McLean v. Homebanc Mortgage Corporation et al

Filing 11

ORDER AND OPINION granting defendants Motion to Dismiss 2 and denying plaintiffs Motion to Amend 7 . Signed by Judge Julie E. Carnes on 3/25/14. (ddm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ERIN DIANE MCLEAN,
Plaintiff,
CIVIL CASE NO.
v.

1:13-cv-01051-JEC

HOMEBANC MORTGAGE CORPORATION,
EMC
MORTGAGE
CORPORATION,
CITIBANK, N.A., as trustee for
Bear Stearns ARM Trust 2006-04,
JPMORGAN CHASE BANK, N.A., and
JOHN DOES 1-5,
Defendants.
ORDER & OPINION
This case is before the Court on defendants’ Motion to Dismiss
Plaintiff’s Complaint [2] and plaintiff’s Opposition to Defendants’
Motion to Dismiss, Or, In the Alternative, Motion to Permit Amendment
to Complaint (“Motion to Amend”) [7].

The Court has reviewed the

record and the arguments of the parties and, for the reasons that
follow, concludes that defendants’ Motion to Dismiss [2] should be
GRANTED and plaintiff’s Motion to Amend [11] should be DENIED.
BACKGROUND
This case arises from an allegedly wrongful foreclosure.

On

March 24, 2006, plaintiff purchased real property located at 4067 and
4069 Coopers Hill Drive, Smyrna, Georgia 30080.

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(Notice of Removal

[1] at Ex. A, part 2 (hereinafter “Compl.”), ¶¶ 9-10.)

To finance

her purchase, plaintiff obtained a loan from HomeBanc Mortgage
Corporation (“HomeBanc”).

In conjunction, plaintiff executed a note

in the principal sum of $264,000 in favor of HomeBanc, which was
secured by a security deed.
21.)

(Id. at ¶¶ 11-12, Ex. A, part 3, at 3-

Under the security deed, plaintiff pledged as collateral the

Coopers Hill Drive property.

(Notice of Removal [1] at Ex. A, part

3, at 10.)
On August 9, 2007, HomeBanc filed for Chapter 11 bankruptcy
protection in the bankruptcy court for the District of Delaware.
(Mot. to Dismiss [2] at 2.)

It moved for approval of a proposed

Servicing Rights Purchase Agreement whereby EMC Mortgage Corporation
(“EMC”) would become the servicer of HomeBanc’s loans, which the
bankruptcy court granted on November 2, 2007. (Id. at 2-3); In re
HomeBanc Mortg. Corp., et al., Bankr. Case No. 07-11079 (KJC), Order
at Dkt. No. [491] (Bankr. D. Del. Nov. 2, 2007).

Once in possession,

EMC sold plaintiff’s note to a trust that tranched and securitized
the loan.

(Notice of Removal [1] at Compl., ¶ 14.)

Then, on

December 6, 2007, HomeBanc assigned the security deed executed by
plaintiff to Mortgage Electronic Registration Systems, Inc. (“MERS”).
(Notice of Removal [1] at Compl. ¶ 16, Ex. A, part 6, at 30.)
At some point, plaintiff defaulted on her

loan and defendants

initiated non-judicial foreclosure proceedings. (See Mot. to Dismiss
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[2] at 3.)

To forestall these proceedings, plaintiff filed a

complaint against defendants on January 15, 2013 in the Superior
Court of Cobb County, which defendants removed to this Court on April
1, 2013.

(Notice of Removal [1] at Compl.)

Thereafter, on April 8,

2013, defendants filed a Motion to Dismiss plaintiff’s complaint [2].
Plaintiff filed her response and alternative Motion to Amend on April
22, 2013 [7].
I.

DEFENDANTS’ MOTION TO DISMISS
A.

Subject Matter Jurisdiction

Defendants removed plaintiff’s action to this Court, pursuant to
28

U.S.C.

1446,

asserting

that

pursuant to 28 U.S.C. §§ 1332.

diversity

jurisdiction

existed

In so doing, defendants acknowledged

that, while defendants EMC Mortgage, Citibank, and JPMorgan Chase
Bank are not citizens of Georgia,

defendant HomeBanc is. Because

plaintiff is also a citizen of Georgia, the joinder of defendant
Homebanc

suggests

that

there

is

not

a

complete

diversity

of

citizenship among the parties, which, if true, would deprive this
Court of subject matter jurisdiction.

Defendants argued, however,

that plaintiff fraudulently joined defendant Homebanc for the purpose
of destroying federal jurisdiction and that, given this fraudulent
joinder, the Court must ignore Homebanc’s citizenship for purposes of
determining whether complete diversity exists.
[1] at ¶¶ 6-17.)
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(Notice of Removal

Plaintiff has offered no disagreement with either plaintiff’s
factual assertions or legal contentions.

As to defendants’ factual

assertions, this Court accepts their accuracy, given the absence of
any opposition by plaintiff. See Legg v. Wyeth, 428 F.3d 1317, 132225

(11th

Cir.

2005)(where

plaintiff

did

not

contest

defense

affidavits supporting defendant’s contention that plaintiffs joinder
was fraudulent, the district court should have considered the facts
contained within those affidavits to have been proved). Yet, as
subject matter jurisdiction is not a waivable matter, the Court
independently assesses defendants’ argument that, on these undisputed
facts, joinder of defendant Homebanc was fraudulent.
Joinder

may

be

deemed

to

be

fraudulent

when

there

is

no

possibility that the plaintiff can prove a cause of action against
the non-diverse defendant.

Triggs v. John Crump Toyota, Inc., 154

F.3d 1284, 1287 (11th Cir. 1998).

Here, defendants have justified

their removal of this action by noting that, at the time plaintiff
filed this action–-and indeed for some time prior to that filing–defendant Homebanc had been in bankruptcy proceedings for which an
automatic stay against any actions or claims against it was in
effect.

Indeed, defendants noted, the bankruptcy proceeding is

ongoing and the stay remains in effect.

(Notice of Removal [1] at ¶¶

13-16.)
As a legal matter, defendants correctly cite United States v.
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AO 72A
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White, 466 F.3d 1241, 1244 (11th Cir. 2006)(for the proposition that
actions taken against a debtor for whom an automatic stay has been
issued are “void and without effect.”)(citation omitted). Defendants
also note that a district court within this circuit has examined the
effect of a lawsuit against a non-diverse party under a bankruptcy
stay with regard to the question of fraudulent joinder.

That court

determined that where complete diversity would exist but for the
plaintiff’s claim against a non-diverse party for whom a bankruptcy
stay is in effect, that stay operates to nullify the suit against the
non-diverse party, rendering his joinder fraudulent. S. Dallas Water
Auth. v. Guarantee Co. of N. Am., USA, 767 F. Supp. 2d 1284, 1297-98
(S.D. Ala. 2011)(Cassady, Mag. J.).

Accord, Toskich v. J.H. Inv.

Serv., Inc., 806 F. Supp. 2d 1224, 1227-28 (M.D. Fla. 2011) (Moody,
J.)(where bankruptcy proceeding and automatic stay were in effect
against civil defendant when plaintiff filed claim, the joinder of
that defendant was without effect and could not destroy complete
diversity between remaining defendants).

See also Brown v. JEVIC,

575 F.3d 322, 327 (3rd Cir. 2009)(joinder of a non-diverse defendant
who had filed for bankruptcy protection and for whom an automatic
stay was in effect was fraudulent and could not defeat otherwise
valid assertion of diversity of citizenship).
Accordingly, the Court concludes that defendant HomeBanc was
fraudulently joined. Striking that defendant from the case, there is
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diversity jurisdiction and thereby subject matter jurisdiction.
B.

Standard For A Motion To Dismiss

In deciding a motion to dismiss under Federal Rule 12(b)(6), the
Court assumes that all of the allegations in the complaint are true
and construes all of the facts in favor of the plaintiff.
Scott, 610 F.3d 701, 705 (11th Cir. 2010).

Randall v.

That said, in order to

survive a motion to dismiss, a complaint “must contain sufficient
factual matter, accepted as true, to ‘state a claim [for] relief that
is plausible on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009)(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
A claim is “facial[ly] plausib[le]” when it is supported with facts
that “allow[] the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”

Id.

Courts will

“eliminate any allegations in the complaint that are merely legal
conclusions.”

Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290

(11th Cir. 2010). “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.”
Iqbal, 556 U.S. at 678.
C.

Plaintiff Has Not Alleged A Plausible A Claim For Relief

Plaintiff argues that dismissal of her action is inappropriate
because she has alleged a prima facie quiet title claim under
O.C.G.A. §§ 23-3-60, et seq.

(Mot. to Amend [7] at 7-14.)

In

support of her claim, plaintiff repeats familiar contentions that
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have

been

repeatedly

rejected:

that

defendants

cannot

pursue

foreclosure proceedings because one entity does not possess both the
note and the security deed executed by plaintiff, (Notice of Removal
[1] at Compl., ¶¶ 16, 31, 34); that, because plaintiff’s note has
been securitized and because MERS is only a servicer, no party
possesses a beneficial interest in plaintiff’s loan and therefore
cannot foreclose upon it, (Id. at ¶¶ 14-15, 24-26; Mot. to Amend [7]
at 3-4, 6, 10-13); that the assignment of the security deed by MERS
to EMC was invalid, (Notice of Removal [1] at Compl., ¶¶ 13, 16-18,
42; Mot. to Amend [7] at 4, 13-14); and that JPMorgan Chase Bank,
N.A. and Citibank, N.A. have a history of engaging in unlawful
foreclosure procedures for which they are subject to consent decrees
with various federal agencies, (Notice of Removal [1] at Compl., ¶¶
19-22; Mot. to Amend [7] at 4-5).

For the following reasons, these

allegations do not support a plausible claim for relief under Georgia
law.
First, at their core, the bulk of plaintiff’s claims are
equitable. Plaintiff’s three-count complaint seeks (1) an injunction
preventing defendants from conducting foreclosure proceedings, (2) a
declaratory judgment regarding the status of defendants and their
ability to pursue foreclosure proceedings with respect to the Coopers
Hill Drive property, and (3) to quiet title to the Coopers Hill Drive
property in plaintiff’s name.

In the foreclosure context, when a
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party seeks injunctive relief or to quiet title, she must have come
to the Court with clean hands, i.e., she must have paid or tendered
the amount due on her loan or otherwise cured her default.

See

Taylor, Bean & Whitaker Mortg. Corp. v. Brown, 276 Ga. 848, 849-51
(2003).

Here plaintiff has failed to allege that she complied with

the tender requirement.

Consequently, she cannot seek equitable

relief regarding her loan.1
Second, the Supreme Court of Georgia has definitively held that
an entity in possession of a security deed need not also possess the
note

or

“otherwise

have

any

beneficial

interest

in

the

debt

obligation underlying the deed” to be able to pursue foreclosure
proceedings.
(2013).

You v. JP Morgan Chase Bank, N.A., 293 Ga. 67, 74

Plaintiff’s complaint is largely based upon the theory that

defendants cannot pursue foreclosure proceedings because they do not
possess a beneficial interest in her loan and because the note and
deed executed by plaintiff have been split.

Under You, these

contentions represent incorrect statements of Georgia law and cannot
support plaintiff’s claims for relief.
Similarly, with respect to plaintiff’s allegations challenging
the

assignment

of

her

security

1

deed,

courts

in

Georgia

have

Plaintiff’s quiet title count also fails because she did not
file a plat of survey of her property. O.C.G.A. § 23-3-62; GHG, Inc.
v. Bryan, 275 Ga. 336, 336 (2002).
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“repeatedly rejected the argument that a homeowner has standing to
challenge the assignment of a security deed which grants the assignor
a power of sale.”

Moore v. McCalla Raymer, LLC, 916 F. Supp. 2d

1332, 1343-44 (N.D. Ga. 2013)(quoting Peterson v. Merscorp Holdings,
Inc., Civil Action No. 1:12-cv-00014-JEC, 2012 WL 3961211, *10 (N.D.
Ga. Sept. 10, 2012)(Carnes, C.J.) and collecting cases).

The result

is no different here. The assignment of plaintiff’s security deed by
MERS

to

EMC

does

not

indicate

that

plaintiff

is

an

intended

beneficiary under that contract, nor does plaintiff make such an
allegation.2

Consequently, plaintiff lacks standing to contest the

validity of the assignment.
Further,

plaintiff’s

argument

that

robo-signing

rendered

HomeBanc’s assignment of her loan invalid fails because such a theory
is not cognizable in Georgia.

See Wilson v. JP Morgan Chase Bank,

N.A., No. 2:11-cv-00135-RWS, 2012 WL 603595, *4-5 (N.D. Ga. Feb. 24,
2012)(Story, J.)(citing Reynolds v. JPMorgan Chase Bank, N.A., Civil
Action No. 5:11-cv-311 (MTT), 2011 WL 5835925, *3 (M.D. Ga. Nov. 21,
2011)(Treadwell, J.)).

And with respect to her allegation that

HomeBanc withdrew from conducting business in Georgia, and therefore
could not legally assign her loan, plaintiff’s own complaint states
that HomeBanc made the assignment ten days before filing to withdraw.

2

Despite plaintiff’s numerous allegations involving MERS, she
did not name that entity as a defendant in her action.
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(Notice of Removal [1] at Compl., ¶ 17.)

Moreover, the Court fails

to see what is wrongful about HomeBanc seeking to “assign its
interest to another party that could legally exercise authority over
[plaintiff’s] loan.”

(Id.)

Next, plaintiff’s discussion of prior unlawful foreclosure
practices committed by Chase and Citibank, and the consent orders to
which those entities are subject, fails to give any indication
whether Chase and Citibank undertook such actions here.
plaintiff’s

complaint

completely

lacks

allegations

of

Indeed,
specific

wrongful actions that Chase or Citibank took with respect to her
loan, thus falling short of the federal pleading standard.

See

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570 (a claim is
plausible when it is supported with facts that “allow[] the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged”)).
Because plaintiff’s allegations do not support a plausible claim
for recovery under Georgia law, no actual, active controversy exists
and the ability of this Court to award plaintiff a declaratory
judgment is foreclosed.

See Malowney v. Fed. Collection Deposit

Grp., 193 F.3d 1342, 1347 (11th Cir. 1999).
Therefore, for the above reasons, plaintiff has failed to allege
facts supporting a plausible claim for relief under Georgia law.
Accordingly, the Court GRANTS defendants’ Motion to Dismiss [2].
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II.

PLAINTIFF’S MOTION TO AMEND
Perhaps recognizing the weakness of her claims and anticipating

an order of dismissal, plaintiff has also filed a motion requesting
leave to amend her complaint, should this Court grant the motion to
dismiss. She indicates that an amendment would permit her to clarify
her allegations.3

(Resp. [7] at 18.)

A party moving for leave to amend must submit a copy of the
proposed amendment or otherwise set forth its substance in the
motion.

FED. R. CIV. P. 7(b)(1)(B); Long v. Satz, 181 F.3d 1275,

1279-80 (11th Cir. 1999).

Here plaintiff has done neither, nor has

she, in the eleven months since she filed her preemptive motion to
amend, hinted at what an amended complaint might look like or why it
might improve her chances of stating a valid claim.

Moreover, as

plaintiff has presumably continued to occupy her residence rent-free
while this litigation proceeds, further delaying the inevitable
dismissal of her case would substantially prejudice the defendants in
their ability to recoup property that secured a note on which
plaintiff

long

ago

defaulted.

Accordingly,

the

Court

DENIES

plaintiff’s Motion to Amend [7].

3

In her response, plaintiff also requests that the Court
reconsider its decision, should it grant defendants’ Motion to
Dismiss. (Resp. [7] at 18.) Obviously, a Court cannot, in the same
order in which it announces a decision, simultaneously reconsider
that decision.
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CONCLUSION
For the above reasons, defendants’ Motion to Dismiss [2] is
GRANTED and plaintiff’s Motion to Amend [7] is DENIED.

The Clerk of

Court is directed to close the case.

SO ORDERED, this 25th day of March, 2014.

/s/ Julie E. Carnes
JULIE E. CARNES
CHIEF UNITED STATES DISTRICT JUDGE

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