CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 1 of 8 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Glenn A. Olson and Anne L. Olson, Trevor J. Nefs and Lisa Nefs, Robert Elias Knutsen and Patricia C. Knutsen, David A. Waxon, Ge Yang and Amelia B. Yang, Holly F. Olson n/k/a Holly F. Mandel, and Wang Xang Xiong and Jua Thao Xiong, Civil No. 11-3710 (PAM/FLN) Plaintiffs, v. MEMORANDUM AND ORDER Bank of America, N.A., BAC Home Loans Servicing, LP, Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., Federal National Mortgage Association, and Peterson, Fram and Bergman, P.A., Defendants. This matter is before the Court on Defendants Motions to Dismiss and Plaintiffs Motion to Remand in this mortgage case, one of nearly 30 substantially identical cases that Plaintiffs counsel, Mr. William Butler, has filed in this District in the past two years. 1 Although none of these cases has survived dispositive motion practice, Mr. Butler remains undeterred. Even the $50,000 sanction imposed by Judge Patrick J. Schiltz in Welk v. GMAC Mortgage, LLC, No. 11-2676, did not persuade Mr. Butler that his legal theories 1 This Court has previously dismissed one of these cases, Jerde v. JPMorgan Chase Bank, N.A., 11-cv-2666.
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 2 of 8 have no merit. This Court again joins the chorus and dismisses this matter with prejudice. BACKGROUND There are twelve individual Plaintiffs in this case, which was originally filed in Hennepin County and removed to this Court. Plaintiffs own homes in Hastings, Isanti, Lakeville, Roseville, Brooklyn Park, Savage, and Minneapolis, Minnesota. Plaintiffs mortgage loans originated through a variety of lenders: Vermillion State Bank (Glenn and Anne Olson), General Mortgage Finance Corp. (Trevor and Lisa Nefs), Anchor Bank West St. Paul (Robert and Patricia Knutsen), America s Wholesale Lender (David Waxon and Wang and Jua Xiong), GreenPoint Mortgage Funding, Inc. (Ge and Amelia Yang 2 ), and Cherry Creek Mortgage Co. (Holly Olson, now Holly Mandel). Apparently, Bank of America or its servicing subsidiary BAC Home Loans Servicing was assigned most of the mortgages at some point, although Fannie Mae was assigned some of the mortgages as well. The Complaint also contends that each Plaintiff executed a mortgage in favor of Mortgage Electronic Registration Systems, Inc., or MERS. The last Defendant, the law firm of Peterson, Fram & Bergman, allegedly conducted non-judicial foreclosures on all of the properties save the Nefs home. (Compl. 15.) Plaintiffs have all defaulted on their obligations to the lenders. They contend, however, that Defendants separation of the note and the mortgage for each loan deprived Defendants of the power to foreclose. The Complaint contains 13 counts, avoiding any claim 2 It appears that Mr. Butler misspelled his clients last name in this case. There is no record of a Ge and Amelia Yang having a mortgage on the property, but rather the mortgagors are Ge and Amelia Vang. (Taylor Decl. 8 (Docket No. 1-1).) 2
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 3 of 8 under federal law. Count I is a claim for quiet title against the bank Defendants. Count II contends that these bank Defendants Are Not Real Parties in Interest, and Count III contends that they Do Not Have Legal Standing to Foreclose Mortgages. (Compl. at 22, 23.) Count IV claims slander of title, Count V claims conversion, Count VI claims unjust enrichment, Count VII claims a civil conspiracy, Count VIII claims a breach of fiduciary duty, Count IX claims fraud, Count X claims negligent misrepresentation, Count XII claims equitable estoppel, and Count XIII seeks an accounting, all against the bank Defendants. Several of these causes of action are also raised against Peterson, Fram & Bergman, P.A., the law firm that allegedly effectuated the illegal foreclosures: Counts IV, V, VII, X, and XII. Plaintiffs assert only one cause of action against the law firm alone. Count XI claims the law firm committed fraud by induc[ing] the Plaintiffs Olson, Knutsen, Waxon, Yang, Mandel and Xiong to forebear from pursuing their legal right to challenge the legal standing of to [sic] foreclose on their homes by representing that Defendants held clear, valid title to Plaintiff s [sic] Original Notes. (Compl. 141.) At the hearing on this matter, the Court pointed out that at least two of the Plaintiffs here, Robert and Patricia Knutsen, are also plaintiffs in another lawsuit in this District, Adorno v. Citimortgage, 12-55 (DWF/JJG), and the property described as their residence here, 25929 Ipava Avenue, is the same property described in Adorno. Two other Plaintiffs, Wang Xang Xiong and his wife, Jua Thao Xiong, appear to be the first named plaintiffs in Xiong v. Bank of Am., 11-3377 (JRT/JSM). Here, however, they purportedly reside at 5900 Bethia Lane in Minneapolis (Compl. 7), whereas in Xiong, they reside at 403 76th 3
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 4 of 8 Avenue North in Brooklyn Park. Mr. Butler attempted to explain this by claiming a possible mistake, but this is certainly not the first time a Court in this District has called out exactly this sort of mistake. See Welk, slip op. at 39, No. 11-2676 (Docket No. 121). Mr. Butler is an officer of the Court and under Rule 11 is responsible for researching the claims he intends to bring and ensuring that the contentions in his complaints are correct and are not duplicative of claims he has made elsewhere. He would be well-advised to examine the pleadings in all matters pending in this District to ensure that he has not attempted to sue more than once on the same property. DISCUSSION A. Motion to Remand Plaintiffs have moved to remand the action, contending that the Court lacks diversity jurisdiction over the matter because the law firm is a proper Defendant and not diverse from Plaintiffs. Plaintiffs also argue that the state court has prior exclusive jurisdiction over the case. 1. Diversity Jurisdiction Fraudulent joinder occurs when a plaintiff files a frivolous or otherwise illegitimate claim against a non-diverse defendant solely to prevent removal. Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003). As noted, every Court in this District to have considered the exact situation presented here has concluded that there is no reasonable basis in fact and law supporting a claim against the resident defendants. Id. at 810. Plaintiffs theory ignores the fact that attorneys are, in the main, immune from actions 4
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 5 of 8 taken within the scope of the employment relationship unless those actions amount to active steps to conceal a fraud. L&H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372, 380 (Minn. 1989). No active steps are alleged here, and the law firm is therefore immune from suit. Ultimately, however, Plaintiffs claims against the law firm fail because their claims against all Defendants fail. As the Minnesota Supreme Court held more than two years ago, a mortgagee need not have an interest in a promissory note to foreclose on a mortgage. Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn. 2009). Thus, whether Defendants are in possession of the actual promissory note is irrelevant. If Defendants are the legal holders of the underlying security interest, also known as the mortgage, they are entitled to foreclose. There is no reasonable basis supporting a claim against Peterson, Fram & Bergman and, as such, the law firm must be dismissed as fraudulently joined. The Court may thus exercise diversity jurisdiction over this matter. 2. Prior Exclusive Jurisdiction The doctrine of prior exclusive jurisdiction posits that, when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res. Marshall v. Marshall, 547 U.S. 293, 311 (2006). Plaintiffs argue that, by filing state-court actions to evict four of them, Defendants invoked state-court jurisdiction over those four properties and this Court cannot take jurisdiction over the same properties. But as Defendants point out, an eviction action is in personam, not in rem, seeking an order against an individual to vacate the property. Whether or not those actions are still pending 5
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 6 of 8 (or were pending at the time this lawsuit was filed), they have no bearing on Plaintiffs claims here, which seek to stop a foreclosure and quiet title, something that is not at issue in an eviction proceeding. Plaintiffs contend rather vehemently that Defendants are wrong because an action for possession of property is an in rem action. (Pls. Reply Mem. (Docket No. 28) at 8.) But the case on which they rely says the opposite: an action to seize property for the payment of debts is in personam, not in rem. See Curran v. Nash, 29 N.W.2d 436, 438 (Minn. 1947) ( We believe that this action is one in personam. ). Mr. Butler once again misrepresents the law. The doctrine of prior exclusive jurisdiction simply does not apply here. Plaintiffs also contend that because one of the properties is registered under Minnesota s Torrens statute the state court has exclusive jurisdiction over that property. This argument is wholly without merit and deserves no discussion. B. Motions to Dismiss 1. Standard of Review For purposes of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court takes all facts alleged in the complaint as true. See Westcott v. Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). The Court must construe the factual allegations in the complaint and reasonable inferences arising from the complaint favorably to the plaintiff and will grant a motion to dismiss only if it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986) (citations omitted). The complaint must include enough facts to state a claim to relief 6
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 7 of 8 that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 2. Merits Plaintiffs contention is that [b]ecause Defendant has no right, title or interest in [Plaintiff s] Original Note, Defendant cannot exercise rights in the security instrument securing payments in the Original Note. (Compl. 42.) In other words, Plaintiffs argument is that Defendants do not own the notes for Plaintiffs mortgages and thus cannot foreclose on those mortgages. But as Judge Schiltz so thoroughly discussed in Welk, slip op. at 7-15, No. 11-2676 (Docket No. 121), this argument has no merit whatsoever. The right to enforce a mortgage through foreclosure by advertisement lies with the legal, rather than equitable, holder of the mortgage. Stein v. Chase Home Finance, LLC, 662 F.3d 976. 980 (8th Cir. 2011). The legal holder of a mortgage is the holder of the mortgage itself; the holder of the note is the equitable holder of the mortgage. Thus, it does not matter whether Defendants can establish that they hold the notes; there is no dispute that Defendants hold the mortgage instruments and are therefore entitled to foreclose on Plaintiffs properties. All of Plaintiffs other arguments are similarly without merit. Plaintiffs have alleged no defect in the mortgage instrument, for instance, such as forgery or the like, and thus have no legal support for their claim that Defendants are not holders in due course of the notes. In addition, it is irrelevant whether Defendants are holders in due course or have any other interest in the notes, as discussed above. Plaintiffs Complaint fails to state a claim on which relief can be granted and must be dismissed. CONCLUSION 7
CASE 0:11-cv-03710-PAM-FLN Document 33 Filed 04/19/12 Page 8 of 8 As Mr. Butler no doubt knows by now, Plaintiffs claims are patently meritless and frivolous and must be dismissed. Accordingly, IT IS HEREBY ORDERED that: 1. Plaintiffs Motion to Remand (Docket No. 13) is DENIED as moot; 2. The Motion to Dismiss filed by Federal National Mortgage Association, MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc. (Docket No. 3) is GRANTED; 3. The Motion to Dismiss filed by BAC Home Loans Servicing LP, Bank of America, N.A., Federal National Mortgage Association, MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc. (Docket No. 5) is GRANTED; 4. Peterson, Fram and Bergman, P.A. s Motion to Dismiss (Docket No. 8) is GRANTED; and 5. The Complaint (Docket No. 1-2) is DISMISSED with prejudice. LET JUDGMENT BE ENTERED ACCORDINGLY. Dated: Thursday, April 19, 2012 s/ Paul A. Magnuson Paul A. Magnuson United States District Court Judge 8