Henry v. Aurora Loan Services, LLC et al

Filing 54

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 3/25/2016. (kns, Deputy Clerk)(c/m 3/25/16)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

CECIL HENRY,
Plaintiff,

v.
AURORA LOAN SERVICES, LLC,
U.S. BANK, N.A.,
As Trustee/or LehmanXS

Trust, Series 2007-

Civil Action No. TDC-14-1344

15N,
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
NATIONSTAR MORTGAGE, LLC, and
AURORA BANK FSB,
Defendants.

MEMORANDUM OPINION

This case arises out of a dispute over who has rightful title to a house in Laurel,
Maryland. Plaintiff Cecil Henry has filed suit against Defendants Aurora Loan Services, LLC
("Aurora Loan"), U.S. Bank, N.A., as trustee for Lehman XS Trust, Series 2007-15N ("U.S.
Bank"), Mortgage Electronic Registration Systems ("MERS"), Nationstar Mortgage, LLC
("Nationstar"), and Aurora Bank, FSB ("Aurora Bank") (collectively, "Defendants"), asserting
claims under the Uniform Declaratory Judgment Act, Md. Code Ann., Cts. & Jud. Proc. SS 3401-15 (West 2012); the Maryland Mortgage Fraud Protection Act ("MMFPA"), Md. Code.
Ann., Real Prop. SS 7-401-09 (West 2012); the Maryland Consumer Protection Act ("MCPA"),
Md. Code Ann., Com. Law SS 13-301-19 (West 2013); and the Maryland Consumer Debt
Collection Act ("MCDCA"), Md. Code Ann., Com. Law

S~ 14-201-04 (West 2013).

Presently

pending before the Court is Defendants' Motion to Dismiss Plaintiffs First Amended Complaint

("Motion to Dismiss").

The Motion is now ripe for disposition, and no hearing is necessary. See

D. Md. Local R. 105.6. For the following reasons, Defendants' Motion is GRANTED.

BACKGROUND
Unless otherwise noted, the following facts are presented as alleged in the Amended
Complaint.

I.

The Mortgage Loan
On May 24, 2007, Henry executed a promissory note for $303,000.00

(the "Note")

secured by a Deed of Trust (the "Deed") with American Brokers Conduit on the property located
at 13204 Sandston Court in Laurel, Maryland (the "Property").

The Deed of Trust listed MERS

as beneficiary of the Deed and nominee for the lender and its successors and assigns. On May 3,
2011, MERS, as the nominee for American Brokers Conduit, assigned the Deed to Aurora Loan,
a subsidiary of Aurora Bank, through a document signed by MERS Vice President Nancy L.
Walker. Henry alleges that Walker actually worked for Aurora Loan, not MERS, such that the
assignment was "self-serving."

Am. Compl. ~ 20, ECF No. 33. On May 15,2013, Aurora'Bank

assigned the Deed to Nationstar, which had bought Aurora Bank's mortgage servicing rights.
This assignment was signed by Susan Lindhorst, whom Henry alleges is an employee of
Nationstar.

Then on October 18, 2013, Aurora Loan assigned the Deed to Aurora Bank in an

instrument with the notation, "This assignment is being recorded to establish the intended chain
of title." Am. Compl. Ex. F, Deed Assignment, ECF No. 33-6.
The loan was securitized as a mortgage-backed
versions of the Note to his Amended Complaint.

security.l

Henry has attached two

One version, attached to an affidavit filed in

1
A "mortgage-backed security," and likewise "securitization," is established when a financial
institution purchases a mortgage from the original lender and pools that mortgage with others in
an investment instrument that can be sold. See Montgomery Cty. v. Fed Nat'l Mortg. Ass'n, 740

2

the Circuit Court for Prince George's County, Maryland ("Circuit Court") "certifying ownership
of debt instrument and that copy of note is a true and accurate copy," bears an endorsement from
the original lender, American Brokers Conduit, to Aurora Loan. Am. Compl. ~ 27; Am. Compl.
Ex. B, Aurora Loan Note, ECF No. 33-2. It does not bear endorsements evidencing any other
assignments.

The other version of the Note, attached to U.S. Bank's Motion for Order Granting

Relief from Automatic Stay filed in the United States Bankruptcy Court for the District of
Maryland in In re Cecil Arend Henry, No. 13-20662 (Bankr. D. Md.), bears a blank endorsement
from American Brokers Conduit.

II.

Procedural History
By September 20,2010, Henry had defaulted on the loan, and Aurora Loan had notified

him of its intent to foreclose on the Property.

On October 19, 2011, several individuals

identified as substitute trustees, who are not parties to this case, filed a foreclosure action against
Henry in the Circuit Court?

These individuals filed a June 21, 2011 declaration from the Vice

President of Aurora Loan stating that Aurora Loan had appointed them as substitute trustees. On

F.3d 914, 918 (4th Cir. 2014); Deutsche Bank Nat'l Trust Co. v. Brock, 63 A,3d 40, 42 (Md.
2013). Henry specifically notes that he does not challenge the securitization of the Note. Even if
he were challenging the securitization, however, it is well-established that securitization does not
render a note unenforceable. See, e.g., McNeil v. Bank of America, No. DKC 13-2162, 2014 WL
1831115, at *5 (D. Md. May 7, 2014) ("[E]ven assuming that her loan was securitized, Plaintiff
has presented no basis for the Court to declare the deed of trust invalid or unenforceable."
(internal quotation marks omitted)); Lawson v. MERS, Inc., No. 8:13-cv-02149-AW, 2013 WL
4482953, at *1 (D. Md. Aug. 20, 2013) ("Judges in this District ... have repeatedly rejected the
notion that, as a general matter, the securitization of notes renders them unenforceable."); Flores
v. Deutsche Bank Nat'l Trust, Co., No. DKC 10-0217,2010 WL 2719849, at *5 (D. Md. July 7,
2010) ("[T]hat Plaintiffs mortgage may have been combined with many others into a securitized
pool ... does not absolve Plaintiff of responsibility for the Note.").
Under Federal Rule of Evidence 201(c)(l), the Court takes judicial notice of the docket in
Henry's foreclosure case, which is available through the Maryland Judiciary's website. Dore v.
Henry, No. CAEII-26816,
available at http://casesearch.courts.state.md.us/casesearch/
inquiryByCaseNum.jis.
2

3

December 19,2014, the Circuit Court stayed the case pending the resolution of this case. Dore
v. Henry, No. CAEll-26816.
Henry, proceeding pro se, filed suit against Defendants on February 24, 2014 in the
Circuit Court.

He advanced claims (1) to quiet title, (2) for fraud, (3) for violations of the

MCPA, and (4) for violations of the MCDCA. On April 21, 2014, Aurora Loan, U.S. Bank, and
MERS removed the case to this Court on the basis of diversity jurisdiction

because there is

complete diversity of citizenship and the Property is valued at $225,600.00.

See Peterson v.

Sucro, 93 F.2d 878, 882 (4th Cir. 1938) ("[I]n suits to quiet title ... , the amount in controversy
is the value of the whole of the real estate to which the claim extends." (internal quotation marks
and citation omitted)).
On April 28, 2014, Aurora Loan, U.S. Bank, and MERS filed their first Motion to
Dismiss. On October 14,2014, the Court granted leave for another defendant, Lehman Brothers
Holding, Inc. ("Lehman"), to supplement the record with the Motion to Dismiss it filed in state
court prior to the case's removal.

On November 18, 2014, after a hearing, the Court issued an

Order dismissing Lehman, denying the April 28, 2014 Motion to Dismiss as moot, and granting
Henry leave to file an Amended Complaint.

On November 24,2014, Henry filed his Amended

Complaint seeking a declaratory judgment and alleging violations of the MMFPA, the MCPA,
and the MCDCA. On July 27,2015, Defendants filed the present Motion to Dismiss.
DISCUSSION
I.

Legal Standards
To defeat a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6),

the complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). A claim is plausible when the facts pleaded "allow[] the Court to draw the

4

reasonable inference that the defendant is liable for the misconduct alleged."

Id.

Legal

conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint
as a whole, consider the factual allegations in the complaint as true, and construe the factual
allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268
(1994); Lambeth v. Bd. ofComm'rs

of Davidson Cnty., 407 F.3d 266,268 (4th Cir. 2005). In

conducting this analysis, the Court may consider public real estate records where, as here, they
are referred to in the complaint and are integral to it. See Sec y of State for Defence v. Trimble
Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).

Because the Court's jurisdiction here is based on diversity, the Court relies on state law,
in this case Maryland law, to resolve the pending issues. Horace Mann Ins. Co. v. Gen. Star
Nat'l Ins. Co., 514 F.3d 327,329 (4th Cir. 2008).

II.

Count I: Declaratory Judgment
In Count I, Henry alleges that U.S. Bank and Aurora have an invalid or defective adverse

interest in the Property because (1) there are three conflicting assignments of the Deed of Trust;
and (2) there are two versions of the Note. As relief, Henry asks that the Court "declare the
rights of the parties, including ... Defendants' rights, if any, to the first Deed of Trust recorded
against the Property, any Defendant's authority to foreclose, whether it is in possession of any
original Note, [and] its ownership of the subject Note." Am. Compl. ~ 42. As discussed below,
these arguments fail as a matter of law.
Maryland law providing for the issuance of a declaratory judgment states that:
Any person interested under a deed, will, trust, land patent, written contract, or
other writing constituting a contract, or whose rights, status, or other legal
relations are affected by a statute, municipal ordinance, administrative rule or
regulation, contract, or franchise, may have determined any question of
construction or validity arising under the instrument, statute, ordinance,

5

administrative rule or regulation, land patent, contract, or franchise and obtain a
declaration of rights, status, or other legal relations under it.
Md. Code Ann., Cts. & Jud. Proc. ~ 3-406. Under this section, it is within the sound discretion
of the court whether a declaratory judgment should be granted. See Brohawn v. Transamerica

Ins. Co., 347 A.2d 842, 849 (Md. 1975). For the following reasons, the Court dismisses the
claim for a declaratory judgment.
First, the Court declines to exercise its discretion to consider a declaratory judgment in
this case because of the pending foreclosure proceeding.

Notably, the Anti-Injunction

Act, 28

U.S.c. ~ 2283 (2012), bars the Court from granting "an injunction to stay proceedings in a State
court except as expressly authorized by Act of Congress, or where necessary in aid of its
jurisdiction,

or to protect or effectuate its judgments."

Id

Because none of these "three

specifically defined exceptions" applies to this case, Atl. Coast Line R. Co. v. Bhd of Locomotive
Eng'rs, 398 U.S. 281, 286 (1970), the Court would not be permitted to enjoin the pending state
foreclosure proceeding.

Courts have held that the limitations of the Anti-Injunction Act also bar

a federal court from issuing a declaratory judgment relating to property rights where there is a
pending foreclosure proceeding.

See Tucker v. Specialized Loan Servicing, LLC, 83 F. Supp. 3d

635, 641 (D. Md. 2015) (finding that the Anti-Injunction Act barred the court from issuing a
declaratory judgment that the property is not subject to foreclosure sale because it would have
had the effect of staying a foreclosure proceeding); Williams v. Jp Morgan Chase Bank, NA.,
No. RDB-16-0312,

2016 WL 509426, at *2 (D. Md. Feb. 4, 2016) (stating that the Anti-

Injunction Act bars declaratory or injunctive relief relating to a pending foreclosure action).
addition, while the foreclosure proceeding

is ongoing, the state court maintains

In

exclusive

jurisdiction over the Property. Tucker, 83 F. Supp. 3d at 641--42; Williams, 2016 WL 509426, at

6

*2. Consequently, Henry's claim for equitable relief in the form of a declaratory judgment
necessarily fails.
Second, Henry's claim for a declaratory judgment that Defendants lack rights to the Deed
of Trust and lack authority to foreclose necessarily fails because it is premised on the alleged
invalidity of the assignments of the Deed and Note. Henry, however, lacks standing to challenge
the validity of such assignments. State contract law governs whether a plaintiff can challenge a
mortgage assignment. See Wolfv. Fed Nat'l Mortg. Ass'n, 512 F. App'x 336, 342 (4th Cir.
2013) (per curiam). In Maryland, only a party or third-party beneficiary to a contract can sue to
enforce the terms of that contract. 120 W. Fayette St., LLLP v. Mayor & City Council of BaIt.,
43 A.3d 355,368 (Md. 2012). The intervening assignments do not affect Henry's rights in that,
regardless of their validity, he "still has an obligation under the note to make payments." Wolf,
512 F. App'x at 342. The assignments only affect to whom he must make those payments.
Because Henry does not and cannot allege that he is a party to, or an intended third party
beneficiary of, any of the allegedly improper assignments, he has no standing to challenge them.
See Wolf, 512 F. App'x at 342 (finding that the plaintiff did not have standing to challenge the
validity of an assignment by MERS).
Third, Henry has also failed to identify any plausible basis for the conclusion that the
assignments were contradictory or invalid. To the contrary, Henry's allegations do not consider
that the Deed of Trust explicitly listed MERS as a beneficiary, that MERS generally "tracks
ownership interests in residential mortgages in an electronic database," and that "(m]ortgages on
which MERS is named as a beneficiary may be freely transferred among MERS members and
the transfers are recorded in MERS electronic database but are not public(ly] recorded," Suss v.

7

Jp Morgan Chase Bank, NA., No. WMN-09-1627, 2010 WL 2733097, at *1 (D. Md. July 9,
2010). The Court of Appeals of Maryland has described this process in more detail:
MERS ... skirt(s] the traditional land-title recording process in localities ... and
replac(es] it with the industry's own tracking system. To do so, the mortgage
broker names MERS as a nominal mortgagee in the mortgage. Then, subsequent
transfers of the mortgage are recorded electronically and entirely on MERS while
the original mortgage, recorded in the public land records, remains unchanged. .
Anderson v. Burson, 35 A,3d 452,455-56

(Md. 2011) (internal citations omitted).

Courts have regularly held that the MERS system of recordation

"is proper and

assignments through that system are valid." Suss, 2010 WL 2733097, at *5; see also McNeil v.
Bank of America, No. DKC 13-2162,2014

WL 1831115, at *5 (D. Md. May 7, 2014); Parker v.

Deutsche Bank Nat 'I Trust Co., No. WMN-12-3358, 2013 WL 1390004, at *3 (D. Md. Apr. 3,
2013). Moreover, courts in this district have dismissed similar claims where assignments of both
instruments were conducted in the same manner as here.

See, e.g., Somarriba v. Greenpoint

Mortg. Funding, Inc., No. 13-CV-072-RWT, 2013 WL 5308286, at *1, *3 (D. Md. Sept. 19,
2013).
Contrary to Henry's claim, the three assignments made through this system that were
attached to his Amended Complaint are not inconsistent with each other. Read together, these
three assignments clearly show that: (1) there was an initial assignment of the Deed of Trust
from MERS on behalf of American Brokers Conduit to Aurora Loan; (2) there was a later
assignment from Aurora Bank to Nationstar; and (3) there was a correcting assignment to
"establish the chain of title" from Aurora Loan to Aurora Bank, to show how Aurora Bank
received authority to make the second assignment.

Am. Compo Ex. F. These documents do not

demonstrate conflicting claims that must be addressed through a declaratory judgment.
For all of these reasons, Count I is dismissed.

8

III.

Count II: Maryland Mortgage Fraud Protection Act
Count II must be dismissed because Henry fails to state a claim for mortgage fraud and

does not meet the heightened standard for pleading fraud in federal court. To allege mortgage
fraud in Maryland, a plaintiff must assert facts sufficient to establish that the defendant, with
intent to defraud, (l) knowingly made "any deliberate misstatement,
omission

during

the mortgage

lending

process

misrepresentation,

or

with the intent that the misstatement,

misrepresentation, or omission be relied on by a mortgage lender, borrower, or any other party to
the mortgage lending process"; (2) knowingly used or facilitated the use of "any deliberate
misstatement, misrepresentation, or omission during the mortgage lending process with the intent
that the misstatement,

misrepresentation,

or omission be relied on by a mortgage

lender,

borrower, or any other party to the mortgage lending process"; or (3) filed or caused to be filed
"in the land records in the county where a residential real property is located, any document
relating to a mortgage
misrepresentation,

loan that the person knows to contain a deliberate

or omission."

Md. Code Ann., Real Prop.

9

misstatement,

7-401 (d). In addition, Federal

Rule of Civil Procedure 9(b) requires a plaintiff to plead fraud claims in federal court with
particularity.

A plaintiff must plead "the time, place, and contents of the false representations, as

well as the identity of the person making the misrepresentation

and what he obtained thereby."

Harrison v. Westinghouse Savannah River, Co., 176 F.3d 776, 784 (4th Cir. 1999) (citation and
internal quotation marks omitted).
Henry fails to state a plausible fraud claim because he has not identified any deliberate
misrepresentation.

He alleges that Defendants engaged in fraud by (1) representing that they

were authorized to foreclose knowing that they were not the secured party or the holder of the

9

Note; (2) initiating the foreclosure action in the Circuit Court; and (3) filing land records that
they knew to contain a deliberate misstatement,

misrepresentation,

or omission.

All three

allegations turn on Henry's claim that (1) the assignments of the Deed of Trust were invalid
because MERS lacked authority to assign the Deed and the signatories lacked authority to
execute them; and (2) the existence of two versions of the Note rendered the endorsement to
Aurora Loan invalid.
These claims, however, fail as a matter of law. The Deed of Trust specifically identifies
MERS as a beneficiary, and the authority ofMERS to then assign the Deed of Trust to others has
been regularly upheld by courts, including in this district.
*4-5 (noting that the "plaintiffs'

See McNeil, 2014 WL 1831115, at

claim, that MERS did not have the authority to assign the

mortgage, flatly contradicts the language in the Deed of Trust" that MERS is a beneficiary and
nominee for the Lender); Suss, 2010 WL 2733097, at *5; see also Sanchez v.

us. Bank, NA.,

No. C 09-04506 SI, 2010 WL 670632, at *5 (N.D. Cal. Feb. 22,2010).
Henry's claim that assignments were invalid because the signatories lacked authority also
fails. Henry claims that Nancy Walker, the MERS Vice President who executed the assignment
of the Deed of Trust to Aurora Loan, was actually an employee of Aurora Loan, and therefore
executed a self-serving assignment.

Similarly, he alleges that Susan Lindhorst, the Aurora Bank

FSB Assistant Secretary who signed the May 15,2013 assignment, was actually an employee of
Nationstar, the assignee. Henry's claim regarding these allegedly unauthorized assignments fails
for two reasons.

First, as with the other claims alleging improprieties with the assignments,

Henry lacks standing to challenge the circumstances of these assignments.

See Wolf, 512 F.

App'x, at 342. Although Maryland courts have not specifically addressed whether a borrower
has standing to challenge an unauthorized assignment, several courts have found that a plaintiff

10

lacks such standing because an unauthorized assignment document would only render the
assignment voidable by the assigning party, not void as a matter of law. In a similar case in
which borrowers challenged an assignment signed as "Vice President of Citi" when the signor
was actually an employee of a third-party contractor, the United States Court of Appeals for the
Fifth Circuit held that, while a plaintiff could challenge the validity of an assignment if it could
plausibly allege that the assignment was void, the assignment in question was not void ab initio
but rather voidable at the option of the assignor. Reinagel v. Deutsche Bank Nat'l Trust Co., 735
F.3d 220, 225-28 (5th Cir. 2013) (holding that "facially valid assignments cannot be challenged
for want of authority except by the defrauded assignor").
Various district courts addressing the same issue in different jurisdictions have reached
the same conclusion? See, e.g., Brodie v. Nw. Tr. Servs., Inc., No. 12-CV-0469-TOR, 2012 WL
6192723, at *2-3 (RD. Wash. 2012) (finding that an assignment document signed by someone
without authorization did not discharge the obligation to pay the debt but would allow the
defrauded party, not the debtor, to void the assignment at its option); Javaheri v. JPMorgan
Chase Bank, NA., No. 2:10-cv-08185-0DW (FFMx), 2012 WL 3426278, at *6 (C.D. Cal. Aug.

13,2012) (finding that the plaintiff "suffered no injury" arising from robo-signing because "[t]he
foreclosure would occur regardless of what entity was named as trustee"); Bateman

v.

Countrywide Home Loans, No. 12-00033 SOM/BMK, 2012 WL 5593228, at *4 (D. Haw. Nov.

14, 2012) (citing 29 Williston on Contracts ~ 74:50 (4th ed. 2014)) ("The reason debtors
generally lack standing to challenge assignments of their loan documents is that they have no

Cases addressing allegations that the signatories lacked authority to sign an assignment or
other instrument relevant to a foreclosure proceeding, whether because of their lack of corporate
authority or their lack of personal knowledge of the contents of the instrument, often refer to the
practice as "robo-signing." Att'y Grievance Comm'n of Md v. Doe, 73 A.3d 151, 176 (Md.
2013) (citation omitted).
3

11

interest in those assignments, and the arguments they usually make do not go to whether the
assignments are void ab initio, but instead to whether the various assignments are voidable.
Debtors lack standing to challenge voidable assignments; only the parties to the assignments may
seek to avoid such assignments."); In re Mortg. Elec. Registration Sys. (MERS) Litig., No. CV
1O-1547-PHX-JAT, 2012 WL 932625, at *3 (D. Ariz. Mar. 20, 2012).

These holdings are

consistent with the principle of Maryland law that "contracts obtained by fraud are not absolutely
void, but are 'voidable at the election of the parties affected by the fraud' and 'binding until
properly avoided.'" Julian v. Buonassissi, 997 A.2d 104, 119-20 (Md. 2010) (quoting Urner v.
Sollenberger,

43 A. 810, 811-12 (Md. 1899» (holding that a conveyance of deed of trust

allegedly without providing legally required disclosures is voidable at the election of the parties,
not void ab initio). Under this reasoning, regardless of who employed Walker and Lindhorst or
who authorized them to sign the assignments to Aurora Loan and Nationstar, the assignments
would be valid unless MERS, Aurora Bank, or American Brokers Conduit sought to void them,
which has not occurred.
Second, even if an assignment of the Deed of Trust were signed by an unauthorized
official and that signature were deemed to be a misrepresentation, Henry cannot plausibly allege
that he relied on that misrepresentation to his detriment. See Nails v. S & R, Inc. tfa VOB Auto
Sales, 639 A.2d 660, 669 (Md. 1994) (holding that to establish the reliance element of a fraud
claim, the plaintiff must show at a minimum that "the misrepresentation substantially induced the
plaintiff to act").

In Willis v. Bank of America Corporation, No. ELH-13-02615,

2014 WL

3829520 (D. Md. Aug. 1, 2014), for example, the court dismissed with prejudice a fraud claim
arising from the use of robo-signed documents relating to a foreclosure action in part because of
the lack of allegations that the plaintiff "justifiably relied" on the signatures. Id at *20-21.

12

The

court noted that there was no allegation that the documents contained any false information on
the amount due on the loan or that the contents were inaccurate in a way that caused harm to the
plaintiff. Id. Notably, the United States Court of Appeals for the Fourth Circuit has found, in the
context of a claim that the lack of authorized

signatures on documents

in a foreclosure

proceeding violated the Fair Debt Collection Practices Act, that such signatures do not constitute
"material" misrepresentations

because the identity and knowledge of the signatories had "no

connection to the debt at issue" where "the documents correctly stated the debt" and because
there was no allegation how "any consumer would be misled by a signature that is affixed to a
document that was substantively correct." Lembach v. Bierman, 528 F. App'x 297,303 (4th Cir.
2013); see also Repokis v. Deutsche Bank Nat'l Trust Co., No. 11-15145, 2012 WL 2373350 at
*2 (E.D. Mich. June 25, 2012) (dismissing fraud claim based on unauthorized signature because,
"as a nonparty
misrepresentation"

to the assignment,"

the plaintiff could not "claim that he relied on the

or that he was "damaged due to fraud or misrepresentation

is responsible for his default on the loan").

because he alone

Under this reasoning, even if the signatory of the

Deed of Trust assignment was unauthorized, Henry continued to owe the same amount and was
required to repay the loan. Because the nature of the signature on the assignment would not have
caused the borrower to act any differently, Henry cannot fairly allege that he relied on any
misrepresentation arising from the allegedly unauthorized signatures.
As for Henry's allegation of fraud relating to the alleged existence of two different Notes,
an examination of these documents indicates that the two versions are actually copies of the
same document, except that one has an endorsement in blank by American Brokers Conduit, and
the other has "Aurora Loan Services, LLC" written into that same endorsement stamp as the
payee.

Am. Compl. ~~ 27 & 30; Am. Compl. Ex. B, Aurora Loan Note; Am. Compl. Ex. G,

13

Blank Note, ECF No. 33-7. The only plausible conclusion to be drawn is that the copy of the
Note endorsed in blank was made first, and the second copy was made after the Note was
specifically endorsed to Aurora Loan.

Thus, there is nothing facially invalid about the Note.

More importantly, because the later endorsement is from the original lender, American Brokers
Conduit, to the entity that is seeking to foreclose, Aurora Loan, the Note, on its face, identifies
Aurora Loan as the valid holder of the Note. See Anderson v. Burson, 35 A.3d 452,460-61

(Md.

2011) (finding that when a note holder endorses the note to another, and gives possession of the
note to that person or entity, the recipient is the new holder of note). Thus, Henry has not alleged
facts to support a plausible claim of fraud.4

IV.

Count III: The Maryland Consumer Protection Act
In Count III, Henry alleges that, in asserting that they had the right to enforce the Deed of

Trust, Defendants

violated the MCP A by employing unfair and deceptive trade practices,

specifically, making false or misleading statements or material omissions.

Under the MCPA, a

person is prohibited from engaging in any "unfair or deceptive trade practice" in a variety of
consumer transactions and activities, including the collection of consumer debts and the sale,
lease, rental, or loan of consumer goods, realty, or services.

Md. Code Ann., Com. Law

S

13-

303(5). The term "unfair or deceptive trade practices" includes any:
Deception, fraud, false pretense, false premise, misrepresentation, or knowing
concealment, suppression, or omission of any material fact with the intent that a
consumer rely on the same in connection with ... [t]he promotion or sale of any
consumer goods, consumer realty, or consumer service.
Md. Code Ann., Com. Law

S

13-301(9).

Because Henry has not alleged facts showing that Defendants were not entitled to enforce the
Note and Deed of Trust, he has also failed to demonstrate that Aurora Loan lacked authority to
appoint substitute trustees.
4

14

To state a claim under the MCPA, plaintiffs must prove that they relied on the material
misrepresentation or material omission and sustained an actual injury or loss as a result. Bank of
America, NA. v. Jill P. Mitchell Living Trust, 822 F. Supp. 2d 505, 533-34 (D. Md. 2011).
Reliance requires a showing that the misrepresentation

substantially induced the consumer's

choice. Id at 532. A consumer relies on a material omission where it is "substantially likely that
the consumer would not have made the same choice in question had the commercial entity
disclosed the omitted information."

Id at 535. Moreover, MCPA claims involve fraud and thus

are also subject to the heightened pleading standards under Rule 9(b). Spaulding v. Wells Fargo
Bank, NA., 714 F.3d 769, 781 (4th Cir. 2013).
Henry fails to state a claim under the MCP A because, as discussed above, he has not
alleged sufficient facts to show that Defendants made any false or misleading representations.
The allegations that the assignments of the Deed were signed by unauthorized individuals, and
that there was more than one Note, do not establish that Defendants falsely claimed that they had
the right to foreclose or otherwise establish any misrepresentation upon which Henry relied. See
supra Part III.

In Willis, the court dismissed an MCPA claim alleging irregularities

in

foreclosure filings, including signing of documents by unauthorized individuals, because of the
lack of facts "to show that [the plaintiff] relied on [the] defendants'

misrepresentations

or

omissions" or "how the alleged errors in the foreclosure materially impacted [the] plaintiffs
circumstances or conduct."

Willis, 2014 WL 3829520 at *23. Likewise, Henry's assertion of the

same or similar claims cannot establish a cause of action under the MCPA. Accordingly, Count
III is dismissed with prejudice.

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V.

Count IV: The Maryland Consumer Debt Collection Act
In Count IV, Henry alleges that Defendants

violated the MCDCA

by claiming,

attempting, and threatening "to enforce a right with knowledge that they were using false
documents to support their actions, and without any authority to do so." Am. Compl. ~ 65. The
MCDCA

prohibits

debt collectors

from using threatening

attempting to collect a delinquent debt.

or fraudulent

methods

Md. Code Ann., Com. Law ~ 14-202.

while

Under the

MCDCA, a debt collector cannot "[c]laim, attempt, or threaten to enforce a right with knowledge
that the right does not exist."

~ 14-202(8). "Maryland courts have consistently interpreted the

MCDCA to require plaintiffs to allege that defendants acted with knowledge that the debt was
invalid, or acted with reckless disregard as to its validity."

Lembach, 528 F. App'x at 304

(internal quotation marks omitted); see also Kouabo v. Chevy Chase Bank, FSB., 336 F. Supp.
2d 471,475 (D. Md. 2004) ("This has been held to mean that a party may not attempt to enforce
a right with actual knowledge or with reckless disregard as to the falsity of the existence of the
right.").
Viewing the Amended Complaint as a whole, Henry's claim appears to rely entirely on
the premise that Defendants had no right, and knew they had no right, to collect the mortgage
debt because the debt is completely invalid under the same theories he offers for his other
claims-that

unauthorized signers executed assignments of the Deed of Trust and that there were

two different Notes.

As discussed above, however, these theories do not support a conclusion

that the debt is invalid, so Henry cannot show that the efforts to collect his debt were conducted
with knowledge or disregard of the falsity of the right to collect. See Lembach, 528 F. App'x at
304-05 (dismissing MCDCA claim arising from unauthorized signatories because "the MCDCA
does not allow for recovery for an error in the process of collecting this legitimate

16

and

undisputed debt"). Accordingly, Henry's MCDCA claim fails, and Count IV is dismissed with
prejudice.
CONCLUSION
For the foregoing reasons, Defendants'

Motion to Dismiss is GRANTED.

Order shall issue.

Date: March 25,2016
THEODORE D. CH
United States Distric

17

A separate