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Carter v. Seterus, Inc.

United States District Court, D. Utah, Northern Division

June 30, 2017



          DALE A. KIMBALL United States District Judge

         This matter is before the court on: (1) Defendants Federal National Mortgage Association (“Fannie Mae”) and Seterus, Inc.'s Motion to Dismiss Plaintiff's First Amended Complaint [Docket No. 28]; (2) Defendants Paul M. Halliday, Jr. and Halliday, Watkins & Mann, P.C.'s (“Halliday Defendants”) Joinder to Motion to Dismiss Filed By Co-Defendants Federal National Mortgage Association and Seterus, Inc. and Motion to Dismiss and Memorandum in Support of Motion to Dismiss and Motion for Fees [Docket No. 26]; and (3) Defendants Michael Kushlan and Talitha Kushlan's joinder in those two motions [Docket No. 29]. On May 31, 2017, the court held a hearing on the motions. At the hearing, Plaintiffs were represented by Douglas R. Short, Defendants Fannie Mae and Seterus were represented by Michael S. Kelley, the Halliday Defendants were represented by Spencer Macdonald, and the Kushlan Defendants were represented by James H. Deans. The court took the motions under advisement. Based on the memoranda filed by the parties and the law and facts relevant to the pending motions, the court issues the following Memorandum Decision and Order.


         Plaintiff Robert Allen Carter brought the present “wrongful foreclosure” lawsuit asserting numerous causes of action against the successor lender and its loan servicer, the successor trustee who conducted the non-judicial foreclosure, and the couple who bought the house at the foreclosure sale.

         On or about June 8, 1992, Robert Neil Carter and Monta Ray Carter (“Borrowers”) acquired property at 58 West 150 North, North Salt Lake, Davis County, Utah (“Property”). On or about December 26, 2002, the Borrowers executed a Deed of Trust that secured a loan and note in the amount of $60, 000, identifying Washington Mutual Bank as lender and beneficiary and United Title Services as trustee. Robert Neil Carter died on April 22, 2010, and Monta Ray Carter died on March 2, 2011. Plaintiff Robert Allen Carter is the Administrator in Intestacy of their joint estate and he has brought the present lawsuit on behalf of the estate.

         On or about April 3, 2015, a Corporate Assignment of Deed of Trust was recorded against the Property stating that the Federal Deposit Insurance Corporation, acting as receiver of Washington Mutual Bank, had assigned the Deed of Trust to JPMorgan Chase Bank. On or about December 28, 2015, a Utah Assignment of Deed of Trust was recorded on the Property reflecting that JPMorgan Chase Bank had assigned the Deed of Trust to Federal National Mortgage Association (“Fannie Mae”).

         The Deed of Trust provides that “the covenants and agreements of this Security Instrument shall bind . . . and benefit the successors and assigns of Lender.” The Deed of Trust also provides that “the Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower.”

         On May 21, 2015, Seterus, the loan servicer for Fannie Mae, sent a letter to Carter notifying him that the loan was in default for failure to make payments. The letter informed Carter that he was required to pay a specific sum by June 25, 2015 to prevent the recording of a Notice of Default and initiation of foreclosure proceedings. On January 7, 2016, Paul M. Halliday, Jr., as Successor Trustee, recorded a Notice of Default and Election to Sell against the Property. On January 12, 2016, Seterus, as loan servicer for Fannie Mae, recorded a Substitution of Trustee stating: “The Beneficiary ratifies and confirms any action taken on the Beneficiary's behalf by the herein appointed Successor Trustee prior to the recording of the Substitution of Trustee.” The Substitution of Trustee is signed by Seterus as authorized subservicer for Fannie Mae.

         The Trust Deed provides that a sale of the Note “might result in a change of the entity (known as the “Loan Servicer”) that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law. There also might be one or more changes of the Loan Servicers unrelated to a sale of the Note.” In addition, the Deed of Trust provides: “Lender, at its option, may from time to time remove Trustee and appoint a successor trustee to any Trustee appointed hereunder. Without conveyance of the Property, the successor trustee shall succeed to all the title, power and duties conferred upon Trustee herein and by Applicable Law.”

         On May 24, 2016, the Successor Trustee held a foreclosure sale of the Property and sold the Property to Michael and Talitha Kushlan for $128, 100. On May 26, 2016, the Successor Trustee recorded a Trustee's Deed identifying the sale price and Michael and Talitha Kushlan as grantees. The Trustee's Deed also states “all applicable statutory provisions of the State of Utah and all of the provisions of the Trust Deed have been complied with as to the acts to be performed and the notices to be given.”

         Carter filed his Complaint in this case on May, 23, 2016, the day before the foreclosure sale. However, Carter did not serve Defendants until November, 2016. Carter then amended his Complaint on January 30, 2017, and Defendants filed the motions to dismiss presently before the court.


         Defendants' Motions to Dismiss

         Fannie Mae and Seterus filed a motion to dismiss, which has been joined in by the remaining defendants. The Halliday Defendants filed their own motion to dismiss incorporating Fannie Mae and Seterus' arguments and explaining how those arguments apply to the claims alleged against them. The Kushlan Defendants filed only a joinder in the other Defendants motions. However, the Kushlan Defendants' joinder explains how they are involved in the claims and the basis for their ...

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