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Unicredit Bank Ag, New York Branch, F/K/A/ Bayerische Hypo-Und v. Deborah R. Eastman

January 18, 2013


The opinion of the court was delivered by: J. Thomas Marten, Judge


The present matter comes to the court on the defendants' Motion to Dismiss (Dkt. 16). For the following reasons, the court grants in part and denies in part the defendants' motion.

I. Factual Background

Plaintiff UniCredit brings this action on a defaulted loan, as agent for The Bank of New York Mellon ("Mellon"), which was the indenture trustee under the Indentures described below. Mellon is the party in interest under the loan and the related commercial loan agreement and other relevant loan documents. Deborah R. Eastman, Inc. (the "Eastman Agency"), is the obligor of the loan. Deborah R. Eastman, in her personal capacity, is the guarantor of the loan received by the Eastman Agency. This action arises from defendants' defaults under the loan documents and related guaranty, which allegedly caused damage to the plaintiff.

The plaintiff and the defendants are connected by a securitization, also known as an asset-backed security arrangement. The chain of transactions linking the plaintiff with the defendants is lengthy and complicated because the parties are on opposite ends of the chain. A short explanation of what a securitization is may be helpful.*fn1

A securitization involves two steps, which may occur simultaneously or separately. Initially, an entity that creates loans in its normal course of business (the "Originator") sells its loans to a special purpose entity ("SPE"). The sale will be performed in a manner that qualifies as a "true sale," as opposed to a secured transaction, which is done in part to protect the loans and their streams of revenue from creditors of the Originator. Second, the SPE will issue and sell debt securities, referred to as Notes, to investors. The Notes are secured by the loans the SPE bought from the Originator. Additionally, the SPE will satisfy its obligations on the Notes using the proceeds of the loans it bought from the Originator. When the securitization is "closed," funds flow from the purchasers of the Notes (the investors) to the SPE, and then from the SPE to the Originator.

This case begins with Brooke Credit Corp. ("BCC"), an entity located in Kansas that sponsored a number of securitizations, including the one at issue here. BCC was in the business of underwriting and making loans to duly licensed insurance agents, including the Eastman Agency. On March 28, 2003, Eastman, in her personal capacity, executed and delivered her Personal Guaranty to BCC providing that she would "absolutely and unconditionally" guarantee the indebtedness of the Eastman Agency. On September 30, 2003, BCC and the Eastman Agency executed an Agreement for Advancement of Loan (the "Eastman Loan Agreement") establishing the terms of their lender/borrower relationship. Pursuant to the Eastman Loan Agreement, the Eastman Agency executed a Commercial Security Agreement ("Eastman Security Agreement") granting BCC a security interest and lien in all assets used to operate the Eastman Agency. BCC perfected this security interest on October 20, 2003, by filing a U.C.C. financing statement. On February 28, 2006, BCC lent $745,459.52 to the Eastman Agency through Loan No. 5084, which referred to and incorporated the terms of the Eastman Loan Agreement and Security Agreement. The Eastman Agency used the loan proceeds to purchase insurance agency assets and for other agency-related purposes.

To proceed with its securitizations, BCC created SPEs to which it sold various loans. In exchange, the SPEs would pay cash they had raised by issuing Notes. The specific securitization at issue here was formed through BCC's creations of the SPE Brooke Securitization Company 2006-1, LLC ("BSC 2006-1"). BCC sold several loans in an asset pool to BSC 2006-1 by executing the Sale and Servicing Agreement. The asset pool included Loan No. 5084 from BCC to the Eastman Agency.

BCC sold the loans in exchange for cash raised by BSC 2006-1 through its issuance of Notes. On July 1, 2006, BSC 2006-1 issued $52,346,089 in Notes pursuant to the Indenture.*fn2 In the Indenture, BSC 2006-1 was the issuer and Mellon was the trustee. In exchange for the Notes issued in the Indenture, BSC 2006-1 assigned the collateral asset pool to Mellon, as security on behalf of the investors. This security took the form of a first priority perfected security interest in, and lien upon, virtually all of BSC 2006-1's assets, including its right, title and interest in the asset pool acquired from BCC, the security for the loans in the asset pool, the guaranties of the loans in the asset pool, and the proceeds of the foregoing. Plaintiff UniCredit became a Noteholder, acquiring 100% of the Notes issued in the Indenture.

In 2008, BSC 2006-1 defaulted on its obligations under the Notes by failing to remit payments on those Notes. On October 9, 2008, UniCredit sent a letter notifying Mellon of the default and instructing it to demand accelerated payment of the remainder due on the Notes and to take all permitted action against the collateral securing the Notes. Pursuant to a letter agreement and Power of Attorney dated October 22, 2008, Mellon designated UniCredit as its agent to take all actions with respect to the rights and remedies permitted under the Indenture, including collection on the collateral.

On October 28, 2008, several Brooke entities filed for Chapter 11 bankruptcy in U.S. District Court for the District of Kansas. The court entered an order permitting Mellon and UniCredit to enforce their rights and remedies including the right to foreclose on the collateral assigned to Mellon in the Indenture.

Additionally, the Eastman Agency allegedly failed to remit payment when due, defaulting on Loan No. 5084. Eastman has also refused and failed to make payments due under her Personal Guaranty.

UniCredit-on behalf of Mellon -filed suit in this court, seeking to collect on Loan No. 5084 through the rights it has acquired through the chain of transactions in this securitization and subsequent defaults by the BSC 2006-1, the Eastman Agency, and Eastman. UniCredit alleges the following causes of action: (I) Action on the Loan Against the Eastman Agency; (II) Action on the Guaranty Against Deborah R. Eastman; (III) Detinue and Collateral foreclosure Judgment Against the Eastman Agency; (IV) Quantum Meruit Against all Defendants; (V) Breach of Implied Covenant of good Faith and Fair Dealing Against all Defendants; (VI) Conversion Against all Defendants; and (VII) Account Notice/Declaratory Relief Against all Defendants.

Defendants have filed a Motion to Dismiss, arguing that (1) UniCredit has not proved a valid chain of title sufficient for standing, and (2) Unicredit has failed to state a claim in claims IV, V, and VI.

II. Legal Standard

A. Motion to Dismiss for Lack of Standing

Article III of the U.S. Constitution limits the exercise of the federal judicial power to cases and controversies. U.S. Const. art. III, § 2. The doctrine of standing serves to identify cases and controversies that are appropriate for exercise of judicial power. To satisfy Article III's standing requirements, a plaintiff must show: (1) it has suffered an "injury in fact" that is concrete and particularized and actual or imminent; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. Inc., 528 U.S. 167, 180--81 (2000). A motion to dismiss for lack of standing implicates the court's subject matter jurisdiction and, therefore, is construed pursuant to Federal Rule of Civil Procedure 12(b)(1). See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1498--99 (10th Cir. 1995).

Rule 12(b)(1) motions generally take one of two forms: (1) a facial attack on the sufficiency of the complaint's allegations as to subject matter jurisdiction; or (2) a challenge to the actual facts upon which subject matter jurisdiction is based. Holt v. United States, 46 F.3d 1000, 1002--03 (10th Cir. 1995) (citation omitted). A facial attack questions the sufficiency of the complaint, but a factual challenge contests the facts upon which the subject matter depends. Id. When considering a facial attack, the court "must accept the allegations of the complaint as true." Id. at 1003. However, when considering a factual challenge, the court "may not presume the truthfulness of the complaint's factual allegations." Id. When considering a factual challenge under Rule 12(b)(1), "[a] court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts." Id. "In such instances, a court's references to evidence outside the pleadings ...

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