Bennett et al v. Flagstar Bank
Filing
20
ORDER granting 11 Defendant Flagstar's Motion to Dismiss. The Clerk is directed to close the case and ENTER FINAL JUDGMENT in favor of Defendant on all claims. Signed by Chief Judge Lisa G. Wood on 12/8/2011. (csr)
In the Initeb tate Jttrttt Court
for the Oouthtm Jtstrfrt of georgic
3trunMottk Dfbt ton
GENESIS S. BENNETT and
EVORA K. BENNETT
*
Plaintiffs,
*
vs.
*
FLAGSTAR BANK,
CV 210-181
*
Defendant.
ORDER
Presently before the Court is Defendant Flagstar Bank's
("Flagstar") Motion to Dismiss. Dkt. No. 11. For the reasons
stated below, Flagstar's motion is GRANTED.
BACKGROUND
Genesis and Evora Bennett ("Plaintiffs") filed this action
against Flagstar seeking damages and injunctive relief for
conduct associated with a mortgage on the Plaintiffs' principal
residence. Dkt. No. 1. Flagstar moved to dismiss Plaintiffs'
suit, and Plaintiffs filed a response to the motion. Dkt. Nos.
11, 19.
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Flagstar issued a mortgage to the Plaintiffs on September
15, 2008 to finance (or possibly refinance) the Plaintiffs'
principal residence located at 4241 Old Jesup Road, Brunswick,
Georgia. In conjunction with the mortgage, the Plaintiffs
granted a security deed on the property to Flagstar. It appears
that sometime around December 2009 or January 2010 Flagstar
determined that the Plaintiffs were delinquent in making
payments on the mortgage.' Flagstar contacted Plaintiffs and
apparently proposed some sort of agreement regarding loan or
payment modification. Dkt. No. 19, Ex. A. It is not clear
whether Plaintiffs accepted this proposal, but based on
documents submitted by Plaintiffs, it appears that Plaintiffs
made payments consistent with the modification suggested by
Flagstar. Id. Plaintiffs filed petitions for Chapter 13
bankruptcy on November 4, 2010. In re Genesis Steven Bennett &
Evora Kenty Bennett, 10-21472-JSD, Dkt. No. 1.
With regards to the relationship between the parties at the
time the suit was filed, the record is particularly sparse. The
Court is left only to guess about the status of the mortgage,
The Plaintiffs' Complaint contains virtually no facts, historical or
otherwise. The Court's assumptions about delinquency and subsequent
agreement between the parties are based on a document filed as an exhibit to
Plaintiffs' Response and Objection/Rebuttal to Defendant's Motion to Dismiss
Plaintiffs' Complaint. Dkt. No. 19, Ex. A. That document is a letter which
appears to have been sent from Flaystar to the Plaintiffs. Flagstar has not
disputed the veracity of the letter or its contents. The Court considers
this letter only as a basis for establishing the background of the dispute;
the Court does not consider this letter in deciding whether to dismiss
Plaintiffs' Complaint.
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whether a modification agreement was entered into, or whether
foreclosure proceedings have been initiated. At most, the Court
can reasonably assume that some falling out between the parties
occurred, such that the Plaintiffs felt compelled to initiate
this lawsuit against Flagstar.
The Plaintiffs' Complaint attacks Flagstar with passion, if
not clarity. Dkt. No. 1. Plaintiffs appear to challenge the
amount of payments they were required to make, the methods
Flagstar used to collect those payments, and Flagstar's general
lending practices. Id. As legal grounds for their Complaint,
Plaintiffs cite numerous legal provisions and theories: the
Truth in Lending Act, Fraud, Conspiracy, Fair Debt Collections
Practices Acts, the Constitution (State and Federal), the Civil
Rights Act, the Fair Housing Act, the Equal Credit Opportunity
Act, and the Racketeering Influenced and Corrupt Organizations
Act. Id.
Flagstar has moved to dismiss Plaintiffs' Complaint on
three grounds. Dkt. No. 11. Flagstar argues that the
Plaintiffs are not the real party in interest because the
Plaintiffs filed for bankruptcy, and therefore the claims, if
any, belong to the bankruptcy estate, making the bankruptcy
trustee the real party in interest. Additionally, Flagstar
argues that the Plaintiffs are judicially estopped from
asserting their claims because the Plaintiffs failed to disclose
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the claims in their bankruptcy petition and failed to amend
their petition to reflect the claims. Flagstar also argues that
Plaintiffs' Complaint fails to state a claim upon which relief
may be granted.
I. The Real Party in Interest
Flagstar moves to dismiss Plaintiffs' Complaint pursuant to
Federal Rule of Civil Procedure 17(a) 2 on the grounds that the
Plaintiffs are not the real parties in interest. Dkt. No. 11.
Flagstar argues that the Plaintiffs filed a bankruptcy petition
prior to initiating this lawsuit, and therefore only the
bankruptcy trustee can pursue Plaintiffs' claims. Flagstar
points to 11 U.S.C. § 541(a) which states that when a debtor
files a bankruptcy petition, "all legal or equitable interests
of the debtor" become property of the bankruptcy estate.3
Flagstar further relies on Barger v. City of Cartersville, Ga.,
348 F.3d 1289, 1292 (11th Cir. 2003), for the proposition that
"the [bankruptcy trustee] is the real party in interest and it
has exclusive standing to assert . . - [legal] claims."
2
Fed. R. Civ. P. 17(a) states: "An action must be prosecuted in the name of
the real party in interest."
The expression "all legal or equitable
"legal causes of action the debtor had
the bankruptcy case." In re J. H. Inv.
(11th cir. 2011) (quoting In re Icarus
(11th cir. 2004))
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interests of the debtor" includes all
against others at the commencement of
Servs., Inc., 413 F. App'x 142, 148
Holding, LLC, 391 F.3d 1315, 1319
Flagstar's reliance on Barger is misguided, and overlooks
an important distinction between Barger and the instant case.
Barger dealt with a Chapter 7 debtor's standing, not a Chapter
13 debtor's standing. In the years since Barger, there has been
some debate about the distinctions between the standing of
debtors in Chapter 7 proceedings and debtors in Chapter 13
proceedings. See, e.g., Looney v. Hyundai Motor Mfg. Ala., LLC,
330 F. Supp. 2d 1289 (M.D. Ala. 2004). Although ambiguity about
the issue lingers, the majority position appears to be that,
unlike a Chapter 7 debtor, a Chapter 13 debtor retains standing
to pursue his or her pre-petition claims. 4 See id. (collecting
and analyzing cases, ultimately rejecting the argument that the
plaintiff, a Chapter 13 debtor, is not the real party in
interest, and holding that the debtor retained standing to
pursue pre-petition claims); In re Stewart, 373 B.R. 801 (Bankr.
S.D. Ga. 2007) (holding that a Chapter 13 debtor had standing to
challenge the existence of a settlement between the trustee and
a creditor on the basis that a debtor and a trustee have, "at a
minimum, concurrent standing."); Snowden v. Fred's Stores of
Tenn., Inc., 419 F. Supp. 2d 1367, 1371 n.6 (M.D. Ala. 2006)
("[A] Chapter 13 debtor maintains control over all assets . . .
4 The Court notes that a debtor's pre-petition causes of action unquestionably
become property of the estate under 11 U.S.C. § 541(a). See In re Alvarez,
224 F.3d 1273, 1278 n.12. The more unsettled issue is whether the trustee
has exclusive standing to pursue those causes of action after they become
property of the bankruptcy estate.
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and therefore has standing to bring suit in his own right.");
see also pre-Barger cases, In re Griner, 240 B.R. 432, 437
(Bankr. S.D. Ala. 1999) ("[I]t is clear that Congress intended
to provide chapter 13 trustees and chapter 13 debtors with
concurrent capacity to litigate prepetition nonbankruptcy law
claims."), and cases from outside the Eleventh Circuit In re
Henneghan, 2005 WL 2267185, *6 (Bankr. E.D. Va. June 22, 2005)
("{A] chapter 13 debtor has standing to bring suit on his or her
own causes of action.").
Plaintiffs filed this lawsuit then filed a Chapter 13
petition for bankruptcy. Flagstar moved to dismiss on the
grounds that the bankruptcy trustee is the real party in
interest, not the Plaintiffs, implicitly arguing that the
Plaintiffs lack standing to sue on this claim. Because the
Plaintiffs filed a Chapter 13 petition, and not a Chapter 7
petition, the Plaintiffs retain standing to pursue the prepetition causes of action and are consequently the real parties
in interest.
II. Judicial Estoppel
"Judicial estoppel . . . is an equitable doctrine invoked
at a court's discretion." Ajaka v. Brooksamerica Mortg. Corp.,
453 F.3d 1339, 1343-44 (11th Cir. 2006) (quoting New Hampshire
v. Maine, 532 U.S. 742, 750 (2001)). Specifically, judicial
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estoppel bars parties from asserting a claim that is
inconsistent with a claim asserted in a previous proceeding.
Id.
The doctrine aims to "prevent perversion of the judicial
process," but is a "flexible rule in which courts must take into
account all of the circumstances of each case." Id. (citations
omitted) (denying summary judgment on the issue of judicial
estoppel where defendants had adequate time to seek revocation
of plaintiff's Chapter 13 reorganization plan and where there
was an issue of material fact as to whether plaintiff intended
to manipulate the judicial system).
"In the Eleventh Circuit, courts consider two factors in
the application of judicial estoppel to a particular case."
Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir.
2002) (citing Salomon Smith Barney, Inc. v. Harvey, M.D., 260
F.3d 1302, 1308 (11th Cir. 2001)). "First, it must be shown that
the allegedly inconsistent positions were made under oath in a
prior proceeding. Second, such inconsistencies must be shown to
have been calculated to make a mockery of the judicial system."
Id.
The first factor, whether the Plaintiffs took inconsistent
positions in another proceeding, is a simple matter. The
Plaintiffs initiated the present lawsuit then filed the
bankruptcy petition. In conjunction with their petition, the
Plaintiffs signed, under penalty of perjury, a "Statement of
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Financial Affairs." Paragraph 4 of that Statement mandates that
the debtors "[l]ist all suits and administrative proceedings to
which the debtor is or was a party within one year immediately
preceding the filing of this bankruptcy case." In re Genesis
Steven Bennett & Evora Kenty Bennett, 10-21472-JSD, Dkt. No. 1,
at 28. The Plaintiffs checked "None" in response to this
paragraph. Id. Clearly, the Plaintiffs took inconsistent
positions in the instant suit and in the bankruptcy proceedings.5
As is commonly the case, the determination of the
applicability of judicial estoppel turns on whether the
Plaintiffs had the requisite intent to mislead the bankruptcy
court when they failed to disclose the instant suit. In order
for Plaintiffs' claims to be barred by judicial estoppel, it
must be shown that the Plaintiffs' inconsistent positions were
"intentional contradictions," "calculated to make a mockery of
the judicial system" and were "not simple error or
inadvertence." Robinson v. Tyson Foods, Inc., 595 F.3d 1269,
1273-75 (11th Cir. 2010). The requisite intent may be inferred
from the record. Burnes, 291 F.3d at 1288. Importantly,
There is little question that the Plaintiffs were under a continuing duty to
amend their petition to disclose the suit as well. See Robinson v. Tyson
Foods, Inc., 595 F.3d 1269 (11th Cir. 2010) (holding that a Chapter 13
debtor has an obligation to amend his schedule of assets to reflect claims
against third parties and that failure to do so constitutes "inconsistent
positions" for the purposes of judicial estoppel) . It is, however,
unnecessary to delve into the continuing duty issue given that Plaintiffs
filed the instant lawsuit before filing their bankruptcy petition. The
first factor in the judicial estoppel analysis is therefore unambiguously
established.
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failure to properly disclose claims in the bankruptcy
proceedings is "'inadvertent' only when, in general, the debtor
either lacks knowledge of the undisclosed claims or has no
motive for their concealment." Robinson, 595 F.3d at 1275.
Flagstar asks the Court to invoke the discretionary
doctrine of judicial estoppel, but fails to point to any facts
in the record that show that the Plaintiffs intentionally
attempted to make a mockery of the judicial system. Rather,
Flagstar argues that Plaintiffs knew about their claims prior to
filing their bankruptcy petition, and therefore the Plaintiffs
should be judicially estopped from asserting those claims.
Although intent may be properly inferred from a relatively
sparse record, mere knowledge of the existence of claims is not
enough to satisfy the second judicial estoppel factor. See,
e.g., Robinson, 595 F.3d at 1275 ("It is undisputed that [the
debtor] had knowledge of her claims. Therefore, the issue of
motive is the determining factor in this case.") . Flagstar has
not presented any facts to support an inference of motive in the
instant case.
Flagstar relies heavily on Robinson, stating "[t]he facts
and law in the present case are so similar to Robinson as to
demand the same result." 6 However, Robinson is factually
6
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The Court also points out that Robinson simply concluded that application of
judicial estoppel by the trial court in that case was not clearly erroneous.
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distinguishable in several ways: the debtor in Robinson had a
history of not disclosing claims in her bankruptcy petition; the
Robinson debtor was in her second Chapter 13 bankruptcy plan at
the time she took inconsistent positions; the Robinson debtor
defaulted on her bankruptcy plan, showing a real risk of no
repayment; and finally, the claim at issue in Robinson was an
employment discrimination claim, not a mortgage dispute. The
court in Robinson emphasized that "[t]he questions regarding
repayment coupled with the chance of monetary gain" supported a
finding that the debtor had motive to conceal her claims. Id.
at 1276. By contrast, there are no facts in the record that
indicate that the Plaintiffs will not fully comply with their
bankruptcy plan obligations. As such, Flagstar's reliance on
Robinson is unavailing. Therefore, Flagstar is not entitled to
dismissal of Plaintiffs' Complaint on judicial estoppel grounds.
III. Dismissal for Failure to State a Claim
Flagstar also moves for dismissal of Plaintiffs' Complaint
on the grounds that the Complaint fails to state a claim upon
which relief can be granted. Dkt. No. 11.
That, however, does not mandate that the same result must occur here, even
if some of the facts are similar.
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A. Legal Standard
"A pleading that states a claim for relief must contain
a short and plain statement of the claim showing that the
pleader is entitled to relief." Fed. R. Civ. P. 8. Here,
Plaintiffs are proceeding pro
Se,
and pro se pleadings are "to
be liberally construed" and held to a "less stringent standard"
than those drafted by a lawyer. Erickson v. Pardus, 551 U.S.
89, 94 (2007) . However, the latitude given
to pro se
litigants
does not eliminate the requirement that they conform to
procedural rules. Moton v. Cowart, 631 F.3d 1337, 1340 n.2
(11th Cir. 2011)
Where a defendant challenges a complaint for failing to
adequately state a claim upon which relief can be granted, the
court should apply a "two-pronged approach" in analyzing the
complaint. See Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283,
1290 (11th Cir. 2010) (quoting Ashcroft v. Iqbal, 129 S.Ct.
1937, 1950 (2009) in resolving a motion to dismiss pursuant to
Fed. R. Civ. P. 12(b) (6)) . First, the court should "eliminate
any allegations in the complaint that are merely legal
conclusions." Id. This first prong excludes "threadbare
recitals of a cause of action's elements, supported by mere
conclusory statements." Iqbal, 129 S.Ct. at 1940. Second, the
court should assume that all well-pleaded factual allegations
are true "and then determine whether [those allegations]
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plausibly give rise to an entitlement to relief." Am. Dental
Ass'n, 605 F.3d at 1290. In determining plausibility, the court
should "draw on its experience and common sense." Iqbal, 129
S.Ct. at 1950. Moreover, it is proper for the court to infer
'obvious alternative explanation[s]' which suggest lawful
conduct rather than the unlawful conduct the plaintiff [s] would
ask the court to infer." Am. Dental Ass'n, 605 F.3d at 1290
(quoting Iqbal and relying on Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007)). Ultimately, if the plaintiffs have not
"nudged their claims across the line from conceivable to
plausible, their complaint must be dismissed." Id. at 1289
(quoting Twombly, 550 U.S. at 570).
B. Discussion
Following Iqbal's guidance, it is clear that Plaintiffs
have failed to state a claim upon which relief may be granted.
The Plaintiffs' Complaint is a essentially a series of legal
terms and undeveloped, wholly unsupported accusations, strung
together in a stream of consciousness fashion.
Proceeding under the two-pronged approach set forth in
Igbal, the Court first eliminates the "legal conclusions" and
"threadbare recitals of the elements of a cause of action"
contained in Plaintiffs' Complaint. Iqbal, 129 S.Ct. at 1949.
In the instant case, the first step in the Iqbal process
basically eliminates the Plaintiffs' entire complaint. For
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example, the Plaintiffs claim that Flagstar engaged in "systemic
institutionalized racism in sub-prime home Mortgage Lending, in
that constitutes predatory Mortgage Lending, of which contrary
to the Truth and Lending Act, and in violation of the Fair
Housing Act and the Equal Credit Opportunity Act, as well as the
Civil Rights Act," but fail to identify even a scintilla of
factual support for such claims. Id. ¶ 10. Such a statement,
without factual support, is a legal conclusion that the Court
must disregard. The remainder of Plaintiffs' Complaint reads
basically the same .7 Even after taking a fine-toothed comb to
the Plaintiffs' Complaint, the Court can find almost no factual
statement suggesting the slightest wrongdoing by Flagstar.
The sole statement that approaches a factual allegation is
contained in Paragraph 9 of the Complaint and states, in
relevant part, "all the funds/payments by checks [that Elizabeth
Dukay, a Flagstar employee] collected and received for the
Defendant Flagstar Bank were unreported, unaccounted and
unaudited according to information, belief and personal
knowledge." Dkt. No. 1, 91 9. The remainder of Paragraph 9
See, e.g., Dkt. No. 1, ¶ 5 (accusing Flagstar of collecting "unfair debt
mortgage payment"), ¶ 7 (accusing Flagstar of collecting "excessive illegal
payments"), ¶ 8 (stating that a loan closing document shows that the
"mortgage loan paperwork is Bogus illegal, and contains and constitutes
Fraud," but no closing document is attached), ¶ 12 (stating that the
Plaintiffs made adequate payments to Flagstar, but that portions of the
payments were "extra excessive"), ¶ 13 (stating damages were the result of
Flagstar's "bad faith illegal wrongful acts and actions"), 91 14 (stating
that "conspiracy was . . . carried out through a pattern of racketeering
activity"), 91 15 (stating Flagstar "conspired to collect and received extra
excessive over payments")
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states that an "Exhibit A," containing copies of the checks, is
attached to the Complaint. No exhibit was attached to the
Complaint 8
Even giving the Plaintiffs the utmost leeway as pro se
litigants, and engaging in truly liberal construction, the Court
holds that Plaintiffs' statement in Paragraph 9 still falls
short of asserting a plausible factual allegation. Drawing all
inferences in the Plaintiffs' favor, the statement essentially
says: Plaintiffs made payments to Flagstar, and Flagstar failed
to credit those payments to Plaintiffs' account. The statement
contains no details about the payments that Plaintiffs allege
were not credited, such as the amount or number of the
unreported payments. 9 This allegation is purely conclusory, and
therefore, under Igbal, should be disregarded. The Court does
not reject the claim in Paragraph 9 because it is "unrealistic
or nonsensical" or because the claim is "too chimerical to be
The Plaintiffs attached copies of several checks payable to Flagstar as an
exhibit to a later filing. Dkt. No. 19, Ex. A. Presumably, these are the
same checks the Plaintiffs intended to attach as Exhibit A to their
Complaint. The Court does not consider the checks in resolving Flagstar's
Motion to Dismiss, given that the documents were not properly attached as
exhibits to the Complaint. However, the Court emphasizes that even if the
checks had been properly attached to the Complaint the outcome would be the
same. At most, the checks demonstrate that Plaintiffs made certain payments
to Flagstar, a fact Plaintiffs plainly assert in their Complaint, which
consequently is presumed as true when evaluating Flagstar's Motion to
Dismiss. Further proof of payments would provide no additional benefit to
Plaintiffs.
Most importantly, the Plaintiffs fail to explain the basis for their belief
that the payments were not credited to their account. For example, the
Plaintiffs could have pointed to a billing discrepancy or a verbal statement
by a Flagstar representative disputing that Plaintiffs had made the
payments. The Plaintiffs have done nothing of the sort.
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maintained"; the Court rejects the claim because it is entirely
lacking in factual detail, embodying the concept of a
"conclusory" allegation. Igbal, 129 S.Ct. at 1951.
Aside from the brief mention of "unreported, unaccounted,
and unaudited" payments, the only factual allegations that
remain after elimination of the Complaint's legal conclusions
are as follows: (1) the Plaintiffs had a mortgage with Flagstar,
(2) Plaintiffs paid certain mortgage payments to Flagstar, and
(3) Plaintiffs are unhappy with the terms of the relationship
with Flagstar. Beyond these few innocuous facts, Plaintiffs'
Complaint is a repetitive, conclusory assertion that Flagstar
acted unlawfully. As such, it is unnecessary for the Court to
proceed to the second prong of Iqbal, determining the
plausibility of the allegations.
Plaintiffs have done precisely what Iqbal prohibits: stated
an "unadorned, the-defendant-unlawfully-harmed-me accusation"
built on "labels and conclusions." Igbal, 129 S.Ct. at 1949.
Plaintiffs' Complaint is utterly devoid of factual support and
therefore the Complaint is dismissed for failure to state a
claim on which relief can be granted.
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CONCLUSION
For the reasons stated above, Defendant Flagstar's Motion
to Dismiss is GRANTED. The Clerk is directed to close the case
and ENTER FINAL JUDGMENT in favor of Defendant on all claims.
SO ORDERED, this 8th day of December, 2011.
LISA GODBEY OD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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