Morshaeuser et al v. Citimortgage, Inc. et al
Filing
33
ORDER & REASONS denying 29 Motion to Dismiss for Failure to State a Claim. Signed by Judge Martin L.C. Feldman on 1/9/2013. (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 the plaintiffs’ supplemental and amending complaint.
For
the reasons that follow, the motion is DENIED.
Background
This
litigation
arises
from
the
alleged
fraudulent
and
wrongful foreclosure initiated by Citimortgage, Inc. on Andrea
Moreshaeuser
Louisiana.
and
James
Paul
Casey
Fos’
house
in
Covington,
The facts as alleged in the state court petition are
more completely set forth in this Court’s October 24, 2012 and
November 14, 2012 Orders and Reasons.
On July 30, 2012 plaintiffs sued Citimortgage, Inc., Anne
Raymond, and Jackson & McPherson, LLC in state court.1
1
The
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
1
plaintiffs allege in their state court petition that, at some point
after buying their house in Covington, Louisiana with a loan
evidenced by a note secured by a mortgage that was given to
Mortgage
Electronic
Registration
Systems,
Inc.
(MERS)
as
beneficiary, Citi informed them that their mortgage payments should
be
made
to
it;
Fos
fell
behind
on
mortgage
payments;
Citi
intentionally accelerated the note and refused to accept Fos’ offer
of payment in violation of the mortgage; based on an improperly
verified petition for executory process filed on behalf of Citi on
January 10, 2011,2 the court in St. Tammany Parish ordered the
Sheriff to constructively seize the plaintiffs’ property; Fos twice
applied for loan modification or reinstatement, but Citi refused to
process the applications; in response to Citi’s second payoff
quote, Fos paid the remaining loan in full; Fos attempted to secure
return of the cancelled note from Citi; and plaintiffs received
from Citi on March 22, 2012 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.
The plaintiffs contend that March 22,
which more foreclosures are processed than the staff of the firm
allows.
2
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.
2
2012 was the first they could have known that Citi did not own or
hold the note or mortgage rights on January 10, 2011.3
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 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 respect to the plaintiffs’
loan modification application.
Citi
timely
diversity
and
removed
federal
They filed suit in state court.
the
lawsuit,
question
invoking
jurisdiction.
this
The
Court’s
plaintiffs
3
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....
[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....
The Notarial Endorsement was recorded with the Clerk of Court on
July 25, 2011.
3
requested remand of this lawsuit, and all three defendants sought
dismissal for failure to state a claim.
On October 24, 2012, this
Court denied the plaintiffs’ motion to remand, granted Anne Raymond
and Jackson & McPherson, LLC’s motion to dismiss; and after
submission of supplemental papers by Citi and plaintiffs, on
November 14, 2012, the Court granted in part and denied in part
Citi’s motion to dismiss.4
The Court allowed the plaintiffs to
amend their complaint to attempt to cure their deficiencies in
pleading their fraud claim.
The plaintiffs filed their amended
complaint on November 21, 2012.
Citi now seeks to dismiss the
plaintiffs’ amended fraud claim for failure to state a claim under
Federal Rules of Civil Procedure 12(b)(6) and 9(b).
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
4
The Court dismissed the plaintiffs’ fraud, third-party
beneficiary, and sale of a litigious right claims, but denied
Citi’s motion to dismiss the plaintiffs’ conversion/wrongful
foreclosure claim.
4
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
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
factual
Id.
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
5
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.
Rule 9(b) of the Federal Rules of Civil Procedure imposes a
“heightened pleading standard”, and 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).
“Rule 9(b) is an exception to Rule 8(a)’s
simplified pleading that calls for a ‘short and plain statement of
the claim.’” U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185
(5th Cir. 2009).
Fifth
Circuit
“The particularity demanded by Rule 9(b)”, the
instructs,
“is
supplemental
to
the
Supreme
Court’s...interpretation of Rule 8(a) requiring ‘enough facts
6
[taken as true] to state a claim to relief that is plausible on its
face.’” Id. (citing Twombly, 550 U.S. at 570).
To satisfy Rule 9(b), a plaintiff must (1) specify the
statements alleged to be fraudulent, (2) identify the speaker or
author of the statements, (3) state when and where the statements
were made, and (4) state why the statements were fraudulent.
Hermann Holdings Ltd. v. Lucent Technologies, Inc., 302 F.3d 552,
564-65 (5th Cir. 2002)(citations omitted).
commands
that
Rule
9(b)
be
interpreted
The Fifth Circuit
strictly
but
(id.),
instructs courts to be mindful that “Rule 9(b) supplements but does
not supplant Rule 8(a)’s notice pleading[;]
Rule 9(b) does not
‘reflect
and
a
subscription
to
fact
pleading’
requires
only
‘simple, concise, and direct’ allegations of the ‘circumstances
constituting
plausible,
Kanneganti,
fraud,’
not
565
realistically
which
merely
F.3d
observe
after
Twombly
conceivable,
at
that
185-86.
“Rule
must
when
taken
Finally,
9(b)’s
the
ultimate
make
relief
as
true.”
Court
must
meaning
is
context-specific, and thus there is no single construction of Rule
9(b) that applies in all contexts.”
Id. at 188.
II.
A.
Citi contends that the plaintiffs’ amended fraud claim should
be dismissed for failure to state a claim; in particular, Citi
contends that the plaintiffs have failed to allege facts or
allegations that support an inference that Citi knew it was not the
7
owner and holder of the mortgage. The plaintiffs counter that they
have stated a claim for fraud that satisfies Rule 12(b)(6) and
9(b).
As this Court has previously noted in considering Citi’s prior
motion to dismiss, 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.
Kadlec Med. Center v.
Lakeview Anesthesia Assoc., 527 F.3d 412, 418 (5th Cir.), cert.
denied, 129 S. Ct. 631 (2008).
The Court considers whether these amended allegations comport
with Rule 9(b)’s requirements:
•
•
•
•
•
•
By letter in 2007 an unknown representative of Citi advised
the plaintiffs that Citi had become the owner of their
mortgage.
The letter was fraudulent per se because Citi had not become
the owner of the mortgage in 2007. Citi’s suggestion to the
contrary is an attempt to obtain an unjust advantage for
itself to the plaintiffs’ detriment.
The allegations made in the petition for executory process
filed on January 10, 2011 were not true in stating that Citi
was the holder and owner of the mortgage.
Citi did not become the holder and owner of the mortgage until
June 30, 2011.
MERS announced 6 weeks after Citi filed the petition of
foreclosure that it should ensure the accuracy of the
information contained in complaints and foreclosure affidavits
to confirm that MERS had assigned the mortgage to the
foreclosing note-holder.
Citi did not ensure the accuracy of the information in the
8
•
•
•
•
affidavit filed with the petition for foreclosure.
During the spring of 2011, plaintiffs applied for a
reinstatement with Citi’s loss mitigation department. Citi
failed to advise plaintiffs that it did not own the mortgage
or the note. Citi’s silence constitutes fraud.
At the latest, on June 30, 2011 (when Citi finally came into
ownership of the mortgage note and mortgage), Citi knew or
should have known that it did not own the mortgage or the note
on which it had wrongfully foreclosed. But Citi persisted in
its wrongful and fraudulent actions, including demanding
payment of the full amount of the note to prevent sheriff’s
sale of the property.
Additional fraudulent actions by Citi include sending to the
plaintiffs two payoff quotes.
Citi knew it was not the owner and holder of the mortgage note
at the time it filed foreclosure proceedings against the
plaintiffs.
B.
Construing
all
facts
and
allegations
in
the
light
most
favorable to the plaintiff, the Court finds that the plaintiffs
have stated a claim for fraud that could plausibly entitle them to
relief.
They have cured their prior deficiency by alleging facts
that would support an inference that Citi acted with fraudulent
intent:
the
plaintiffs
contend
that
Citi,
through
letters,
telephone conversations, court filings, and demands for payoffs,
misrepresented (by silence and by affirmative statement) that Citi
owned their mortgage, at a time when Citi knew it did not own the
mortgage,
that
Citi
wrongfully
foreclosed
on
the
plaintiffs’
property; and that Citi engaged in conduct (such as re-setting the
sheriff’s sale many times in bad faith to increase fees and
demanding payment on the full amount of the mortgage note to
prevent the sheriff’s sale of their property) as part of a plan to
9
make any final loan payoff more difficult, and so that the Foses
could not reinstate or payoff their loan.
Citi has fair notice of
plaintiffs’ fraud claims, which are sufficiently alleged to pass
Rule 9(b)’s muster.
Accordingly, Citi’s motion to dismiss is DENIED.
New Orleans, Louisiana, January 9, 2013
______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
10
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?