Morshaeuser et al v. Citimortgage, Inc. et al
Filing
26
ORDER & REASONS granting in part and denying in part 8 Motion to Dismiss for Failure to State a Claim as stated herein. IT IS FURTHER ORDERED that the plaintiffs request for leave to amend their state court petition is GRANTED. Signed by Judge Martin L.C. Feldman on 11/14/2012. (caa, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ANDREA MORSHAEUSER,
wife of and PAUL JAMES CASEY FOS
CIVIL ACTION
v.
NO. 12-2210
CITIMORTGAGE, INC., ET AL.
SECTION "F"
ORDER AND REASONS
Before the Court is Citimortgage’s Rule 12(b)(6) motion to
dismiss.
For the reasons that follow, the motion is GRANTED in
part and DENIED in part.
Background
This litigation arises from the alleged wrongful foreclosure
initiated by Citimortgage, Inc. on Andrea Moreshaeuser and James
Paul Casey Fos’ house in Covington, Louisiana.
The facts as
alleged in the state court petition are more completely set forth
in this Court’s October 24, 2012 Order and Reasons.
On April 22, 2005 Andrea Moreshaeuser and Paul James Casey Fos
bought a house at 70355 8th Street in Covington, Louisiana.
The
purchase was made with a loan from Parish National Bank; the loan
was evidenced by a Note (made payable to Parish National Bank) and
secured with a mortgage, which was given to Mortgage Electronic
Registration Systems, Inc. (MERS) as beneficiary.
Parish National
Bank then assigned and transferred the mortgage and mortgage note
to MERS; the assignment of mortgage was recorded with the Clerk of
St. Tammany Parish on April 24, 2006.
1
While the Foses were making
their monthly payments under the note, Citimortgage informed them
that the payments should be made to Citi.
During the Fall of 2010, the Foses fell behind on the payments
on the note.
Mr. Fos remained in contact with Citi.
When Citi
accelerated the note, Mr. Fos says that he attempted to pay the
arrears in full, but Citi refused to accept the payment offer; a
representative told him that the loan had been foreclosed.
On January 10, 2011 Anne Raymond, a partner with Jackson &
McPherson, on Citi’s behalf, filed with the Clerk of Court of St.
Tammany Parish a petition for executory process to foreclose on the
mortgage and enforce the note.
In the verified petition, Citi and
Raymond (acting as attorney for Citi and representative of Citi)
asserted that Citi was the holder of the note secured by the
mortgage on the Fos property.
Two days later, the St. Tammany
Parish court ordered the Sheriff to seize and sell the property.
On
January
24,
2011
the
Sheriff
of
St.
Tammany
Parish
constructively seized the Fos property.
During the spring and summer of 2011 Mr. Fos applied twice for
a loan modification or reinstatement.
Fos claims that Citi failed
to properly process the modification and reinstatement application,
failed to keep him informed, and failed and refused to staff its
departments to process modification/reinstatement applications.
Also during this time, the Sheriff’s sale of the house was set,
cancelled, and re-set numerous times.
2
It is the Foses position
that the re-settings were done in bad faith to increase fees and as
part of a plan to make
any final loan payoff more difficult and so
that the Foses could not reinstate or payoff their loan.
Ultimately, after Citi submitted to Fos some payoff quotes, on
September 6, 2011, Fos transferred to Jackson & McPherson the
payoff amount of $124,194.69; the loan was paid in full.
After
efforts to secure from Citi the cancelled note,1 on March 22, 2012
Fos received a letter from Citi stating that the mortgage account
had been paid in full on September 12, 2011; attached to the letter
was a Lost Note Affidavit (which stated that the note had been paid
in full but the note had been lost) with a copy of the note.
Attached to the Lost Note Affidavit was a Notarial Endorsement and
Assignment of Mortgage and Note, which stated that, as of June 30,
2011, MERS:
is the legal and equitable owner of the said note and
mortgage with full power to sell and assign the same;
that it has executed no prior assignment or pledge
thereof; that it has executed no release, discharge,
satisfaction or cancellation of said mortgage; that it
has executed no release of any portion of any of the
security described in said mortgage; and that it has
executed no instrument of any kind affecting the mortgage
or the note or the liability of the maker or makers
thereof....
[f]or value received, the said [MERS] does hereby,
assign, transfer, sell and deliver, without recourse to:
CITIMORTGAGE, INC....one certain mortgage note made and
subscribed by PAUL JAMES CASEY FOS AND ANDREA MORSHAEUSER
FOS, which mortgage note is secured by a mortgage of as
1
On November 23, 2011 the mortgage was cancelled by the
St. Tammany Parish Clerk of Court.
3
described herein executed by the same parties, and so
paraphed by a Notary Public, n/a Parish, Louisiana on
04/22/2005 recorded under Registry 1491223....
The Notarial Endorsement was recorded with the Clerk of Court on
July 25, 2011. According to Fos, the consideration or “value
received” actually paid by Citi for the assignment and transfer of
the mortgage note from MERS was de minimus.
Because Citi neither
owned nor held the note on the day Citi filed the petition for
executory process, January 6, 2011, the plaintiffs contend, it was
not entitled to receive the amounts it claimed in the pleading
filed on January 6, 2011; nor did Citi have rights to or an
interest in the mortgage as it claimed in its pleading.
On July 30, 2012 plaintiffs sued Citimortgage, Inc., Anne
Raymond, and Jackson & McPherson, LLC in state court.2
Based on
the language in the Notarial Endorsement and the date of its
recordation (July 2011), the plaintiffs allege that Citi wrongfully
foreclosed on their property and that, by doing so, committed fraud
on the court and on them; in addition to committing the tort of
wrongful
foreclosure,
the
plaintiffs
also
allege
that
Citi
committed conversion; that it committed fraud on the public records
2
The plaintiffs had alleged that Ms. Raymond “failed to
fulfill her duties under La.C.C.P. art. 863(B)” when she signed the
underlying petition for executory process, that Ms. Raymond also
violated Rule 3.7 of the Rules of Professional Conduct by executing
the verification attached to the petition for executory process,
and that Jackson & McPherson is running a “foreclosure mill” in
which more foreclosures are processed than the staff of the firm
allows.
4
of St. Tammany Parish; that the assignment of the note was a sale
of a litigious right; and that Citi breached the Home Affordable
Modification
Program
with
modification application.
respect
to
the
plaintiffs’
loan
They filed suit in state court.
The plaintiffs seek damages (1) for the conversion of the
property for the period of the Sheriff’s constructive seizure in
January 2011 until the note was assigned to Citi in June 2011; (2)
for anxiety, embarrassment, and emotional stress, and (3) the
difference between the amount the plaintiffs paid to Citi minus the
amount Citi paid to MERS for the assignment of the note.
The
plaintiffs also ask that the Court refer this matter to the
District Attorney of St. Tammany Parish and “to take judicial
notice that the nationwide foreclosure practices of Citimortgage
have been investigated...by the Office of the Inspector General of
the United States Department of Housing and Urban Development the
results of the investigation having been published....”
Citi
timely
diversity
and
requested
remand
removed
federal
of
the
lawsuit,
question
this
invoking
jurisdiction.
lawsuit
and
dismissal for failure to state a claim.
the
this
The
Court’s
plaintiffs
defendants
sought
On October 24, 2012, this
Court denied the plaintiffs’ motion to remand, granted Anne Raymond
and Jackson & McPherson, LLC’s motion to dismiss, and continued
Citi’s motion to dismiss pending submission of supplemental papers.
Citi now seeks dismissal of the plaintiffs’ claims for failure to
5
state a claim.
I.
Rule 12(b)(6) allows a party to move for dismissal of a
complaint when the plaintiff has failed to state a claim upon which
relief can be granted. Such a motion “‘is viewed with disfavor and
is rarely granted.’”
See Lowrey v. Tex. A & M Univ. Sys., 117 F.3d
242, 247 (5th Cir. 1997) (quoting Kaiser Aluminum & Chem. Sales,
Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.
1982)).
“‘To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.’”
Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct.
1937, 1949 (2009)) (internal quotation marks omitted).
“A claim
has facial plausibility when the pleaded factual content allows the
court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.”
Iqbal, 129
S. Ct. at 1940.
“Factual
allegations 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).”
Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation marks,
citations, and footnote omitted).
The
United
States
Supreme
Court
suggests
a
“two-pronged
approach” to determine whether a complaint states a plausible claim
6
for relief.
Iqbal, 129 S.Ct. at 1950.
First, the Court must
identify pleadings that are conclusory and thus not entitled to the
assumption of truth.
supported
by
Id.
factual
A corollary: legal conclusions “must be
allegations.”
Id.
Second,
for
those
pleadings that are more than merely conclusory, the Court assumes
the
veracity
of
those
well-pleaded
factual
allegations
and
determines “whether they plausibly give rise to an entitlement to
relief.”
Id.
This facial plausibility standard is met when the plaintiffs
pleads facts that allow the Court to “draw the reasonable inference
that the defendant is liable for the misconduct alleged.”
Id. at
1949. Claims that are merely conceivable will not survive a motion
to dismiss; claims must be plausible.
Twombley, 550 U.S. at 570;
see also Iqbal, 129 S.Ct. at 1949 (“The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than
a sheer possibility that a defendant has acted unlawfully”).
“Where a complaint pleads facts that are merely consistent with a
defendant’s
liability,
it
stops
short
of
the
line
between
possibility and plausibility of entitlement to relief.”
Iqbal 129
S.
the
Ct.
at
1949
(internal
quotations
omitted).
In
end,
evaluating a motion to dismiss is a “context-specific task that
requires the reviewing court to draw on its judicial experience and
common sense.”
Id. at 1950.
7
II.
A.
A federal court sitting in diversity applies the forum state’s
prescription period as substantive law.
Holt v. State Farm Fire &
Cas. Co., 627 F.3d 188, 191 (5th Cir. 2010).
Because the burden of
proving that a suit has prescribed is an affirmative defense, the
burden
of
proving
prescription
rests
with
the
moving
party.
Taranto v. Louisiana Citizens Prop. Ins. Corp., 62 So.3d 721, 726
(La. 2011)(citing Bailey v. Khoury, 891 So.2d 1268, 1275 (La.
2005)). However, if a petition is prescribed on its face, then the
burden shifts to the plaintiff to negate the presumption by
establishing that prescription has been suspended or interrupted.
Id.
“According
to
[the]
civilian
tradition,
prescription
is
defined as a means of acquiring real rights or of losing certain
rights as a result of the passage of time.”
omitted).
“[T]he
fundamental
purpose
of
the
Id. (citation
prescription
statutes”, the Louisiana Supreme Court has observed, “is ‘to afford
a defendant economic and psychological security if no claim is made
timely and to protect the defendant from stale claims and from the
loss
or
non-preservation
of
relevant
proof.’”
Id.
(quoting
Cichirillo v. Avondale Indus., Inc., 917 So.2d 424 (La. 2005)). Of
the three types of prescription, “liberative prescription” is “a
mode of barring actions as a result of inaction of a period of
time.”
La.C.C. art. 3447.
If prescription is suspended, “the
8
period
of
suspension
is
not
counted
toward
accrual
of
prescription”; “[p]rescription commences to run again upon the
termination of the period of suspension.” La.C.C. art. 3472.
B.
It is undisputed that the plaintiffs’ claims for fraud,
conversion, and wrongful foreclosure are subject to a one-year
prescriptive period.
Citi contends that each of these claims is
facially prescribed.
The plaintiffs counter that the claims are
not prescribed, invoking the doctrine of contra non valentem.
At
this stage of the litigation, based on the plaintiffs’ allegations
alone, the Court agrees with the plaintiffs.
“Delictual actions are subject to a liberative prescription
of one year[;]
injury
or
This prescription commences to run from the day
damage
is
sustained....”
La.C.C.
art.
3492.
Prescription statutes are strictly construed against prescription
and in favor of the obligation sought to be extinguished.
Carter
v. Haygood, 892 So.2d 1261, 1268 (La. 2005).
In
exceptional
cases,
prescription
may
be
suspended
by
application of an equitable jurisprudential exception to statutory
prescription:
contra non valentem non currit praescriptio (which
means that prescription does not run against a person who could not
bring
his
suit)
halts
the
running
of
prescription
when
the
circumstances of the case fall into one of four categories.
Id.
Of the four instances where contra non valentem is applied to
9
prevent the running of prescription, the plaintiffs here invoke the
one commonly known as the discovery rule: “where the cause of
action is not known or reasonably knowable by the plaintiff, even
though his ignorance is not induced by the defendant”, prescription
may be prevented from running until the plaintiff knew or should
have known of the cause of action.
Id. (noting that the four
categories of contra non valentem “allow the courts to weigh the
equitable nature of the circumstances in each individual case to
determine whether prescription will be tolled”).
Prescription
begins to run when the plaintiffs have “a reasonable basis to
pursue a claim against a specific defendant.”
Jordan v. Employee
Transfer Corp., 509 So.2d 420, 423 (La. 1987). Stated differently:
“‘Mere apprehension that something might be wrong’ does not make
delay
in
filing
an
action
unreasonable...;
[t]here
must
be
knowledge of the tortious act, the damage caused by the tortious
act, and the causal link between the act and the damage before one
can be said to have ‘constructive notice’ of one’s cause of
action.”
Ducre v. Mine Safety Appliances, 963 F.2d 757, 760 (5th
Cir. 1992).
The
plaintiffs
allege
in
their
complaint
that
(1)
Citi
informed them that their mortgage payments should be made to it;
(2) Fos fell behind on mortgage payments; (3) Citi intentionally
accelerated the note and refused to accept Fos’ offer of payment in
violation of the mortgage; (4) based on an improperly verified
10
petition for executory process filed on January 10, 2011 the court
in St. Tammany Parish ordered the Sheriff to constructively seize
the
plaintiffs’
property;
(5)
Fos
twice
applied
for
loan
modification or reinstatement but Citi refused to process the
applications; (6) in response to Citi’s second payoff quote, Fos
paid the remaining loan in full; (7) Fos attempted to secure return
of the cancelled note from Citi; (8) plaintiffs received from Citi
on March 22, 2012 a lost note affidavit with a copy of the note.
The plaintiffs contend that March 22, 2012 was the first they could
have known that Citi did not own or hold the note or mortgage
rights on January 10, 2011 and that the discovery rule applies to
prevent
the
running
of
prescription
on
their
fraud
and
conversion/wrongful foreclosure claims until that date. Citi makes
no persuasive argument to the contrary.
At this stage of the
litigation, taking these allegations as true, the Court finds these
allegations sufficient to demonstrate the applicability of contra
non valentem to suspend the running of prescription until March
2012 on the plaintiffs’ fraud, conversion, and wrongful foreclosure
claims.3
III.
Citi
contends
that
the
plaintiffs’
3
claims
of
fraud,
The Court makes no finding on the merits of any defense
of prescription the defendant may invoke at a later stage of this
litigation. Moreover, if plaintiffs’ allegations can be proved,
the facts as alleged are quite troublesome.
11
conversion, wrongful foreclosure, third-party beneficiary, and sale
of a litigious right should be dismissed for failure to state a
claim.
The plaintiffs counter that they have stated claims for
fraud, conversion/wrongful foreclosure, and third party beneficiary
contract, but point out that their allegation regarding the sale of
a litigious right is not a claim but, rather, a measure of damages
for Citi’s alleged fraud.
Moreover, the plaintiffs request that,
if the Court finds that their pleadings do not satisfy Rule 9(b),
that they be granted leave to amend their state court petition.
A.
Fraud
Louisiana Civil Code article 1953 provides:
Fraud is a misrepresentation or a suppression of the
truth made with the intention either to obtain an unjust
advantage for one party or to cause a loss or
inconvenience to the other. Fraud may also result from
silence or inaction.
The elements of a fraud claim are (1) a misrepresentation of a
material fact; (2) made with intent to deceive; and (3) causing
justifiable reliance with resultant injury. Newport Ltd. v. Sears,
Roebuck & Co., 6 F.3d 1058, 1068 (5th Cir. 1993)(citations omitted).
Rule 9(b) of the Federal Rules of Civil Procedure provides
that when alleging fraud “a party must state with particularity the
circumstances constituting fraud or mistake...
Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged
generally.”
Fed.R.Civ.P. 9(b).
To satisfy Rule 9(b), a plaintiff
must (1) specify the statements alleged to be fraudulent, (2)
12
identify the speaker or author of the statements, (3) state when
and
where
the
statements
were
statements were fraudulent.
made,
and
(4)
state
why
the
Hermann Holdings Ltd. v. Lucent
Technologies, Inc., 302 F.3d 552, 564-65 (5th Cir. 2002)(citations
omitted). The Fifth Circuit commands that Rule 9(b) be interpreted
strictly.
Id.
Citi contends that the plaintiffs’ fraud claim does not
satisfy Rule 9(b) because they simply discuss Citi’s alleged fraud
in general terms and fail to specifically allege facts that would
support an inference that Citi acted with the intent to deceive.
The Court agrees.
Although malice, intent, and knowledge may be alleged in
general terms, the Fifth Circuit requires that plaintiffs “set
forth specific facts to support an inference of fraudulent intent.”
See Melder v. Morris, 27 F.3d 1097, 1102 (5th Cir. 1994).
The
plaintiffs here have made no such charge against Citi in their
state court petition; they fail to allege any facts that would
support an inference that Citi intended to deceive the plaintiffs
or otherwise acted with fraudulent intent.
Their conclusory
allegation that “Citimortgage committed fraud...against the Fos in
causing [the January 6, 2011 petition for executory process] to be
made” falls well short of satisfying Rule 9(b).
must
identify
Citi
officials
that
made
The plaintiffs
specific
fraudulent
statements at a specified time and place, and must also allege why
13
those specific statements amount to fraud.
Not only must the plaintiffs’ fraud claim against Citi be
dismissed, but to the extent that the plaintiffs purport to allege
fraud on the court and public records of St. Tammany Parish, any
such claims are likewise dismissed for failure to state a claim.
B.
Conversion/Wrongful Foreclosure
Citi contends that the plaintiffs’ claims for conversion and
wrongful
foreclosure
prescribed.
survive
should
be
dismissed
because
they
are
The Court has determined, however, that these claims
Citi’s
prescription
challenge
at
this
state
of
the
litigation.
The plaintiffs contend that their conversion claim is the same
as their wrongful foreclosure claim, and they point out that the
defendant failed to challenge whether they had stated a substantive
claim for relief.
supplemental
For the first time in its submission of
papers,
Citi
contends
that
the
plaintiffs’
conversion/wrongful foreclosure claim fails as a matter of law
because
the
plaintiffs
foreclosure/seizure
of
admit
their
that,
property,
at
they
the
time
were
in
of
the
arrears.
Because this challenge was not raised in their moving papers,
however, the Court declines to address at this time this new ground
for dismissing the plaintiffs’ conversion/wrongful foreclosure
claim.
14
C.
Third-Party Beneficiary to Contract
Citi contends that the plaintiffs’ attempt to allege that they
are third party beneficiaries of the contract between the federal
government
Modification
and
Citi
Program)
(presumably
fails
under
because
the
the
Home
plaintiffs
Affordable
make
no
allegations necessary to prove a “stipulation pour autrui” under
Louisiana Civil Code article 1971. The plaintiffs counter that the
Court should allow them to engage in discovery on this claim
because the clear purpose of the HAMP program was to assist
distressed borrowers like them.
Louisiana’s Civil Code provides that a contracting party may
stipulate a benefit for a third person not a party to the contract;
specifically, article 1978 provides:
A contracting party may stipulate a benefit for a third
person called a third party beneficiary.
Once the third party has manifested his intention to
avail himself of the benefit, the parties may not
dissolve the contract by mutual consent without the
beneficiary’s agreement.
To establish a “stipulation pour autrui” (a contractual provision
that benefits a third-party and gives the third-party a cause of
action against the promisor for specific performance), there must
be a clear expression of intent to benefit the third-party.
See
Stall v. State Farm Fire and Cas. Co., 995 So.2d 670 (La. App. 4th
Cir. 2008).
“A stipulation pour autrui is never presumed but,
rather, the intent of contracting parties to stipulate a benefit in
favor of a third-party must be made manifestly clear.” See Paul v.
15
Louisiana State Employees’ Group Ben. Program, 762 So.2d 136 (La.
Ap. 1st Cir. 2000).
“[T]he third-party relationship must form the
consideration for a condition of the contract, and the benefit may
not be merely incidental to the contract.”
So.2d 861 (La. App. 4th Cir. 2006).
Meyer v. Tufaro, 934
Finally, the party demanding
performance of an obligation pursuant to a stipulation pour autrui
bears the burden of proving the existence of this obligation.
See
La.C.C. art. 1831.
As the Eleventh Circuit has observed:
During the economic crisis of 2008, Congress passed
the Emergency Economic Stabilization Act of 2008 (EESA),
12 U.S.C. §§ 5201 - 5261. EESA charges the Secretary of
the United States Department of the Treasury with acting
in a manner that “preserves homeownership and promotes
jobs and economic growth.” Id. § 5201(2)(B). To this
end, the Department of the Treasury created the making
Home Affordable Program, a program that included HAMP.
HAMP is designed to prevent avoidable home
foreclosures by incentivizing loan servicers to reduce
the required monthly mortgage payments for certain
struggling homeowners. Servicers are obliged to abide by
guidelines promulgated by the Secretary when determining
a mortgagor’s eligibility for a permanent loan
modification.... Neither HAMP nor EESA expressly creates
a private right of action for borrowers against loan
servicers.
Miller v. Chase Home Finance LLC, 677 F.3d 1113, 1116 (11th Cir.
2012)(holding that no implied right of action exists: “EESA was not
passed for the ‘especial benefit’ of struggling homeowners, even
though they may benefit from HAMP’s incentives to loan servicers”).
It is because Congress did not create a private cause of action for
borrowers like the plaintiffs that the plaintiffs here seek to hold
16
Citi liable under the third-party beneficiary theory.
However, as
the Seventh Circuit has observed, “[m]ost...courts hold[] that
borrowers
were
not
intended
third-party
beneficiaries
[Servicer Participation Agreements pursuant to HAMP].”
of
the
Wigod v.
Wells Fargo Bank, 673 F.3d 547, 560 n.4 (7th Cir. 2012)(citing
cases). Absent any compelling argument as to why this Court should
not follow the majority view, this Court joins those courts that
have rejected the proposition that borrowers like the Foses were
intended third-party beneficiaries of HAMP Service Participation
Agreements; thus, the plaintiffs cannot establish a stipulation
pour autrui as a matter of law, and that claim must be dismissed.
See Wigod, 673 F.3d at 560 n.4; see also, e.g., Moore v. Mortg.
Elec. Registration Sys., Inc., 848 F. Supp. 2d 107, 127-28 (D.N.H.
2012); Boyd v. U.S. Bank, N.A. ex. Rel. Sasco Aames Mortg. Loan
Trust, Series 2003-1, 787 F. Supp. 2d 747, 757 (N.D. Ill. 2011);
Marks v. Bank of America N.A., No. 10-8039, 2010 WL 2572988, at *45 (D. Ariz. June 22, 2010); Villa v. Wells Fargo Bank, N.A., No.
10-81, 2010 WL 935680, at *2-3 (S.D. Cal. Mar. 15, 2010).
D.
Sale of a Litigious Right
Citi contends that the plaintiffs’ claim for sale of a
litigious right should be dismissed because the right of Citi to
institute the foreclosure was not contested in the foreclosure
action.
The plaintiffs counter that they are not alleging a
separate claim for sale of a litigious right but, rather, only
17
assert it as a measure of damage in connection with Citi’s alleged
fraud.
It is unclear whether the plaintiffs in fact oppose the
defendant’s motion to dismiss this claim for relief.
If the
plaintiffs do not oppose Citi’s motion to dismiss their sale of a
litigious right claim, then the motion should be granted as
unopposed. Even if the plaintiffs intend to oppose the defendant’s
motion by characterizing the sale of litigious right claim as a
measure
of
plaintiffs
damages,
have
however,
failed
to
Citi
state
a
has
demonstrated
claim
for
relief
that
that
the
is
plausible on its face.
As the defendants have pointed out, Louisiana Civil Code
Article 2652 expressly provides that a right is litigious “when it
is contested in a suit already filed.” La.Civ. Code art. 2652; see
also Arrington v. Republic Credit Corp., No. 02-2687, 2002 WL
31844905, at *5 (E.D. La. Dec. 16, 2002)(Vance, J.).
The right is
contested only once an answer or defense has been filed in response
to the suit filed.
First Nat’l Bank of Jefferson Parish v.
Keyworth, 670 So.2d 1288 (La.App. 5th Cir. 1996)(“In an executory
proceeding, defenses or objections may be asserted either through
an injunction to arrest the seizure and sale, or a suspensive
appeal from the order directing the issuance of the writ of seizure
and sale”).
Here, the plaintiffs allege that the assignment from MERS to
18
Citi was the sale of a litigious right pursuant to Article 2652.
But even according to the allegations of the state court petition,
Citi’s right to institute the foreclosure was not contested in the
foreclosure proceeding; plaintiffs do not allege that they filed an
answer, plea or defense. Accordingly, the plaintiffs fail to state
a claim upon which relief may be granted for the sale of a
litigious right.
Accordingly, IT IS ORDERED: that Citi’s motion to dismiss is
GRANTED in part (insofar as the plaintiffs’ fraud, third-party
beneficiary, and sale of a litigious right claims are hereby
dismissed)
and
DENIED
in
part
(insofar
as
the
plaintiffs’
conversion/wrongful foreclosure claim survives the defendant’s
challenge).
IT IS FURTHER ORDERED: that the plaintiffs’ request
for leave to amend their state court petition is GRANTED.4
New Orleans, Louisiana, November 14, 2012
______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
4
The plaintiffs request leave to amend their state court
petition to the extent this Court sustains the defendant’s
challenge to the sufficiency of their fraud allegations. Given
that this is the plaintiffs’ first request to do so and the
defendant fails to suggest that it would be prejudiced by any
amendment at this stage in the litigation, the Court will permit
the plaintiffs to amend their state court petition, upon the filing
of a proper motion, no later than 7 days from this Order and
Reasons.
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