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Mbaku v. Bank of America, National Association

United States District Court, Tenth Circuit

January 10, 2014

JOHN M. MBAKU, LUVIBIDILA JOLIE LUMUENEMO, Plaintiffs,
v.
BANK OF AMERICA, NATIONAL ASSOCIATION, as successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing LP, Defendant.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Recommendation of United States Magistrate Judge (the "Recommendation") [Docket No. 81]. The magistrate judge recommends that the Court grant Plaintiffs' Second Motion for Leave to File Amended Complaint Pursuant to Fed.R.Civ.P. 15(a)(2) [Docket No. 39] with respect to plaintiffs' proposed amended due process claim and deny the motion with respect to all other proposed amended claims. Docket No. 81. On October 7, 2013, plaintiffs filed timely objections [Docket No. 88] to the Recommendation. The Court will "determine de novo any part of the magistrate judge's disposition that has been properly objected to." Fed.R.Civ.P. 72(b)(3).

Rule 15(a) of the Federal Rules of Civil Procedure instructs courts to "freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a). Nevertheless, denying leave to amend is justified if the proposed amendments are unduly delayed, unduly prejudicial, futile, or sought in bad faith. Foman v. Davis, 371 U.S. 178, 182 (1962); Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). "A proposed amendment is futile if the complaint, as amended, would be subject to dismissal for any reason." Watson ex rel. Watson v. Beckel, 242 F.3d 1237, 1239-40 (10th Cir. 2001) (internal citation omitted). In light of plaintiffs' pro se status, the Court reviews their filings liberally. See Haines v. Kerner, 404 U.S. 519, 520 (1972); Hall v. Bellmon, 935 F.2d 1106, 1110 n. 3 (10th Cir. 1991). The facts of this case are set out in detail in the August 20, 2012 Recommendation of United States Magistrate Judge [Docket No. 22] and will not be recited here.

I. SPURIOUS LIEN

Plaintiffs argue that the Court should grant them leave to amend their complaint to assert a claim for violation of Colo. Rev. Stat. § 38-35-109(3) (Spurious Lien). Docket No. 88 at 1-2.

Section 38-35-109(3) imposes a penalty for offering to record or refusing to release "any document purporting to convey, encumber, create a lien against, or otherwise affect the title to real property" if a party knows or has reason to know "that such document is forged or groundless, contains a material misstatement or false claim, or is otherwise invalid." In their proposed amended complaint, plaintiffs allege that defendant violated this provision by "filing and recording the false assignment purporting to transfer Plaintiffs' promissory note and deed of trust, and by causing the filing of a notice of election and demand." Docket No. 39-1 at 43, ¶ 150.

The magistrate judge found that this statute does not cover the recording of an assignment or a Notice of Election and Demand because these documents do not convey an interest in, or otherwise encumber, real property. Docket No. 81 at 4-5 (citing Colo. Rev. Stat. § 38-35-201(2) ("Lien' means an encumbrance on real or personal property as security for the payment of a debt or performance of an obligation.")). Thus, the magistrate judge found that amending the complaint to add this claim would be futile. Id.

Plaintiffs object on the grounds that the magistrate judge's reading of the statute would "open[] the door to misconduct" and "lead to an absurd result" because anyone could fabricate an assignment to wrongfully obtain an interest in real property. Docket No. 88 at 1-2. Plaintiffs' argument does not undermine the magistrate judge's conclusion that, according to the plain language of the statute, it does not apply to plaintiffs' proposed claim. Plaintiffs may disagree with the wisdom of the Colorado legislature in maintaining this legislative scheme, but it is not within the purview of the Court to depart from the clear meaning of the statute.

II. FRAUD

Plaintiffs argue that the Court should grant them leave to amend their complaint to assert a claim for fraud. Docket No. 88 at 2-3.

A claim for fraud requires a plaintiff to show that the defendant knowingly made a false representation "with the intention that it be acted upon." Vinton v. Virzi, 269 P.3d 1242, 1247 (Colo. 2012). In its February 1, 2013 Order [Docket No. 26], the Court found that plaintiffs did not satisfy this element because they alleged that they acted in a way contrary to defendant's intent. In their proposed amended complaint, plaintiffs allege that defendant made various misrepresentations in the course of initiating non-judicial foreclosure proceedings against plaintiffs and that these were made "with the intent of misleading plaintiffs into relying upon [the misrepresentations] and [filing] for bankruptcy." Docket No. 39-1 at 19, 20, 21 ¶¶ 64, 70, 74. These allegations contradict the allegation that, "in furtherance of its fraud scheme, BOA made the strategic decision that most homeowners will not challenge its claimed status as mortgagee/assignee" Docket No. 39-1 at 18, ¶ 59. Plaintiffs address this contradiction in their objections to the Recommendation, arguing that:

there could only be two possible outcomes to Defendant's initiating foreclosure; Plaintiffs could have either fought the foreclosure with all means available to them which includes filing for bankruptcy or simply stood idly by while the foreclosure process took its course. Therefore, the Defendant could be characterized as having dual intent-where bankruptcy filing by the Plaintiffs is the less preferable of the two possible outcomes from the Defendant's perspective. Because this is a question of fact, it therefore belongs to a reasonable jury to render judgment on the allegation.

Docket No. 88 at 3.

In essence, plaintiffs argue that defendant made a false representation with the intention that plaintiffs choose one of two options available-either do something or do nothing-and that, by doing something, plaintiffs were acting in reliance on defendant's misrepresentation. Plaintiffs' concept of "dual intent" is virtually meaningless when plaintiffs only had two options. Moreover, this argument does not render plausible plaintiffs' allegation that defendant acted with the intent that plaintiffs file for bankruptcy. It is not plausible that defendant would seek to induce plaintiffs' bankruptcy despite the fact ...


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