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Schonebaum v. Shellpoint Mortgage Servicing

United States District Court, D. Colorado

February 29, 2016



          KRISTEN L. MIX, Magistrate Judge.

         This matter is before the Court on Defendants' Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) [#18][1] (the "Motion"). Plaintiff, who is proceeding pro se, [2] 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. § 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.

         I. Summary of the Case

         On July 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] ¶ 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"[3] as well as the beneficiary. Id. Plaintiffs were listed as the "Borrower." Id. The Promissory Note was endorsed in blank.[4] 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.

         In 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] ¶ 11; id. [#1-2] at 20. The Assignment of Deed of Trust was then recorded in Arapahoe County on March 22, 2012. Compl. [#1] ¶ 11.

         On May 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].[5] Plaintiffs received a Chapter 7 discharge on August, 17, 2012. Id. [#18-3].

         In 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] ¶ 12; id. [#1-2] at 30.

         In June 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] ¶ 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] ¶ 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.

         Plaintiffs allege that the payment history provided by Defendant Shellpoint is a false "off-balance sheet." Id. [#1] ¶ 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. ¶¶ 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. ¶ 41. Plaintiffs assert that the "entire enforcement and foreclosure" of the loan by Defendants was "improper, wrongful, illegal and/or fraudulent." Id. ¶ 45.

         Thus, 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. § 2601, et seq., against Defendant Shellpoint; (2) violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., against Defendant Shellpoint; (3) violations of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 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 12-21.

         In 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.

         II. Standard of Review

         A. Federal Rule of Civil Procedure 12(b)(1)

         The 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)).

         A 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.

         B. Federal Rule of Civil Procedure 12(b)(6)

         The 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).

         To 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 marks omitted).

         III. Analysis

         A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         Defendants 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.

         Pursuant to the United States Bankruptcy Code, a bankruptcy estate is created at the commencement of a case. 11 U.S.C. § 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. § 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).[6]

         At the 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. § 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. § 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)).

         If a 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 passively.")).

         A duty 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).

         Here, 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. ¶ 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.

         However, 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.

         To 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).

         Thus 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. ...

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