United States District Court, D. Colorado
MERLE H. SCHONEBAUM, and DENISE M. SCHONEBAUM, Plaintiffs,
SHELLPOINT MORTGAGE SERVICING, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., and BANK OF NEW YORK MELLON as Trustee for Countrywide ALT 2005-42CB Trust, Defendants.
RECOMMENDATION OF UNITED STATES MAGISTRATE
KRISTEN L. MIX, Magistrate Judge.
matter is before the Court on Defendants' Motion to
Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6)
[#18] (the "Motion"). Plaintiff,
who is proceeding pro se,  filed a Response [#20] in
opposition to the Motion, and Defendants filed a Reply [#22].
The Motion is thus ripe for review. Pursuant to 28 U.S.C. Â§
636(b)(1) and D.C.COLO.LCivR 72.1(c)(3), the Motion is
referred to the undersigned for recommendation [#25]. Having
reviewed the entire case file and being sufficiently advised,
the Court RECOMMENDS that the Motion [#18] be GRANTED.
Summary of the Case
8, 2005, Plaintiffs signed and executed a Promissory Note in
the amount of $218, 400 and a Deed of Trust securing the
Promissory Note with property located at 16368 East Phillips
Lane, Englewood, Colorado, 80112. Compl. [#1] Â¶ 10;
id. [#1-2] at 38, 41-43. The Deed of Trust was then
recorded in Arapahoe County on July 25, 2005. Id.
[#1-2] at 2. The Deed of Trust named America's Wholesale
Lender as the "Lender" and Defendant Mortgage
Electronic Registration Systems, Inc. ("Defendant
MERS") as the "nominee for Lender and Lender's
successors and assigns" as well as the
beneficiary. Id. Plaintiffs were listed as the
"Borrower." Id. The Promissory Note was
endorsed in blank. Id. [#1-2] at 43. Under the
terms of the Deed of Trust, Defendant MERS, as the nominee,
was given explicit authority to act on behalf of
America's Wholesale Lender, which included the right to
sell the Promissory Note and the Deed of Trust. Id.
[#1-2] at 3, 10.
March of 2012, Defendant MERS, acting as the nominee,
assigned the Deed of Trust pursuant to an Assignment of Deed
of Trust to Defendant Bank of New York Mellon as Trustee for
Countrywide ALT 2005-42CB Trust ("Defendant BNYM").
Compl. [#1] Â¶ 11; id. [#1-2] at 20. The
Assignment of Deed of Trust was then recorded in Arapahoe
County on March 22, 2012. Compl. [#1] Â¶ 11.
7, 2012, Plaintiffs filed a joint petition for Chapter 7
bankruptcy with the United States Bankruptcy Court in the
District of Colorado. See Motion [#18] at 3;
id. [# 18-1]. Plaintiffs received a Chapter 7
discharge on August, 17, 2012. Id. [#18-3].
early February of 2014, Plaintiffs received a letter from
Defendant Shellpoint Mortgage Servicing ("Defendant
Shellpoint"), dated February 14, 2014, stating that
Resurgent Mortgage Servicing would become part of Defendant
Shellpoint and that the servicing of Plaintiffs' loan
would be transferred to Defendant Shellpoint beginning on
March 1, 2014. Compl. [#1-2] at 57. On or about
March 30, 2014, Plaintiffs received a letter, dated March 26,
2014, from Defendant Shellpoint stating that, on behalf of
Defendant BNYM, Defendant Shellpoint was providing notice
that Plaintiffs' loan was in default for failure to pay.
Compl. [#1] Â¶ 12; id. [#1-2] at 30.
of 2014, Plaintiffs received a "Securitization Analysis
& County Records Report" ("Audit Report") from
Holmes & Galt, LLC, which Plaintiffs allege put them on
notice of alleged wrongdoings by all Defendants concerning
Plaintiffs' loan. Id. [#1-1]; id.
[#1-2] at 22-28; Response [#20] at 4. Plaintiffs
claim that in response to the Audit Report and the notice of
default letter dated March 26, 2014, Plaintiffs sent a
Qualified Written Request ("QWR") to Defendant
Shellpoint on August 1, 2014, asking for information
regarding Plaintiffs' account. Compl. [#1] Â¶ 13;
id. [#1-2] at 32-34; Response [#20] at 4.
On August 18, 2014, Plaintiffs received confirmation of
receipt of the QWR from Defendant Shellpoint. Compl.
[#1] Â¶ 14; id. [#1-2] at 36. Subsequently, on
September 15, 2014, Plaintiffs received Defendant
Shellpoint's response to Plaintiffs' QWR, which
included copies of the Assignment of the Deed of Trust, the
Promissory Note, the Deed of Trust, Good Faith Estimate, Loan
Application, Settlement Statement, Notice of Servicing
Transfer, Acquisition Letter, and a loan transaction history
dating back to the origination of the loan. Id.
[#1-2] at 38-65.
allege that the payment history provided by Defendant
Shellpoint is a false "off-balance sheet."
Id. [#1] Â¶ 15. Plaintiffs further allege that the
chain of title regarding the Promissory Note and Deed of
Trust was broken because Defendant MERS had no legal
authority to transfer any interest in the loan to Defendant
BNYM. Id. Â¶Â¶ 23, 35, 50. Plaintiffs contend that
because Defendant MERS had no authority to transfer, none of
the Defendants have legal ownership of the loan. Id.
Â¶ 41. Plaintiffs assert that the "entire enforcement and
foreclosure" of the loan by Defendants was
"improper, wrongful, illegal and/or fraudulent."
Id. Â¶ 45.
Plaintiffs assert several statutory and tort claims pursuant
to federal and Colorado law based on their allegations that
Defendants engaged in a fraudulent mortgage loan scheme.
Id. at 3. Specifically, Plaintiffs bring the
following claims for relief: (1) violations of the Real
Estate Settlement Procedures Act ("RESPA"), 12
U.S.C. Â§ 2601, et seq., against Defendant
Shellpoint; (2) violations of the Truth in Lending Act
("TILA"), 15 U.S.C. Â§ 1601, et seq.,
against Defendant Shellpoint; (3) violations of the Fair
Credit Reporting Act ("FCRA"), 15 U.S.C. Â§ 1681,
against Defendant Shellpoint; and, against all Defendants,
(4) intentional misrepresentation; (5) unjust enrichment; (6)
civil conspiracy; and (7) wrongful foreclosure.
Compl. [#1] at 12-18. Plaintiffs seek
"cancellation of instruments, " an order quieting
title to the property, and money damages. Id. at
response, Defendants filed the instant Motion [#18]
requesting that the Court dismiss Plaintiffs' complaint.
In the Motion, Defendants argue that Plaintiffs lack standing
to bring these claims. Defendants assert that these causes of
action all accrued prior to Plaintiffs' filing for
Chapter 7 bankruptcy and that Plaintiffs did not disclose
these causes of actions in their petition for bankruptcy.
Motion [#18] at 2-4, 6-7. Defendants contend that,
by failing to disclose causes of action that accrued prior to
the filing for bankruptcy, Plaintiffs' unlisted claims
became property of the bankruptcy estate, and hence only the
trustee of the bankruptcy estate has standing to bring these
claims. In the alternative, Defendants argue that all of
Plaintiffs' claims fail to state a claim upon which
relief can be granted. Id. at 7-16.
Standard of Review
Federal Rule of Civil Procedure 12(b)(1)
purpose of a motion to dismiss pursuant to Rule 12(b)(1) is
to test whether the Court has jurisdiction to properly hear
the case before it. Because "federal courts are courts
of limited jurisdiction, " the Court must have a
statutory basis to exercise its jurisdiction. Montoya v.
Chao, 296 F.3d 952, 955 (10th Cir. 2002); Fed.R.Civ.P.
12(b)(1). Statutes conferring subject-matter jurisdiction on
federal courts are to be strictly construed. F & S Const.
Co. v. Jensen, 337 F.2d 160, 161 (10th Cir. 1964).
"The burden of establishing subject-matter jurisdiction
is on the party asserting jurisdiction." Id.
(citing Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994)).
motion to dismiss pursuant to Rule 12(b)(1) may take two
forms: facial attack or factual attack. Holt v. United
States, 46 F.3d 1000, 1002 (10th Cir. 1995). When
reviewing a facial attack on a complaint, the Court accepts
the allegations of the complaint as true. Id. By
contrast, when reviewing a factual attack on a complaint, the
Court "may not presume the truthfulness of the
complaint's factual allegations." Id. at
1003. With a factual attack, the moving party challenges the
facts upon which subject-matter jurisdiction depends.
Id. The Court therefore must make its own findings
of fact. Id. In order to make its findings regarding
disputed jurisdictional facts, the Court "has wide
discretion to allow affidavits, other documents, and a
limited evidentiary hearing." Id. (citing
Ohio Nat'l Life Ins. Co. v. United States, 922
F.2d 320, 325 (6th Cir. 1990); Wheeler v. Hurdman,
825 F.2d 257, 259 n.5 (10th Cir. 1987)). The Court's
reliance on "evidence outside the pleadings" to
make findings concerning purely jurisdictional facts does not
convert a motion to dismiss pursuant to Rule 12(b)(1) into a
motion for summary judgment pursuant to Rule 56. Id.
Federal Rule of Civil Procedure 12(b)(6)
purpose of a motion to dismiss pursuant to Rule 12(b)(6) is
to test "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); Fed.R.Civ.P. 12(b)(6) (stating that a
complaint may be dismissed for "failure to state a claim
upon which relief can be granted"). "The
court's function on a Rule 12(b)(6) motion is not to
weigh potential evidence that the parties might present at
trial, but to assess whether the plaintiff's complaint
alone is legally sufficient to state a claim for which relief
may be granted." Sutton v. Utah State Sch. for the
Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999)
(citation omitted). To withstand a motion to dismiss pursuant
to Rule 12(b)(6), "a complaint must contain enough
allegations of fact to state a claim to relief that is
plausible on its face.'" Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting
Bell Atlantic Co. v. Twombly, 550 U.S. 544, 570
(2007)); see also Shero v. City of Grove,
Okla., 510 F.3d 1196, 1200 (10th Cir. 2007) ("The
complaint must plead sufficient facts, taken as true, to
provide plausible grounds' that discovery will reveal
evidence to support the plaintiff's allegations."
(quoting Twombly, 550 U.S. at 570)). "A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). "A pleading that offers labels and conclusions
or a formulaic recitation of the elements of a cause of
action will not do. Nor does a complaint suffice if it
tenders naked assertion[s] devoid of further factual
enhancement." Id. (brackets in original;
internal quotation marks omitted).
survive a motion to dismiss pursuant to Rule 12(b)(6), the
factual allegations in the complaint "must be enough to
raise a right to relief above the speculative level."
Christy Sports, LLC v. Deer Valley Resort Co., 555
F.3d 1188, 1191 (10th Cir. 2009). "[W]here the
well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, " a factual
allegation has been stated, "but it has not
show[n]that the pleader is entitled to relief, " as
required by Fed.R.Civ.P. 8(a). Iqbal, 552 U.S. at
679 (second brackets added; citation and internal quotation
Motion to Dismiss for Lack of Subject Matter Jurisdiction
assert that Plaintiffs' claims should be dismissed
pursuant to Rule 12(b)(1) because Plaintiffs lack standing.
Motion [#18] at 5. Defendants argue that because the
claims that Plaintiffs are asserting in this lawsuit took
place prior to Plaintiffs' filing for Chapter 7
bankruptcy and Plaintiffs failed to list these claims when
filing for bankruptcy, these claims are part of
Plaintiffs' Chapter 7 bankruptcy estate and therefore
only the trustee of the bankruptcy estate has standing to
bring a lawsuit on these claims. Id. at 3, 5-7.
to the United States Bankruptcy Code, a bankruptcy estate is
created at the commencement of a case. 11 U.S.C. Â§ 541(a).
Once the bankruptcy estate is established, the bankruptcy
trustee becomes the representative of the estate and has the
capacity to sue and be sued on behalf of the estate. 11
U.S.C. Â§ 323. Therefore, the trustee is "the only party
with standing to prosecute causes of action belonging to the
estate." In re Cook, 520 Fed.App'x 697,
701-02 (10th Cir. 2013) (citing Moses v. Howard Univ.
Hosp., 606 F.3d 789. 795 (D.C. Cir. 2010); see also
Willess v. United States, 560 Fed.App'x 762, 764
(10th Cir. 2014).
commencement of a case, a debtor must disclose, among other
things, a list of creditors, a schedule of assets and
liabilities, and a schedule of current income and current
expenditures. 11 U.S.C. Â§ 521(a)(1). Because the scope of the
bankruptcy estate is "broad" and is comprised of
property "wherever located and by whomever held, "
a debtor must also disclose "all legal claims and causes
of action, pending or potential, which a debtor may
have" at the time of filing. 11 U.S.C. Â§ 541(a)(1);
In re Dittmar, 618 F.3d 1199, 1207 (10th Cir. 2010);
Eastman v. Union P. R. Co., 493 F.3d 1151, 1159
(10th Cir. 2007) (citing In re Coastal Plains, Inc.,
179 F.3d 197, 208 (5th Cir. 1999) cert. denied, sub
nom. Mims v. Browing Mfg., 528 U.S. 1117
(2000)); United States v. Cardall, 885 F.2d 656, 678
(10th Cir. 1989) (quoting In re DeWeese, 47 B.R.
251, 254 (W. D. N.C. Bankr. 1985)).
debtor fails to disclose a legal claim or cause of action,
"[t]he integrity of the bankruptcy proceeding is
compromised" because the bankruptcy court relies on the
information the debtor provides. Autos, Inc. v.
Gowin, 244 Fed.App'x 885, 891 (10th Cir. 2007)
(citing Payless Wholesale Distributors, Inc. v. Alberto
Culver (P.R.) Inc., 989 F.2d 570, 571 (1st Cir. 1993)
("Conceal your claims; get rid of your creditors on the
cheap, and start over with a bundle of rights. This is a
palpable fraud that the court will not tolerate, even
to disclose a legal claim attaches to any claim that
"accrues" prior to a debtor filing for bankruptcy.
Willess v. United States, 560 Fed.App'x 762, 764
(10th Cir. 2014) (finding that even though the
plaintiff's personal injury claim was filed after the
plaintiff filed for bankruptcy, the actual injury had
occurred and therefore the claim accrued before he filed for
bankruptcy). In the Tenth Circuit, courts determine whether a
legal claim or cause of action accrued prior to the filling
for bankruptcy based on "the date of the conduct giving
rise to the claim." In re Parker, 313 F.3d
1267, 1269 (10th Cir. 2002) (citing In re Parker,
264 B.R. 685, 696 (10th Cir. BAP 2001)). In addition to the
requirement that the conduct occur prior to filing for
bankruptcy, a claim is deemed to have accrued only if
"the [debtor] has knowledge of the facts essential to
the cause of action." Clementson v. Countrywide Fin.
Corp., 464 Fed.App'x 706, 713 (10th Cir. 2012).
the conduct giving rise to Plaintiffs' claims is
Defendant MERS' Assignment of the Deed of Trust to
Defendant BNYM on March 15, 2012, which was then recorded on
March 22, 2012. Motion [#18] at 2-3;
Response [#20] at 2. Specifically, Plaintiffs argue
that Defendant MERS had "no right to transfer any
interest" in the Deed of Trust, and thus that Defendant
BNYM received no valid interest in the Deed of Trust.
Compl. [#1] at 5-7. Plaintiffs premise this argument
on the fact that Defendant MERS is the "nominee for
Lender and Lender's successors and assigns" in the
Deed of Trust and therefore "any claim that MERS
assigns' the Note... was thus beyond MERS' authority
as nominee or agent of the lender.'" Id. Â¶
48. Neither party here disputes that this conduct occurred
prior to Plaintiffs filing a joint voluntary petition for
Chapter 7 with the United States Bankruptcy Court in the
District of Colorado on May 7, 2012, and that the claims in
this lawsuit were not listed in Plaintiffs' petition.
Motion [#18-1]; Response [#20] at 1-3.
Plaintiffs contend that their claims are not part of their
bankruptcy estate because at the time they filed for
bankruptcy, they disclosed information to "the best of
their ability, " but that on or about March 30, 2014,
"other facts [came] to the forefront regarding the
mortgage loan, '" which then provided Plaintiffs
with knowledge of the claims in this lawsuit.
Response [#20] at 2-3.
prove knowledge of a cause of action, the debtor does not
need to "know all the facts or even the legal basis for
the cause of action; rather, if the debtor has enough
information... prior to confirmation to suggest that [the
debtor] may have a possible cause of action, then that is a
known' cause of action such that it must be
disclosed." In re Coastal Plains, Inc., 179
F.3d at 208 (quoting Union Carbide Corp. v. Viskase
Corp. ( In re Envirodyne Indus, Inc. ), 183
B.R. 812, 821 n.17 (Bankr. N.D.Ill. 1995)); see also
Eastman, 493 F.3d at 1157. "[A] debtor's
ignorance or mistake... does not excuse a debtor from listing
all potential causes of action in a bankruptcy
petition." Clementson, 464 Fed.App'x at 711
(citing Eastman, 493 F.3d at 1159).
the question is not whether Plaintiffs had actual knowledge
of their legal claim; the question is whether they had enough
information to suggest potential causes of action against
Defendant MERS and Defendant BNYM. The Court finds that they
did. Pursuant to Colorado law "a person is deemed to
have constructive notice of any instrument encumbering the
title to real property once the document has been recorded in
the office of the appropriate county clerk and
recorder." In re Potts, No. 11-22624-HRT, 2013
WL 5508429, at *4 (Bankr. D. ...