TOWNS et al v. WELLS FARGO BANK NA et al
ORDER granting in part and denying in part 4 Motion to Dismiss for Failure to State a Claim. This action is ADMINISTRATIVELY CLOSED. Within sixty (60)days from the date of the decision of the Georgia Supreme Court in You v. JP Morgan Chase Bank, N.A., the parties shall notify this Court of the decision and indicate how they wish to proceed. At that time, the Court will administratively reopen the action and proceed with the litigation.Ordered by Judge C. Ashley Royal on 2/1/13 (lap)
IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF GEORGIA
JOHN TOWNS, PAMELA TOWNS,
No. 3:12‐CV‐142 (CAR)
WELLS FARGO BANK, N.A., d/b/a
WELLS FARGO HOME MORTGAGE :
d/b/a AMERICA’S SERVICING
COMPANY and U.S. BANCORP
d/b/a U.S. BANK, NATIONAL
ORDER ON DEFENDANTS’ MOTION TO DISMISS
Before the Court is Defendants Wells Fargo Bank, N.A. d/b/a Wells Fargo Home
Mortgage, d/b/a America’s Servicing Company (“Wells Fargo”) and U.S. Bancorp
d/b/a U.S. Bank, N.A.’s (“U.S. Bank”) (collectively, “Defendants”) Motion to Dismiss
[Doc. 4] Plaintiffs John and Pamela Towns’s Complaint. The Motion is fully briefed
and ripe for adjudication.
On a motion to dismiss, the Court must accept as true all well‐pleaded facts in a
plaintiff’s complaint.1 To avoid dismissal pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure, “a complaint must contain specific factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’”2 A claim is plausible
where the plaintiff alleges factual content that “allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”3 The
plausibility standard requires that a plaintiff allege sufficient facts “to raise a
reasonable expectation that discovery will reveal evidence” that supports a plaintiff’s
The facts in the light most favorable to Plaintiffs, the nonmoving party, are as
follows. On May 31, 2006, Plaintiffs executed a Promissory Note securing a loan to
purchase the property located at 1070 Oaklake Trail, Watkinsville, Georgia (the
“Property”). The Note identifies Mortgage Lenders Network USA, Inc. (“MLN”) as
the Lender. The Note was, in turn, secured by a Security Deed that expressly
identifies Mortgage Electronic Registration System, Inc. (“MERS”) as “nominee” for
MLN and its successors and assigns.5 Following execution, America’s Servicing
Sinaltrainal v. Coca‐Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009).
Ashcroft v. Iqbal, 556 U.S. 662, ‐‐‐, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)).
4 Twombly, 550 U.S. at 556.
5 [Doc. 1‐1 ¶ 35, 36].
Company (“ASC”) became the servicer for Plaintiffs’ mortgage, and on October 28,
2008, Plaintiffs modified their loan naming ASC d/b/a for Wells Fargo, as “Lender.”
Plaintiffs allege that the records of Oconee County Superior Court reflect neither an
assignment from MERS, as nominee for MLN, to ASC, d/b/a Wells Fargo, nor that the
modification was recorded.
In March of 2011, Plaintiffs sought a second loan modification through ASC,
this time under the Home Affordable Modification Program (“HAMP”). Prior to
applying for the modification, an ASC representative recommended Plaintiffs stop
making mortgage payments to show hardship, a prerequisite for HAMP eligibility.
The representative also informed Plaintiffs a decision regarding their eligibility would
be rendered within sixty days upon submitting their HAMP application. Pursuant to
this advice, in June of 2011 Plaintiffs defaulted on their payments, and applied for a
HAMP modification from ASC.
Meanwhile, unbeknownst to Plaintiffs, MERS, as nominee for MLN, assigned
the Security Deed to U.S. Bank. This assignment was recorded on September 7, 2011.
More than a year after submitting their request, Plaintiffs was denied a HAMP
modification because the loan was “serviced for an investor (presumably U.S. Bank)
that had not given ASC authority to modify [Plaintiffs’] loan.6
Id. at ¶ 53.
Due to Plaintiffs’ default, U.S. Bank initiated foreclosure on the Property. The
Property was scheduled to be sold in a foreclosure sale on October 2, 2012.7 The day
before the date of the foreclosure sale, Plaintiffs filed the instant action in the Superior
Court of Oconee County, Georgia, in which they alleged the following counts against
Defendants: (1) third party beneficiary breach of contract (Count One); breach of
implied covenant of good faith and fair dealing (Count Two); wrongful foreclosure
(Count Three); and negligent implementation of HAMP (Count Four). Plaintiffs seek a
temporary restraining order, injunctive relief, and damages as a result of Defendants’
alleged wrongful foreclosure.
After filing their Complaint, the superior court issued a temporary restraining
order against Defendants, enjoining them from foreclosing on the Property. Shortly
thereafter, at a hearing held on October 19, the court granted Plaintiffs’ request for an
interlocutory injunction. Despite being served with process on October 8 and 15,
Defendants Wells Fargo and U.S. Bank (respectively) failed to appear at this hearing to
contest Plaintiffs’ request.
On November 1, 2012, Defendants timely removed the action to this Court and
filed the instant Motion to Dismiss. In their Motion, Defendants request that this
Court (1) dismiss the action with prejudice, (2) dissolve the interlocutory injunction,
and (3) deny Plaintiff’s request for permanent injunctive relief.
Plaintiff alleges ASC is a loan servicer with no beneficial interest in the Note or Security Deed.
In its Motion, Defendants assert that Plaintiff’s complaint is subject to dismissal
for insufficient service of process upon U.S. Bank and for failure to state a claim
against Defendants upon which relief can be granted.
Service of Process of U.S. Bank
In their Motion, Defendants contend that the docket does not indicate U.S. Bank
has been served with process, and therefore, that Plaintiff’s claim against U.S. Bank
should be dismissed for lack of personal jurisdiction. On December 7, 2012, Plaintiffs
filed the Affidavit of Service with the Court, evidencing that U.S. Bank was properly
served on October 15, 2012. Because the record indicates that Plaintiffs have properly
served U.S. Bank with service of process, and therefore that the Court has personal
jurisdiction over Defendant, Defendants’ Motion to Dismiss U.S. Bank based on a
failure to serve process is DENIED.
Claims Premised on HAMP
Next, the Court considers Plaintiffs’ claims which are premised on HAMP,
specifically breach of contract (Count One), breach of implied covenant of good faith
and fair dealing (Count Two), and negligent implementation of HAMP (Count Four).
In each of these claims, Plaintiffs rely on Defendants’ failure to comply with their
obligation under HAMP by declining to issue them a permanent loan modification.
The Eleventh Circuit has explicitly held that there is no private right of action,
express or implied, under HAMP.8 Accordingly, Plaintiffs lack standing to pursue
their claims for breach of contract (Count One), breach of implied covenant of good
faith and fair dealing (Count Two), and negligent implementation of HAMP (Count
Four). Defendants’ Motion with respect to Counts One, Two, and Four is GRANTED.
The Court next considers Plaintiffs’ wrongful foreclosure claim (Count Three).
In particular, Plaintiffs contend that U.S. Bank, the assignee of MERS, is not the holder
of the Note, and therefore cannot validly initiate foreclosure proceedings. The Court
will consider Plaintiffs’ claim in two parts.
First, to the extent Plaintiffs’ claim relies upon the alleged invalidity of the
assignment of the Security Deed to U.S. Bank, Plaintiffs’ theory lacks merit. Georgia
law is clear: “As a general rule, an action on a contract … shall be brought in the name
of the party in whom the legal interest in the contract is vested, and against the party
who made it in person or by agent.”9 Because Plaintiffs are not a party to the
See Miller v. Chase Home Fin., LLC, 677 F.3d 1113, 1116 (11th Cir. 2012) (holding plaintiff “lack[ed]
standing to pursue breach of contract, breach of implied duty of good faith and fair dealing, and
promissory estoppel claims insofar as they are premised on an alleged breach of [Defendant’s] HAMP
obligations.”). This authority is recognized by Plaintiffs in their Response Brief to preclude such private
causes of actions. [See Doc. 8‐1 at 13].
9 O.C.G.A. § 9–2–20(a); see also, Woodberry v. Bank of Am., N.A., No. 1:11‐CV‐3637‐TWT, 2012 WL 113658
(N.D. Ga. Jan. 12, 2012) (“Plaintiff does not have standing to challenge the assignment from MERS to
BONY because he was not a party to the assignment.”); Rosenhaft v. BAC Home Loans Servicing, LP, No.
1:11‐CV‐259‐TWT, 2012 WL 484842 (N.D. Ga. Feb. 13, 2012) (“Plaintiff does not have standing to
challenge the assignment from MERS to BAC because she was not a party to the assignment.”).
assignment from MERS to U.S. Bank, they lack standing to challenge this assignment.
Accordingly, to the extent Plaintiffs’ wrongful foreclosure claim relies upon this
theory, Defendants’ Motion is GRANTED.10
However, to the extent Plaintiffs’ claim focuses on the separation of the Note
and Security Deed, the Court recognizes that a conflict of authority exists on this issue.
The majority of judges in our sister courts have held that the holder of a security deed
need not also possess or hold the note to conduct valid foreclosure proceedings under
Georgia law.11 However, as recognized by Judge Carnes in You v. JPMorgan Chase
Bank, N.A.,12 there is contrary authority in federal district courts as to this issue.13
Consequently, the You court certified the following question to the Georgia Supreme
Court: “Can the holder of a security deed be considered to be a secured creditor, such
that the deed holder can initiate foreclosure proceedings on residential property even
Defendants make this argument as to all of Plaintiffs’ claims which are based on the validity of the
assignment. Because the Court dismissed Plaintiffs’ other claims above, the Court need only address this
argument to the extent it relates to Plaintiffs’ wrongful foreclosure claim.
11 See, e.g., Howard v. Mortg. Elec. Registration Sys., Inc., No. 1:10‐cv‐1630‐WSD, 2012 WL 3582586, at *5
(N.D. Ga. Aug. 17, 2012) (holding that plain language of security deed foreclosed plaintiff’s argument that
MERS lacked standing to foreclose on property); Montoya v. Branch Banking & Trust Co., No. 1:11‐cv‐1869‐
RWS, 2012 WL 856993, at *5 (N.D. Ga. Mar. 9, 2012) (rejecting wrongful foreclosure claim to the extent
that it was based on a note‐splitting theory); Alexist v. Mortg. Elec. Registration Sys., Inc., No. 1:11‐cv‐1967‐
RWS, 2012 WL 716161, at *3 (N.D. Ga. Mar. 5, 2012) (holding that Georgia law does not preclude the
holder of a security deed from initiating foreclosure if it does not also hold the note and finding that the
plain language of the security deed granted MERS and its assignee the right to foreclose).
12 No. 1:12‐cv‐202‐JEC‐AJB, 2012 WL 3904363, at *6 (N.D. Ga. Sept. 7, 2012).
13 Id. at *5 (citing Morgan v. Ocwen Loan Serv., LLC, 795 F. Supp. 2d 1370, 1375 (N.D. Ga. 2011) (holding that
“separation of the note and the security deed … create[s] a substantial question of what entity has the
right to foreclose when the borrower defaults on the loan) and Stubbs v. Bank of Am., 844 F. Supp. 2d 1267,
1273 n.3 (N.D. Ga. 2012) (“Georgia statutes and case law require the holder of the loan to carry out the
foreclosure and to identify itself as the secured creditor of public record foreclosure prior to the
if it does not also hold the note or otherwise have any beneficial interest in the debt
obligation underlying the deed.”14
Because the Supreme Court of Georgia’s decision will be dispositive of the issue
of whether Plaintiffs’ complaint asserts a viable claim for relief for wrongful
foreclosure against U.S. Bank, the Court concludes that the best course of action is not
to resolve Plaintiffs’ wrongful foreclosure claim at this time.15 Pending resolution of
the certified questions in the You case, Defendants’ Motion to Dismiss with respect to
this claim is DENIED without prejudice.16
Lastly, Plaintiffs seek attorney’s fees under O.C.G.A. 13‐6‐11. To the extent this
claim is premised on the dismissed claims above, Plaintiffs have not alleged
Defendants acted in bad faith. To the extent this claim relates to the prosecution of the
foreclosure, Plaintiffs have not pointed to any evidence of pre‐litigation bad faith or
abusive litigation in this regard. Moreover, the existence of split authority on this
issue, as discussed above, undermines any argument Defendants acted in bad faith by
You v. JPMorgan Chase Bank, N.A., 1:12‐cv‐202‐JEC, [Doc. 16, at 2] (N.D. Ga. Sept. 7, 2012).
See Patterson v. CitiMortgage, Inc., No. 1:11‐CV‐0339‐CC, 2012 WL 4468750 (N.D. Ga. Sept. 26, 2012)
(denying without prejudice wrongful foreclosure claim similar certified question in You); U.S. Bank, N.A.
v. Phillips, ‐‐‐ S.E. 2d ‐‐‐, 2012 WL 5935993 (Ga. App. 2012) (same, remanded with instruction to stay
pursuant to You).
16 At this time, the Court will not rule on Defendants’ argument to dismiss Plaintiffs’ damages and
Plaintiffs’ request for injunctive relief, both of which relate to their wrongful foreclosure claim.
proceeding to conduct the foreclosure.17 Accordingly, Defendants’ Motion with
respect to Plaintiffs’ attorneys’ fees claim is GRANTED.
Based on the foregoing, Defendants Motion to Dismiss [Doc. 8] is GRANTED
in part and DENIED in part. Defendants’ Motion is GRANTED with respect to
Plaintiffs claims for breach of contract (Count One), breach of implied covenant of
good faith and fair dealing (Count Two), wrongful foreclosure based on the validity of
the assignment (Count Three), and negligent implementation of HAMP (Count Four).
Defendants’ Motion is DENIED in part with respect to Defendants’ argument
regarding failure of service of process on U.S. Bank and DENIED without prejudice
with respect to Plaintiffs’ wrongful foreclosure claim based on the separation of the
Security Deed and Note (Count Four), and their requests for injunctive relief and
emotional distress damages. The instant action is accordingly STAYED pending the
Georgia Supreme Court’s decision in You v. JP Morgan Chase Bank, N.A.18
As the Court can take no further action pending the resolution of the certified
question in You, this action is ADMINISTRATIVELY CLOSED. Within sixty (60)
days from the date of the decision of the Georgia Supreme Court in You, the parties
shall notify this Court of the decision and indicate how they wish to proceed. At that
time, the Court will administratively reopen the action and proceed with the litigation.
See Patterson, 2012 WL 4468750, at *16.
No. 1:12‐cv‐202‐JEC‐AJB, 2012 WL 3904363, at *6 (N.D. Ga. Sept. 7, 2012).
SO ORDERED, this 1st day of February, 2013.
S/ C. Ashley Royal
C. ASHLEY ROYAL
UNITED STATES DISTRICT JUDGE
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