samples, 2012 WL 1309135, at *3-5. Securitization “would not absolve [a] plaintiff from having to make payments on his loan or somehow shield plaintiff‘s property from foreclosure.” Searcy v. EMC Mortg. Corp., No. 1:10-CV-0965-WBH, 2010 U.S. Dist. LEXIS 119975, at *2 (N.D.Ga. Sept. 30, 2010). Rather, securitization creates “a separate contract, distinct from [a p]laintiff‘s debt obligations under the reference credit (i.e. the Note).” Larota-Florez v. Goldman Sachs Mortg. Co., 719 F.Supp.2d 636, 642 (E.D.Va.2010).
Thus, the district court did not err in rejecting Borrowers’ claims based on the argument that securitization of the Note eliminated their obligation to pay back their loan, and that separation of the Note and Deed of Trust invalidated their loan.
c) Challenge to Pooling and Servicing Agreement
Borrowers also allege that Defendants’ securitization of the Note into the Trust, violated the Trust‘s Pooling and Servicing Agreement and that therefore BNYM, as trustee, did not have the authority to foreclose on behalf of the trust. The district court appropriately dismissed this argument, finding that Borrowers lack standing to assert violations of the Agreement.
Courts have consistently rejected borrowers’ requests to have mortgage assignments and foreclosures invalidated due to non-compliance with Pooling and Servicing Agreement provisions, based on borrowers’ lack of standing. See Livonia Prop. Holdings, L.L.C. v. 12840-12976 Farmington Rd. Holdings, LLC, 717 F.Supp.2d 724, 748 (E.D.Mich.2010), aff‘d, 399 Fed. Appx. 97 (6th Cir.2010) (finding the plaintiff lacked standing to challenge the defendant‘s compliance with Pooling and Servicing Agreement terms because the plaintiff was not a party to or third-party beneficiary of the agreement); In re Correia, 452 B.R. 319, 324 (1st Cir. BAP 2011) (finding debtors lacked standing to challenge the chain of title under a Pooling and Servicing Agreement because they cannot show they were a party to the contract). This rule derives from the general principle of contract law that prohibits parties from challenging an assignment where they are not contract parties or third-party beneficiaries thereof. See Owner-Operator Indep. Drivers Ass‘n v. Concord EFS, 59 S.W.3d 63, 68 (Tenn.2001). Borrowers do not dispute that they were not parties to or third-party beneficiaries of the Pooling and Servicing Agreement at issue. As a result, the district court rightly determined Borrowers lack standing.
Thus, the district court did not err in dismissing claims regarding the validity of the assignment of Borrower‘s loan to the Trust based on alleged violations of the Pooling and Servicing Agreement.
d) BNYM as a Holder in Due Course
Finally, Borrowers argue that the district court‘s ruling on the securitization issue was based on the erroneous belief
In the district court, Borrowers alleged that BNYM was not a holder in due course of the Note because BNYM was not a proper assignee and the Note was not negotiable. The district court rejected those arguments, finding that “[Borrowers] have not given any factual basis for the Court to find that BNYM is not a holder in due course of the Note.”
Borrowers bore the burden to make factual allegations sufficient to support their claim that BNYM was not a holder in due course. Because Borrowers failed to do so, the district court properly rejected their contention. Additionally, the district court never made a finding that BNYM was the holder in due course; only that Borrowers failed to plead facts that it was not. Because Borrowers failed to carry their burden, and the district court never affirmatively found BNYM was a holder in due course, the district court committed no error.
In sum, the district court did not err in analyzing Borrowers’ securitization, assignment, and pooling of mortgages arguments.
4) Failure to State a Claim
Borrowers assert that the district court erred in dismissing their complaint for failure to state a claim for which relief may be granted. Borrowers’ complaint alleges six grounds, and we address each in turn.
a) Quiet Title
Borrowers assert that the district court erred in dismissing their claim for quiet title, alleging errors in assignment of the Note. The district court dismissed Borrowers’ claim for quiet title, finding that Borrowers failed to plead a necessary component of that claim—that they fulfilled their obligation under the Note. We find no error.
To succeed on a claim for quiet title, “the complainant must show that he himself has the title, or else he has no right to have a cloud removed form that to which he has no title to himself.” Hoyal v. Bryson, 53 Tenn. 139, 141 (1871).
By signing the Note, Ms. Dauenhauer agreed to repay the money Bank of America lent her to purchase the property. Borrowers agreed in the Deed of Trust that MERS held legal title and all interests granted by the Deed of Trust until Borrowers paid their debt in full under the Note. Because Borrowers have not alleged that they paid their debt in full, they do not have the right to obtain title of the property from the trustee. Since Borrowers did not allege sufficient facts to show they have legal title, the district court did not err in dismissing the quiet title claim.
b) Fraudulent Misrepresentation
Borrowers argue that the district court should not have dismissed their fraudulent misrepresentation claim because it confounded the effects of securitization, transfer and assignment of their Note. Further, Borrowers claim the district court overlooked Defendants’ duty to disclose information under the
Akin to
In their Complaint, Borrowers allege six material omissions or misrepresentations, and provide the sources thereof. Borrowers claim that had they known about these misrepresentations, they “would have been able to save their home from foreclosure through judicial intervention to discover the true owner of [their] loan.” Id. at 23. Nonetheless, as the district court noted, Borrowers’ “claim fails to set forth any facts to support how those representations were fraudulent or even mistaken.” Borrowers provide no facts to indicate that they were not in default, or that the Note holder did not have the right to initiate foreclosure proceedings. Borrowers do not explain how they were injured by Bank of America‘s alleged plan to place their loan into the Trust, or Defendants’ failure to identify the true lender. Id. Instead, Borrowers repeat their arguments regarding the alleged effects of securitization and improper assignment, which we rejected above. 2 We find Borrowers failed to comply with the heightened pleading requirements for fraudulent misrepresentation.
On appeal, Borrowers argue that the
Thus, the district court did not err in dismissing the fraudulent misrepresentation claim.
c) Tennessee Consumer Protection Act
Borrowers argue that the district court erred in dismissing their
d) Fair Debt Collections Practices Act
Borrowers argue that the district court erred in dismissing their
The
Any person who uses any instrumentality of interstate commerce or in the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another . . . the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. The term does not include (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or bona fide escrow arrangement; (iii) concerns a debt which was not in default at the time it was obtained by such person;
e) Slander of Title
Borrowers argue that the district court erred in finding that they failed to state a claim for slander of title. The district court dismissed Borrowers’ slander of title claim because they failed to plead malice, a necessary element of that claim. We find no error.
In order to state a claim for slander of title in Tennessee, a plaintiff must demonstrate four elements: “(1) that it has an interest in the property, (2) that the defendant published false statements about the title to the property, (3) that the defendant was acting maliciously, and (4) that the false statements proximately caused the plaintiff a pecuniary loss.” Brooks v. Lambert, 15 S.W.3d 482, 484 (Tenn.Ct.App. 1999). Malice is a necessary component of a slander of title claim. Waterhouse v. McPheeters, 176 Tenn. 666, 145 S.W.2d 766, 767 (1940). Borrowers failed to plead that Defendants maliciously claimed title to the property. Thus, the district court properly dismissed Borrowers’ slander of title claim.
f) Civil Conspiracy
Borrowers argue that because their underlying claims should have survived the motion to dismiss, their civil conspiracy claim also should have survived. The district court dismissed Borrowers’ claim because there was no underlying claim upon which Borrowers may base their civil conspiracy claim. We find no error.
In order to state a cause of action for conspiracy, a plaintiff must demonstrate the existence of an underlying predicate tort. BancorpSouth Bank v. Herter, 643 F.Supp.2d 1041 (W.D.Tenn. 2009). Because Borrowers’ complaint failed to state
In sum, because each of Borrowers’ six claims failed to state a claim upon which relief can be granted, the district court properly granted Defendants’ motion to dismiss.
IV. CONCLUSION
The judgment of the district court is affirmed in all respects.