Smallwood et al v. Nationstar Mortgage, LLC et al

Filing 39

MEMORANDUM OPINION AND ORDER granting 30 and 36 Defendants Motions to Dismiss; dismissing with prejudice 29 Plaintiff's Second Amended Complaint; directing clerk to close this case. Signed by Judge Paula Xinis on 5/1/2018. (c/m 5/1/2018 aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
*
MICHAEL SMALLWOOD, et al.,
*
Plaintiffs,
*
v.

Civil Action No. PX-16-4008
*

NATIONSTAR MORTGAGE, LLC,
et al.,
Defendants.

*

******
MEMORANDUM OPINION AND ORDER

On December 28, 2016, pro se Plaintiffs Michael and Melinda Smallwood asserted a
variety of statutory and common law claims against the Defendants, Nationstar Mortgage, LLC
(“Nationstar”), Bank of America, NA (“Bank of America”), Thomas Montag (“Montag”),
LaSalle Bank, NA (“LaSalle Bank”), Rosenberg & Associates, LLC (“Rosenberg LLC”), Diane
Rosenberg (“Rosenberg”), and Wilmington Trust, National Association, as Successor Trustee to
Citibank, N.A., as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed
Certificates, Series 2005-FF12 (“Wilmington Trust”),1 in connection with a pending foreclosure
on Plaintiffs’ home. In their Second Amended Complaint, submitted January 18, 2018, Plaintiffs
allege a common law claim of unjust enrichment. ECF No. 29. Plaintiffs request injunctive
relief against Defendants, restitution, and “punitive damages in an amount of three times our
actual damages.” Id. at ¶ 21. Plaintiffs are also currently appealing the ratification of foreclosure

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 Plaintiffs list this Defendant as “Wilmington Trust, NA,” but the correct name is Wilmington Trust, National
Association, as Successor Trustee to Citibank, N.A., as Trustee for First Franklin Mortgage Loan Trust, Mortgage
Loan Asset-Backed Certificates, Series 2005-FF12 (“Wilmington Trust”). See ECF No. 9-1 at note 1.

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rendered in the Circuit Court for Prince George’s County, Maryland,2 BSBSC v. Smallwood, et
al, Case No. CAEF15-25056 (Prince George Country Cir. Ct.), and have filed a civil suit against
all defendants in the United States District Court for the District of Columbia on similar, but not
identical, grounds. See ECF No. 21-6.
Pending before the Court are two motions to dismiss. For the foregoing reasons, the
motions are GRANTED.
I.

Background
In September 2005, Plaintiffs purchased a home located at 8113 Elora Lane, Brandywine,

Maryland, with a mortgage loan of $379, 550.00 (“the Loan”) from First Franklin, a Division of
National City Bank of Indiana. See ECF No. 9-2. A Deed of Trust secured the obligations on the
Loan. ECF No. 9-2. The Deed of Trust provides that in the event of Plaintiffs’ default, the
lender is entitled to institute foreclosure proceedings against the Property and collect all costs
incurred to foreclosure. Id. The Deed of Trust also provides that the “Note or partial interest in
the Note (together with this Security Instrument) can be sold one or more times without prior
notice to Borrower,” id. at ¶ 20, and that “Lender, at its option, may from time to time remove
Trustee and appoint a successor trustee” who “shall succeed to all title, power and duties
conferred upon Trustee herein any by Applicable Law.” Id. at ¶ 24.
On April 4, 2006, First Franklin assigned its interest in the Deed of Trust to First Franklin
Financial Corporation (“FFFC”). ECF No. 21-3. On February 19, 2009, FFFC assigned its
rights in the Deed of Trust to Citibank, acting as Trustee for First Franklin Mortgage Loan Trust,
Mortgage Loan Asset-backed Certificates, Series 2005-FF12 (“Citibank”). See ECF No. 21-4.
On June 14, 2014, Nationstar was appointed as attorney-in-fact for the current Trustee, Citibank,

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In a motion to dismiss, “a court may take judicial notice of docket entries, pleadings and papers in other cases
without converting a motion to dismiss into a motion for summary judgment.” Mua v. Maryland, No. ELH–16–
01435, 2016 WL 1258469 (D. Md. Feb. 15, 2017).

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by Citibank’s successor trustee, Wilmington Trust. See ECF No. 9-6.3 Citibank then assigned
its interest to in the Deed of Trust to Wilmington Trust on January 13, 2015. ECF No. 21-5.
Wilmington Trust is the current holder of the beneficial interest under the Deed of Trust. Id.
Nationstar is Wilmington Trust’s servicer for the Loan.
In 2012, the Plaintiffs fell behind on their loan payments. Nationstar initiated foreclosure
proceedings in the Circuit Court for Prince George’s County, Maryland. ECF Nos. 9-7 & 9-8.
Plaintiffs’ various legal challenges to the foreclosure in Circuit Court were unsuccessful, ECF
No. 9-9, and the Property was sold at auction on January 19, 2017. Plaintiffs have filed two
federal actions against Defendants; this case was filed on December 26, 2016, ECF No. 1, and a
separate case was filed against all of the present Defendants in the United States District Court
for the District of Columbia in January 2016, Smallwood v. Wilmington Trust, Nat’l Assoc’n, et
al, No. 16-00080-EGS-RMM. Plaintiffs amended their complaint on January 3, 2017, in it
asserting claims arising under the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), the Fair Debt Collection Practices Act (“FDCPA”), and common law claims of
negligent misrepresentation, unjust enrichment, insurance fraud, breach of contract, and bad
faith. Plaintiffs requested damages and equitable relief, to which Defendants asserted an array of
challenges.
On December 21, 2017, the Court issued a Memorandum Opinion and Order dismissing
all but one of Plaintiffs’ claims with prejudice. ECF Nos. 27 & 28. The remaining claim for

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The Limited Power of Attorney was executed pursuant to a Pooling and Servicing Agreement. See ECF No. 9-6 at
2. The Limited Power of Attorney in relevant part reads: “Wilmington Trust, National Association, as successor
trustee to Citibank, N.A. (the “Trustee”) in connection with the Pooling and Servicing Agreement (the
“Agreement”) relating to each of the certificates described on Exhibit A attached hereto . . . hereby constitutes and
appoints Nationstar Mortgage LLC by and through the Servicer’s officers, the Trustee’s true and lawful Attorney-inFact, in the Trustee’s name, place and stead and for the Trustee’s benefit, in connection with all mortgage loans.”
ECF No. 9-6.

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unjust enrichment was dismissed without prejudice and with leave to amend the complaint as to
this count. ECF No. 28. 
On January 18, 2018, Plaintiffs timely submitted a Second Amended Complaint, alleging
unjust enrichment against all Defendants. ECF No. 29. Defendants Nationstar and Wilmington
Trust moved to dismiss Plaintiffs’ Second Amended Complaint, arguing that it fails to state a
claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).
Each motion is addressed below.
II.

Analysis
For a common law claim of unjust enrichment, Plaintiffs must plausibly allege that (1) a

benefit was conferred on the Defendants; (2) Defendants knew of or appreciated the benefit; and
(3) Defendants’ acceptance or retention of the benefit under the circumstances was inequitable
absent payment of for the value of the benefit. See, e.g., Hill v. Cross Country Settlements, LLC,
402 Md. 281, 295 (2007). Unjust enrichment claims are subject to a three year statute of
limitations. See, e.g., Jason v. Nat’l Loan Recoveries, LLC, 227 Md. App. 516, 527–29 (2016).
The Court will address the sufficiency of the claims as to each Defendant.
a. Nationstar
The Deed of Trust submitted and signed by Plaintiffs, ECF No. 9-2, allows the “Lender”
or loan servicer to charge Borrower “default-related fees,” such as hazard insurance costs and
various expenses associated with Plaintiffs’ default, including repairs, changing locks, inspecting
the property, and eliminating code violations, id. at ¶¶ 5, 9. Plaintiffs allege that from June 2014
to 2016, Nationstar exceeded these terms and charged unnecessary or excessive fees that were
fraudulently concealed on Plaintiffs’ account by labeling them “ ‘ Other Charges,’ ‘Other fees,’
‘Miscellaneous Fees,’ and ‘Corporate Advances.’ ” ECF No. 29 at ¶¶ 17, 19.

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Nationstar argues

that Plaintiffs’ claims must be dismissed because, among other reasons, the Second Amended
Complaint does not plausibly allege facts to support their claim, and instead proffers conclusory
and unsupported allegations. The Court agrees.
Although Plaintiffs’ Second Amended Complaint appears to assert more particularized
facts, it still does not allege the foundational element of an unjust enrichment claim: that
Plaintiffs actually conferred a benefit on Nationstar. Indeed, while the Second Amended
Complaint repeatedly notes that Nationstar charged Plaintiffs fees, Plaintiffs do not allege, or put
forth any facts suggesting, that they actually paid Nationstar these fees. See generally ECF No.
29. Because it is necessary that a benefit actually be conferred which, in essence, enriched the
Defendants, and because that critical averment is absent here, Nationstar’s motion to dismiss,
ECF No. 30, is GRANTED. See Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp., 249 F.
Supp. 2d 703, 708–09 (D. Md. 2003) (dismissing unjust enrichment claim, holding that
“[plaintiff] must plead that it provided a benefit to [defendant] and it has not done so, nor does it
appear that it could.”); see also Lewis v. Caliber Home Loans, Inc., Case No. TDC-15-1331,
2016 WL 8715675, at *5 (D. Md. Feb. 26, 2016).
b. Wilmington Trust
As to Wilmington Trust, Plaintiffs further allege that Wilmington Trust “has been paid
three times for our Note.” In support, Plaintiffs assert that “Defendant Wilmington collected
mortgage insurance proceeds from the mortgage insurance carrier and then after filing a
foreclosure action against us Defendant Wilmington collected additional insurance proceed from
the pool insurance carrier amounting to a double recovery . . . in excess of $600,000.00.” ECF
No. 29 at ¶ 13. Plaintiffs’ argument, therefore, relies on a legal theory that mortgage and/or
foreclosure insurance somehow discharges borrowers’ contractual obligations to lenders, and

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that lenders’ collection of such insurance while proceeding with foreclosure is an unlawful
“double recovery.” See ECF No. 29 at ¶¶; see also ECF No. 33 at 7–8. As Wilmington Trust
notes in its motion to dismiss, this Court has previously rejected this theory of recovery as
legally untenable. See ECF No. 27 at 10–11 (citing cases); see also ECF No. 38 at 3–5. The
Court’s opinion in this regard remains unchanged. Wilmington Trust’s motion to dismiss, ECF
No. 30, is GRANTED.4
III.

Dismissal with prejudice
Dismissal of claims with or without prejudice remains within the discretion of the district

court. Weigel v. Maryland, 950 F. Supp. 2d 811, 825–26 (D. Md. 2013) (citing 180S, Inc. v.
Gordini U.S.A., Inc., 602 F. Supp. 2d 635, 638–39 (D. Md. 2009)). Generally, the plaintiff
should be afforded the opportunity to amend or dismissal should be without prejudice. See
Adams v. Sw. Va. Reg'l Jail Auth., 524 F. App’x 899, 900 (4th Cir. 2013) (“Where no
opportunity is given to amend the complaint, the dismissal should generally be without
prejudice.”); Cosner v. Dodt, 526 F. App’x 252, 253 (4th Cir. 2013) (same). However,
“dismissal with prejudice is proper if there is no set of facts the plaintiff could present to support
his claim.” Weigel, 950 F. Supp. 2d at 825–26. As the United States Court of Appeals for the
Fourth Circuit has explained:
While a potentially meritorious claim ..., should not be unqualifiedly dismissed for failure
to state a claim unless its deficiencies are truly incurable, such an unqualified dismissal is
entirely proper when the court has reviewed the claim and found it to be substantively
meritless. Once a court has determined that the complaint is truly unamendable, a
dismissal without prejudice is of little benefit to the litigant, as the claim cannot be made
viable through reformulation.
McLean v. United States, 566 F.3d 391, 400–01 (4th Cir. 2009) (internal citation omitted).

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Although Plaintiffs stylize the Complaint against all Defendants, it alleges claims against
only Nationstar and Wilmington Trust. See ECF No. 29. Bank Defendants’ motion to dismiss
on this basis, ECF No. 36, is therefore GRANTED.

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Having amended twice already, and with the guidance of this Court’s previous
Memorandum Opinion, Plaintiffs crafted a complaint that is regrettably vague and attempts to relitigate a legal theory of “double recovery” previously rejected by this Court. See ECF Nos. 29
& 33. Therefore, the dismissal of Plaintiffs’ claim for unjust enrichment shall be with prejudice.
IV.

Conclusion
For the reasons stated in the foregoing Memorandum Opinion, it is this 1st day of May,

2018, by the United States District Court for the District of Maryland, ORDERED that:
1. Defendants’ Motions to Dismiss, at ECF Nos. 30 & 36, are GRANTED and the
Plaintiffs’ Second Amended Complaint, ECF No. 29, is DISMISSED with
prejudice; and
2. The Clerk is directed to transmit copies of this Memorandum Opinion and Order
to the parties and CLOSE this case.

5/1/2018
Date

/s/
Paula Xinis
United States District Judge

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