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Mbaku v. Bank of America, N.A.

United States District Court, D. Colorado

August 20, 2014

BANK OF AMERICA, NATIONAL ASSOCIATION, as successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing LP, Defendant.


PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Recommendation of United States Magistrate Judge Kristen L. Mix (the "Recommendation") filed on July 2, 2014 [Docket No. 141]. The magistrate judge recommends that the Court grant in part and deny in part the Motion to Dismiss Plaintiffs' First Amended Complaint [Docket No. 124] filed by defendant Bank of America, National Association ("BANA") pursuant to Federal Rule of Civil Procedure 12(b)(6). Specifically, the magistrate judge recommends that the Court dismiss the federal claims plaintiffs assert in Counts II through IV of their amended complaint, [1] Docket No. 115 at 36-38, and deny defendant's motion to dismiss with respect to plaintiffs' claim under the Colorado Fair Debt Collection Practices Act ("CFDCPA"). Docket No. 141. Plaintiffs John M. Mbaku and Luvibidila Jolie Lumuenemo filed a timely objection [Docket No. 143] to the Recommendation, as did BANA [Docket No. 147].

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). In the absence of a proper objection, the Court may review a magistrate judge's recommendation under any standard it deems appropriate. See Summers v. Utah, 927 F.2d 1165, 1167 (10th Cir. 1991); see also Thomas v. Arn, 474 U.S. 140, 150 (1985) ("[i]t does not appear that Congress intended to require district court review of a magistrate's factual or legal conclusions, under a de novo or any other standard, when neither party objects to those findings"). An objection is proper if it is specific enough to enable the Court "to focus attention on those issues-factual and legal-that are at the heart of the parties' dispute." United States v. 2121 East 30th Street, 73 F.3d 1057, 1059 (10th Cir. 1996). In light of plaintiffs' pro se status, the Court construes 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 amended complaint sets forth the following allegations relevant to plaintiffs' claims. For the purpose of ruling on BANA's Rule 12(b)(6) motion to dismiss, the Court accepts plaintiffs' non-conclusory allegations as true. See Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007).

Plaintiffs are individuals who reside at 1177 South Alton Street in Denver, Colorado. Docket No. 115 at 6, ¶ 19. On February 22, 2008, plaintiffs took out a loan from Taylor, Bean & Whitaker to refinance their home. Id. at 1, ¶ 1. Plaintiffs allege that BANA "initiated foreclosure proceedings on August 16, 2010, " by recording certain documents with the Clerk and Recorder's Office for the County of Arapahoe, Colorado, including a Statement by Attorney for Qualified Holder Pursuant to 38-38-101, C.R.S. Id. at 4, 7 ¶¶ 11, 20; Docket No. 1-1 at 9.[2] Plaintiffs allege that, at that time, BANA was a "mere servicer" of plaintiffs' loan. Id. at 4, ¶ 11.

On August 1, 2011, an assignment of plaintiffs' deed of trust and promissory note from MERS to BAC Home Loans Servicing, L.P. ("BAC")[3] was recorded in Arapahoe County. Docket No. 1-1 at 4-5; Docket No. 115 at 5, ¶ 16. On October 27, 2011, defendant moved the Arapahoe County District Court for an order authorizing sale of plaintiffs' home. Docket No. 115 at 4, 10 ¶¶ 11, 32. Plaintiffs allege that it "therefore follows that on August 16, 2010 the defendant did not have a proper assignment" and was not in possession of plaintiffs' promissory note or deed of trust, although BANA claimed that it did have possession of these documents in its filings with the Arapahoe County Clerk. Id. at 4, ¶ 11. Plaintiffs allege that, "[i]n order to foreclose, " BANA fabricated an assignment of plaintiffs' promissory note and deed of trust from Mortgage Electronic Registration Systems, Inc. ("MERS") to BANA. Id. at 5, ¶ 12. The assignment is dated April 28, 2011. Id. at 7, ¶ 21.

In the fall of 2010, plaintiffs filed for bankruptcy. Docket No. 115 at 9, ¶ 30. BANA did not appear at the creditor meetings and did not move for relief from the automatic stay. Id. at 10, ¶ 32. Plaintiffs allege that BANA "deliberately avoided filing a motion to lift the automatic stay in Plaintiffs' bankruptcy proceedings because it knew that it had no valid assignment of the note and deed of trust to support a proof of claim in bankruptcy court." Id. at 25, ¶ 89.

After BANA filed its October 27, 2011 motion for an order authorizing sale, the state court held a hearing pursuant to Colorado Rule of Civil Procedure 120 ("Rule 120"). Docket No. 115 at 7, ¶ 20. At the hearing, BANA did not produce the allegedly fabricated assignment. Id. BANA "made no claim that it is the successor of [Taylor, Bean & Whitaker] and offered no proof that [plaintiffs' promissory note] was assigned to it." Id. at 10, ¶ 33. BANA produced a document that appears to be plaintiffs' promissory note. Id. at 15, ¶ 49. The note is endorsed in blank by Eria Carter-Shaw as "E.V.P." for Taylor, Bean & Whitaker Mortgage Corp. Docket No. 1-1 at 26. Plaintiffs allege, inter alia, that there is "no verified identity" as to Ms. Shaw, that she does not exist, that she did not sign plaintiffs' promissory note, that she did not have authority to sign the note, and that her signature is a forgery. Docket No. 115 at 16, ¶ 52.

Plaintiffs allege that at the Rule 120 hearing 1) BANA was not required to produce a "valid assignment"; (2) the state court did not inquire into "the manner in which [BANA] acquired plaintiffs' promissory note"; (3) BANA was not required to produce "evidence as to the origin, date and purpose of delivery of plaintiffs' promissory note" to BANA; and (4) the state court "hear[d] testimony via telephone of a witness whose identity and credibility was challenged."[4] Docket No. 115 at 30-31, ¶¶ 110, 111.

In the fall of 2012, BANA moved to dismiss its state court foreclosure action. Docket No. 115 at 11, ¶ 35. The state court dismissed the action without prejudice on September 21, 2012. Id. On May 3, 2013, BANA filed another motion for an order authorizing sale of plaintiffs' property. Id. BANA's second foreclosure case was closed on November 20, 2013 and is no longer pending before the state court. See Bank of America, N.A. v. Mbaku, Case No. 2013CV200883 (D. Ct. Arapahoe Cnty. Colo. Nov. 20, 2013).

In their amended complaint, plaintiffs assert claims under the equal protection and due process clauses of the Fourteenth Amendment to the United States Constitution and under the CFDCPA. Docket No. 115 at 35-38. Plaintiffs request the following relief:

A. Preliminarily and permanently enjoin all proceedings subsequent to and under Rule 120 and Colo. Rev. Stat. § 38-38-101 et seq;
B. Preliminarily and permanently enjoin the sale of plaintiffs' property in a foreclosure sale;
C. Declaratory and injunctive relief dismissing the foreclosure of plaintiffs' property with prejudice;
D. Declaratory and injunctive relief declaring the mortgage, promissory note and other related instruments of plaintiffs void and unenforceable;
E. Declaratory and injunctive relief declaring Rule 120; Colo. Rev. Stat. § 38-38-100.3(10), (20) and Colo. Rev. Stat. § 38-38-101(1)(b)(II) unconstitutional;
F. Award the plaintiffs actual damages;
G. Award the plaintiffs punitive damages;
H. Grant such other relief as the Court deems just, equitable and proper.

Id. at 39.


A. Constitutional Claims

1. Declaratory Judgment

Plaintiffs "contend that [Rule 120] is unconstitutional on its face and/or as applied in this case." Docket No. 115 at 2, ¶ 4. In Count II of the amended complaint, they allege that Rule 120 and Colo. Rev. Stat. §§ 38-38-101 et seq. "violate the due process clause of the U.S. Constitution by improperly shifting the burden of proof from the bank to the Plaintiffs." Id. at 36, ¶ 129. In Count III, plaintiffs allege that these statutes violate the equal protection clause of the United States Constitution. Id. at 36, ¶ 130. In Count IV, they allege that defendant violated plaintiffs' "right not to have their real property taken from them without due process of law." Id. at 37, ¶ 131. Plaintiffs request relief in the form of, inter alia, (1) a permanent injunction against "all proceedings subsequent to and under Rule 120 and Colo. Rev. Stat. §§ 38-38-101 et seq. " and (2) a declaration that Rule 120 and Colo. Rev. Stat. §§ 38-38-100.3(10), (20), and 38-38-101(1)(b)(II) are unconstitutional. Id. at 39, ¶¶ A and E.

The magistrate judge found that Counts II and III "seek[] a declaratory judgment and injunctive relief in connection with the constitutionality of Colorado's Rule 120 foreclosure process." Docket No. 141 at 6. In its response to plaintiffs' objections, BANA argues that plaintiffs cannot obtain a declaratory judgment regarding the constitutionality of the cited laws because the State of Colorado is not a defendant in this case. Docket No. 148 at 9-10.

Under the Declaratory Judgment act, "[i]n a case of actual controversy within its jurisdiction, " a court "may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). A declaratory judgment is available where there is a dispute between the parties that is "definite and concrete, touching the legal relations of parties having adverse legal interests, " as well as "real and substantial, " admitting of "specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) ("Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.") (citation omitted).

On July 8, 2013, the Colorado Attorney General gave "notice of his intervention in this matter to defend the constitutionality of C.R.C.P. 120 proceedings." Docket No. 58 at 1. The Attorney General intervened ...

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