Clarke et al v. Dunn et al
Filing
49
MEMORANDUM OPINION (c/m to Defendants Carlvern Dunn and Paula Graham-Dunn 9/4/14 sat). Signed by Chief Judge Deborah K. Chasanow on 9/4/14. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
JAMES E. CLARKE, et al.
:
v.
:
Civil Action No. DKC 13-2330
:
CALVERN M. DUNN, et al.
:
MEMORANDUM OPINION
Presently
foreclosure
pending
case
and
are
counterclaim/third-party
Counter-Defendants
Menapace
three
for
resolution
motions
filed
Clarke,
Trustees”)
in
this
dismiss
to
the
by:
complaint
James
(“Substitute
ready
Renee
(ECF
Plaintiffs/
Dyson,
No.
and
26);
Shannon
Third-Party
Defendants Nationstar and Mortgage Electronic System (“MERS”)
(ECF
No.
30);
and
Third-Party
Defendant
Corporation (“First Home”) (ECF No. 38).
briefed,
and
necessary.
Home’s
the
court
now
Local Rule 105.6.
motion
to
dismiss
rules,
no
First
Home
Mortgage
The issues have been
hearing
being
deemed
For the following reasons, First
will
be
granted;
the
Substitute
Trustees’ motion to dismiss will be granted in part and denied
in part; and Nationstar and MERS’s motion to dismiss will be
granted in part and denied in part.
I.
Background
On May 2, 2005, Defendants/Counter-Plaintiffs Carlvern M.
Dunn
and
Paula
promissory
note
N.
in
Graham-Dunn
favor
of
(“the
First
Dunns”)
Home
in
executed
the
amount
a
of
$468,000.00 (“the Note”) and a deed of trust (“DOT”) on real
property located at 11941 Saint Francis Way, Bowie, Maryland.
The DOT was executed in favor of MERS “solely as nominee for
Lender and Lender’s successors and assigns,” meaning MERS was
given authority to transfer the mortgage on behalf of First Home
and any subsequent lenders.
(ECF No. 2-1, at 3).
First Home
sold the Note to Lehman Brothers Bank, which then sold the Note
to Lehman Brothers Holdings.
According to later filings, the
Note and DOT were purportedly sold/assigned to Associated Bank,
N.A., and subsequent to these transfers, Nationstar (formerly
Aurora Loan Services) began servicing the Dunns’ loan.
On
April
Appointment
of
11,
2013,
Substitute
Nationstar
Trustees,
executed
naming
James
a
Deed
E.
of
Clarke,
Renee Dyson, and Shannon Menapace as substitute trustees of the
DOT.
(ECF No. 2-3).
On July 22, 2013, Substitute Trustees
brought a foreclosure action against the Dunns in the Circuit
Court for Prince George’s County.
Among the filings in the
foreclosure docket was an Affidavit of Note Ownership (ECF No.
2-2, at 2), filed by the Substitute Trustees on July 12, 2013,
certifying that “Associated Bank, N.A. is the owner of the debt
2
instrument and has authorized Nationstar Mortgage, LLC to be the
holder of the Note[.]”
(ECF No. 18 ¶ 29; No. 18-10).
On August 12, 2013, the Dunns, proceeding pro se, removed
the
foreclosure
action
to
this
court
pursuant
to
28
U.S.C.
§ 1441, asserting diversity of citizenship jurisdiction under 28
U.S.C.
§ 1332.
(ECF
No.
1).
The
Substitute
Trustees
are
citizens of Virginia, and the Dunns are citizens of Maryland.1
1
28 U.S.C. § 1441(b)(2) prohibits a case to be removed
solely on the basis of diversity jurisdiction if any of the
parties properly joined and served as defendants is a citizen of
the state in which such action is brought.
The Dunns, as
citizens of Maryland, would appear to fall within this rule,
making removal improper. But as Judge Hollander recently noted:
The ‘forum-state defendant rule’ found in 28
U.S.C. § 1441(b)(2) is widely regarded as
procedural,
rather
than
jurisdictional.
‘Although the United States Court of Appeals
for the Fourth Circuit has yet to rule on
this question, ten circuit courts have had
occasion to address it’ and, of those ten
circuits, ‘nine have found that removal by a
forum defendant is a procedural defect, and
thus waivable.’
Councell v. Homer Laughlin
China Co., 823 F.Supp.2d 370, 378 (N.D.W.Va.
2011) (citing cases).
Ross v. Mayor & City Council of Balt., No. ELH-14-369, 2014 WL
2860580, at *7 (D.Md. June 20, 2014). Pursuant to 28 U.S.C. §
1447(c), “[a] motion to remand the case on the basis of any
defect other than lack of subject matter jurisdiction must be
made within 30 days after the filing of the notice of removal.”
The Dunns removed the case on August 12, 2013, and no motion to
remand has been filed.
On October 8, 2013, the Substitute
Trustees filed a status report stating that removal is
inappropriate in a foreclosure docket.
(ECF No. 20).
The
undersigned noted on October 28, 2013 that “[b]ecause 30 days
have passed since this case was removed, the only basis on which
a case can be remanded to state court is if subject matter
3
On
September
against
26,
2013,
the
Dunns
“Counter-Defendants”2
the
Substitute
Home, Nationstar, and MERS.
filed
counterclaim
Trustees,
(ECF No. 18).
contains four causes of action.
a
First
The counterclaim
First, the Dunns request a
declaratory judgment pursuant to 28 U.S.C. § 2202 as to all
Counter-Defendants stating that none of them have any right or
interest
in
authorizes
the
them
Note,
to
the
collect
DOT,
or
the
mortgage
terms of the Note or the DOT.
Bowie
payments
property
or
that
enforce
the
Second, the Dunns assert a claim
of unjust enrichment against Nationstar.
Third, they make a
claim alleging violations of the Fair Debt Collection Practices
Act
(“FDCPA”),
Substitute
15
U.S.C.
Trustees.
§ 1692,
Fourth,
against
they
Nationstar
assert
a
claim
and
for
the
an
accounting against First Home, Nationstar, and the Substitute
Trustees.
Although
Nationstar
purported
to
be
the
Dunns’
loan
servicer as early as 2009, the Dunns contend that MERS never
properly
assigned,
Nationstar.
transferred,
or
granted
the
DOT
to
The Dunns’ allegation is based on the fact that
jurisdiction is lacking.
14 days.” (ECF No. 22).
Any such motion should be filed within
No such motion was filed.
2
Although MERS, Nationstar, and First Home are technically
third-party defendants in this action, for ease of reference,
they will be referred to as “Counter-Defendants” along with
Substitute Trustees, the only true counter-defendants.
4
Nationstar
informed
them
that
it
was
servicing
the
loan
on
behalf of Associated Bank, the owner of the loan, but Associated
Bank later disclaimed ownership.3
The Dunns further allege that
Nationstar knew that the assignment of the loan was improper,
and attempted to cover up this fact by having Ms. Stacy Sandoz,
a
purported
Vice
President
of
MERS,
execute
the
alleged
Corporate Assignment of Deed of Trust on or around January 12,
2012, in order to foreclose of the Dunns’ mortgage.4
On
dismiss.
November
25,
2013,
(ECF No. 26).
the
Substitute
Trustees
moved
to
Nationstar and MERS filed a motion to
dismiss on December 6, 2013.
(ECF No. 30).
motion to dismiss on December 23, 2013.
First Home filed a
(ECF No. 38).
In
accordance with Roseboro v. Garrison, 528 F.2d 309, 310 (4th Cir.
1975), the clerk of court mailed letters to the Dunns on the
3
Specifically, on June 25, 2012, the Dunns requested that
Nationstar provide them a “copy of the original Note and a
complete life of the loan transaction history.”
(ECF No. 18 ¶
25). Nationstar sent the Dunns a letter on July 15, 2012, which
identified Associated Bank as the owner of the loan and
Nationstar as the loan servicer. On May 30, 2013, nearly a year
later, Mr. Dunn called Associated Bank to verify the information
he had received from Nationstar.
On May 31, 2013, Associated
Bank responded with a letter stating that “[a]fter a thorough
review of our account records we are unable to locate any
consumer mortgage loans for residential property in your name.
The account numbers you provided are not valid and we have no
records that indicate you are or were a customer of Associated
Bank.” (ECF No. 18 ¶ 28; ECF No. 18-9).
4
The Dunns contend that this assignment is void because Ms.
Sandoz had no corporate authority to assign the Note or DOT to
Nationstar. (ECF No. 18 ¶ 24).
5
same
day
motion
as
had
opposition
each
been
filing,
filed
material
or
notifying
and
that
risk
(ECF Nos. 32, 36, and 43).
they
entry
(ECF Nos. 27, 31, 41, and 42).
them
of
that
were
a
dispositive
entitled
judgment
to
against
file
them.
The Dunns opposed each motion.
Only First Home filed a reply.
(ECF
No. 44).
II.
Standard of Review
The
Substitute
Trustees,
Nationstar
and
MERS,
and
First
Home, filed three separate motions to dismiss (ECF Nos. 26, 30,
and 38).
The purpose of a motion to dismiss under Rule 12(b)(6)
is to test the sufficiency of the complaint.
Presley v. City of
Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).
A complaint
need only satisfy the standard of Rule 8(a), which requires a
“short and plain statement of the claim showing that the pleader
is entitled to relief.”
Fed.R.Civ.P. 8(a)(2).
“Rule 8(a)(2)
still requires a ‘showing,’ rather than a blanket assertion, of
entitlement to relief.”
544, 555 n.3 (2007).
Bell Atl. Corp. v. Twombly, 550 U.S.
That showing must consist of more than “a
formulaic recitation of the elements of a cause of action” or
“naked
assertion[s]
devoid
of
further
factual
enhancement.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations
omitted).
At this stage, all well-pleaded allegations in a complaint
must be considered as true, Albright v. Oliver, 510 U.S. 266,
6
268 (1994), and all factual allegations must be construed in the
light
most
favorable
to
the
plaintiff.
See
Harrison
v.
Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)).
In evaluating the complaint, unsupported legal
allegations
not
need
be
accepted.
Revene
Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).
v.
Charles
Cnty.
Legal conclusions
couched as factual allegations are insufficient, Iqbal, 556 U.S.
at 678, as are conclusory factual allegations devoid of any
reference to actual events.
United Black Firefighters v. Hirst,
604 F.2d 844, 847 (4th Cir. 1979).
Finally,
pleadings
while
less
“to
courts
generally
stringent
standards
should
than
hold
formal
pro
se
pleadings
drafted by lawyers,” they may nevertheless dismiss complaints
that
lack
a
cognizable
legal
theory
or
that
fail
sufficient facts under a cognizable legal theory.
to
allege
Haines v.
Kerner, 404 U.S. 519, 520 (1972); Turner v. Kight, 192 F.Supp.2d
391, 398 (D.Md. 2002), aff’d, 121 F.App’x. 9 (4th Cir. 2005).
III. Analysis
A.
Fair Debt Collection Practices Act
The
Dunns
Trustees
allege
violated
the
that
FDCPA,
Nationstar
(ECF
No.
and
18,
the
at
Substitute
14-16),
which
protects consumers from “abusive and deceptive debt collection
practices by debt collectors.”
Akalwadi v. Risk Mgmt. Alts.,
7
Inc., 336 F.Supp.2d 492, 500 (D.Md. 2004).
They contend that
Nationstar is a debt collector under the FDCPA and has violated
the
FDCPA
by
using
fraudulent
representations
and
unlawful
actions in its attempt to collect on the Dunns’ debt obligation.5
The
Dunns
allege
that
the
Substitute
Trustees
attempted
to
collect on their debt by foreclosing on their Property using
false pretenses.6
The FDCPA “forbids the use of any false, deceptive, or
misleading
representation
or
means
in
debt
collection
provides a non-exhaustive list of prohibited conduct.”
and
United
States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 135 (4th Cir.
1996).
The Dunns allege that both Nationstar and the Substitute
Trustees violated 15 U.S.C. § 1692e, which states that:
[a] debt collector may not use any false,
deceptive, or misleading representation or
means in connection with the collection of
any debt. . . . [T]he following conduct is
a violation of this section:
5
Specifically, the Dunns allege that Nationstar has:
(1)
falsely represented that it has authority to demand payments
from the Dunns; (2) attempted fraudulently to conceal the fact
that it does not have this authority; and (3) unlawfully
authorized the Substitute Trustees to engage in the foreclosure
action. (ECF No. 18 ¶¶ 66-67, 69-77).
6
The Dunns contend that the Substitute Trustees falsely
represented that:
Nationstar had been assigned the debt; they
were lawfully appointed as substitute trustees; and they were
entitled to enforce the Note via the foreclosure action.
(ECF
No. 18 ¶¶ 68, 71, 73).
8
- The
false
representation
of
the
character, amount, or legal status of
any debt;
- The threat to take any action that
cannot legally be taken or that is
not intended to be taken.
15 U.S.C. § 1692e(2)(A),(5).
To state a claim for relief under
§ 1692e, the Dunns must allege that:
(1) they have been the
object of collection activity arising from consumer debt, (2)
the Counter-Defendants are “debt collectors” as defined by the
FDCPA, and (3) the Counter-Defendants have engaged in an act or
omission
prohibited
by
the
FDCPA.
Sterling
v.
Ourisman
Chevrolet of Bowie Inc., 943 F.Supp.2d 577, 585 (D.Md. 2013).
Nationstar
defined
by
requirements.
argues
the
that
FDCPA
and
it
is
thus
(ECF No. 30 ¶ 29).
not
not
a
debt
subject
collector
to
the
as
Act’s
It further states that it is
“an undisputed material fact that [it] is the holder of the note
and the servicer of the loan at issue[,]” and thus argues it is
statutorily exempt from the FDCPA.
(ECF No. 30 ¶ 29-30).
In
response, the Dunns provide a letter sent from Nationstar to
them which states that “Nationstar is a debt collector.”
No. 36-4).
The FDCPA defines “debt collector,” in part, as:
9
(ECF
any person who uses any 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.
15 U.S.C. § 1692a(6) (emphasis added).
“Debt collectors” are
distinguished from “creditors” under the FDPA by the fact that
they collect debts that are not owed to them but to another
creditor, and by the fact that the primary purpose of their
businesses
is
to
collect
debts.
A
creditor
becomes
a
debt
collector, under the FDCPA, if he receives an assignment of a
debt already in default for the sole purpose of collecting it.
Id. § 1692a(4).
1.
Nationstar
Nationstar contends that it acted as a loan servicer not a
debt
collector
in
this
transaction.
“Ordinarily,
mortgage
servicers are not ‘debt collectors’ under the [FDCPA] because
they are not persons who attempt to collect debts owed or due or
asserted to be owed or due another.”
Allen v. Bank of Am.,
N.A., 933 F.Supp.2d 716, 729 (D.Md. 2013) (emphasis in original)
(internal
quotation
marks
omitted).
Importantly,
the
FDCPA
excludes from its definition of “debt collector” “any person
collecting or attempting to collect any debt owed . . . which
was not in default at the time it was obtained by such person.”
15 U.S.C. § 1692a(6)(F)(iii) (emphasis added).
10
Courts across
the
country
mortgage
have
servicer
consistently
such
as
held
that
Nationstar
the
“would
actions
only
be
of
a
covered
under the FDCPA if the debt at issue was acquired after the
customer or debtor defaulted on the loan in question.”
Diaz v.
Residential Credit Solutions, Inc., 297 F.R.D. 42, 49 (E.D.N.Y.
2014); Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 360 n.4 (6th
Cir. 2012) (“a loan servicer will become a debt collector under
1692a(6)(F)(iii) if the debt was in default or treated as such
when it was acquired.”); Perry v. Stewart Title Co., 756 F.2d
1197, 1208 (5th Cir. 1985) (noting that the legislative history
of § 1692a(6) indicates that “a debt collector does not include
the consumer’s creditors, a mortgage servicing company, or an
assignee of a debt, as long as the debt was not in default at
the time it was assigned”); Casault v. Fed. Nat’l Mortg. Ass’n,
915 F.Supp.2d 1113, 1126 (C.D.Cal. 2012) (noting that to have a
properly pled claim under the FDCPA a plaintiff must not only
allege that loan services was a “debt collector” but also show
that loan servicer was “assigned defaulted loans for the purpose
of collection”).
Furthermore, an entity that refers to itself
as a “debt collector” does not become one for purposes of the
FDCPA
if
definition.
1249
it
does
not
otherwise
fall
within
that
law’s
Prickett v. BAC Home Loans, 946 F.Supp.2d 1236,
(N.D.Ala.
2013)
(explaining
that
“the
relevant
test
of
whether an entity is a debt collector under the FDCPA is whether
11
the statutory definition applies, not whether the entity has
ever stated in a document that it is a debt collector”); see
also Laccinole v. Twin Oaks Software Dev., Inc., No. CA 13-716
ML, 2014 WL 2440400, at *10 (D.R.I. May 30, 2014) (citing cases
that have rejected the “self-identification argument,” namely
that entities which send letters stating that they are “debt
collectors”
or
“attempt[ing]
necessarily
“debt
to
collectors”
collect
within
a
the
debt”
FDCPA’s
are
not
definition
(internal quotation marks omitted)).
Here, the Dunns have pled facts sufficient to show that
Nationstar, a mortgage servicer, is a debt collector under the
FDCPA.
Although Nationstar’s letter to the Dunns stating that
it is a “debt collector” is immaterial, there is documentation
from
Nationstar
in
the
foreclosure
record,
showing
that
Dunns’ mortgage was in default as of October 2, 2011.
2-6,
at
3).
Dunns
stating
Nationstar
The
have
that
also
provided
“[e]ffective
a
(ECF No.
letter
07/01/12
the
from
Nationstar
Mortgage is now the servicer for your mortgage account[,]”
(ECF
No. 36-4), indicating the approximate date that Nationstar was
assigned their mortgage.
attached
as
an
exhibit
A separate letter from Nationstar,
supporting
the
Dunns’
counterclaim,
states that the Dunns’ “debt is owed to ASSOCIATED BANK, N.A.,
but
is
being
serviced
by
Nationstar.”
(ECF
No.
18-5).
Construing the facts in the light most favorable to the Dunns,
12
they have adequately supported an accusation that Nationstar may
be a “debt collector” under the FDCPA because it acquired the
Dunns’ account after their debt was in default, and it attempted
to collect on the debt obligation for Associated Bank.
The
Dunns have also alleged facts sufficient to show that Nationstar
may
have
violated
the
FDCPA
by
making
false
representations
regarding their loan, namely that it is servicing the loan on
behalf of Associated Bank (ECF No. 18-5), when Associated Bank
refutes that the Dunns are or ever were its customer, (ECF No.
18-9),
and
fraudulently
attempting
to
collect
payments
and
foreclose on the loan under this same premise.
2.
The Substitute Trustees
The Substitute Trustees argue that the FDCPA claim should
also
be
dismissed
as
to
them.
The
Dunns
contend
that
the
Substitute Trustees − acting as agents of Nationstar − attempted
to
collect
on
the
Note
under
false
pretenses,
namely
that
Nationstar was assigned the Dunns’ debt when in fact it was not,
and
that
the
Substitute
Trustees
were
appointed
substitute trustees, when in fact they were not.
68).
as
lawful
(ECF No. 18 ¶
The Dunns also allege that the Substitute Trustees knew
they were not legally authorized agents, (Id. ¶ 74), implying
that their actions were fraudulent.
The Substitute Trustees
argue that Nationstar is the current holder of the mortgage loan
and appointed the Substitute Trustees pursuant to the Deed of
13
Appointment of Substitute Trustees, which was filed in the court
docket and land records.
(ECF No. 26 ¶ 23).
They contend that
their actions were authorized by law due to Nationstar’s rights
as
a
holder
to
collect
on
the
debt
and
appoint
them
as
rejected,
as
substitute trustees to enforce the debt.
The
Substitute
Trustees’
arguments
will
be
they rely on documents extrinsic to the counter-complaint.
The
Dunns
and
dispute
the
authenticity
of
the
appointments
affidavits in the foreclosure action and rely on them only to
show that they are legally invalid.
(ECF No. 18 ¶¶ 29-41).
Furthermore, the Substitute Trustees do not dispute that they
are a “debt collector” subject to the FDCPA.7
The Dunns have
pled with sufficient particularity that the Substitute Trustees
violated the FDCPA by alleging that they attempted to collect
7
The United States Court of Appeals for the Fourth Circuit
has held that lawyers appointed by a lender as substitute
trustees, who attempt to foreclose on a deed of trust, can be
liable under the FDCPA as “debt collectors.”
See Wilson v.
Draper & Goldberg, P.L.L.C., 443 F.3d 373, 378-79 (4th Cir. 2006)
(finding that the substitute trustees’ “foreclosure action was
an attempt to collect a ‘debt,’ [and that substitute trustees]
are not excluded from the definition of ‘debt collector’ under
15 U.S.C.A. § 1692a(6)(F)(i) merely because they were acting as
trustees foreclosing on a property pursuant to a deed of
trust”); see also Glazer v. Chase Home Finance LLC, 704 F.3d
453, 464 (6th Cir. 2013) (“[W]e hold that mortgage foreclosure is
debt collection under the [FDCPA]. Lawyers who meet the general
definition of a ‘debt collector’ must comply with the FDCPA[,]
. . . [a]nd a lawyer can satisfy this definition if his
principal business purpose is mortgage foreclosure or if he
‘regularly’ performs this function.”).
14
the
debt
under
a
false
pretense,
namely
that
they
were
the
lawful substitute trustees of Nationstar.
B.
Quasi-Contract
Count II of the Dunns’ counterclaim is a “quasi-contract”
claim against Nationstar.
In its motion to dismiss, Nationstar
construes this as a claim for unjust enrichment, (ECF No. 30 ¶
26), and the Dunns respond in kind.
“Unjust
enrichment
(ECF No. 36, at 9-10).
consists
of
three
elements:
(1)
a
benefit conferred upon the defendant by the plaintiff; (2) an
appreciation or knowledge by the defendant of the benefit; and
(3) the acceptance or retention by the defendant of the benefit
under
such
defendant
value.”
circumstances
to
retain
the
as
to
make
benefit
it
inequitable
without
the
for
the
of
its
payment
Hill v. Cross Country Settlements, LLC, 402 Md. 281,
295 (2007) (citations omitted).
The Dunns contend that Nationstar accepted payments from
them, knowing that it had not acquired an interest in the Note
and therefore that it was not entitled to keep the payments and
has
been
challenge
unjustly
the
enriched.
assignment
(ECF
of
the
No.
18
debt
Nationstar’s authority to collect payments.
The
Dunns
state
that
they
are
seeking
¶
and
61-62).
They
correspondingly,
(ECF No. 36 ¶ 25).
restitution
for
any
payments made to Nationstar that were not paid to First Home or
another beneficiary of the Note.
15
(ECF No. 18 ¶ 64).
In
response,
Nationstar
argues
that
it
services
the
mortgage loan and is the holder of the loan, and therefore has
authority
to
collect
payments.
This
contention,
however,
illustrates the crux of the dispute between the parties, which
is
largely
evidentiary
motion to dismiss.
and
not
ripe
for
determination
on
a
Furthermore, Nationstar relies on evidence
outside the four corners of the Dunns’ counterclaim to support
its arguments.
As a general rule, extrinsic evidence cannot be
considered at the Rule 12(b)(6) stage.
There is an exception to
this rule where the plaintiff has notice of the evidence, does
not dispute its authenticity, and relies on it in framing the
complaint.
367
F.3d
Am. Chiropractic Ass’n v. Trigon Healthcare, Inc.,
212,
234
(4th
Cir.
2002).
The
Dunns
dispute
the
authenticity of the appointments and affidavits regarding the
Note, DOT, and who has holder status, and rely on them only to
the extent of alleging that they are invalid.
C.
Declaratory Judgment
The Dunns seek a declaratory judgment against all CounterDefendants that “none of the named Counter-Defendants have any
right
or
interest
in
[their]
Note,
Deed
of
Trust,
or
the
Property which authorizes them, in fact or as a matter of law,
to collect mortgage payments or enforce the terms of the Note or
DOT in any manner whatsoever.”
(ECF No. 18 ¶ 56).
16
The Declaratory Judgment Act provides that “[i]n a case of
actual controversy within its jurisdiction . . . any court of
the
United
relations
States
of
any
. . .
declare
may
interested
party
the
seeking
whether or not further relief is sought.”
(emphasis added).
rights
such
and
other
declaration,
28 U.S.C. § 2201(a).
The United States Court of Appeals for the
Fourth Circuit has further explained that a federal court may
properly
exercise
criteria
are
controversy
jurisdiction
met:
between
“(1)
the
the
parties
in
such
complaint
of
cases
where
alleges
sufficient
an
three
actual
immediacy
and
reality to warrant issuance of a declaratory judgment; (2) the
court possesses an independent basis for the jurisdiction over
the parties (e.g., federal question or diversity jurisdiction);
and (3) the court does not abuse its discretion in its exercise
of jurisdiction.”
Volvo Constr. Equip. N. Am., Inc. v. CLM
Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004) (citing 28
U.S.C. § 2201; Cont’l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th
Cir. 1994)).
1.
First Home
First Home argues that the Dunns have failed to state a
claim
under
the
Declaratory
Judgment
Act
because
they
have
alleged no facts showing a controversy between the Dunns and
First Home.
allegation
First Home argues that the Dunns have made no
that
it
has
an
adverse
17
interest
in
the
Subject
Property or that it has any legal relationship that would create
a justiciable controversy.
First Home maintains that the Dunns’
counterclaim concedes this fact as it states that First Home
sold the Note (and thus all of its rights) to Lehman Brothers
Bank, who then sold it to Lehman Brothers Holdings.
¶ 17).
(ECF No. 18
The Dunns attached, as an exhibit to their counterclaim,
the Note which evidences First Home’s sale of its rights to
Lehman Brothers.
First
Home
(ECF No. 18-1).
also
asserts
that
the
Dunns
are
essentially
asking the court to declare the rights of the parties to the
underlying foreclosure action – an action in which it is not
involved.
Consequently, it alleges that there is no controversy
or adverse interests between it and the Dunns; and thus, the
Dunns
have
judgment.
is
made
Property,
not
shown
they
are
entitled
to
a
declaratory
The Dunns counter that unless a judicial declaration
that
First
First
Home
Home
can
does
not
attempt
have
to
sue
an
interest
them
in
the
in
the
future
because the Note bears First Home as the lender.
A declaratory judgment is authorized only in a case with an
actual controversy between the parties.
The Dunns’ allegations
do not demonstrate a controversy with First Home.
Their fear
that absent a declaratory judgment First Home could sue them in
the
future
does
not
have
the
sufficient
immediacy
and
concreteness necessary to invoke the Declaratory Judgment Act.
18
See Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)
(noting that “the facts alleged, under all the circumstances,
[must show] that there is a substantial controversy, between
parties having adverse legal interests, of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment”).
The Dunns’ counterclaim for a declaratory judgment against First
Home will be dismissed.
2.
MERS
MERS
contends
that
the
counterclaim
against
it
must
be
dismissed because its interest in the chain of title was never
more than as nominee for a mortgage.
sought
by
the
necessary party.
Dunns
would
affect
Furthermore, no remedy
MERS,
(ECF No. 30, at 10).
and
MERS
is
not
a
In response, the Dunns
argue that MERS is a necessary party because MERS, having no
interest in the property, executed an assignment of the DOT to
Nationstar, which they contend is void.
Just as the Dunns have not shown a true controversy with
First Home, they similarly have not shown a true controversy
with MERS.
The Dunns’ allegation regarding the void transfer
implicates whether Nationstar had a legal right to collect on
the mortgage and foreclose, but does not suggest that MERS has
any
rights
to
the
Dunns’
property,
the
Note,
or
the
DOT.
Furthermore, MERS is not a party to the foreclosure action and
19
is not claiming any right in the Dunns’ Property, the Note, or
the DOT.
Courts have consistently recognized in factually similar
cases that MERS does not have a beneficial interest in mortgage
debts or the borrower’s property.
very
limited
way”
as
a
Instead, it merely acts “in a
“nominee”
for
lenders
and
their
“successors and assigns” in order to transfer bare legal title
on behalf of beneficial owners.
Kiah v. Aurora Loan Services,
LLC, CIV.A. 10-40161-FDS, 2011 WL 841282, at *8 (D. Mass. Mar.
4, 2011); Bank of New York v. Raftogianis, 418 N.J. Super. 323,
347 (Ch. Div. 2010) (“MERS, as nominee, does not have any real
interest in the underlying debt, or the mortgage which secured
that debt.
It acts simply as an agent or “straw man” for the
lender.”); cf. Landmark Nat. Bank v. Kesler, 289 Kan. at 545
(noting that MERS did not have the right to intervene in the
suit because it “did not demonstrate . . . that it possessed any
tangible interest in the mortgage beyond a nominal designation
as the mortgagor [-] [i]t lent no money and received no payments
from the borrower”); cf. In re Mortgage Elec. Registration Sys.
(MERS) Litig., MDL 09-2119-JAT, 2011 WL 4550189, at *4 (D.Ariz.
Oct. 3, 2011) (“MERS holds legal title to the secured interests
and is the beneficiary or lienholder of record, as the nominee
or agent for Plaintiffs’ lenders and the lenders’ successors and
assigns.
That is, MERS serves as . . . the nominee or agent for
20
any
valid
note
holder.”).
Courts
have
classified
MERS’s
relation to lenders as that of agent acting on behalf of a
principal,
rather
than
finding
MERS
to
interest in the mortgages it transfers.
have
any
ownership
See Landmark Nat. Bank,
289 Kan. at 539 (citing several cases finding “the relationship
of MERS and the lender as an agency relationship”).
Accordingly, MERS, as nominee for whichever lender holds
the Note, does not have any interest in the underlying debt or
the foreclosure; it merely acted as a straw man in transferring
the
Note
and
DOT.
The
validity
or
invalidity
of
MERS’s
assignment of the Note does not change the fact that MERS at no
point held an interest in the Dunns’ property.
The Dunns have
not shown that there is a controversy between them and MERS that
would be impacted by a declaratory judgment from the court.
Thus, the sole claim against MERS for a declaratory judgment
will be dismissed.8
3.
Substitute Trustees & Nationstar
The Substitute Trustees and Nationstar argue that the Dunns
have failed to state a claim that would entitle them to the
8
After filing its initial motion to dismiss with Nationstar
(ECF No. 30), MERS moved to amend its initial motion to add more
support. (ECF No. 45). The Dunns subsequently moved to strike
this motion.
(ECF No. 47).
Because the arguments in MERS’s
original motion to dismiss the Dunns’ third-party claim (ECF No.
30, at 10-11), provided sufficient information for the court to
resolve it, both motions will be denied as moot.
21
relief requested, a declaratory judgment that aims to stop the
foreclosure and quiet title in their favor.
The Substitute Trustees argue that the Dunns’ allegations
that they do not have any right to foreclose on the subject
property because of an imperfect assignment are unsupported by
facts or law.
Substitute Trustees maintain that all assignments
were proper and all procedures necessary to foreclose have been
satisfied.
(ECF No. 26, at 7-8).
undisputed
that
entitled
to
Nationstar
enforce
proceeding.”
the
is
Deed
They also contend that “it is
the
of
(ECF No. 26 ¶ 20).
holder
Trust
in
of
the
this
Note
and
foreclosure
The Dunns disagree, stating
that “[they] specifically dispute the fact that any party to the
foreclosure is the holder or owner of the note.”
(ECF No. 32,
at 5).
Nationstar adopts all of Substitute Trustees’ arguments and
similarly
maintains
regarding
the
that
lender’s
the
merits
right
to
of
the
foreclose
Dunns’
are
arguments
erroneous.9
Problematically, the Substitute Trustees and Nationstar again
9
Nationstar further states that “[o]ther borrowers in the
foreclosure process have made similar if not identical arguments
attempting to dismiss the foreclosure action without any
success.”
(ECF No. 30, at 7).
Nationstar and Substitute
Trustees fail to realize that currently pending are their
motions to dismiss the Dunns’ counterclaim, not the Dunns’
motion to dismiss the foreclosure action. Consequently, at this
stage in the case, the Dunns must only show that they have
stated a valid claim for relief under the Declaratory Judgment
Act, not that they have a meritorious defense under Maryland’s
foreclosure laws for dismissal of the foreclosure.
22
rely on documents, the authenticity of which the Dunns dispute,
outside the four corners of the Dunns’ counterclaim to support
their
arguments.
authenticity
Specifically,
of
Substitute
the
Dunns
Trustees’
dispute
and
the
Nationstar’s
appointments and affidavits regarding the Note, DOT, and who has
holder status, and rely on them only to the extent of alleging
that they are invalid.
at 3).
(ECF No. 18 ¶ 22-29, 53-54; ECF No. 32,
Thus, based on the four corners of the counterclaim, the
Dunns have alleged a genuine controversy with Nationstar and
Substitute Trustees regarding these parties’ respective rights
in the Note and the DOT.
Additionally, the Dunns’ declaratory
judgment action is ripe for review, because Substitute Trustees
are attempting to foreclose.
Cf. Horvath v. Bank of N.Y., 641
F.3d 617, 622 n.2 (4th Cir. 2011) (concluding that plaintiff’s
request for a declaratory judgment regarding lender’s ability to
foreclose on a mortgage contract is not ripe for adjudication
when there has been “no attempt to foreclose”).
the
first
and
second
requirements
for
In this case,
the
exercise
of
jurisdiction under the Declaratory Judgment Act are met.
The only question remaining is whether it would be a proper
exercise
judgment.
of
the
“In
court’s
the
discretion
declaratory
to
judgment
issue
a
context,
declaratory
the
normal
principle that federal courts should adjudicate claims within
their jurisdiction yields to considerations of practicality and
23
wise judicial administration.”
New Wellington Fin. Corp. v.
Flagship Resort Dev. Corp., 416 F.3d 290, 296 (4th Cir. 2005)
(quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995)).
Accordingly,
the
court
may,
in
the
exercise
of
its
“broad
discretion,” S.C. Dep’t of Health & Envtl. Control v. Commerce &
Indus. Ins. Co., 372 F.3d 245, 260 (4th Cir. 2004), decline to
exercise its jurisdiction and dismiss the action, Volvo Constr.
Equip., 386 F.3d at 594.
A court must be cautious, however, as
it should only decline to exercise jurisdiction where there is a
good
reason
to
do
so.
For
Id.
instance,
a
court
should
normally entertain a declaratory action where the “relief sought
(i) will serve a useful purpose in clarifying and settling the
legal relations in issue,’ and (ii) ‘will terminate and afford
relief from the uncertainty, insecurity, and controversy giving
rise to the proceeding.’”
Cont’l Cas. Co. v. Fuscardo, 35 F.3d
963, 965 (4th Cir. 1994) (quoting Nautilus Ins. Co. v. Winchester
Homes,
15
Inc.,
“[C]onsiderations
of
F.3d
371,
federalism,
375
(4th
efficiency,
Cir.
and
1994)).
comity”
also significant factors for courts to contemplate.
are
Aetna Cas.
& Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir.
1998).
It is in the interest of efficiency to adjudicate in one
action
what
Trustees’
is
and
essentially
Nationstar’s
the
Dunns’
defense
foreclosure
action.
24
to
Substitute
There
is
a
genuine
controversy
between
the
Dunns,
Nationstar,
and
Substitute Trustees regarding which entity has rights in the
Note and DOT, which ultimately impacts the foreclosure action.
Accordingly, the Dunns’ claim for a declaratory judgment as to
Nationstar
and
Substitute
Trustees
survives
this
motion
to
dismiss.
D.
Accounting
The
Dunns
also
seek
an
accounting
Nationstar, and the Substitute Trustees.
from
First
Home,
From First Home, they
would like an accounting as “evidence that a loan was given”
because they maintain that they have “no record of receipt of a
loan[.]”
because
(ECF No. 18 ¶ 80).
of
Nationstar’s
The Dunns also contend that
fraudulent
conduct,
mortgage payments that were not owed to it.
As
a
result,
they
argue
that
these
the
Dunns
made
(ECF No. 18 ¶ 81).
monies
should
either
be
credited back to them in full or credited back to the rightful
owner of the Dunns’ Note and DOT.
Finally, they allege that the
amount of money owed from First Home and/or Nationstar to them
is unknown and cannot be ascertained without an accounting of
the
receipts
transactions.
and
disbursements
of
the
aforementioned
(Id. ¶¶ 79-82).
“A suit for an accounting arises in equity and ‘may be
maintained when the remedies at law are inadequate.’”
Gephardt
v. Mortgage Consultants, Inc., CIV. JFM-10-1537, 2011 WL 531976,
25
at *4 (D.Md. Feb. 8, 2011) (quoting P.V. Props. Inc. v. Rock
Creek Vill. Assocs. Ltd. P’ship, 77 Md.App. 77, 89 (1988)).
“In
Maryland, a claim for an accounting is available when ‘one party
is under [an] obligation to pay money to another based on facts
and records that are known and kept exclusively by the party to
whom the obligation is owed, or where there is a [confidential
or] fiduciary relationship between the parties.”
Polek v. J.P.
Morgan Chase Bank, N.A., 424 Md. 333, 365 (2012) (quoting P.V.
Props., Inc. v. Rock Creek Vill. Assocs. Ltd. P’Ship, 77 Md.App.
77, 89 (1988)); see also see also Goldstein v. F.D.I.C., CIV.A.
ELH-11-1604,
2012
WL
1819284,
at
*13
(D.Md.
May
16,
2012)
(noting that “[a]lthough assertion of an independent cause of
action for accounting is no longer necessary in most cases [due
to modern discovery rules], it has not been entirely abolished
in Maryland”).
“Because the relief sought in an accounting
claim is access to information, discovery is the remedy given to
plaintiffs who prove they are entitled to an accounting.”
Golub
ex rel. Golub v. Cohen, 138 Md.App. 508, 523 (2001).
First Home argues that the Dunns have failed to state a
valid claim for an accounting from First Home, because it no
longer has a relationship with the Dunns considering that it
transferred
their
Note
and
DOT.
(ECF
No.
38,
at
8).
Furthermore, First Home states that the Dunns have failed to
allege
that
First
Home
“maintains
26
any
records
exclusively.”
(Id.).
are
Substitute Trustees and Nationstar argue that the Dunns
not
entitled
to
an
accounting
from
them
because
the
Substitute Trustees have already filed in the foreclosure action
all
documents
“default
date,
pertinent
principal
to
the
mortgage
balance,
loan
interest,
including
escrow
the
advances,
corporate advances and total pay off amount of the loan.”
(ECF
No. 26 ¶ 25; ECF No. 30 ¶ 32).
The Dunns argue that up until the time it sold the Note,
First Home held itself out as being their “true creditor,” (ECF
No. 32, at 8), and that Nationstar held itself out as being
their
mortgage
servicer
and
the
Substitute
Trustees
themselves out as being authorized substitute trustees.
held
They
allege that on account of these purported relationships, these
Counter-Defendants have a fiduciary duty to provide the Dunns an
accounting.
(Id.).
They further contend that the origination
of the debt began with First Home, therefore, the accounting
should begin with First Home.
They maintain that the amount due
from First Home and Nationstar to them is unknown and cannot be
ascertained
without
an
accounting
of
the
disbursements of the aforementioned transactions.
receipts
and
(ECF No. 36 ¶
29).
Maryland courts, however, have demonstrated a reluctance to
permit accounting claims where the records could have been kept
by the party seeking the accounting.
27
See Polek, 424 Md. at 366
(“We have said that ‘[t]he butcher, the baker and the candlestick maker do not occupy a fiduciary relation toward every
customer who has too much faith in human nature or is too busy
or too careless (whichever way he may properly be characterized)
to count his change.’” (quoting Johnson v. Bugle Coat, Apron &
Linen Serv., 191 Md. 268, 276-77 (1948)); see also Goldstein,
2012 WL 1819284, at *15 (“accounting claims have been rejected
where the plaintiff was fully capable of ascertaining, through
its own efforts, the information it sought from the defendant by
way of an accounting, where discovery was otherwise available,
or where there was no basis for inferring that [defendant] was
in
any
sort
fiduciary
of
duty
confidential
toward
relationship
[plaintiff]”
with
(quoting
or
Alts.
bore
any
Unlimited,
Inc. v. New Balt. City Bd. of School Comm’rs, 155 Md.App. 415,
508, 510-11 (2004))).
held
that
it
would
In Polek, the Maryland Court of Appeals
“not
require,
as
a
matter
of
law,
that
assignees of secondary mortgage loans provide a record-keeping
service for many years after the contractual obligation to pay
money has been concluded, simply because borrowers failed to
maintain their own records.”
424 Md. at 366.
The Dunns have not alleged facts showing they are owed an
accounting
from
First
Home.
First
Home
and
the
Dunns’
relationship was contractual, not fiduciary; in addition, the
Dunns are no longer obligated to make payments to First Home, as
28
this relationship expired long ago when First Home sold its
interest in the Note and DOT.
Finally, the Dunns’ assertion
that they need an accounting to show that they actually received
the loan is without merit.
These records are not within the
exclusive control of First Home, as the Dunns can check their
own bank accounts to verify whether or not they received a loan
disbursement.
The Dunns’ claim for an accounting from First
Home will be dismissed.
Nor is an accounting warranted with regard to Nationstar
and the Substitute Trustees.
to
show
that
fiduciary
they
are
relationship
The Dunns have not alleged facts
entitled
with
to
these
an
accounting
parties,
nor
through
that
a
these
Counter-Defendants are in exclusive control of the information
sought
by
the
Dunns.
Thus,
the
Dunns’
counterclaim
for
an
accounting against Nationstar and Substitute Trustees will be
dismissed.10
IV.
Conclusion
For the foregoing reasons, First Home’s motion to dismiss
will be granted; the Substitute Trustees’ motion to dismiss will
10
Moreover, “[a]n accounting is unnecessary where discovery
is sufficient to determine the amounts at issue.”
Doe v. CinLan, Inc., 08-CV-12719, 2010 WL 726710, at *8 (E.D.Mich. Feb.
24, 2010); accord Goldstein, 2012 WL 1819284 at *14.
Because
the Dunns have properly pled other counterclaims against
Nationstar and the Substitute Trustees, they will be entitled to
discovery; thus, their accounting claim − which if properly pled
would have entitled them to discovery − is superfluous. Id.
29
be granted in part and denied in part; and Nationstar and MERS’s
motion to dismiss will be granted in part and denied in part.
separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
30
A
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