Sparks v. Countrywide Home Loans, Inc. et al
Filing
26
MEMORANDUM OPINION & ORDER: 1. Motion to Dismiss filed by SPS, Deutsche Bank, MERS, and Hierman 18 is GRANTED; 2. Motion to Dismiss filed by Defendants Countrywide and BANA [DE 19] is GRANTED; 3. all claims alleged in the Complaint [DE 1] again st all Defendants are DISMISSED WITH PREJUDICE; 4. all pending motions or requests for relief are DENIED AS MOOT; 5. all deadlines and scheduled proceedings are CONTINUED GENERALLY; 6. that the Clerk shall STRIKE THIS MATTER FROM THE ACTIVE DOCKET; 7. that this ORDER is FINAL AND APPEALABLE ORDER and THERE IS NO JUST CAUSE FOR DELAY. Signed by Judge Joseph M. Hood on 10/29/2015.(CBD)cc: COR, Ellen Sparks via US Mail
UNITED STATES DISTRICT COURT
EASTERN DIVISION OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
ELLEN SPARKS,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
COUNTRYWIDE HOME LOANS,
INC., et al.,
Defendants.
Action No.
5:15-cv-99-JMH
MEMORANDUM OPINION
AND ORDER
***
This matter is before the Court on two Motions to Dismiss
filed by six Defendants pursuant to Federal Rule of Civil Procedure
12(b)(6).
The first Motion to Dismiss was filed by Defendants
Select Portfolio Servicing, Inc. (“SPS”), Deutsche Bank National
Trust Company, as Trustee for holders of the Harborview 2004-09
Trust a/k/a Deutsche Bank National Trust Company, as Trustee, on
behalf
of
Mortgage
the
Loan
Certificates,
registered
Trust
Series
Certificate
2004-09,
2004-09
Holders
Mortgage
(“Deutsche
of
Loan
Harbor
View
Pass-Through
Bank”),
Mortgage
Electronic Registration Systems, Inc. aka MERS (“MERS”), and Mary
Ann Hierman, a MERS agent (“Hierman”)1 (collectively referred to
1 As Defendants SPS et al. argue, Plaintiff fails to make a single
specific allegation against Defendant Hierman or even mention Hierman
in her Complaint. [DE 18-1 at 24]. For this reason, and for all the
reasons set forth in this opinion, all claims against Hierman are
dismissed with prejudice.
as “SPS et al.”).
[DE 18].
The second Motion to Dismiss was filed
by Defendants Countrywide Home Loans, Inc. (“Countrywide”) and
Bank of America, N.A. (“BANA”).
[DE 19].
Plaintiff filed Responses in Opposition to both Motions to
Dismiss [DE 21, 22], and Defendants replied [DE 23, 24].
Without
leave of Court, Plaintiff also filed a Supplemental Joint Response
in Opposition to Defendants’ Motions to Dismiss.
[DE 25].
The
Federal Rules of Civil Procedure do not permit the filing of a
surreply without leave of the Court, nevertheless, the Court will
regard Plaintiff’s Supplemental Response as a Motion for Leave of
Court.
No new arguments having been made by Defendants in their
Replies, the Court declines to consider Plaintiff’s Supplemental
Response.
The Court being adequately advised, Defendants’ Motions
are ripe for decision.
After
careful
responses,
consideration
replies,
and
of
applicable
the
Complaint,
law,
the
Court
motions,
grants
Defendants’ Motions to Dismiss in their entirety.
I.
BACKGROUND
On April 14, 2015, Plaintiff, Ellen Sparks, appearing pro se,
filed a Complaint against Defendants for various claims that stem
from the origination and servicing of a refinance loan for her
residence
located
at
214
South
Kentucky.
[DE 1].
Plaintiff set forth the following allegations
in her Complaint.
2
Hanover
Avenue
in
Lexington,
A. The 2004 Loan Agreement
Plaintiff alleges that, in or about 2004, seeking to refinance
her
single
conditions
family
by
home,
America’s
she
was
promised
Wholesale
Lender
certain
terms
(“AWL”) 2 for
a
and
loan
agreement, most notably, a fixed interest rate of 4.25 percent for
30 years.
[DE 1 at ¶12b-h].
Plaintiff alleges that on or about
September 22, 2004, she signed various documents originated by AWL
(“the 2004 Loan Agreement”) to close her loan. [DE 1, ¶12b].
Plaintiff
makes
various
allegations
about
the
improper
notarization of the loan documents surrounding the 2004 Loan
Agreement.
[DE 1, ¶12c,d,e,f].
Plaintiff also alleges that she
did not receive copies of the signed, loan documents on the day of
signing or thereafter despite requests to the notary but had to
request the documents from the escrow company.
[DE 1, ¶12e,f].
Plaintiff further alleges that, in 2007, upon receiving the
loan documents from the escrow company, she discovered that the
documents, including a Note, Mortgage, and Rider to the Note, were
“defective” and not the documents she had agreed to or signed in
September of 2004. [DE 1, ¶12f,g].
In particular, Plaintiff
alleges that instead of including a fixed rate as promised by
2
The Court notes that AWL, the lender of Plaintiff’s original
refinance loan, is not a named Defendant in this action. Although not
spelled out by Plaintiff, it appears that Countrywide and AWL are one
in the same as both entities are listed on the 2004 mortgage [DE 18-2]
and because Countrywide modified Plaintiff’s loan on June 2, 2008 [DE
18-4].
3
Defendants, the loan documents included an adjustable interest
rate, as well as penalty and interest charge terms to which she
allegedly did not agree. [DE 1, ¶12g].
Plaintiff alleges that the
loan documents she actually signed in or about September 22, 2004,
which Plaintiff believed contained a fixed interest rate, were
“substituted
cryptically
and
clandestinely” with
forged
loan
documents containing an adjustable interest rate. [DE ¶12g].
Plaintiff further alleges that in an attempt to determine the
authenticity of the loan documents from the escrow company, she
then obtained copies of her mortgage records from the Fayette
County Clerk’s office, which she alleges included: (1) a Mortgage
that contained forged signatures and improper notarization, (2) an
Adjustable Rate Note, also not notarized and containing what
Plaintiff believes to be a forged signature, (3) an Adjustable
Rate Rider “purporting to be signed” but “neither signed nor
initialed
by
plaintiff” and
(4)
an
Assignment
of
transferring the mortgage from MERS to Deutsche Bank.
¶12h].
Mortgage
[DE 1,
Although not entirely clear from the Complaint, it appears
that Plaintiff is pleading in the alternative:
either (a) she was
duped into signing a loan agreement with an adjustable interest
rate when she believed she was getting a fixed interest rate or
(b) the loan documents she signed, which she alleges included a
fixed interest rate, were switched out for documents with forged
4
signatures
that
include
a
variable
interest
rate.
[DE
1,
¶12f,g,h].
B. Loan Payments
Plaintiff alleges that from 2005 to 2008, her monthly mortgage
payments increased from $1,711.12 to over $4,000.00 as a result of
the variable interest rate on her loan.
[DE 1, ¶16.1].
However,
as the Court understands, Plaintiff alleges to not have discovered
the increased payment amounts until on or about November 10, 2007
when her payments began increasing and when Plaintiff was allegedly
contacted by Defendant BANA with a threat of foreclosure if she
did not make her payments current.
[DE 1, ¶16].
Plaintiff then
alleges that BANA informed her that her outstanding Note was
$589,000 and could not explain the increase from the original loan
amount of $532,000 despite Plaintiff’s payments over the prior
four years. Id.
Plaintiff alleges to have demanded a loan validation and
confirmation from BANA under the Fair Debt Collection Practices
Act but claims BANA did not provide the information and continued
to threaten foreclosure if Plaintiff did not pay the full amount
owed.
Id.
Plaintiff also alleges to have contacted BANA in
writing seeking information regarding the variable interest rates
and that BANA never responded.
[DE 1, ¶17].
5
C. Loan Modifications
Plaintiff alleges that in an attempt to obtain a better loan
arrangement, she entered into a series of “novations” or loan
modifications with BANA. [DE ¶18, 19].
The first modification
indicates that Plaintiff entered into a modification agreement
with Countrywide on June 13, 2008, effective August 1, 2008,
converting the adjustable interest rate to a fixed rate of 5.25
percent and keeping the October 1, 2034 maturity date.
[DE 18-
4].
Plaintiff also alleges to have attempted to enter into a loan
modification with BANA on or about October 7, 2008. [DE 1, ¶76].
Plaintiff alleges to have been contacted by BANA and instructed
that if she did not pay her mortgage for three consecutive months,
BANA guaranteed a new note with better terms and a decreased
monthly
rate,
and
that
Plaintiff
would
not
be
foreclosed upon by her three month failure to pay.
defaulted
Id.
or
Plaintiff
alleges that in reliance on BANA’s promise of a $772.39 decrease
in her monthly mortgage payment, she failed to pay her mortgage
for three months. [DE 1, ¶76a-b].
Plaintiff further alleges that
when she made the decreased payment amount in the fourth month,
she was told by BANA that they had no record of her loan being
novated, she was in default, and that she would be foreclosed upon
because her default was over 90 days without payment. [Id., ¶76cd].
6
A second modification occurred in or about April of 2010.
[DE 1, ¶19].
This modification was executed by Plaintiff on April
1, 2010 as part of the Home Affordable Modification Program in
which a series of scheduled reduced fixed interest rates were
established.
[DE 18-5].
D. Plaintiff’s Claims
On the basis of the facts alleged above, Plaintiff asserts
violations against all Defendants under the Fair Credit Reporting
Act, 15 U.S.C. § 1688 et seq.; the Federal Fair Debt Collection
Practices
Act,
15
U.S.C.
§ 1692
et
seq.;
the
Racketeering
Influenced Corrupt Organization Act, 18 U.S.C. §§ 1961 et seq.;
the Truth in Lending Act, 15 U.S.C. § 1601, et seq.; the Real
Estate Procedures Act, 12 U.S.C. § 2607; and also claims Defendants
are
jointly
fraudulent
and
severally
intentional
negligence,
and
liable
to
her
misrepresentation,
defamation.
In
addition
on
the
breach
to
theories
of
monetary
of
contract,
damages,
Plaintiff seeks a declaratory judgment as to the rights and duties
of the parties regarding the mortgage and note at issue and an
accounting of Plaintiff’s loan account from Defendants.
II.
STANDARD OF REVIEW
A
motion
Procedure
complaint.
to
12(b)(6)
dismiss
tests
pursuant
the
to
Federal
sufficiency
of
Rule
the
of
Civil
plaintiff’s
If the plaintiff fails to state a claim upon which
relief can be granted, a court may grant the motion to dismiss.
7
Fed. R. Civ. P. 12(b)(6).
Rule 8(a)(2) states that, at a minimum,
a pleading should contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”
8(a)(2).
Fed. R. Civ. P.
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
the Supreme Court explained that in order to survive a Rule
12(b)(6),
a
complaint
need
not
contain
“detailed
factual
allegations,” but must present something more than “labels and
conclusions, and a formulaic recitation of the elements of a cause
of action’s elements will not do.”
Id. at 555.
Although a court must accept as true all of the well-pleaded
factual allegations contained in the complaint, Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570), courts
are not bound to accept conclusory allegations as true.
Twombly,
550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265 (1986)).
The factual allegations in a complaint “must be enough to raise a
right to relief above the speculative level on the assumption that
all the allegations in the complaint are true (even if doubtful in
fact).”
Twombly, 550 U.S. at 555-56 (citations omitted).
Under
this standard, only a claim which is “plausible on its face” will
survive dismissal. Id. at 570; Tam Travel, Inc. v. Delta Airlines,
Inc., 583 F.3d 896, 903 (6th Cir. 2009).
“A claim is plausible
when it contains facts that allow the court to draw the reasonable
inference that the defendant is liable for the alleged misconduct.”
Ashcroft, 556 U.S. at 678.
If it appears beyond doubt that the
8
plaintiff’s complaint does not state facts sufficient to “state a
claim to relief that is plausible on its face,” then the claims
must be dismissed.
Twombly, 550 U.S. 544 at 570; Weisbarth v.
Geauga Park Dist., 499 F.3d 538, 542 (6th Cir. 2007).
“Pro se complaints are to be held ‘to less stringent standards
than formal pleadings drafted by lawyers,’ and should therefore be
liberally construed.” Williams v. Curtin, 631 F.3d 380, 383 (6th
Cir. 2011).
At the same time, courts must place certain limits on
the lenient treatment given to pro se litigants who are not
“‘automatically entitled to take every case to trial.’” Farah v.
Wellington, 295 F. App’x 743, 748 (6th Cir. 2008) (quoting Pilgrim
v. Littlefield, 92 F.3d 413, 416 (6th Cir. 1996)).
All complaints
“‘must contain either direct or inferential allegations respecting
all material elements to sustain a recovery under some viable legal
theory.’” Tam Travel, 583 F.3d at 903 (quoting Edison v. State of
Tenn. Dep’t of Children’s Servs., 510 F.3d 631, 634 (6th Cir.
2007)).
When evaluating a Motion to Dismiss, the Court may consider
any document attached to or incorporated in the Complaint that are
central to the claims contained therein, and public documents of
which the Court can take judicial notice, without converting the
motion into a motion for summary judgment. See Amini v. Oberlin
College, 259 F.3d 493 (6th Cir. 2001); Weiner v. Klais & Co., 108
F.3d 86, 88-89 (6th Cir. 1997).
For this reason, when evaluating
9
Defendants’ Motions
to
Dismiss,
the
Court
may
consider
the
documents attached to the motions to dismiss, including the 2004
Mortgage and Adjustable Rate Rider [DE 18-2; DE 19-2], Adjustable
Rate Note [DE 19-1], Assignment of Mortgage [DE 18-3], 2008 Loan
Modification
Agreement
[DE
18-4],
and
2010
Home
Affordable
Modification Agreement [DE 18-5], all of which are central to
Plaintiff’s claims and all of which are documents for which the
Court may take judicial notice.
III. DISCUSSION
Plaintiff
has
asserted
each
of
her
claims
against
all
Defendants, and both Motions seek to dismiss Plaintiff’s claims in
their totality based on substantially similar arguments, thus, the
Court will address the Motions together herein.
Defendants argue
that each of Plaintiff’s claims fail to state a claim upon which
relief may be granted and must be dismissed pursuant to Federal
Rule of Civil Procedure 12(b)(6).
For the reasons articulated
below, the Court agrees with Defendants.
A. Counts I and II: Plaintiff Has Failed to State A Claim
Alleging Violations of the Fair Credit Reporting Act,
Negligence or Defamation.
Plaintiff alleges in Counts I and II of her Complaint that
the
Defendants
have
violated
the
Fair
Credit
Reporting
Act
(“FCRA”), 15 U.S.C. § 1688 et seq., by failing to properly and
accurately apply payments made by Plaintiff toward her home loan
thereby causing false and inaccurate documents to be filed with
10
the credit reporting agencies, including a Notice of Default. [DE
1 at ¶ 35-43].
Plaintiff claims that as a result of Defendants’
alleged false and inaccurate reporting, her credit score dropped
from approximately 700 to 465, causing a loss of credit worthiness,
which has also resulted in increased tax liability and physical
and
mental
$500,000.
damages
Id.
to
Plaintiff
in
an
amount
not
less
than
As the Defendants demonstrate in their motions,
Plaintiff’s claims under the FCRA fail.
The FCRA is “aimed at protecting consumers from inaccurate
information in consumer reports and at the establishment for credit
reporting procedures that utilize correct, relevant, and up-todate information in a confidential and responsible manner.” Jones
v. Federated Financial Reserve Corp., 144 F.3d 961, 965 (6th Cir.
1998).
Plaintiff’s claim against Defendants is evaluated under 15
U.S.C. § 1681s-2(b), which authorizes a private right of action.3
See Stafford v. Cross Country Bank, 262 F. Supp. 2d 776, 783
(W.D.Ky 2003).
Section 1681s-2(b) of the FCRA sets forth the “duties of
furnishers of information upon notice of dispute.” 15 U.S.C. §
1681s-2(b).
Specifically, subsection (b) provides that a consumer
who disputes an item on his credit report must first notify a
3
As Defendants correctly argue, courts have readily recognized that no
private cause of action exists under § 1681s-2(a). [DE 19 at 5, 18-1
at 8]. See Morgan v. HSBC Mortg. Svcs., Inc., 930 F. Supp. 2d 833, 837
(E.D. Ky. 2013).
11
credit reporting agency, which must in turn give notice to the
furnisher that provided the disputed credit information (e.g. a
bank).
Id.
“This
information...has
no
means
that
a
responsibility
furnisher
to
of
credit
a
credit
investigate
dispute until after it receives notice of a dispute from a consumer
reporting agency.
Under the statutory language, notification from
a consumer is not enough.”
Stafford, 262 F. Supp. 2d at 784
(emphasis in original).
Here, it is not clear to the Court that Plaintiff notified
any
credit
information.
reporting
agency
about
her
disputed
payment
Plaintiff states: “Plaintiff in compliance with the
FCRA contacted to dispute the credit scores and history contesting
the data” although Plaintiff does not specify which agencies, if
any, she contacted and when the contact was made.
[DE 1, ¶ 44.3].
Regardless, at this stage, and construing Plaintiff’s Complaint
liberally, the Court will accept that Plaintiff did indeed notify
one or more credit agencies of her dispute.
Nevertheless, this is
insufficient to trigger a private right of action under the §1681s2(b).
See Morgan v. HSBC Morg. Svcs., Inc., 930 F. Supp. 2d 833,
837 (E.D. Ky. 2013).
Rather, as Defendants argue, Defendants must have received
notice of a dispute from a credit reporting agency.
1681s-2(b).
15 U.S.C. §
Because Plaintiff has failed to allege that any
Defendant received notice from a credit reporting agency of a
12
dispute or that a credit reporting agency provided Defendants with
notice of her disputed payment information as required by § 1681s2(b), Plaintiff has failed to state a cause of action based on the
FCRA against all Defendants, and on this basis, Plaintiff’s FCRA
claim is dismissed. See Stafford, 262 F.Supp. at 784; Yaldu v.
Bank of America Corp., 700 F.Supp.2d 832, 843 (E.D.Mich 2012);
Gorman, 584 F.3d at 1154; Young v. Equifax Credit Info. Svs., 294
F.3d 631, 639 (5th Cir. 2002).
Even if Plaintiff did properly plead a claim under the FCRA,
as Defendants further argue, her claims are also barred under the
applicable statute of limitations. 15 U.S.C. § 1681(p).
Section
1681(p) provides:
An action to enforce any liability created under this
subchapter may be brought in any appropriate United
States district court, without regard to the amount in
controversy, or in any other court of competent
jurisdiction, not later than the earlier of—
(1)
2 years after the date of discovery by the
plaintiff of the violation that is the basis
for such liability; or
(2)
5 years after the date on which the
violation that is the basis for such
liability occurs.
Id. Plaintiff alleges that on or about August of 2005, her monthly
payments increased under the terms of the “bogus Note,” and that a
“valid dispute” began over her loan payments in or about November
10, 2007 when she discovered said increase.
13
[DE 1, ¶¶16, 16.1].
Therefore, given these dates, the latest Plaintiff could have
brought a FCRA claim was in November 2009, which was two years
after the date of discovery of the violation that provides the
basis for liability.
April 2015.
Plaintiff did not file this action until
[DE 1].
Plaintiff argues that the damage from the alleged incorrect
credit reporting is continuing, and therefore, the two year statute
of limitation should not apply.
[DE 21, ¶2].
However, as
Defendants’ SPS et al. emphasize, other courts have declined to
recognize the continuing injury argument in the case of FCRA
claims. See e.g., Lawhorn v. Trans Union Credit Information Corp.,
515 F. Supp. 19 (E.D. Mo. 1981).
Consequently, any FCRA claim
Plaintiff makes against any Defendant is barred by the applicable
statute of limitation and is dismissed.
Plaintiff also asserts state law claims related to the credit
reporting on her loan [DE 1 at ¶¶35-43], which Defendants argue
are preempted by the FCRA.
the claims are preempted.
[DE 19 at 6-7].
The court agrees that
The FCRA contains two overlapping
preemption provisions, § 1381h(e) and § 1681s-2.
Morgan v. HSBC
Mortgage Servs., Inc., 930 F. Supp. 2d 833, 838 (E.D. Ky. 2013).
Section 1681h(e) provides for immunity of certain types of state
actions relating to the reporting of credit information, including
defamation, invasion of privacy and negligence claims.
15 U.S.C.
§ 1681h(e); see also Stafford v. Cross Country Bank, 262 F. Supp.
14
2d 776, 784 (W.D. Ky. 2003).
Without repealing § 1681h(e), the
FCRA was amended to include an additional preemption provision, §
1681(b)(1)(F), which provides absolute immunity from all state law
claims covered by § 1681s-2 (i.e. claims relating to furnishers of
credit).
Stafford, 262 F. Supp. 2d at 784.
There has been much debate about the interplay of the two
preemption provisions, and the Sixth Circuit has not addressed
this
debate.
Nevertheless,
the
Second,
Fourth,
and
Seventh
Circuits have concluded that the provisions do not conflict and
that
courts
must
analyze
preemption
under
each
provision.
Macpherson v. JP Morgan Chase Bank, N.A., 665 F.3d 45 (2d Cir.
2011); Ross v. FDIC, 625 F.3d 808 (4th Cir. 2010); Purcell v. Bank
of Am., 659 F.3d 622 (7th Cir. 2011).
At least two courts within
the Sixth Circuit have also opined that the two FRCA preemption
provisions are consistent, and have analyzed preemption first
under § 1681(b)(1)(F), with § 1681(h)(e) only being considered if
the former does not apply.
See Morgan v. HSBC Mortgage Servs.,
Inc., 930 F. Supp. 2d 833, 839 (E.D. Ky. 2013); Stafford, 262 F.
Supp. 2d at 785–786.
Following the analysis of our sister court in Morgan,
evaluation
begins
with
whether
Plaintiff’s
negligence
defamation claims are preempted by § 1681(b)(1)(F).
the
and
See Morgan,
930 F. Supp. 2d at 839 (E.D. Ky. 2013). According to the Complaint,
Plaintiff’s negligence and defamation claims are based on the
15
allegation that Defendants reported false or incorrect information
to the credit reporting agencies, which is conduct regulated under
§ 1681s-2.
[DE 1 at 35-43].
Therefore, since § 1681(b)(1)(F)
provides absolute immunity from all state law claims covered by §
1681s-2,
Plaintiff’s
state
law
claims
are
preempted
by
§
1681t(b)(1)(F), and dismissal of these claims is appropriate.
B. Count II: Plaintiff Has Failed to State a Claim Alleging
a Violation of the Federal Fair Debt Collection Practices
Act.
Plaintiff asserts violations of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., against all
Defendants in Count II of her Complaint.4
[DE 1, ¶44].
The FDCPA
prohibits various wrongful conduct in the collection of a debt,
including harassment (§ 1692d), making false statements (§ 1692e),
engaging in unfair practices (§ 1692f), and failing to provide
consumers certain information about the debt (§ 1692g). See 15
U.S.C. § 1692d-g; see also Ray v. Citibank (S. Dakota), N.A., 187
F. Supp. 2d 719, 722 (W.D. Ky. 2001).
Debt collectors may be
subject
violate
to
civil
liability
when
they
any
of
these
provisions and suit is brought within one year from the date on
which the violations occur. See 15 U.S.C. § 1692k.
4
Plaintiff incorrectly cites to 15 U.S.C. §§ 1681, et seq., the Fair
Credit Reporting Act, when referring to the Fair Debt Collection
Practices Act in her second cause of action. [DE 1, ¶44]. Having
addressed Plaintiff’s claims under the Fair Credit Reporting Act,
supra, the Court will now address Plaintiff’s FDCPA allegations set
forth in paragraph 44 of her Complaint.
16
1. Debt Collectors
The FDCPA, however, does not apply to every entity that
attempts to collect a debt. The FDCPA's provisions generally apply
only
to
those
who
meet
the
statutory
definition
of
“debt
collector.” Montgomery v. Huntington Bank, 346 F.3d 693, 698 (6th
Cir. 2003).
The term “debt collector” is statutorily defined, in
relevant part, as:
Any person who uses instrumentality of interstate
commerce or the mails in any business the principal
purpose of which is the collection of any debts, or
who regularly collects or attempts to collect,
directly or indirectly, debts owed or due or asserted
to be owed or due another.
Id. (quoting 15 U.S.C. § 1692a(6)).
The statute further states
that the term “debt collector” does not include “any officer or
employee
of
a
creditor
while,
in
the
name
of
the
creditor,
collecting debts for such creditor.” 15 U.S.C. § 1692a(6)(A).
Plaintiff generally alleges that all Defendants violated the
FDCPA [DE 1, ¶44], therefore, the Court must first determine
whether
Plaintiff
has
alleged
that
Defendants
collectors” within the purview of the FDCPA.
are
“debt
With regard to SPS,
Plaintiff sufficiently alleges that SPS is a debt collector.
Plaintiff
states
“Select
Portfolio
Servicing,
Inc.,
a
Utah
business [hereafter SPS] purporting to be a “loan servicer” [aka
debt collector for hire] apparently took over the collection
process in or about December, 2012” [DE 1, ¶12], and “Plaintiff
17
believes the current loan servicer [collection agent] is defendant
SPS, since 2012.” [DE 1, ¶12a].
While not specifically labeling BANA a “debt collector,”
Plaintiff has alleged that BANA attempted to collect on a debt and
that Plaintiff demanded a loan validation and confirmation from
BANA
pursuant
to
the
FDCPA.
[DE
¶16,
17].
Nevertheless,
Plaintiff’s allegations against BANA concern BANA’s conduct as a
lender.
[DE 1, ¶¶12, 12a, 76].
Creditors, as opposed to “debt
collectors,” are generally not subject to the FDCPA. See Montgomery
v. Huntington Bank, 346 F.3d 693, 698 (6th Cir. 2003); Stafford v.
Cross Country Bank, 262 F. Supp. 2d 776, 794 (W.D. Ky. 2003). The
FDCPA defines “creditor” as “any person who offers or extends
credit creating a debt or to whom a debt is owed ... .” 15 U.S.C.
§ 1692a(4). Because all allegations are against BANA as a creditor,
not a debtor, within the meaning of the FDCPA, all FDCPA claims
against BANA are dismissed.
Plaintiff alleges that an Assignment of Mortgage is recorded
with the Fayette County Clerk, assigning her mortgage from MERS to
Deutsche Bank.5
[DE 1, ¶12h].
The Court takes judicial notice of
the assignment and notes that it was recorded on June 26, 2012
with the Fayette County Clerk.
[DE 18-3, Assignment of Mortgage].
5 Plaintiff alleges that the assignment of her mortgage from MERS to
Deutsche Bank is void because she did not authorize the assignment,
however, Plaintiff, as a stranger to the assignment, lacks standing to
challenge its validity. Yuille v. Am. Home Mortgage Servs., Inc., 483
F. App'x 132, 135 (6th Cir. 2012).
18
Plaintiff also alleges that her loan was in default at the time of
assignment.
[DE 1, ¶16].
Deutsche Bank, as an assignee of the
mortgage after Plaintiff defaulted on her loan, is considered a
“debt collector” within the purview of the FDCPA.
Bridge v. Ocwen
Fed. Bank, FSB, 681 F.3d 355, 362 (6th Cir. 2012)(“[T]he definition
of debt collector pursuant to § 1692a(6)(F)(iii) includes any nonoriginating debt holder that either acquired a debt in default or
has treated the debt as if it were in default at the time of
acquisition.”).
favorable
to
Therefore, viewing the Complaint in a light most
Plaintiff,
the
Court
finds
that
Plaintiff
has
sufficiently alleged Deutsche Bank to be a debt collector within
the meaning of the FDCPA.
As to Defendant MERS, Plaintiff stipulates that MERS is not
a debt collector. [DE 21, p. 8].
Likewise, Defendant Hierman, a
MERS agent, is also not a debt collector.
As to Defendant
Countrywide, the Court determines that Plaintiff has failed to
allege
that
it
is
a
“debt
collector” or
performed
collecting activities within the meaning of the FDCPA.
any
debt
Likewise,
all claims relating to violations of the FDCPA are dismissed
against MERS, Hierman, and Countrywide.
2. FDCPA Statute of Limitations
Having determined that Plaintiff has alleged SPS and Deutsche
Bank to be “debt collectors” as defined by the FDCPA, the next
19
question is whether Plaintiff’s claims against each are timely.
In the Complaint, Plaintiff alleges:
from 2008 to 2014, defendant violators of the act did
so by attempting to collect a debt promoted efforts
that included the demand for payment of a fraudulent
debt in an excessive amount, repeatedly at all hours
of the day and night, vis., before 8 a.m., and after
9 p.m., which included the contacting of third parties
about the debt, in violation of the act; threatened to
have plaintiff criminally arrested under a “civil debt
warrant,” a fraudulent devise and representation when
no such instrument existed as a matter of law, told
Plaintiff to either pay or she could “go to hell,”
calling her a “cheat and deadbeat,” and that “some day
she’d pay for her corrupt sins.”
[DE 1, ¶44].
SPS and Deutsche Bank argue that Plaintiff’s FDCPA claims
must be dismissed as time-barred under the FDCPA’s one-year statute
of limitations, 15 U.S.C. § 1692k(d), because Plaintiff does not
make allegations that either contacted her in violation of the
FDCPA on or after April 14, 2014, one year prior to the date
Plaintiff filed her Complaint. [DE 18-1 at 10]. The Court agrees.
Plaintiff attempts to avoid the time bar under a “continuing
violation” theory, arguing that the FDCPA statute of limitations
does not apply because the damages to her is of a “continuing
nature.”
[DE 21 at 7-8].
Nevertheless, the Sixth Circuit has
held that the continuing violation doctrine does not apply to a
mortgagor’s claim under the FDCPA.
See Slorp v. Lerner, Sampson
& Rothfuss, 587 F. App'x 249, 259 (6th Cir. 2014).
20
For this
reason, the one-year statute of limitations set forth in the FDCPA
bars any portion of Plaintiff’s claims against SPS and Deutsche
Bank that relate to violations of the FDCPA prior to April 14,
2014, while any alleged violations occurring after April 14, 2014
are not time barred.
3. Violations of the FDCPA
The final question for the Court with regard to the timely
portion of the FDCPA claims is whether Plaintiff has sufficiently
alleged that SPS and Deutsche Bank have engaged in conduct in
violation of the FDCPA.
Although “[s]pecific facts are not
necessary” to comply with Rule 8(a)(2), the complaint must “‘give
the defendant fair notice of what the...claim is and the grounds
upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(quoting Twombly, 550 U.S. at 555) (alteration in original).
Plaintiff attributes a litany of alleged violations of the
FDCPA, without specifying upon which portion of the FDCPA she
relies, to all “defendant violators of the act” (which includes
twenty-eight
defendants
total).
From
such
broad
allegations
against a large and mostly anonymous “Doe” group of defendants, the
Court cannot draw the reasonable inference that Defendants SPS or
Deutsche Bank are liable for the misconduct alleged, because the
Court cannot tell what activity SPS or Deutsche Bank are alleged
to have done.
See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
Since Defendants SPS and Deutsche Bank do not have fair notice of
21
what the FDCPA claims are against them and the grounds upon which
they rest, Plaintiff’s FDCPA claims against SPS and Deutsche Bank
are dismissed on this basis as well.
See Twombly, 550 U.S. at
555.
In sum, Plaintiff claims under the FDCPA against Defendants
are dismissed.
Plaintiff has not alleged that BANA, Countrywide,
MERS or Hierman are debt collectors.
Any claims Plaintiff has
against SPS or Deutsche Bank prior to April 14, 2014 are dismissed
under the FDCPA one-year statute of limitation. Plaintiff’s claims
against SPS and Deutsche Bank asserting violations of the FDCPA
after April 14, 2014 are too conclusory and vague to state a claim
for relief and are dismissed on this basis.
C. Count VI: Plaintiff Has Failed to State a Claim
Alleging a Violation of the Racketeering Influenced
Corrupt Organization Act.
In Count Six of her Complaint, Plaintiff alleges violations
of
the
Racketeer
Influenced
and
Corrupt
Organizations
(“RICO”), 18 U.S.C. §§ 1961-1968, against all Defendants.
Act
RICO
provides a private right of action for “[a]ny person injured in
his business or property by reason of a violation of [18 U.S.C. §
1962].”
18 U.S.C. § 1964(c).
Therefore, a civil RICO claim must
set forth the following requirements of 18 U.S.C. § 1962(c): (1)
conduct
(2)
of
an
enterprise
(3)
through
a
pattern
racketeering activity or collection of an unlawful debt.
22
(4)
of
Heinrich
v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 404 (6th
Cir. 2012).
A “pattern of racketeering activity” requires at least two
acts of “racketeering activity,” which activities are set forth in
§ 1961(1).
18 U.S.C. § 1961(5).
An “unlawful debt” is a debt which
was incurred in an illegal gambling activity through an illegal
gambling business, or a debt unenforceable because of usury laws
and which was obtained through a business enterprise that loans
money
at
a
usury
interest
rate
that
is
at
least
twice
the
enforceable rate.” 18 U.S.C. § 1961(6); Saglioccolo v. Eagle Ins.
Co., 112 F.3d 226, 229 (6th Cir. 1997).
Defendants SPS et al. move to dismiss Plaintiff’s RICO claim
on the basis that Plaintiff’s allegations are too conclusory,
Plaintiff has not properly alleged either a pattern of racketeering
activity or collection of an unlawful debt, Plaintiff has not plead
the required “enterprise” element of a RICO claim, and Plaintiff’s
claim is time-barred under RICO’s four-year statute of limitation.
[DE 18-1].
Defendants Countrywide and BANA move to dismiss the
RICO claim on the basis that collection of an unlawful debt under
RICO does not include collection on a home loan and on the basis
of the four-year statute of limitation.
[DE 19].
Plaintiff’s RICO claim recites several portions of the RICO
statute along with the following two more specific allegations:
23
Plaintiff alleges that the sections 1343, 1341, 1344
place the acts of defendants within the purview of the
statute and thus must be imposed on each targeted
defendants. Inter alia, institutional bank fraud is
included as prohibited corrupt practices amounting to
racketeering under sub section (B). [DE 1, ¶161].
Plaintiff has sufficiently alleged false debt [one not
owed, due or overinflated] was being collected, that
at least two efforts and attempts were made to falsely
collect, that the evidence shows intent to defraud and
cheat plaintiff in a scheme to fabricate the truth of
the error then add additional false charges to the
loan, then and now, never due. [DE 1, ¶162].
In her opposition to Countrywide and BANA’s Motion to Dismiss,
Plaintiff argues that additional support for her RICO claim can be
found
in
the
Complaint.
General
Allegations
[DE 22, ¶IV.].
and
Fraud
sections
of
her
As outlined above, in those sections
of her Complaint, Plaintiff complains that the note she signed,
which she alleges included a fixed interest rate, was switched out
for an adjustable rate note and that she was fraudulently induced
into not paying her mortgage for three months in reliance on a
promise of a loan modification.
“Section
provides
1962
different
prohibits
theories
[DE 1, ¶¶ 12-12h].
various
upon
types
which
to
of
base
activity
a
claim
that
...
[likewise] it is essential that a plaintiff specify upon which
subsection of Section 1962 his cause of action is predicated.”
James v. Meow Media, Inc., 90 F. Supp. 2d 798, 812 (W.D. Ky. 2000).
Plaintiff has not sufficiently made clear which subsections of the
RICO statute upon which she relies but rather alleges that all
24
Defendants have violated “18 U.S.C. 1961-1964, et al.” [DE 1,
¶159].
Given that Plaintiff is appearing pro se, the Court will
accept that Plaintiff is attempting to allege RICO violations based
on both portions of § 1962(c): a pattern of racketeering activity
and collection of an unlawful debt by Defendants.6
Regardless,
for either a claim of unlawful racketeering activity or collection
of
unlawful
debt,
Plaintiff
must
also
establish
that
an
“enterprise” was involved. See Jackson v. Sedgwick Claims Mgmt.
Servs., Inc., 731 F.3d 556, 562 (6th Cir. 2013) (en banc); James
v. Meow Media, Inc., 90 F. Supp. 2d 798, 813 (W.D. Ky. 2000).
1. Enterprise
“In order to establish the existence of an “enterprise” ...
a plaintiff is required to prove:
(1) an ongoing organization with some sort of
framework or superstructure for making and carrying
out decisions;
(2) that the members of the enterprise functioned as
a continuing unit with established duties; and
(3) that the enterprise was separate and distinct from
the pattern of racketeering activity in which it was
engaged.
Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 793–94
(6th Cir. 2012); see also Boyle v. United States, 556 U.S. 938,
6
Plaintiff has bolded the term “collection of unlawful debt” throughout
her recitation of the RICO statute and also uses the word
“racketeering” and refers to “at least two efforts” in her Complaint.
[DE 1, ¶¶160, 161, 162.].
25
946 (2009) (the enterprise “must have at least three structural
features: a purpose, relationships among those associated with the
enterprise, and longevity sufficient to permit these associates to
pursue the enterprise’s purpose.”).
As Defendants SPS et al.
argue, Plaintiff has not alleged nor identified the existence of
an “enterprise.”
Plaintiff’s bare-bone accusation that “buying
and selling of Notes in the national marketplace seems to qualify”
[DE 1, ¶160(b) is not sufficient to allege the existence of an
enterprise,
and
for
this
reason,
Plaintiff’s
RICO
claim
is
dismissed.
2. Racketeering
Plaintiff’s RICO claim is also dismissed for failing to
properly allege a pattern of racketeering activity as required by
§1962(c).
To establish a pattern of racketeering activity, a
plaintiff must allege at least two related acts of racketeering
activity that amount to or pose a threat of continued criminal
activity.
Brown v. Cassens Transp. Co., 546 F.3d 347, 354 (6th
Cir. 2008).
The RICO statute enumerates dozens of crimes that
constitute racketeering activity.
See 18 U.S.C. § 1961(1).
As Defendants SPS et al. maintain, rather than alleging the
required “racketeering activity” actionable under RICO, Plaintiff
lists three federal criminal but does not articulate how the
statutes may apply to this case and how they were violated by
Defendants. [DE 1, ¶161].
The crimes upon which Plaintiff relies,
26
§ 1341 (mail fraud), § 1343 (wire fraud), and § 1344 (financial
institution fraud), require the heightened specificity of Fed. R.
Civ. P. 9, as Defendants SPS et al. contend.
See Paycom Billing
Servs., Inc. v. Payment Res. Int'l, 212 F. Supp. 2d 732, 736 (W.D.
Mich. 2002).
Plaintiff has not made any specific allegations with
respect to mail fraud, wire fraud, or financial institution fraud
including the who, what, when, and where of such fraudulent
activity as required by Fed. R. Civ. P. 9, likewise, dismissal of
the RICO claims is necessary.
Plaintiff further alleges that “at least two efforts and
attempts were made to falsely collect” a “false debt” with an
“intent to defraud and cheat plaintiff in a scheme to fabricate
the truth of the error then add additional false charges to the
loan, then and now, never due.” [DE ¶162].
Plaintiff also relies
on her general mortgage fraud accusations in support of her RICO
claim.
[DE 22, Section IV.].
However, as Countrywide and BANA
highlight, the Sixth Circuit has recognized that an unlawful threat
of foreclosure and mortgage fraud are not recognized as predicate
acts
under
immediately.
RICO,
and
has
stated
that
they
can
be
dismissed
18 U.S.C. § 1961(1)(B); Otworth v. Budnik, 594 F.
App'x 859, 862 (6th Cir. 2014) cert. denied, 135 S. Ct. 1905, 191
L. Ed. 2d 773 (2015).
Regardless, as Defendants argue, Plaintiff’s allegations of
racketeering
conduct
by
Defendants
27
do
not
meet
the
minimal
requirements of factual specificity and sufficiency “to raise a
right
to
relief
above
dismissed on this basis.
the
speculative
level,” and
are
also
Bell Atl. Corp. v. Twombly, 550 U.S.
544, 545 (2007).
3. Collection of an Unlawful Debt
Plaintiff also alleges that Defendants have violated RICO
based on the collection of an unlawful debt. RICO defines “unlawful
debt” as a debt “incurred or contract in gambling activity” or
“which is unenforceable under State of Federal law in whole or in
part…because of the laws relating to usury.” 18 U.S.C. § 1961(6).
Plaintiff’s allegations do not fall within either category and,
therefore, are dismissed for this reason as well.
4. RICO Statute of Limitations
The defendants’ final argument with respect to dismissal of
Plaintiff’s RICO claim rests on the four-year statute of limitation
that applies to civil RICO actions.
Agency Holding Corp. v.
Malley-Duff & Associates, Inc., 483 U.S. 143 (1987); Hofstetter v.
Fletcher, 905 F.2d 897, 904 (6th Cir. 1988). The four-year statute
of limitation “begins to run when the plaintiff knows or has reason
to know of the RICO injury which is the basis of his action.” CoalMac, Inc. v. JRM Coal Co., 734 F.Supp. 499, 501 (E.D. Ky. 1990).
All specific allegations in the Complaint relate to the loan
origination, which Plaintiff alleges occurred in 2004, and the
loan modifications, which Plaintiff alleges occurred in 2008 and
28
2010.
[DE 1].
Plaintiff’s filed her Complaint on April 14, 2015,
therefore any RICO claims relating to the loan origination and
modifications are barred by the four-year statute of limitation.7
D. Count VII: Plaintiff Has Failed to State a Claim
Alleging Violations of TILA or RESPA.
In her seventh cause of action, Plaintiff seeks to have the
2004 Loan Agreement rescinded under the Truth in Lending Act and
the Real Estate Settlement Procedures Act. [DE 1, ¶165-166].
The Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq.,
“was enacted to promote the informed use of credit by consumers by
requiring meaningful disclosure of credit terms.”
Morgan
Chase
Bank,
N.A.,
445
F.3d
874,
Barrett v. JP
875-876
(6th
Cir.
2006)(quoting Begala v. PNC Bank, Ohio, N. A., 163 F.3d 948, 950
(6th Cir.1998)).
At the outset, Plaintiff’s TILA claims against
SPS and MERS are dismissed because the statute generally does not
impose liability on servicers of a loan unless the servicer is
also the owner of the obligation.
15 U.S.C. § 1641(f)(1); see
also Yaldu v. Bank of Am. Corp., 700 F. Supp. 2d 832, 841-42 (E.D.
Mich. 2010).
There are no allegations that SPS or MERS is the
owner of the loan.
[DE 1 at ¶12a].
7
Based on the case law cited by Defendants SPS, et al., the Court
disagrees with Plaintiff’s contention that a continuing injury theory
applies to RICO claims. See Osborn v. Griffin, 50 F. Supp. 3d 772, 806
(E.D. Ky. 2014).
29
Plaintiff alleges to have given timely written notice of her
right to cancel the note based on failure to receive the required
TILA disclosures but does not specify to whom she sent a written
notice. [DE 1, ¶164].
At a minimum, Defendants must have fair
notice of what claims are being made against them and the grounds
upon which they rest.
Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(quoting Twombly, 550 U.S. at 555) (alteration in original).
Having failed to specify to whom she gave notice pursuant to TILA,
Plaintiff’s TILA claim is dismissed.
Finally, even if Plaintiff asserted a valid TILA claim against
a specific Defendant, her claim is time-barred.
18-1, p. 20].
[DE 19, p. 13; DE
TILA provides an obligor the right to rescind up to
three years after the date of the consummation of the transaction
or upon the sale of the property, whichever occurs first.
U.S.C. § 1635(f).
15
Suit based on an attempted rescission must be
brought by the borrower within one year of seeking rescission under
TILA.
15 U.S.C. §1640)(e).
As stated by the U.S. District Court
for the District of Columbia:
Under TILA, borrowers have three business days after
the loan is consummated to exercise their right of
rescission and cancel the transaction. See 15 U.S.C.
§ 1635(a). If the creditor fails to provide all
material disclosures and/or proper notice of the right
to rescind, however, a borrower's right of rescission
is extended to three years from the date of settlement.
See 15 U.S.C. § 1635(f). If the borrower exercises her
right of rescission during this extended period, the
creditor's denial of rescission or its failure to
30
properly respond to the rescission within 20 days
after receipt of notice gives rise to a potential
violation under TILA and commences the running of
TILA's one year statute of limitations.
Johnson v. Long Beach Mortgage Loan Trust 2001-4, 451 F. Supp. 2d
16, 40 (D.D.C. 2006); see also Knittel v. First Fin. Mortgage
Corp., No. CIV.A. 08-44-JBC, 2009 WL 1702174, at *2 (E.D. Ky. June
17, 2009).
in
2004,
Since the consummation of the original loan occurred
Plaintiff
had
until
2007
to
submit
her
notice
of
rescission, and until 2008 to file suit under TILA, which Plaintiff
did not do until April of 2015.
Plaintiff’s TILA claim is
dismissed on this basis as well.
Plaintiff
also
asserts
a
claim
under
the
Real
Procedures Act (“RESPA”), 12 U.S.C. § 2607. [DE 1, ¶165].
Estate
Although
Plaintiff does not specify upon which provision of RESPA she
relies, it appears to the Court that Plaintiff is alleging a
violation of 12 U.S.C. § 2605(e). 8
Section 2605(e) of RESPA
provides borrowers of a loan a private action against a loan
servicer for failure to respond, an incomplete response, or an
untimely response to a qualified written request (“QWR”) related
to the servicing of a loan.
12 U.S.C. § 2605(e).
A QWR is a
written correspondence that includes the name and account of the
borrower and a statement setting forth the reasons for the belief
8
Defendants surmise that Plaintiff’s RESPA claim is based on 12 U.S.C.
§ 2607 [DE 18-1 at 22], although the Court finds no basis for this
claim in the Complaint.
31
that the account is in error or a request for information.
Marais
v. Chase Home Fin., LLC, 24 F. Supp. 3d 712, 719 (S.D. Ohio
2014)(quoting 12 U.S.C. § 2605(e)(1)(B)(2006)).
receiving
a
QWR,
a
servicer
is
required
Within 60 days of
to
take
action
by
correcting the account or providing requested information, and by
providing an explanation as to what action was or was not taken by
the servicer as necessary.
Id.
Although Plaintiff alleges she contacted BANA in writing and
demanded information about the variable payment calculations on
her loan pursuant to RESPA, and that BANA never responded, [DE 1,
¶17], “[t]he Sixth Circuit has made it clear that liability for
RESPA
for
servicers.”
failure
to
respond
to
QWRs
attaches
only
to
loan
Morton v. Bank of Am., N.A., No. 1:12-CV-511, 2013 WL
6491089, at *5 (W.D. Mich. Dec. 10, 2013).
Since Plaintiff has
not alleged that BANA is a servicer of her loan, Plaintiff’s RESPA
claim is dismissed.9
E. Counts IV, VII, and VIII: Plaintiff Has Failed to State
a Claim for Fraud.
Plaintiff asserts two claims of fraud:
one concerning the
formation of the 2004 Loan Agreement and statements made to her at
that
time
by
AWL,
and
the
9
other
relating
to
alleged
The Court declines to dismiss Plaintiff’s RESPA claim on the basis of the
three (3) year statute of limitations for violations of 12 U.S.C. § 2605 since
it is not clear from the face of the Complaint when Plaintiff submitted her
alleged QWR. See 12 U.S.C. § 2614.
32
misrepresentations made during an October 7, 2008 telephone call
with a BANA representative.
In alleging fraud, Rule 9(b) requires
a party to state with particularity the circumstances constituting
fraud.
Fed. R. Civ. P. 9(b).
To be pled with particularity, the
time, place, and contents of the false representations, as well as
the identity of the person making the misrepresentations must be
stated.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007);
Eva v. Midwest Nat'l Mortg. Bank, Inc., 143 F.Supp.2d 862, 877
(N.D.Ohio 2001).
allegations
Because Plaintiff makes no particular fraud
against
Countrywide,
Deutsche
Bank,
SPS,
MERS
or
Hierman, all fraud claims against them are dismissed.
1. The 2004 Loan Agreement
Plaintiff’s first fraud claim relates to the origination of
her 2004 Loan Agreement.
[DE 1, ¶ 12b,c].
Plaintiff alleges that
she was promised by AWL, the loan originator, a fixed rate note of
4.25 percent for 30 years, which is the document she believed to
have signed at her loan closing in 2004.
[DE 1, 12f].
However,
Plaintiff alleges that the document she signed was switched out
for a note with terms to which she did not agree, namely an
adjustable rate, and with what “appears to be forged signatures
and certainly not what she recalls signing in 2004.” [DE 1, ¶¶ 12f12h].
Plaintiff states that she discovered the alleged fraudulent
activity “in or about November 20, 2007 after BANA suspiciously
increased the monthly payments” [DE 1, ¶16] and upon receiving her
33
loan documents from an escrow company in or about 2007. [DE 1,
¶12f].
In her seventh cause of action, Plaintiff seeks to have
the 2004 Loan Agreement rescinded for fraud in the formation of
the contract and seeks restitution of all sums paid by down payment
and monthly payments.
[DE 1, ¶ 165].
Importantly, all fraud
allegations regarding the origination of the loan relate to AWL,
who is not a named Defendant in this action.
For this reason,
Plaintiff’s fraud claim relating to the origination of her loan is
dismissed.
Even if the Court were to assume that the conduct of AWL may
be imputed to Countrywide, which the Court declines to do without
more specific allegations as required by Rule 9, under Kentucky
law, an action for relief or damages on the ground of fraud or
mistake must be commenced within five years after the cause of
action accrues. KRS 413.120. Plaintiff alleges to have discovered
the fraudulent loan documents in November of 2007 [DE 1, ¶16],
therefore,
a
claim
misrepresentation
for
regarding
rescission
the
based
formation
of
on
fraudulent
the
2004
Agreement must have been brought by November of 2012.
Loan
Having not
brought this claim until April of 2015, Plaintiff’s attempt to
34
disaffirm
the
2004
Loan
Agreement
on
the
basis
of
fraud
is
dismissed.10
In her eighth cause of action, Plaintiff makes a duplicative
fraud allegation that her 2004 Loan Agreement was void ab initio
stating there was no meeting of the minds based on the inclusion
of an adjustable rather than a fixed interest rate. [DE 1, ¶164168]. Although couched as a breach of a written contract, Plaintiff
is in fact disaffirming the contract and seeking rescission and
restitution, which, as stated above, is also dismissed as outside
the five-year statute of limitations set forth in KRS 413.120(11)
since plaintiff alleges to have discovered the fraudulent loan
documents in 2007. [DE 1, ¶12f].
Plaintiff also claims her 2004 loan documents were notarized
by a “phantom notary” and alleges several defects with the notary
acknowledgement.
[DE 1, ¶12b,c,d,e,f].
Defendants SPS et al.
move to dismiss this claim on the basis that KRS 61.060 prohibits
challenges
to
notarized
documents
valid
on
their
face;
the
requirements for a Kentucky notary certificate are fulfilled in
this case pursuant to KRS 423.130 and KRS 423.140; and because the
five year statute of limitations for fraud has passed.
10
[DE 18-1
As Defendants SPS et al. contend, if Plaintiff truly seeks a return
to status quo based on rescission, she will be required to pay the
mortgage proceeds back to Defendant lenders. Plaintiff has not alleged
that she is prepared to restore to Defendants the monies she received
to purchase her residence, moreover, this is not the result Plaintiff
appears to seek.
35
at 4-6].
Defendants Countrywide and BANA move to dismiss any
claims based on the origination of Plaintiff’s loan on the basis
that Plaintiff does not allege that Countrywide or BANA were
involved in the origination of her loan.
[DE 19 at 3].
Although Plaintiff alleges improper notarization of her loan
documents, the claim of relief she seeks is not distinguishable
from the face of the Complaint.
To the extent Plaintiff seeks
relief from Doe I-Notary Public, the “phantom notary,” she must
seek recovery from the notary directly, not simply miscellaneous
relief.
KRS 61.060; In re St. Clair, 380 B.R. 478, 484 (B.A.P.
6th Cir. 2008).
Because Plaintiff has merely joined Defendants
L.A. Llenos and Doe I – Notary Public to this action but not sought
recovery from the notaries based on their alleged dereliction,
Plaintiff has not sought direct action from the notary as required
by KRS 61.060; In re St. Clair, 380 B.R. at 484.
Moreover, if Plaintiff is alleging improper notarization as
part of her fraud claim, that claim is barred by the five year
statute of limitations set forth in KRS 413.120(11). To the extent
Plaintiff is in fact attempting to allege a claim of professional
negligence against the notaries, which the Court is not concluding
is a valid claim or not, any such claim must be brought within one
year from the date of the occurrence or from the date when the
cause of action was, or reasonably should have been, discovered by
Plaintiff.
KRS 413.245.
Plaintiff alleges the documents were
36
defectively notarized on or about September 22, 2004 and that she
obtained copies of the documents in or about 2007, however, this
action was not filed until April of 2015, which makes any fraud or
professional negligence claim untimely. [DE 1 at ¶12c,f].
of
these
reasons,
Plaintiff’s
claim
regarding
For all
defective
notarization of her loan documents are dismissed.
2. October 7, 2008 Telephone Conversation
Plaintiff asserts an additional fraud claim relating to her
October 7, 2008 telephone conversation with Ms. Garcia of BANA
wherein Ms. Garcia allegedly promised Plaintiff a decrease in her
mortgage payment amount if Plaintiff failed to pay her loan for
three months.
[DE 1, ¶76-77].
Plaintiff alleges that in reliance
on Ms. Garcia’s promise, she did not pay her loan for three months
and, upon paying the alleged newly agreed upon lower payment amount
in the fourth month, BANA failed to recognize the new agreement
but instead issued a default notice on or about February 13, 2009.
[DE 1,¶76c-d].
five
million
Plaintiff alleges damages in a sum not less than
dollars
as
a
result
of
the
alleged
fraudulent
activities. [DE 1, ¶77].
Pursuant to KRS 413.120, a fraud claim must be commenced
within five years after the cause of action accrued.
Here,
Plaintiff discovered the alleged fraudulent misrepresentation in
February of 2009, such that her fraud claim would have had to have
been brought by February 2014 to be timely.
37
Plaintiff filed her
Complaint, including her claim of fraud, on April 14, 2015, which
is outside the five year statute of limitations for fraud claims
in Kentucky.
On this basis, her fraud claim based on the October
7, 2008 telephone call with BANA is also dismissed.
Plaintiff relies on a “continuous injury” theory to argue that
the five-year statute of limitation does not apply to her fraud
claims. [DE 22, p. 6; DE 21, p. 9].
Plaintiff argues that her
continuous injury is a higher monthly loan payment as a result of
Ms.
Garcia’s
alleged
fraudulent
misrepresentation
in
2008.
Plaintiff’s theory is not in accord with Kentucky case, which
provides a narrow exception to the five-year statute of limitations
if the circumstances are such that plaintiff did not only not
discover the fraud during the five year period but the fraud could
not have been discovered with reasonable diligence. Skaggs v.
Vaughn, 550 S.W.2d 574, 577 (Ky. Ct. App. 1977).
Having admitted
to discovering the alleged acts of fraud in or about November 10,
2007 when her monthly payments increased and in February of 2009
when a Notice of Default was issued, Plaintiff cannot make a
tolling claim based on lack of discovery. For these reasons, Count
IV of Plaintiff’s Complaint is dismissed.
F. Count VIII: Plaintiff Has Failed to State a Claim for
Breach of Contract.
In Plaintiff’s eighth cause of action, in addition to seeking
rescission of the 2004 Loan Agreement based on fraud as discussed
38
above, Plaintiff alleges a breach of the oral contract made between
her and BANA during her October 7, 2008 telephone conversation
with Ms. Garcia. Oral contracts in Kentucky are subject to a fiveyear
statute
of
limitation,
likewise,
Plaintiff’s
claim
is
dismissed as untimely. See Trischler v. Haire, No. 5:07-437-JMH,
2009 WL 1515763 (E.D. Ky. June 1, 2009)(applying KRS 413.120).
In addition, as Defendants argue, any agreement made between
Plaintiff and BANA during the alleged October 7, 2008 telephone
call would have been a modification to Plaintiff’s 2004 Loan
Agreement, a contract covered by the statute of frauds.
“The
Kentucky Supreme Court has held that any modification materially
altering the terms of a contract covered under the statute of
frauds must also comply with the statute of frauds, and thus must
be in writing.” Parker v. Kentucky Housing Corp., 2015 WL 301222
(Ky. Ct. App. Jan 23, 2015)(citing Farmers Bank & Trust Co. of
Georgetown v. Willmott Hardwoods, Inc., 171 S.W.3d 4, 8 (Ky.
2005)). Because the oral contract that Plaintiff alleges BANA
breached is not in writing and does not satisfy the statute of
frauds, it is an invalid contract. Accordingly, Plaintiff’s breach
of contract claim based on this invalid oral contract is dismissed.
G. Counts III and V: Plaintiff Has Failed to State a Claim
Entitling Her to a Declaratory Judgment or Accounting.
In her third cause of action, Plaintiff seeks a declaration
regarding the parties’ respective rights and duties under her note
39
and mortgage, specifically, a declaration as to whether she has a
legal
duty
to
continue
making
her
mortgage
payments
and
a
declaration as to ownership of the note and the right to foreclose.
[DE 1, 46].
Defendants argue that this claim should be dismissed
because a request for declaratory relief must be based on an
underlying substantive claim, and Plaintiff has failed to state a
claim upon which relief can be granted as to any of her tangential
claims.
[DE 19, p. 11; DE 18-1, p. 12-13]. The Court agrees with
Defendants.
“A request for declaratory relief is barred to the
same extent that the claim for substantive relief on which it is
based would be barred.” Int'l Ass'n of Machinists & Aerospace
Workers v. Tennessee Valley Auth., 108 F.3d 658, 668 (6th Cir.
1997). Since Plaintiff has not adequately pleaded her substantive
claims as set forth above, the court has no basis upon which to
issue declaratory relief, and therefore, Plaintiff’s claim seeking
a declaratory judgment is dismissed.
In her fifth cause of action, Plaintiff seeks an accounting
of her entire loan account from all Defendants to determine the
correct amount of the loan, note, payments made, payments due,
credits due, and payoff balance. [DE 1, 123-124a].
Plaintiff’s
request
declaratory
for
an
accounting,
like
her
request
for
judgment, is a remedy for the wrongdoings alleged above, not a
separate, actionable claim.
Because Plaintiff’s accounting claim
is premised on underlying claims, the Court denies this relief
40
where all of the underlying claims have fallen.
See Cmty. Ties of
Am., Inc. v. NDT Care Servs., LLC, No. 3:12-CV-00429-CRS, 2015 WL
520960, at *26 (W.D. Ky. Feb. 9, 2015).
IV.
CONCLUSION
For the reasons articulated above, Plaintiff has failed to
state a claim upon which relief may be granted.
Accordingly, IT
IS HEREBY ORDERED that:
1. the Motion to Dismiss filed by SPS, Deutsche Bank, MERS,
and Hierman [DE 18] is GRANTED;
2. the Motion to Dismiss filed by Defendants Countrywide and
BANA [DE 19] is GRANTED;
3. all claims alleged in the Complaint [DE 1] against all
Defendants are DISMISSED WITH PREJUDICE;
4. all pending motions or requests for relief are DENIED AS
MOOT;
5. all deadlines and scheduled proceedings are CONTINUED
GENERALLY;
6. that the Clerk shall STRIKE THIS MATTER FROM THE ACTIVE
DOCKET;
7. that this ORDER is FINAL AND APPEALABLE ORDER and THERE
IS NO JUST CAUSE FOR DELAY.
This the 29th day of October, 2015.
41
42
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?