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Smith v. Bank of New York Mellon

United States District Court, W.D. Washington, Seattle

July 9, 2019

KAREN D. SMITH, Plaintiff,
BANK OF NEW YORK MELLON, et al., Defendants.


          John C. Coughenour United States District Judge.

         This matter comes before the Court on Defendant Malcolm & Cisneros' (“M&C”) motion to dismiss (Dkt. No. 21). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby DENIES the motion for the reasons explained herein.

         I. BACKGROUND

         On February 9, 2007, Plaintiff Karen D. Smith obtained a loan from Mortgage Solutions Management, Inc. and secured the loan with a deed of trust on the residence. (Dkt. No. 10 at 4.) In July 2007, Plaintiff stopped making payments on the loan. (Id.) Shortly thereafter, Plaintiff filed for bankruptcy and her mortgage loan was eventually discharged. (Id. at 5.) Defendant Bank of New York Mellon retained an in rem interest in Plaintiff's property after the discharge and recorded a series of notices of trustee's sales from 2009 through 2016, though none of the sales occurred. (Id. at 5-6.) In November 2016, Plaintiff initiated mediation under Washington's Foreclosure Fairness Act. (Id. at 6.) During mediation, Plaintiff was informed that her loan modification application was denied. (Id.) Plaintiff alleges that M&C, who represented the loan servicer Defendant Shellpoint, stopped participating in mediation. (Id. at 6-7.) On January 10, 2018, a foreclosure mediation certificate was issued stating that “[Defendant Shellpoint] failed to timely participate in mediation.” (Dkt. 10-2 at 3.)

         On April 11, 2018, M&C filed a judicial foreclosure complaint on behalf of Defendant Bank of New York Mellon in King County Superior Court against Plaintiff's property. (Dkt. No. 10 at 7.) After being removed to federal court, Judge Thomas S. Zilly dismissed the judicial foreclosure complaint with prejudice, finding that it was time-barred. (Id.); see The Bank of New York Mellon v. Karen D. Smith, No. C18-0764-TSZ, Dkt. No. 16 (W.D. Wash. 2018).

         Plaintiff subsequently filed this lawsuit, alleging that M&C is a debt collector and violated the Washington Consumer Protection Act (“CPA”), Revised Code of Washington § 19.86.020, and the Federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, when it filed a lawsuit to collect on a time-barred mortgage debt. (Dkt. No. 10 at 9-11, 15-16.) M&C moves to dismiss all claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 21.)


         A. Federal Rule of Civil Procedure 12(b)(6) Legal Standard

         A defendant may move to dismiss a complaint if a plaintiff “fails to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A motion to dismiss can be based on the lack of a cognizable legal theory or on a lack of sufficient facts alleged. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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. While detailed factual allegations are not necessary, mere conclusory statements or “a formulaic recitation of the elements of a cause of action” will not suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007).

         B. Judicial Notice

         When ruling on a motion to dismiss for failure to state a claim, the Court may consider the complaint, documents attached to the complaint, documents incorporated by reference in the complaint, or matters that are subject to judicial notice. U.S. v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). The Court may judicially notice adjudicative facts that are not in dispute. Fed.R.Evid. 201(a)-(b). Adjudicative facts are those that a jury would review. See Fed. R. Evid. 201(a) advisory committee's notes to 1972 proposed rules. M&C asks the Court to take judicial notice of three notices of discontinuance of trustee's sale recorded against Plaintiff's property and the judicial foreclosure complaint filed in the prior lawsuit between the parties. (Dkt. No. 21 at 3-4, 12.)

         While the facts contained in the discontinuance notices are not disputed, the Court finds that judicial notice of these documents is unnecessary. M&C attaches these notices to support its argument that the judicial foreclosure complaint was not time-barred. (Dkt. No. 21 at 8.) However, Judge Zilly already ruled that the judicial foreclosure complaint was time-barred. See The Bank of New York Mellon, No. C18-0764-TSZ, Dkt. No. 16. The Court agrees with Plaintiff that M&C is collaterally estopped from re-litigating the statute of limitations issue in this case. All of the elements of collateral estoppel apply here: (1) the issue decided in the previous case is identical to the issue raised here; (2) Judge Zilly entered a final judgment on the merits; (3) M&C was in privity with the plaintiffs in the previous case; and (4) application of collateral estoppel does not work an injustice against M&C. See Christensen v. Grant County Hosp. Dist. No. 1, 96 P.3d 957, 961 (Wash. 2004).

         The Court also finds it unnecessary to judicially notice M&C's previous judicial foreclosure complaint. M&C attaches the complaint in support of its argument that it is not a debt collector. (Dkt. No. 21 at 12.) M&C argues that the judicial foreclosure complaint only sought to foreclose the deed of trust and did not seek a deficiency judgment against Plaintiff. (Id.) However, both the judicial foreclosure complaint and Plaintiff's amended complaint state that M&C sought attorney fees and other expenses from Plaintiff in the prior action. (Dkt. Nos. 21-4 at 6, 10 at 11.) In other words, the judicial foreclosure action could have resulted in a monetary judgment against Plaintiff. Thus, even if the Court were to take judicial notice of the judicial foreclosure complaint, Plaintiff is not precluded from stating a claim upon which relief can be granted under the FDCPA. Therefore, M&C's request for judicial notice is DENIED.

         C. Washington ...

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