Gould v. Citi Mortgage, Inc. et al

Filing 49

MEMORANDUM OPINION AND ORDER. 1. Magistrate Judge Janie S. Mayeron's December 29, 2011 Report and Recommendation (Doc. No. 45 ) is ADOPTED in its entirety. 2. Plaintiff's Motion to Amend the Pleadings (Doc. No. 18 ) is GRANTED IN PART and DENIED IN PART as follows: a. Plaintiff's Motion for Leave to Amend as to the following Counts in the Proposed Amended Complaint against Defendants First Rate Financial, Inc. and Closers Finalis, Inc. is GRANTED: as to Counts One, Two, Three, F our, Five (as to First Rate), Six, Seven (as to First Rate), Eight, Nine, Eleven, Twelve (as to First Rate), Fourteen (as to First Rate), Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, Twenty-One, and Twenty-Two. b. Plaintiffs Motion for Leave to Amend as it relates to withdrawing his Violation of the Truth in Lending Act and Real Estate Settlement Procedures Act, Unfair Businesses Practice, and Predatory Lending claims (Counts Four, Five, Eight, and Ten) as set forth in the original Complain t as to all Defendants is GRANTED. c. Plaintiff's Motion for Leave to Amend as it relates to the proposed remaining amended claims against Defendants Citi Mortgage, MERS, and PennyMac is DENIED. 3. The Motion to Dismiss brought by Defendants MER S and PennyMac (Doc. No. 2 ), is GRANTED IN PART and DENIED IN PART as follows: a. The motion as it relates to Counts Four, Five, Eight, and Ten is DENIED AS MOOT. b. The motion as it relates to Counts One, Two, Three, Six, Seven, Nine, Eleven, and Twelve is GRANTED and those Counts are DISMISSED WITH PREJUDICE. 4. Defendant Citi Mortgage, Inc.'s Motion to Dismiss (Doc. No. 5 ), is GRANTED IN PART and DENIED IN PART as follows: a. The motion as it relates to Counts Four, Five, Eight, and Ten is DENIED AS MOOT. b. The motion as it relates to Counts One, Two, Three, Six, Seven, Nine, Eleven, and Twelve is GRANTED and those Counts are DISMISSED WITH PREJUDICE. 5. Plaintiff's Complaint (Doc. No. 1 ) is DISMISSED WITH PREJUDICE as it is asserted against Defendants MERS, PennyMac, and Citi Mortgage. 6. Plaintiffs claims in his Proposed Amended Complaint against Defendants First Rate Financial and Closers Finlis are remanded to state court.(Written Opinion). Signed by Judge Donovan W. Frank on 3/26/2012. (BJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Charles Gould,

Civil No. 11-1982 (DWF/JSM)
Plaintiff,

v.

MEMORANDUM
OPINION AND ORDER

Citi Mortgage, Inc., a corporation; Closers
Finalis, Inc.; First Rate Financial, Inc., a
corporation; Mortgage Electronic Registration
Systems, Inc., a corporation; and PennyMacLoan
Services, LLC, a limited liability company,
Defendants.
________________________________________________________________________
Christopher M. Daniels, Esq., David J. Wymore, Esq., and Jesse H. Kibort, Esq., Daniels
& Wymore, PLLC, counsel for Plaintiff.
Kevin T. Dobie, Esq., Matthew H. Jones, Esq., and Paul A. Weingarden, Esq., Usset,
Weingarden & Liebo PLLP, counsel for Defendant Citi Mortgage, Inc.
Benjamin E. Gurstelle, Esq., and Mark G. Shroeder, Esq., Briggs & Morgan, PA, counsel
for Defendants Mortgage Electronic Registration Systems, Inc. and PennyMacLoan
Services, LLC.
________________________________________________________________________

INTRODUCTION
This matter is before the Court on a Motion to Dismiss brought by Defendants
Mortgage Electronic Registration Systems, Inc. (“MERS”) and PennyMacLoan
Services, LLC (“PennyMac”) (Doc. No. 2), a Motion to Dismiss brought by Defendant
Citi Mortgage, Inc. (“Citi Mortgage”) (Doc. No. 5), a Motion to Amend the Pleadings

brought by Plaintiff Charles Gould (Doc. No. 18), and on Plaintiff’s objections (Doc.
No. 46) to Magistrate Judge Janie S. Mayeron’s December 29, 2011 Report and
Recommendation (Doc. No. 45). For the reasons stated below, the Court grants the
motions to dismiss and adopts the Report and Recommendation.
BACKGROUND
The facts of this case are fully and completely set forth in Magistrate Judge
Janie S. Mayeron’s December 29, 2011 Report and Recommendation. (Doc. No. 45.)
For purposes of the pending motions, the Court sets forth the following procedural
history. Defendants removed this action to federal court on July 20, 2011, based on
Plaintiff’s federal claims alleging violations of the Truth in Lending Act (“TILA”) and
Real Estate Settlement Procedures Act (“RESPA”). (Doc. No. 1, Exs. 1–9.) On
July 27, 2011, Defendants Citi Mortgage, MERS, and PennyMac filed motions to dismiss
the Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief may be granted. (Doc. Nos. 2, 5.) The hearing on these motions was
held before the undersigned. (Doc. No. 35.) Prior to the hearing, Plaintiff filed a Motion
for Leave to Amend the Complaint. (Doc. No. 18.) As part of the Proposed Amended
Complaint, Plaintiff withdrew four causes of action, including his federal TILA and
RESPA claims, and proposed the addition of several new state-law claims. (Doc. No.
18.)
On November 2, 2011, with Citi Mortgage’s consent, Defendants PennyMac and
MERS filed an Amended Notice of Removal alleging diversity of citizenship, in addition

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to federal question and supplemental jurisdiction. (Doc. No. 32.) 1 Defendants argued
that on information and belief, First Rate Financial, Inc. (“First Rate Financial”) and
Closers Finalis, Inc. (“Closers Finalis”), both Minnesota corporations, were fraudulently
joined, as they had not been served, no claims had been asserted against them, and First
Rate Financial was in the process of dissolution. (Id. ¶¶ 7–10.) After a hearing before
Magistrate Judge Mayeron on Plaintiff’s Motion to Amend the Complaint, Magistrate
Judge Mayeron requested that the parties file additional briefing on the issue of whether
diversity of citizenship could be raised at that point in the proceedings, when it had not
been raised at the initial time of removal by Defendants. (Doc. Nos. 30, 31, 33.)
Plaintiff asserted the following claims in his original Complaint: (1) Declaratory
Relief; (2) Injunctive Relief; (3) Breach of Contract and Breach of Implied Covenant of
Good Faith and Fair Dealing; (4) Violation of TILA; (5) RESPA; (6) Rescission;
(7) Fraud; (8) Unfair Business Practices; (9) Breach of Fiduciary Duty; (10) Predatory
Lending; (11) Civil Conspiracy; and (12) Unjust Enrichment. (Doc. No. 1, Compl.) As
fully set forth in the Report and Recommendation, in his Proposed Amended Complaint,
Plaintiff sought to withdraw his federal TILA and RESPA claims (Counts Four and Five),
the state-law unfair business practices and predatory lending claims (Counts Eight and
Ten), and sought to modify his claims seeking declaratory and injunctive relief (Counts
One and Two), as well as his claims of breach of implied covenant of good faith and fair
dealing and breach of fiduciary duty (Counts Three and Nine).
1

Diversity jurisdiction was not raised when Defendants initially removed this action
to federal court.
3

In his Proposed Amended Complaint, Plaintiff seeks to allege the following
state-law claims: (1) Declaratory Relief; (2) Injunctive Relief; (3) Breach of Contract;
(4) Breach of Implied Covenant of Good Faith and Fair Dealing; (5 and 6) Violation of
Minn. Stat. § 58.13; (7) Violation of Minn. Stat. § 58.04; (8) Breach of Contract—
Improper Transfer of Mortgage Loan into Pool and/or Trust; (9 and 10) Violation of
Minn. Stat. § 580, et seq.; (11) Rescission; (12 and 13) Fraud-Intentional
Misrepresentation; (14) Breach of Fiduciary Duty; (15) Negligent Misrepresentation;
(16) Constructive Misrepresentation; (17) Civil Conspiracy; (18) Unjust Enrichment;
(19) Quiet Title; (20) Slander of Title; (21) Qui Tam Against; and (22) Promissory
Estoppel.
On December 29, 2011, Magistrate Judge Mayeron issued a Report and
Recommendation recommending that Plaintiff’s motion for leave to amend the
Complaint be granted in part and denied in part. (Doc. No. 45.) As a threshold matter,
the Magistrate Judge concluded that the Court had the requisite authority to address the
viability of Plaintiff’s state-law claims, explaining that there was federal question
jurisdiction at the time the Court heard the motion to amend, and that that even if there
were no federal question jurisdiction, PennyMac, MERS and Citi Mortgage had timely
raised diversity of citizenship as a basis for the case being in federal court. (Doc. No. 45
at 13.) Specifically with respect to the motion to amend, Magistrate Judge Mayeron
recommended that: Plaintiff’s motion be granted as it relates to withdrawing Plaintiff’s
TILA, RESPA, Unfair Business Practice, and Predatory Lending claims (Counts Four,
Five, Eight, and Ten of the original Complaint); and that it be granted insofar as Plaintiff
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seeks to amend claims asserted against First Rate Financial and Closer Finalis on the
grounds that he has the right to do so as a matter of course under Fed. R. Civ. P.
15(a)(1)(A). Magistrate Judge Mayeron also recommended that Plaintiff’s motion be
denied as it relates to the remaining proposed amended claims against Citi Mortgage,
MERS, and PennyMac based on the conclusion that all remaining proposed claims
against these defendants are futile or fail to state a viable claim. 2
Plaintiff has objected to the Report and Recommendation. (Doc. No. 46.) Citi
Mortgage and PennyMac responded to Plaintiff’s objections, both urging the Court to
adopt the Report and Recommendation. (Doc. Nos. 47 & 48.)
DISCUSSION
I.

Report and Recommendation
The Court has conducted a de novo review of the record, including a review of the

arguments and submissions of counsel, pursuant to 28 U.S.C. § 636(b)(1) and Local Rule
72.2(b). 3 Based on its de novo review, the Court adopts Magistrate Judge Mayeron’s
Report and Recommendation in its entirety, including the recommendation that the Court
has the requisite authority to address the viability of Plaintiff’s state-law claims.

2

These claims include breach of contract, promissory estoppel, breach of implied
covenant of good faith and fair dealing, quiet title claims, fraud and misrepresentation
claim, breach of fiduciary duty, civil conspiracy, and claims for injunctive and
declaratory relief.
3

Plaintiff’s Motion for Leave to Amend is dispositive in nature. Thus the Court
applies the de novo standard of review.
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II.

Motions to Dismiss
The Court turns to the motions to dismiss brought by PennyMac and MERS (Doc.

No. 2) and Citi Mortgage (Doc. No. 5) on the state-law claims that were asserted against
them in the original Complaint and remain before the Court for consideration after the
adoption of the Report and Recommendation. These include Plaintiff’s claims for
declaratory relief, injunctive relief, breach of contract and covenant of good faith and fair
dealing, rescission, fraud, breach of fiduciary duty, civil conspiracy, and unjust
enrichment.
In the Report and Recommendation, the Magistrate Judge considered the viability
of Plaintiff’s proposed amended claims for breach of contract, breach of implied
covenant of good faith and fair dealing, fraud, breach of fiduciary duty, civil conspiracy,
and declaratory and injunctive relief. The allegations in Plaintiff’s original Complaint
supporting these causes of action are encompassed by the allegations made in Plaintiff’s
Proposed Amended Complaint. The Magistrate Judge found, and the Court agrees, that
the allegations in support of these claims in the Proposed Amended Complaint fail to
state a claim for relief or are futile. For the reasons stated in the Magistrate Judge’s
Report and Recommendation, Plaintiff’s claims for declaratory relief, injunctive relief,
breach of contract and covenant of good faith and fair dealing, fraud, breach of fiduciary
duty, and civil conspiracy, as asserted in the original Complaint, similarly fail.
Accordingly, counts One, Two, Three, Seven, Nine and Eleven of the original Complaint
are dismissed.

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In Count Six of the original Complaint, Plaintiff alleges a claim for rescission.
Plaintiff claims that he is entitled to rescind the loan based on TILA and RESPA
violations, fraudulent concealment, deceptive acts and practices, public policy grounds,
and breach of contract. Because this case no longer involves a claim under TILA or
RESPA, any rescission claim based on TILA or RESPA grounds fails. Moreover,
Plaintiff has not sufficiently alleged any other basis to support a rescission claim.
Accordingly, Count Six is properly dismissed.
Finally, in Count Twelve, Plaintiff alleges a claim for unjust enrichment. In
support, Plaintiff alleges that “Defendant[s] received a benefit of money, of ownership
and of claim to equity as a result of a predatory lending scheme wherein [Plainitff] was
charged excessive fees, including the yield spread premium, in connection with the
origination of the loan.” (Compl. ¶ 88.) Plaintiff also alleges that he “entered into a trial
plan for modification of the loan” . . . and that “Defendants accepted multiple modified
payments” but “ended up rejecting the loan modification for the purpose of taking the
property via foreclosure.” (Id. ¶ 90.) To prevail on an unjust enrichment claim, Plaintiff
must show that a Defendant “knowingly received something of value, not being entitled
to the benefit, and under circumstances that would make it unjust to permit its retention.”
Southtown Plumbing, Inc. v. Har-Ned Lumber Co., 493 N.W.2d 137, 140 (Minn. Ct. App.
1992). Here, Plaintiff has alleged no facts that would show that he conferred a benefit
upon Citi Mortgage, MERS, or PennyMac to which they were not entitled. Thus, this
claim fails as a matter of law.

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III.

Claims Against First Rate Financial and Closers Finalis
The Court acknowledges that there are no federal claims remaining as part of the

Proposed Amended Complaint. In addition, Plaintiff is a Minnesota resident and both
remaining Defendants, First Rate Financial and Closers Finalis, are Minnesota
corporations. (Verified Am. Compl. ¶¶ 1, 3, 4.) Thus, there is no diversity jurisdiction
here and the Court otherwise declines to exercise supplemental jurisdiction over
Plaintiff’s claims against First Rate Financial and Closers Finalis. Accordingly, those
claims are remanded to state court.
ORDER
Based on the records, files, and proceedings herein, IT IS HEREBY ORDERED
that:
1.

Magistrate Judge Janie S. Mayeron’s December 29, 2011 Report and

Recommendation (Doc. No. [45]) is ADOPTED in its entirety.
2.

Plaintiff’s Motion to Amend the Pleadings (Doc. No. [18]) is GRANTED

IN PART and DENIED IN PART as follows:
a.

Plaintiff’s Motion for Leave to Amend as to the following

Counts in the Proposed Amended Complaint against Defendants First Rate
Financial, Inc. and Closers Finalis, Inc. is GRANTED: as to Counts One,
Two, Three, Four, Five (as to First Rate), Six, Seven (as to First Rate),
Eight, Nine, Eleven, Twelve (as to First Rate), Fourteen (as to First Rate),
Fifteen, Sixteen, Seventeen, Eighteen, Nineteen, Twenty-One, and
Twenty-Two.
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b.

Plaintiff’s Motion for Leave to Amend as it relates to

withdrawing his Violation of the Truth in Lending Act and Real Estate
Settlement Procedures Act, Unfair Businesses Practice, and Predatory
Lending claims (Counts Four, Five, Eight, and Ten) as set forth in the
original Complaint as to all Defendants is GRANTED.
c.

Plaintiff’s Motion for Leave to Amend as it relates to the

proposed remaining amended claims against Defendants Citi Mortgage,
MERS, and PennyMac is DENIED.
3.

The Motion to Dismiss brought by Defendants MERS and PennyMac (Doc.

No. [2]), is GRANTED IN PART and DENIED IN PART as follows:
a.

The motion as it relates to Counts Four, Five, Eight, and Ten is

DENIED AS MOOT.
b.

The motion as it relates to Counts One, Two, Three, Six, Seven,

Nine, Eleven, and Twelve is GRANTED and those Counts are DISMISSED
WITH PREJUDICE.
4.

Defendant Citi Mortgage, Inc.’s Motion to Dismiss (Doc. No. [5]), is

GRANTED IN PART and DENIED IN PART as follows:
a.

The motion as it relates to Counts Four, Five, Eight, and Ten is

DENIED AS MOOT.
b.

The motion as it relates to Counts One, Two, Three, Six, Seven,

Nine, Eleven, and Twelve is GRANTED and those Counts are DISMISSED
WITH PREJUDICE.
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5.

Plaintiff’s Complaint (Doc. No. [1]) is DISMISSED WITH PREJUDICE

as it is asserted against Defendants MERS, PennyMac, and Citi Mortgage.
6.

Plaintiff’s claims in his Proposed Amended Complaint against Defendants

First Rate Financial and Closers Finalis are remanded to state court.
LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: March 26, 2012

s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge

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