Ball v. Federal National Mortgage Association et al

Filing 16

ORDER granting 6 Motion to Dismiss. Signed by District Judge Victoria A. Roberts. (CPin)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Joan Ball,
Plaintiff,

Case No.: 16-11475
Hon. Victoria Roberts

v.
Federal National Mortgage Association,
as Trustee for FannieMae Guaranteed Remic Pass-Through
Certificates FannieMae Remic Trust 2004-W12, and
PHH Mortgage,
formerly known as
Cendant Mortgage Corporation,
Defendants.
___________________________________________
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS [ECF NO. 6]
I.

Introduction
Joan Ball filed a four count Complaint against Defendants Federal National

Mortgage Association (“Fannie Mae”) and PHH Mortgage (“PHH”). Ball alleges
violations of: the Truth in Lending Act (“TILA”); MCL 565.201; the Federal Racketeer
Influenced and Corrupt Organizations Act (“Civil RICO”); and the Real Estate
Settlement Procedures Act (“RESPA”).
Fannie Mae says it is improperly named as a trustee.
Defendants filed a Motion to Dismiss the Complaint in its entirety. The Motion is
GRANTED. In her response, Ball requests leave to file an amended Complaint. Her
request is DENIED; any amendment would be futile.

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II.

Background
The Complaint alleges that on October 26, 2004, Ball executed a promissory

note (“Note”) and granted PHH a mortgage in the amount of $101,872 for property
located at 28666 Blackstone Dr., Lathrup Village, Michigan 48076. Ball says PHH,
formerly known as Cendant Mortgage Corporation, failed to record the mortgage in
Oakland County.
On August 31, 2012, PHH filed an affidavit of lost mortgage, along with a copy of
the mortgage. The affidavit says a search of the records disclosed that Ball’s mortgage
was never recorded and that a copy of the mortgage was found in PHH’s loan file. The
recording of the affidavit along with a copy of the mortgage perfected the lien.
On November 12, 2015, Ball says she learned Defendants failed to include and
disclose certain charges. Ball does not attach a copy to the Complaint or otherwise
identify the document that allegedly contains an error. She says some of the
undisclosed charges were identified on the “settlement statement,” where the amount
financed is different than the sum included in the original Note. Id. Defendants clarify
that Ball is referring to the HUD-1 Settlement Statement (“Settlement Statement”) dated
October 24, 2004 and attach a copy to their Motion.
Ball says Defendants miscalculated the annual percentage rate of the loan but
fails to provide detail. Ball does not explain the significance of the November 12, 2015
date, or describe how she became aware of any alleged errors.
The Complaint alleges PHH failed to establish it was ever in actual possession of
the mortgage and therefore any interest it claims to have in the property is void. Ball
says PHH collected monthly mortgage payments from 2004 until 2012 without any
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consideration and Ball made payments based on the belief that PHH had properly
recorded. She says she sent numerous correspondences to PHH, including requests
for documentation, but PHH never responded. Ball says Defendants collaborated
together and executed a series of frauds and felonious crimes, which appear to arise
from PHH’s delay in recording the mortgage. She claims she has a right to rescind the
loan and asks for damages.
III.

Motion to Dismiss
Defendants filed a Motion to Dismiss under Fed. R. Civ. P. 12(b)(6). Ball

attached only one exhibit to her Complaint; a copy of the affidavit of lost mortgage filed
by PHH and a copy of the mortgage. Defendants attached a copy of the loan
Settlement Statement and the Note as an exhibit to the Motion to Dismiss. Ball
attached several documents to her response including a document titled “release of lien
and full reconveyance” and what purport to be several pieces of correspondence
addressed to PHH. The release of lien and full reconveyance document contains legal
conclusions - it says the mortgage is void based on fraud. It is also stamped by the
Lamar Superior Court in Georgia, a rather strange fact and Ball does not explain.
Defendants also attach a copy of Ball’s July 6, 2016 monthly mortgage statement to
their reply.
If matters outside the pleadings are presented to and not excluded by the Court
on either a motion under Rule 12(b)(6) or 12(c), the motion must be treated as one for
summary judgment under Rule 56. FED. R. CIV. P. 12(d).
The Court concludes that the exhibits attached to the briefs need not be relied
upon to resolve this motion; they are excluded.
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A.

Legal Standard

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of
the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th
Cir. 1996). A court must “construe the complaint in the light most favorable to the
plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the
plaintiff.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). Dismissal is proper
only if it appears beyond doubt that the plaintiff can prove no set of facts in support of
the claims that would entitle him or her to relief.” Zaluski v. United Am. Healthcare
Corp., 527 F.3d 564, 570 (6th Cir. 2008). A complaint must contain sufficient factual
matter to ‘state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
claim is plausible on its face "when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged." Id. (citing Twombly, 550 U.S. at 556).
A complaint "must contain something more ... than ... a statement of facts that
merely creates a suspicion [of] a legally cognizable right of action." Twombly, 550 U.S.
at 555 (citations omitted). Indeed, "a plaintiff's obligation to provide the ‘grounds' of his
‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do." Id.; see also Iqbal, 556 U.S.
at 678 ("Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice."). Moreover, the Court is "not bound to accept as
true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (citation
omitted).
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B.

Discussion
1.

Count 1: TILA against PHH and Fannie Mae is barred by the
Statute of Limitations and Statute of Repose

In Count 1, Ball alleges a violation of TILA, 15 U.S.C. §1601 et seq., Regulation
Z, § 226.18. Ball says Defendants failed to properly include and disclose certain items
in the finance charge resulting in an annual percentage rate that she alleges was
calculated improperly on the wrong amount. Count 1 also alleges PHH failed to
respond to correspondence. Ball says she did not learn about Defendants’ failure to
disclose until November 12, 2015. Ball claims a right to rescind.
"[T]he purpose of TILA [is] to promote the informed use of credit by assuring
meaningful disclosures and protecting against fraud, a purpose that requires TILA to be
considered liberally in favor of the consumer." Patton v. Jeff Wyler Eastgate, Inc., 608
F. Supp. 2d 907, 915 (S.D. Ohio 2007) (citations omitted). Regulation Z provides, in
part, that "[t]he creditor shall make the disclosures required by this subpart clearly and
conspicuously in writing, in a form that the consumer may keep." 12 C.F.R. §
226.17(a)(1); Baker v. Sunny Chevrolet, Inc., 349 F.3d 862, 865-66 (6th Cir. 2003).
TILA claims have a one year statute of limitations. 15 U.S.C. §1640(e).
Although Ball doesn’t address tolling in her response, the Complaint says she first
learned of Defendants’ actions, including failure to disclose and fraud, on November 12,
2015. Ball says any statute of limitations should run from this date.
“Although a motion under Rule 12(b)(6), which considers only the allegations in
the complaint, is generally not an appropriate vehicle for dismissing a claim based upon
the statute of limitations, if the allegations in the complaint affirmatively show that the
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claim is time-barred, dismissing the claim under Rule 12(b)(6) is appropriate.” Cheatom
v. Quicken Loans, 587 F. App'x 276, 279 (6th Cir. 2014) (unpublished).
Since it is unclear whether Ball invokes tolling under the doctrine of equitable
estoppel/fraudulent concealment (“fraudulent concealment”) or the doctrine of equitable
tolling, the Court addresses both. See, Cheatom, 587 F. App'x at 280.
Equitable tolling for TILA claims is available where a defendant has engaged in
fraudulent concealment. Jones v. TransOhio Sav. Ass'n, 747 F.2d 1037, 1043 (6th Cir.
1984). For equitable tolling under the doctrine of fraudulent concealment, Ball must
allege: “(1) defendants concealed the conduct that constitutes the cause of action; (2)
defendants’ concealment prevented plaintiffs from discovering the cause of action within
the limitations period; and (3) until discovery, plaintiffs exercised due diligence in trying
to find out about the cause of action.” Kanouno v. SunTrust Mortgage, Inc., No. 1014724, 2011 WL 5984023, at *9 (E.D. Mich. Nov. 30, 2011) (citations omitted).
Although the Court reads Ball’s pro se Complaint liberally, Ball has not sufficiently
alleged fraudulent concealment. Ball says PHH failed to include and disclose certain
charges. Ball has not alleged PHH took affirmative steps to conceal her cause of
action. In Kanouno, the court held a plaintiffs’ allegation that they were not provided
with notices and disclosures in connection with a mortgage foreclosure was not enough
to support equitable tolling. Id. at *7. To successfully allege fraudulent concealment, a
plaintiff must allege conduct by the defendant “above and beyond the wrongdoing upon
which the plaintiff’s claim is founded, to prevent, by fraud or deception, the plaintiff from
suing in time.” Cheatom v. Quicken Loans, 587 F. App'x 276, 281 (6th Cir. 2014)
(unpublished).
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The doctrine of equitable tolling by fraudulent concealment is distinguishable
from equitable tolling, generally. Id. Equitable tolling applies when there is no allegation
that the defendant acted improperly, and yet the plaintiff remains unaware of her causes
of action despite exercising due diligence. Id.
When generally considering whether to toll a statute of limitations, the Sixth
Circuit has identified five factors: “(1) lack of notice of the filing requirement; (2) lack of
constructive knowledge of the filing requirement; (3) diligence in pursuing one's rights;
(4) absence of prejudice to the defendant; and (5) the plaintiff's reasonableness i[n]
remaining ignorant of the particular legal requirement.” Truitt v. Cty. of Wayne, 148
F.3d 644, 648 (6th Cir. 1998) (citing Andrews v. Orr, 851 F.2d 146, 151 (6th Cir.1988)
(abrogated on other grounds by Patterson v. Lafler, 455 F. App'x 606, 609 n.1 (6th Cir.
2012)); Touqan v. Metro. Life Ins. Co., No. 2:11-CV-10708, 2012 WL 3465493, at *4
(E.D. Mich. Aug. 14, 2012) ("the Sixth Circuit has continued to apply the five-factor test
in non-habeas cases"); Cheatom, 587 Fed. Appx. at 281.
A plaintiff seeking to invoke either doctrine must demonstrate that her ignorance
is not attributable to a lack of diligence on her part. See, Egerer v. Woodland Realty,
Inc., 556 F.3d 415, 425 (6th Cir. 2009) (citing Bridgeport Music, Inc., et al. v. Diamond
Time, Ltd., 371 F.3d 883, 891 (6th Cir.2004)). Ball has not shown she exercised due
diligence. Her reference to tolling in the Complaint is cursory. Additionally, she fails to
address Defendants’ arguments or demonstrate she meets the five-factor test.
In addition to the statute of limitations, TILA claims are subject to a three year
statute of repose. Kanouno v. SunTrust Mortgage, Inc., No. 10-14724, 2011 WL
5984023, at *8. The statute of repose limits the time an individual may rescind and it is
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not subject to tolling. Thielen v. GMAC Mortgage Corp., 671 F. Supp. 2d 947, 955 (E.D.
Mich. 2009).
The Mortgage was signed on October 26, 2004. Ball’s TILA claim and right to
rescind is barred by the statute of limitations and the statute of repose.
Count 1 is DISMISSED
2.

Count 3: Civil RICO against PHH and Fannie Mae

Count 3 of the Complaint alleges violations of RICO arising out of an ongoing
pattern of mortgage fraud by Fannie Mae and PHH. Count 3 references multiple
sections of the RICO statute.
The RICO statute provides, in part:
It shall be unlawful for any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise's
affairs through a pattern of racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c).
To state a RICO violation, Ball must plead the following elements: “(1) conduct
(2) of an enterprise (3) through a pattern (4) of racketeering activity.” Moon v. Harrison
Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006).
Ball’s conclusory allegations fail to identify an enterprise or a pattern of
racketeering activities.
A RICO enterprise “includes any individual, partnership, corporation, association,
or other legal entity, and any union or group of individuals associated in fact although not
a legal entity.” 18 US.C. §1961(4). To establish an "enterprise" under § 1962(c), Ball
must show: "(1) an ongoing organization with some sort of framework or superstructure
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for making and carrying out decisions; (2) that the members of the enterprise functioned
as a continuing unit with established duties; and (3) that the enterprise was separate and
distinct from the pattern of racketeering activity in which it engaged." Ouwinga v.
Benistar 419 Plan Servs., Inc., 694 F.3d 783, 793 (6th Cir. 2012). An “association-infact” enterprise must have at least three structural features: “a purpose, relationships
among those associated with the enterprise, and longevity sufficient to permit these
associates to pursue the enterprise.” Boyle v. United States, 556 U.S. 938, 946 (2009).
Ball claims PHH and Fannie Mae “consummated, collaborated, and executed a
series of frauds, theft, and felonious crimes . . . specifically by failing to perform under
the terms and conditions of the mortgage, including but not limited to recording said
document.” ECF No. 1 at 7.
Ball fails to allege a sufficient relationship between PHH and Fannie Mae to
establish a RICO enterprise. Even assuming they both were involved in the failure to
record the mortgage, there is no allegation of an ongoing organization or pattern of
activity.
In order to establish a pattern of racketeering activity, a plaintiff must allege the
RICO enterprise engaged in “at least two predicate acts of racketeering activity occurring
within a ten-year period.” Moon v. Harrison Piping Supply, 465 F.3d at 723. A “predicate
act” consists of indictable offenses under any of a number of federal statutes, including
the mail and/or wire fraud statutes. Id. In Moon, the plaintiff adequately alleged two
predicate acts, but failed to establish “a pattern of racketeering activity.” Id. To properly
allege a pattern, a plaintiff must satisfy both the relatedness and continuity requirements.
Id. at 724.
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Even assuming the failure to record the mortgage is enough to be a predicate act,
a single isolated event does not show a pattern.
Count 3 also references Sections 1962(a) and (d) but these claims also fail.
Section 1962(a) prohibits “the use or investment” of any income derived from a
pattern of racketeering activity “in the establishment or operation of, any enterprise”
engaged in or affecting interstate commerce. 18 U.S.C. §1962(a). See, Berent v.
Kemper Corp., 780 F. Supp. 431, 446 (E.D. Mich. 1991), aff'd, 973 F.2d 1291 (6th Cir.
1992). To state a claim under Section 1962(a), Ball must allege a separate injury
stemming directly from Defendants’ alleged use or investment of illegally obtained
income in the RICO enterprise. Barent, 780 F.Supp. at 446.
Aside from failing to allege the existence of an enterprise, Ball also does not
allege facts of any injury stemming from the alleged use or investment of racketeering
funds.
To plausibly state a claim under 18 U.S.C. § 1962(d), Ball must successfully
allege all the elements of a RICO violation, as well as “the existence of an illicit
agreement to violate the substantive RICO provision.” Heinrich v. Waiting Angels
Adoption Servs., Inc., 668 F.3d 393, 411 (6th Cir. 2012) (citations omitted).
“An agreement can be shown if the defendant objectively manifested an agreement to
participate directly or indirectly in the affairs of an enterprise through the commission of
two or more predicate crimes.” Id.
Since Ball has not alleged all the elements of a RICO violation, it is not necessary
to discuss the conspiracy claim.
Count 3 is DISMISSED.
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3.

Count 4: RESPA against PHH and Fannie Mae is Barred by the
Statute of Limitations

Count 4 contains several allegations under RESPA: (1) Defendants accepted
charges for real estate services which were not performed; (2) Ball submitted a Qualified
Written Request (“QWR”) which PHH did not acknowledge receipt of within the time
period required by statute: and (3) Defendants failed to comply with requirements for
escrow accounts and assignment. For these failings, Ball claims she has the right to
rescind.
Defendants say Ball’s allegations are barred by the statute of limitations, and,
alternatively, lack merit because the allegations are conclusory and unsupported.
Additionally, Defendants say the allegations regarding the QWR request do not pertain to
Fannie Mae. As to PHH, Ball failed to allege facts that PHH failed to timely respond to a
QWR request or that Ball suffered damages.
A QWR is a written correspondence that:
i) includes, or otherwise enables the servicer to identify, the name and account of
the borrower; and (ii) includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in error or provides sufficient
detail to the servicer regarding other information sought by the borrower.
12 U.S.C. § 2605(e)(1)(B).
Violations of RESPA have either a one or three year statute of limitations
depending on the section. 12 U.S.C. §2614. “Both periods are measured from the
‘occurrence of the violation.’” Golliday v. First Direct Mortgage Co., No. 09-CV-526,
2009 WL 5216141, at *6 (W.D. Mich. Dec. 29, 2009) (citing 12 U.S.C. § 2614).
The Complaint does not provide the dates for any alleged QWR requests or
provide detail regarding what information was requested. As an exhibit to her response,
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Ball attaches several pieces of correspondence addressed to PHH. Even if the Court
considered these documents they do not help Ball; all are dated 2012 or earlier which is
outside the three year statute of limitations period for claims under §2605.
Ball’s other allegation, that PHH accepted charges for real estate services not
performed, is also barred by the statute of limitations. The Complaint does not list any
actions other than the failure to properly record the mortgage. Any action under §2607 is
subject to a one year statute of limitations. 12 U.S.C. §2614.
As stated earlier, equitable tolling is available for TILA claims where a defendant
has engaged in fraudulent concealment. The Sixth Circuit has not ruled on the question
of whether the RESPA statute of limitations is subject to equitable tolling. Egerer v.
Woodland Realty, Inc., 556 F.3d 415, 421 (6th Cir. 2009). However, even assuming that
RESPA is subject to equitable tolling, Ball fails to demonstrate it is appropriate here.
The facts do not warrant the application of either tolling doctrine. Ball has not
alleged defendants took affirmative acts to prevent her from learning about a cause of
action or to prevent her from timely filing suit. Although she says she only learned of
PHH’s alleged failure to disclose on November 12, 2015, she provides no detail. Her
allegations of fraud are legal conclusions without factual support. Ball has not
established that she acted diligently or that she lacked notice of the filing requirement.
Count 4 is DISMISSED.
4.

Count 2: Accounting

This Order dismisses Ball’s federal claims. Count 2 is a state law claim
requesting an accounting of Ball’s loan because she made payments under the

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presumption that PHH had properly recorded. Ball says PHH’s failure to record violates
M.C.L. 565.201.
“[T]his circuit has adopted the position that the district courts have minimal
discretion to decide pendent state law claims on the merits once the basis for federal
jurisdiction is dismissed before trial.” Province v. Cleveland Press Pub. Co., 787 F.2d
1047, 1055 (6th Cir.1986). However, “overwhelming interests in judicial economy” may
allow a district court to properly exercise jurisdiction over state law claims after the
federal claim is dismissed. Id.
The Court finds that its investment of time and judicial resources is not sufficient
to justify retaining jurisdiction over this state law claim.
Count 2 is DISMISSED without prejudice.
IV.

Leave to Amend
In her response, Ball requests leave to amend her Complaint. Ball did not file a

formal motion to amend, nor does she attach a copy of her proposed amendment.
Amendment would be futile. Counts 1 and 4 are barred by the statute of
limitations. Ball’s allegations in Count 3 fail to state a RICO violation. In her response,
Ball disagrees that the Complaint lacks allegations of specific fraudulent activity. But, she
does not provide additional facts sufficient to state a RICO violation or of fraudulent
activity such that equitable tolling is appropriate.
Ball’s request to amend the Complaint is DENIED.
V.

Conclusion
Defendants’ Motion to Dismiss is GRANTED. Counts 1, 3 and 4 are DISMISSED

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with prejudice. Count 2 is DISMISSED without prejudice.
IT IS ORDERED.

S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: September 8, 2016
The undersigned certifies that a copy of this
document was served on the attorneys of
record by electronic means or U.S. Mail on
September 8, 2016.
S/Carol A. Pinegar
Deputy Clerk

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