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10-cv-01749-RPM-KLM Bruce C. McDonald, an individual, Plaintiff, vs. ONEWEST BANK, F.S.B.; John and Jane Does, 1-100 inclusive; ABC CORPORATIONS, entities of unknown form, 1-20, inclusive, Defendants. ______________________________________________________________________ PLAINTIFF’S RESPONSE TO DEFENDANT ONE WEST BANK’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT ______________________________________________________________________ COMES NOW the Plaintiff, Bruce C. McDonald, by and through counsel, Gary D. Fielder, Esq., and in response to the Defendant‟s Motion to Dismiss Plaintiff‟s Complaint, the Plaintiff states as follows: I. STATEMENT OF FACTS According to the Plaintiff‟s Complaint (Doc.1), on May 27, 2003, the Plaintiff, Bruce C. McDonald (“Mr. McDonald”) entered into an agreement with INDYMAC BANK, FSB (“IndyMac Bank”), wherein Mr. McDonald executed an ADJUSTABLE RATE NOTE (“Note”), secured by and concerning his residence located at 4434 Rarity Court, Crestone, Colorado (“Property”). (Doc.1, ¶¶15-17). The Note (Doc.1, Ex. A) memorialized Mr. McDonald‟s promise to pay $198,000, plus interest, to the order of IndyMac Bank. The first paragraph of the Note states:
I understand that the lender may transfer this note. Lender or anyone who takes this note by transfer and who is entitled to receive payments under this note is called the “Note Holder.” A Deed of Trust (Doc.1, Ex. B), secured the money owed under the terms of the Note. IndyMac Bank was the beneficiary of the Deed of Trust. Additionally, the Public Trustee of Saguache County, Colorado (“Public Trustee”), was appointed “Trustee,” by agreement of the parties. On July 11, 2008, IndyMac Bank was closed by the Office of Thrift Supervision, an agency of the United States Government. After the closure, IndyMac went into bankruptcy and the Federal Deposit Insurance Corporation (“FDIC”) was named the bank‟s conservator. The FDIC re-opened the bank in receivership. Ultimately, all of the assets of IndyMac Bank were sold to another entity and re-opened in March 2009 as ONEWEST BANK, FSB (“OneWest Bank”). (Doc.1, ¶¶20-27). Although Mr. McDonald knew the bank with which he had contracted was bankrupt, he continued to make his payments under the Note. On April 10, 2009, Mr. McDonald received a letter from OneWest indicating that the “servicing” of the Note had been assigned, sold or transferred to OneWest. (Doc. 1, Ex. C). After inquiry, Mr. McDonald was not satisfied that the information he had
received was sufficient to establish a contractual obligation between himself and OneWest. As outlined in his Complaint, Mr. McDonald believed that he had certain rights under the Uniform Commercial Code (“UCC”) to require OneWest to provide reasonable evidence of authority to make such a presentment—and refuse payment if
such instrument or evidence was not forthcoming. As alleged, OneWest failed to prove Mr. McDonald was contractually obligated to pay OneWest. Beginning in May 2009, Mr. McDonald discontinued payment. (Doc.1, ¶¶29-34). Thereafter, on August 4, 2009, Attorneys Aronowitz and Mecklenburg, LLP (“Aronowitz”), mailed a letter to Mr. McDonald indicating the matter had been referred to the law firm for institution of foreclosure proceedings. The notice informed Mr. McDonald of his right to request a verification of the debt. Further, Aronowitz, on behalf of OneWest, indentified itself as a “debt collector.” (Doc.1, Ex.D). Concurrently, Aronowitz filed a CERTIFICATION BY QUALIFIED HOLDER PURSUANT TO 38-38-101, C.R.S. (“Certification”) with the Public Trustee, in which Aronowitz identifies itself as attorney for OneWest (Doc.1, Ex.E). Said Certificate, signed under oath, stated: 1.) OneWest was a qualified holder as defined in C.R.S. '3838-100.3(20); 2.) OneWest was the holder of the original evidence of debt; and, (3) OneWest was the current beneficiary of the Deed of Trust. As alleged in Mr. McDonald‟s Complaint, OneWest was not, is not, and never has been the “Note Holder” as defined by the Note, or the beneficiary of the Deed of Trust. (Doc.1, ¶¶51-52). On August 10, 2009, through written correspondence, Mr. McDonald requested verification of the debt. In response, OneWest, through Aronowitz, mailed
correspondence to Mr. McDonald on August 22, 2009, enclosing a copy of the Note and Deed of Trust. No notations, marks, stamps, endorsements or assignments on the Note
or Deed of Trust indicated the Note and/or Deed of Trust had been transferred, endorsed, sold, assigned or conveyed to OneWest. (Doc.1, Ex.H). Additionally, no endorsements or assignments of the Note and Deed of Trust had been recorded in the public records of Saguache County. On September 10, 2009, OneWest filed for an Order Authorizing Sale Pursuant to C.R.C.P. Rule 120 in Saguache County District Court. Additionally, Mr. McDonald filed an independent action for, among other things, injunctive relief. (Doc.1, ¶86). The District Court, presided over by the Honorable Judge Martin A. Gonzales, required OneWest to produce the original Note and Deed of Trust. After OneWest failed to produce the documents, the court dismissed both actions. OneWest eventually produced the documents and requested reconsideration. The Rule 120 matter was thereafter reopened, and the parties were allowed to engage in some limited discovery. Ultimately, on February 4, 2010, the District Court issued an Order allowing the sale of Mr. McDonald‟s property to proceed to public sale on the previously scheduled date of March 4, 2010. Throughout the Rule 120 proceeding, OneWest explicitly and implicitly presented itself as the holder of the Note and beneficiary of the Deed of Trust. For example, in said Motion to Reconsider, filed on November 4, 2009, OneWest states in paragraph 6 of its pleading: Accordingly [OneWest Bank] is the holder of the original Note and Deed of Trust and has presented prime facie evidence to the Court that Petitioner is the real party in interest and has standing to bring this action.
Attached hereto as Plaintiff‟s Exhibit A is said Motion to Reconsider of November 4, 2009, as though fully contained herein. On February 15, 2010, OneWest filed a response to Mr. McDonald „s Motion to Reconsider, wherein it again asserted that OneWest was the real party in interest, had standing to bring the action, and that Mr. McDonald had no basis in law or fact for proceeding with his “frivolous, groundless or vexatious defense.” Attached hereto as Plaintiff‟s Exhibit B is said Response to Motion to Reconsider filed February 15, 2010, as though fully contained herein. Miraculously, on March 2, 2010, two days before the scheduled sale of his property, Mr. McDonald received information from the FDIC in response to his request under the Freedom of Information Act. The letter, dated March 1, 2010, from Rhonda Trata MMC Assistant Management on behalf of the FDIC as receiver for IndyMac Federal Bank, FSB, stated: I have been authorized by Mia Lee, First Vice-President of Compliance, OneWest Bank, to provide you with the attached document. Enclosed please find a screen print from OneWest Bank. It shows that Federal Home Loan Mortgage Corp., (FreddyMac), owns your first trust deed. OneWest is acting in a servicing capacity only. (Doc.1, Ex.I.) The attached “screen print” from OneWest indicated that the investor to Mr. McDonald‟s loan was, in fact, FEDERAL HOME LOAN MORTGAGE CORP. (“FreddiMac”), and indicates a sale to FreddiMac in September 2004. (Id.) Mr. McDonald also had received a letter from IndyMac Mortgage Services, a Division of OneWest Bank, dated February 26, 2010, which states, in pertinent part:
Please accept this letter as confirmation that the investor on your loan is Federal Home Loan Mtg. Co. Any questions regarding your loan should be addressed directly to IndyMac Mortgage Services, a Division of OneWest Bank, FSB, as we are responsible for the servicing of this loan. The investor should not be contacted directly. (Doc.1, Ex. K) After receiving said information, Mr. McDonald, through counsel, filed a Motion to Vacate Order Authorizing Sale. OneWest objected and, over a month after the home had been sold at public auction, District Court Judge Gonzales denied Mr. McDonald‟s Motion to Vacate Order Authorizing Sale, holding, among other things, that: 1. OneWest had complied with the Colorado Foreclosure Statutes by providing the Court with a copy of the Note, the Deed of Trust, and the certification made by the qualified holder signed by its attorneys in compliance with C.R.S. '38-38-101; 2. OneWest‟s compliance with C.R.S. '38-38-101 was prime facie evidence that OneWest was the real party in interest and has standing to bring the action; 3. OneWest, as the holder of the Note, was entitled to enforce payment thereon; and, 4. Although OneWest may have been acting in a “servicing capacity only,” it was “at a minimum an indication that the Petitioner is entitled to enforce the Note pursuant to C.R.S. '4-3-301(iii).” Attached hereto as Plaintiff‟s Exhibit C is said Order dated April 10, 2010, as though fully contained herein. At the public auction of March 4, 2010, OneWest, the only bidder, offered a credit bid of $171,002.74. (Doc.1, ¶86). On March 25, 2010, OneWest assigned its interest in said property to FreddiMac for ten dollars ($10). (Doc.1, ¶90).
Under Colorado law, Mr. McDonald did not have a right to appeal the District Court‟s final orders of February 4, 2010, and April 10, 2010. On June 29, 2010,
FreddiMac, as new owner, filed an action for forced entry and detainer to evict Mr. McDonald. (Doc.1,¶92). Thereafter, Mr. Donald filed suit in this Honorable Court on July 22,2009, for damages caused by OneWest Bank. II. LEGAL ANALYSIS A. Standard of Review This Court must accept all well-pled allegations in the Complaint as true, and view those allegations in the light most favorable to Mr. McDonald. Stidham v. Peace Officer Standards and Training, 265 F.3d 1144, 1149 (10th Cir. 2001). Mr. McDonald‟s Complaint should not be dismissed for failure to state a claim “unless it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Connelly v. Gibson, 355 U.S. 41, 45-46 (1957). See also Benefield v. McDowall, 241 F.3d 1267, 1270 (10th Cir. 2001). The Court should limit its consideration to the four corners of the Complaint, but can consider the documents attached thereto, and any external documents referenced in the Complaint, the accuracy of which is not in dispute. Oxendine v. Kaplan and Negron, 241 F.3d 1272, 1275 (10th Cir. 2001). The United States Supreme Court has recently clarified what constitutes a wellpled fact for purposes of determining a Rule 12 Motion to Dismiss. Ashcroft v. Iqbal, ___ U.S. ____, 129 S.Ct. 1937. Bell Atlantic Court v. Twombly, 550 U.S. 544 (2007). A
pleader is not required to set forth detailed factual allegations, but must offer more than labels and conclusions, a formulaic recitation of the elements of a cause of action, or naked assertions devoid of further factual enhancements. Iqbal, 129 S.Ct. at 1949. Once pled, the facts must demonstrate a plausible claim, in which the pleader has shown more than just an abstract possibility that the Defendant has engaged in actionable misconduct. Id. When faced with well-pled factual allegations, the Court “should assume their veracity and then determine whether they plausibly give rise to entitlement to relief.” Id. at 1950. B. Judicial Notice This Court may also consider matters of which it takes judicial notice. A
judicially noticed fact is one not subject to reasonable dispute and is either generally known within the territorial jurisdiction of the trial court or capable of accurate and ready determination by resort to resources whose accuracy cannot reasonably be questioned. O’Toole v. Northrop Grumman Corp., 499 F.3d 1218, 1224 (10th Cir. 2007). C. Rebuttal OneWest contends there is no question that OneWest‟s foreclosure on the Property was proper under Colorado law. This argument overlooks the obvious:
Technical compliance with Colorado‟s simplified foreclosure statute nonetheless requires the foreclosing party to provide truthful and accurate information to the Public Trustee and local District Court.
1. Qualified Holder OneWest argues a qualified holder of an evidence of debt can declare a violation of a covenant of a Deed of Trust and elect to publish all or a portion of the property therein described for sale. C.R.S. § 38-38-101, et seq. Under Colorado law, a “qualified holder” is a holder of an evidence of debt that is also one of the different types of entities described in C.R.S. § 38-38-100.3(20). OneWest is a federally chartered savings and loan association doing business in Colorado. C.R.S. '38-38-100.3(20)(c). OneWest contends it need only file, “among other thing, a „copy of the evidence of debt and a certificate signed and properly acknowledged by a holder of an evidence of debt acting for itself or as agent, nominee, or trustee‟ and „[c]opies of the recorded deed of trust and any recorded modifications‟ thereto.‟” (Doc.8, p.6). Why OneWest chose to emphasize this portion of the statute is without explanation. Throughout the process, OneWest implicitly and explicitly held itself out as the owner of the evidence of debt and beneficiary of the Deed of Trust. In its Motion to Dismiss, OneWest unequivocally states: Here, OneWest, a federal savings bank, initiated foreclosure as the „qualified holder‟ of the debt by filing, among other things, a „copy of the evidence of debt and a certification signed and properly acknowledged by‟ the owner of the Loan. [citation] Contrary to McDonald‟s contentions, OneWest need not be a holder of the original evidence of debt in order to foreclose. [citation] OneWest never suggested it was anything other than a qualified holder of the debt. (Emphasis added). (Id.)
In the Certification, OneWest claimed, under oath: [x] 1. Qualified Holder is the holder of the original evidence of debt. A true and correct copy of the original evidence of debt is attached hereto. [x] 2. Qualified Holder is the current beneficiary of the Deed of Trust. A true and correct copy of the recorded Deed of Trust is attached hereto. (Doc.1, Ex.E). OneWest does not dispute that its agents and attorneys, Aronowitz and Mecklenburg, LLP (“Aronowitz”), were dutifully speaking on its behalf. In fact, OneWest concedes it initiated the foreclosure. Additionally, paragraph 3(j) of the Certification allows a “Qualified Holder” to identify itself as an entity “acting in the capacity of agent, nominee except as otherwise specified in subsection (10) of this section, or trustee of another person.” However, OneWest did not declare itself as an entity in such a capacity. Accordingly, Mr. McDonald does not contend OneWest needs the original evidence of debt to foreclose. Mr. McDonald contends OneWest fraudulently claimed an equity interest in the Note, when it had none. Mr. McDonald also claims OneWest illegally exercised certain powers under the Deed of Trust, of which it was not the beneficiary. 2. Holder No issue causes greater confusion in Colorado foreclosure law than the term “holder.” From the beginning, OneWest has claimed it is “the servicer and holder of the loan which was originated by INDYMAC BANK, F.S.B.” (Doc 1, Ex.H). Additionally, in
its Motion to Dismiss, OneWest asserts it “has never suggested it was anything other than a qualified holder of the debt;” and, as such, “[f]or purposes of foreclosure, OneWest was the holder of the interest in the Loan, and properly exercised its right to foreclose when McDonald defaulted.” (Doc.8., pp.6-7,14).
C.R.S. § 38-38-100.3(10), states as follows: "Holder of an evidence of debt" means the person in actual possession of or otherwise entitled to enforce an evidence of debt; except that "holder of an evidence of debt" does not include a person acting as a nominee solely for the purpose of holding the evidence of debt or deed of trust as an electronic registry without any authority to enforce the evidence of debt or deed of trust. For purposes of articles 37 to 40 of this title, the following persons are presumed to be the holder of the evidence of debt: (a) The person who is the obligee of and who is in possession of an original evidence of debt; (b) The person in possession of an original evidence of debt together with the proper endorsement or assignment thereof to such person in accordance with section 38-38-101(6); (c) The person in possession of a negotiable instrument evidencing a debt, which has been duly negotiated to such person or to bearer or indorsed in blank, or (d) The person in possession of an evidence of debt with authority, which may be granted by the original evidence of debt or deed of trust, to enforce the evidence of debt as agent, nominee, or trustee or in a similar capacity for the obligee of the evidence of debt. Here, OneWest is not the obligee of the Note. As alleged, the Note was not endorsed or assigned to OneWest; nor was OneWest acting as an agent, nominee, or trustee, or in a similar capacity for an otherwise unknown obligee. The substance of OneWest‟s averment to any interest in the Note is found in its actual possession and 11
claim that the Note was “duly negotiated” to OneWest as an asset purchased from IndyMac Bank. However, as has been established by more than mere conclusionary allegations in Mr. McDonald‟s Complaint, IndyMac sold the Note and Deed of Trust before its bankruptcy—and thus the Note and Deed of Trust were simply not assets, the rights to which OneWest could acquire in its purchase. Additionally, physical possession of the Note does not equate with being a holder of the Note, C.R.C.P. § 4-1-201(b)(20)(A) defines a “holder” of a negotiable instrument as: The Person in possession of a negotiable instrument that is payable either to bearer or to an indentified person that is the person in possession. This Note was not “payable to bearer.” The Note involved in this case is payable to IndyMac Bank, not OneWest. With regard to the transfer of the physical possession of the Note from IndyMac to OneWest, C.R.C.P. 4-3-2-3, states:
Transfer of instrument; rights acquired by transfer. (a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. (b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument. (c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of endorsement by the transferor, the transferee has a specifically enforceable right to the 12
unqualified endorsement of the transferor, but negotiation of the instrument does not occur until the endorsement is made. (d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this article and has only the rights of a partial assignee. Subsection (b) would seem to invest OneWest with rights to enforce the Note by its physical transfer. However, Comment 2 of said statute states: Subsection (b) states that transfer vests in the transferee any right of the transferor to enforce the instrument "including any right as a holder in due course." If the transferee is not a holder because the transferor did not indorse, the transferee is nevertheless a person entitled to enforce the instrument under Section 3-301 if the transferor was a holder at the time of transfer. Although the transferee is not a holder, under subsection (b) the transferee obtained the rights of the transferor as holder. Because the transferee's rights are derivative of the transferor's rights, those rights must be proved. Because the transferee is not a holder, there is no presumption under Section 3-308 that the transferee, by producing the instrument, is entitled to payment. The instrument, by its terms, is not payable to the transferee and the transferee must account for possession of the unendorsed instrument by proving the transaction through which the transferee acquired it. Proof of a transfer to the transferee by a holder is proof that the transferee has acquired the rights of a holder. At that point the transferee is entitled to the presumption under Section 3-308. Under subsection (b) a holder in due course that transfers an instrument transfers those rights as a holder in due course to the purchaser. The policy is to assure the holder in due course a free market for the instrument. There is one exception to this rule stated in the concluding clause of subsection (b). A person who is party to fraud or illegality affecting the instrument is not permitted to wash the instrument clean by passing it into the hands of a holder in due course and then repurchasing it. Regardless of whether OneWest wishes to admit the obvious, OneWest acquired only the servicing rights to Mr. McDonald‟s loan. That fact is beyond debate. With that, certain rights retained by IndyMac Bank were transferred to OneWest through
purchase, which may have included the right to enforcement. The key issue remaining, however, is under what circumstances and procedure may OneWest seek enforcement of the provisions of the Note. 3. Deed of Trust The Colorado General Assembly created the office of the Public Trustee in each county in the state. C.R.S § 38-37-100.5, et seq. This provided a method of
foreclosure by advertisement and sale by the Public Trustee of instruments used to secure payment to the lender called “deeds of trust.” C.R.S § 38-38-101, et seq. These deeds of trust are executed to the Public Trustee and provide the time and manner of a Public Trustee foreclosure once the debtor has defaulted on the terms of a promissory note, otherwise referred to in Colorado law as “evidence of debt.” Id. “Foreclosure of a deed of trust by public trustee sale under the applicable statutes is activated by a power of sale in the deed of trust.” Plymouth Capital Co. Inc., v. Dist. Ct. of Elbert County, 955 P.2d 1014, 1017 (Colo. 1998). To foreclose on a promissory note, however, a different legal process must be used. “When a debtor defaults on a promissory note, a creditor may elect which
remedy the creditor wishes to pursue, as a creditor may enforce payment of the debt by: (1) foreclosing on the lien of the deed of trust; (2) pursuing a suit for a judgment upon default and filing the transcript of the judgment to obtain a judgment lien that allows for execution upon the judgment of the debtor‟s property; or (3) both.” Investments Corp. v. Battle Mountain Corp., 70 P.3d 1176 (2003). Mortgage
If one defaults on a mortgage loan, the lender can proceed with a public trustee foreclosure of the deed of trust, or choose to sue on the promissory note. If the latter method is chosen, judgment must be entered and a transcript of judgment filed. Only then can a lender commence foreclosure of the security. Almost all residential foreclosures in Colorado are administered using the Public Trustee. The deed of trust provides the assurance that the borrower will pay the lender, as the deed of trust pledges the borrower‟s home as security. However, the rights under a deed of trust extend only to its beneficiary. Here, the evidence establishes that OneWest was not the beneficiary of the Deed of Trust. Thus, no privity of contract exists between OneWest and Mr. McDonald. Accordingly, although OneWest may have certain rights to enforce the Note as its designated servicer, those rights do not extent to the contractual terms outlined in the Deed of Trust, to which OneWest is simply not a party. D. The Rooker-Feldman Doctrine A legal action brought pursuant to C.R.C.P. 120 is not an action to collect a debt. Its purpose is “very narrow” and limited to determin[ing] whether there is a reasonable probability that a default or other circumstance authorizing exercise of a power of sale has occurred.” Plymouth Capitol Co. v. District Court, 955 P.2d 1014, 1017 (Colo.
1998). In light of that, Colorado courts have made it clear that claims for damages by debtors, whether they be independent or cognizable as recoup or set-off, are not proper subjects for consideration within the Rule 120 hearing. Id.
Historically, proceedings “under this rule are not adversary proceedings in which the Court determines issues and enters final judgment, and no appeal may be taken to review the same.” Hastings v. Security Thrift Mtg. Co., 357 P.2d 919 (1960). A Rule 120 hearing is an administrative process, the intent of which is to provide a legitimate party entitled to foreclose a pathway to an expedited foreclosure process when no major issues are in dispute. The “scope of inquiry for a hearing held pursuant to this rule is limited to the existence of a default or other circumstances authorizing the sale, and action collateral to such hearing is necessary to resolve other issues.” Ragsdale Bros. Roofing v. United Bank, 744 P.2d 750 (Colo. App. 1987). Additionally, C.R.C.P. Rule 120 states in pertinent part: The granting of any such motion shall be without prejudice to the right of any person aggrieved to seek injunctive or other relief in any Court of competent jurisdiction, and the denial of any motion shall be without prejudice to any right or remedy of the moving party . . . OneWest claims the Complaint is barred by the Rooker-Feldman doctrine. However, Mr. McDonald has not asked this Court to overturn or modify the decision of the Saguache County District Court. Rule 120 hearings at the state-level do not purport to adjudicate issues such as those raised in Mr. McDonald‟s Complaint. In 2005, the Supreme Court of the United States revisited the Rooker-Feldman Doctrine. Exxon Mobile Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005). In its opinion, the Court stated: Variously interpreted in the lower courts, the doctrine has sometimes been construed to extend far beyond the contours of the Rooker and Feldman cases, overriding congress=s conferral of federal-Court 16
jurisdiction concurrent with the jurisdiction exercised by state courts, and superseding the ordinary application of preclusion law pursuant to 28 U.S.C. '1738. Id. Additionally, OneWest=s citation of a recent decision by the United States Court of Appeals, 10th Circuit, is misplaced and, in fact, supports Mr. McDonald=s contention that his action is not barred by the Rooker-Feldman Doctrine. See, Mann v. Boatright, 477 F.3d 1140 (10th Cir. 2007). In Mann, the plaintiff requested injunctive relief to various orders issued by a Colorado probate Court. In its decision, the 10th Circuit stated: The Rooker-Feldman Doctrine prevents the lower federal courts from exercising jurisdiction over cases brought by >state-court losers= challenging >state-court judgments rendered before the District Court proceedings commenced.= [Citations omitted] [T]o the plaintiff, this means that having lost in probate Court, she cannot file a federal complaint seeking review and reversal of the unfavorable judgment. Even if the probate court=s decision was wrong, that does not make its judgment void, but merely leaves it open to reversal or modification in an appropriate and timely appellate proceeding. Exxon-Mobile, 544 U.S. at 284, 125 S.Ct.at 1517. Mann v. Boatright, 477 F.3d 1140, 1146 (10th Cir. 2007). The Mann Court further concluded: Since Beverly did not file a timely appeal of those judgments, the District Court properly considered the probate proceedings final for purposes of Rooker-Feldman. In its Motion to Dismiss, OneWest states: While, as the Court has recently acknowledged, Rule 120 Orders are generally not adversarial and not appealable, and thus do not constitute final judgments, Athe applicability of Rooker-Feldman does not depend on whether state Court orders are appealable, but rather upon whether they 17
completely determine the rights of the parties. See, Beeler, 2007 W.L. 1346571, at *3 (citing Mann v. Boatright, 477 F.3d 1140 (10th Cir. 2007)). (Doc.8, p.9) Here, District Court Judge Gonzales found OneWest had “complied with the Colorado Foreclosure Statutes,” which established “prima facie evidence that [OneWest] is the real party in interest and has standing to bring this action.” See
Plaintiff‟s Exhibit C, ¶¶ 4-5. Said Order was not a complete determination of, or final judgment with regard to the rights of the parties. Essentially, the local court found that
in the limited scope of the Rule 120 hearing, OneWest complied with the foreclosure statute in Colorado. This case concerns whether, through its action, OneWest induced the public trustee and district court to act in accordance with the statute through misrepresentation. Further, Mr. McDonald, in this federal action, is not seeking to overturn Judge Gonzales= Order Authorizing Sale. Mr. McDonald has not asked for federal injunctive relief, a declaratory judgment, or any relief which seeks to review Judge Gonzales= decision. Mr. McDonald=s Complaint is a separate action based upon violations of
federal statute, and this District Court=s jurisdiction to then hear Mr. McDonald=s statebased, common law claims. In fact, Mr. McDonald invites OneWest to specifically address the issue with an explicit declaration that it stands by its original certification that OneWest was the ANote Holder” under the terms of the Note, and was then Athe current beneficiary of the deed of trust.” 18
E. Civil RICO Claim Mr. McDonald concedes he must plead his RICO claim with specificity. In his Complaint, Mr. McDonald recites, with particularity, specific dates, parties, and actions of OneWest, in concert with others, which would most certainly establish a plausible action against OneWest. Recently, the Supreme Court clarified the word Aplausible” in the context of whether well-pled facts establish a complaint upon which relief may be granted. The term is understood to mean that the plaintiff has a demonstratable and concrete belief that a wrong has been committed, and the Defendant is the entity responsible—as opposed to a set of facts in which a wrong my possibly and hypothetically be ascertained; and, the Defendant, might, hypothetically, be a person who might have been responsible for that wrong. Ashcroft v. Iqbal,____U.S.____, 129 S.Ct. 1937
(2009). See, also Bell Atlantic Corp., v. Twombly, 550 U.S. 544 (2007). In Twombly, the Supreme Court observed that the plaintiff had sufficiently pled that two defendants that engaged in Aparallel behavior.” The Court, however, found
that while parallel conduct might be consistent with the required element of an agreement between the two defendants, Ait was not only compatible with, but indeed was more likely explained by, lawful unchoreographed free-market behavior.” Id. at 567. The Court ruled Athe well-pleaded fact of parallel conduct, accepted as true, did not plausibly suggest an unlawful agreement.” Id. at 570.
Mr. McDonald=s Complaint specifically alleges conduct between OneWest, in concert with Aronowitz, FreddyMac and others, which establishes that certain entities engaged in an enterprise, through a pattern of racketeering activity, to unlawfully file an action in state Court to foreclose upon Mr. McDonald=s property, when the moving party was not the “Note Holder” by the terms of the Note or the beneficiary of the Deed of Trust—specifically to, among other things, launder title and shield other conduct which may have be engaged in by the parties. In a recent Florida foreclosure case, IndyMac Federal Bank, F.S. v. Israel A. Machado, Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Case No. 50 2008 CA 037322XXXX MB AW, the deposition of a Vice-President of IndyMac Bank (now OneWest Bank), Erica A. Johnson-Seck, gave direct testimony that establishes OneWest was engaged in conduct with FreddyMac and other entities, as a routine course of their business activity, to foreclose certain mortgage loans in a name other than the real party in interest. As stated, the Court can take judicial notice of certain facts, the accuracy of which cannot be reasonably questioned. The testimony below is a statement against interest, uttered under oath by a person with knowledge from OneWest. In the deposition, page 199, ll. 5-21, OneWest Vice-President, Ms. JohnsonSeck, testified as follows: The reason, the idea is that MERS, sometimes Deutsche in the past Fannie and Freddie would like for us to do the action in our name. That doesn't mean that we cannot do the action in any of those four entities names. The result, however, of doing an action in their name, when their 20
guide, the investor guideline is that we not, is that if there's any loss, we may be responsible for that loss. If any lawsuit happens, like in this case, your lawsuit is not against Deutsche, your lawsuit is against IndyMac Federal. It's for that reason that investors usually don't want you to do the action in their name. It's there, it's for their protection, but it doesn't mean that we don't, we categorically cannot. It happens because it happens in error. It happens because someone didn‟t realize this was a Fannie Mae loan and thought it was an IndyMac Bank … Attached hereto as Plaintiff‟s Exhibit F are the relevant portions of Ms. JohnsonSeck‟s deposition. Further, Ms. Johnson-Seck stated: [G]enerally the investor does not want their name tied, they don't want to be pulled into the lawsuit. Their expectation of the servicer is that they service the loan, which includes the good and the bad, and that if for any reason there's ever a lawsuit, then the bank would handle it. Id. at p.200, ll.14-19. Further, a letter dated October 15, 2009, was submitted to the Florida Supreme Court by Vice-President of FreddyMac, Mr. Robert E. Bostrom, in response the Court‟s 51 page, Final Report and Recommendations on Residential Mortgage Foreclosure Cases. Attached hereto as Plaintiff‟s Exhibit D are relevant portions of said Final
Report, pages 1-3 & 43. Attached hereto as Plaintiff‟s Exhibit E is said letter from Robert E. Bostrom dated October 15, 2009, as though fully contained herein. As this Court can see, Mr. Bostrum states with clarity that FreddyMac is fully aware that their servicers, including OneWest, do not own the underlying loans being foreclosed upon, and confesses FreddyMac does not own them either. Mr. Bostrum admits:
FreddyMac does not originate loans in the primary residential mortgage market. We fulfill our mission by purchasing mortgages in the secondary market and securitizing them into mortgage-related securities that can be sold to investors. Later, Mr. Bostrum states: Typically, the plaintiff in a foreclosure action does not own the underlying note or loan that is secured by the property subject to the foreclosure proceeding. FreddyMac=s servicers initiate foreclosure actions in their names, even though they are not the owners of the notes or loans in question. As was indicated with particularity in Mr. McDonald=s Complaint, OneWest admitted in correspondence that it sent directly to Mr. McDonald: Please accept this letter as confirmation that the investor on your loan is Federal Home Loan Mortgage Co. Any questions concerning your loan should be addressed directly to IndyMac Mortgage Services, a division of OneWest Bank, FSB, as we are responsible for the servicing of this loan. The investor should not be contacted directly. (Doc.1,Ex.K) As is outlined with particularity in Mr. McDonald=s Complaint, on March 4, 2010, OneWest purchased Mr. McDonald=s property at public auction with a deficiency bid in the amount of $171,002.74. (Doc.1, ¶86). Attached hereto as Plaintiff=s G is a copy of the PUBLIC TRUSTEE‟S CERTIFICATE OF PURCHASE dated March 4, 2010, as though fully contained herein. This Acredit bid” is an important part of the scheme as only the holder of the evidence of debt, or the attorney for the holder, may submit a credit bid to the public trustee, as only the true holder carries the loan on their books. C.R.S. '4-3-301(1) states, in pertinent part: 22
The holder of the evidence of debt, or the attorney for the holder, shall submit a bid to the officer no later than twelve noon on the second business day prior to the date of sale as provided in this section. The holder of the evidence of debt shall submit a signed and acknowledged bid, or the attorney for the holder shall submit a signed bid. Anyone other than the holder of the evidence of debt, or the attorney for the holder, must provide immediate payment to the public trustee at the time of the sale pursuant to C.R.S. '38-37-108, which states in pertinent part: All monies payable to a public trustee at any foreclosure sale under the provisions of this article or upon redemption or cure pursuant to Article 38 of this Title, shall be in the form of cash, electronic transfer to an account of the public trustee available for such purposes, or certified check, cashier=s check, teller=s check, or draft denominated as an official check that is a teller=s check or a cashier=s check . . . By fraudulently filing a credit bid, OneWest again misrepresented themselves as the true holder, and thereby acquired Mr. McDonald=s property for no consideration. Thereafter, as is again described with particularity in Mr. McDonald=s Complaint, on March 25, 2010, OneWest assigned its interest in said property to FreddyMac in the nominal consideration of $10. (Doc.1, ¶90). Attached hereto as Plaintiff=s Exhibit H is a copy of the ASSIGNMENT OF CERTIFICATE OF PURCHASE dated March 25, 2010, as though fully contained herein. F. Fair Debt Collections Practices Act OneWest=s contention that it is not a debt collector as defined by the FDCPA is disingenuous in the extreme. As is outlined with particularity in Mr. McDonald=s
Complaint, OneWest, through its attorneys, sent correspondence to Mr. McDonald on August 4, 2009, which states, in pertinent part:
The Law Firm of Aronowitz and Mecklenburg, LLP, is acting as a debt collector and is attempting to collect a debt. (Doc.1, Ex.D). On August 22, 2009, as is outlined in Mr. McDonald=s Complaint, OneWest, through its attorneys, sent additional correspondence to Mr. McDonald which indicated that the Law Firm of Aronowitz and Mecklenburg, LLP, which states, in pertinent part: Our office represents OneWest Bank, FSB, who is the servicer and holder of the loan which was originated by IndyMac Bank, FSB. We received your correspondence dated August 1, 2009 [sec], the correspondence is requesting a validation of the debt pursuant to the Fair Debt Collection Practices Act. (Doc.1, Ex.H). Attached to the Complaint is a letter from OneWest Bank sent Mr. Donald on February 26, 2010, which states, “This company is a debt collector and any information obtained will be used for that purpose.” (Doc.1, Ex.K). As stated in Defendant=s Motion to Dismiss, a debt collector under FDCPA is Aany person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. '1692(a)(6). This matter would be easily resolved if OneWest was simply acting in its capacity as a mortgage servicing company. See, Perry v. Stuart Title Co., 756 F.2d 1197 (5th
Cir. 1985). However, the facts indicate an agency relationship between OneWest and Aronowitz. With due respect, the scheme perpetrated upon Mr. McDonald to unlawfully foreclose upon his house, required Aronowitz to Arepresent” OneWest while contracting with others involved in the scheme. In said deposition of Vice-President Erica Johnson-Seck, the following colloquy ensued: Q: Do you have any involvement in negotiating the contracts for the attorneys that are in your network? A: No, we don=t have a contract with our attorneys. It=s a business relationship. [Lender Processing Service] does have contracts with the firms for use of the technology and the bank is not party to that contract. Q: So you select them, but you don=t have any direct contract with the attorneys? And when I say you, I=m talking about OneWest, of course. A: Q: A: That=s right. Their contracts are with FIS or LPS? Right, for the technology, yes. Use of their proprietary system, yes.
Q: But I=m interested in the contracts to represent IndyMac or OneWest as their attorney. A: We don=t have contracts for that.
Plaintiff‟s Ex. F, p.193, ll.3-19. Accordingly, this evidence suggests that OneWest contracts with Lender Process Service (“LPS”), who contracts with law firms—who are themselves, debt collectors. Everyone involved in this enterprise is thus engaged in unfair and deceptive Adebt collection” trade practice. 25
The Supreme Court of the United States has consistently held that the FDCPA=s definition of Adebt collector,” Aapplies to attorneys who >regularly= engage in consumerdebt-collection activity, even when that activity consists of litigation.” Heintz v. Jenkins, 514 U.S. 291, 299 (1995). AIf attorneys regularly engaged in debt collection activities, including foreclosures, they are >debt collectors= under Fair Debt Collections Practices Act and were subject to its provisions.” Zartman v. Shapiro and Meinholdt, 811 P.2d 409 (Colo. App. 1990). Here, by its own admission and agency relationship with Aronowitz in the scheme, OneWest is a debt collector pursuant to FDCPA. G. Colorado Consumer Protection Act OneWest concedes that the Colorado Consumer Protection Act (ACCPA”) was enacted to provide a remedy against consumer fraud and that private parties can initiate actions against persons engaged in deceptive trade practices. To establish a claim under CCPA, Mr. McDonald must show that OneWest: 1. Engaged in an unfair and deceptive trade practice; 2. The challenged practice occurred during the course of defendant=s business; 3. The practice significantly impacted the public as actual or potential consumers of their goods, services or property; 4. Mr. McDonald suffered injury in fact to a legally protected interest; and, 5. The challenge practice caused Plaintiff injury.
See, Rhino Linings U.S.A. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d, 142, 146-47 (Colo. 2003). Here, OneWest knowingly made a false representation to Mr. McDonald, the Public Trustee and the District Court of Saguache County. The false representation had the capacity to deceive and induce the Public Trustee and District Court Judge to act in unlawfully foreclosing upon Mr. McDonald=s property. As was revealed by the aforementioned Ascreen shot,” OneWest knew it was not the holder of the evidence of debt and/or the current beneficiary of the Deed of Trust, before the local District Court‟s Order Authorizing Sale. Further, on or about February 12, 2010, the FDIC issued a press release with regard to the sale of IndyMac FSB to OneWest Bank. The press release is easily obtainable and readily verifiable as a matter of public record. Said press release is
attached hereto as Plaintiff=s Exhibit I, as though fully contained herein. As the Court can see, only A7% percent of loans OneWest services are owned by OneWest . . . other institutions own the remaining 93% of loans OneWest services.” OneWest claims that a little due diligence on undersigned counsel=s part would have revealed that Mr. McDonald=s consumer protection claims cannot survive dismissal. Conversely, Mr. McDonald asserted that a little due diligence on behalf of OneWest and its attorneys would have disclosed all of the facts alleged in his Complaint. In fact, Mr. McDonald contends OneWest will be hard-pressed to deny any of the allegations outlined in paragraphs 1-93 as contained in his Complaint.
H. Fraud Mr. McDonald‟s Complaint states the main facts and incidents which constitute the fraud perpetrated upon him. In its Motion to Dismiss, OneWest states: McDonald alleges OneWest committed fraud because it >expressly and/or impliedly represented to= him and the Saguache County District Court that >it was the holder in due course, and thus the real party in interest to= his loan. (See, Compl. &128). This allegation cannot serve as a basis for his fraud claim because it is simply not a misrepresentation. Accordingly, it is obvious that OneWest continues to claim that it was the holder of the evidence of debt and the beneficiary of the Deed of Trust. Mr. McDonald claims are fact--intensive and should be decided by the trier-of-fact. If true, Mr. McDonald respectfully asserts that he has met his initial burden to sufficiently pled a cause of action for common law fraud. III. ARGUMENT The evidence is clear that OneWest did not own Mr. McDonald=s Note and was never the beneficiary of the Deed of Trust. Therefore, OneWest committed fraud by demanding the Saguache County Public Trustee exercised the Power of Sale in the Deed of Trust for their benefit. This fraud resulted in the illegal seizure of Mr.
McDonald=s property—for zero consideration by OneWest. Mr. McDonald did not refuse to pay his mortgage because servicing rights were transferred to OneWest. Mr. McDonald outlined particularly why he made a conscious decision to stop making his mortgage payment. (Doc.1, ¶¶30, 31, 33, 56, 58, 59, 60, 62, & 76).
Additionally, Mr. McDonald did not default on his loan pursuant to UCC '3-501 regarding his rights in relationship to the presentment requiring payment made by OneWest. Simply put, Mr. McDonald never admitted that he was in default. Attached hereto as Plaintiff‟s Exhibit J is a partial transcript of the original Rule 120 Hearing on October 14, 2009, in Saguache County District Court, as though fully contained herein. At said hearing on October 14, 2009, the following colloquy ensued between Mr. McDonald and Judge Gonzales: The Court: Mr. McDonald, I=m not hearing one critical thing. And that is: are you current with this note? But that=s in relationship . . . It=s a straight-up question. I=m not current with the note, but according to the UCC, I looked up that if I dispute the debt C I=m not going to get into an argument with you Mr. McDonald. It=s a straightforward question. Are you current with this note or not? No.
Mr. McDonald: The Court: Mr. McDonald:
See Plaintiff‟s Ex. J, pp.11, ll.2-15. Mr. McDonald claimed he was not in default, as OneWest Arefused” to comply with the simple and reasonable request made by Mr. McDonald to provide proper proof as required by UCC '3-501(b). Said statute states, in pertinent part: (2) upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full 29
payment is made. (3) without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary endorsement, or (ii) refuse payment or accept for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule. Here, OneWest refused to substantiate their right and/or authority to demand payment from Mr. McDonald. Accordingly, Mr. McDonald was entitled to withhold payment until such proof was received. Additionally, any objections Mr. McDonald may have had concerning the enforceability and/or conscionability of certain terms in the original Note and Deed of Trust would need to be addressed with the actual ANote Holder” as defined by the Note itself, and the current beneficiary of the Deed of Trust. Arguing with an interloper, who has not established it is the ANote Holder” under the Note, or the beneficiary of the Deed of Trust, would be meaningless. IV. CONCLUSION Based upon the foregoing reasons, Plaintiff, Mr. McDonald, by and through counsel, respectfully request that Defendant OneWest Bank, FSB‟s Motion to Dismiss Plaintiff‟s Complaint be denied.
s/ Gary D. Fielder Gary D. Fielder, #19757 LAW OFFICE OF GARY D. FIELDER 5777 Olde Wadsworth Boulevard, #R700 Arvada, CO 80002 (303) 650-1505 Fax: (303) 650-1705 e-mail: firstname.lastname@example.org Attorney for Plaintiff Bruce C. McDonald CERTIFICATE OF SERVICE I hereby certify that I have on this 13 th day of December 2010,, I electronically filed the foregoing PLAINTIFF=S RESPONSE TO DEFENDANT ONE WEST BANK=S MOTION TO DISMISS PLAINTIFF=S COMPLAINT with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Victoria E. Edwards AKERMAN SENTERFITT, LLP victoria.edwards”akerman.com Attorneys for Defendant One West Bank FSB
s/ Shelley Ricker, Legal Assistant
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