Harvey v. U.S. Bank, National Association

Background

Michael Jerome Harvey filed this action seeking to stop foreclosure on a residence he purchased in February 2022. He alleged that he obtained a $309,294 loan from TruStone Financial Credit Union, secured by a mortgage, and that the mortgage was later transferred to U.S. Bank. A foreclosure notice stated that U.S. Bank was foreclosing and that Harvey owed $314,653.76, including taxes paid.

The complaint appeared to rely on two theories. First, Harvey argued that the promissory note had been separated from the mortgage and transferred through a mortgage-backed security transaction, so U.S. Bank lacked authority to foreclose. Second, he argued that he had satisfied the loan by tendering a document called an “International Bill of Exchange” for $320,000.

Ginnie Mae’s Motion

The magistrate judge recommended granting Ginnie Mae’s motion to dismiss. Ginnie Mae is a corporation owned by the United States, so Federal Rule of Civil Procedure 4(i) required Harvey to serve both Ginnie Mae and the United States. The record showed that Harvey had served Ginnie Mae and the United States Attorney General by certified mail, but it did not show that he had served the United States Attorney for the District of Minnesota. The court concluded that Harvey had received sufficient notice and time to correct the problem but had not done so. It therefore recommended dismissal under Rules 12(b)(5) and 4(m) for insufficient service of process.

The court also concluded that sovereign immunity barred Harvey’s claims against Ginnie Mae. The complaint sought only injunctive or declaratory relief, not money damages, and the court determined that federal law protected Ginnie Mae from those forms of relief. Because the court concluded that it lacked jurisdiction over the claims against Ginnie Mae, it recommended dismissing those claims without prejudice. It did not address Ginnie Mae’s separate argument that the complaint failed to state a claim.

U.S. Bank’s Motion

The magistrate judge recommended granting U.S. Bank’s motion under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. The court rejected Harvey’s argument that the “International Bill of Exchange” paid the mortgage debt, explaining that courts have repeatedly rejected similar “vapor money” theories and that Harvey’s document did not support treating the debt as paid.

The court also rejected Harvey’s argument that U.S. Bank could not foreclose because different entities held the promissory note and mortgage. It described this as a “show-me-the-note” theory and concluded that Minnesota law and controlling precedents reject the argument that separating the note and mortgage invalidates the mortgage or foreclosure. The court recommended dismissing all claims against U.S. Bank with prejudice under Rule 12(b)(6). Because it recommended dismissal on that ground, it did not address U.S. Bank’s additional arguments under Rules 8 and 9(b).

Motion to Vacate

Harvey’s motion sought several forms of relief. The court ordered that his requests to vacate the order requiring proper service on Citibank and Mellon and to recuse the magistrate judge be denied. The court explained that certified-mail service was ineffective for these private corporations because Harvey had not personally served them or obtained waivers of service. It also concluded that requiring proper service did not show judicial bias and that Harvey had not met the substantial burden required for recusal.

The magistrate judge separately recommended denying Harvey’s requests for a declaration that the mortgage assignment was fraudulent and for a default judgment. The court treated the fraud argument as another version of the rejected “show-me-the-note” theory. It found no basis for default judgment because U.S. Bank and Ginnie Mae had appeared and filed motions, while Harvey had not shown proper service on Citibank or Mellon.

Disposition and Review

The order denied in part Harvey’s motion to vacate by denying his requests to vacate the service order and for recusal. The recommendation proposed that U.S. Bank’s motion to dismiss be granted and the claims against it be dismissed with prejudice; that Ginnie Mae’s motion to dismiss be granted and the claims against it be dismissed without prejudice; and that the fraud-declaration and default-judgment requests be denied. The recommendation stated that it was not an order or judgment of the District Court and was not directly appealable to the Eighth Circuit. Judge Dulce J. Foster signed the report and recommendation on September 30, 2024.