STATE OF COUNTY OF BONNIER FIRST JUDICIAL DIST. ZiIII SEP 22 P 2: 4S CLERK DISTRICT COL DEPUTY IN THE DISTRICT COURT OF THE FIRST JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF BONNER BRYAN and ZABRIELLE DILLON, a married couple, Case No. CV 2011-0001328 Plaintiffs, MEMORANDUM DECISION vs. AND ORDER OF DISMISSAL GMAC MORTGAGE LLC, f/k/a GlVIAC Mortgage Corporation, a -Delaware - - corporation, HOMECOMINGS FINANCIAL, LLC, f/k/a Homecomings Financial Network, Inc., a Delaware corporation, its successors and assigns or its nominee MORTAGE ELECTRONIC REGISTRATION SYSTEMS, INC. 1"MERS"1; EXECUTIVE TRUSTEE SERVICES, LLC, a Delaware corporation; PIONEER TITLE OF ADA COUNTY, an Idaho corporation d/b/a PIONEER LENDER TRUSTEE SERVICES; and All Persons in Possession or Claiming any Right to Possession (DOES I-V, Defendants. MEMORANDUM DECISION AND ORDER OF DISMISSAL - I
Based on the weight of authority from other jurisdictions, Defendant GMAC Mortgage, LLC's clear status as record beneficiary in this case, and the defendants' compliance with the Idaho non-judicial foreclosure statute, the Court concludes that the plaintiffs have failed to state any cognizable claim for relief. Accordingly, the plaintiffs' motions to stay the foreclosure and trustee's sale and for a continuance are denied. The defendants' motion to dismiss is granted, and this case is dismissed. I. INTRODUCTION This matter came before the Court on September 21, 2011, for a hearing on Plaintiffs' Second Motion to Stay Foreclosure and Trustee's Sale; Plaintiffs' Rule 56(f Motion for a Continuance to Permit Plaintiffs to Obtain the Testimonies of Relevant Witnesses; and Defendants' Motion to Dismiss. Based on the record, and the briefing and oral argument of counsel, the Court issues the following decision and order. II. ANALYSIS The plaintiffs' motions to stay the foreclosure and trustee's sale and for a continuance are based on two arguments: the so-called "show me the note" and "split the note" arguments. First, the plaintiffs claim that the defendants, including GMAC Mortgage, LLC, cannot enforce the note because they "have never produced the actual note tied to the security interest that they are seeking to foreclose..." Plaintiffs' Reply to Defendants' Response (filed September 20, 2011, p. 1. Second, the plaintiffs contend that: "Because the Plaintiffs' note has been assigned to different parties while the relevant trust deed continues to name Homecomings Financial as the lender with MERS allegedly acting as its nominee, a split of the note and trust deed has occurred and, therefore, the latter is a nullity." Complaint for Injunctive and Declaratory Relief and to Quiet Title (filed July 26, 2011, p. 2, VIII. Idaho appellate courts have not yet addressed MEMORANDUM DECISION AND ORDER OF DISMISSAL - 2
either of these theories. However, there are numerous federal and state court cases from other states which have found no merit in either argument. A survey of the case law reveals that courts in other jurisdictions, including Arizona, California, Nevada, Washington, and Hawaii all non-judicial foreclosure states have rejected "show me the note" claims. See, e.g., Diessner v. Mortgage Electronic Registration Systems, et al., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009; Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009; Hogan v. Washington Mutual Bank, NA., 2011 WL 1158944, *3-4 (Ariz. App. Div. 1; Miller v. Skogg, 2011 WL 383948, *3 (D. Nev.; Christopher v. First Franklin Financial Corp., 2010 WL 1780077, *2 (S.D. Cal.; Padayachi v. Indymac Bank, 2010 WL 4367221, *3 (N.D. Cal.; Sakala v. BAC Home Loans Servicing, LP, 2011 WL 719482, *7 (D. Hawaii. Idaho is a non-judicial foreclosure state. Under Idaho law, prior to foreclosure, three prerequisites must be met: (1 the trust deed, all assignments, and the appointment of successor trustee, must be recorded in the mortgage records of the county where the property is located; (2 there must be default; and (3 the trustee or beneficiary must record a notice of default. I.C. 45-1505(1-(3. Idaho's non-judicial foreclosure statute does not require production of the original note in order to proceed with foreclosure. In this case, the defendants have complied with these statutory prerequisites. Therefore, any cause of action in the plaintiffs' Complaint involving an allegation that the defendants do not possess the note fails to state a cognizable claim for relief. Further, the non-judicial foreclosure statute vitiates the plaintiffs' concern about double jeopardy because the statute prohibits a person from bringing an action on a secured note without resorting to foreclosure. I.C. 45-1503(1. Contrary to the plaintiffs' assertion, therefore, a MEMORANDUM DECISION AND ORDER OF DISMISSAL - 3
hypothetical third party who possesses the plaintiffs' secured Note after the occurrence of a trustee's sale to discharge the same Note would not have a cause of action. Other jurisdictions have similarly rejected "split the note" claims. For instance, in Utah, the court in Wade v. Meridias Capital, Inc., 2011 WL 997161 (D. Utah, reasoned: Mr. Wade's "split the note" theory has been heavily litigated in this district and in multiple other districts and has been rejected repeatedly. Utah Code Annotated 57-1-35 states, "The transfer of any debt secured by a trust deed shall operate as a transfer of the security therefor." The statute does not provide for exceptions, nor has Mr. Wade cited to any case law or statute that says that such an exception exists. By law, each successor to the Note also receives the benefit of the security. Under the plain terms of the Trust Deed, which Mr. Wade signed, MERS was appointed as the beneficiary and nominee for the Lender and its successors and assigns and granted power to act in their stead, including making assignments and instituting foreclosure. The case law on the matter in this jurisdiction is clear and unequivocal that MERS is able to act as the beneficiary for the Trust Deed. Mr. Wade's argument that the wrong beneficiary is foreclosing, or that the beneficiary is unknown, even if the underlying facts are assumed to be true, is entirely irrelevant to the question of whether a non-judicial foreclosure sale may be stopped. The identity of the beneficiary has no affect on whether the borrower has made its required monthly payments, which is default under the plain terms of the note. Mr. Wade does not contend that he has made his payments, and a default on the Note is admitted. Nor does the identity of the beneficiary have any affect on the notice and sale requirements for a non-judicial foreclosure. The execution of the trust deed transfers all of the trustor's interest in the property "to the trustee as security for the obligation or obligations for which the trust property is conveyed..." Utah code Annotated 57-1-20 (emphasis added. Regardless of who holds the note or has "standing" to pursue a judicial foreclosure, in a nonjudicial foreclosure the trustee is acting as that party's fiduciary and the borrower is obligated to deal with the trustee. Possession and proof of the Note are not a requirement for non judicial foreclosure. A quiet title claim seeks to extinguish competing interests in the property in favor of the interest of the plaintiff. In this case Wade is seeking to extinguish the Trust Deed, and is therefore required to prove that his interest is superior to the Trust Deed. He does not do so. He admits that he executed the Trust Deed, and that it was notarized and recorded. There is no claim that the Trust Deed has been reconveyed. The identity of the beneficiary does not affect the validity of the Trust MEMORANDUM DECISION AND ORDER OF DISMISSAL - 4
Deed as an encumbrance on Plaintiffs title, nor does the status of the servicer or trustee. By law, each successor to the Note also receives the benefit of the security. There is no basis for Wade to claim that the Trust Deed is not a valid encumbrance against his title, and therefore he cannot make out a claim for quiet title. Id, at *2-3. (Emphasis in original. It is undisputed in this case that the plaintiffs executed a Deed of Trust securing a payment obligation of $884,000.00. The Deed of Trust expressly identified Homecomings Financial, LLC as the lender and identified MERS as the beneficiary and nominee for Homecomings and Homecomings' successors and assigns. It is also undisputed that the plaintiffs executed a Loan Modification Agreement which renewed and extended the Deed of Trust (and a payment obligation of $891,503.26 and expressly acknowledged GMAC Mortgage, LLC as the current lender. Further, GMAC's status as record beneficiary is clear, because on January 20, 2011, MERS executed an Assignment of Deed of Trust, which reflected the transfer of all beneficial interest under the Deed of Trust to GMAC Mortgage, LLC. The Assignment was recorded on January 28, 2011, in the records of Bonner County, Idaho, as Instrument No. 805172. Notably, the plaintiffs do not assert that they are not in default under the terms of the Note, the Deed of Trust, and the Loan Modification Agreement. They do not assert that they have made payments to GMAC, the loan servicer and acknowledged lender, which were not properly credited. They also do not assert that the amount owed is inaccurate or that any person or entity other than the defendants has asserted any rights or interest in the property or in payments secured by the property. Rather the plaintiffs, despite retaining the benefits of their nearly $900,000.00 loan, and despite their uncontroverted failure to make the contractually MEMORANDUM DECISION AND ORDER OF DISMISSAL - 5
required payments, request that this Court declare their loan obligation a nullity and entirely void the loan based on note-splitting and "failure to produce the note" theories that have been repeatedly rejected by other non-judicial foreclosure jurisdictions. Accordingly, based on the weight of authority from other jurisdictions, GMAC's clear status as record beneficiary in this case, and the defendants' compliance with the Idaho nonjudicial foreclosure statute, the Court concludes that the plaintiffs have failed to state any cognizable claim for relief, and their Complaint shall be dismissed. III. CONCLUSION NOW, THEREFORE, based on the foregoing, the Plaintiffs' Second Motion to Stay Foreclosure and Trustee's Sale is DENIED. The Plaintiffs' Rule 56(f Motion for a Continuance to Permit Plaintiffs to Obtain the Testimonies of Relevant Witnesses is DENIED. The Defendants' Motion to Dismiss is GRANTED. This case is hereby DISMISSED. IT IS SO ORDERED. DATED this 2,-7-- day of Se - : - : 411110.1,411. op. "NIF George R. Reinhardt III District Judge MEMORANDUM DECISION AND ORDER OF DISMISSAL - 6
CERTIFICATE OF SERVICE hereby certify that a true and correct copy of the foregoing was mailed, postage prepaid, this OAS day of September, 2011, to: Regina M. McCrea April M. Linscott OWENS AND CRANDALL, PLLC 8596 N. Wayne Drive, #A Hayden, Idaho 83835 Matthew J. McGee MOFFATT, THOMAS, BARRETT, ROCK & FIELDS, CHARTERED 101 S. Capitol Blvd., 10 th Floor P.O. Box 829 Boise, Idaho 83701 MEMORANDUM DECISION AND ORDER OF DISMISSAL - 7