Dalby v. Ditech Financial LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
JOHN S. DALBY,
Plaintiff,
v.
DITECH FINANCIAL LLC and
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
Defendants.
Case No. 3:19-cv-00003-SLG
ORDER RE FANNIE MAE’S MOTION TO DISMISS COUNT II OF PLAINTIFF’S
AMENDED COMPLAINT
Before the Court at Docket 32 is Defendant Federal National Mortgage
Association’s Motion to Dismiss Count II of Plaintiff’s Amended Complaint. Plaintiff
John S. Dalby responded in opposition at Docket 35. Defendant replied at Docket
36. Oral argument was not requested and was not necessary to the Court’s
decision.
BACKGROUND
On September 26, 2017, John S. Dalby commenced an action against
Ditech Financial LLC (“Ditech”) and the Federal National Mortgage Association
(“Fannie Mae”) (together, “Defendants”) alleging violations of Alaska’s Unfair
Trade Practices and Consumer Protection Act (“UTPA”), as well as common law
quiet title and breach of contract claims and requesting rescission of the
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foreclosure sale on his home.1 On November 7, 2017, Defendants removed the
action to this Court based on diversity jurisdiction.2 Mr. Dalby moved to remand
the case for lack of subject matter jurisdiction. On February 6, 2018, finding that
Defendants had failed to establish that the amount in controversy exceeded
$75,000, the Honorable Russel Holland remanded the case back to the State
Superior Court. 3
On February 28, 2018, the Honorable Jennifer S. Henderson reopened the
case in State Superior Court and on March 20, 2018, Defendants moved to dismiss
the complaint.4 On November 16, 2018, the Superior Court granted in part and
denied in part Defendants’ motion to dismiss.5 Specifically, the Superior Court
dismissed without prejudice Mr. Dalby’s UTPA and breach of contract claims but
left intact his quiet title claim against Fannie Mae.6 On December 22, 2018, Mr.
Dalby filed the First Amended Complaint (“FAC”) alleging breach of contract and
violations of the UTPA, the Fair Debt Collection Practices Act (“FDCPA”), and the
Real Estate Settlement Procedures Act (“RESPA”), along with the quiet title claim.7
1 Docket 1-1 at 2.
2 Dalby v. Ditech Fin. LLC, 285 F. Supp. 3d 1092 (D. Alaska 2018).
3 Id.
4 Docket 1-1 at 58.
5 Docket 1-1 at 61–73.
6 Docket 1-1 at 68–69.
7 Docket 1-1 at 74–81.
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On January 9, 2019, Defendants again removed the case to this Court
based on original jurisdiction over the FDCPA and RESPA claims pursuant to 28
U.S.C. § 1331 and supplemental jurisdiction over the related state law claims
pursuant to 28 U.S.C. § 1367.8 Shortly thereafter, Defendants moved to dismiss
the FAC for failure to state a claim.9 In parallel, on February 11, 2019, Ditech
commenced Chapter 11 bankruptcy proceedings, triggering an automatic stay of
all claims against it.10 Accordingly, the Court stayed this matter as to Ditech.11 Mr.
Dalby requested that the Court stay all proceedings in this case pending resolution
of the bankruptcy proceedings against Ditech.12 The Court denied Mr. Dalby’s
request and denied Defendants’ motion to dismiss but without prejudice to refiling
by Fannie Mae.13 On June 18, 2019, Fannie Mae moved to dismiss Mr. Dalby’s
quiet title claim against it.14 Mr. Dalby opposed the motion on July 11, 2019, and
8 Docket 1.
9 Docket 9.
10 Docket 11. The U.S. Bankruptcy Court for the Southern District of New York approved
the terms of Ditech’s Chapter 11 Plan which includes an injunction barring any claims
seeking monetary relief arising prior to the closing of the transactions under the plan.
See Docket 37 at 2. Ditech has asked Plaintiff to voluntarily dismiss the stayed claims
against Ditech in this Court in light of the injunction, and absent a voluntary dismissal,
may seek an order from the Bankruptcy Court prohibiting Plaintiff from continuing to
pursue those claims. See Docket 37 at 3.
11 Docket 12.
12 Docket 16.
13 Docket 31 at 4.
14 Docket 32.
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Fannie Mae replied on July 29, 2019.15
FACTS
As described in the FAC, Mr. Dalby took out a home loan from Countrywide
Bank, FSB (“Countrywide”) which was memorialized in a Deed of Trust (“DOT”)
recorded on December 31, 2007.16 Mr. Dalby put up his home as security for the
loan.17 Countrywide was the lender; Mortgage Electronic Registration Systems,
Inc. (“MERS”) was the beneficiary; and Reconstruct Company was the trustee.18
The interested parties changed over time as the DOT transferred hands. In 2008,
Bank of America (“BOA”) purchased Countrywide,19 replacing it as the lender, and
in March 2012, MERS assigned the DOT to BOA.20 In September 2012, Alaska
Trustee LLC replaced Reconstruct Company pursuant to a Substitution of
Trustee.21 Thus by 2012, Bank of America was the lender of the DOT and Alaska
Trustee was the trustee. Sometime prior to January 2, 2014, Mr. Dalby defaulted
15 Dockets 35 and 36.
16 Docket 1-1 at 75, ¶ 7.
17 Docket 1-1 at 75, ¶ 7.
18 Docket 1-1 at 75–76, ¶¶ 7, 10.
19 Docket 1-1 at 76, ¶ 8.
20 Docket 1-1 at 76, ¶ 9.
21 Docket 1-1 at 76, ¶ 10.
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on his loan.22 Then, in January 2014, BOA assigned the DOT to Ditech.23 In
October 2016, Ditech executed two corrective assignments. In the first, it executed
a Corrective Assignment Deed of Trust on behalf of MERS as its attorney in fact
(“MERS Corrective Assignment”).24 In the second, Ditech executed a Corrective
Assignment Deed of Trust on behalf of Bank of America (“BOA Corrective
Assignment”).25 On March 2, 2017, Mr. Dalby’s home was sold at a foreclosure
sale and Ditech took title and transferred it to Fannie Mae.26
In the FAC, Mr. Dalby challenges the validity of several aspects of the
transfer of the DOT. Specifically, the FAC alleges that: (1) the Substitution of
Trustee was “robosigned and/or void and/or invalid” because a clerk at Alaska
Trustee signed it on behalf of BOA and MERS but was not the attorney in fact for
either;27 (2) the MERS Corrective Assignment was “robosigned and/or void and/or
invalid” and that MERS did not have the power to assign anything in 2016 and that
Ditech was not its attorney in fact;28 and (3) the BOA Corrective Assignment was
22 Docket 1-1 at 76, ¶ 11 (“On January 2, 2014, Bank of America assigned the DOT to
defendant. At this point in time, the loan was already in default”.).
23 Docket 1-1 at 76, ¶ 11.
24 Docket 1-1 at 76–77, ¶ 12.
25 Docket 1-1 at 77, ¶ 13
26 Docket 1-1 at 79, ¶ 21.
27 Docket 1-1 at 76, ¶ 10.
28 Docket 1-1 at 76, ¶ 12.
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“robosigned and/or void and/or invalid” and that BOA had no power to assign
anything at that time and that Ditech was not its attorney in fact.29
Moreover, Mr. Dalby alleges that he was not notified when BOA purchased
Countrywide and erroneously made five monthly payments to Countrywide.30
Although BOA eventually notified him to stop making payments to Countrywide,
Mr. Dalby alleges that he was never reimbursed for those erroneous payments and
he was placed into default status.31 Mr. Dalby alleges that when Ditech attempted
to collect his debt, “it never credited him for these payments and, thus, was always
seeking an excessive amount from him.”32 He alleges that at some point, Ditech
or its predecessors “force-placed insurance” on his property when he already had
property insurance, thereby increasing his payment and making it “wholly
unaffordable.”33 Mr. Dalby maintains that he never received transfer of servicing
notices or monthly statements or updates.34
Based on the foregoing, Mr. Dalby asserts that he has equitable title to his
property (as well as possession).35 He alleges that Fannie Mae “has an adverse
29 Docket 1-1 at 77, ¶ 13.
30 Docket 1-1 at 77, ¶ 15.
31 Docket 1-1 at 77, ¶ 15.
32 Docket 1-1 at 77, ¶ 15.
33 Docket 1-1 at 77–78, ¶ 16.
34 Docket 1-1 at 78–79, ¶ 20.
35 Docket 1-1 at 79, ¶ 27.
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claim to [his] title” which is “unsound or baseless” because “many of the documents
on which the foreclosure is founded appear to be robosigned and/or void and/or
invalid.”36 Mr. Dalby alleges that a “foreclosure sale that is predicated on a raft of
invalid or fraudulent documents does not give good title to the tortfeasor,” Ditech,
and therefore Ditech “did not have good title to give to [Fannie Mae].”37
LEGAL STANDARD
I. Jurisdiction
The Court has original jurisdiction over Plaintiff’s FDCPA and RESPA claims
pursuant to 28 U.S.C. § 1331 and supplemental jurisdiction over Plaintiff’s other
claims, including the quiet title claim against Fannie Mae, pursuant to 28 U.S.C. §
1367. In this removed action, the Court applies substantive state law to the state
law claims and federal law to procedural issues.38
II. Motion to Dismiss
The Federal Rules of Civil Procedure “apply to a civil action after it is
removed from a state court.”39 Accordingly, the Court evaluates Fannie Mae’s
36 Docket 1-1 at 80, ¶ 28.
37 Docket 1-1 at 80, ¶ 28.
38 Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055 n.2 (9th Cir. 2000) (“[A] federal
court exercising supplemental jurisdiction over state law claims is bound to apply the
law of the forum state to the same extent as if it were exercising its diversity
jurisdiction.”) (citing United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966) and
Mangold v. California Pub. Utils. Comm’n, 67 F.3d 1470, 1478 (9th Cir. 1995) (“The Erie
principles apply equally in the context of pendent jurisdiction.”)).
39 Fed. R. Civ. P. 81(c)(1). See, e.g., Wendell v. Johnson & Johnson, No. 09-cv-04124-
CW, 2010 WL 271423, at *2 (N.D. Cal. Jan. 20, 2010) (holding that “federal law, not
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Rule 12(b)(6) motion under the federal pleading standard.40 When reviewing a
Rule 12(b)(6) motion, a court considers only the pleadings and documents
incorporated into the pleadings by reference, as well as matters on which a court
may take judicial notice.41 “To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’”42 A claim is plausible on its face “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”43 Thus, there must be “more than
state law, governs the specificity that Plaintiffs must plead in order to survive a 12(b)(6)
motion” in a removed case); Stearns v. Select Comfort Retail Corp., No. 08-cv-2746-JF,
2008 WL 4542967, at *2 (N.D. Cal. Oct. 1, 2008) (finding that federal procedural rules
apply to the motion to dismiss).
40 Plaintiff relies on Conley v. Gibson, 355 U.S. 41 (1957) in articulating the “no set of
facts” standard for a motion to dismiss (also known as the notice pleading standard)
used by the Alaska state courts and maintains that the federal pleading standard is
identical. See Docket 35 at 6. Plaintiff is mistaken. The United States Supreme Court’s
decisions in Bell Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556
U.S. 662 (2009) abrogated the notice pleading standard set forth in Conley and
introduced the “plausibility pleading standard” for all federal cases. See generally Philip
A. Tarpley, Note, The Doctrine in the Shadows: Reverse-Erie, its Cases, its Theories,
and its Future With Plausibility Pleading in Alaska, 32 Alaska L. Rev. 213, 218 (2015).
Thus, while Alaska state courts may continue to apply Conley’s notice pleading
requirement, federal courts cannot and do not. See id. at 215.
41 Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008)
(citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).
42 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).
43 Id. (citing Twombly, 550 U.S. at 556).
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a sheer possibility that a defendant has acted unlawfully.”44 A court “accept[s]
factual allegations in the complaint as true and construe[s] the pleadings in the
light most favorable to the nonmoving party.”45
Moreover, when granting a motion to dismiss, a court is generally required
to grant the plaintiff leave to amend, unless amendment would be futile.46 In
determining whether amendment would be futile, a court examines whether the
complaint could be amended to cure the defect requiring dismissal “without
contradicting any of the allegations of [the] original complaint.”47
III. Quiet Title Claim
Under Alaska law, a person in possession of real property “may bring an
action against another who claims an adverse estate or interest in the property for
the purpose of determining the claim.”48 The Supreme Court of Alaska has
explained:
The normal rule is that a defendant in a quiet title action may always
resist a decree against himself by showing simply that the plaintiff is
without title. Once the plaintiff’s claim of title is put in issue by the
defendant, the plaintiff can succeed only on the strength of his own
title, and not on the weakness of that of his adversary. While it may
44 Id.
45 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).
46 Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir.
1990).
47 Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990).
48 Alaska Stat. § 09.45.010; see also Nicdao v. Chase Home Fin., 839 F. Supp. 2d 1051,
1075–76 (D. Alaska 2012).
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not be necessary for a plaintiff to have a perfect title, to make out a
prima facie case he must at least prove that he has a substantial
interest in the property and that his title is better than that of the
defendants.49
To determine whether a plaintiff has a “substantial interest in the disputed
property,” a court “must interpret their deed.”50 If it “unambiguously presents the
parties’ intent” then the court need go no further.51 Moreover, this Court has
previously recognized that “a borrower could not assert a quiet title claim against
a lender without paying off the debt.”52
DISCUSSION
Fannie Mae moves to dismiss with prejudice Count II of Mr. Dalby’s FAC—
the quiet title claim—on three grounds. First, Fannie Mae contends that Mr. Dalby
failed to allege sufficient factual matter to support his claim.53 It contends that Mr.
Dalby’s “quiet title claim is based on the allegation that Ditech executed a
corrective assignment for MERS,” and on allegations “regarding Bank of America’s
corrective assignment and the Substitution of Trustee,” but the FAC fails to explain
49 Shilts v. Young, 643 P.2d 686, 689 (Alaska 1981) (internal citations omitted); see also
Fink v. Municipality of Anchorage, 379 P.3d 183, 190 (Alaska 2016) (“[P]laintiffs must
prevail on the strength of their own title and not on the weakness of the defendants’
title.”).
50 Fink, 379 P.3d at 190–91.
51 Id.
52 Nicdao v. Chase Home. Fin., 839 F. Supp. 2d 1051, 1076 (D. Alaska 2012).
53 Docket 32 at 3–4.
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why the assignments “appear[] to be robosigned and/or void and/or invalid.”54
Second, Fannie Mae contends that Mr. Dalby’s quiet title claim fails because he
“does not have superior title to the property over Fannie Mae.”55 Fannie Mae notes
that Mr. Dalby executed a DOT granting an interest in his property, “could no longer
afford to make payments,” at which time “Ditech foreclosed, took title to the
property, and then transferred it to Fannie Mae.”56 Fannie Mae maintains that Mr.
Dalby “must allege that he is entitled to the property, and he cannot do that
because he admits that he could not pay the loan secured by the property.”57 Third,
Fannie Mae maintains that even if there were defects with the assignments, “they
would also be irrelevant to the propriety of the foreclosure process.”58 Fannie Mae
contends that under Alaska law, “the purpose of recording is simply to provide
notice of the security instrument to third parties.”59
Mr. Dalby opposes the motion to dismiss. As a threshold issue, he maintains
that this Court should deny the motion to dismiss “for the same reasons the state
superior court did.”60 In denying the motion to dismiss, the Superior Court held
54 Docket 32 at 3–4.
55 Docket 32 at 4.
56 Docket 32 at 5.
57 Docket 32 at 5.
58 Docket 32 at 5.
59 Docket 32 at 5.
60 Docket 35 at 6–7.
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that “[i]n order to state a claim for quiet title, the ‘complaint need only set forth in
general terms the title of the plaintiff, declare generally that the defendant claims
some interest in the property, without defining it, and aver that the claim is without
foundation.’”61 Additionally, Mr. Dalby presents two grounds for denying the
motion: (1) the foreclosure sale is void or, in the alternative, (2) the foreclosure sale
is voidable. Specifically, Mr. Dalby contends that he has sufficiently pled facts “that
the illicit sale of his home is void” and that “[v]oid sales can be set aside, even if
there is a bona fide purchaser.”62 Mr. Dalby contends that a foreclosure sale can
be void if “an alleged defect concerns a trustee’s right to proceed with the
foreclosure” or if the sale reaches “unjust extremes.”63 He maintains that the
trustee had no right to sell his home and that this “unauthorized foreclosure sale
occurred atop scores of known and predictable law-breaking,” “despite his effort to
make payments” and thus the sale was “unjust and extreme.”64
A. The Court Must Apply the Federal Pleading Standard
The Court considers Fannie Mae’s Rule 12(b)(6) motion pursuant to federal
pleading requirements and therefore declines to follow the Superior Court’s earlier
ruling on Mr. Dalby’s quiet title claim.65
61 Docket 1-1 at 68 (quoting Davis v. Tant, 361 P.2d 763, 766 (Alaska 1961)).
62 Docket 35 at 7.
63 Docket 35 at 7.
64 Docket 35 at 7–8.
65 See, e.g. A.E. ex rel. Hernandez v. Cnty. of Tulare, 666 F.3d 631, 637 (9th Cir. 2012)
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B. Mr. Dalby Does Not Allege Superior Title
As detailed above, the FAC alleges several defects in the transfers of Mr.
Dalby’s DOT.66 Notably, however, the FAC does not allege that Mr. Dalby has
good title to the property. Indeed, the FAC confirms that Mr. Dalby took out a home
loan memorialized by a recorded DOT and defaulted on his payments on or before
January 2, 2014.67 Mr. Dalby does not contend that he ever offered to or did repay
his outstanding debt in the years since he first defaulted.68
The Court finds that Mr. Dalby has not alleged that “he has a substantial
interest in the property and that his title is better than that of [Fannie Mae]” as
required where, as here, Fannie Mae put his title at issue.69
Mr. Dalby’s possession of his property is a necessary but not sufficient
condition to maintain a quiet title claim; possession is required to bring a claim
(“[A]llegations in a complaint or counterclaim may not simply recite the elements of a
cause of action, but must contain sufficient allegations of underlying facts to give fair
notice and to enable the opposing party to defend itself effectively.”) (quoting Starr v.
Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)).
66 See supra at 5–6.
67 Docket 1-1 at 75–76, ¶¶ 7, 11.
68 The Court is cognizant that the FAC alleges that Mr. Dalby “was wrongfully put into
default status” because he was never credited for five payments that he allegedly made
to Countrywide. Docket 1-1 at 77, ¶ 15. Mr. Dalby asserted causes of action under the
FDCPA and the UTPA arising from those allegations. Those causes of action are not at
issue here.
69 Shilts v. Young, 643 P.2d 686, 689 (Alaska 1981); see also Fink v. Municipality of
Anchorage, 379 P.3d 183 (Alaska 2016) (“[P]laintiffs must prevail on the strength of their
own title and not on the weakness of the defendants’ title.”).
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under AS § 09.45.010, but “one in possession merely, without legal or equitable
title, cannot maintain a suit to quiet title.”70
As this Court has previously recognized, “other courts interpreting similar
statutes have found that a borrower could not assert a quiet title claim against a
lender without paying off the debt” because otherwise they are “essentially asking
the Court to ‘give [them] a free house.’”71 Courts applying Arizona,72 California,73
70 Ripinsky v. Hinchman, 181 F. 786, 793 (9th Cir. 1910) (“One in possession merely,
without legal or equitable title, cannot maintain a suit to quiet title.”), modified, 186 F.
151 (9th Cir. 1911).
71 Nicdao v. Chase Home Fin., 839 F. Supp. 2d 1051, 1076 (D. Alaska 2012); see, e.g.,
Bacon v. Countrywide Bank FSB, No. 2:11-cv-00107-ELJ, 2012 WL 642658, at *7 (D.
Idaho Feb. 8. 2012) (“A mortgagor cannot without paying his debt quiet title as against
the mortgagee.”) (citing Trusty v. Ray, 249 P.2d 814, 817 (Idaho 1952)), report and
recommendation adopted, 2012 WL 639521 (D. Idaho Feb. 28, 2012); Evans v. BAC
Home Loan, No. 10-cv-0656-RSM, 2011 WL 5138394, at *4 (W.D. Wash. Dec. 10,
2010) (“The logic of such a rule is overwhelming. Under a deed of trust, a borrower’s
lender is entitled to invoke a power of sale if the borrower defaults on its loan
obligations. As a result, the borrower’s right to the subject property is contingent upon
the borrower’s satisfaction of loan obligations.”); Hobson v. Wells Fargo Bank, NA, 576
Fed. Appx. 678, 679 (9th Cir. 2014) (“The district court properly granted summary
judgment in Hobson’s quiet title action because Hobson failed to raise a genuine
dispute of material fact as to whether the loan had been repaid.”).
72 See, e.g., Hamilton v. Fed. Nat’l Mortgage Assoc., No. 2:12-cv-02379-PHX-SLG,
2013 WL 12107466, at *2 (D. Ariz. Feb. 4, 2013) (“Under Arizona law, a party may not
quiet title until that party has paid off the loan or tendered the balance due under the
loan.”).
73 See, e.g., Won v. Fannie Mae, 714 Fed. Appx. 810, 811 (9th Cir. 2018) (“To
sufficiently plead a quiet title claim in California, plaintiffs must allege that they have
satisfied their obligations under the Deed of Trust.”); Rosenfeld v. JPMorgan Chase
Bank NA, 732 F. Supp. 2d 952, 975 (N.D. Cal. 2009) (“A borrower may not assert ‘quiet
title’ against a mortgagee without first paying the outstanding debt on the property.”).
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Washington,74 and Nevada law75 have enforced this so-called “tender rule,” finding
that a plaintiff must satisfy their obligations under the deed of trust in order to
maintain a quiet title claim.
The Court finds this reasoning persuasive; even if Mr. Dalby’s allegations
about Fannie Mae’s title prove to be true, he has not plausibly alleged facts that, if
proven, would establish that he has good title to the property. Mr. Dalby executed
a deed of trust and defaulted on his loan. By the time of the foreclosure sale, at
least three years had passed since he had defaulted and he had not satisfied his
obligations under the DOT.
C. Mr. Dalby Does Not Allege Facts Sufficient to Maintain That the
Foreclosure Sale is Void
Exceptions to the tender rule exist; most notably, the Ninth Circuit has
recognized that under California law the tender rule “does not apply to a void, as
opposed to a voidable, foreclosure sale.”76 The Court is unaware of any Alaska
case that expressly recognizes such an exception to the tender rule; and, in any
74 See, e.g., McIndoe v. JPMorgan Chase Bank, N.A., 542 Fed. Appx. 606, 607 (9th Cir.
2013) (“Under Washington law, a borrower must satisfy (or be able to satisfy)
outstanding debt to maintain a quiet title action.”).
75 See, e.g., Jacobsen v. HSBC Bank USA, NA, 713 Fed. Appx. 679, 680 (9th Cir. 2018)
(“The district court properly dismissed Jacobsen’s quiet title claim because Jacobsen
failed to allege facts sufficient to show that the paid the debt owed on the property.”)
(applying Nevada law).
76 Martinez v. America’s Wholesale Lender, 446 Fed. Appx. 940, 943 (9th Cir. 2011); see
also Benson v. Ocwen Loan Servicing, LLC, 562 Fed. Appx. 567, 571 (9th Cir. 2014)
(“[T]ender may not be necessary to quiet title if a foreclosure sale is void.”) (discussing
exception to California quiet title law).
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event, even if Alaska had such an exception, it would not apply here.
Under Alaska law, a substantial defect in a foreclosure will render it void.77
Accordingly, a foreclosure sale “will be void ‘only in cases which reach unjust
extremes.’”78 Procedural defects may render a foreclosure sale voidable, but not
void.79 Taking the facts in the FAC as true, the two Corrective Assignments and
the Substitution of Trustee are “robosigned and/or void and/or invalid” and Mr.
Dalby never received notices of transfer of services or otherwise and was never
reimbursed for his five payments to Countrywide.80 Notably, Mr. Dalby does not
contest the validity of the actual transfers of the DOT or the right of the trustee to
bring a foreclosure sale. Indeed, he does not contest the right of BOA or MERS
to execute a substitution of trustee. The Court finds that Mr. Dalby has not alleged
facts sufficient to state a plausible claim that the foreclosure sale is void; the
alleged defects are procedural or mechanical and do not rise to the level of unjust
77 Rosenberg v. Smidt, 727 P.2d 778, 783–84 (Alaska 1986).
78 Richardson v. Estate of Berthelot, 2013 WL 203271, at *7 (Alaska 2013) (quoting
Semlek v. Nat’l Bank of Alaska, 458 P.2d 1003, 1006 (Alaska 1969)). The Supreme
Court of Alaska has indicated its “reluctance to set aside foreclosure sales except in the
most unusual circumstances. Even when the sale fails to comply with the statutory
provisions, [it] will set it aside only in cases that reach ‘unjust extremes.’” Cook
Schuhmann & Groseclose, Inc. v. Brown & Root, Inc., 116 P.3d 592, 595–96 (Alaska
2005) (footnote omitted).
79 Baskurt v. Beal, 101 P.3d 1041, 1044 (Alaska 2004) (explaining that “defects in the
mechanics of the trustee’s exercise of the power to foreclose may render the sale
voidable”).
80 Docket 1-1 at ¶¶ 10, 12, 13, 15, 20.
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extremes or substantive defects with the foreclosure.81
None of the cases cited by Mr. Dalby compels a different conclusion.82 In
Semlek v. National Bank of Alaska, the Supreme Court of Alaska affirmed the
district court’s grant of summary judgment on the validity of the foreclosure sale,
holding it was neither void nor voidable because the overstatement of the amount
due on the secured debt “was not so excessive that it might have deterred bidders”
and was not “part of a fraudulent design.”83 In Semlek, clear error in the amount
due on the secured debt was insufficient to render the sale void or voidable absent
actual effects on the sale or bad faith. More strikingly still, in Rosenberg v. Smidt,
the Supreme Court of Alaska held that the allegations that the trustee had failed to
give “actual notice of the sale” to appellants before their property was sold at a
foreclosure sale went to the “mechanics of exercising the power” rendering the
81 See, e.g., St. James v. JP Morgan Chase Bank Corp., No. 16-cv-00529-LEK, 2017
WL 4392040, at *11 (D. Hawaii Sept. 29, 2017) (dismissing with prejudice allegations
that sale was void as a result of robo-signed assignment, substitution of trustee, and
notice of default because “[e]ven if [Defendant] robosigned the documents, JP Morgan
and CRC ratified them by pursing the foreclosure process . . . [and] Plaintiff does not
dispute the existence of his mortgage on the Property and that the mortgage loan was
in default.”).
82 Docket 35 at 7–10 (citing to Rosenberg v. Smidt, 727 P.2d 778 (Alaska 1986);
Richardson v. Estate of Berthelot, 2013 WL 203271 (Alaska 2013); Semlek v. National
Bank of Alaska, 458 P.2d 1003 (Alaska 1969); Rucker v. NovaStar Mortg., Inc., 311 P.3d
31 (Wash. Ct. App. 2013); and Howard v. Wells Fargo Bank, NA, No. 2:15-cv-02238-
RDP, 2016 WL 1730162 (N.D. Ala. May 2, 2016)).
83 458 P.2d 1003, 1005–07 (Alaska 1969).
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sale voidable, not void.84 Thus, even where the mechanical defects resulted in
lack of notice of foreclosure, the sale was not void. In contrast, in Richardson v.
Estate of Berthelot, the Supreme Court of Alaska held that a foreclosure sale
“completed in violation of a judicial stay” was void because it was a non-
mechanical defect that risked undermining the efficacy of judicial stay orders and
reached unjust extremes.85 Mr. Dalby’s allegations do not rise to the level of a
direct violation of a court order.
Finally, the Court of Appeals of Washington’s decision in Rucker v. NovaStar
Mortgage Inc. is informative. There, the Court of Appeals held that vacating a
foreclosure sale was an appropriate remedy where the trustee may not have had
the authority to conduct the foreclosure sale because the party that appointed the
successor trustee conceded it “did not hold the promissory note at the time.”86 In
contrast, here, Mr. Dalby does not allege that BOA or MERS did not hold the
promissory note when it executed the Substitution of Trustee; rather, he alleges
procedural defects with the signatures.
Accordingly, accepting the allegations in the FAC as true, and construing
the pleadings in the light most favorable to Mr. Dalby, as it must at this juncture,
the Court concludes that the FAC does not state a plausible claim that the
84 727 P.2d 778, 780, 783–84 (Alaska 1986)
85 2013 WL 203271, at *8 (Alaska 2013).
86 311 P.3d 31, 38–39 (Wash. Ct. App. 2013).
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Order re Fannie Mae’s Motion to Dismiss Count II of Plaintiff’s Amended Complaint
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foreclosure sale is void and therefore would not qualify for any exception to the
tender rule on that basis. The Court further finds that any attempt at amending the
complaint to try to state a claim against Fannie Mae upon which relief could be
granted would contradict the original allegations and would be futile. Therefore,
Mr. Dalby’s quiet title claim is dismissed with prejudice.
CONCLUSION
In light of the foregoing, Fannie Mae’s Motion to Dismiss Count II of Plaintiff’s
Amended Complaint at Docket 32 is GRANTED and Count II is dismissed with
prejudice.
DATED this 19th day of November, 2019, at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE
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