Durnam v. Bank of America

Citation: 2014 MT 32NDocket: 13-0389

Court: Montana Supreme Court; February 3, 2014; Montana; State Supreme Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Zachary and Stephanie Durnam filed an appeal against Bank of America N.A. and several other financial entities after the Eighteenth Judicial District Court dismissed their claims to prevent a nonjudicial foreclosure on their property. The Durnams borrowed $360,000 from Countrywide Home Loans in 2006, secured by a deed of trust (DOT) that designated Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary and allowed for the transfer of the note without borrower notice. MERS transferred the beneficial interest in the DOT and note to The Bank of New York Mellon on May 31, 2011, and appointed ReconTrust Company as the successor trustee. ReconTrust issued a Notice of Trustee’s Sale on June 1, 2011, citing the Durnams’ default since August 2010. In response, the Durnams filed a complaint alleging invalid foreclosure, lack of standing, and other claims on September 26, 2011, but acknowledged their default and did not serve their complaint properly. The District Court granted the defendants' motion to dismiss, prompting the Durnams to appeal. The opinion emphasized that the case is decided by memorandum opinion and is noncitable as precedent.

A second Notice of Trustee’s Sale was recorded on December 16, 2011, followed by a Cancellation of Trustee’s Sale filed by ReconTrust on April 2, 2012. Despite not being served for almost a year, the Defendants, represented by Attorney Charles K. Smith, filed a Motion to Dismiss in District Court. In response, the Durnams filed a Motion to Dismiss the Defendants’ motion, arguing that the Defendants had not provided sufficient evidence or met the necessary standards for dismissal under M. R. Civ. P. 56. They contended that Smith lacked evidence of his authority to represent the Defendants, that the Defendants failed to show entitlement to foreclosure, and that the Defendants could not file a motion as they had not been served.

The District Court granted the Defendants' motion, determining that the Durnams did not provide factual support for their claims of 'Invalid Foreclosure, Invalid Affidavit, or Lack of Standing,' nor did they refute the documents granting ReconTrust the power to foreclose. The court noted that the Durnams were not challenging the mortgage payment but sought to identify defects in the lender transfers. The court also dismissed their claim under the Real Estate Settlement Procedures Act (RESPA), finding no plausible facts in their correspondence to qualify as a written request and no demonstration that a failure to respond caused damages. Additionally, Durnams failed to allege sufficient elements of fraud.

On appeal, the Durnams raised issues regarding the dismissal of their complaint, the premature ruling on fraud and unjust enrichment, and the propriety of Smith's representation. The court reviews the dismissal of a complaint for failure to state a claim as a legal conclusion. The District Court had found that the Note and Deed of Trust (DOT) allowed for the sale of the mortgage without borrower approval, and therefore the Durnams' claims regarding consent and partial payment through subsequent servicing were unsupported by the documentation.

Durnams failed to provide any legal authority or rationale for why the purchase price of a Note among beneficiaries should be deducted from their outstanding debt. There are no disputed facts relevant to this issue, as all allegations made by Durnams are accepted as true under a 12(b)(6) motion. Durnams argue that the District Court lacked authority to dismiss the case, claiming it was not "open" due to their failure to serve the named Defendants and that the Defendants were not properly involved as they did not file a notice of appearance. However, the court noted that despite Durnams' claims, the case was indeed open because they had filed a complaint and utilized a Notice of Lis Pendens to halt foreclosure, even without serving the complaint. The court established that a defendant can voluntarily appear in a case prior to being served, which waives the necessity for service. The Durnams also argued that the Defendants’ failure to file an Answer before dismissal violated their due process rights, but the court affirmed its jurisdiction and proper proceedings, stating that a motion to dismiss may precede an Answer. 

Furthermore, the court clarified that the nonjudicial foreclosure process cannot be obstructed by mere unsupported allegations and that plaintiffs must present factual bases for relief rather than speculative claims. While acknowledging a previous case that might pertain to the issues raised, the court emphasized that Durnams did not adequately preserve or argue the validity of MERS as a beneficiary, effectively waiving that point. The court concluded that the issues presented were governed by established Montana law, which the District Court interpreted correctly, and affirmed the dismissal.