Tucker et al v. Charles Schwab Bank et al

Filing 73

ORDER Signed by the Honorable John J. Tharp, Jr on 5/19/2014: For the reasons set forth in the Statement below, the Court denies the motion to dismiss. A status hearing is set for May 29, 2014, at 9:00 a.m. (For further details see order)Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARION J. TUCKER and STEPHANIE
TUCKER,
Plaintiffs,
v.
CHARLES SCHWAB BANK, f/k/a
Charles Schwab Bank, N.A,
Defendant.

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No. 12 C 03399
Judge John J. Tharp, Jr.

ORDER
For the reasons set forth in the Statement below, the Court denies the motion to dismiss.
A status hearing is set for May 29, 2014, at 9:00 a.m.
STATEMENT
In their Second Amended complaint, mortgagors Marion and Stephanie Tucker continue
to assert that defendant Charles Schwab lacks an enforceable interest in their mortgage and that,
therefore, its efforts to collect payments, its filing of a lis pendens, and its action to foreclose on
the property securing the mortgage are unlawful. The complaint alleges that Schwab violated the
Fair Debt Collection Practices Act (“FDCPA”) by “posing deceptively” as the owner of the note.
The Tuckers also brings a claim to quiet title,1 seeking a declaratory judgment “to clarify the
interest, if any, that Defendant has . . . in the Note, the Mortgage, and/or the Subject Property.”
Schwab, the only remaining defendant, moves to dismiss the complaint.
“Dismissal for failure to state a claim under Rule 12(b)(6) is proper ‘when the allegations
in a complaint, however true, could not raise a claim of entitlement to relief.’” Virnich v.
Vorwald, 664 F.3d 206, 212 (7th Cir. 2011) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554,
558 (2009)). The complaint must contain allegations that state a claim to relief that is plausible
on its face. Id.; see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Twombly, 550 U.S. at 570. “A
claim has facial plausibility when the plaintiff pleads ‘factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.’” Virnich,
664 F.3d at 212 (quoting Iqbal, 556 U.S. at 663). In reviewing a plaintiff's claim, the court must
construe all of the plaintiff's factual allegations as true, and must draw all reasonable inferences
1

“An action to quiet title in property is an equitable proceeding in which a party seeks to remove
a cloud on his title to the property…. To constitute a cloud, there must be a semblance of title
that is, in fact, unfounded and casts a doubt upon the validity of the record title.” Stahelin v.
Forest Preserve Dist., 877 N.E. 2d 1121, 1135 (Ill. App. Ct. 2007).

in the plaintiff's favor, but legal conclusions and conclusory allegations merely reciting the
elements of the claim are not entitled to this presumption. Id.
In deciding a motion to dismiss, “a court may consider, in addition to the allegations set
forth in the complaint itself, documents that are attached to the complaint, documents that are
central to the complaint and are referred to in it, and information that is properly subject to
judicial notice.” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013); see Fed. R. Civ. P.
10(c) (“[A] written instrument that is an exhibit to a pleading is a part of the pleading for all
purposes”). Here the complaint incorporates and attaches a number of documents, Exhibits A
through H, and those materials are therefore before the Court in considering Schwab’s motion.
Schwab first argues that Count I must be dismissed on the grounds that, as a matter of
law, it is not a “debt collector” within the meaning of the FDCPA. It is indisputable that a
creditor that collects its own debt using its own name is not a “debt collector,” and this includes a
mortgagee attempting to enforce a mortgage debt. 15 U.S.C. § 1692a(4), (6); see also Nwoke v.
Countrywide Home Loans, Inc., 251 Fed. App. 363, 365 (7th Cir. 2007) (holding that mortgagee
was creditor, not “debt collector”). This legal conclusion, however, depends upon disregarding
the facts alleged in the complaint, namely, that Schwab does not own or hold the mortgage and
note and has no right to enforce it. According to the complaint, Schwab never acquired the right
to enforce the mortgage and note from the prior owner of the mortgage, a mortgage-backed
securities trust. Despite Schwab’s argument to the contrary, the plaintiffs are not merely
asserting a bald legal conclusion that Schwab is a “debt collector”—a conclusion that this Court
need not credit. Rather, the plaintiffs assert facts undermining Schwab’s unsupported conclusion
that it is a “creditor” under the statute.2
This kind of factual dispute would ordinarily require denial of a motion to dismiss, as
such motions cannot be decided on the basis of contradicting the facts set forth in the complaint.
See, e.g., Senne v. Village of Palatine, 695 F.3d 597, 608 (7th Cir. 2012); Marshall-Mosby v.
Corporate Receivables, Inc., 205 F.3d 323, 326-27 (7th Cir. 2000). However, the documents
attached to the complaint might tell a story that is different from plaintiff’s allegations. Among
these are an assignment3 (Exhibit “E”) and an endorsement allonge to the mortgage note4
(“Exhibit F”) which purport to show that Schwab is the holder of the note and therefore entitled
to enforce it.
2

For example, despite the substantial extrinsic material attached to the complaint, Schwab does
not rely on (i.e., cite to) any of these documents with respect to its arguments that it is a
“creditor” and that it is a legal “holder” of the note. See Mem., Dkt. # 63 at 4-7.
3

The Assignment is dated February 18, 2005 (the same date on which the mortgage was
recorded) and was recorded on July 26, 2012—after the state-court foreclosure action had been
filed by Schwab and after the plaintiffs filed this lawsuit.

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The allonge purports to endorse a note to Schwab “without recourse.” Although the heading of
the allonge states that it is “To be made a part of the Mortgage Note referenced hereon,” nowhere
on the allonge is there a “reference” a specific mortgage note to which the allonge releates. It
does refer to Mortgagor Marion Tucker but it is undated and does not identify the note or state
the loan number or amount.
2

“When an exhibit incontrovertibly contradicts the allegations in the complaint, the exhibit
ordinarily controls, even when considering a motion to dismiss.” Bogie v. Rosenberg, 705 F.3d
603, 609 (7th Cir. 2013) (further explaining that “[w]hen an exhibit contradicts the allegations in
the complaint, ruling against the non-moving party on a motion to dismiss is consistent with our
obligation to review all facts in the light most favorable to the non-moving party.”). The
documents that plaintiff has submitted appear to contradict their claim that the note was not
assigned to Schwab.
The plaintiffs, however, attempt to “contradict the apparent meaning or significance” of
these documents, which can preclude dismissal. See Bogie, 705 F.3d at 609; see also Williamson,
714 F.3d at 436 (court would rely on documents referred to in complaint “in the absence of any
indication from [plaintiff]—be it in the complaint or the briefing—that the documents are not
genuine or that they have been falsified in some way”). In the complaint, they allege: “The
purported ‘Assignment’ is a forged document and is void ab initio. The purported ‘Assignment’
is a back-dated, pre-notarized contract document, and was dubiously prepared for litigation.”
Compl., Dkt. # 54 ¶ 20; see id. ¶¶ 21-25 (alleging facts supporting claim that assignment was not
prepared in 2005). The plaintiffs further alleges that the allonge is invalid because it is not
attached to the note, and that it is “another inauthentic document created in anticipation, or
response to, litigation,” which “should be considered a forgery, and void ab initio as well.” In
response to the motion to dismiss, the plaintiffs argue the defendants are attempting to obtain
dismissal by contradicting the complaint, and that “the Defendant lacks the essentials for its
claim (a Note in its name or endorsed to it) and is probably manufacturing substitute documents
during litigation to take their place.”
The plaintiffs have sufficiently challenged the authenticity of the documents—documents
which, it bears repeating (see Note 2, supra), Schwab has not specifically relied upon to support
its arguments that it is a “creditor” for FDCPA purposes and a “holder” for purposes of Illinois
law. Generally, a bald claim that facially proper documents are forged or falsified would not be
sufficient. But here, the documents themselves and the circumstances under which they have
appeared in this case lend plausibility to the plaintiffs’ claim. The key documents that purport to
definitively establish Schwab’s status as a holder have trickled out slowly (or have yet to appear)
in the course of this case, in response to plaintiffs pointing out apparent deficiencies in Schwab’s
chain of evidence. Despite their significance to showing Schwab’s right to enforce the mortgage
and note, these documents were not submitted in support of the original foreclosure complaint—
a fact that clearly precipitated this lawsuit and the plaintiffs’ belief that they are in jeopardy of
paying the wrong entity, without recourse. Schwab has made no effort to authenticate the
documents, which are not self-explanatory, or to explain the circumstances through which they
were generated and produced. For example, as noted by the plaintiffs and the court, the allonge
contains very little information—it lacks a date, loan number, and loan amount—and stands
apart from the note. And while Schwab repeatedly insists that it is the holder of the note, that too
is a question of fact as to which there is no basis to find in Schwab’s favor at present: it did not
attach a copy of the note to its state court complaint and it has not yet surfaced in this case.
In light of these issues, some explanation and authentication is needed if these documents
are to support dismissal. As it stands, in the face of the plaintiff’s allegations and the opacity of
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the evidence, the Court will not take Schwab’s word for it that it is the holder of the note or that
the documents it was not able to produce in support of its initial foreclosure complaint are proper
and authentic. And without them, Schwab has no support for the conclusory statements it makes
in favor of dismissal, namely that it is a creditor and a holder, contrary to the allegations in the
complaint. Rather than filing its motion to dismiss the second amended complaint, the defendant
would have been better served denying the allegations in the complaint and moving for summary
judgment on the basis of an authenticated set of documents proving its right to enforce the
mortgage.
Schwab’s arguments for dismissing Count II, the declaratory judgment action, are also
premised on its status to enforce the mortgage and note. Schwab contends that it is entitled to
dismissal because “[a]s holder of the note, Charles Schwab is entitled to enforce it under clear
UCC law.” Mem., Dkt. # 63 at 7. Again, the argument relies on the as-yet-unproved assertion
that Schwab is the legal “holder” of the note. On a motion to dismiss, the Court will not resolve
that disputed issue of fact on the basis of documents whose authenticity has been challenged.
The motion to dismiss is therefore denied.
Date: May 19, 2014

Enter: /s/ John J. Tharp
Hon. John J. Tharp, Jr.
United States District Court

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