United States District Court, D. Colorado
ELIZABETH D. SATRIANO, Plaintiff,
COUNTRYWIDE HOME LOANS, INC., a New York corporation, and all unknown persons who claim any interest in the subject matter of this action, Defendant.
KRISTEN L. MIX, Magistrate Judge.
This matter is before the Court on Defendant's Motion to Dismiss Plaintiff's Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) [#14] (the "Motion"). Plaintiff filed a Response [#18] in opposition to the Motion, and Defendant filed a Reply [#22]. The Court has reviewed the Motion, the Response, the Reply, the entire case file, and the applicable law and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#14] is DENIED.
I. Summary of the Case
In short, Plaintiff seeks to quiet title to real property consisting of Condominium Unit No. 6452, Building No. 5, the French Quarter Condominiums, located at 6452 East Mississippi Avenue, Denver, Colorado 80224 (the "Property"). Compl. [#4] at 2. Plaintiff initially filed suit in state court on July 8, 2014. Id. at 1; Notice of Removal [#1] at 1. Defendant removed the case based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. Id. at 2.
On March 29, 2006, Ross Tefft ("Tefft") became the record title owner of the Property pursuant to a Correction Deed, which was recorded on April 18, 2006. Compl. [#4] at 2. On March 31, 2006, Mr. Tefft executed a Deed of Trust for the benefit of Mortgage Electronic Registration Systems, Inc. ("MERS"), as a nominee for Universal Lending Corporation ("Universal"), securing the payment of a promissory note in the amount of $162, 585.00. Id. The Deed of Trust was recorded on April 18, 2006. Id. On April 18, 2007, the District Court for the City and County of Denver, Colorado entered a Judgment and Decree for Judicial Foreclosure (the "Order") in civil action 2006 CV 12134, French Quarter Association v. Ross Tefft, Mortgage Electronic Registration Systems, Inc., Universal Lending Corporation, and Wayne E. Vaden as the Public Trustee of Denver County, Colorado (the "Civil Action"). Id. The Order directed that the Property be sold at public auction by the Sheriff of Denver County, Colorado, and pursuant to the Order, the Sheriff sold the Property at public auction on June 14, 2007, to Dutch Park, LLC and Webster Lending, LLC. Id. A Sheriff's Deed conveying the Property from the Sheriff to Dutch Park, LLC and Webster Lending, LLC was executed on August 29, 2007, and recorded on August 30, 2007. Id. On November 21, 2007, Dutch Park, LLC and Webster Lending, LLC conveyed the Property to Plaintiff pursuant to a Special Warranty Deed, recorded January 3, 2008. Id.
On September 27, 2007, Defendant, as a successor beneficiary to MERS and Universal under the Deed of Trust, commenced a foreclosure under the Deed of Trust pursuant to a Notice of Election and Demand for Sale, which was recorded on October 12, 2007. Id. at 3. On January 2, 2008, the Public Trustee for Denver County, Colorado completed a Public Trustee's Certificate of Purchase evidencing the sale of the Property at public auction to Defendant pursuant to the foreclosure of the Deed of Trust, which was recorded on January 3, 2008. Id. On December 12, 2011, the Public Trustee executed a Public Trustee's Deed conveying the property to Defendant, recorded on December 12, 2011. Id.
Plaintiff alleges that "any interest of MERS and/or Universal in the Property pursuant to the Deed of Trust was extinguished by the [Order] in the Civil Action and [Defendant] had no interest in the Property at the time it commenced the foreclosure under the Deed of Trust." Id. Plaintiff alleges also that the real property records "should reflect Plaintiff as the record title owner of the Property" and requests an order of this Court quieting title to the Property in Plaintiff's name. Id.
In the Motion, Defendant argues that Plaintiff's claim fails "because the chain of events that led to her alleged purchase of the property is based on an erroneous order and decree regarding a prior foreclosure." [#14] at 1. Defendant also argues that the claim fails because, when Plaintiff recorded her Deed of Trust regarding her alleged purchase on January 3, 2008, "she had constructive notice that [Defendant] was foreclosing and the property was scheduled to be sold on January 2, 2008, " and that she also had inquiry notice that the Order which led to her purchase of the property was erroneous. Id. at 1-2. Defendant argues that Plaintiff seeks to have this Court enforce an erroneous Order. Id. at 5-6.
Defendant argues that the Order entered in 2007 in the Civil Action was erroneous because the court's decision was contrary to the plain language of the governing statute, Colo. Rev. Stat. § 38-33.3-316(2)(b)(1). Id. at 6. Defendant argues that instead of "issuing an order that reflected that the super-priority lien of the homeowner's association had priority over the lien reflected in the 2006 Deed of Trust only in the amount of six months of fees, the court's [Order] allowed the association's lien to take complete priority over and wipe out the lien reflected in the 2006 Deed of Trust." Id. Defendant argues that this is improper under Colo. Rev. Stat. § 38-33.3-316(2)(b)(1) and that the Order is erroneous. Id.
Defendant further argues that "Plaintiff had notice of the foreclosure pursuant to the 2006 Deed of Trust and the erroneous [O]rder, " because when Plaintiff "recorded the 2008 deed of trust purportedly documenting she owned the property, documents in the public record... put her on constructive notice that [Defendant] had foreclosed pursuant to the 2006 Deed of Trust and on inquiry notice that her purchase was pursuant to the erroneous 2007 [O]rder." Id. at 6-7.
In the Response, Plaintiff argues that the Order in the Civil Action for foreclosure must be upheld because Defendant's Motion is "in essence, a collateral attack on the validity of the [Order]." [#18] at 5. Plaintiff argues that even if the 2007 judgment and the Order of the court in the Civil Action were erroneous, they are only subject to direct attack through a new trial procedure or review by an appellate court and are not vulnerable to a collateral attack. Id. Plaintiff argues that Defendant's predecessor took no steps to challenge the Order entered in 2007 in the Civil Action, and that Defendant may not now petition this Court "as a substitute for an appeal [Defendant]'s predecessor and nominee timely failed to pursue." Id. at 6. Additionally, Plaintiff argues that the 2007 Order from the Civil Action was not erroneous because the mechanism through which the HOA collected assessments holding super priority lien status (i.e., the Civil Action) "necessitated the extinguishment of [Defendant]'s and its predecessor's and nominee's interest in the Property through the foreclosure process." Id. at 9.
In the Reply, Defendant argues that Plaintiff effectively conceded notice of the foreclosure pursuant to the 2006 Deed of Trust and the "erroneous [O]rder, " and again argues that "Plaintiff is seeking to enforce an erroneous order and decree." [#22] at 2-3. Defendant did not respond to Plaintiff's argument regarding Defendant's inability to collaterally attack the 2007 Order. See id.
II. Standard of Review
The Rule 12(b)(6) standard tests "the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true." Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). To survive a Rule 12(b)(6) motion, "[t]he complaint must plead sufficient facts, taken as true, to provide plausible grounds' that discovery will reveal evidence to support plaintiff's allegations." Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[P]lausibility refers to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiff[has] ...