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Hernandez v. Federal National Mortgage Association

United States District Court, D. New Jersey

May 26, 2015



WILLIAM J. MARTINI, District Judge.

Pro se Plaintiff Grimaldo Hernandez brings this action arising out of the execution of a mortgage agreement and the subsequent foreclosure on his property. This matter comes before the Court on Defendants' unopposed motion to dismiss for failure to state a claim. For the reasons stated in this Opinion, the motion to dismiss will be GRANTED.


Pro se Plaintiff Grimaldo Hernandez ("Hernandez") is a resident of Middlesex County, New Jersey and the alleged owner of property that is the subject of a pending foreclosure action in state court ("the State Foreclosure Action"). Defendant Bank of America, N.A. ("BANA") is the alleged holder of Plaintiff's mortgage on the subject property and is a party to the State Foreclosure Action. The Complaint also names the Federal National Mortgage Association as Trustee for Securitized Trust Fannie Mae REMIC Trust 2007-69 ("Fannie Mae") and Mortgage Electronic Registration Systems, Inc. ("MERS") as Defendants. Unless otherwise noted, the following facts are what Plaintiff has alleged in the Complaint.

On June 5, 2007, Hernandez executed a note ("the Note") in favor of Vertical Lend, Inc. ("Vertical") in the amount of $227, 000[1] to purchase property located at 68 State Street, Perth Amboy, New Jersey (the "Property"). The Note was secured by a mortgage ("the Mortgage"), and together, the Note and the Mortgage constitute the Loan. Exhibits to Defendants' motion to dismiss show that the Note has been re-assigned three times, leaving BANA as its current holder. The exhibits also show that BANA is the current holder of the Note, which was previously endorsed in blank. On June 29, 2007, Fannie Mae - who is the investor in the Loan - securitized the Loan as a derivative mortgage-backed security.[2]

On September 15, 2014, BANA brought the State Foreclosure Action in New Jersey Superior Court - Chancery Division - Middlesex County (Docket No. F-038402-14). In response, Hernandez has brought this action seeking to, among other things, quiet title on the Property. He argues that because the Loan was securitized, none of the Defendants own the Mortgage (or the Note) and therefore have no right to foreclose on the Property.[3] Specifically, Hernandez argues that when a promissory note is securitized, it ceases to remain a negotiable instrument and becomes a security. Therefore, Hernandez contends, the only possible holders of the Note are certificate holders of the relevant trust, not Defendants.

In addition to seeking to quiet title, Hernandez brings the following causes of action: declaratory relief; injunctive relief; negligence per se; accounting; breach of good faith and fair dealing; breach of fiduciary duty; wrongful foreclosure; violation of the Real Estate Settlement Procedures Act; violation of the Home Ownership Equity Protection Act; fraud; intentional infliction of emotional distress; and slander of title. In support of these claims, Hernandez contends, among other things, that Vertical made the loan without proper due diligence; Vertical sold a deceptive loan product and never explained its inherent volatility; and the Mortgage did not comply with the Trust's Pooling and Servicing Agreement ("PSA"). Defendants now move to dismiss the Complaint pursuant to 12(b)(6).


A. Abstention

Defendants first argue that this Court should abstain from hearing this matter under the Younger and/or Colorado River abstention doctrines.

i. Younger Abstention Doctrine

The Younger abstention doctrine requires federal courts to abstain from interfering with certain pending state proceedings. Younger v. Harris, 401 U.S. 37 (1971); See also Gonzalez v. Waterfront Comm'n of N.Y. Harbor, 755 F.3d 176, 180 (3d Cir. 2014). In Sprint Communications, Inc. v. Jacobs, 134 S.Ct. 584 (2013), the Supreme Court clarified that Younger applies in only three exceptional' classes of cases: (1) state criminal prosecutions, ' (2) civil enforcement proceedings, ' and (3) civil proceedings involving certain orders that are uniquely in furtherance of the state courts' ability to perform their judicial functions.'" Here, the ongoing state court foreclosure action is neither a criminal nor a civil enforcement proceeding, nor is it "uniquely in furtherance of the state court['s] ability to perform [its] judicial function[]." Sprint, 134 S.Ct. at 591 (quoting NOPSI, 491 U.S. at 368). Since Sprint, courts have declined to apply the Younger doctrine in the context of state foreclosure proceedings. See Carrier v. Bank of Am., N.A., No. CIV. 12-104 RMB/JS, 2014 WL 356219 (D.N.J. Jan. 31, 2014) aff'd sub nom. Carrier v. Bank of Am. NA, 592 F.Appx. 135 (3d Cir. 2015) (declining to apply Younger despite existence of pending foreclosure action); Tucker v. Specialized Loan Servicing, LLC, No. PWG-14-813, 2015 WL 452285 (D. Md. Feb. 3, 2015) (finding that Younger did not apply to foreclosure proceeding in light of Sprint ). Younger abstention is not warranted in this case.

ii. Colorado River Doctrine

The Colorado River doctrine governs whether a district court should stay or dismiss a federal suit pending the resolution of a parallel state court proceeding, with the goal of avoiding duplicative litigation. Abstention pursuant to Colorado River will be appropriate only if there is a "parallel state proceeding" raising "substantially identical claims [and] nearly identical allegations and issues." Nationwide Mut. Fire Ins. Co. v. George V. Hamilton, Inc., 571 F.3d 299, 307 (3d Cir. 2009) (quoting Yang v. Tsui, 416 F.3d 199, 204 n. 5 (2005)). Here, Defendants fail to articulate specifically how and why Hernandez's complaint raises claims and issues substantially identical to what is currently before the state court; instead they rely on a threadbare recital and superficial application of the Colorado River factors. AAR Intern., Inc. v. Nimelias Enters., 250 F.3d 510, 520 (7th Cir. ...

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