Alexander et al v. Nationstar Mortgage, LLC et al
Filing
37
MEMORANDUM ORDER: re: 30 MOTION to Dismiss Third Amended Complaint filed by Deutsche Bank National Trust Company, Nationstar Mortgage, LLC. For the foregoing reasons, Defendants' motion to dismiss Plaintiffs' Third Amended Complaint is g ranted, and all of Plaintiffs' federal law claims are dismissed with prejudice. The Court declines pursuant to 28 U.S.C. section 1367(c) to exercise jurisdiction of Plaintiffs' state law claims. This Memorandum Opinion and Order resolves Docket Entry No. 30. The Clerk of Court is requested to enter judgment in favor of Defendants and close this case. SO ORDERED. (Signed by Judge Laura Taylor Swain on 12/22/2017) Copies Mailed By Chambers. (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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DONALD R. ALEXANDER,
EARLEEN W. ALEXANDER,
Plaintiffs,
-v-
No. 16-CV-2607-LTS-JLC
NATIONSTAR MORTGAGE, LLC;
DEUTSCHE BANK NATIONAL TRUST
COMPANY AS TRUSTEE FOR GS HOME
EQUITY TRUST 2007-5. et al.; and DOES 1
THROUGH 100 INCLUSIVE,
Defendants.
-------------------------------------------------------x
MEMORANDUM ORDER
Donald R. Alexander and Earleen W. Alexander (together, “Plaintiffs”),
proceeding pro se, bring this lawsuit against Nationstar Mortgage, LLC (“Nationstar”), Deutsche
Bank National Trust Company (“Deutsche Bank”) as trustee for GS Home Equity Trust 2007-5,
et al., and Does 1 through 100 Inclusive (collectively, “Defendants”), seeking declaratory relief
invalidating encumbrances upon and the foreclosure sale of a home, and damages. Plaintiffs
assert federal claims, for violation of the Truth in Lending Act, 15 U.S.C. § 1601 et seq.
(“TILA”), the Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq. (“CCPA”), and the Real
Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-17 (“RESPA”), in addition to eight state
law claims. This Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. §
1331.
Defendants move, pursuant to Federal Rule of Civil Procedure 12(b)(6), to
dismiss the Third Amended Complaint (Docket Entry No. 28) (“Complaint”) with prejudice for
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failure to state a claim. (Docket Entry No. 30.) The Court has considered the parties’
submissions in connection with the instant motion carefully and, for the reasons below, grants
Defendants’ motion to dismiss.
BACKGROUND
The following recitation of facts is drawn from the Complaint, the factual content
of which is taken as true for purposes of this motion, and a Deed of Trust securing Plaintiffs’
mortgage which is referred to in the Complaint as “Assignment No. 1.” The Deed of Trust is
explicitly referred to in the Complaint, is integral to Plaintiffs’ claims and, furthermore, is a
publicly recorded document of which the Court may take judicial notice. Staehr v. Hartford Fin.
Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008) (in deciding a Rule 12(b)(6) motion, a court
may consider matters of which judicial notice may be taken); DiFolco v. MSNBC Cable L.L.C.,
622 F.3d 104, 111 (2d Cir. 2010) (in considering a 12(b)(6) motion, a court may consider
documents incorporated by reference in the complaint); L-7 Designs, Inc. v. Old Navy, LLC, 647
F.3d 419, 422 (2d Cir. 2011) (when deciding a motion to dismiss, courts may consider
documents integral to a complaint).
On December 15, 2006, Plaintiffs executed “a mortgage loan in the sum of
$600,000 originated by Ryland Mortgage Company.” (Compl. ¶ 10.) Plaintiffs assert that “[t]he
original beneficiary and nominee of the [p]romissory [n]ote and [m]ortgage was MERS
[(Mortgage Electronic Registration Systems, Inc.)].” (Id.) The Deed of Trust identifies MERS
as beneficiary “(solely as nominee for Lender [(defined as Ryland Mortgage Company)] and
Lender’s successors and assigns).” (Document No, 2006-270887, recorded December 29, 2016,
filed in this action as Docket Entry No. 19-1, at 4.) Plaintiffs nonetheless characterize the Deed
of Trust as an “assignment” to MERS (“Assignment No. 1.”). (See Complaint ¶ 11.) Three
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notices of default were recorded against Plaintiffs’ property, in 2009, 2012 and 2014,
respectively. (Id. ¶¶ 12, 17, 18.) On February 15, 2015, Nationstar Mortgage, LLC, foreclosed
on Plaintiffs’ home. (Id. ¶ 19.)
Plaintiffs make several allegations of wrongdoing by Defendants. Many of the
allegations appear to rely on the theory that a defect in what Plaintiffs characterize as
“Assignment No. 1” of the Deed of Trust has rendered “all of the actions that occurred as a result
of the void assignment, including the foreclosure of the subject Mortgage . . . also void.” (Id. ¶¶
20-24, 26.) According to Plaintiffs, “Assignment 1 was from MERS as [n]ominee to Ryland
Mortgage Company. Assignment 2, whereby MERS attempted to assign its interest, . . . was
invalid since MERS had already assigned any and all of its interest in Assignment 1.”1 (Id. ¶
21.) Plaintiffs further allege that “Assignment 1 was to a non-existent entity which rendered
Assignment 2 void.” (Id. ¶22.) Plaintiffs allege that Assignment 1 occurred in 2006, and that
Assignment 2 occurred in 2011. (Id. ¶¶ 11, 16.) Plaintiffs allege that legal notice requirements
were violated in connection with both alleged assignments such that both assignments were
concealed until October 24, 2014, the date on which Plaintiffs obtained a Securitization Analysis
Report,2 a loan audit, from “expert Michael Carrigan.” (Id. ¶ 13.)3
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2
3
As noted above, Plaintiffs’ characterization of the Deed of Trust as an Assignment from
MERS to Ryland is inconsistent with the plain terms of the Deed of Trust. Plaintiffs’
theory that MERS divested itself of any interest in the Deed of Trust through that 2006
instrument is therefore unsupported by plausible factual allegations. The Court is not
required to accept as true Plaintiffs’ allegations that are contradicted by public
documents. See In re Livent, Inc. Sec. Litig., 148 F. Supp. 2d 331, 368 (S.D.N.Y. 2001).
The “loan audit” document is attached to Plaintiffs’ original Complaint and is referred to
in the operative Third Amended Complaint.
Plaintiffs also allege in the Complaint that the assignments were concealed until their
review of a January 2016 loan audit. (Compl. ¶¶ 13, 59.) Plaintiffs, however, make no
further mention and provide no documentation of this audit, instead referencing and
attaching, as Exhibit A to the Initial Complaint, only an October 24, 2014 Securitization
Analysis Report by Carrigan. Because the October 24, 2014, report would have provided
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In addition to the claims based on their allegations of improper assignments,
Plaintiffs allege violations of federal law, California State law, and of their Pooling and
Servicing Agreement under New York law, during the foreclosure process. (Compl.)
Plaintiffs filed their Initial Complaint on April 7, 2016 (Docket Entry No. 1.),
followed by three subsequent amended complaints (Docket Entry Nos. 22, 27, 28) in response to
Defendants’ motions to dismiss (Docket Entry Nos. 18, 23).
DISCUSSION
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A proper complaint cannot simply recite legal conclusions or bare elements of a cause
of action; there must be factual content plead that “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
TILA and CCPA Claims
Defendants seek dismissal of Plaintiffs’ third and fifth causes of action as time
barred. In Plaintiffs’ third and fifth causes of action, they allege Defendants violated TILA when
they failed to disclose the assignments of their Deed of Trust and Promissory Note to the
Plaintiffs. 4 “TILA provides that, ‘not later than 30 days after the date on which a mortgage loan
4
adequate notice of any title defects, Plaintiffs’ conclusory reference to a January 2016
audit is insufficient to establish plausibly a basis for treatment of January 2016 as the
point when Plaintiffs became aware of the allegedly defective transfers.
Plaintiffs’ fifth cause of action is asserted under the Consumer Credit Protection Act
(“CCPA”), 15 U.S.C. § 1641(g). “TILA is part of Title I of CCPA, and 15 U.S.C. §
1641(g) is part of TILA. See Stein v. JP Morgan Chase Bank, 279 F. Supp. 2d 286, 290
n.2 (S.D.N.Y. 2003). Accordingly, the Court will treat both counts as having been
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is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or
assignee of the debt shall notify the borrower in writing of such transfer.’ The ‘statute of
limitations for causes of action brought under TILA . . . is one year from the date of the alleged
violation.’” Nationstar Mortgage, No. 16-cv-2943(KBF), 2017 WL 570941, at *5 (S.D.N.Y.
Feb. 13, 2017) (quoting 15 U.S.C. § 1641(g)(1)) (internal citations omitted). The alleged
assignments of the Deed of Trust occurred in 2006 and 2011. (Compl. ¶¶ 11, 16.) Plaintiffs
filed their Initial Complaint in 2016, almost five years after the most recent purported
assignment. (Docket Entry No. 1.) Thus, Plaintiffs’ claims are time barred on their face.
Plaintiffs nonetheless assert that they are entitled to invoke equitable tolling and
the claims should be treated as timely, alleging that Defendants did not record, and concealed,
the 2006 assignment. (Compl. ¶ 58.) Plaintiffs allege their October 24, 2014, loan audit outlined
the chain of title and made each assignment “reasonably ascertainable.” (Compl. ¶¶ 13, 59.)
Therefore, even if the statute of limitations had been tolled by reason of Defendants’ conduct,
Plaintiffs’ discovery of the alleged TILA violations in 2014 eliminated any continuing basis for
such tolling. This suit was not filed until 2016, more than one year after Plaintiffs were apprised
of the assignments, and thus is still time barred. Accordingly, the Court dismisses counts three
and five of the Complaint as barred by the statute of limitations. See In re Palermo, 739 F.3d 99,
106 (2d Cir. 2014) (stating that a dismissal without prejudice of a claim outside of the statute of
limitations operates in effect as a dismissal with prejudice since any refiling would be barred).
brought under TILA.” Dins v. Bank of America, N.A., No. 16-cv-5741(KBF), 2017 WL
570944, at *5 (S.D.N.Y. Feb. 13, 2017).
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Regulation X Claim5
In count six of the Complaint, Plaintiffs assert that Defendants violated Consumer
Financial Protection Bureau Regulation X, 12 C.F.R. § 1024.41(b). Specifically, Plaintiffs allege
that Defendants “did not conduct a review to determine whether the Plaintiffs [sic] submitted
loan modification application . . . [was] complete or…incomplete” (Compl. ¶ 73), and “did not
act affirmatively to complete the Plaintiff's [sic] loan modification application and did not
exercise reasonable diligence to obtain any documents/information to complete the application.”
(Compl. ¶ 76.)
The Complaint fails to state a claim that Defendants breached their duty under 12
C.F.R. § 1024.41(b). In particular, the Complaint proffers no information identifying any loan
modification application by Plaintiffs, and does not allege nonconclusory facts demonstrating
any breach of the requirements of the regulation. See Bank of America, 2017 WL 570944, at *4.
(A well pled complaint alleging a breach of a lender’s duties prescribed by 12 C.F.R. §
1024.41(b) must “include . . . concrete allegations, such as to whom [P]laintiff[s] sent the
application . . . and whether . . . [they] received any sort of response or acknowledgement.”).
Accordingly, count six of the Complaint is dismissed.
Table-funding Claim
Plaintiffs allege generally that their loan was “table funded” by Ryland Mortgage
Company, the loan originator, using a warehouse line of credit, that the loan and security
documentation were handled improperly, and that Defendants’ failure to disclose the table
5
Regulation X administratively implements RESPA. See Hill v. DLJ Mortgage Cap., Inc.,
689 Fed. Appx. 97, 98 (2d Cir. 2017). “A borrower may enforce the provisions of [12
C.F.R. § 1024.41(b)] pursuant to section 6(f) of RESPA (12 U.S.C. 2605(f)).” 12 C.F.R.
§ 1024.41(b).
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funding violated RESPA. (Compl. ¶¶ 38, 41). This claim is insufficiently pled, and thus fails.
Table funding is a transaction at closing in “which a loan is funded by a contemporaneous
advance of loan funds and [there is] an assignment of the loan to the person advancing the
funds.” Moreno v. Summit Mortg. Corp., 364 F.3d 574, 576 (5th Cir. 2004) (quoting 24 C.F.R.
§ 3500.2(b)) (internal quotation marks omitted). A transaction that is table funded is not a
secondary market transaction, and thus, is subject to RESPA. Id. at 576. To properly state a
claim for table funding in violation of RESPA, a plaintiff must allege that the loan originator was
not the real source of funding for the loan and that the loan was not closed in the originator’s
own name. See id. at 577. Here, the Deed of Trust was closed in the name of Ryland Mortgage
Company, the loan originator, and Plaintiffs do not allege that their loan was contemporaneously
funded by a third-party to whom the loan was assigned. (See Compl. ¶ 10.) Accordingly,
Plaintiffs’ table funding claim is dismissed.
State Law Claims
Plaintiffs also assert numerous state law claims, including wrongful foreclosure,
violations of their Pooling and Servicing Agreement under New York law, violations of the
California Civil Code and a request for declaratory relief. “Plaintiff[s’] state law claims are the
only remaining claims. Having dismissed all claims over which it has jurisdiction, the Court, in
its discretion, declines to exercise supplemental jurisdiction over [P]laintiff[s’] state law
claim[s].” Bank of America, 2017 WL 570944, at *4; See Kolari v. New York-Presbyterian
Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (holding that in cases where all federal law claims are
eliminated before trial it is usual that the balance of factors to be considered will point toward
declining to exercise jurisdiction over remaining state law claims).
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CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ Third
Amended Complaint is granted, and all of Plaintiffs’ federal law claims are dismissed with
prejudice. The Court declines pursuant to 28 U.S.C. section 1367(c) to exercise jurisdiction of
Plaintiffs’ state law claims. This Memorandum Opinion and Order resolves Docket Entry No.
30.
The Clerk of Court is requested to enter judgment in favor of Defendants and
close this case.
SO ORDERED.
Dated: New York, New York
December 22, 2017
/s/ Laura Taylor Swain
LAURA TAYLOR SWAIN
United States District Judge
Copy mailed to:
Donald R. Alexander
Earleen W. Alexander
7873 West Depot Master Drive
Tracy, CA 96504
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