Greene et al v. Indymac Bank, FSB et al
Filing
30
ORDER granting 21 Motion to Dismiss for the reasons set out in the order. Signed by District Judge Daniel P. Jordan III on November 6, 2012. (SP)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
MICHAEL and AMANDA GREENE
PLAINTIFFS
v.
CIVIL ACTION NO. 3:12cv347-DPJ-FKB
INDYMAC BANK, FSB, et al.
DEFENDANTS
ORDER
This pro se diversity case is before the Court on the Rule 12(b)(6) Motion of Defendants
Deutsche Bank National Trust Company, Mortgage Electronic Registration System (“MERS”),
and Residential Asset Securitization Trust, Series 2007-A5, Pass-Through Series 2007-E
(collectively “Defendants”) [21].1 In their Amended Complaint, Plaintiffs seek a declaration that
none of the Defendants have any security interest in their home because the purported transfers of
their note were illegal under Mississippi law. In effect, they ask the Court to award them free
and clear title to their home, despite never alleging that they have paid the $630,000 debt.
Because “such windfalls are the province of the sweepstakes, not of the federal courts,”
Defendants’ Motion to Dismiss will be granted. Wiggington v. Bank of N.Y. Mellon, No. 1210136, 2012 WL 4053793, at *3 (5th Cir. Sept. 14, 2012).
I.
Factual Allegations and Procedural History
On March 1, 2007, Plaintiffs Michael and Amanda Greene borrowed $630,000 to
purchase a home in Madison, Mississippi. They executed a fixed rate note to repay the funds to
Home Loan Center, Inc., and a deed of trust in favor of Home Loan Center securing the note.
The note explains that it may be transferred: “I understand that the Lender may transfer this Note.
1
Indymac MBS, Inc. filed a motion to dismiss on October 29, 2012. On October 30,
2012, the FDIC, as Receiver for Indymac Bank, FSB, filed a letter with the Court asserting that
the Court lacks jurisdiction over the FDIC as Receiver for Indymac Bank, FSB, in this matter.
The Lender or anyone who takes this Note by transfer and who is entitled to receive payments
under this Note is called the ‘Note Holder.’” Mot. to Dismiss [21] Ex. A, Note at 1. The back
side of the final page of the note contains two endorsements: Home Loan Center endorsed the
note “Pay to the Order of Indymac Bank, FSB,” and Indymac Bank endorsed the note in blank.
Id. at 4. The deed of trust named MERS as the beneficiary “as a nominee for Lender and
Lender’s successors and assigns” and explained that “[t]he Note or a partial interest in the Note
(together with this Security Instrument) can be sold one or more times without prior notice to
Borrower.” Mot. to Dismiss [21] Ex. B, Deed of Trust at 1, 10.
Plaintiffs allege that the note was sold several times, including to defendants Deutsche
Bank and Residential Asset Securitization Trust, but that the deed of trust was not effectively
transferred or assigned to any other party. As a result, Plaintiffs claim, “the security interest in
Plaintiffs’ property known as the Deed of Trust and or [sic] mortgage was terminated . . . .”
Amended Compl. [4] ¶ 21. Based on this assertion, Plaintiffs raise four counts in their May 22,
2012 Amended Complaint: wrongful foreclosure, fraud, quiet title, and declaratory relief.
Defendants moved for dismissal under Rule 12(b)(6), Plaintiffs responded in opposition, and
Defendants filed a rebuttal.2
2
As Defendants note, Plaintiffs’ response was filed nine days late. Defs.’ Rebuttal [26] at
1 n.1; see L.U. Civ. R. 7(b)(4) (providing that responses must be filed within fourteen days after
service of a motion); Fed. R. Civ. P. 6(d) (providing that three days are added after the period
would otherwise expire for certain types of service, including service by mail). Defendants
served their motion on Plaintiffs via U.S. Mail on June 27, 2012, making Plaintiffs’ response due
July 16, 2012. “Even pro se litigants must comply with procedural rules . . . .” Vafaiyan v. City
of Witchita Falls, Tex., 398 F. App’x 989, 990 (5th Cir. 2010) (citing Birl v. Estelle, 660 F.2d
592, 593 (5th Cir. 1981)). Nevertheless, the Court excuses the tardy response and has considered
Plaintiffs’ submission, which largely ignores Defendants’ arguments and fails to cite any relevant
authority.
2
II.
Standard
In considering a motion under Rule 12(b)(6), the “court accepts ‘all well-pleaded facts as
true, viewing them in the light most favorable to the plaintiff.’” Martin K. Eby Constr. Co. v.
Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones v. Greninger, 188
F.3d 322, 324 (5th Cir. 1999)). However, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). To overcome a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “Factual allegations must
be enough to raise a right to relief above the speculative level, on the assumption that all the
allegations in the complaint are true (even if doubtful in fact).” Id. at 555 (citations and footnote
omitted). “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.”
Iqbal, 556 U.S. at 678.
The Supreme Court’s examination of the issue in Iqbal provides a framework for
examining the sufficiency of a complaint. First, the district court may “begin by identifying
pleadings that, because they are no more than conclusions, are not entitled to the assumption of
truth.” Id. at 679. Second, “[w]hen there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Id.
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Ordinarily, a court decides a motion to dismiss for failure to state a claim looking only at
the face of the complaint; if “matters outside the pleadings are presented to and not excluded by
the court, the motion shall be treated as one for summary judgment.” Fed. R. Civ. P. 12(d); see
In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2011). Documents attached to a
motion to dismiss that are “referred to in the plaintiff’s complaint and . . . central to [his] claim,”
however, are considered part of the pleadings for purposes of a motion under Rule 12(b)(6).
Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). In this case,
Defendants attached to the motion to dismiss the note, deed of trust, and the Pooling and
Servicing Agreement under which the note and deed were transferred to Deutsche Bank in 2007.
Mot. to Dismiss [21] Ex. A–C. Because these documents are “referred to in the plaintiff[s’]
complaint and . . . central to [their] claim,” the Court may consider them in ruling on Defendants’
motion.
III.
Analysis
All four of Plaintiffs’ claims rest on the same flawed theory—that their note became
unsecured when allegedly split from the deed of trust during post-closing transfers. Under
Plaintiffs’ reasoning, they believe they have won “a free house” as a result of the transfer of their
note from one lender to another. Wiggington, 2012 WL 4053793 (affirming dismissal of similar
split-note case under Texas law).
The Greenes are not the first homeowners to attempt to nullify their debt in this way, but
as this Court has already noted, the theory finds no support in Mississippi law and has been
“repeatedly discredited.” Emmons v. Capital One, N.A., No. 1:11cv99-RHW, 2012 WL 773288,
at *4 (S.D. Miss. Mar. 6, 2012) (dismissing claim and collecting cases); see also Kirby v. Bank of
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Am., N.A., 2:09cv182-DCB-JMR, 2012 WL 1067944, at *3 (S.D. Miss. Mar. 29, 2012)
(addressing the plaintiffs’ argument that separating the note and the deed “makes any subsequent
transfers of the Note or the Deed void under Mississippi law” and noting that “[t]his once-novel
theory of mortgage law has been consistently rejected by courts which have considered its
merit”) (collecting cases); Lindsey v. Bates, 42 Miss. 397, 1869 WL 3765, at *2 (Miss. 1869)
(“[T]he assignment of the note carries with it the mortgage, which is a mere incident to the debt,
and the assignee of the note is entitled to resort to the mortgage and all other securities, which
were given for the purpose of assuring its payment, as its incidents.”) (cited in Kirby, 2012 WL
1067944, at *4). Plaintiffs have offered no helpful authority to support their claim, and the Court
sees no need to rehash the legal analysis provided in these earlier cases. As applied to each of
their four causes of action, Plaintiffs’ claims should be dismissed.
A.
Wrongful Foreclosure
Mississippi law recognizes a claim for wrongful foreclosure. Nat’l Mortg. Co. v.
Williams, 357 So. 2d 934 (Miss. 1978). While the elements of the claim have not been clearly
stated, an aggrieved mortgagor ordinarily “may recover damages or have the foreclosure set
aside.” West v. Nationwide Tr. Servs., Inc., 1:09CV295 LG-RHW, 2010 WL 3122801, at *3
(S.D. Miss. Aug. 4, 2010) (citing Williams, 357 So. 2d at 936). The claim may exist “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.” Williams, 357
So. 2d at 935–36 (quoting 59 C.J.S. Mortgages § 491 (1949)). Some authority suggests that a
wrongful foreclosure claim may not be asserted until there has “been a foreclosure sale.” West,
2010 WL 3122801, at *3 (citing Temple-Inland Mortg. Corp. v. Jones, 749 So. 2d 1161, 1167
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(Miss. Ct. App. 1999)); accord Smith v. Bank of Am., N.A., No. 2:11cv120-MPM-JMV, 2012
WL 4320845, at *4 (N.D. Miss. 2012).
Here, Plaintiffs allege that “Defendants, and each of them, . . . have illegally commenced
foreclosure under the Note on the Property via a foreclosure action supported by false or
fraudulent documents in violation of the Mississippi Penal Code.” Am. Compl. [4] ¶ 68.
Plaintiffs do not allege that a foreclosure sale has taken place. Rather, Plaintiffs assert that the
pending foreclosure is wrongful “since none [of the Defendants] own the Note or had any legal
relationship with . . . the last owner of the Note . . . .” Id. Thus, Plaintiffs base their wrongful
foreclosure claim on their belief that transferees of the note have no security interest in the
property. Assuming Plaintiffs may assert a wrongful foreclosure claim before a foreclosure sale
is actually completed, and assuming further that the claim was sufficiently pleaded under
Iqbal/Twombly, Plaintiffs’ legal premise for the wrongful foreclosure claim has no basis in
Mississippi law. See Emmons, 2012 WL 773288, at *4. The claim therefore fails under Rule
12(b)(6).3
B.
Fraud
Plaintiffs’ fraud claim also challenges the validity of the assignments, claiming that
Defendants “misrepresented to Plaintiffs that [they were] entitled to receive mortgage payments
from Plaintiffs” when they, “[i]n fact, . . . were not entitled to receive mortgage payments as
[they] did not have equitable, or actual beneficial interest in the Note or the property.” Am.
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It is worth noting Defendants’ argument that Plaintiffs are current on their loan and no
foreclosure proceeding has been initiated or even threatened. Defs.’ Mem. [22] at 9. If they are
current and no foreclosure has been threatened, then a wrongful foreclosure claim would not be
ripe. That said, Defendants’ assertion goes beyond the pleadings and cannot contradict
Plaintiffs’ averments at the Rule 12(b)(6) stage.
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Compl. [4] ¶ 72. They essentially claim that any representation by any party that it is entitled to
enforce the note is necessarily fraudulent:
No party is entitled to receive mortgage payments from the Plaintiffs since the
original Note has been paid off at least twice: Once by INDYMAC BANK, FSB
when it purchased the Note and then again when the Note was paid off by default
insurance taken out by RESIDENTIAL ASSET SECURITIZATION TRUST
2007-A5, PASS-THROUGH SERIES 2007-E.
Id. ¶ 73.
There are a couple of problems with Plaintiffs’ fraud claim. First, as stated above, the
underlying legal premise—that the transferees of the note had no rights under the note or deed of
trust—finds no support in Mississippi law. See Emmons, 2012 WL 773288, at *4. Indeed, the
legal conclusion disguised as a factual allegation that the Greenes’ liability under the note ceased
when it was “paid off” through a transfer to another lender lacks facial plausibility. See Iqbal,
556 U.S. at 678.
Second, Plaintiffs fail to allege their fraud claim with the particularity required by Federal
Rule of Civil Procedure 9(b), which requires a party to “state with particularity the circumstances
constituting fraud . . . .” Fed. R. Civ. P. 9(b). “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 representation and what he obtained thereby.’” Tel-Phonic Servs., Inc. v.
TBS Intern., Inc., 975 F.2d 1134, 1139 (5th Cir. 1992) (quoting 5 C. Wright & A. Miller, Federal
Practice and Procedure § 1297, at 590 (1990)). Under Mississippi law, to state a claim for fraud,
a plaintiff must plead with factual particularity the following nine elements:
(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 upon by
the person and in the manner reasonably contemplated; (6) the hearer’s ignorance
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of its falsity; (7) his reliance on the truth; (8) his right to rely thereon; [and] (9) his
consequent proximate injury.
Smith v. Union Nat. Life Ins. Co., 187 F. Supp. 2d 635, 650 (S.D. Miss. 2001) (citation omitted).
“In pleading the elements of an actionable fraud claim, the underlying allegations must be factual
and not conclusory.” Da Luz v. Five Star Contractors, No. 1:09cv268-HSO-JMR, 2012 WL
1070117, at *5 (S.D. Miss. Mar. 29, 2012) (citing Smith, 187 F. Supp. 2d at 650). “Rule 9(b)
requires the who, what, when, where, and how of a fraud claim to be laid out.” Id. (citing
Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir. 1997)).
Reviewing the Amended Complaint reveals a generic form that fails to plead a fraud
claim with requisite particularity. No specific misrepresentation has been attributed to any
particular Defendant, and Plaintiffs have not explained when and how the alleged
misrepresentations were made. This is particularly important in light of the three-year statute of
limitations that applies to fraud claims. Miss. Code Ann. § 15-1-49; see Defs.’ Mem. [22] at 9.
Because Plaintiffs’ fraud claim is based on an inaccurate interpretation of Mississippi law and is
pleaded without with the particularity required by Rule 9(b), dismissal is proper.
C.
Quiet Title
As with the other claims, Plaintiffs’ quiet title claim is based on their erroneous belief
that any transfer of the note destroyed the security interest in their property such that they own
their property free and clear. Moreover, as Defendants point out, Plaintiffs’ quiet title claim fails
because Plaintiffs do not include the deraignment of title required by section 11-17-35 of the
Mississippi Code:
In bills to confirm title to real estate, and to cancel and remove clouds therefrom,
the complainant must set forth in plain and concise language the deraignment of
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his title. If title has passed out of the sovereign more than seventy-five (75) years
prior to the filing of the [Complaint], then the deraignment shall be sufficient if it
show title out of the sovereign and a deraignment of title for not less than sixty
(60) years prior to the filing of the [Complaint]. A mere statement therein that
complainant is the real owner of the land shall be insufficient, unless good and
valid reason be given why he does not deraign his title.
See also Moore v. McDonald, 47 So. 3d 1186, 1189 (Miss. Ct. App. 2010); 7 G. Ogletree & D.
Rueff, Encyclopedia of Mississippi Law § 60:117 (“This generally requires proof that title passed
from the sovereign by reference to the patent and a deraignment of title for at least 60 years prior
to the filing of the complaint.”). Plaintiffs’ Amended Complaint contains nothing more than “[a]
mere statement . . . that [Plaintiffs are] the real owner[s] of the land,” which is “insufficient”
under section 11-17-35. For these reasons, dismissal of the quiet title claim is appropriate.
D.
Declaratory Relief
Plaintiffs’ final claim is one for declaratory relief. Plaintiffs “request a judicial
determination of the rights, obligations and interest of the parties with regard to the Property.”
Am. Compl. [4] ¶ 89. The foundation for the alleged dispute as to the parties’ respective rights is
Plaintiffs’ mistaken belief that any and all transfers of the note were ineffective under Mississippi
law. Because the underlying premise has no foundation in Mississippi law, the Court concludes
that the claim for declaratory relief presents no justiciable controversy.
For a court to exercise jurisdiction over a claim for declaratory relief, the claim must be
justiciable. Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). “Typically,
this becomes a question of whether an ‘actual controversy’ exists between the parties to the
action.” Id. “As a general rule, an actual controversy exists where ‘a substantial controversy of
sufficient immediacy and reality [exists] between parties having adverse legal interests.’” Id. at
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896 (quoting Middle S. Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir. 1986))
(additional citation omitted). A complaint seeking declaratory relief “must allege facts from
which it appears there is a substantial likelihood that [the plaintiff] will suffer injury in the
future.” Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003) (citations omitted). Moreover, “[i]n a
declaratory judgment action, the parties litigate the underlying claim, and the declaratory
judgment is merely a form of relief that the court may grant.” Val-Com Acquisitions Trust v.
CitiMortgage, Inc., 421 F. App’x 398, 400–01 (5th Cir. 2011).
For the same reasons Plaintiffs fail to state a claim as to their substantive claims, the
claim for declaratory relief presents no justiciable controversy. There is no “substantial
controversy,” and Plaintiffs have not alleged “a substantial likelihood that [they] will suffer
injury in the future,” because there is nothing invalid about the manner in which the note was
allegedly assigned. Wolfe, 212 F.3d at 895; Bauer, 341 F.3d at 358. Thus, the claim for
declaratory relief must be dismissed for lack of subject matter jurisdiction.
IV.
Conclusion
The Court has considered all arguments. Those not addressed would not have changed
the outcome. For the foregoing reasons, Defendants’ Motion to Dismiss [21] is granted, and
Plaintiffs’ claims against Deutsche Bank National Trust Company, Mortgage Electronic
Registration System, and Residential Asset Securitization Trust, Series 2007-A5, Pass-Through
Series 2007-E are dismissed with prejudice. See Wiggington, 2012 WL 4053793 (affirming
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dismissal with prejudice of split-note case where district court concluded amendment would be
futile).
SO ORDERED AND ADJUDGED this the 6th day of November, 2012.
s/ Daniel P. Jordan III
UNITED STATES DISTRICT JUDGE
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