Kulovic et al v. BAC Home Loans Servicing, L.P. et al

Filing 26

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that defendants BAC Home Loans Servicing, LP and Federal Home Loan Mortgage Association, Inc. d/b/a Freddie Macs motion to dismiss is GRANTED. [Doc. 7 ] IT IS FURTHER ORDERED that defendant Martin, Leigh, Laws & Fritzlen, P.C.s motion to dismiss is GRANTED. [Doc. 11 ] IT IS FURTHER ORDERED that defendant Millsap & Singer, P.C.s motion to dismiss is GRANTED. [Doc. 21 ] An Order of Dismissal will accompany this Memorandum and Order. Signed by Honorable Charles A. Shaw on 4/19/11. (KJS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

BAHRUDIN KULOVIC, et al.,
Plaintiffs,
vs.
BAC HOME LOANS SERVICING, L.P., et al.,
Defendants.

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No. 4:10-CV-2058 CAS

MEMORANDUM AND ORDER
On September 13, 2010, plaintiffs Bahrudin and Rasema Kulovic filed a petition in the
Circuit Court of St. Louis County, Missouri. Plaintiffs allege claims of wrongful foreclosure, quiet
title, violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.,
negligence, fraud, and willful, wanton, and malicious conduct against defendants BAC Home Loans
Servicing, LP (“BAC”), Federal Home Loan Mortgage Corporation d/b/a Freddie Mac (“Freddie
Mac”), Millsap & Singer, P.C. (“Millsap”), and Martin, Leigh, Laws & Fritzlen, P.C. (“Martin”).1
On October 29, 2010, defendants BAC and Freddie Mac filed a notice of removal, in which they
state that the action is removable to this Court pursuant to 28 U.S.C. § 1441(b) because a federal
question (under the FDCPA) is present, and that the Court has supplemental jurisdiction over
plaintiffs’ state-law claims of wrongful foreclosure, quiet title, negligence, fraud, and willful,
wanton, and malicious conduct.

1

Defendant Freddie Mac states that plaintiffs incorrectly identify Federal Home Loan Mortgage
Corporation as “Federal Home Loan Mortgage Association, Inc.”

Now before the Court are defendants BAC and Freddie Mac’s motion to dismiss [Doc #7],
defendant Martin’s motion to dismiss [Doc. #11], and defendant Millsap’s motion to dismiss [Doc.
#21]. Plaintiffs oppose defendants BAC and Freddie Mac’s motion to dismiss and defendant
Millsap’s motion to dismiss; plaintiffs have filed no memorandum in opposition to defendant
Martin’s motion to dismiss. Defendants BAC and Freddie Mac have filed a reply memorandum;
defendant Millsap has not filed a reply memorandum. With regard to all three motions, the time in
which to file briefs has expired, and therefore all three motions are ready for disposition.
I.

Standard of Review
Under Federal Rule of Civil Procedure 8(a)(2), a pleading 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). The
pleading standard Rule 8 announces does not require “detailed factual allegations,” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007), but “it demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation,” Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937,
1949 (2009). A pleading that offers labels, conclusions, a formulaic recitation of elements, or naked
assertions devoid of factual enhancement does not suffice. Iqbal, 129 S. Ct. at 1949.
Rule 9(b) requires that an allegation of fraud “state with particularity the circumstances
constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “Under Rule 9(b), a plaintiff must plead ‘such
matters as the time, place and contents of false representations, as well as the identity of the person
making the misrepresentation and what was obtained or given up thereby.’” BJC Health Sys. v.
Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007) (quoting Abels v. Farmers Commodities
Corp., 259 F.3d 910, 920 (8th Cir. 2001)). “The level of particularity required depends on, inter alia,

2

the nature of the case and the relationship between the parties.” Id. (citing Payne v. United States,
247 F.2d 481, 486 (8th Cir. 1957)).
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain sufficient
factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Iqbal, 129
S. Ct. at 1949. A claim has facial plausibility when the alleged facts allow a court to draw the
reasonable inference that the defendant is liable for the misconduct alleged. Id. “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.” Id. When a complaint contains well-pleaded
factual allegations, a court should assume the well-pleaded facts are true and then determine whether
they plausibly entitle the plaintiff to relief. Id. at 1949-50. Only well-pleaded facts are accepted as
true, while “[t]hreadbare recitals of the elements of a cause of action” and legal conclusions are not.
Id. at 1949. “[L]egal conclusions can provide the framework of a complaint, [but] they must be
supported by factual allegations.” Id. at 1950. When a complaint contains well-pleaded factual
allegations, a court should determine whether they plausibly entitle the plaintiff to relief. Id. If the
well-pleaded facts do not plausibly entitle the plaintiff to relief, the claim should be dismissed. Id.
Generally, the Court must ignore materials that are outside of the pleadings; however, the
Court may “consider some public records, materials that do not contradict the complaint, or
materials that are ‘necessarily embraced by the pleadings.’” Noble Sys. Corp. v. Alorica Cent.,
LLC, 543 F.3d 978, 982 (8th Cir. 2008) (quoting Porous Media Corp. v. Pall Corp., 186 F.3d 1077,
1079 (8th Cir. 1999)); see also 5B Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure: Civil 3d § 1357, at 376 (2004) (opining that a trial court may consider “matters of public
record, orders, items appearing in the record of the case, and exhibits attached to the complaint”).

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“The district court may take judicial notice of public records and may thus consider them on a
motion to dismiss.” Stahl v. U.S. Dept. of Agriculture, 327 F.3d 697, 700 (8th Cir. 2003) (citing
Faibisch v. Univ. of Minn., 304 F.3d 797, 802-03 (8th Cir. 2002)).
II.

Plaintiffs’ Petition
In their petition, plaintiffs allege that on May 21, 2007, they entered into a promissory note

with Gorman & Gorman Residential Mortgage Services, Inc., which is secured by a deed of trust
on property located in St. Louis County, Missouri. Doc. #5, ¶¶ 6-8. Plaintiffs allege that “[u]pon
information and belief, no [a]ssignment of [the] [d]eed of [t]rust, or any similar document has been
filed with the St. Louis County Recorder of Deeds office purporting to assign any rights, title or
interest in the [d]eed of [t]rust to any of the” defendants. Id. ¶ 10. Plaintiffs also allege that, “[u]pon
information and belief, no instrument has been recorded in the St. Louis County Recorder of Deeds
office appointing any successor trustee, including” defendant Millsap. Id. ¶ 15.

Plaintiffs allege

that defendant BAC is not the original lender, the holder of the note, a nonholder in possession of
the note who has the rights of the holder, or a person in possession of the note “who is entitled to
enforce the instrument pursuant to Section 400.3-309 or 400.30418(d), [sic] of the [n]ote.”2 Id. ¶
12. Additionally, plaintiffs allege that defendant Millsap knew, or should have known, that BAC
was not the lender or the holder of the note and had no authority to appoint defendant Millsap as
successor trustee. Id. ¶ 38. Plaintiffs allege that defendant Millsap is not the trustee of the deed of
trust, and had no right or authority, legal or otherwise, to conduct a trustee’s sale of the property.
Id. ¶¶ 15-16.

2

Plaintiffs appear to reference Mo. Rev. Stat. §§ 400.3-309, 400.3-418(d), not a section of the note.

4

Plaintiffs allege that on May 18, 2010, defendant BAC, through defendant Millsap, contacted
plaintiffs by correspondences sent by the United States Postal Service which indicated or implied
that: (1) defendant BAC was the holder of the note; (2) nonpayment of the debt would result in a
trustee foreclosure sale of plaintiffs’ property; (3) defendant Millsap was foreclosing on the note,
which would result in the sale of plaintiffs’ property; and (4) plaintiffs owed attorney’s fees,
collection costs, and other charges to defendant Millsap. Id. ¶¶ 34-35. Plaintiffs allege that on or
about July 29, 2010, defendant Millsap purported to conduct a trustee’s sale of the property, and
executed a trustee’s deed transferring title of the property to defendant Freddie Mac. Id. ¶ 17.
Plaintiffs allege that defendants “BAC and/or Millsap had no interest in the property, and
no standing to foreclose on the [p]roperty, as they were never assigned any interest through a valid
[a]ssignment from the original [l]ender under the [d]eed of [t]rust.” Id. ¶ 13. Plaintiffs allege that
“[t]he foreclosure of the [p]roperty...was and is wrongful and absolutely void, as Millsap had no
authority to conduct such sale, or to execute such deed, as they were not properly appointed as
successor trustee of the [d]eed of [t]rust, and BAC was not the original lender, nor the holder, in due
course or otherwise, of the [n]ote.” Id. ¶ 18. Plaintiffs further allege that the sale was not lawful and
that the sale and filing of the trustee deed was a nonjudicial action to effect disposition or
disablement of the property from plaintiffs when there was no present right to possession of the
property. Id. ¶¶ 37, 39.
Plaintiffs allege that based on the trustee’s deed and sale, defendant Freddie Mac is claiming
an interest in the property, and defendant BAC is or was claiming an interest in the property. Id. ¶¶
20-21. Plaintiffs allege that, because defendants BAC and Freddie Mac have no right or claim to

5

the property, plaintiffs’ rights and interest in the property supersede that of defendants BAC and
Freddie Mac. Id. ¶ 22.
Plaintiffs allege that defendant BAC is a loan “servicer” and has no right or interest in the
note, or the proceeds from payment thereof. Id. ¶ 24. Plaintiffs also allege that defendants BAC,
Millsap, and Martin are “debt collectors” as that term is defined in 15 U.S.C. § 1692a(6)(F). Id. ¶
25. Additionally, plaintiffs allege that defendant BAC did not obtain the note prior to the time the
debt was in default. Id. ¶ 26. Plaintiffs allege that the representations contained in the May 18,
2010, letters mailed to plaintiffs by defendant Millsap on behalf of defendant BAC were made for
the purpose of attempting to collect a debt, misrepresented the character and legal status of the debt,
represented or implied that nonpayment would result in the sale of the subject property, threatened
to take legal action that could not legally be taken, and threatened to take nonjudicial action to effect
disposition of the subject property when there was no present right to possession of the subject
property. Id. ¶ 36.
Plaintiffs allege that defendants, acting as plaintiffs’ “lender and/or loan servicer, and agents
thereof,” had a duty to exercise reasonable care and skill to maintain proper and accurate records
with regard to plaintiffs’ loan, including maintenance, accounting, and servicing of loan records.
Id. ¶ 44. Plaintiffs allege that defendants breached their duty in the servicing of plaintiffs’ loan by
preparing and filing false documents and foreclosing on the subject property without having either
the legal authority or the proper documentation to do so, and as a direct and proximate result
plaintiffs have suffered severe emotional distress, injury to their character and good will in the
community, damage to their credit scores, and a loss of their ability to seek or qualify for credit in
the future. Id. ¶¶ 45-46.

6

Plaintiffs allege that following the trustee’s sale of the property, defendants Martin and
Freddie Mac sent them a letter stating that: (1) Freddie Mac is now the owner of the property, and
(2) plaintiffs either had to vacate the property or enter into an agreement to rent the property, or they
would be evicted. Id. ¶¶ 49-51. Plaintiffs allege that these representations, as well as the
representations contained in the letters dated May 18, 2010, mailed to them by defendants Millsap
on behalf of defendant BAC, were false, defendants had knowledge of these misrepresentations,
defendants made these misrepresentations with the intent to induce plaintiffs’ reliance, and, in
reliance on these misrepresentations, plaintiffs obtained an attorney to stop the foreclosure. Id. ¶¶
52-53.
Finally, plaintiffs allege that defendants sent to plaintiffs communications that made false
representations regarding defendants’ legal entitlement to foreclose on and defendants’ ownership
interest in plaintiffs’ property. Id. ¶ 57. Plaintiffs allege that defendants “knew or should have
known of their lack of legal standing and/or lack of interest in the property prior to, and following,
the date of the [t]rustee’s sale.” Id. ¶ 59. Plaintiffs allege that such conduct was willful, wanton,
and malicious. Id. ¶ 62.
Plaintiffs seek an order setting aside the foreclosure and the sale of the trustee’s deed, as well
as an order that determines the estate, title, and interest of the parties in the property. Further,
plaintiffs seek actual damages, $1,000.00 for each alleged violation of the FDCPA, attorney’s fees,
punitive damages in the amount of $500,000.00, and additional relief as the Court deems proper.
Id. ¶¶ 18, 22, 42, 46, 54, 63.

7

Deed of Trust
Attached to plaintiffs’ petition is the deed of trust, which is dated May 21, 2007, names
Gorman & Gorman Residential Mortgage Services, Inc. as the lender, and names Mark P. Gorman
as trustee. Id. at 16-17. The deed of trust also states that Mortgage Electronic Registration Systems,
Inc. (“MERS”) “is the beneficiary under this Security Instrument.” According to the deed of trust,
The beneficiary of this Security Instrument is MERS (solely as nominee
for Lender and Lender’s successors and assigns) and the successors and
assigns of MERS.... Borrower understands and agrees that MERS holds
only legal title to the interest granted by Borrower in this Security
Instrument, but, if necessary to comply with law or custom, MERS (as
nominee for Lender and Lender’s successors and assigns) has the right:
to exercise any or all of those interests, including, but not limited to, the
right to foreclose and sell the Property; and to take any action required
of Lender including, but not limited to, releasing and canceling this
Security Instrument.
Id. at 18. Additionally, the deed of trust states that “Lender, at its option, may from time to time
remove Trustee and appoint a successor trustee to any Trustee appointed hereunder by an instrument
recorded in the county in which this Security Instrument is recorded. Without conveyance of the
Property, the successor trustee shall succeed to all the title, power and duties conferred upon Trustee
herein and by Applicable Law.” Id. at 28.
III.

Discussion
As an initial matter, defendants BAC, Freddie Mac, and Millsap state in their respective

motions that plaintiffs’ allegations that there is no recorded assignment of the subject deed of trust
(specifically, to defendant BAC) or recorded appointment of a successor trustee (specifically,
defendant Millsap) are inaccurate. Defendants state that on May 16, 2010, MERS executed an

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“Assignment of Deed of Trust” and assigned the subject deed of trust to defendant BAC.3
Defendants also state that on May 18, 2010, defendant BAC executed an “Appointment of Successor
- Trustee” and appointed defendant Millsap as successor trustee.4 Defendants state that both the
MERS assignment and the successor trustee appointment were recorded with the St. Louis Recorder
of Deeds on June 4, 2010. Defendants submit as evidence copies of the MERS assignment and
successor trustee appointment, docs. # 8-1; 8-2, and state that the Court may take judicial notice of
these documents as public records because they are on file with the St. Louis County Recorder of
Deeds. Defendants argue that this evidence demonstrates that defendants had a right to foreclose
on the disputed property, and each of plaintiffs’ claims should be dismissed for failure to state a
claim.
Although plaintiffs have been put on notice of defendants’ intent to rely on the recorded
MERS assignment and successor trustee appointment, plaintiffs do not respond to defendants’
motions by: (1) disputing the authenticity of the MERS assignment and successor trustee
appointment; (2) refuting defendants’ argument that evidence of the MERS assignment or successor
trustee appointment is part of the public record and therefore may be considered by the Court when
considering the instant motions to dismiss; or (3) providing citation to Missouri law refuting

3

The “Assignment of Deed of Trust” states that MERS “does hereby grant, sell, assign, transfer and
convey, unto” defendant BAC “all beneficial interest under a ceratin Deed of Trust” made and executed by
plaintiffs to MERS upon the subject property. Doc. #8-1, p. 2. This deed of trust assignment was filed with
the St. Louis County Recorder of Deeds on June 4, 2010. Id. at 1.
4

The “Appointment of Successor - Trustee” states that “acting under the power conferred upon it by
the aforesaid Deed of Trust [defendant BAC], legal holder and owner of the Note secured thereby, does by
these presents nominate and appoint [defendant Millsap], the grantee hereunder, as Successor-Trustee in lieu
and stead of Mark P. Gorman....” Doc. #8-2, p. 2. This successor trustee appointment was signed by Serena
Harman, assistant vice president of defendant BAC, and was filed with the St. Louis County Recorder of
Deeds on June 4, 2010. Id. at 1, 3.

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defendant’s arguments regarding the validity of the MERS assignment, the validity of the successor
trustee appointment, or the existence of defendants’ authority to foreclose on the subject property.
Rather, plaintiffs merely refer the Court back to allegations5 contained in their petition (founded on
the alleged nonexistence of an assignment of the deed of trust and appointment of a successor
trustee) and argue that these allegations must be assumed to be true for purposes of the pending
motions to dismiss. Plaintiffs maintain that defendants’ arguments are irrelevant and, pursuant to
averments contained in the petition, they sufficiently allege that defendant BAC had no right to
foreclose on the subject property or to order a trustee’s sale pursuant to Mo. Rev. Stat. § 443.410.6
As noted above, although when considering a motion to dismiss the Court must generally
ignore materials that are outside of the pleadings, it may consider materials that are part of the public
record or those that are necessarily embraced by the pleadings. The Court finds that records from
the St. Louis County Recorder of Deeds are public records and may be considered in deciding the
pending motions to dismiss. See Hintz v. JP Morgan Chase Bank, No. 10-119 DWF/AJB, 2010 WL
4220486, at *2 (D. Minn. Oct. 20, 2010) (considering, in deciding a motion to dismiss, “publicly
filed documents” maintained by the county registrar “that establish who holds the mortgage and
note” despite allegation that “there was an invalid foreclosure because Defendants did not own the
note and the mortgage”).

5

That defendant BAC is not the original lender, the holder of the note, a nonholder in possession of
the note who has the rights of a holder, or a person in possession of the note who is entitled to enforce it
pursuant to Missouri law.
6

“Deeds of trust in the nature of mortgages of land may...be...foreclosed by trustee’s sale at the option
of the holder of the debt or obligation thereby secured and the mortgaged property sold by the trustee or his
successor in the same manner and in all respects as in case of mortgages with power of sale....”

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The deed of trust grants MERS, “nominee” serving as legal title holder to the beneficial
interest under the deed of trust, the right to exercise any or all of the lender’s interests. This
language contained in the deed of trust is more than sufficient “to create an agency relationship
between MERS and the [original lender] and its successors in Missouri.” In re Tucker, 441 B.R.
638, 645 (Bankr. W.D. Mo. 2010). The deed of trust designates MERS as the nominee and
authorizes MERS to take any action to enforce the loan, including the right to foreclose and sell the
property. See id. (finding, under Missouri law, deed of trust that stated MERS holds legal title in
its capacity “as nominee for the Lender and the Lender’s successors and assigns” and granted MERS
broad rights “to exercise any or all” of the interests granted by the borrower under the deed of trust,
“including but not limited to, the right to foreclose and sell the Property, and to take any action
required of Lender” clearly authorized MERS to act on behalf of the lender in serving as the legal
title holder to the beneficial interest under the deed of trust and exercising any of the rights granted
to the lender thereunder); cf. Mortg. Elec. Registration Sys., Inc. v. Bellistri, No. 4:09-CV-731 CAS,
2010 WL 2720802, at *14 (E.D. Mo. July 1, 2010) (finding, under Missouri law, similar language
in a deed of trust gave MERS “a legal right to file suit to foreclose the mortgage” and “the right to
enforce the lien on the property via a power of sale in the trustee”). As nominee of the original
lender and the original lender’s successors and assigns, “MERS has bare legal title to the note and
the deed of trust securing it....” Mortg. Elec. Registration Sys., 2010 WL 2720802, at *15.
Defendants have submitted evidence that shows on May 16, 2010, MERS assigned the deed
of trust to defendant BAC, and the assignment was filed with the St. Louis County Recorder of
Deeds on June 4, 2010. Doc. #8-1, pp. 1-3. Defendants have also submitted evidence that shows
on May 18, 2010, defendant BAC appointed defendant Millsap as trustee, and this trustee

11

appointment was filed with the St. Louis County Recorder of Deeds on June 4, 2010. Doc. #8-2,
pp. 1-3. Accordingly, the Court agrees with defendants BAC, Freddie Mac, and Millsap that
plaintiffs’ allegations that there exists no recorded assignment of the subject deed of trust to
defendant BAC or recorded appointment of defendant Millsap as trustee are simply inaccurate, and
such allegations will therefore not be accepted as true for purposes of the instant motions.7
As noted above, plaintiffs fail to respond in any meaningful way to defendants’ arguments
regarding the validity of the MERS assignment. In light of the public record documents provided
by defendants and defendants’ unchallenged arguments regarding the legal effect of these
documents, the Court is persuaded that plaintiffs do not plausibly assert that the MERS assignment
was invalid. Accordingly, the Court rejects that assertion.
The Court finds that plaintiffs’ allegations regarding defendant BAC’s interest in the subject
property (that defendant BAC is not the original lender, the holder of the note, a nonholder in
possession of the note who has the rights of a holder, or a person in possession of the note who is
entitled to enforce it pursuant to Missouri law) are unsupported legal conclusions or naked assertions
devoid of factual enhancement not properly accepted as true when considering these motions to
dismiss. See In re Box, No. 10-20086, 2010 WL 2228289, at *3 (Bankr. W.D. Mo. June 3, 2010)
(finding the converse statement, that a party is the “holder of the Promissory Note and Deed of

7

In light of the public record evidence presented by defendants regarding the existence of an
assignment of the deed of trust to defendant BAC and appointment of defendant Millsap as successor trustee,
both such documents having been filed with the St. Louis County Recorder of Deeds, the Court questions the
sufficiency of plaintiffs’ counsel’s factual inquiry before filing this action. Further, plaintiffs’ counsel’s
continued reliance on the demonstrably false allegations contained in the petition regarding the nonexistence
of an assignment of the deed of trust and appointment of a successor trustee when faced with evidence of an
assignment and a successor trustee appointment, without disputing or even acknowledging such evidence,
puts counsel perilously close to being found to have violated the duty to conduct a reasonable inquiry before
making factual representations to the Court. See Fed. R. Civ. P. 11.

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Trust,” is a legal conclusion, not a fact (citing In re Wilhelm, 407 B.R. 392, 402 (Bankr. D. Idaho
2009) (noting that “holder” is a defined term when dealing with negotiable instruments)). Similarly,
the Court finds that plaintiffs do not sufficiently allege that defendant BAC had no authority to
appoint a successor trustee or that defendants were not entitled to foreclose on the subject property.
Accordingly, the Court will not accept as true these allegations when analyzing defendants’ motion.
A.

Fair Debt Collection Practices Act Brought Against Defendants BAC and
Millsap

Defendant BAC argues that plaintiffs cannot sustain an action for violations of the FDCPA
because, in only referencing correspondence from defendant Millsap, they fail to plead any facts that
would demonstrate that defendant BAC took any actions that were false, deceptive, misleading,
unfair, or unconscionable. Defendant BAC also argues that plaintiffs fail to state a claim under the
FDCPA because each alleged violation of the FDCPA relies on the inaccurate allegation that
defendant BAC was not the holder of the subject note and lacked authority to appoint defendant
Millsap as trustee. Further, defendant Millsap argues that its actions did not amount to the collection
of a debt and, accordingly, the FDCPA does not apply. Plaintiffs oppose defendant BAC’s motion,
arguing that they allege that defendant BAC, through defendant Millsap, contacted plaintiffs.
Plaintiffs also argue that their allegations must be accepted as true and that those allegations
establish that defendant BAC had no interest in the property and no right to foreclose under Missouri
law. Further, plaintiffs argue that their petition alleges that defendant Millsap fits the definition of
a debt collector and therefore states a cause of action under the FDCPA.
The FDCPA “is designed to protect consumers from abusive debt collection practices and
to protect ethical debt collectors from competitive disadvantage.” Quinn v. Ocwen Fed. Bank FSB,
470 F.3d 1240, 1246 (8th Cir. 2006) (citing 15 U.S.C. § 1692(e); Peters v. Gen. Serv. Bureau, Inc.,
13

277 F.3d 1051, 1054 (8th Cir. 2002)). Under the FDCPA, debt collectors cannot use false,
deceptive, misleading, unfair, or unconscionable means to collect or attempt to collect a debt.
Peters, 277 F.3d at 1054 (8th Cir. 2002) (citing 15 U.S.C. §§ 1692e, 1692f). The FDCPA prohibits,
among other things, the false representation of the character, amount, or legal status of any debt; the
representation that nonpayment of any debt will result in the sale of any property unless such action
is lawful and the debt collector intends to take such action; the threat to take any action that cannot
legally be taken; or taking or threatening to take any nonjudicial action to effect dispossession of
property if there is no present right to possession of the property claimed as collateral through an
enforceable security interest. 15 U.S.C. §§ 1692e, 1692f.
In this case, plaintiffs’ FDCPA claim is founded on the allegations that defendant BAC did
not have an interest in the subject property or authority to appoint a successor trustee, and therefore
defendants were not entitled to foreclose on the subject property. However, the Court above finds
that these allegations should not be accepted as true. Therefore, plaintiffs’ petition does not allege
sufficient factual support that suggests that the information included in the May 18, 2010,
communications were false, deceptive, misleading, unfair, or unconscionable. Accordingly, the
Court will grant defendants BAC and Millsap’s respective motions to dismiss plaintiffs’ claim
brought pursuant to the FDCPA for failure to state a claim.
B.

Supplemental State-Law Claims

The instant action was removed to this Court pursuant to 28 U.S.C. § 1441(b) because a
federal question under the FDCPA is present in the petition. Although the Court finds that this
federal claim should be dismissed, “[r]etention of supplemental jurisdiction over a supplemental
state claim is appropriate, even after dismissal of the jurisdiction-conferring claim, if it is absolutely

14

clear how the supplemental claim should be decided.” 16 James Wm. Moore et al., Moore’s Federal
Practice ¶ 106.66[3][b] (3d ed. 2010). “If the federal court, in deciding a jurisdiction-conferring
claim, decides a factual issue dispositive of a supplemental claim, there is no reason to leave the
matter for resolution in the state court. Also, retention of a state-law claim is appropriate if the
correct disposition of the claim is so clear as a matter of state law that it can be determined without
further trial proceedings and without entanglement with any difficult issues of state law. The same
is true if the state-law claims are patently frivolous or plainly lack merit.” Id. (citing Ivy v.
Kimbrough, 115 F.3d 550, 552-53 (8th Cir. 1997) (district court did not err in dismissing pendent
claims with prejudice because federal and state claims relied on same core facts)).
Here, the disposition of the state-law claims is absolutely clear. These claims fail for the
same reasons plaintiffs’ federal claim fails. Specifically, plaintiffs’ state-law claims rely on the
unsupported legal conclusion and assertion that defendant BAC did not have an interest in the
subject property or authority to appoint a successor trustee. The Court has already determined that
these allegations should not be accepted as true for purposes of ruling on the motions to dismiss.
Exercising its discretion, the Court will retain supplemental jurisdiction over the state law claims
and dismiss these claims as follows. See id.; see also 28 U.S.C. § 1367(c)(3).
(1)

Wrongful Foreclosure Brought Against Defendants BAC and Millsap

Defendant BAC argues that plaintiffs cannot sustain a cause of action in tort or in equity
based on wrongful foreclosure because defendant BAC had a right to foreclose on the subject
property at the time of the foreclosure. Further, defendant BAC argues that plaintiffs cannot
maintain a cause of action in tort based on wrongful foreclosure because plaintiffs do not allege that
they were not in default. Similarly, defendant Millsap argues that plaintiffs fail to plead that they

15

were not in default and that plaintiffs’ allegation that defendant Millsap was never appointed as
trustee is inaccurate. Plaintiffs oppose both defendants BAC and Millsap’s motions. Plaintiffs state
that under Missouri law only the holder of the debt or obligation may order a trustee to foreclose on
a deed of trust. Plaintiffs further state that they allege defendant BAC was not the holder of the note
and defendant Millsap was never assigned any interest through a valid assignment. Plaintiffs argue
that, because the Court should accept these allegations as true, they sufficiently allege that
defendants had no standing to foreclosure on the property and, therefore, that the foreclosure was
wrongful.
Under Missouri law, the term “wrongful foreclosure” has been used both in suits in equity
as a basis for setting aside a foreclosure sale and in suits at law as a basis for recovering tort
damages. Fields v. Millsap & Singer, P.C., 295 S.W.3d 567, 571 (Mo. App. 2009). “What
constitutes a ‘wrongful foreclosure’ sufficient to set aside a sale and what constitutes a ‘wrongful
foreclosure’ sufficient to recover damages in tort are not the same.” Id. at 571-72 (quotation
omitted). Although plaintiffs specifically seek only to set aside the trustee’s sale in Count I of their
petition, they also include a general prayer for “additional relief as this Court deems just and
proper.” Doc. #5, ¶ 18. Further, they argue in their brief in opposition to defendants BAC and
Freddie Mac’s motion to dismiss that they state causes of action for both damages and equitable
relief. Doc. #15, p. 3. Accordingly, the Court will examine plaintiffs’ wrongful foreclosure claim
under both actions available under Missouri law. See Siesta Manor, Inc. v. Cmty. Fed. Sav. & Loan
Ass’n, 716 S.W.2d 835, 839 (Mo. App. 1986) (“By including a prayer for general relief in its
petition, [the plaintiff] cannot now deny seeking legal relief if that is what the court deemed
appropriate.”).

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(a)

Tort Action for Wrongful Foreclosure

A tort action for damages for wrongful foreclosure “lies against a mortgagee only when the
mortgagee had no right to foreclose at the time foreclosure proceedings were commenced.” Fields,
295 S.W.3d at 571 (quotation omitted). “A plaintiff seeking damages in a wrongful foreclosure
action must plead and prove that when the foreclosure proceeding was begun, there was no default
on its part that would give rise to a right to foreclose.” Id. (quotation omitted). In this case,
plaintiffs do not allege in their petition that their mortgage was not in default when the foreclosure
proceeding began.8 Accordingly, plaintiffs fail to state a claim for a tort action for damages for
wrongful disclosure. See Dobson v. Mortg. Elec. Registration Sys., Inc., 259 S.W.3d 19, 22-23 (Mo.
App. 2008) (finding that the plaintiff’s claim to recover damages for wrongful foreclosure failed
because the “plaintiff has not shown that it was not in default”).
(b)

Action in Equity for Wrongful Foreclosure

If a mortgagee had the right to foreclose, but the sale was otherwise void or voidable, then
the remedy is a suit in equity to set the sale aside. Nevertheless, “[a] mortgagee’s act of
commencing a foreclosure cannot be wrongful when there is a clear right to foreclose.” Peterson
v. Kansas City Life Ins. Co., 98 S.W.2d 770, 773 (Mo. 1936) (citation omitted). “‘A mortgagor []
can invoke the aid of equity to set aside a foreclosure sale only if fraud, unfair dealing or mistake
was involved in the trustee’s sale.’” Ice v. IB Property Holdings, LLC, No. 09-3232-CV-S GAF,
2010 WL 1936175, at *3 (W.D. Mo. May 13, 2010) (quoting Am. First Fed., Inc. v. Battlefield Ctr.,
L.P., 282 S.W.3d 1, 8-9 (Mo. App. 2009)).

8

Rather, plaintiffs allege that defendant BAC “did not obtain the [n]ote prior to the time the debt was
in default,” which appears the be an admission that the debt was, in fact, in default. Doc. #5, ¶ 26.

17

As noted above, the Court does not accept as true the allegations that defendant BAC did not
have an interest in the subject property, defendant BAC did not have authority to appoint a successor
trustee, and defendants were not entitled to foreclose on the subject property. Plaintiffs also fail to
allege that they were not in default. Accordingly, the Court finds that plaintiffs do not allege
sufficient factual support for the contention that the foreclosure sale was improper, and therefore fail
to allege sufficiently fraud, unfair dealing, or mistake was involved in the trustee’s sale. Plaintiffs
fail to state a claim for an action in equity for wrongful foreclosure. Therefore, the Court will
dismiss plaintiffs’ wrongful foreclosure claim.
(2)

Quiet Title Brought Against Defendants BAC and Freddie Mac

Defendants BAC and Freddie Mac state that a motion to dismiss for failure to state a claim
is properly granted in a quiet title action if a plaintiff fails to show he has superior title to the
property at issue. Defendants BAC and Freddie Mac argue that they have demonstrated that
defendant BAC was assigned the deed of trust and appointed defendant Millsap as trustee. Further,
defendants BAC and Freddie Mac state that there is no allegation that plaintiffs were not in default,
and defendant BAC had authority to foreclose on the subject property. Finally, defendants BAC and
Freddie Mac state that defendant Freddie Mac purchased the property at the trustee’s sale.
Defendants BAC and Freddie Mac argue that plaintiffs cannot show they have title superior to
defendant Freddie Mac. Plaintiffs oppose defendants BAC and Freddie Mac’s motion to dismiss.
Plaintiffs argue that the allegation that defendant BAC had no interest in the property (because
defendant BAC was not the original lender or holder of the note) should be assumed true, and
therefore defendant BAC could not have transferred title to defendant Freddie Mac. Plaintiffs argue
that they therefore sufficiently allege title superior to both defendants BAC and Freddie Mac.

18

Under Missouri law, any person claiming title, estate, or interest in real property “may
institute an action against any person or persons having or claiming to have any title, estate or
interest in such property....” Mo. Rev. Stat. § 527.150(1). To state a cause of action to quiet title,
a plaintiff must allege: (1) ownership in the described real estate; (2) that the defendant claims some
title, estate or interest to or in said premises; and (3) said claim is adverse and prejudicial to plaintiff.
Howard v. Radmanesh, 586 S.W.2d 67, 67 (Mo. App. 1979) (citing Randall v. St. Albans Farms,
Inc., 345 S.W.2d 220, 221 (Mo. 1961)).
As noted above, the Court does not accept as true the allegations that defendant BAC did not
have an interest in the subject property, defendant BAC did not have authority to appoint a successor
trustee, and defendants were not entitled to foreclose on the subject property. Plaintiffs also fail to
allege that they were not in default. Accordingly, the Court finds that plaintiffs fail to allege
sufficiently that they have superior title to the subject property, and therefore fail to state a claim to
quiet title. See Dufrenne v. Citimortgage, Inc., No. 4:09-CV-1524 HEA, 2009 WL 5103275, at *3
(E.D. Mo. Dec. 17, 2009) (“Plaintiffs’ claims to quiet title...fail to state a claim for relief as they
have failed to plead any facts showing they, in fact, have a superior title to the property at issue.”).
Therefore, the Court will dismiss plaintiffs’ quiet title claim.
(3)

Negligence Brought Against Defendants BAC and Millsap

With regard to plaintiffs’ negligence cause of action, defendant BAC states that the
relationship between a lender and a borrower is one of contractual obligation, not one of duty.
Defendant BAC argues that it therefore owed no duty to plaintiffs that would support a negligence
action. Further, defendant BAC argues that authority to foreclose on the subject property existed,
and therefore no breach of duty occurred. Additionally, defendant Millsap argues that, because

19

plaintiffs fail to allege a duty it owed or breached, plaintiffs’ negligence action against it should be
dismissed. Plaintiffs agree that “the relationship between a lender and a borrower in [sic] one of
contractual obligation, not one of duty.” Doc. #15, p. 7. Nevertheless, plaintiffs oppose defendants
BAC and Millsap’s motions, arguing that, because the petition clearly alleges that defendant BAC
was a loan servicer and not the holder of the note, no lender-borrower relationship between the
parties is alleged to exist. Further, plaintiffs argue that they sufficiently allege defendant Millsap
acted as an agent of defendant BAC. Plaintiffs argue that the petition satisfies the pleading
requirements for a negligence cause of action, and state the motions to dismiss should be denied.
To state a claim for negligence under Missouri law, a plaintiff must plead facts that support
each of the following elements: (1) the defendant had a duty to protect the plaintiff from injury; (2)
the defendant breached that duty; and (3) the breach was the proximate cause of the plaintiff’s
injury. Whipple v. Allen, 324 S.W.3d 447, 451 (Mo. App. 2010) (citation omitted). “[A] mere
breach of contract does not provide a basis for tort liability....” Bus. Men’s Assur. Co. of Am. v.
Graham, 891 S.W.2d 438, 453 (Mo. App. 1994) (citing Am. Mortg. Inv. Co. v. Hardin-Stockton,
671 S.W.2d 283, 293 (Mo. App. 1984)). Nevertheless, “the negligent act or omission which
breaches the contract may serve as the basis for an action in tort.” Id.; see also Preferred Physicians
Mut. Mgmt. Group v. Preferred Physicians Mutual Risk Retention, 918 S.W.2d 805, 813 (Mo. App.
1996) (“Missouri law recognizes that a tort may be committed in the nonobservance of contract
duties and that a negligent failure to perform a contractual undertaking may result in tort liability.”).
If the duty arises solely from the contract, the action is contractual. The
action may be in tort, however, if the party sues for breach of a duty
recognized by the law as arising from the relationship or status the parties
have created by their agreement.

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Graham, 891 S.W.2d at 453; see also Preferred Physicians, 918 S.W.2d at 814 (“[A] mere failure
to complete the undertaking required by contract would not give rise to a cause of action in tort; the
remedy for such failure to act would lie in contract. The courts in Missouri have never recognized
a mere breach of contract as providing a basis for tort liability.”). As an example, the court in
Graham noted that failure of a real estate broker to perform his contractual and fiduciary duties
would support an action either for breach of contract or for negligence. Under Missouri law, the
relationship between a lender and a borrower is one of contractual obligation, not one of duty.
Wood & Huston Bank v. Malan, 815 S.W.2d 454, 458 (Mo. App. 1991) (noting that “the
relationship between a bank and its depositor involves a contractual relationship between a debtor
and a creditor”) (citing Matter of Estate of Parker, 536 S.W.2d 25, 29 (Mo. 1976) (en banc)).
As noted above, the Court does not accept as true the allegations that defendant BAC did not
have an interest in the subject property, defendant BAC did not have authority to appoint a successor
trustee, and defendants were not entitled to foreclose on the subject property. Plaintiffs also fail to
allege that they were not in default. Moreover, plaintiffs allege that defendants were “acting as
Plaintiff’s [sic] lender and/or loan servicer, and agents thereof....” Doc. #5, ¶ 44 (emphasis added).
Accordingly, the Court finds that plaintiffs fail to allege sufficient facts to support the contention
that defendant BAC is not a lender. As both parties recognize that the relationship between a lender
and a borrower is one of contractual obligation, not one of duty, plaintiffs fail to allege sufficiently
the first element of a negligence claim.
Furthermore, even if plaintiffs have sufficiently alleged the existence of a relationship that
created a duty owed to them by defendants, the negligence claim fails because plaintiffs do not state
sufficient factual support for the allegation that defendant BAC or defendant Millsap prepared false

21

documents or lacked legal authority to foreclose on the subject property. Therefore, plaintiffs fail
to allege the second element of a negligence claim. Plaintiffs’ negligence claim will be dismissed
for failure to state a claim.
(4)

Fraud Brought Against All Defendants

Defendants BAC and Freddie Mac argue that plaintiffs fail to state a claim for fraud against
them because plaintiffs cannot show that defendants BAC or Freddie Mac made any false
representations. Further, defendant Millsap argues that plaintiffs fail to plead their fraud claim with
the particularity required by Rule 9(b). Additionally, defendant Martin argues, because there were
no false representations, plaintiffs do not plead any facts which would show the falsity of any
representation made by defendant Martin and, because plaintiffs state they hired an attorney to
handle the wrongful foreclosure (with no allegation that defendant Martin handled the foreclosure),
plaintiffs do not plead any facts which would show reliance upon any alleged false representation
made by defendant Martin. Plaintiffs oppose defendant BAC and Freddie Mac’s and defendant
Millsap’s motions to dismiss, arguing that their allegations should be assumed true and that all of
the elements of a fraud claim are sufficiently pled in the petition. Plaintiffs fail to respond to
defendant Martin’s arguments.
Under Missouri law, the elements of a claim of fraud are:
(1) a false, material representation; (2) the speaker’s knowledge of the
falsity or his ignorance of the truth; (3) the speaker’s intent that the
hearer act upon the representation in a manner reasonably contemplated;
(4) the hearer’s ignorance of the representation; (5) the hearer’s reliance
on the truth of the representation; (6) the hearer’s right to rely thereon;
and (7) the hearer’s consequent and proximately caused injury.
Kempton v. Dugan, 224 S.W.3d 83, 87 (Mo. App. 2007) (citation omitted). A misrepresentation
“may be made by conduct calculated to mislead and fraudulently obtain an undue advantage.” Reis
22

v. Peabody Coal Co., 997 S.W.2d 49, 64 (Mo. App. 1999) (citing Haberstick v. Gordon A. Gundaker
Real Estate Co., 921 S.W.2d 104, 109 (Mo. App. 1996)). “[O]ne who participates in a fraud is of
course guilty of fraud, and one who, with knowledge of the facts, assists another in the perpetration
of a fraud is equally guilty.” Id. at 73 (citing Hobbs v. Boatright, 93 S.W. 934, 939-40 (Mo. 1906)).
In this case, it is questionable whether plaintiffs’ allegations regarding the non-existence of
an assignment of the deed of trust or appointment of a successor trustee based on “information and
belief” satisfy the particularity requirements of Rule 9(b). Dronbnak v. Andersen Corp., 561 F.3d
778, 783 (8th Cir. 2009) (“Allegations pleaded on information and belief usually do not meet Rule
9(b)’s particularity requirement.” (citation omitted)). Further, as noted above, the Court does not
accept as true the allegations that defendant BAC did not have an interest in the subject property,
defendant BAC did not have authority to appoint a successor trustee, and defendants were not
entitled to foreclose on the subject property. Plaintiffs also fail to allege that they were not in
default. Plaintiffs allege that defendants falsely represented that defendant BAC was the holder of
the note; nonpayment of the debt would result in a trustee foreclosure sale of the subject property;
defendant Millsap was foreclosing the note, which would result in the sale of the subject property;
plaintiffs owed attorney’s fees, collection costs, and other charges to defendant Millsap; Freddie
Mac purchased the property at a foreclosure sale; and plaintiffs either had to vacate the property or
enter into an agreement to rent the property, or they would be evicted. However, plaintiffs fail to
allege sufficient factual support for the first element of a claim of fraud, that any of these
representations were, in fact, false. Therefore, the Court will dismiss plaintiffs’ claim of fraud for
failure to state a claim.

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(5)

Willful, Wanton, and Malicious Conduct Brought Against All Defendants

Defendants argue that plaintiffs improperly assert a claim for willful, wanton, and malicious
conduct to obtain punitive damages. Defendants argue that, because punitive damages cannot be
the basis for a separate cause of action, plaintiffs fail to state a claim. Further, defendants argue that
plaintiffs have not alleged any facts that would entitle them to relief based on willful, wanton, and
malicious conduct. Plaintiffs fail to oppose defendants’ arguments.
The Court agrees with defendants that, because plaintiffs have not pled any viable causes of
action, the claim for punitive damages must also fail. See Misischia v. St. John’s Mercy Med. Ctr.,
30 S.W.3d 848, 866 (Mo. App. 2000) (“A punitive damage claim is not a separate cause of action,
it must be brought in conjunction with a claim for actual damages.” (quotation omitted)). Further,
for the reasons that Counts I-V fail to state a claim, the Court agrees that plaintiffs have not alleged
any facts that would entitle them to relief based on willful, wanton, and malicious conduct.
Accordingly, the Court will grant defendants’ motions to dismiss plaintiffs’ punitive damages claim.
C.

Plaintiffs’ Request for Leave to Amend

At the end of plaintiffs’ memorandum in opposition to defendants BAC and Freddie Mac’s
motion to dismiss, plaintiffs ask for leave to amend Count VI of their petition “against defendants,
for Willful, Wanton and Malicious Conduct, as a matter of course.”9 Plaintiffs’ “motion” is not
accompanied by a memorandum in support of the relief requested as required by this district’s local
rules nor is it accompanied by the proposed amendment. The Court has no information from which

9

The Court notes that plaintiffs’ time for amending their pleading as a matter of course has passed.
See Fed. R. Civ. P. 15(a)(1)(B).

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it could find that plaintiffs’ proposed amendment to Count VI would save this claim for “Willful,
Wanton, and Malicious Conduct.”
Although leave to amend is to be freely granted under Federal Rule of Civil Procedure 15(a),
the Court has discretion whether to grant leave to amend. “‘[I]n order to preserve the right to amend
the complaint, a party must submit the proposed amendment along with its motion.’” In re 2007
Novastar Fin., Inc., Secs. Litig., 579 F.3d 878, 884 (8th Cir. 2009) (quoting Clayton v. White Hall
Sch. Dist., 778 F.2d 457, 460 (8th Cir. 1985)). Plaintiffs have not submitted the proposed
amendment or proffered the substance of such an amendment. They merely include a request to
amend at the end of their response to defendants’ motion to dismiss. For this reason, the Court will
deny plaintiffs’ request to amend the complaint. Additionally, plaintiffs have not shown, and the
Court cannot find, that any amendment to Count VI would remedy any of the aforementioned
deficiencies of plaintiffs’ complaint. The Court finds that any amendment to Count VI would be
futile and plaintiffs’ petition should be dismissed.
Accordingly,
IT IS HEREBY ORDERED that defendants BAC Home Loans Servicing, LP and Federal
Home Loan Mortgage Association, Inc. d/b/a Freddie Mac’s motion to dismiss is GRANTED. [Doc.
7]
IT IS FURTHER ORDERED that defendant Martin, Leigh, Laws & Fritzlen, P.C.’s motion
to dismiss is GRANTED. [Doc. 11]
IT IS FURTHER ORDERED that defendant Millsap & Singer, P.C.’s motion to dismiss
is GRANTED. [Doc. 21]

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An Order of Dismissal will accompany this Memorandum and Order.

CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE
Dated this 19th

day of April, 2011.

26