United States District Court, D. New Mexico
WILMINGTON SAVINGS FUND SOCIETY, FSB, D/B/A CHRISTIANA TRUST AS OWNER TRUSTEE OF THE RESIDENTIAL CREDIT OPPORTUNITIES TRUST III, Plaintiff,
GREGORY HUTCHINS, in his individual capacity and as personal representative of the Estate of SANDRA J. NEILL, and THE UNKNOWN HEIRS, DEVISEES, OR LEGATEES OF SANDRA J. NEILL, Defendants.
PROPOSED FINDINGS AND RECOMMENDED
H. RITTER, U.S. MAGISTRATE JUDGE
matter comes before the Court on Defendant Gregory
Hutchins' Motion to Dismiss [Doc. 34');">34], filed March 28,
2019, and fully briefed on April 22, 2019. [See
Docs. 35, 38]. Pursuant to 28 U.S.C. § 636(b), presiding
District Judge Herrera referred this case to the undersigned
Magistrate Judge “to conduct hearings, if warranted,
including evidentiary hearings, and to perform any legal
analysis required to recommend to the Court an ultimate
disposition of the case.” [Doc. 46]. At issue in Mr.
Hutchins' Motion is whether the Court has subject matter
jurisdiction over the parties, whether Plaintiff Wilmington
Savings has standing to bring the present action, and whether
it has adequately stated a claim for in rem
foreclosure of the subject property. Having considered the
parties' arguments and all pertinent authority, the
undersigned recommends that Defendant's Motion to Dismiss
Savings seeks an in rem judgment of foreclosure
against the former property of Ms. Sandra J. Neill, more
commonly known as 929');">29');">29');">29 Purple Aster Dr., Bernalillo, New
Mexico. Mr. Hutchins, who claims an interest in the property
post-dating Ms. Neill's default, moves under Federal Rule
of Civil Procedure 12 to dismiss Wilmington Savings'
Complaint for lack of subject matter jurisdiction, lack of
standing, and failure to state a claim. Mr. Hutchins'
arguments are primarily based on his contention that
Wilmington Savings does not exist as a legal entity and
therefore cannot demonstrate the requirements of diversity of
citizenship. Alternatively, Mr. Hutchins argues that
Wilmington Savings has failed to demonstrate its ownership of
the debt sufficient to demonstrate Article III standing and
to state a claim under New Mexico law. For the reasons that
follow, the Court disagrees.
“Wilmington Savings Fund Society, FSB, d/b/a,
Christiana Trust as Owner Trustee of the Residential Credit
Opportunities Trust III, ” [Doc. 1, p. 1] (hereinafter
“Wilmington Savings”), filed its Complaint for
In Rem Foreclosure against Sandra J. Neill on April
13, 2018. [See generally Doc. 1]. Attached to the
Complaint is a copy of a promissory note, dated May 23, 2007,
and indorsed in blank, bearing Ms. Neill's signature and
evidencing a debt in the principal sum of $225, 000.00 with a
fixed interest rate of 6.875% per annum until paid.
[See Doc. 1-2]. Also attached to the Complaint is a
copy of a recorded mortgage, dated June 26, 2007, bearing Ms.
Neill's signature and securing the Note by reference to:
Lot numbered One Hundred Ninety-five (195) of THE
ORCHARD'S UNIT 3, being a replat of Tract 3 of the
Orchard's, as the same is shown and designated on the
plat thereof, filed in the Office of the County Clerk of
Sandoval County, New Mexico, on January 31, 2005, in Vol. 3,
Folio 2499B (Book 408, Page 34');">3428, as Document No. 2005034');">3428).
property is more commonly known as 929');">29');">29');">29 Purple Aster Dr.,
Bernalillo, New Mexico. [See Doc. 1-3]. Also attached to the
Complaint is an affidavit of Wilmington Savings' counsel,
stating that his law firm is in possession of the original
note that is the subject of this suit. [See Doc.
13, 2018, Ms. Neill filed a Notice of Filing of Petition of
Bankruptcy, thereby staying these proceedings. [See
Doc. 9]. On September 20, 2018, Wilmington Savings filed a
Notice Regarding Closing of Bankruptcy and Discharge.
[See Doc. 10]. On September 21, 2018, Mr. Hutchins,
claiming to be “Executor of the Estate of Sandra J.
Neill, ” filed a Suggestion of Death informing the
Court of Ms. Neill's death. [See Doc. 12]. After
briefing, District Judge Herrera granted Wilmington
Savings' Motion to Amend its Complaint to substitute Mr.
Hutchins as well as any unknown heirs who make claim an
interest in the subject property as Defendants in light of
Ms. Neill's death. [See Docs. 13, 28].
Wilmington Savings filed its Amended Complaint naming Mr.
Hutchins in his individual capacity and as personal
representative of the estate of Ms. Neill and her unknown
heirs, devisees or legatees on March 1, 2019. [Doc. 30].
March 28, 2019, Mr. Hutchins filed the instant Motion. [Doc.
34');">34]. In it, he raises three issues. First, Mr. Hutchins
argues there is no diversity jurisdiction because Wilmington
Savings does not exist as a legal entity and cannot claim
citizenship of any state. [Doc. 34');">34, pp. 5-8]. Second, Mr.
Hutchins argues that Wilmington Savings has no standing to
bring the present action because it has no legally cognizable
existence and, therefore, cannot suffer an injury in fact as
required by Article III. [Doc. 34');">34, pp. 8-11]. Finally, Mr.
Hutchins argues that Wilmington Savings has failed to state a
claim because it “has not alleged facts that would
allow the reasonable inference that it is the owner or
assignee of the beneficial interest in the debt.” [Doc.
34');">34, p. 20].
April 11, 2019, Wilmington Savings filed a Response. [Doc.
35]. In it, Wilmington Savings presents evidence of its legal
existence, and argues that the Amended Complaint plausibly
alleges its capacity to sue as a statutory trust along with
the requirements of diversity jurisdiction. [Doc. 35, p. 12;
see Docs. 35-1, 35-2]. Wilmington Savings also
argues that it has standing to foreclose under New Mexico law
because the Complaint included as attachments (1) a scanned
reproduction of the original promissory note at issue in this
lawsuit; and (2) an affidavit from an employee of Lewis Roca
Rothgerber Christie LLP attesting that this original
promissory note was in the possession of the law firm at the
time of filing suit. [Id., pp. 2-3]. Wilmington
Savings also argues that it has adequately pled Article III
standing because it has suffered a “defined economic
injury” due to the fact that Ms. Neill and any
successor now claiming an interest in the subject property
have failed to pay the obligations under the mortgage. [Doc.
35, pp. 10-12]. Wilmington Savings can trace this injury to
Defendant Hutchins and any individuals who may claim an
interest in the property. As to redressability, Wilmington
Savings argues that “the federal court system can
easily provide relief through in rem relief against the real
estate at issue in the dispute, ” explaining that
“[t]he standard remedy afforded in a mortgage
foreclosure dispute is to move forward with a foreclosure
auction under the oversight of a special master.”
[Id., p. 11]. Thus, Wilmington Savings argues that
the Amended Complaint plausibly alleges a right to relief on
the loan obligation consistent with Rule 12(b)(6) standards
because a borrower's failure to pay the loan obligation
permits it, as the mortgagee, to pursue suit on the mortgage.
[Doc. 35, p. 13].
April 22, 2019, Mr. Hutchins filed a Reply, largely restating
his arguments in support of the Motion. [See Doc.