Friday, November 1, 2013

Mortgage assignment, pooling and servicing agreement; standing. Consumer protection: no standing to sue where alleged deceptive act did not induce purchase, and no showing of injury or damages / declaratory judgment not an available private remedy.


 DOOLEY, J.   Plaintiffs Peter and Nicole Dernier appeal the dismissal for failure to state a claim, of their action for (1) a declaratory judgment that defendant U.S. Bank National Association cannot enforce the mortgage and promissory note for the debt associated with plaintiffs’ purchase of their house based on irregularities and fraud in the transfer of both instruments, (2) a declaration that U.S. Bank has violated Vermont’s Consumer Fraud Act (CFA) by asserting its right to enforce the mortgage and note, and (3) attorney’s fees and costs under the CFA.   We affirm in part and reverse in part.

We hold that plaintiffs do not have standing to challenge the assignments of the note and mortgage based on the perceived violations of the pooling and servicing agreement (PSA) governing the pool into which the mortgage had been assigned, because any such violations would render the assignments voidable rather than void. However the complaint also alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant.  These allegations are sufficient to give plaintiffs standing.  The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement.

Next, we turn to plaintiffs’ consumer fraud claim.   Here, plaintiffs allege that the violation was based on the letter under which defendant stated its legal position that, as a holder of the note and mortgage, it had the right to enforce. The section of the statute providing for a private right of action is § 2461(b), which requires a “consumer” to show either (1) reliance on a deceptive act in contracting for goods or services or (2) damages or injury from an unfair or deceptive act.  If a plaintiff, in bringing a consumer fraud action, either fails to allege facts that meet the definitions of an unfair or deceptive act under 9 V.S.A. § 2453 or fails to demonstrate the prerequisites to a private action, as we have itemized above under 9 V.S.A. § 2461(b), the case is properly dismissed.    We focus on the prerequisites for a private action under 9 V.S.A. § 2461(b), and find that plaintiffs do not meet these requirements,.  Specifically, we look at the second prong of § 2461(b), because plaintiffs cannot have relied on this letter to contract for goods or services, as it was sent long after the purchase.  Our only question thus becomes: assuming that defendant’s statement regarding its belief that it had the right to enforce the mortgage and note was indeed deceptive, did plaintiffs suffer damages or injury from this act?   Plaintiffs do not offer an explanation as to what injury or damages the letter caused, as they do not address the requirements of § 2461(b) at all.  Indeed, the complaint seeks neither damages nor an injunction, the remedies authorized by § 2461(b).  Instead it seeks a declaratory judgment that defendant “violated Vermont Consumer Fraud Law.”  We read the complaint as seeking a declaratory judgment that defendant violated § 2453, without having to prove entitlement to a private remedy under § 2461(b).     Plaintiffs have not established an injury for the purposes of standing under 9 V.S.A. § 2461(b).  


Affirmed as to dismissal of Counts 3 and 4 of plaintiffs’ proposed amended complaint; Reversed and remanded with respect to dismissal of Counts 1 and 2 of plaintiffs’ proposed amended complaint for further proceedings not inconsistent with this decision