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Vnb Realty, Inc. v. U.S. Bank, N.A.&Nbsp;

United States District Court, D. New Jersey

April 23, 2014

VNB REALTY, INC., a wholly owned subsidiary of Valley National Bank, Plaintiff,
U.S. BANK, N.A., Defendant.


WILLIAM J. MARTINI, District Judge.

Plaintiff VNB Realty, Inc. ("VNB") owns an interest in two trusts holding residential mortgage backed securities. Defendant U.S. Bank, N.A. ("U.S. Bank") served as the indenture trustee for both trusts. In a seven-count Complaint, VNB alleges that U.S. Bank knew about wrongdoing in both trusts but failed to notify interested parties because of a conflict of interest. U.S. Bank moves to dismiss all counts pursuant to Federal Rule of Civil Procedure 12(b)(6). There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, U.S. Bank's motion is GRANTED IN PART, and DENIED IN PART.


The Complaint alleges as follows: VNB is a real estate investment trust and a wholly owned subsidiary of Valley National Bank. Compl. ¶ 6. On October 20, 2006, VNB purchased certificates in the CSMC Mortgage Backed Trust 2006-8, CSMC Mortgage-Backed Pass-Through Certificates, Series 2006 ("the CSMC Trust"). Id. ¶ 22. At the time of purchase, the CSMC Trust certificates had a par value of $21, 637, 000. Id. Since the purchase, VNB has taken an impairment charge on its CSMC Trust certificates in the amount of $1, 024, 253.00. Id. ¶ 24.

On January 30, 2007, VNB purchased certificates in the MASTR Alternative Loan Trust 2007-1, Mortgage Pass-Through Certificates, Series 2007-1 (the "MALT Trust"). Id. ¶ 27. At the time of purchase, the MALT Trust certificates had a par value of approximately $30 million. Id. Since the purchase, VNB has taken an impairment charge on its MALT Trust certificates in the amount of $2, 555, 088.00. Id. ¶ 28.

Both the CSMC Trust and the MALT Trust (together "the Trusts") are composed of residential mortgage backed securities ("RMBS"). Id. ¶ 1. The securitization process begins when a borrower gets a mortgage loan from a lender, called an "Originator." Id. ¶ 12. The originator sells the loan to a "Seller, " who sells the loan to a "Depositor." Id. ¶ 14. The Depositor then places the loan in trusts governed by a "Pooling and Servicing Agreements" ("PSAs"). Id. ¶¶ 14-15. Once loans are placed into a trust, borrowers make their payments to the trust through a "Master Servicer, " which sometimes involves additional "Servicers" in the process. Id. ¶ 16. After the Master Servicer collects loan payments from borrowers, the Master Servicer transfers the payments to a "Trustee." Id. ¶ 19. The Trustee then distributes the payments to the trust's beneficiaries, referred to as "Certificateholders." Id. ¶ 19.

Countrywide Home Loans and Wells Fargo were among the Originators of the mortgages in the Trusts at issue in this case. Id. ¶¶ 53-54. Wells Fargo was the Master Servicer for both of the Trusts, and several other banks acted as Servicers. Id. ¶ 17. Finally, Defendant U.S. Bank was the Trustee for both Trusts. Id. ¶ 19.

VNB alleges that the Trusts were tainted by "robo-signing, " which the Complaint defines as "the practice of signing mortgage assignments, satisfactions, and other mortgage-related documents in assembly-line fashion, often with a name other than the affiant's own, and swearing to personal knowledge of facts which the affiant has no knowledge." Id. ¶ 69. VNB alleges that Wells Fargo, the Master Servicer for the Trusts, and U.S. Bank, the Defendant, filed robo-signed documents in the Trusts. Id. ¶ 83. VNB further asserts that because U.S. Bank was engaging in robo-signing practices outside of the Trusts, U.S. Bank had a conflict of interest that "made it impossible for [U.S. Bank] to prevent, remedy, or address the robo-signing within the Trusts at issue." Id. ¶ 88.

VNB also alleges that Countrywide and Wells Fargo, two of the Originators for the Trusts, carried out their origination responsibilities recklessly and negligently. Id. ¶¶ 53-54. Here, VNB points to a June 7, 2010 Federal Trade Commission complaint alleging that Countrywide "knowingly originated risky loans." Id. ¶ 55. VNB claims that "[d]espite pervasive evidence of breaches of the representations and warranties relating to the origination of the loans in the Trusts, U.S. Bank failed to nose to the source, provide notice of, and address these breaches." Id. ¶ 55. VNB also claims that U.S. Bank knew or should have known about an Allstate Insurance Company review of the mortgage loans in the CSMC Trust that uncovered "significant and material discrepancies between statements contained in the Prospectus Supplement and actual loan data." Id. ¶¶ 56-61. VNB claims that in the wake of the Allstate review, U.S. Bank "took no action to further investigate or give notice of the breaches on behalf of the Certificateholders in the Trust." Id. ¶ 61. Furthermore, VNB alleges that U.S. Bank breached its duties by failing to ensure that mortgage documents relating to the Trusts were executed properly. Id. ¶ 66.

Finally, VNB alleges that by at least October 19, 2011, problems in the mortgage industry had become so widespread that U.S. Bank was imputed with knowledge of the robo-signing and loan origination issues documented in the Complaint. Id. ¶ 123.


Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).

Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is "plausible on its face." See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). 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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a probability requirement'... it asks for more than a sheer possibility." Id.

In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263 (3d Cir. 2007). The court may also consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] document[s]." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993). Moreover, "documents whose contents are alleged in the complaint and whose authenticity no party questions, ...

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