Tubwell v. Specialized Loan Servicing, LLC et al
ORDER denying 35 Motion to Strike ; granting in part and denying in part 7 Motion to Dismiss. Signed by District Judge Debra M. Brown on 9/22/17. (jtm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
SPECIALIZED LOAN SERVICE LLC (SLS),
Agents and Successors, Loan No. 1012441108;
MORGAN STANLEY MORTGAGE CAPITAL
HOLDINGS LLC, Agents and Successors
Before the Court are Joe Tubwell’s “Motion to Strike Defendant’s Statement of
Amendment of Allegations of Jurisdiction,” Doc. #35; and Morgan Stanley Mortgage Capital
Holdings LLC and Specialized Loan Servicing’s motion to dismiss, Doc. #7.
On December 20, 2016, Joe Tubwell filed a “Verified Complaint” in the Circuit Court of
DeSoto County, Mississippi, against “Specialized Loan Service LLC (SLS), Agents and
Successors, Loan No. 1012441108;” and “Morgan Stanley Mortgage Capital Holdings LLC,
Agents and Successors.” Doc. #2. In his twelve-count complaint, Tubwell alleges that the
defendants collectively own a home refinance loan made to him and Willie L. Chalmer1 and that,
in servicing the loan, the defendants engaged in an array of wrongful conduct, including
wrongfully refusing to accept his payments and “attempt[ing] to foreclose upon the property
without having provided adequate notice or opportunity to the owner and co-borrower.” Id. at ¶¶
13, 17, 23. Tubwell asserts numerous claims, including causes of action brought under the “Fair
Debt Collection Act” and the Truth in Lending Act. Id. at ¶¶ 35, 48. Tubwell seeks (1)
Throughout the complaint, Tubwell uses the surnames “Chalmer” and “Chalmers” interchangeably to refer to this
rescission of the loan; (2) $69,515.00 in damages “which defendants caused plaintiff to loose
[sic] in failing to acknowledge the plaintiff’s status as a co-borrower on the lone [sic] and
thereby prevented refinancing under lesser interest rate which has thereby cause [sic] plaintiff to
fall behind on payments on home;” (3) injunctive relief; (4) “Actual Damages;” (5) punitive
damages; and (6) attorney’s fees, costs, and expenses. Id. at ¶ 54.
On January 20, 2017, the defendants, asserting diversity and federal question jurisdiction,
removed the action to this Court. Doc. #1. Five days later, the defendants filed a motion to
dismiss. Doc. #7.
Tubwell filed a motion to remand on January 26, 2017, arguing the defendants’ removal
was untimely. Doc. #10. On February 1, 2017, Tubwell filed a motion for entry of default. Doc.
#12. The next day, Tubwell filed “Plaintiff’s Supplemental Motion to Remand and Response to
Defendants’ Notice of Removal Filed in United States District Court”—which the Court
construes as a supplement to his remand motion, Doc. #14; and a motion to strike the defendants’
motion to dismiss, Doc. #13. On February 6, 2017, Tubwell filed a motion to extend the
deadline to respond to the defendants’ motion to dismiss, which this Court granted in part on
April 12, 2017. Doc. #17; Doc. # 28.
The defendants responded in opposition to the motion for entry of default on February 7,
2017, Doc. #18; to the motion to remand on February 2, 2017, Doc. #15; to the supplement to the
motion to remand on February 16, 2017, Doc. #21; to the motion to strike on February 16, 2017,
Doc. #20; and to the motion for extension on February 21, 2017, Doc. #23.
On April 12, 2017, the Court denied Tubwell’s motion to remand. Doc. #28. The Court
found that it had federal question jurisdiction over the action but, because the defendants failed
to allege their citizenships, that it lacked diversity jurisdiction. Id. at 4–7. The Court allowed the
defendants fourteen days to file a statement of amendment pursuant to 28 U.S.C. § 1653 to
adequately allege diversity jurisdiction should they wish to re-assert the existence of diversity
jurisdiction. Id. at 10. Based on its finding that the removal notice failed to sufficiently allege
complete diversity, the Court declined to address the subject of amount in controversy but stated
that should the defendants re-assert diversity jurisdiction, the Court would do so then. Id. at 7.
On April 26, 2017, the defendants filed a statement amending their allegations of
diversity jurisdiction, alleging the citizenship of their members and including additional authority
to establish the amount in controversy. Doc. #30. Tubwell moved to strike the statement of
amendment on April 28, 2017, to which the defendants responded on May 3, 2017. Doc. #35;
On April 28, 2017, Tubwell filed a response to the defendants’ motion to dismiss and the
defendants replied on May 8, 2017. Doc. #37; Doc. #39. On June 2, 2017, the defendants filed
an answer and affirmative defenses to Tubwell’s complaint. Doc. #41.
Motion to Strike
Tubwell argues the defendants’ statement amending their allegations of diversity
jurisdiction should be stricken because it (1) “contains citations of case law in violation of L.U.
Civ[.]R. 7(b)(2),” and (2) was untimely filed. Doc. #35 at 1.
In the Court’s April 12, 2017, order, the Court allowed the defendants fourteen days to
file a statement of amendment to adequately allege diversity jurisdiction.
defendants filed their statement fourteen days later on April 26, 2017, the statement was not
Though the Court stated in its April 12 order that it would address the subject of amount in controversy should the
defendants re-assert the existence of diversity jurisdiction, in light of its finding of federal question jurisdiction and
supplemental jurisdiction over the state law claims, there is no need to do so to establish this Court’s authority to
Local Civil Rule 7(b)(2)(B) provides that “a motion may not exceed four pages,
excluding exhibits, may contain only the grounds for the request and may not contain legal
argument or citations to case law or other secondary authority.” The defendants’ statement was
filed pursuant to 28 U.S.C. § 1653, which states that “[d]efective allegations of jurisdiction may
be amended, upon terms, in the trial or appellate courts.” Because the defendants’ statement is
directed to amending their jurisdictional allegations as permitted by the Court, the statement of
amendment is not a motion under the local rules. Tubwell’s motion to strike will be denied.
decide the merits of Tubwell’s claims. The Court nevertheless acknowledges that the defendants’ April 26
submissions establish complete diversity of citizenship and the requisite amount in controversy.
Regarding complete diversity, the citizenship of a limited liability corporation is determined by the citizenship of all
its members. Tewari De-Ox Sys., Inc. v. Mtn. States/Rosen, Ltd. Liab. Corp., 757 F.3d 481, 483 (5th Cir. 2014). The
“citizenship of an unincorporated association must be traced through each layer of the association, however many
there may be.” Deep Marine Tech., Inc. v. Conmaco/Rector, L.P., 515 F.Supp.2d 760, 766 (S.D. Tex. 2007).
Further, “§ 1332(c)(1), which deems a corporation of ‘every State and foreign state’ in which it is incorporated and
the ‘State or foreign state’ where it has its principal place of business, applies to alien corporations.” Vantage
Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014). The defendants submitted an upstream analysis of
their organizational structure, tracing through each layer of association, to properly allege the citizenship of each
member, ultimately establishing that they and Tubwell are citizens of different states.
As to the amount in controversy, in this case where the complaint does not contain a specific damages amount, the
defendants argue (1) Tubwell’s request for declaratory relief to set aside the deed of trust is valued at $76,000; and
(2) Tubwell’s request for unliquidated damages and punitive damages satisfies the threshold requirement. Doc. #30
at ¶¶ 11–12, 14. The “amount in controversy, in an action for declaratory or injunctive relief, is the value of the right
to be protected or the extent of the injury to be prevented.” State Auto Prop. Cas. Co. v. El Shaddai Christian
Ministries, Inc., No. 3:15-cv-122, 2017 WL 1225885, *3 (S.D. Miss. Mar. 29, 2017). “In actions enjoining a lender
from transferring property and preserving an individual’s ownership interest, it is the property itself that is the object
of the litigation; the value of that property represents the amount in controversy.” Farkas v. GMAC Mortg., L.L.C.,
737 F.3d 338, 341 (5th Cir. 2013). To determine the value of the property here, the Court relies on the evidence
most relevant to its value at the time of removal. Davis v. Bank of Am., N.A., No. 4:13-cv-00116, 2014 WL
4145551, at *4 (N.D. Miss. Aug. 19, 2014) (citing Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir.
2000)). Such evidence here is the December 19, 2016, mortgage statement attached to the complaint showing an
outstanding balance of $64,705.49. Because the deed of trust amount on which the defendants rely relates to the
property value nearly ten years from the removal date, the value of the right to be protected for Tubwell’s request for
injunctive relief is $64,705.49.
As to punitive damages, it is well settled that, if Mississippi law permits punitive damages on the particular claims
for which the plaintiff seeks redress, they are included in computing the amount in controversy. St. Paul
Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998). Under Mississippi law, punitive damages
may be awarded where the defendant’s conduct constitutes “intentional wrong, insult, or abuse as well as from such
gross negligence as constitutes an independent tort.” American Funeral Ins. Co. v. Hubbs, 700 So.2d 283, 286
(Miss. 1997). Moreover, punitive damages are available in Mississippi for a negligence action if the plaintiff proves
by clear and convincing evidence “that the defendant against whom punitive damages are sought acted with actual
malice, gross negligence which evidences a willful, wanton or reckless disregard for the safety of others, or
committed actual fraud.” Miss. Code Ann. § 11–1–65(1)(a). Because Tubwell alleges “wrongful, intentional, and
malicious” conduct by the defendants, Doc. #2 at ¶ 54, punitive damages may be justified. Since any punitive award
added to Tubwell’s injunctive relief claims, if proven true, would exceed $75,000, the amount in controversy
threshold is met on the face of Tubwell’s complaint.
Motion to Dismiss for Failure to State a Claim
The defendants move to dismiss on grounds that Tubwell failed to state a claim for each
count pled in his complaint. As a general matter, “[a] pleading that states a claim for relief must
contain … a short and plain statement of the claim showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2). When a complaint falls short of this directive, a defendant may move to
dismiss for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6).
In considering the interplay between Rule 8 and Rule 12, the United States Supreme Court has
To survive a motion to dismiss [for failure to state a claim], a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face. A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. The plausibility standard is not
akin to a probability requirement, but it asks for more than a sheer possibility that
a defendant has acted unlawfully. Where a complaint pleads facts that are merely
consistent with a defendant’s liability, it stops short of the line between possibility
and plausibility of entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and punctuation omitted) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–58 (2007)). Under this standard, a “court must
accept all well-pleaded facts as true and view those facts in the light most favorable to the
plaintiff.” Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 803 n.44 (5th Cir. 2011)
(internal quotation marks and punctuation omitted).
“Count 1 - Gross Negligence”
Tubwell alleges the defendants were grossly negligent in failing to report his loan
payments to credit reporting agencies. Doc. #2 at ¶¶ 26–27. The defendants argue Tubwell’s
gross negligence claim must fail because (1) his claim is preempted by the Fair Credit Reporting
Act (“FCRA”) for failure to allege the defendants reported him delinquent with malice or willful
intent to injure him; (2) his allegations are too vague and conclusory to state a claim; and (3) his
negligence claim should be rejected because his breach of contract claims stem from the same
alleged conduct. Doc. #8 at 5.
“Federal preemption is an affirmative defense that a defendant must plead and prove.”
Fisher v. Halliburton, 667 F.3d 602, 609 (5th Cir. 2012) (citing Met. Life Ins. Co. v. Taylor, 481
U.S. 58, 63 (1987) (other citations omitted)).
“Unless the complaint itself establishes the
applicability of a federal-preemption defense—in which case the issue may properly be the
subject of a Rule 12(b)(6) motion—a defendant should ordinarily raise preemption in a Rule
12(c) motion for judgment on the pleadings or a Rule 56 motion for summary judgment.” Id.
(internal citation omitted).
The FCRA was enacted “to ensure fair and accurate credit reporting, promote efficiency
in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. v. Burr, 551 U.S.
47, 52, (2007). “The FCRA preempts state law ... negligent reporting claims unless the plaintiff
consumer proves ‘malice or willful intent to injure’ him.” Young v. Equifax Credit Info. Servs.,
Inc., 294 F.3d 631, 638 (5th Cir. 2002) (citing 15 U.S.C. § 1681h(e) (emphasis added)); see
Morris v. Equifax Info. Servs., LLC, 457 F.3d 460, 471 (5th Cir. 2006) (referencing “the ‘malice’
exception to preemption under section 1681h(e)”). Therefore, for Tubwell’s gross negligence
claim to survive, he must have pled that the defendants acted with malice or willful intent to
injure him in their failure to report his payments to the credit bureau.
Allegations of malice and willful intent to injure
Because “the FCRA does not define malice,” the Fifth Circuit has “applied the commonlaw standard,” which requires the plaintiff to show that the defendant “published the false
statements about [him] knowing the statements were false or with reckless disregard of whether
they were false.” Morris, 457 F.3d at 471 (citing Cousin v. Trans Union Corp., 246 F.3d 359,
375 (5th Cir. 2001)). Reckless disregard means that “the defendant in fact entertained serious
doubts as to the truth of his publication.” St. Amant v. Thompson, 390 U.S. 727, 731 (1968).
Accordingly, “[n]egligence, lack of investigation, or failure to act as a reasonably prudent person
are insufficient to show actual malice.” Duffy v. Leading Edge Prods., Inc., 44 F.3d 308, 313
(5th Cir. 1995) (citation omitted). Lastly, “[t]he term ‘willful’ in [the FCRA] context has been
interpreted to require that a defendant knowingly and intentionally commit an act in conscious
disregard to the rights of others.” Rivera v. Countrywide Fin. Corp., No. 1:04-cv-103, 2006 WL
2431391, at *4 (S.D. Miss. Aug. 21, 2006) (citation omitted).
Tubwell alleges that the defendants knew he and Chalmer jointly entered into the loan
and that Tubwell made all loan payments but that the defendants “intentionally and negligently
failed to report such actions to the credit bureau which negligence caused plaintiff harm [and]
disqualified him from securing refinancing and a lower interest rate.” Doc. #2 at ¶ 27. In his
plea for damages, Tubwell alleges the defendants’ actions were “wrongful, intentional and
malicious.” Id. at ¶ 54. Based on these allegations, Tubwell has sufficiently alleged specific
facts to support an inference that the defendants acted with malice. Because Tubwell alleges the
defendants knew he made all loan payments, any reporting that Tubwell was not making
payments implies the defendants knew the reporting was false.
Construing the complaint
liberally and taking Tubwell’s allegations as true, Tubwell’s gross negligence claim is
sufficiently pled and not preempted.
Same conduct as breach of contract claims
“[T]he breach of a contract (whether described as ‘negligent’ or not) is not actionable in
tort under an ordinary negligence theory unless breaching the contract also breached a duty of
care recognized by tort law. There must be a duty of care ‘fixed by law and independent of the
contract.’” Clausell v. Bourque, 158 So.3d 384, 391 (Miss. Ct. App. 2015) (en banc) (quoting
Hazell Mach. Co. v. Shahan, 161 So.2d 618, 624 (Miss. 1964)).
A review of Tubwell’s contract claims leads the Court to conclude that his gross
negligence allegations are not founded on his breach of contract claims. Tubwell’s negligence
claim is based on the defendants’ independent duty under the FCRA to accurately report his loan
payments to credit reporting agencies; thus, the defendants’ duty is fixed by law and independent
of any contract. Accordingly, the defendants’ motion to dismiss will be denied as to Tubwell’s
gross negligence claim in Count 1.
B. “Count 2 - Fraud and Misrepresentation”
As grounds for the dismissal of Tubwell’s “fraud and misrepresentation” count, the
defendants argue Tubwell has failed to plead such claims with particularly as required by Federal
Rule of Civil Procedure 9(b). Specifically, the defendants argue Tubwell has not alleged a
misrepresentation by SLS or Morgan Stanley, the individual responsible for the
misrepresentation, and when or where the misrepresentation was made. Doc. #8 at 5–6.
Tubwell does not specify whether Count 2 includes a claim for negligent
misrepresentation or whether his misrepresentation claim is the same as his fraud claim. He
simply “re-asserts” each preceding paragraph of the complaint, adding that the defendants’
actions constitute a misrepresentation. Doc. #2 at ¶ 30. Whether negligent and/or fraudulent
misrepresentation is alleged, Tubwell’s Count 2 claims fail.
The elements of a fraudulent or intentional misrepresentation claim are: “(1) a
representation, (2) its falsity, (3) its materiality, (4) the speaker's knowledge of its falsity or
ignorance of its truth, (5) his intent that it should be acted on by the hearer and in the manner
reasonably contemplated, (6) the hearer’s ignorance of its falsity, (7) his reliance on its truth, (8)
his right to rely thereon, and (9) his consequent and proximate injury.” Poppelreiter v. GMAC
Mortgage, LLC, No. 1:11-cv-008, 2011 WL 2690165, at *4 (N.D. Miss. July 11, 2011) (citation
omitted). Under Rule 9(b) of the Federal Rules of Civil Procedure, “[i]n alleging fraud ..., a
party must state with particularity the circumstances constituting fraud .... Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.” “Rule 9(b)
applies by its plain language to all averments of fraud, whether they are part of a claim of fraud
or not.” Lone Star Ladies Inv. Club v. Scholtzsky’s Inc., 238 F.3d 363, 368 (5th Cir. 2001).
“What constitutes ‘particularity’ will necessarily differ with the facts of each case. At a
minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the
false representations, as well as the identity of the person making the misrepresentation and what
he obtained thereby. Put simply, Rule 9(b) requires ‘the who, what, when, where, and how’ to be
laid out.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003)
(internal punctuation and citations omitted).
In the allegations preceding Count 2, Tubwell alleges that he contacted another mortgage
company to refinance the property and that the defendants incorrectly advised those mortgage
companies that he was not a party to the loan and not qualified to secure refinancing. Doc. #2 at
¶¶15–16. Tubwell alleges these statements resulted in him not being able to secure a loan with a
lower interest rate. Id. at ¶ 16. These allegations are devoid of any facts about the who, when,
where, and how. Accordingly, the defendants’ motion to dismiss Tubwell’s claim for fraud (and
any claimed intentional misrepresentation) will be granted.
The elements of negligent misrepresentation are: “(1) a misrepresentation or omission of
a fact; (2) that the representation or omission is material or significant; (3) that the person/entity
charged with the negligence failed to exercise that degree of diligence and expertise the public is
entitled to expect of such persons/entities; (4) that the plaintiff reasonably relied upon the
misrepresentation or omission; and (5) that the plaintiff suffered damages as a direct and
proximate result of such reasonable reliance.”3 Holland v. Peoples Bank & Trust Co., 3 So.3d
94, 101 (Miss. 2008) (quoting Horace Mann Life Ins. Co. v. Nunaley, 960 So.2d 455, 461 (Miss.
2007)). The Fifth Circuit applies “the heightened pleading requirements [of Rule 9(b)] when the
parties have not urged a separate focus on the negligent misrepresentation claims such as when
fraud and negligent misrepresentation claims are based on the same set of alleged facts.” Lone
Star Fund V (U.S.) LP v. Barclays Bank PLC, 594 F.3d 383, 387 n.3 (5th Cir. 2010) (internal
quotation marks omitted).
Because any claim for negligent misrepresentation by Tubwell would be based on the
same allegations as his Count 2 fraud claim, any negligent misrepresentation claim must also
C. Counts 3, 4, and 8 - Breach of Contract
Counts 3, 4, and 8 of Tubwell’s complaint allege various breach of contract claims. The
defendants argue that Tubwell fails to state a claim for breach of contract because he “does not
attach a copy of the purportedly breached agreement to his Complaint, specify terms that were
violated, or identify which Defendant violated which term.” Doc. #8 at 6. Additionally, the
defendants argue that because Tubwell admits that he has never been recognized as a party to the
“Negligent misrepresentation differs from fraudulent misrepresentation only in that the defendant-speaker need not
know the statement was false if he failed to exercise reasonable care in making the statement.” Crockett v.
Citifinancial, Inc., 192 F.Supp.2d 648, 653 (N.D. Miss. 2002).
loan agreement, Tubwell has not established he is a party to the loan agreement.
To show a breach of contract, a plaintiff has the burden to prove, “by a preponderance of
the evidence: 1. the existence of a valid and binding contract; and 2. that the defendant has
broken, or breached it ….” Bus. Commc’ns, Inc. v. Banks, 90 So.3d 1221, 1224 (Miss. 2012)
(rejecting actual damages as an element of a breach of contract claim).
In the caption of his complaint, Tubwell identifies the loan as “Loan No. 1012441108.”
Doc. #2 at 1. He alleges the loan was entered into to “refinance a home at 8229 Ashbrook
Drive … on January 11, 2005” and was executed by “First Choice Mortgage LLC.” Id. at ¶ 9.
Tubwell further alleges that he was a party to the original loan bought by the defendants; and that
the defendants have inserted requirements for late fees, insurance fees, escrow requirements, and
have failed to provide Tubwell “with credits for note paid over the life of the loa[n].” Id. at ¶¶
13, 17, 21. Based on these allegations, Tubwell has sufficiently pled a breach of contract
claim—the existence of a binding agreement4 breached by the defendants.
D. “Count 5 – Violation of Fair Debt Collection Practices Act”
Tubwell claims the defendants violated the “fair debt collection act.” The defendants
argue that Tubwell failed to state a claim under the Fair Debt Collection Practices Act
(“FDCPA”) because he has not alleged facts to establish each element for a FDCPA claim.
The FDCPA provides, “A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C.A. § 1692e.
“The statute then lists several activities which violate the FDCPA.” Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009); see 15 U.S.C.A. § 1692e(1)-(16). “To state a claim under the FDCPA,
Plaintiff must show (1) that he was the object of collection activity arising from a consumer debt;
Though Tubwell did not attach to his complaint a copy of the contract upon which his breach of contract claims
exist, the defendants have not identified any rule or other authority applicable in this federal court requiring him to
(2) that Defendant is a debt collector as defined by the FDCPA; and (3) that Defendant engaged
in an act or omission prohibited by the FDCPA.” Askew v. Crown Mgmt., LLC, No. 1:16-cv-129,
2017 WL 1534396, at *3 (N.D. Miss. Apr. 27, 2017).
Object of collection activity arising from consumer debt
The defendants argue Tubwell has failed to “allege that he is the object of collection
activity” because the “Defendants are not communicating with him about the subject debt.” Doc.
#8 at 3.
Tubwell has not alleged any facts regarding this claim; instead, he “re-asserts” the
previous paragraphs of the complaint.
As explained above, Tubwell alleges in preceding
paragraphs that the defendants failed to report his payments to the credit bureau, disqualifying
him from refinancing the loan at a lower rate. Even assuming that reporting a debt to a credit
agency can be an activity “in connection with the collection of [a] debt,” Tubwell has not
plausibly alleged that the defendants’ reporting activity in this case was in connection with
collection of a debt. Nor does Tubwell allege that he received a demand letter or any other
communication from the defendants, or any other facts which would suggest the defendants
reported the debt as a means to collect on the debt.5 Accordingly, Tubwell has not plausibly
alleged that the purpose of the defendants’ credit reporting was to induce him to pay his debts.
See Billups v. Retail Merchants Ass’n, Inc., 620 F. App’x 211, 213–14 (5th Cir. 2015) (reporting
of debt to credit agency, without more, insufficient to allege lenders’ activity was in connection
The remaining allegations reasserted with regard to Count 5, which relate to foreclosure
efforts, do not support an inference that the defendants’ actions were efforts to collect a debt.
Attached to the complaint are letters from attorneys which are merely efforts to foreclose on a mortgage and do not
constitute debt collecting under the FDCPA. Fouche’ v. Shapiro & Massey L.L.P., 575 F.Supp.2d 776, 787 (S.D.
Miss. 2008) (correspondence from attorney solely for purpose of foreclosure and not for debt collecting).
Efforts to foreclose on a mortgage do not constitute debt collecting under the FDCPA. Fouche’,
575 F.Supp.2d at 785. Tubwell claims that, in refusing to speak with him or accept his payments
and recognize him as a borrower, the defendants were “engaged in a concerted campaign and
attempt to foreclose upon the property without having provided adequate notice or opportunity to
the owner and co-borrower,” and that the defendants took over the loan for the “sole purpose to
take advantage of plaintiff’s hardship and inability to keep the payments current and to foreclose
upon the property as a means to take the homes of the less fortunate struggling to maintain their
home.” Doc. #2 at ¶¶ 13, 20, 22, 23. Similarly, Tubwell alleges that when he was current on the
loan, the defendants communicated to potential lenders seeking to assist him in refinancing his
home that “Tubwell was not a party to the loan and therefore was not qualified to secure the
refinancing,” in an effort “to prevent plaintiff from obtaining refinancing.” Id. at ¶¶ 15–16.
While the FDCPA prohibits communicating knowingly false information as a means to attempt
to collect a debt, Tubwell has not alleged the defendants’ false statements to lenders were an
attempt to collect a debt but rather an effort to prevent him from paying off the debt so the
lenders can foreclose.
Finally, Tubwell alleges the defendants have altered and manipulated the contract by
inserting requirements for late fees, insurance expense fees, escrow requirements, and additional
interest. Section 1692f prohibits “[t]he collection of any amount (including any interest, fee,
charge, or expense incidental to the principal obligation) unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1); see
Laali v. IndyMac Mortg. Servs., No. 4:12-cv-432, 2013 WL 4456680, at *12 (E.D. Tex. Aug. 16,
2013). The Court can infer from Tubwell’s allegations that the defendants’ attempts to collect
interest and other fees were not authorized under the agreement; however, Tubwell has not
alleged such actions were in connection with collecting on a debt. Tubwell alleges only that the
defendants acted to their “benefit and to disadvantage plaintiff.” Doc. #2 at ¶ 34.
In short, Tubwell has not pled plausible facts to show that he is the object of collection
activity arising from a consumer debt.
The defendants also argue Tubwell has not pled facts to establish the defendants are debt
collectors. Under the FDCPA, a debt collector is defined as “any person … who regularly
collects or attempts to collect … debts owed or due or asserted to be owed or due another.” 15
U.S.C. § 1692a(6).
Tubwell alleges the defendants purchased the home loan from First Choice Mortgage
LLC. Doc. #2 at ¶ 9. Neither a mortgage servicing company nor a lender is considered a “debt
collector” as long as the debt was not in default at the time it was assigned. Kareem v. Am. Home
Mortg. Servicing, Inc., No. 3:10-cv-762, 2011 WL 1869419, at *2 (N.D. Tex. Apr. 12, 2011),
adopted by 2011 WL 1868413 (N.D. Tex. May 13, 2011), aff’d, 479 F. App’x 619 (5th Cir.
2012); Williams v. Countrywide Home Loans, Inc., 504 F.Supp.2d 176, 190 (S.D. Tex.
2007), aff’d, 269 F. App’x 523 (5th Cir. 2008). Tubwell’s complaint does not specify whether he
was in default when the deed of trust was bought by the defendants. Thus, even taking Tubwell’s
allegations as true, the Court cannot infer that the defendants are debt collectors under the
Act or omission prohibited by FDCPA
As stated above, inaccurate reporting and communicating knowingly false credit
In response to the defendant’s arguments on his FDCPA claim, Tubwell states that he “fell behind [on] one
payment upon his loan which resulted in defendants, a collection agency, to seek to purchase the loan as a means to
secure the property and become more financially wealthier…[u]pon having acquired plaintiffs loan as a collection
agency….” Doc. #36 at 2. Had this argument been alleged in the complaint, it would support a claim that the
defendants are debt collectors.
information in connection with the collection of a debt is prohibited by § 1692e. While Tubwell
has alleged several violations of the FDCPA, he, as explained above, has failed to allege the
defendants actions were taken in an effort to collect on a debt.
Due to the deficiencies in Tubwell’s allegations described above, the defendants’ motion
to dismiss will be granted on the FDCPA claim.
E. “Count  - Loan Gouging”7
For his loan gouging claim, Tubwell realleges the preceding paragraphs in his complaint
without alleging additional facts. Doc. #2 at ¶¶ 37–38. The defendants argue this claim is not
recognized by law. The Court agrees that “loan gouging” is not a separately recognized cause of
action. Accordingly, the defendants’ motion to dismiss will be granted as to this claim.
F. “Count 7 - Entitlement to Damages”
The defendants argue Tubwell’s “entitlement to damages” claim is not recognized by law.
Construing Tubwell’s allegations liberally, the Court finds their substance sounds in claims for
breach of the duty of good faith and fair dealing and wrongful foreclosure.
1. Good faith and fair dealing
“Under Mississippi law, every contract contains an implied covenant of good faith and
fair dealing.” Stewart v. GMAC Mortg., LLC, No. 2:10-cv-00149, 2011 WL 1296887, at *5 (S.D.
Miss. Mar. 31, 2011) (quoting Merchants & Planters Bank of Raymond v. Williamson, 691 So.2d
398, 405 (Miss. 1997)) (internal quotation marks omitted). Good faith and fair dealing requires
the “faithfulness of an agreed purpose between two parties, a purpose which is consistent with
the justified expectations of the other party.” Cenac v. Murry, 609 So.2d 1257, 1272 (Miss.
“Bad faith is characterized by some conduct which violates standards of decency,
Tubwell’s complaint refers to loan gouging as Count 10 but chronologically, this count should be Count 6.
Because Tubwell alleges another Count 10 in his complaint, the Court refers to the loan gouging claim as Count 6.
fairness, or reasonableness.” Stewart, 2011 WL 1296887, at *5 (quoting Williamson, 691 So.2d
Numerous Mississippi state and federal courts “have refused to find a breach of the duty
of good faith and fair dealing in ordinary lender/borrower disputes.” Id. at *6; see Mann v. Am.
Federated Life Ins. Co., No. 97-60810, 146 F.3d 868, at *3 (5th Cir. June 2,1998) (lenders’
refusal to accept deed to personal residence in lieu of foreclosure on apartment building was
“reasonable, and not uncommon”) (unpublished opinion); Gen. Motors Acceptance Corp. v.
Baymon, 732 So.2d 262, 269 (Miss. 1999) (lender’s threats to repossess car and decision to
charge insurance to borrower on vehicle was “duly authorized by the contract”); McDaniel v.
Citizens Bank, 937 So.2d 26, 29 (Miss. Ct. App. 2006) (lender’s repossession of vehicle after
borrower failed to make loan payments was “within reasonable business practices”). However, a
lender’s misrepresentations of its intention to foreclose on a property may state a claim for
breach of the duty of good faith and fair dealing. See Stewart, 2011 WL 1296887, at *5–6
(refusing to dismiss claim when lender promised buyer it would review short sale proposals but
instead attempted to foreclose and failed to respond to borrower’s short sale requests).
Tubwell “re-asserts paragraphs 1-38” in which he alleges the defendants refused to
recognize his payments and added additional fees to the mortgage to cause him to get behind on
the payments. Tubwell additionally alleges the defendants interfered with or prevented his
ability to refinance and to pay off the mortgage loan held by them, which allowed them the
opportunity to foreclose on the property. Doc. # 2 at ¶ 40. Construing all inferences in
Tubwell’s favor, if the defendants acquired the mortgage to intentionally mismanage the
payments and thwart Tubwell’s ability to stay current or refinance the loan to guarantee
foreclosure, such could constitute a breach of the duty of good faith and fair dealing. Tubwell
thus has alleged conduct by the defendants lacking faithfulness and fairness beyond that of an
“ordinary” lender/borrower dispute, such that he has stated a claim for breach of the duty of good
faith and fair dealing. See Stewart, 2011 WL 1296887, at *5–6.
2. Wrongful foreclosure
“Mississippi recognizes a claim for wrongful foreclosure where ‘an unlawful foreclosure
is attempted solely from a malicious desire to injure the mortgagor; or … where the foreclosure
is conducted negligently or in bad faith, to his detriment.’” Stewart, 2011 WL 1296887, at *11
(quoting Nat’l Mortg. Co. v. Williams, 357 So.2d 934, 935–36 (Miss. 1978)).
complaint refers to the defendants’ attempt to improperly foreclose on the property only in
conclusory terms. He does not allege any facts to support a plausible conclusion that the alleged
foreclosure attempt was “unlawful, motivated by bad faith, or conducted negligently.” Wentzell
v. JPMorgan Chase Bank, Nat. Ass’n, 627 F. App’x 314, 318 (5th Cir. 2015). Tubwell’s
allegations thus do not support a claim for wrongful foreclosure. Accordingly, Count 7 will be
dismissed to the extent Tubwell asserts a claim for wrongful foreclosure but not to the extent it
asserts a claim for breach of the duty of good faith and fair dealing.
G. “Count 9 - Unlawful Discrimination”
Tubwell’s “unlawful discrimination” claim charges that the defendants discriminated
against him because of “race, poverty, age, income, and the inability to pay on a constant and
instant basis.” Doc. #2 at ¶ 44. The defendants argue Tubwell has failed to state a claim because
he cites no civil rights statute violated by the defendants and has not identified others treated
more favorably on account of race, poverty, or age. Construing Tubwell’s allegations liberally,
their substance sounds in a claim for violation of the Equal Credit Opportunity Act (“ECOA”).
The ECOA, 15 U.S.C. § 1691 et seq., was enacted, in relevant part, to “promote the
availability of credit to all creditworthy applicants without regard to … the fact that all or part of
the applicant’s income derives from a public assistance program.” 12 C.F.R. § 202.1. The
ECOA specifically makes it illegal “for any creditor to discriminate against any applicant, with
respect to any aspect of a credit transaction … because all or part of the applicant’s income
derives from any public assistance program.” 15 U.S.C. § 1691(a)(2). “To state a claim for
relief under the ECOA, the plaintiff must plausibly show that he was discriminated against in
violation of the statute. More specifically, the complaint must plausibly allege that (1) each
plaintiff was an ‘applicant’; (2) the defendant was a ‘creditor’; and (3) the defendant
discriminated against the plaintiff with respect to any aspect of a credit transaction on the basis
of the plaintiff’s membership in a protected class.” Alexander v. AmeriPro Funding, Inc., 848
F.3d 698, 705–06 (5th Cir. 2017) (citing 15 U.S.C. §§ 1691(a), 1691a(b), 1691a(e), 1691e(a)).
“[T]he ECOA does not prohibit discrimination with respect to mortgages purchased on the
secondary market; the Act only applies to originating lenders in the primary market.” Id. at 706.
Tubwell does not allege that he was an “applicant” or that the defendants were
“creditors” with respect to the loans or credit allegedly denied; rather, he alleges the defendants
interfered with his ability to obtain a loan from other creditors. Additionally, Tubwell alleges the
defendants purchased his mortgage on a secondary market, which is distinct from acting as an
originating lender. See id. Accordingly, accepting Tubwell’s allegations as true, the Court
cannot conclude he has pled a plausible claim for discrimination under the ECOA.
defendants’ motion as to Count 9 will be granted.
H. “Count 10 - Negligence in Failing To Maintain Accountability”
In Count 10, Tubwell “re-asserts paragraphs 1–44 as if fully copied herein” and alleges
that the defendant’s “actions constitute negligence in maintaining accountability of the death
records regarding individuals in which [sic] maintain loans with such defendants and that the
defendants should not profit or take advantage of their own shortcomings.” Doc. #2 at ¶¶ 45–46.
In the allegations preceding Count 10, Tubwell alleges the following with regard to the
maintenance of death records:
That on August 20, 2016, Willie L. Chalmers deceased without any estate or last
will being created. Defendants were duly notified of such matter by way of an
agent which defendants sent to the property introducing them self as an
That prior to having deceased, Willie L. Chalmers did execute and file a quit
claim deed with the Office of the Chancery Court Clerk of DeSoto County,
Mississippi quitclaiming all interest in the home at 8229 Ashbrook Drive,
Southaven, Mississippi 38671, to the co-borrower, Joe Tubwell. Such home is
now fully owned by Joe Tubwell. in accordance with law.
That the defendants have refused to recognize and continues to ignore the fact that
Joe Tubwell is a borrower on the loan regarding the loan regarding property
located at 8229 Ashbrook Drive, Southaven, MS 38671.
Where records demonstrates defendants having failed to provide Joe Tubwell with
credits for notes paid over the life of the loa[n] and where deed of trust identifies
both parties as borrowers as Willie Chalmers and Joe Tubwell as the borrowers,
defendants now have no valid deed of trust and, in fact, have only an unsecured
note from a deceased Willie L. Chalmers.
After having been advised of the death of Willie L. Chalmers, per information
provided personally by plaintiff to defendant’s independent banker agent as well
as per phone conversations to the defendants, Defendants have engaged in a
practice to ignore such information and continue to send mail to the property
address which is always addressed to the deceased Willie L. Chalmers.
That the defendants have refused to speak with nor accept any payments from Joe
Tubwell, the co-borrower, and is now engaged in a concerted campaign and
attempt to foreclose upon the property without having provided adequate notice
and opportunity to the owner and co-borrower.
Doc. #2 at ¶¶ 18–23 (paragraph numbering omitted).
The defendants argue Tubwell’s claim in Count 10 is not recognized by law. To prevail
in any type of negligence action, a plaintiff must show “(1) the existence of a duty to conform to
a specific standard for the protection of others against the unreasonable risk of injury; (2) a
breach of that duty; (3) causal relationship between the breach and alleged injury; and (4) injury
or damages.” Laurel Yamaha, Inc. v. Freeman, 956 So.2d 897, 904 (Miss. 2007) (citations and
quotation marks omitted). “Whether a duty exists in a negligence case is a question of law to be
determined by the Court.” Keen v. Miller Envtl. Grp., Inc., 702 F.3d 239, 244 (5th Cir. 2012).
Though unclear, Tubwell appears to allege that his status as a co-borrower, and as the sole
borrower following Chalmer’s death, has been ignored by the defendants due to their failure to
acknowledge records of Chalmer’s death and the quitclaim deed Chalmer provided to Tubwell
before his death, of which the defendants were aware.
Generally, “the breach of a contract (whether described as ‘negligent’ or not) is not
actionable in tort under an ordinary negligence theory unless breaching the contract also
breached a duty of care recognized by tort law. There must be a duty of care ‘fixed by law and
independent of the contract.’” Clausell v. Bourque, 158 So.3d 384, 391 (Miss. Ct. App. 2015)
(en banc) (quoting Hazell Mach. Co. v. Shahan, 161 So.2d 618, 623 (1964)). Under Mississippi
law, “[a] contract creates a reasonable duty of care in fulfilling one’s contractual obligations.”
River Prod. Co., Inc. v. Baker Hughes Prod. Tools, Inc., 98 F.3d 857, 859 (5th Cir. 1996) (citing
McKinnon v. Batte, 485 So.2d 295, 298 (Miss. 1986)). And, under Mississippi law, mortgagees
and mortgagors “are in a relationship of trust, and [a] mortgagee should not be allowed to abuse
that relationship ….” First Am. Nat. Bank of Iuka v. Mitchell, 359 So.2d 1376, 1380 (Miss.
1978), overruled on other grounds by C & C Trucking Co. v. Smith, 612 So.2d 1092 (Miss.
1992). Mortgagees “at least” owe their mortgagors a “duty of fairness.” Id. Thus, a lender has a
tort duty to apply due care in performing its obligations under a loan contract. See Montgomery
v. CitiMortgage, Inc., 955 F.Supp.2d 640, 650 (S.D. Miss. 2013) (“Given the nature of the
parties’ relationship, the Court finds that CitiMortgage owed the Plaintiffs a legally enforceable
duty, which encompassed the obligation to apply their mortgage payments to the loan in
accordance with the terms of the Deed of Trust.”).
Viewing the complaint in the light most favorable to Tubwell, the Court finds, though a
close call, that Tubwell has alleged a plausible, although rambling, negligence claim that the
defendants had a duty to keep accurate records of mortgagors and that the defendants breached
this duty. The defendants’ motion to dismiss will be denied as to Count 10.
Counts 11 and 12 - TILA Claims
Tubwell brings Counts 11 and 12 under the Truth in Lending Act (“TILA”). In Count 11,
he seeks “to enforce [his] right to rescind a consumer transaction, to void the claimed security
interest in plaintiff’s home by the defendants, and to recover statutory damages, reasonable
attorney fees and costs by reason of defendants violation of the TILA and Regulation Z ….”
Doc. #2 at ¶ 48. In Count 12, Tubwell alleges that the defendants, “on the date in which they
entered into loan, failed to comply with making sure [he] met the minimum standard for
residential loans as it relates to the ability to repay in violation of 15 USCS 1693(a).” Id. at ¶ 50.
He further claims the defendants “breached their duty as fiduciaries and acted in their own selfinterest to attempt to take the property of the plaintiff by increasing the loan with in-applicable
fees and costs to increase the sum which would bring the loan current so as to create grounds to
foreclose or threaten foreclosure.” Id. at ¶ 52. The defendants argue Tubwell’s TILA claims fail
because Tubwell has not identified any required disclosure the defendants failed to make, and his
demand for rescission is time-barred.
TILA “has the broad purpose of promoting ‘the informed use of credit’ by assuring
‘meaningful disclosure of credit terms’ to consumers.” Ford Motor Credit Co. v. Milhollin, 444
U.S. 555, 559–60, (1980) (citing 15 U.S.C. § 1601). “The statute requires creditors to disclose
the terms and conditions of the loan to borrowers, including the amount financed, the finance
charges, the number of payments scheduled to repay the loan, and the borrower’s right to rescind
the loan.” Maxwell v. Chase Home Fin. LLC, No. H-09-4038, 2011 WL 181345, at *3 (S.D. Tex.
Jan. 19, 2011) (citing 15 U.S.C. §§ 1635(a), 1638(a)).
In certain consumer credit transactions, TILA requires disclosure of the consumer's right
to rescind up to three business days following consummation of the transaction, delivery of a
notice of right to rescind, or delivery of all material disclosures, whichever occurs last. 15
U.S.C. § 1635(a); 12 C.F.R. §§ 226.23(a)(3), (b). If notice of the right to rescind and certain
material disclosures are not timely made, the right to rescind expires three years after
consummation of the transaction. 15 U.S.C. § 1635(f); 12 C.F.R. §§ 226.23(a)(3).
violations are otherwise subject to a one-year statute of limitations. 15 U.S.C. § 1640(e). If an
obligor exercises his right to rescind, the security interest given by the obligor is void, and the
creditor must return any money or property given as earnest money or downpayment and take
any necessary action to reflect the termination of the security interest. 15 U.S.C. § 1635(b).
Once the creditor performs its obligations, the obligor is required to tender the property to the
creditor, or tender its reasonable value. Id.
Generally, there is no right of rescission with respect to “residential mortgage
transactions.” 15 U.S.C. § 1635(e)(1); 12 C.F.R. § 226.23(f)(1); see Perkins v. Central Mortg.
Co., 422 F.Supp.2d 487, 489 (E.D. Pa. 2006). A “residential mortgage transaction means a
transaction in which a mortgage ... is created or retained against the consumer’s dwelling to
finance the acquisition or initial construction of such dwelling.” 15 U.S.C. § 1602(w).
Similarly, there is no right to rescind with respect to a “refinancing” by the same creditor. 15
U.S.C. § 1635(e)(2); 12 C.F.R. § 226.23(f)(2).
“A right to rescind may be available with respect to a refinancing of a residential
mortgage by a different creditor or with respect to a variable-rate adjustment to a residential
mortgage.” Castrillo v. Am. Home Mortg. Servicing, Inc., 670 F.Supp.2d 516, 527 (E.D. La.
2009) (citing 12 C.F.R. § 226.23(f)(2)). For a refinancing with a different creditor to give rise to
a right of rescission, however, the existing obligation must be “satisfied and replaced by a new
obligation.” 12 C.F.R. § 226.20(a). “The new obligation must completely replace the prior one.”
Castrillo, 670 F.Supp.2d at 527. “Thus, mere changes to the terms of an existing obligation do
not give rise to a right of rescission unless accomplished by the cancellation of that obligation
and the substitution of a new obligation.” Id. at 527–28; see Sheppard v. GMAC Mortg.
Corp., 299 B.R. 753, 762 (E.D. Pa. 2003) (collecting authorities that mere loan modification
does not constitute refinancing). “The addition of a variable rate feature to an existing obligation
may constitute a new transaction giving rise to a new right of rescission.” Castrillo, 670
F.Supp.2d at 528.
In this case, Tubwell and Chalmer refinanced a loan with First Choice Mortgage LLC on
January 11, 2005. Doc. #2 at ¶ 9. As a preliminary matter, the Court finds that Tubwell failed to
timely rescind his January 2005 mortgage. See 15 U.S.C. § 1635(f) (requiring exercise of
rescission within three years).
Tubwell does not allege that his loan with the defendants is subject to TILA’s rescission
provisions. While he alleges that during the course of repayment of the loan, “the loan was
purchased by the defendants,” Doc. #2 at ¶ 13, he has not alleged that the loan with the
defendants “satisfies” and “completely replaces” the 2005 mortgage. Thus, as alleged, the
defendants’ purchasing of the loan is a mere modification of an existing debt and not a
“refinancing” by a different creditor. It therefore does not give rise to disclosure requirements or
rescission rights under TILA. Accordingly, the defendants’ motion to dismiss Tubwell’s Count
11 TILA rescission claims will be granted.
“15 USCA 1693(a)”
15 U.S.C. §1693(a) contains definitions to be used under “Subchapter VI. Electronic
Funds Transfers.” Accordingly, no cause of action exists under §1693(a). Moreover, Tubwell’s
allegations in Count 12 are irrelevant to conduct regulated by TILA.
defendants’ motion to dismiss will be granted as to Count 12.
Summary and Leave to Amend
In sum, Tubwell’s claims for “fraud and misrepresentation” in Count 2, violation of
FDCPA in Count 5, loan gouging in Count 6, unlawful discrimination in Count 9, and TILA
violations in Counts 11 and 12, will be dismissed for failure to state a claim.
“entitlement to damages” claim in Count 7 will also be dismissed in part to the extent it asserts a
claim for wrongful foreclosure. Tubwell’s claims for gross negligence in Count 1; breach of
contract in Counts 3, 4, and 8; negligence in Count 10; and “entitlement to damages” in Count 7,
to the extent it asserts a claim for breach of good faith and fair dealing, will be allowed to
Tubwell seeks leave to amend any of his claims that are subject to dismissal. Doc. #36 at
5. When a court finds that a motion to dismiss should be granted on the basis of a failure to
comply with Rule 8, it is generally appropriate to provide the plaintiff an opportunity to remedy
the pleading deficiencies through the filing of an amended complaint. See Gordon v. Green, 602
F.2d 743, 745 (5th Cir. 1979) (“We think the Trial Court should have dismissed the complaints
with leave to amend.”); see also Atascocita Realty Inc. v. Western Heritage Ins. Co., No. H–10–
4519, 2012 WL 423395, at *1 (S.D. Tex. Feb. 8, 2012) (“The Court grants Plaintiff leave
to amend its original petition so as to comply with the standards of Rules 8 and 9(b).”). The
Court concludes that such relief is warranted here such that the claims to be dismissed will be
dismissed without prejudice.
For the reasons above:
Tubwell’s motion to strike  is DENIED.
The defendants’ motion to dismiss  is GRANTED in Part and DENIED in
Part. Counts 2, 5, 6, 9, 11, and 12, and Count 7, to the extent it asserts a claim for wrongful
foreclosure, are DISMISSED without prejudice. The motion is denied as to Counts 1, 3, 4, 8,
and 10, and to the extent Count 7 asserts a claim for breach of good faith and fair dealing.
Tubwell may file an amended complaint within fourteen (14) days from the filing
of this order.
SO ORDERED, this 22nd day of September, 2017.
/s/Debra M. Brown
UNITED STATES DISTRICT JUDGE
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