Editor: David Reiss
Brooklyn Law School

June 11, 2013

Oregon District Court Dismisses Borrower’s Suit to Invalidate Foreclosure in Favor of BOA and MERS, Stating Lack of Merit

By Orly Graeber

In Moreno v. Bank of America., N.A., 3:11-CV-1265-HZ, (D. Or. Apr. 27, 2012) the U.S. District Court of Oregon, granted the defendant’s motion to dismiss for failure to state a claim. Plaintiff had alleged violations under several federal and state Acts, each of which the Judge rejected based on lack of merit.

The plaintiff brought action to invalidate a foreclosure sale, which, although dated earlier than the filed complaint, had not yet occurred. On March 29th, 2007, Moreno borrowed $220,000 from Aegis Wholesale Corporation. A promissory note in favor of Aegis was secured by a Deed of Trust (DOT) against the plaintiff’s real property and identified Fidelity National Title Insurance Company of Oregon (Fidelity) as trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as the “beneficiary under this Security Instrument.” MERS later assigned the DOT to BAC Home Loans Servicing (BACHLS) in June of 2010. On the same day, BACHLS appointed ReconTrust Co. as successor trustee to Fidelity. Fidelity filed a Notice of Default and Election to Sell (NODES), initiating foreclosure proceedings against Moreno, who had been in default since July, 2009.

The Court dismissed each of the plaintiff’s complaints in turn, starting with his first two claims of relief based on violations of the Oregon Trust Deed Act (OTDA). The plaintiff claimed that under the DOT, MERS lacked authority to assign beneficial interests to BACHLS, who in turn, lacked power to appoint ReconTrust as successor trustee. The Judge, Marco A. Hernandez, stated that he had previously held that “naming MERS as a beneficiary in a DOT does not violate the OTDA,” and while other judges in the district have found otherwise, he would continue to uphold this ruling. The plaintiff alleged that a 3-year gap between the execution of the DOT and MERS’s assignment to BACHLS  showed there “must have” been unrecorded assignments (in violation of ORS 86.735(1)). The Court found that allegation was both speculative and based on an erroneous assertion of fact (the Complaint mistakenly names Bank of America as the original lender, whereas the DOT names Aegis, and subsequent documents state Bank of America was assigned interest only in 2010). The second OTDA based claim was that the defective notice was invalid for failure to include a correct statement of the amount in default. The Court dismissed it because the plaintiff had not “plead his ability to cure the default, that his damages resulted from the lost opportunity to cure the default, and that he requested information from the trustee under O.R.S. § 86.757 and O.R.S. § 86.759.”

Next, the Court dismissed the plaintiff’s claim brought under the Truth in Lending Act (TILA) for both the failure to meet the 1-year statute of limitations and for having incorrectly brought the action against Bank of America rather than Aegis, the original lender. Under TILA a claim may only be brought against the Creditor, who is the person who “regularly extends… consumer credit” and “to whom the debt arising from the consumer credit transaction is initially payable.” 15 U.S.C. Sect. 1602(g). The plaintiff further argued that he is Hispanic and “as a result” did not understand the nature of the loan documents. He therefore requested equitable tolling, which suspends the “limitation period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosure that form the basis of the TILA action,” which he stated was in 2011 after having spoken to a translator who explained his loan audit. The Court found this unconvincing on several accounts. First, since the complaint brought no allegations in support of equitable tolling, it failed to state a TILA violation. Second, the plaintiff never alleged he did not speak English. Third, equitable tolling is applied when the 1-year period would be “unjust” or “frustrate the purpose” of the TILA. Fourth,  the plaintiff must bring allegations “that the defendant had fraudulently concealed information that would have allowed plaintiff to discover his claim,” engaged in action to prevent plaintiff from discovering a claim, or encountered “some other extraordinary circumstance would have made it reasonable for Plaintiff not to discover his claim within the limitations period.” Garcia v Wachovia Mortg. Corp. 676 F. Supp.2d 895, 905 (C.D. Cal. 2009).

The Court dismissed the plaintiff’s claim under the Real Estate Settlement Procedures Act (RESPA) for failure to meet the statute of limitations since his claim arose out of the origination of the loan in 2007, and his arguments for equitable tolling “are unavailing.”  Plaintiff also failed to allege that a RESPA violation resulted in actual damage, a requirement of a RESPA claim.

The plaintiff’s claim under Oregon’s Unfair Trade Practices Act (UTPA) was dismissed because at the time of the loan, in 2007, UTPA had not yet been amended to include “loans and extensions of credit,” O.R.S. 646.605(6) (2010), therefore plaintiff’s loan was not covered by the Act. Additionally, UTPA claims must be brought within a year from the discovery of the “unlawful method, act or practice,” but the plaintiff failed to assert that the discovery of a UTPA violation could not have been made at the time of the loan

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