Goode et al v. Pennymac et al
Filing
52
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, the motions to dismiss [30, 33] of Defendants PennyMac, MERS, and Bank of America are granted, and the claims against them are dismissed wit h prejudice. The claims against American Sterling Bank, Ginnie Mae, the unidentified defendants are dismissed without prejudice for failure to effect proper service of process. A separate AO-450 judgment shall be entered. Status hearing of 12/11/2014 is vacated. Civil case terminated.Emailed and mailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DIAHANN GOODE,
)
)
Plaintiff,
)
)
v.
)
)
PENNYMAC LOAN SERVICES, LLC, et al., )
)
Defendants.
)
No. 14 C 01900
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Pro se Plaintiff Diahann Goode1 filed this suit against PennyMac Loan
Services, LLC, American Sterling Bank, Mortgage Electronic Registration Systems,
Inc. (MERS), Government National Mortgage Association (Ginnie Mae), Bank of
America, N.A., and “Does 1 through 100, inclusive,” alleging various claims related
to Goode’s mortgage loan.2 R. 8, Compl. Defendants PennyMac, MERS, and Bank of
America have moved to dismiss Goode’s complaint under Federal Rule of Civil
Procedure 12(b)(6). R. 30, PennyMac and MERS’s Mot. Dismiss; R. 33, Bank of
America’s Mot. Dismiss. For the reasons discussed below, Defendants’ motions are
granted. Goode’s claims against American Sterling Bank and Ginnie Mae are also
dismissed without prejudice for failure to effect proper service under Federal Rule of
1Although
Anson Goode, Ms. Goode’s husband, often appears in the case caption, he
is not a plaintiff in this case. See R. 12, Apr. 25, 2014 Minute Entry (“Plaintiff informed the
Court that she did not intend to name Anson Goode as a plaintiff in this case. The Clerk’s
Office shall terminate Anson Goode as a plaintiff.”).
2This Court has subject matter jurisdiction under 28 U.S.C. § 1331 over the TILA
and RESPA claims, and supplemental jurisdiction over the state law claims under 28
U.S.C. § 1367.
Civil Procedure 4. Finally, Goode’s claims against “Does 1 through 100, inclusive”
are dismissed without prejudice because Goode failed to timely identify and serve
these unidentified parties.
I. Background
In November 2007, Diahann and Anson Goode took out a $197,214 loan from
American Sterling Bank. Compl. ¶ 30; see also R. 9, Pl.’s Exh. 1, Carrigan Aff. ¶¶ 67 (identifying November 26, 2007 as the closing date); R. 9, Pl.’s Exh. 2, Elrod Aff.
¶ 16 (same); R. 32-1, Defs.’ Exh. A.A, Mortgage at 7 (same). The loan was secured by
a mortgage on their home, located at 9343 South Indiana Avenue in Chicago,
Illinois. Compl. ¶¶ 13, 30. The mortgage identifies MERS as the nominee of the
American Sterling Bank and its successors and assigns. Id. ¶¶ 8, 34; Mortgage at 1.
In February 2014, PennyMac (which is now the holder of the note, as explained
later in the Opinion) sought to foreclose the Goodes’ mortgage, claiming that the
Goodes had not made payments since August 2013. R. 32-1, Defs.’ Exh. A,
Foreclosure Compl.
Goode filed this lawsuit shortly after PennyMac initiated the foreclosure
proceedings. She alleges that American Sterling signed a “Pooling and Servicing
Agreement” that allowed her loan to be converted into a security. Compl. ¶¶ 22, 30.
Securitizing the mortgage required transferring the note to Ginnie Mae, which was
acting as trustee for the TRUST 2008-012 Trust. Id. ¶ 31. The Goodes’ mortgage
would then be packaged with other mortgages and shares would be sold to
investors. Id. ¶¶ 18, 20. According to Goode, this process required several transfers
2
and assignments before a particular date. Id. ¶¶ 32-33, 35-36. She alleges that these
transfers did not happen properly, and that Ginnie Mae, therefore, did not hold or
own the promissory note or have a right to enforce the mortgage. Id. ¶¶ 35-36, 4043. Goode also claims that during the securitization process, the promissory note
and the underlying mortgage were separated, making them unenforceable. Id.
¶¶ 44-45, 50. She alleges that, because of these deficiencies, none of the Defendants
(whose precise role in the securitization process is not explained in the complaint)
can enforce the mortgage against the Goodes. Id. ¶ 51. The only individual who has
standing to foreclose, according to Goode, “is the holder of the note because they
have a beneficial interest.” Id. ¶ 59. She identifies these individuals as “the
certificate holders of the securitized trust.” Id. Based on these allegations, Goode
brought claims for wrongful foreclosure, fraud in the inducement, intentional
infliction of emotional distress, slander of title, and quiet title. Id. ¶¶ 57-76, 87-88,
90, 94-120.
In her complaint, Goode also identifies several issues with substance of the
note and mortgage. She alleges that the terms of the promissory note and mortgage
were not properly disclosed by American Sterling, that the terms were unclear,
inconsistent, and illegal, and that American Sterling wrongfully qualified the
Goodes for a loan that they could not afford. Compl. ¶¶ 52-54. She further claims
that all of the Defendants “neither explained the workings of the entire mortgage
loan transaction, how the rates, finance charges, costs and fees were computed, nor
the inherent volatility of the loan product(s) provided by Defendants.” Id. ¶ 55.
3
Based on these allegations, Goode brought claims for fraudulent concealment, fraud
in the inducement, violations of the Truth in Lending Act (TILA), 15 U.S.C. § 1601,
et seq., and violations of the Real Estate Settlement Procedures Act (RESPA), 12
U.S.C. § 2601, et seq.
II. Legal Standards
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need
only include “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give
the defendant fair notice of what the…claim is and the grounds upon which it
rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation
marks and citation omitted). The Seventh Circuit has explained that this rule
“reflects a liberal notice pleading regime, which is intended to ‘focus litigation on
the merits of a claim’ rather than on technicalities that might keep plaintiffs out of
court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v.
Sorema N.A., 534 U.S. 506, 514 (2002)).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570). These allegations “must be enough to raise a right to relief above
the speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to
4
the assumption of truth are those that are factual, rather than mere legal
conclusions. Iqbal, 556 U.S. at 678-79.
Claims alleging fraud must also satisfy the heightened pleading requirement
of Federal Rule of Civil Procedure Rule 9(b), which requires that “[i]n alleging fraud
or mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b) (emphasis added). Thus, Rule 9(b) “require[s]
the plaintiff to state the identity of the person making the misrepresentation, the
time, place, and content of the misrepresentation, and the method by which the
misrepresentation was communicated to the plaintiff.” Uni*Quality, Inc. v.
Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) (internal quotation marks and
citation omitted). Put differently, the complaint “must describe the who, what,
when, where, and how of the fraud.” Pirelli Armstrong Tire Corp. Retiree Med.
Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011) (internal
quotation marks and citation omitted).
III. Analysis
A. PennyMac, MERS, and Bank of America
In her complaint, Goode brings ten separate claims against all Defendants:
(1) wrongful foreclosure; (2) fraudulent concealment; (3) fraud in the inducement;
(4) intentional infliction of emotional distress; (5) slander of title; (6) quiet title;
(7) declaratory relief; (8) TILA; (9) RESPA; and (10) rescission. Compl. ¶¶ 57-154.
Because many of Goode’s claims—Counts 1, 3, 4, 5, 6, 7, and 10—depend at least in
5
part on which party (if any) has standing to foreclose on the Goodes’ mortgage, the
Court will address that issue first. The remaining claims will be addressed in turn.3
1. Standing to Foreclose
The central allegation of Goode’s complaint is that no Defendant has a
“lawful ownership or a security interest” in Goode’s home. Compl. ¶¶ 15, 30-56.
Goode claims that her mortgage loan was securitized shortly after it was executed.
Id. ¶ 31. The securitization process required several transfers between various
parties, ultimately culminating in a transfer to Ginnie Mae, acting as trustee for
the TRUST 2008-012 Trust. Id. ¶¶ 31-33. Goode alleges that the transfers were not
properly performed and are therefore void. Id. ¶¶ 35-44. She further alleges that in
the process of these transfers, her mortgage and promissory note were split up,
allegedly making them unenforceable. Id. ¶ 50. Because the transfer to Ginnie Mae
was invalid and the split note and mortgage could not be enforced, Goode concludes
that Ginnie Mae, which she claims identified itself (though she provides no factual
context for this allegation) as the “holder and owner” of the note and beneficiary of
the mortgage, does not own the mortgage or have standing to foreclose. Id. ¶¶ 3551. She further concludes that the only party who can foreclose on her mortgage is
the “holder of the note”; she identifies “the holder of the note” as the “certificate
holders of the securitized trust.” Id. ¶ 59.
PennyMac, MERS, and Bank of America4 argue that documents in the public
record demonstrate that PennyMac has standing to foreclose Goode’s mortgage
3No
party asked the Court to relinquish supplemental jurisdiction over the state-law
claims if the federal claims were to be dismissed. Therefore, the Court will address both the
state- and federal-law claims in evaluating the motions to dismiss.
6
loan. See R. 32, Defs.’ Br. at 4-7.5 Ordinarily, a court may not consider matters
outside the pleadings when deciding a motion to dismiss. Doss v. Clearwater Title
Co., 551 F.3d 634, 639-40 (7th Cir. 2008). A court may, however, take judicial notice
of matters of the public record without converting a motion to dismiss into a motion
for summary judgment. Ennenga v. Starns, 677 F.3d 766, 773-74 (7th Cir. 2012).
This “narrow exception” only permits judicial notice of facts that are “not subject to
reasonable dispute.” Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d
1074, 1080-81 (7th Cir. 1997) (quoting Fed. R. Evid. 201(b)). A fact is not subject to
reasonable dispute when it “(1) is generally known within the trial court’s territorial
jurisdiction; or (2) can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). Judicial notice
thus “allow[s] courts to avoid unnecessary proceedings when an undisputed fact in
the public record establishes that the plaintiff cannot satisfy the 12(b)(6) standard.”
Gen. Elec. Capital, 128 F.3d at 1081. A court may also consider documents attached
to a motion to dismiss without transforming it into a motion for summary judgment
if the documents are “referred to in the plaintiff’s complaint and are central to his
claim.” McCready v. eBay, Inc., 453 F.3d 882, 891 (7th Cir. 2006) (internal quotation
marks and citations omitted). “The court is not bound to accept the pleader’s
allegations as to the effect of the exhibit, but can independently examine the
4In
addition to making its own arguments, Bank of America adopted the arguments
made by PennyMac and MERS in their motion to dismiss. R. 33-1, Bank of America’s Br at
6.
5For convenience’s sake and because all moving parties have adopted the arguments
therein, the Memorandum in Support of PennyMac and MERS’s Joint Motion to Dismiss
[R. 32] will be referred to as Defs.’ Br.
7
document and form its own conclusions as to the proper construction and meaning
to be given the material.” Burke v. 401 N. Wabash Venture, LLC, 714 F.3d 501, 505
(7th Cir. 2013) (internal quotation marks and citations omitted).
Based on these principles, the Court will consider the underlying state-court
foreclosure complaint, the attached mortgage and promissory note, and records of
assignments available from the Cook County Recorder of Deeds in evaluating the
motions to dismiss. See Defs.’ Exh. A, Foreclosure Compl; Defs.’ Exh. A.A, Mortgage;
R. 32-1, Defs.’ Exh. A.B, Note; R. 32-3, Defs.’ Exh. C, Apr. 17, 2012 Assignment; R.
32-4, Defs.’ Exh. D, Dec. 20, 2013 Assignment. Goode’s complaint frequently
references the foreclosure action against her, see, e.g., Compl. ¶¶ 43, 57-76, 94-104,
and there is no question that it is central to her claims. She alleges, among other
things, wrongful foreclosure and intentional infliction of emotional distress based
upon the underlying foreclosure action. Id. Moreover, the foreclosure complaint is a
matter of the public record; it is a state-court document, “a source whose accuracy
cannot reasonably be questioned.” Gen Elec. Capital, 128 F.3d at 1081 (quoting Fed.
R. Evid. 201(b)) (internal quotation marks omitted); see also Henson v. CSC Credit
Servs., 29 F.3d 280, 284 (7th Cir. 1994) (holding that public court documents are the
proper subject of judicial notice). The Court will therefore consider the underlying
foreclosure proceeding in evaluating the motions to dismiss (it bears emphasizing
that the state-court filings do not, by themselves, establish facts; rather the point is
that the Court may examine them because there is no reason to doubt that they
have been filed on the state docket). The mortgage itself and the promissory note
8
are also referred to in Goode’s complaint and central to her allegations. Goode’s
basic argument is that no party has lawful ownership of both the mortgage and the
note, and therefore no party can enforce the mortgage. See, e.g., Compl. ¶¶ 15, 4045, 67. The mortgage and note are critical to Goode’s allegations, and the Court will
consider the documents in evaluating the motions to dismiss. Finally, the Court will
consider the assignments of the Goodes’ mortgage that are available through the
Cook County Record of Deeds. The transfers and assignments of the mortgage are
referenced in and central to Goode’s claims, because she alleges that Defendants
cannot show proper assignment of the mortgage and note. See, e.g., Compl. ¶¶ 2627, 35-36, 40-43. The Court will therefore consider the assignments, particularly
because they are available in the public record.
The underlying foreclosure action, the mortgage documents, and the
assignments available in the public record render the allegations in Goode’s
complaint implausible. Yes, a court must accept a complaint’s allegations as true at
the dismissal-motion stage, but “determining whether a complaint states a
plausible claim is context-specific, requiring the reviewing court to draw on its
experience and common sense.” Iqbal, 556 U.S. at 663-64. Goode alleges that her
mortgage was securitized and transferred to a trust managed by Ginnie Mae, and
that Ginnie Mae claims to be the “holder and owner” of Goode’s promissory note and
the beneficiary of the mortgage. Compl. ¶¶ 31, 40. Because of the nature of this
securitization process, Goode alleges that no Defendant has standing to foreclose.
Id. ¶¶ 58-59. But Goode provides no factual context for the allegation that Ginnie
9
Mae asserts that it is the holder and owner of the note and the mortgage’s
beneficiary. In what context has that purported assertion been made? The
complaint says nothing about that, and so provides no notice of the specific claim.
And, on top of the lack of notice, the documents in the record plainly contradict this
assertion. The underlying foreclosure action was brought by PennyMac, not Ginnie
Mae, and PennyMac asserts that it is the holder and owner of the note and
beneficiary of the mortgage. See Defs.’ Exh. A, Foreclosure Compl. PennyMac
attached the promissory note, indorsed in blank, to the foreclosure complaint. Defs.’
Exh. A.B, Note. Furthermore, the assignments in the public record show that the
mortgage was assigned by MERS (as nominee) to Bank of America on April 17,
2012, and then from Bank of America to PennyMac on December 20, 2013. Defs.’
Exh. C, Apr. 17, 2012 Assignment; Defs.’ Exh. D, Dec. 20, 2013 Assignment. There
is no recorded transfer or assignment to Ginnie Mae or any trust, and no hint that
Ginnie Mae has ever identified itself as the holder or owner of the note or
beneficiary of the mortgage.
In an affidavit attached to Goode’s complaint, Chad Elrod, who purportedly
conducted “Securitization Analysis” on Goode’s mortgage, declares that there is an
assignment of Goode’s mortgage “dated FEBRUARY 28, 2008 and recorded APRIL
23, 2012 COOK County, ILLINOIS No. #11408189 with an assignor MERS with an
assignee GOVERNMENT NATIONAL MORTGAGE ASSOCIATION as Trustee for
the TRUST 2008-012 Trust.” Pl.’s Exh. 2, Elrod Aff. ¶ 45. Ordinarily, this factual
assertion would be taken as true for the purposes of the motion to dismiss. But the
10
documents available through the Cook County Recorder of Deeds, combined with
common sense, lead to the unavoidable conclusion that this allegation is
implausible. Elrod states that there is an assignment to Ginnie Mae recorded on
April 23, 2012 with a document number of 11408189. Yet there is no document
bearing this number in the records of the Cook County Recorder of Deeds.6 A search
using the Goodes’ property identification number (25033170150000) does show a
document recorded on April 23, 2012, but this document is the April 17, 2012
assignment from MERS to Bank of America.7 See Defs.’ Exh. C, Apr. 17, 2012
Assignment. Curiously, this assignment bears the document number 1211408189,
the last eight digits of which are identical to the document number of the purported
assignment to Ginnie Mae identified in the Elrod Affidavit. There do not appear to
be any assignments to or from Ginnie Mae associated with the Goodes’ property
identification number. And Goode does not attach to the complaint a copy of the
purported assignment to Ginnie Mae, nor does Elrod explain the method by which
he searched for the document. The absence of the purported transfer to Ginnie Mae
in the public records of the State, combined with the absence of an explanation by
Elrod as to how he came to the legal conclusion that there is an assignment to
Ginnie Mae, render Goode’s allegation that this transfer occurred implausible.
6The
Court also attempted to search for document numbers 1140818900 and
0011408189 without success (most document numbers in the records of the Cook County
Recorder of Deeds appeared to be ten digits long).
7The existence or non-existence of these documents in the public records of the state,
“a source whose accuracy cannot reasonably be questioned,” is the proper subject of judicial
notice. See Fed. R. Evid. 201(b).
11
Goode’s complaint also alleges that Bank of America was the “Master
Servicer” for the securitized trust run by Ginnie Mae.8 Compl. ¶ 7. Read charitably,
this allegation could suggest that the assignment to Bank of America was, in fact,
an assignment to the trust. In the affidavit of Michael Carrigan, attached to Goode’s
complaint, Carrigan asserts that “Guarantor – Ginnie Mae” is reported as an
“investor” in the Goode’s loan on the MERS website, “which indicates a past or
current purported ownership interest of the FHA loan.” Pl.’s Exh. A, Carrigan Aff.
¶ 7. Carrigan then notes the existence of a Ginnie Mae trust settled in February,
2008 underwritten by Banc of America Securities LLC and Loop Capital Markets
LLC. Id. (identifying the trustee as U.S. Bank National Association). Carrigan
ultimately concludes after “[c]areful review and examination” that the Goodes’
mortgage “may have been a securitized loan.” Id. ¶ 15 (emphasis added). The Elrod
Affidavit also describes the Ginnie Mae TRUST 2008-012 Trust as being serviced by
Bank of America. Pl.’s Exh. 2, Elrod Aff. ¶ 16. Elrod includes screenshots of records
found on Bloomberg L.P., but none of these screenshots appear to identify Bank of
America as the servicer. Id. Elrod does not provide any information as to how he
knows Bank of America is the servicer, stating unintelligibly that “[t]he loan is
being serviced by BANK OF AMERICA, N.A. with the clarifying code and, or
abbreviation on the Specialty Licensed Terminal of GINNIE MAE REMIC TRUST
2008-012.” Id.
8Perhaps
this explains why Elrod would identify an assignment from MERS to Bank
of America as one from MERS to Ginnie Mae.
12
Unfortunately for Goode, these allegations are not sufficient to raise her
claim for relief beyond the speculative level. Particularly when viewed in
conjunction with the other deficiencies in Goode’s complaint, the conclusory
statements that Bank of America was involved with the Ginnie Mae trust that is
then linked vaguely to the Goode’s loan does not constitute “sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678. Based on a common-sense reading of Goode’s complaint and
the documents referenced therein that are central to Goode’s claims, the Court
concludes that Goode’s allegations surrounding Ginnie Mae’s involvement, the
assignment of the Goodes’ mortgage to a trust, and the securitization process are
implausible.
This conclusion bears on several counts in Goode’s complaint. In Count 1,
Goode brings a claim for “wrongful foreclosure,” in which she claims that no
Defendant has the right to foreclose on the mortgaged property. Compl. ¶¶ 57-76.
As a preliminary matter, this Count fails to state a claim against MERS or Bank of
America because Goode has put forth no factual allegations whatsoever that either
Defendant has taken any action to foreclose. Although Goode makes no specific
allegation that PennyMac wrongfully foreclosed her mortgage, the underlying
foreclosure
complaint
demonstrates
that
PennyMac
instituted
foreclosure
proceedings. See Defs.’ Exh. A, Foreclosure Compl. In her claim for wrongful
foreclosure, Goode claims that no Defendant has standing to foreclose because the
loan was not properly securitized, and that “[n]o Defendant…can show they are the
13
holder or owner of the mortgage and/or note.” Compl. ¶¶ 35-44, 60-62. She claims
that “the only individual who has standing to foreclose is the holder of the note
because they have a beneficial interest.” Id. ¶ 59. She goes on to identify the holders
as the “certificate holders of the securitized trust.” Id. As discussed above, however,
Goode’s allegations that the mortgage was transferred to Ginnie Mae and placed in
trust to be securitized are implausible. The documents before the Court show that
PennyMac was in possession of the note, indorsed in blank, and an assignee of the
mortgage. Defs.’ Exh. A.B, Note; Defs.’ Exh. C, Apr. 17, 2012 Assignment; Defs.’
Exh. D, Dec. 20, 2013 Assignment. Under Illinois law, PennyMac had standing to
enforce the mortgage as a holder of the note. See 735 ILCS 5/15-1504(a)(3)(N); 810
ILCS 5/1–201(b)(21)(A); Mortg. Elec. Registration Sys., Inc. v. Barnes, 406 Ill. App.
3d 1, 6 (Ill. App. Ct. 2010); see also Compl. ¶ 59 (“[T]he only individual who has
standing to foreclose is the holder of the note.”). Goode’s claim of wrongful
foreclosure therefore fails to state a claim against PennyMac.
In Count 3 of her complaint, Goode alleges fraud in the inducement. Compl.
¶¶ 86-93. She claims, in part, that Defendants fraudulently foreclosed on Goode’s
mortgage by misrepresenting that they were the holder and owner of the note and
the beneficiary of the mortgage. Id. ¶ 88. Again, there are no factual allegations
that MERS or Bank of America took any action to foreclose or represented that they
were the holder and owner of the note or beneficiary of the mortgage. This Count,
therefore, fails to state a claim against those Defendants. Count 3 also fails to state
a claim against PennyMac. Count 3 alleges that Defendants fraudulently
14
misrepresented that they were the holder and owner of the note and had standing
to foreclose. As discussed above, Goode’s allegations that the loan was transferred to
Ginnie Mae and securitized are implausible, and the documents before the Court
demonstrate that PennyMac held the note indorsed in blank. Goode’s allegations
that PennyMac misrepresented itself as holder of the note do not plausibly state a
claim. To the extent that the fraud-in-the-inducement count relies on standing to
foreclose, it is dismissed.
In Count 4, Goode alleges intentional infliction of emotional distress caused
when Defendants “fraudulently attempt[ed] to foreclose.” Compl. ¶¶ 94-104. Even
assuming that instituting foreclosure proceedings could ever qualify as the extreme
and outrageous behavior required for intentional infliction of emotional distress, for
the reasons discussed above, Goode does not state a plausible claim that
PennyMac’s attempt to foreclose was fraudulent. Again, there are no factual
allegations suggesting that MERS or Bank of America made any attempt to
foreclose. The claim for intentional infliction of emotional distress against
PennyMac, MERS, and Bank of America is therefore dismissed. In Counts 5 and 6,
Goode brings claims for slander of title and quiet title, which, again, are based on
Goode’s allegations that no party was the holder and owner of the note or
beneficiary of the mortgage. Id. ¶¶ 105-20. As stated above, PennyMac owned the
note, indorsed in blank. The quiet title and slander of title counts therefore fail to
state a claim. Finally, Goode asserted a claim for declaratory relief, seeking a
declaration that Defendants do not have authority to foreclose upon the property.
15
Compl. ¶¶ 123-32. For the same reasons, this count fails to state a claim and is
dismissed.
2. Fraud Claims
In Counts 2 and 3 of her complaint, Goode alleges that Defendants engaged
in two types of fraud: fraudulent concealment (Count 2) and fraud in the
inducement (Count 3). In her fraudulent-concealment claim, Goode alleges that
Defendants committed fraud by concealing that the mortgage loan would be
securitized. Compl. ¶ 78. She claims that securitization had “a materially negative
effect on Plaintiff” and that “Defendant knew or should have known that had the
truth been disclosed, Plaintiff would not have entered into the Loans.” Id. ¶¶ 78-79.
In her fraud-in-the-inducement claim, Goode focuses primarily on Defendants’
standing to foreclose, which was addressed above. See supra § III.A.1. In those
allegations that can be construed to avoid the standing-to-foreclose issue, Goode
claims that Defendants failed to disclose the “material terms” of the loan
transaction with the intent to cause Plaintiff to “rely on the misrepresentation.”
Compl. ¶¶ 89-90. This was allegedly done for “the purpose of initiating the
securitization process.” Id. ¶ 90.
PennyMac, MERS, and Bank of America argue that Goode has failed to state
a claim under the heightened pleading standard required for fraud claims under
Federal Rule of Civil Procedure 9(b). Defs.’ Br. at 8-9. The Court agrees. Under Rule
9(b), a plaintiff alleging fraud must “state with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b) (emphasis added). This
16
“require[s] the plaintiff to state the identity of the person making the
misrepresentation, the time, place, and content of the misrepresentation, and the
method by which the misrepresentation was communicated to the plaintiff.”
Uni*Quality, 974 F.2d at 923 (internal quotation marks and citation omitted).
Goode fails to allege any of the required elements for either fraud claim.
Goode
does
not
identify
who
made
misrepresentations
about
the
securitization process in either claim. In her fraudulent-concealment claim, she
makes a blanket allegation that “Defendants” concealed the fact that the loans were
to be securitized. Compl. ¶ 78. Nothing in her complaint identifies which of the
many Defendant(s) misrepresented the nature of her mortgage loan. Her fraud-inthe-inducement claim similarly refers only to “Defendants” without specifying who
made the offending misrepresentation. Id. ¶¶ 89-90. American Sterling Bank was
the original mortgage lender and allegedly entered into the Pooling and Servicing
Agreement that initiated the securitization process. Compl. ¶¶ 22, 30, 52-53. Goode
makes no factual allegations that PennyMac, MERS, or Bank of America were even
present when the loan was originated, let alone that they made misrepresentations
or concealed material information that induced Goode to enter into the loan. For
both fraud claims, Goode also fails to allege when these misrepresentations were
made or how the misrepresentations were communicated to her.
Goode’s description of the content of the misrepresentations is also
insufficient. Her fraud-in-the-inducement claim says only that Defendants “fail[ed]
to disclose the material terms of the transaction.” Compl. ¶ 89. She does not identify
17
what the material terms were or which terms were concealed. In describing the
misrepresentations in her fraudulent concealment claim, Goode alleges that
“Defendants concealed the fact that the Loans were securitized as well as the terms
of the Securitization Agreements.” Id. ¶ 78. According to Goode, this included
concealing financial incentives paid, the existence of Credit Enhancement
Agreements, and the existence of Acquisition Provisions.” Id. Even if these
undefined terms could provide enough particular factual information to give
PennyMac, MERS, and Bank of America sufficient notice of the nature of the claims
against them, the allegations fail to plead a required element of Goode’s claim: a
duty to disclose. In fraudulent concealment claims, “a plaintiff must allege that the
defendant intentionally omitted or concealed a material fact that it was under a
duty to disclose to the plaintiff.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 571
(7th Cir. 2012) (citing Weidner v. Karlin, 932 N.E.2d 602, 605 (Ill. App. Ct. 2010)).
This typically requires a fiduciary or confidential relationship between the parties
or a situation in which the defendant is in a position of influence and superiority
over the plaintiff. Id. (quoting Connick v. Suzuki Motor Co., 675 N.E.2d 584, 593
(Ill. 1996)). Goode has not alleged (either expressly or impliedly) any fiduciary or
confidential relationship between herself and PennyMac, MERS, or Bank of
America, nor has she put forth any other reason that Defendants had a duty to
disclose to her that her loan would be securitized. Because Goode’s fraudulent
concealment claim fails to plead all required elements and both fraud claims fall
18
dramatically short of the particularity requirement of Rule 9(b), Counts 2 and 3 are
dismissed.
3. TILA Claim
In Count 8, Goode alleges that all Defendants violated TILA “by failing to
provide Plaintiff with accurate material disclosures required under TILA/HOEPA.”9
Compl. ¶ 135. Under TILA, a lender in a commercial credit transaction is required
to disclose certain terms and conditions of the transaction to a borrower prior to
consummating the loan. Rendler v. Corus Bank, 272 F.3d 992, 996 (7th Cir. 2001).
Assignees of the original lender are only liable “if the violation for which such action
or proceeding is brought is apparent on the face of the disclosure statement.” 15
U.S.C. § 1641(a). A violation is “apparent” if it is “(1) a disclosure which can be
determined to be incomplete or inaccurate from the face of the disclosure statement
or other documents assigned, or (2) a disclosure which does not use the terms
required to be used by this subchapter.” Id.; see also Taylor v. Quality Hyundai,
Inc., 150 F.3d 689, 694 (7th Cir. 1998). A servicer of consumer loans “shall not be
treated as an assignee of such obligation…unless the servicer is or was the owner of
the obligation.” 15 U.S.C. § 1641(f)(1); see also Iroanyah v. Bank of America, 753
F.3d 686, 688 n.2 (7th Cir. 2014).
Goode fails to state a claim under TILA against PennyMac, MERS, and Bank
of America. Although a plaintiff’s factual allegations are accepted as true in the
motion to dismiss stage, “allegations in the form of legal conclusions are insufficient
9The
Home Ownership and Equity Protection Act of 1994 (HOEPA), Pub. L. 103-325,
108 Stat. 2160, amended TILA.
19
to survive a Rule 12(b)(6) motion.” McReynolds v. Merrill Lynch & Co., 694 F.3d
873, 885 (7th Cir. 2012) (citing Iqbal, 556 U.S. at 678). “Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Iqbal, 556 U.S. at 678. A plaintiff must “provide some specific facts to
support the legal claims asserted in the complaint.” McCauley v. City of Chicago,
671 F.3d 611, 616 (7th Cir. 2011) (quoting Brooks, 578 F.3d at 581) (internal
quotation marks and alterations omitted).
The factual allegations in Goode’s TILA claim are unacceptably sparse. In her
TILA claim, she alleges only that:
Defendants violated TILA/HOEPA by failing to provide Plaintiff with
accurate material disclosures required under TILA/HOEPA and not taking
into account the intent of the State Legislature in approving this statute
which was to fully inform home buyers of the pros and cons of adjustable rate
mortgages in a language (both written and spoken) that they can understand
and comprehend; and advise them to compare similar loan products with
other lenders. It also requires the lender to offer other loan products that
might be more advantageous for the borrower under the same qualifying
matrix.
Compl. ¶ 135. The only other statement in the complaint that could plausibly
support the alleged TILA violation says that Defendants “neither explained the
workings of the entire mortgage loan transaction, how the rates, finance charges,
costs and fees were computed, nor the inherent volatility of the loan product(s)
provided by Defendants.” Id. ¶ 55. Goode does not provide any factual matter
whatsoever describing what disclosures were given before consummating the loan,
who made such disclosures, and how the disclosures were deficient.
20
Moreover, Goode makes no attempt to plead facts showing that PennyMac,
MERS, and Bank of America—none of which were the original lender—are subject
to liability. As nominee, MERS is not subject to TILA liability unless it was the
owner of the original loan. 15 U.S.C. § 1641(f)(1); Iroanyah, 753 F.3d at 688 n.2
(holding that, as a nominee of a mortgage loan, MERS was not subject to liability
under TILA). Goode has made no allegations suggesting that this was the case. Cf.
Compl. ¶ 25 (stating that “MERS would hold the Mortgage/Deed of Trust for
whoever later claimed to be the ‘owner’ of the homeowners’ mortgage note”).
PennyMac and Bank of America could theoretically be subject to liability as
assignees of the lender, although Goode does not appear to make any specific
allegations suggesting that the parties were, in fact, assignees. Even assuming that
Goode provided sufficient factual matter, taken as true, to demonstrate that
PennyMac and Bank of America were assignees of American Sterling, Goode does
not plead any facts suggesting that the TILA violation was “apparent on the face of
the disclosure statement.” Goode hardly provides any facts at all; she does not come
close to alleging “enough details about the subject-matter of the case to present a
story that holds together.” McCauley, 671 F.3d at 616 (quoting Swanson v. Citibank,
N.A., 614 F.3d 400, 404 (7th Cir. 2010)). Goode’s broad, conclusory allegations are
not sufficient to give Defendants notice of the claims against them, and accordingly,
her TILA claim is dismissed.
21
4. RESPA Claim
Goode also brings a claim against all Defendants for violations of RESPA.
Compl. ¶¶ 143-49. RESPA prohibits, among other things, the payment or receipt of
“any portion, split, or percentage of any charge made or received for the rendering of
a real estate settlement service in connection with a transaction involving a
federally related mortgage loan other than for services actually performed.” 12
U.S.C. § 2607(b). “Settlement services” include “the origination of a federally related
mortgage loan.” 12 U.S.C. § 2602(3). Goode’s precise allegations in her RESPA claim
are not immediately clear. After setting out language from a United States
Department of Housing and Urban Development policy document about appropriate
fees to mortgage brokers, Goode claims that Defendants received “interest and
income” that is disproportionate to Goode’s “situation.” Compl. ¶¶ 145-46. She also
claims that no “separate fee agreements” were provided, and that “payments
between the Defendants were misleading and designed to create a windfall.” Id.
¶¶ 147-48. Read generously, the complaint seems to allege that Defendants received
improper fees related to the settlement of Goode’s loan.10
Goode again fails to state a claim against PennyMac, MERS, and Bank of
America. Even if she had put forth any facts suggesting that PennyMac, Bank of
America, or MERS participated in the loan settlement (which she did not), she has
10RESPA
also requires that borrowers receive notice when their loan is transferred,
12 U.S.C. § 2605(b)-(c), and that loan servicers respond promptly to borrowers’ written
requests for information, 12 U.S.C. § 2605(e). Goode’s complaint, however, appears to focus
on “the legality of lender payments to mortgage brokers” and “payments between the
Defendants.” Compl. ¶¶ 145, 148. Nothing in Count 9 discusses failure to give notice of a
transfer or failure to respond to a request for information. See id. ¶¶ 143-49. The Court
therefore considers Goode’s RESPA claim as one falling under § 2607 rather than § 2605.
22
not alleged what (if any) fees were paid or received by these Defendants. Nor has
Goode alleged how or why these fees (if there were any) were for services not
rendered or otherwise ran afoul of RESPA. Instead, she inscrutably claims that the
“interest and income that Defendants have gained is disproportionate to the
situation Plaintiff find themselves in due directly to Defendant’s failure to disclose
that they will gain a financial benefit while Plaintiff suffer financially.” Compl.
¶ 146. Goode does not even make “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements,” Iqbal, 556 U.S. at 678, much less
factual allegations that would plausibly state a claim for relief. Goode’s RESPA
claim is dismissed.
4. Claim for Rescission
In her complaint, Goode seeks rescission of her mortgage loan. See Compl.
¶¶ 150-54. Goode alleges seven independent grounds for rescission: (1) TILA; (2)
failure to provide a mortgage loan origination agreement; (3) fraudulent
concealment; (4) fraud in the inducement; (5) failure to abide by the PSA; (6)
making illegal or fraudulent transfers of the note and Mortgage/Deed of Trust; and
(7) public policy grounds. Id. ¶ 151. As discussed above, the TILA and fraud claims
are dismissed. See supra § III.A.1-3. Any rescission claim based upon those grounds
is therefore also dismissed. Failure to abide by the PSA is also not an appropriate
ground for rescission. Goode was not a party to the PSA and has no standing to
enforce it. See, e.g., Deutsche Bank Nat’l Trust Co. v. Christian, No. 12 C. 03613,
2013 WL 6283584, at *3 (N.D. Ill. Dec. 4, 2013); HSBC Bank USA, N.A. v.
23
Hardman, No. 12 C 00481, 2013 WL 515432, at *6 (N.D. Ill. Feb. 12, 2013); Long v.
One West Bank, FSB, No. 11 C 00703, 2011 WL 3796887, at *4 (N.D. Ill. Aug. 24,
2011). Her rescission claim based upon enforcement of the PSA is also dismissed.
It is not clear whether the second basis for rescission, failure to provide a
mortgage loan origination agreement, is based on another claim in Goode’s
complaint or is wholly independent. Failure to provide a mortgage loan origination
agreement could plausibly be related to Goode’s RESPA claim, as origination
agreements often concern the relationship between a borrower and a mortgage
broker. See, e.g., Nat. Ass’n of Mortg. Brokers v. Bd. of Governors of Fed. Reserve
Sys., 773 F. Supp. 2d 151, 159 (D.D.C. 2011). Because RESPA prohibits fees
between the lender and the mortgage broker for services not actually performed,
failure to provide an origination agreement could potentially be related to improper
settlement fees. See 12 U.S.C. § 2607(b). If this basis for rescission is based upon
Goode’s now-dismissed RESPA claim, the rescission claim is also dismissed. If,
instead, the second ground for rescission is somehow independent of the previous
claims, the claim is dismissed because there are no factual allegations supporting
relief on this basis. The remaining ground for rescission, public policy, is also so
devoid of factual material that it cannot possibly state a claim on which relief can be
granted. Goode makes no attempt to articulate how a failure to rescind her
mortgage loan would be contrary to public policy. Because all stated grounds for
rescission fail, the claim for rescission is dismissed in its entirety.
24
B. Insufficient Service of Process
Under Federal Rule of Civil Procedure 4(m), a defendant must typically be
served with a summons and a copy of the complaint within 120 days after the
complaint is filed. Fed. R. Civ. P. 4(m). After giving notice to the plaintiff, the court
may dismiss an action on its own initiative for failure to properly serve a defendant
in the 120-day period. Id. After her complaint was filed on April 14, 2014, Goode
attempted to serve the Defendants in this case by certified mail. See R. 11-3,
Summons for Ginnie Mae; R. 11-4, Summons for American Sterling Bank; see also
Compl. On April 25, 2014, the Court warned Goode and the person who attempted
to serve process that certified mail was not an acceptable means of service. See Apr.
25, 2014 Minute Entry. After this warning from the Court, Goode had ample time to
correct her error and serve Defendants in a method that is acceptable under the
Federal Rules. As explained next, Goode nevertheless failed to properly serve
American Sterling Bank and Ginnie Mae, and the claims against those Defendants
are therefore dismissed without prejudice. See Fed. R. Civ. P. 4(m).
1. American Sterling Bank
Goode attempted to serve American Sterling Bank by sending the summons
and complaint via certified mail to an address in Burr Ridge, Illinois. See Summons
for American Sterling Bank. Under the Federal Rules and Illinois law, certified
mail is generally not an adequate means of service for corporations like American
Sterling Bank.11 The Federal Rules provide that a plaintiff may serve a corporation
11It
appears that American Sterling Bank was dissolved in 2009. See Federal Deposit
Insurance Corporation, Metcalf Bank, Lee’s Summit, Missouri, Assumes All of the Deposits
25
“by delivering a copy of the summons and of the complaint to an officer, a managing
or general agent, or any other agent authorized by appointment or by law to receive
service of process and—if the agent is one authorized by statute and the statute so
requires—by also mailing a copy of each to the defendant.” Fed. R. Civ. P. 4(h)(1)(B).
A plaintiff may also serve a corporation under the Federal Rules “in the manner
prescribed by Rule 4(e)(1) for serving an individual.” Fed. R. Civ. P. 4(h)(1)(A). Rule
4(e)(1) instructs a plaintiff to “follow[ ] state law for serving a summons in an action
brought in courts of general jurisdiction in the state where the district court is
located or where service is made.” Fed. R. Civ. P. 4(e)(1).
Under Illinois law, a corporation may be served by “leaving a copy of the
process with its registered agent or any officer or agent of the corporation found
anywhere in the State.” 735 ILCS 5/2-204. If a corporation is dissolved, a plaintiff
may serve the registered agent on record for five years after the dissolution of the
corporation, 805 ILCS 5/5.05, or the Secretary of State, 805 ILCS 5/5.25. Certified
mail is thus not listed as an appropriate method of serving corporations in the text
of the Federal Rules or the relevant state statutes. See Fed. R. Civ. P. 4(e)(1), (h);
735 ILCS 5/2-203; 735 ILCS 5/2-204; see also Reavley v. Toyota Motor Sales Corp.,
No. 00 C 03676, 2001 WL 127662, at *6 (N.D. Ill. Feb. 14, 2001). Even if it were, it
does not appear that the summons and complaint sent by certified mail reached
anyone at all, let alone an agent of the now-dissolved American Sterling Bank.
of American Sterling Bank, Sugar Creek, Missouri, Press Release (Apr. 17, 2009),
https://www.fdic.gov/news/news/press/2009/pr09054.html.
26
Where service is not made within the 120-day period, a court may extend the
time to serve for good cause. Fed. R. Civ. P. 4(m). If good cause does not exist, the
court may nevertheless “direct that service be effected within a specified time.”
Panaras v. Liquid Carbonic Indus. Corp., 94 F.3d 338, 340 (7th Cir. 1996). Goode
and the individual attempting service were warned in April, months before the 120day period expired, that their attempt at service was inadequate. See Apr. 25, 2014
Minute Entry. It does not appear that Goode made any efforts to effect proper
service since that warning, nor has she articulated any good cause for failing to
serve American Sterling. Goode has had ample time and opportunity to serve
Defendants properly, and she has not done so. The Court can see no reason to give
Goode any additional time to serve. The claims against American Sterling Bank are
accordingly dismissed without prejudice under Rule 4(m).
2. Ginnie Mae
For federal government corporations like Ginnie Mae,12 Rule 4 does allow for
service by certified mail in certain circumstances. Fed. R. Civ. P. 4(i). To properly
serve a federal government corporation using certified mail, “a party must serve the
United States and also send a copy of the summons and of the complaint by
registered or certified mail to the agency, corporation, officer, or employee.” Fed. R.
Civ. P. 4(i)(2). To serve the United States, a plaintiff must first serve a copy of the
summons and complaint on the United States Attorney for the district in which the
action is brought or send a copy by registered or certified mail to the civil-process
12Ginnie
Mae is a wholly-owned government corporation within the United States
Department of Housing and Urban Development. 12 U.S.C. § 1717(a)(2)(A); 31 U.S.C.
§ 9101(3)(G).
27
clerk at the United States Attorney’s office. Fed. R Civ. P. 4(i)(1)(A). The plaintiff
must also send a copy of the summons and complaint “by registered or certified mail
to the Attorney General of the United States at Washington, D.C.” Fed. R. Civ. P.
4(i)(1)(B).
Goode attempted to serve Ginnie Mae by sending the summons and
complaint by certified mail to Ginnie Mae’s office in Washington, D.C. See
Summons for Ginnie Mae. It does not appear that Goode made any attempt to serve
the United States as required by Rule 4(i). Again, Goode was warned early in the
case that her method of service was improper and made no further attempts to
properly serve Defendants. Because Ginnie Mae was not properly served within the
120-day period required by the Federal Rules, the claims against Ginnie Mae are
dismissed without prejudice.13
3. Does 1 through 100
Goode also names “Does 1 through 100, inclusive” as defendants in her
complaint. She states that she “does not know the true names, capacities, or basis
for liability of [these defendants],” but that she “will amend this Complaint to allege
their true names and capacities when ascertained.” Compl. ¶ 10. Goode’s complaint
does not identify what the Doe defendants did, their relationship to her or her loan,
or any other information that might help identify them. Perhaps more importantly,
Goode’s complaint does not allege any wrongdoing by these unidentified defendants
beyond that they are “in some manner liable to Plaintiff, or claims some right, title,
13In
any event, judicially-noticed documents in the public record render the claims
against Ginnie Mae implausible. See supra § III.A.1.
28
or interest in the Property.” Id. ¶ 10. Under Rule 4(m), Goode was required to serve
the Doe defendants within 120 days of filing the complaint. Fed. R. Civ. P. 4(m). She
has failed to do so, and again there is no good cause for the failure to serve, nor did
the complaint provide any basis to name the Does in the first place. The claims
against the unidentified defendants are therefore dismissed without prejudice.
IV. Conclusion
For the reasons discussed above, the Defendants’ motions to dismiss are
granted. Accordingly, the claims against PennyMac, MERS, and Bank of America
are dismissed with prejudice. See Walker v. Thompson, 288 F.3d 1005, 1009 (7th
Cir. 2002) (“[D]ismissal of a suit for failure to state a claim is always with
prejudice.”). The claims against American Sterling Bank, Ginnie Mae, the
unidentified defendants are dismissed without prejudice for failure to effect proper
service of process. See Fed. R. Civ. P. 4(m).
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: November 18, 2014
29
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