UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON
EUGENE DIVISION
JAMES FRANCIS STOLL, individually and as Trustee of the James and Rita Stoll Revocable Living Trust,
Plaintiff, v. MICHAEL WILLIAM STOLL, an individual; MARYANNE TERESA STOLL, an individual; ROCKET MORTGAGE, LLC, a Michigan limited liability company, formerly dba Quicken Loans, LLC; and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware corporation, as Nominee for Rocket Mortgage LLC,
Defendants.
Case No.: 6:23-cv-00164-MK
OPINION AND ORDER
KASUBHAI, United States Magistrate Judge: On December 15, 2022, Plaintiff For the reasons explained below DENIED.
The following factual allegations are accepted as true for the purpose of this Motion. Plaintiff is the trustee of the James and Rita Stoll as amended December 3, 2013. FAC ¶ 1.
In February 2018, Michael and Maryanne S Salem FAC ¶¶ 2, 6. The Statutory Warranty Deed lists the Stolls as Tenants by the Entirety. FAC ¶ 7. To purchase the Salem Property, the Stolls allegedly used funds wrongfully received from the Trust and took out a purchase money mortgage from lender Alameda Mortgage Corporation Corporation designated MERS as the nominee for the Alameda Mortgage. FAC ¶ 8. The Deed of Trust from Alameda Mortgage (the . FAC ¶ 8.
In 2019, Plaintiff brought two actions in California against Michael Stoll, seeking confirmation of the the validity of the Trust and alleging that Michael Stoll had improperly withheld and spent Trust assets. FAC ¶¶ 9, 11. On July 2, 2020, the California Court entered Trust within thirty days or be liable to the Trust for twice the value of the improperly withheld
Trust property. FAC ¶ 11. Plaintiff alleges that Michael Stoll did not pay any portion of the California Judgment. FAC ¶ 22.
On January 12, 2021, Michael Stoll transferred his entire ownership in the Salem Property to his wife, Maryanne Stoll, by execution of a Statutory Bargain and Sale Deed (the was $0.00. FAC ¶ 15. Plaintiff alleges that this was a fraudulent conveyance to avoid the
attachment of a judgment lien on interest in the Salem Property. That same day, Maryanne Stoll refinanced the Alameda Mortgage with a new lender, Rocket, creating the Rocket Mortgage Deed of Trust Mortgage DOT were recorded until June 11, 2021. FAC ¶¶ 15, 17.
On February 2, 2021, Alameda Mortgage reconveyed and released the Alameda Mortgage in its entirety by recording a Substitution of Trustee and Deed of Reconveyance, reassigning its right as the trustee to the Alameda DOT. FAC ¶ 16, Ex. 8, 1. The reconveyance was recorded on February 3, 2021. FAC ¶ 16.
On May 4, 2021, Plaintiff registered the California Judgment as a judgment against Michael Stoll in Oregon State Court, creating a judicial for approximately $200,000. FAC ¶ 13. Plaintiff also sent notice of the lien to Michael Stoll and his attorney of record in the California trust litigation. FAC ¶ 14.
As referenced above, on June 11, 2021, the January 12, 2021 conveyance of Michael , and the Rocket Mortgage DOT resulting from refinancing the Alameda Mortgage were recorded in Marion County.
On January 12, 2023, Plaintiff filed his First Amended Complaint, asserting the following Claims for Relief:
Claim (1): Four Counts of Fraudulent Conveyance under ORS § 95.230 and ORS § 95.240 against Defendants Michael Stoll and Maryanne Stoll;
Claim (2): Unjust Enrichment against Defendant Maryanne Stoll; Claim (3): Writ of Execution for Sale of Residential Property against all Defendants; Claim (4): Declaratory Judgment of Priority Lien against all Defendants; and Claim (5): Avoidance of Lien under ORS § 95.260 against all Defendants. Defendants Rocket and MERS move under Fed. R. Civ. P. 12(c) for Judgment on the Pleadings on
LEGAL STANDARD pleadings are closed but early enough not to delay trial a party may move for judgment on the pleadings Fed. R. Civ. P. 12(c). Because a motion for judgment on the pleadings failure to state a claim, the same standard of review applies to both motions. Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989).
Judgment on the pleadings is properly granted when there is no issue of material fact, and the moving party is entitled to judgment Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009) (quoting Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 979 (9th Cir. 1999)). The court must accept the complaint's factual allegations as true and construe those facts in the light most favorable to the non-movant, id., Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion for judgment on the pleadings, a
Id. at 570. A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must set forth Id. at 678.
DISCUSSION Defendants Rocket and MERS lien interest in the Salem Property is subordinate to the Rocket Mortgage DOT as a matter of law for two reasons: (1) the judgment lien did not attach Property, or in the alternative, (2) Defendants lien and are entitled to a defense of equitable subrogation. that Plaintiff plausibly states a claim and that that cannot be properly decided on the pleadings. I. Attachment of the Lien
Salem Property because he validly conveyed his interest to Maryanne Stoll before Plaintiff Defendants assert ongstanding Oregon law is unambiguous that a judgment lien will only attach to the -5, 7-8 (citing Thompson v. Hendricks, 118 Or. 39 (1926); Hawkenson v. Rostad, 86 Or. 704 (1917); Bennett v. Boyd, 89 Or. App. 659 (1988); and Bedortha v. Sunridge Land Co., 312 Or. 307 (1991)).
The priority of a judgment lien over a real property conveyance is governed by Or. Rev. Stat. § 18.165, which states:
(1) If a judgment with lien effect under ORS 18.150, 18.152 or 18.158 is entered or recorded in a county before a conveyance, or a memorandum of a conveyance, of real property of the debtor is recorded in that county, the conveyance of the judgment debtors interest is void as against the lien of the judgment unless:
(a) The grantee under the conveyance is a purchaser in good faith for a valuable consideration, the conveyance is delivered and accepted before the judgment is entered or recorded in the county where the property is located and the conveyance or memorandum of the conveyance is recorded within 20 days after delivery and acceptance of the conveyance, excluding Saturdays and legal holidays under ORS 187.010 and 187.020;
(b) The judgment creditor has actual notice, record notice or inquiry notice of a conveyance of the debtor's interest to a grantee when the judgment is entered or recorded in the county;
(c) The conveyance by the debtor is a fulfillment deed entitled to priority over the judgment under ORS 93.645; or
(d) The conveyance is a mortgage, trust deed or other security instrument given by the debtor to secure financing for the purchase by the debtor of the real property described in the conveyance. (emphasis added).
T are not controlling because they do not interpret the current version of the relevant recording statute, ORS § 18.165. In John Latta Associates, Inc. v. Vasilchenko, 240 Or. App. 96 (2010), the Oregon Court of Appeals discussed in depth the development of 1862 to 2007. The Court explained that the current version of ORS § 18.165 was amended in 2007 because the Oregon legislature ve got a deed or contract of sale, you better record it if you want to protect your interest against a judgment that comes against that property. And the
Id. at 104 (quoting Audio Recording, Senate Committee on Judiciary, SB 322, Feb. 27, 2007, at 46:00 (statement of David Heynderickx), https://records.sos.state.or.us/ORSOSWeb Drawer/Record/4222126 (accessed April 10, 2024)).
Defendants fail to establish that the conveyance was valid as a matter of law. Plaintiff specifically alleges that Michael Stoll did not convey his interest in the Salem Property to Maryanne Stoll in good faith or for valuable consideration and that the conveyance was not recorded within 20 days. These allegations are supported by the Deed, which Plaintiff attaches to the First Amended Complaint and purportedly shows that the True and Actual Consideration for this conveyance was $0.00 and was not recorded until June 11, 2021. FAC Ex. 7, 1. Plaintiff attaches the Rocket Mortgage DOT to his pleadings which was also purportedly recorded more than 20 days after Rocket released the Alameda Mortgage. FAC Exs. 8, 9. Plaintiff plausibly
lien because the conditions of ORS 18.165(1)(a) are not met. Issues of fact preclude ruling as a did not Property. II. Equitable Subrogation
Defendants Rocket Mortgage and MERS were ignorant of any claims asserted by Plaintiff when the Rocket
Defendants argue that even if Michael conveyance was invalid, the Rocket Mortgage DOT should be placed in the position of the Alameda Mortgage prior to refinancing based on the affirmative defense of equitable subrogation.
When a homeowner refinances their mortgage, the doctrine of equitable subrogation ensures that the new lender is given the same priority as the former lender that it substitutes, . Dimeo v. Gesik, 164 Or. App. 567, 570 (1999). rant of the existence of the intervening lien and that its ignorance was not a result of inexcusable SERA Architects, Inc. v. Klahowya Condo., LLC, 253 Or. App. 348, 363 (2012) (quoting Dimeo v. Gesik, 164 Or. App. 567, 571 (1999)). Evidence of whether the new lender
ignorance is excusable. Dimeo, 164 Or. App. at 572. For example:
in Metropolitan Life Ins. Co. v. Craven, 164 Or. 274, 101 P.2d 237 (1940), the lender advanced money to pay off a prior encumbrance in ignorance of a recorded intervening lien. The Supreme Court ultimately granted equitable relief because the lenders ignorance was induced by a misrepresentation by the property owner that no junior liens existed, and the lender obtained an abstract of title from a title company that failed to reveal the junior lien. Id. at 283, 101 P.2d 237. SERA Architects, Inc., 253 Or. App. at 364 65. In contrast, the Oregon Supreme Court declined to apply equitable subrogation where the lender had notice of membership agreements creating hunting and fishing rights and proceeded without further investigation. High v. Davis, 283 Or. 315, 333 34 (1978). Commercial reasonableness is a question of fact. Dimeo, 164 Or. App. at 572.
Here, Defendants must prove they had no knowledge of intervening interests when Maryanne Stoll refinanced the Alameda Mortgage and that their ignorance was not due to inexcusable negligence. Defendants assert they did not and could not have known because the refinancing occurred on January 12, 2021 and the California Judgment was not registered until May 4, 2021. However, Plaintiff alleges that Defendants knew or should have known that Michael Stoll fraudulently conveyed his interest in the Salem Property to avoid attachment of the California Judgment and that Defendants waited an unreasonable amount of time to record. Dra factual issues remain about whether Defendants were whether their ignorance was, at best, the result of excusable neglect, and whether they acted commercially reasonable under the circ*mstances.
In the alternative, Defendants argue that even if issues of fact preclude judgment on the pleadings regarding whether Defendants were inexcusably ignorant, Defendants are entitled to equitable subrogation because, if given senior priority, by . Defendants cite to W. J. Seufert Land Co. v. Greenfield, 273 Or. 408, 412 (1975) for the proposition that equitable subrogation can be used to prevent unjust enrichment and windfalls to junior lienholders. However, unlike the procedural posture under review in Seufert, here, the Court has not made a factual finding that Id. Whether Plaintiff would be unjustly enriched in this case is a factual matter that cannot be decided on the pleadings. If, for example, discovery later revealed that Defendants knew or should have known that refinancing which occurred at the same time as the allegedly fraudulent conveyance was done to avoid attachment of the California Judgment, then there may be nothing unjust about
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CONCLUSION For the reasons explained above, Defendants Motion for Judgment on the Pleadings (ECF No. 33) is DENIED.
IT IS SO ORDERED DATED this 25th day of April 2024. s/ Mustafa T. Kasubhai MUSTAFA T. KASUBHAI (He / Him) United States Magistrate Judge
