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In re Mortgage Electronic Registration Systems (MERS) Litigation

United States District Court, D. Arizona

July 25, 2016

IN RE MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS) LITIGATION
v.
GE Money Bank et al., CV 10-00630-PHX-JAT[1] THIS DOCUMENT RELATES TO: Robinson

          ORDER

          JAMES A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE.

         I. Jurisdiction

         Following the Supreme Court’s decision in Americold Realty Trust v. Conagra Foods, Inc, 136 S.Ct. 1021 (2016) (holding that a trust takes on the citizenship of its members), this Court called for supplemental briefing on jurisdiction. (Doc. 2046). Both Trustees (U.S. Bank as Trustee for Structured Asset Securities Corporation Series 2006-GEL3 and Bank of New York Mellon As Trustee for SAMI II 2006-AR3) and Plaintiffs appear to take the position that the Trustees were not sued to “reach” the assets of the trusts (unlike Navarro Savings Assn. v. Lee, 446 U.S. 458 (1980)), but instead argue the Trustees are literally the Defendants, and that the status as Trustee is irrelevant. (For example, Plaintiffs state “Plaintiffs did not sue any trusts.” (Doc. 2048 at 1)). In other words, both briefs imply that any judgment Plaintiffs might obtain against U.S. Bank, as Trustee, or Bank of New York Mellon, as Trustee, would be paid by U.S. Bank or Bank of New York Mellon personally, and not out of the res of the respective trusts. Further, they both imply that the banks are paying their own legal fees; not that the either Trust is paying the legal fees of its Trustee. If these representations are true, the Court would agree that U.S. Bank’s citizenship and Bank of New York Mellon’s citizenship is the relevant citizenship for diversity purposes and not the citizenship of the Trust (i.e. all the members/certificate holders of the Trust).

         However, Plaintiffs have made no claims of breach of fiduciary duty against U.S. Bank or Bank of New York Mellon, which is the typical claim made against a Trustee personally. Instead, Plaintiffs must be alleging that they can make direct claims against U.S. Bank or Bank of New York Mellon as the de facto “manager” of Plaintiffs’ loans as a Trust asset. Assuming this is true, the Court is unclear why U.S. Bank was named “solely in its capacity as Trustee”, because in reality, it is being named solely in its capacity as a Bank. The same would be true for Bank of New York Mellon.

         Because the Court cannot do any fact investigation on its own, the Court is left to accept the parties’ representations. Based on these representations, the Court will accept that the Trusts, and their respective assets, are not at issue in this case. The Court will also accept these representations to establish that the Banks, and not the Trusts or their assets, are the real parties in interest.

         II. Summary Judgment Standard

         Summary judgment is appropriate when a moving part shows that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. Pro. 56. Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-movant to establish the existence of material fact. Id. The non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts” by “com[ing] forward with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (quoting Fed. R. Civ. Pro. 56(e) (1963) (amended 2010)). A dispute about a fact is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-movant’s bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247-48.

         III. Count I of the Amended Complaint

         Following the Court of Appeals reversal (In re Mortgage Elec. Registration Sys., Inc., 754 F.3d 772 (9th Cir. 2014) at Doc. 1820) of this Court’s dismissal of the consolidated amended complaint in this case, there is one Count remaining. The remaining Count is a cause of action under A.R.S. § 33-420(A). Another Court in this district has summarized this cause of action as follows:

…A.R.S. § 33-420(A) [] penalizes persons claiming an interest or lien in real property for knowingly recording a document that is “forged, groundless, contains a material misstatement or false claim or is otherwise invalid”:
A. A person purporting to claim an interest in, or a lien or encumbrance against, real property, who causes a document asserting such claim to be recorded in the office of the county recorder, knowing or having reason to know that the document is forged, groundless, contains a material misstatement or false claim or is otherwise invalid is liable to the owner or beneficial title holder of the real property for the sum of not less than five thousand dollars, or for treble the actual damages caused by the recording, whichever is greater, and reasonable attorney fees and costs of the action.
(Emphasis added.) The broader statutory section, A.R.S. § 33-420, is entitled “False documents; liability; special action; damages; violation; classification.”

David A. Kester v. CitiMortgage, CV 15-365, Doc. 37 (D. Ariz. March 31, 2016).

         IV. Robinsons’ and Silva’s Fact Specific Claims

         A. The Plaintiffs

         The member case at issue in this Order (CV 10-630) involves two properties previously owned by the Robinsons and Ms. Silvas (see footnote 1). Beyond having both been named as Plaintiffs in this suit, it does not appear that the Robinsons and Ms. Silvas have any relation to each other, nor do their respective properties. Thus, even this member case is in actuality two completely separate cases.

         B. The Defendants

         In their first supplement regarding jurisdiction (Doc. 2001-1), Plaintiffs stated that there are six defendants in the Robinson/Silvas member case: 1) U.S. Bank, National Association, as Trustee for Structured Asset Securities Corporation Series 2006-GEL3; 2) Wells Fargo Bank, N.A.; 3) The Bank of New York Mellon, as Trustee for SAMI II 2006-AR3; 4) ReconTrust Company, N.A.; 5) MERSCORP Holdings, Inc.; and 6) Mortgage Electronic Registration Systems, Inc.

         MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS”) moved for summary judgment at Doc. 1979; Plaintiffs responded at Doc. 2011; and MERS replied at Doc. 2040. This Motion seeks summary judgment against both the Robinsons and Silvas.

         Wells Fargo Bank, N.A. and U.S. Bank, National Association, as Trustee for Structured Asset Securities Corporation Series 2006-GEL3 moved for summary judgment at Doc. 1923, Plaintiffs responded at Doc. 2009 and these Defendants replied at Doc. 2037. This Motion seeks summary judgment against the Robinsons.

         Bank of America, The Bank of New York Mellon, as Trustee for SAMI II 2006-AR3, and ReconTrust Company, N.A. moved for summary judgment at Doc. 1921, Plaintiff responded at Doc. 2021, and Defendants replied at Doc. 2035. This Motion seeks summary judgment against Silvas. With regard to this motion, based on Plaintiffs’ jurisdictional statement (which does not list Bank of America), the Court is unclear whether Bank of America is actually a Defendant to the Silvas’ complaint. However, Plaintiff’s response to this motion for summary judgment includes Bank of America as if it is a proper Defendant.

         In the Consolidated Amended Complaint (Doc. 1424 at 17) Plaintiffs also made a claim on behalf of the Robinsons against America’s Servicing Company. However, Plaintiffs’ statement of jurisdiction (Doc. 2001-1) does not mention America’s Serving Company as a Defendant in this case. America’s Serving Company currently has no motion for summary judgment pending. Nonetheless, the Robinson Plaintiffs repeat their allegation against America’s Serving Company in their response (Doc. 2009 at 4) to Wells Fargo’s and U.S Bank as Trustee’s motion for summary judgment. Further, at footnote 5 of Doc. 2009, Plaintiffs state without citation that America’s Servicing Company is a dba of Wells Fargo. Thus, perhaps this is not a separate Defendant even though the consolidated amended complaint makes specific allegations against it.

         C. Scope of the Mandate (Forgery)

         As to Plaintiffs’ claims, this Court previously recounted,

[Plaintiffs’] amended complaint was dismissed on October 3, 2011. (Doc. 1602). Plaintiffs appealed dismissal of Counts I-VI to the Ninth Circuit Court of Appeals. The Court of Appeals reversed the dismissal of Count I and affirmed the dismissal of Counts II-VI. In re Mortgage Elec. Registration Sys., Inc., 754 F.3d 772, 786 (9th Cir. 2014). Specifically, the Court of Appeals held that: (1) A.R.S. § 33-420 applies to Notices of Trustee Sale, Notices of Substitution of Trustee, and Assignments of a Deed of Trust, documents which Plaintiffs alleged to be fraudulent in the CAC; (2) Plaintiffs’ claims are not timebarred; (3) Plaintiffs have standing to sue under A.R.S. § 33-420; and (4) Plaintiffs pleaded their robosigning claims with sufficient particularity to satisfy Federal Rule of Civil Procedure 8(a). In re Mortgage Elec. Registration Sys., Inc., 754 F.3d at 781-784.

Doc. 2005 at 2.

         More specifically, the Court of Appeals held that Plaintiffs had stated a claim that “the documents at issue are invalid because they are ‘robosigned (forged).’” In re Mortgage Elec. Registration Sys., Inc., 754 F.3d at 783.[2] As this Court discussed at length in the order denying class certification (Doc. 2005), this claim is the only claim of the 18-page Count One that was remanded to this Court. Indeed, the Court of Appeals confirmed that all other theories potentially embedded in Count One were waived by Plaintiffs because Plaintiffs did not raise them on direct appeal. (Doc. 2047) Thus, Plaintiffs must survive summary judgment on this single claim.

         As indicated above, the statute at issue creates a cause of action when someone files a document that is: 1) forged; 2) groundless; 3) contains a material misstatement or false claim; or 4) is otherwise invalid. A.R.S. § 33-420(A). However, the Court of Appeals’ mandate could be construed as permitting Plaintiffs to prove only “forgery” as the means by which this statute was violated. (Doc. 1820). Indeed in a subsequent decision, the Court of Appeals stated

“This court’s reversal of Count I was limited to petitioners’ claims of robosigning and forgery. To the extent petitioners now seek to challenge the MDL Court’s dismissal of Count I as to allegations beyond robosigning and forgery, that challenge is waived because it was not raised in the appeal in MERS I.”

(Doc. 2047 at 2) (emphasis added).

         Accordingly, the Court will analyze “forgery”[3] specifically because it is possibly the only claim remaining before this Court. The Court will then attempt to determine whether Plaintiffs are claiming A.R.S. § 33-420 was violated by Defendants in some other way.

         D. MERS’ motion for summary judgment

         1. MERS Motion as to the Robinsons - Forgery

         MERS has identified Jennifer Hamlin as the person who signed the Robinsons’ assignment on behalf of MERS. With respect to the allegations that Ms. Hamlin’s signature was “forged”, Plaintiffs have failed to create a disputed issue of fact. Specifically, each of the Robinsons’ testified that they had no evidence that Ms. Hamlin’s signature was forged. (Doc. 1979 at 11). Ms. Hamlin testified that the signature was in fact hers. (Id.) Finally, Plaintiffs’ own handwriting expert testified that Ms. Hamlin’s signature on the document was consistent with other examples of her signature. (Id.; Doc. 1980-1 at 116).[4] On this record, Plaintiffs have no evidence of forgery and MERS is entitled to summary judgment.

         2. MERS Motion as to Silvas - Forgery

         MERS has identified Christina Balandran as the relevant signer of the Silvas’ assignment on behalf of MERS. (Doc. 1979 at 11). Ms. Silvas testified that she had no evidence that Ms. Balandran did not actually sign the documents. (Id.) Plaintiff’s expert did not examine Ms. Balandran’s signature, and had no opinion on the authenticity of her signature. (Id.). On this record, Plaintiff has offered no evidence that Ms. Balandran’s signature is a forgery. See Celotex, 477 U.S. at 325 (moving party may discharge its burden on summary judgment by showing there is an absence of evidence to support the nonmoving party’s case). Accordingly, MERS is entitled to summary judgment.

         3. Plaintiffs’ allegations against MERS

         The Court having concluded there is no disputed issue of fact on the only issue the Court of Appeals reversed, namely forgery, the Court could enter judgment in favor of MERS. However, the Court will address “robosigning” because it was specifically mentioned by the Court of Appeals and arguably within the scope of the mandate.

         Reading Plaintiffs response to MERS’ motion for summary judgment, it would appear Plaintiffs believe “robosigning” is, by and of itself, a way to violate A.R.S. § 33-420. It is not. The statute lists four distinct and specific ways it can be violated, and Plaintiffs’ “robosigning” allegation must fall within one of these four categories to even state a claim.[5]

         Plaintiffs define robosigning as, “the actual process where people either forge signatures on high volumes of foreclosure documents, or the actual person signing lacks knowledge of the facts being attested to, and/or the documents are pre-notarized (notarized in blank) or post-notarized (the notary didn’t actually witness the signature).” Doc. 2011 at 7-8.[6] Only one of these means of robosigning, namely forgery, overlaps with the ways to violate A.R.S. § 33-420.

         a. Robinsons’ ...


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