O'Sullivan v. Deutsche Bank

2015 DNH 175

• Court: District Court, D. New Hampshire
• Decided: September 14, 2015
• Docket: 15-cv-114-SM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Roger and Lisa O’Sullivan, Plaintiffs

v. Case No. 15-cv-114-SM Opinion No. 2015 DNH 175 Deutsche Bank National Trust Company, as Trustee for GSSA Home Equity Trust 2006-18, Defendant

O R D E R

Deutsche Bank National Trust Company, as trustee of the GSSA

Home Equity Trust 2006-18, holds a mortgage on plaintiffs’ home.

Plaintiffs challenge its right to foreclose that mortgage under

New Hampshire law. The court has subject matter jurisdiction

over plaintiffs’ claim pursuant to 28 U.S.C. § 1332 (diversity of

citizenship).

Deutsche Bank moves to dismiss the sole claim in plaintiffs’

complaint, asserting that plaintiffs lack standing to challenge

the validity of the assignment by which Deutsche Bank assumed the

mortgage at issue. For the reasons discussed, that motion to

dismiss is granted.

Background

The relevant facts are largely undisputed. In May of 2006,

plaintiffs obtained a $263,700 loan from Wells Fargo. To secure repayment of that loan, plaintiffs gave Wells Fargo a mortgage

deed to their home. The terms of the mortgage included a

statutory power of sale, allowing Wells Fargo to foreclose upon

the property under certain specified circumstances (including

default on the underlying promissory note). In January of 2014,

Wells Fargo assigned the mortgage to Deutsche Bank, as trustee

for a Real Estate Mortgage Investment Conduit Trust. That trust

is governed by a Pooling and Service Agreement.1

At some point (the complaint does not specify exactly when),

plaintiffs began having difficulty making monthly payments on the

loan. They sought, but were unable to obtain, a loan

modification from Wells Fargo. With the loan in default,

Deutsche Bank sought to foreclose the mortgage and it scheduled a

foreclosure auction for March 31, 2015. A few days before that

auction, however, plaintiffs obtained an ex parte temporary

restraining order from the state court, based upon their

assertion that Deutsche Bank lacked authority to foreclose on the

1 In order to pool and securitize loans, investors often establish what is known as a Real Estate Mortgage Investment Conduit or “REMIC” - a unique form of trust that receives favorable tax treatment. In turn, such a trust is often governed by what is known as a pooling and servicing agreement or a “PSA.” Here, plaintiffs allege that the operative PSA had a closing date in 2006, by which the trust was required to stop receiving assets (and at which point the trust would simply become a “static pool of assets.”). See generally Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 272 (1st Cir. 2013).

2 mortgage. Deutsche Bank removed the proceeding to this court,

invoking the court’s diversity subject matter jurisdiction.

Discussion

Plaintiffs’ argument is a familiar one: they claim that

Deutsche Bank is not the lawful holder of their mortgage because

it took an assignment of that mortgage after the closing date

specified in the applicable pooling and servicing agreement.

As explicitly explained in the attached February 20, 2015 letter, the party foreclosing (i.e., Deutsche Bank, et al.) can not be a valid mortgagee with rights to foreclose since they are a Real Estate Mortgage Investment Conduit (“REMIC”) trust with a closing date in 2006. Wells Fargo alleged to assign our mortgage to Deutsche Bank in 2014, but Deutsche Bank has never substantiated that it is the legal mortgagee.

Complaint (document no. 1-1) at 2. Even crediting all of

plaintiffs’ factual allegations as true, it remains plain that

they lack standing to challenge the allegedly untimely assignment

of their mortgage from Wells Fargo to Deutsche Bank.

Assuming that Wells Fargo assigned plaintiffs’ mortgage to

Deutsche Bank after the closing date of the relevant trust (and

contrary to the terms of the governing PSA), that flaw merely

renders the assignment voidable (at the option of the trust’s

beneficiaries). It does not render the assignment void. As the

New Hampshire Supreme Court recently recognized,

3 This is because . . . unauthorized acts by trustees are generally subject to ratification by the trust beneficiaries. The principle that a trustee’s unauthorized acts may be ratified by the beneficiaries is harmonious with the overall principle that only trust beneficiaries have standing to claim a breach of the trust. If a stranger to the trust also had such standing, the stranger would have the power to interfere with the beneficiaries’ right of ratification.

Pike v. Deutsche Bank Nat’l Trust Co., __ N.H. __, 2015 WL

4266759 at *2 (July 15, 2015).

So, the assignment of a mortgage to a trust that fails to

comply with the procedural requirements of a PSA or other trust

agreement is a voidable, not a void, transaction. And, as this

court has repeatedly held, a mortgagor lacks standing to

challenge a voidable (as opposed to a void) transfer of his or

her mortgage. See, e.g., Bradley v. Wells Fargo Bank, N.A., 2014

WL 815333, at *3 (D.N.H. Mar. 3, 2014); Calef v. Citibank, N.A.,

2013 WL 653951, at *4 n.4 (D.N.H. Feb. 21, 2013). See also Woods

v. Wells Fargo Bank, N.A., 733 F.3d 349, 354 (1st Cir. 2013)

(“Thus, claims that merely assert procedural infirmities in the

assignment of a mortgage, such as a failure to abide by the terms

of a governing trust agreement, are barred for lack of

standing.”) (citations omitted). Cf. Pike, supra (construing

New York law and concluding that “an action that violates the

terms of a trust agreement, such as a transfer of a loan to a

4 trust after the trust’s closing date, renders the transaction

voidable at the election of either party to the agreement and a

non-party to the PSA, such as the petitioner in this case, does

not have standing to challenge such a transaction.”).

Conclusion

For the foregoing reasons, as well as those set forth in

defendant’s legal memorandum, it is plain that plaintiffs lack

standing to challenge the allegedly untimely assignment of their

mortgage from Wells Fargo to defendant. Defendant’s motion to

dismiss (document no. 4) is, therefore, granted.

The Clerk of Court shall enter judgment in accordance with

this order and close the case.

SO ORDERED.

____________________________ Steven J. McAuliffe United States District Judge

September 14, 2015

cc: Roger A. O’Sullivan, pro se Lisa M. O’Sullivan, pro se Michael R. Stanley, Esq.