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Witengier v. U.S. Bank N.A.

United States District Court, E.D. Missouri, Eastern Division

April 21, 2017

U.S. BANK N.A., et al., Defendants.



         This matter is before the Court on the motion of defendant SouthLaw, P.C. to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs have responded to the motion, and the issues are fully briefed.[1]

         I. Background

         On January 21, 2010, defendant U.S. Bank issued a loan to plaintiffs for the purchase of real property, secured by a note and deed of trust. The parties recorded the deed of trust with the St. Louis County Recorder of Deeds on February 2, 2010. Several years later, on August 1, 2014, the parties purportedly entered into a loan modification agreement.[2]

         Defendants contend that plaintiffs defaulted on the loan, and plaintiffs do not dispute that claim.[3] On September 14, 2016, defendant U.S. Bank appointed SouthLaw P.C. as the successor trustee under the deed of trust. The Recorder of Deeds filed that instrument on September 21, 2016. Id. Defendants aver that defendant SouthLaw sent notice to plaintiffs on September 26, 2016, that a trustee's sale would take place on October 13, 2016. That notification also allegedly identified defendant SouthLaw as the successor trustee.[4] Plaintiffs successfully halted the foreclosure after filing for bankruptcy.[5]

         Plaintiffs initiated this action pro se in the Twenty-First Judicial Circuit Court of Missouri (County of St. Louis) after the attempted foreclosure. Defendant U.S. Bank subsequently removed the action to this Court on the basis of diversity of citizenship jurisdiction, 28 U.S.C. § 1332. In the complaint, plaintiffs assert claims of breach of contract and breach of the covenant of good faith and fair dealing. They also assert a quiet title claim.[6]

         Plaintiffs base their claims on a number of alleged defects in the both the security instruments and the attempted foreclosure process. First, with regard to the security instruments, plaintiffs allege that (1) they did not receive an executed copy of the modified loan agreement, (2) defendant SouthLaw was not properly designated as the successor trustee, [7] and (3) defendant U.S. Bank fraudulently assigned the note and concealed its “true” holder.[8] Second, plaintiffs argue that defendants did not provide adequate notice of the trustee's sale. Specifically, defendants allegedly directed notice to a “doe tenant, ” sent notice fewer than twenty days before the scheduled foreclosure sale, and did not record the notice in “official records.” [Doc. #1-1 at 4]. See Mo. Rev. Stat. § 443.325. Furthermore, plaintiffs claim that upon inquiry, defendants did not provide a “single point of contact” and evaded plaintiffs' attempts to ascertain the reinstatement amount. Id. at 5-8.[9] Finally, plaintiffs summarily assert that U.S. Bank and SouthLaw perpetrated “a series of fraudulent transactions” by “modifying loan documents, manipulating property values and making loans that were in violation of a multiplicity of [s]tate laws.” Id. at 9.[10]

         In the instant motion, defendant SouthLaw argues that the plaintiffs' claims against it should be dismissed under Rule 12(b)(6). Specifically, defendant SouthLaw argues that (1) plaintiffs do not adequately show that defendant SouthLaw breached its duties under the deed of trust, (2) plaintiffs arguments ultimately amount to claims sounding in attempted wrongful foreclosure, and (3) defendant SouthLaw does not claim any interest in the property at issue, and therefore is not a proper party to an action to quiet title. [Doc. #15 at 3-8].[11]

         II. Legal Standard

         The purpose of a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is to test the legal sufficiency of the complaint. The factual allegations of a complaint are assumed true and construed in favor of the plaintiff, “even if it strikes a savvy judge that actual proof of those facts is improbable.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n.1 (2002)); Neitzke v. Williams, 490 U.S. 319, 327 (1989) (“Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations”); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (a well-pleaded complaint may proceed even if it appears “that a recovery is very remote and unlikely”). The issue is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence in support of his claim. Id. A viable complaint must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp., 550 U.S. at 570; see also Id. at 563 (“no set of facts” language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), “has earned its retirement.”). “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555.[12] A district court may consider public records on a motion to dismiss. Stahl v. United States Dep't of Agric., 327 F.3d 697 (8th Cir. 2006).

         III. Discussion

         Breach of Contract and Covenant of Good Faith and Fair Dealing

         Missouri law provides that extrajudicial foreclosure is not a statutory right, but rather “‘a contractual right established by the power of sale provision in the deed of trust.'” Mildfelt v. Circuit Court of Jackson Cty., Mo., 827 F.2d 343, 346 (8th Cir. 1987) (quoting Fed. Nat'l Mortg. Ass'n v. Howlett, 521 S.W.2d 428, 432 (Mo. 1975) (en banc)). And under Missouri law, a breach of contract claim requires a showing of (1) “the existence of an enforceable contract between the parties, ” (2) “mutual obligations arising under the terms of the contract, ” (3) “defendant did not perform, ” and (4) “plaintiff was thereby damaged from the breach.” Rice v. W. End Motors, Co., 905 S.W.2d 541, 542 (Mo.Ct.App. 1995).[13]

         Relatedly, Missouri law implies a covenant of good faith and fair dealing in every contract. Arbors at Sugar Creek Homeowners Ass'n v. Jefferson Bank & Trust Co., Inc., 464 S.W.3d 177, 185 (Mo. 2015).[14] To state a claim for breach of the covenant, a plaintiff must allege facts that defendant “acted, or exercised a judgment conferred by the terms of the Note, in such a manner as to evade the spirit of the transaction or to deny . . . the expected benefit of the Note.” Reliance Bank v. Paramont Props., LLC, 425 S.W.3d 202 (Mo.Ct.App. 2014).[15] “This implied covenant, however, is not ‘an overflowing cornucopia of wished-for legal duties; indeed, the covenant cannot give rise to obligations not otherwise contained in a contract's express terms.” Sm ...

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