Mo Strutton v. Merscorp

8/12/2019 Mo Strutton v. Merscorp

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IN THE UNITED STATES DISTRICT COURT FOR THEWESTERN DISTRICT OF MISSOURI

WESTERN DIVISION

COREY J. STRUTTON, on behalf of himself )

and all others similarly situated, ) ) Plaintiffs, )

) v. ) Case No. 12-01149-CV-W-BP

) MERSCORP HOLDINGS, INC., and )MORTGAGE ELECTRONIC )REGISTRATION SYSTEM, INC., )

) Defendants. )

ORDER

This case comes before the Court on Defendants Motion to Dismiss. (Doc. 11.)

Defendants move under Fed. R. Civ. P. 12(b)(6) to dismiss Corey J. Struttons Complaint with

prejudice. Struttons Complaint asserts three causes of action based on the 2009 foreclosure sale

of his home. As Strutton explains in his Opposition, his allegations raise a narrow issue of law:

Here, the principal issue framed by the Complaint is whether, under Chapter 443of the Missouri statues and common law, a non-mortgagee such as MERS hasa right to foreclose on property.

(Pl.s Oppn at 2, Doc. 15.)

As discussed below, the Court finds that nothing in Missouri law prohibits a mortgagee 1

from employing a non-mortgagee agent to act on its behalf during the foreclosure process. As a

result, Struttons allegations do not state a violation of Missouri law. Defendants Motion will

be GRANTED .

1 Blacks Law Dictionary defines mortgagee as One to whom property is mortgaged; themortgage creditor, or lender. Black's Law Dictionary (9th ed. 2009); see Roark v. Plaza Sav.

Ass'n , 570 S.W.2d 825, 828 (Mo. Ct. App. 1978) (This court holds the term foreclosingmortgagee as used in [Mo. Rev. Stat. ] 443.325 refers to the holder of the debt or obligationunder both a mortgage with a power of sale and a deed of trust.).

Case 4:12-cv-01149-BP Document 24 Filed 02/06/13 Page 1 of 13


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I. Introduction.

Plaintiff Corey J. Strutton filed this case in Missouri state court against Defendants

MERSCORP Holdings, Inc. and Mortgage Electronic Registration System, Inc.s (collectively,

MERS). (Compl., Doc. 23-1. 2) In his Complaint, Strutton alleges MERS violated Missouri

statutes when [it] falsely denominated [itself] a non-mortgagee as a party entitled to

undertake foreclosures in its own name on residential properties in the State of Missouri. ( Id.

1.) In this way, Strutton alleges MERS orchestrated a non-judicial foreclosure sale of his

property. ( Id. 5.) Strutton seeks relief for himself and for a class of similarly-situated persons.

( Id. 60-65.) MERS removed the case to federal court.3

Struttons Complaint alleges the following. On April 9, 2008, Strutton purchased a home

in Independence, Missouri. ( Id . 14.) Strutton signed a mortgage loan note with lender

Housing Solutions, Inc. ( Id. 15.) Strutton alleges this note does not mention MERS, and that

MERS has no legal basis for enforcing this note. ( Id. 2, 16-24, 35, 39.) Struttons note was

secured by a deed of trust. ( Id. 25.) This deed designates MERS as its beneficiary. ( Id. )

Strutton alleges this deed is MERSs sole source of legal authority over Struttons mortgage. ( Id.

26-29, 31-32, 34-39.) With respect to MERS, the deed states:

Borrower understands and agrees that MERS holds only legal title to the interestsgranted by Borrower in this [deed of trust]; but, if necessary to comply with lawor custom, MERS (as nominee for Lender and Lenders successors and assigns)has the right: to exercise any or all of those interests, including, but not limited to,

2 Page 16 was inadvertently omitted from the initial copy of Struttons Complaint that was filedwith the Court. ( See Compl., Doc. 1-2; Order, Doc. 21; Notice, Doc. 23.) Subsequently, the

parties filed a complete copy of his Complaint. (Notice, Doc. 23; Compl., Doc. 23-1.)3 MERS removed the case based on diversity jurisdiction. (Notice of Removal, Doc. 1.) Struttonis a citizen of Missouri, each Defendant is incorporated in Delaware and has its principal place of

business in Virginia, and Strutton alleges wrongful foreclosure of a home mortgage loan totaling$97,230.00. ( Id. ) Thus, the Court has subject-matter jurisdiction over this case. 28 U.S.C. 1441; id. 1132; e.g. , Carden v. Arkoma Assocs. , 494 U.S. 185, 199-200 (1990) (discussingapplication of diversity jurisdiction principles to class actions).



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the right to foreclose and sell [Struttons home]; and to take any action required ofLender including, but not limited to, releasing or canceling this [deed of trust].

( Id. 33. 4)

On February 5, 2009, MERS recorded a document entitled Appointment of Successor

Trustee. ( Id. 30.) This Appointment states that MERS, acting solely as nominee for Flagstar

Bank FSB, appoints South & Associates as the deeds successor trustee. ( Id. ) Strutton alleges

this Appointment is void, because MERS had no right to enforce Struttons loan note. ( Id. 31.)

Then, on July 21, 2009, MERS recorded a document entitled Assignment of Deed of Trust.

( Id. 29.) This Assignment states that MERS assigned the deed over to itself. ( Id. ) Strutton

alleges MERS had no written authority to assign the deed. ( Id. 27-29.) Finally, on July 30,

2009, South & Associates conducted a foreclosure sale of Struttons home. ( Id. 43, 49-51.)

Strutton alleges this sale occurred at MERSs instruction, and that MERS had no right to give

this instruction. ( Id. 43-44.) Ultimately, MERS purchased Struttons home in this sale for

$106,961.09. ( Id. 52.)

Based on these facts, Strutton alleges MERS foreclosed the Strutton loan in its own

name and that the foreclosure sale is void. ( Id. 56, 59.) Strutton alleges MERS had no

authority under the deed to appoint South & Associates as successor trustee, and thus South &

Associates had no authority to hold the foreclosure sale. ( Id. 30-31, 40, 43-44.) As a result,

Strutton alleges the foreclosure sale violated the deed and is void, because it was conducted by a

non-Trustee (South & Associates) at the instruction of a non-mortgagee (MERS). ( Id. 53-54;

see generally id. 40-54.)

4 Blacks Law Dictionary defends a nominee as A person designated to act in place ofanother, usu. in a very limited way[,] and as A party who holds bare legal title for the benefitof others or who receives and distributes funds for the benefit of others. See also In re Tucker ,441 B.R. 638, 645 (Bankr. W.D. Mo. 2010) (finding that MERS was an agent, even though deedof trust used term nominee).



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Strutton asserts three causes of action against MERS. Count One is for wrongful

foreclosure. ( Id. 66-76.) Strutton alleges that because MERS could not enforce Struttons

note and could not appoint South & Associates as Successor Trustee, the resulting foreclosure

sale did not comply with the deed of trust and is void. ( Id. 71-74.) Count Two is to quiet

title. ( Id. 77-84.) Strutton alleges that because the foreclosure sale was void and did not pass

title, he has a superior interest in the property. ( Id. 78, 82.) Count Three is for violation of

the Missouri Merchandising Practices Act (MMPA), Mo. Rev. Stat. 407.020.1. ( Id. 85-99.)

Strutton alleges that MERS concealed material facts concerning its inability to transfer interests

in land and to enforce Struttons loan note, the identity of the true mortgagee and of the real party-in-interest, and the void appointment of South & Associates. ( Id. 87, 90, 93, 97.)

MERS moves to dismiss each of these claims with prejudice.

II. Standard of Review.

A party may move to dismiss a complaint for failure to state a claim upon which relief

can be granted[.] Fed. R. Civ. P. 12(b)(6). 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. Gallagher v. City of Clayton , 699 F.3d 1013, 1016 (8th Cir. 2012). A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged. Id. In reviewing the motion,

the court accepts as true the complaints factual allegations, and it draws all inferences from

them in favor of the non-moving party. Id. In contrast, a court may disregard a complaints

allegations that contain mere legal conclusions. Id.

Generally, a court must resolve a Rule 12(b)(6) motion based on the pleadings alone.

Miller v. Redwood Toxicology Lab., Inc. , 688 F.3d 928, 931 (8th Cir. 2012); Fed. R. Civ. P.



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12(d). However, a court may also consider materials that are necessarily embraced by the

pleadings. Redwood Toxicology , 688 F.3d at 931. In the Complaint, Strutton quotes from three

documents: the deed of trust; the Appointment of Successor Trustee; and the Assignment of

Deed of Trust. (Compl. 25, 29-30, 33.) Struttons Complaint necessarily embraces these

documents, and thus the Court will consider them here. However, Strutton did not quote from

the mortgage loan note. Therefore, the Court excludes this document from consideration.

III. Discussion.

Missouri law governs Struttons three state law causes of action. Walker v. Barrett , 650

F.3d 1198, 1203 (8th Cir. 2011). When applying Missouri law, the Court is bound by MissouriSupreme Court decisions regarding issues of substantive law. Id. If the Missouri Supreme

Court has not spoken on an issue, [the Court] may consider opinions from the Missouri Court of

Appeals as particularly relevant and must follow them when those opinions provide the best

evidence of Missouri law. Id. (quotations omitted).

As an initial matter, the Court finds that many of Struttons allegations do not concern

facts, but instead present mere legal conclusions. ( E.g. , Compl. 21-23, 36-39, 44, 47-48, 53-

54, 56.) Those legal conclusions are not well-pleaded factual allegations, and the Court will

disregard them here. Gallagher , 699 F.3d at 1016.

a. Wrongful Foreclosure.

In Count One, Strutton alleges MERS is liable for wrongful foreclosure. Strutton

contends that under Missouri law, a mortgagee itself is the exclusive party entitled to foreclose

on a property, and so a mortgagee cannot employ a non-mortgagee to act on its behalf. Because

MERS was not a mortgagee of Struttons note, Strutton alleges its involvement in the foreclosure

process was unlawful. Therefore, he alleges that MERS could not lawfully participate in the



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foreclosure process, regardless of whether it was acting as an agent or nominee on behalf of

another party. ( See Compl. 1-5, 23, 56-58; Oppn at 1-7, 9-10, 12-13.)

Strutton makes this argument by citing Missouri statutes and case law. First, Strutton

cites Mo. Rev. Stat. 443.290. This statute does not support Struttons position. Section

443.290 provides that if a mortgagee exercises a mortgages power of sale provision, the

resulting sale shall be valid and binding by the laws of this state[.] This statute establishes

extrajudicial foreclosure in Missouri, and it ensures that a power of sale and sales made

pursuant thereto would be valid and binding. Fed. Nat. Mortg. Ass'n v. Howlett , 521 S.W.2d

428, 431 (Mo. 1975). This statute does not provide that only a mortgagee itself may foreclose.Strutton also cites Williams v. Kimes , 996 S.W.2d 43 (Mo. 1999). In Williams , the

Missouri Supreme Court stated that a foreclosure sale is void where the foreclosing party does

not hold title to the secured note[.] Williams v. Kimes , 996 S.W.2d 43, 45 (Mo. 1999). In

support, Williams cited Graham v. Oliver and Cobe v. Lovan . Id. at 45 n.6. None of these cases

support Struttons position. Williams concerned whether a foreclosure sale was void because

certain parties did not receive actual notice of it. Id. at 44. Graham concerned whether a

foreclosure sale conveyed title to a certain parcel of land, when that parcel was omitted from the

published notice of sale. Graham v. Oliver , 659 S.W.2d 601, 602 (Mo. Ct. App. 1983). Cobe

concerned whether a companys foreclosure sale of land was void, when the company claimed

an interest in the land based on an improper and unauthorized transfer from a business

association. Cobe v. Lovan , 92 S.W. 93, 96-97 (Mo. 1906). None of these cases holds that

address only a mortgagee itself may foreclose.

Contrary to Struttons argument, Missouri law permits a mortgagee to employ an agent to

act on its behalf. First, Missouris foreclosure statute speaks of a foreclosure sale made by such



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mortgagee, secured party or his personal representatives[.] Mo. Rev. Stat. 443.290. 5 On its

face, this statute permits someone other than the mortgagee himself to foreclose.

A recent Missouri decision supports this conclusion. Bellistri v. Ocwen Loan Servicing,

LLC , 284 S.W.3d 619 (Mo. Ct. App. 2009). In Bellistri , the court wrote:

Generally, a mortgage loan consists of a promissory note and security instrument,usually a mortgage or a deed of trust, which secures payment on the note bygiving the lender the ability to foreclose on the property. Typically, the same

person holds both the note and the deed of trust. In the event that the note and thedeed of trust are split, the note, as a practical matter becomes unsecured. The

practical effect of splitting the deed of trust from the promissory note is to make itimpossible for the holder of the note to foreclose, unless the holder of the deed oftrust is the agent of the holder of the note. Without the agency relationship, the

person holding only the note lacks the power to foreclose in the event of default. Id. at 623 (internal citations omitted). The Bellistri court specifically discussed an agent holding

a deed of trust on behalf of a mortgagee. A plain reading of this passage shows that Missouri

law permits a mortgagee to act through an agent. Indeed, another court reviewing this passage

concluded that one who holds rights under a deed of trust may appoint an agent to exercise

some or all of those rights on its behalf. In re Tucker , 441 B.R. 638, 645 (Bankr. W.D. Mo.

2010). In light of this authority, the Court finds that Missouri law permits a mortgagee to

employ a non-mortgagee agent to act on its behalf during the foreclosure process.

Strutton resists this conclusion by citing contrary authority from other jurisdictions. Of

course, this authority is not controlling here, because Missouri law governs this case. Walker v.

Barrett , 650 F.3d 1198, 1203 (8th Cir. 2011). However, Struttons authority is also

distinguishable for other reasons. For instance, the Washington Supreme Court has held that

5 The Missouri statutes do not define personal representative. See Mo. Rev. Stat. 443.703(definitions). Blacks Law Dictionary defines the term as A person who manages the legalaffairs of another because of incapacity or death, such as the executor of an estate. Blacks Law

Dictionary defines the broader term representative as One who stands for or acts on behalf ofanother.



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where MERS never held the loan note secured by the mortgage deed, it is not a lawful

beneficiary under the Washington Deed of Trust Act. Bain v. Metro. Mortg. Group, Inc. , 285

P.3d 34, 47 (Wash. 2012) (interpreting Wash. Rev. Code Ann. 61.24.005.2). Bain decided an

issue of Washington state statutory law. Id. at 41-42. Washingtons statutes do not control here,

and Missouris statutes are not analogous. Thus, Bain is not persuasive authority. Similarly, the

Maine Supreme Court has held that MERS does not have standing to initiate judicial foreclosure

proceedings in the Maine courts. Mortgage Elec. Registration Sys., Inc. v. Saunders , 2 A.3d 289,

292, 297 (Me. 2010). Maine is a judicial foreclosure state. Id. at 292, 296-97; Me. Rev. Stat. tit.

14, 6321-6325. In contrast, Missouri is a non-judicial foreclosure state. Fed. Nat. Mortg. Ass'n v. Howlett , 521 S.W.2d 428, 431-32 (Mo. 1975). Saunders is not persuasive here.

Applying Missouri law to this case, the Court finds that MERS was acting as an agent on

a mortgagees behalf. Missouri follows traditional agency law principles. See, e.g. , State ex rel.

Ford Motor Co. v. Bacon , 63 S.W.3d 641, 642 (Mo. 2002). Put simply, an agent is a person

authorized by another to act for him, one intrusted with another's business. State ex rel. Elson v.

Koehr , 856 S.W.2d 57, 60 (Mo. 1993) (quotations omitted). When an agent acts within the

authority a principal confers on him, the agent acts for the principal and can alter the principals

legal relations. Bach v. Winfield-Foley Fire Prot. Dist. , 257 S.W.3d 605, 608 (Mo. 2008).

Here, the Strutton deed of trust states:

Borrower understands and agrees that MERS holds only legal title to the interestsgranted by Borrower in this [deed of trust]; but, if necessary to comply with lawor custom, MERS (as nominee for Lender and Lenders successors and assigns)has the right: to exercise any or all of those interests, including, but not limited to,the right to foreclose and sell [Struttons home]; and to take any action required ofLender including, but not limited to, releasing or canceling this [deed of trust].

(Deed of Trust at 2, Defs. Mot. Ex. B, Doc. 11-2; see also Compl. 33.) Others courts have

reviewed this same language and concluded that it creates an agency relationship between MERS



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and the mortgagee. In re Tucker , 441 B.R. at 645); Kulovic v. BAC Home Loans Servicing, L.P. ,

No. 4:10-CV-2058 CAS, 2011 WL 1483374 at *6 (E.D. Mo. Apr. 19, 2011). Furthermore, the

Appointment and Assignment are additional evidence that MERS acted as an agent for a

mortgagee. In the Appointment, MERS, acting solely as nominee for Flagstar Bank, FSB[,]

removed the deeds initial trustee and appointed South & Associates as its successor.

(Appointment at 2, Mot. Ex. C, Doc. 11-3.) In the Assignment, MERS, again acting as nominee

for Housing Solutions, Inc, transferred the deed of trust over to MERS, solely as nomine for

Flagstar Bank, FSB. (Assignment at 1, Mot. Ex. D, Doc. 11-4.)

Next, the Court finds that the scope of MERSs authority was broad. Under the deed oftrust, the mortgagee is entitled to foreclose on Struttons property, and to appoint a successor

trustee. (Deed of Trust at 6 18, 20.) The deed of trust also states that MERS has the right to

exercise any or all of [the Lenders] interests, including, but not limited to, the right to foreclose

and sell [Struttons home]; and to take any action required of Lender[.] (Deed of Trust at 2.)

The Court finds that this language granted MERS broad authority to act on the Lenders behalf.

See In re Tucker , 441 B.R. at 645; Kulovic , 2011 WL 1483374 at *6; Mortg. Elec. Registration

Sys., Inc. v. Bellistri, No. 4:09CV731 CAS, 2010 WL 2720802, at *14 (E.D.Mo. July 1, 2010.)

Finally, each of the actions Strutton alleges is unlawful that is, recording the

Assignment, recording the Appointment, and instructing South & Associates to foreclose fall

within MERSs broad authority. Therefore, in taking these actions MERS was acting as the

mortgagees agent. Because nothing in Missouri law prohibits a mortgagee from employing an

agent to act on its behalf during the foreclosure process, MERSs actions were not unlawful.

In conclusion, the Court has been mindful that it is resolving a Rule 12(b)(6) motion to

dismiss. Thus, the Court has accepted Struttons factual allegations as true, and it has drawn all



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inferences from them in his favor. Gomez v. Wells Fargo Bank, N.A. , 676 F.3d 655, 660 (8th

Cir. 2012). Even so, after reviewing the pleadings and the materials they embrace, the Court

finds that these allegations do not state a violation of Missouri law. Retro Television Network,

Inc. v. Luken Commcns, LLC , 696 F.3d 766, 769 (8th Cir. 2012) (courts may review documents

incorporated into the pleadings for all purposes, including to determine whether a plaintiff has

stated a plausible claim.). Accordingly, Count One will be dismissed.

b. Action to Quiet Title.

Count Two is an action to quiet title. In it, Strutton alleges MERs interest in his home

arises from a void foreclosure sale, so that he holds a superior interest in the property. Asdiscussed above, the Court finds MERSs actions did not violate Missouri law. Struttons action

to quiet title fails to state a plausible claim for relief, and Count Two will be dismissed.

c. Violation of the MMPA.

In Count Three, Strutton alleges MERS violated the MMPA during the foreclosure

process by concealing its inability to transfer interests in land and to enforce Struttons loan note.

(Compl. 87, 90, 93, 97; see also Oppn at 16-17.) Under the MMPAs broad language, it is

unlawful to use deception or to conceal material facts in connection with the sale or

advertisement of any merchandise[.] Mo. Ann. Stat. 407.020.1; see Ports Petro. Co., Inc. of

Ohio v. Nixon , 37 S.W.3d 237, 240 (Mo. 2001) (For better or worse, the literal words cover

every practice imaginable and every unfairness to whatever degree.). If a practice is unlawful

under this section, then it violates the MMPA regardless of whether committed before, during

or after the sale or advertisement. Mo. Ann. Stat. 407.020.1.

Under the statutory language discussed above, an MMPA claim must be based on either a

sale or an advertisement. Id. Struttons MMPA allegations concern actions MERS took during



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the foreclosure process. These actions cannot be understood as either a sale or an

advertisement within meaning of the MMPA. See id. 407.010 (statutory definitions).

Instead, the only sale or advertisement at issue here is Struttons initial purchase of the

home. (Compl. 14.) Therefore, the Court will analyze Struttons claim based on this

transaction.

MERS argues that Struttons MMPA claim fails, because MERSs actions during the

foreclosure process did not occur in connection with his initial property purchase. Two

authorities guide the Courts analysis of this point. The first is State ex rel. Koster v. Prof'l Debt

Mgmt., LLC , 351 S.W.3d 668 (Mo. Ct. App. 2011). In Koster , the plaintiff alleged a debtcollector violated the MMPA when it attempted to collect debt arising from an earlier consumer

transaction. Id. at 670. The issue for the court was whether the broad reach of the [MMPA]

extends to unfair or deceptive debt collection activities that are alleged to have occurred after the

initial sale of merchandise, and by a third-party debt collector who was not a party to the original

consumer transaction. Id. at 671. The court found that unlike other language within the

MMPA, the phrase in connection with had not been given a broad interpretation. Id. at 672.

Thus, the court interpreted this phrase as requiring a relationship in fact between the allegedly

unlawful acts and the initial transaction. Id. Because the plaintiffs petition alleged no

deception or unfair practice made to the consumer at or prior to the initial sales transaction

between the consumer and the seller and instead targeted only the third-partys subsequent

debt collection practices the court found that there was no relationship-in-fact between the

initial transaction and the third partys subsequent actions. Id. at 675. Therefore, the court held

that the plaintiffs allegations did not violate the MMPA. Id. at 673, 675.



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The second authority is Hess v. Wells Fargo Home Mortg. , Case No. 4:12CV22 TIA,

2012 WL 872752 (E.D. Mo. Mar. 14, 2012). Hess concerned a home mortgage foreclosure, and

it is highly analogous to the instant case. Id. at *1. In Hess , the plaintiffs alleged the

Defendants violated the MMPA by representing that the Deed of Trust was properly transferred.

Id. at *4. Relying upon Koster , the court held that [t]hese purported actions occurred after the

sale of the home and do not demonstrate a relationship between the alleged unfair practice or

deception and the initial sale of the property. Id. (emphasis removed).

Following these authorities, the Court concludes that Struttons MMPA claim fails as a

matter of law. MERS was not a party to Struttons initial home purchase, and his Complaintdoes not allege MERS acted unlawfully during that initial transaction. Instead, Strutton alleges

MERS acted unlawfully during the subsequent foreclosure process, which occurred many

months later. The Court finds there is no relationship in fact between Struttons initial home

purchase and MERSs subsequent practices, and so his allegations target actions that did not

occur in connection with the initial sale transaction. Accordingly, Struttons MMPA claim

does not state a violation of Missouri law, and Count Three will be dismissed.



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IV. Conclusion.

As discussed above, the Court finds that nothing in Missouri law prohibits a mortgagee

from employing a non-mortgagee agent to act on its behalf during the foreclosure process. As a

result, Counts One and Two do not state violations of Missouri foreclosure law. In addition,

Struttons allegations concern actions that did not occur in connection with his initial purchase

of his home. Therefore, Count Three does not state a violation of the MMPA.

Accordingly, it is hereby ORDERD that Defendants Motion to Dismiss, (Doc. 11), is

GRANTED . Struttons Complaint is DISMISSED WITH PREJUDICE .

IT IS SO ORDERED./s/ Beth PhillipsBETH PHILLIPS, JUDGE UNITED STATES DISTRICT COURT

DATE: February 6, 2013

Mo Strutton v. Merscorp

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