Konar v. Ocwen Loan Servicing, LLC, et al.

Filing 29

ORDER granting 12 Motion for Summary Judgment; granting 12 Motion for Judgment on the Pleadings. The stay of Plaintiffs claims against Defendant New Century remains in effect; however, the Clerk of Court is DIRECTED to administratively close th is case from the active docket, subject to the same being reopened by any party upon the resolution of New Century's bankruptcy action in the Bankruptcy Court for the District of Delaware, or otherwise upon good cause shown. Signed by Senior Judge James C. Fox on 2/4/2013. (Edwards, S.)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No. 7:11-CV-163-F
CHRISTINE KONAR,

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Plaintiff,

v.
NEW CENTURY MORTGAGE CORP.,
OCWEN LOAN SERVICING, LLC.
Defendants.

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ORDER

This matter is before the court on the Motion for Judgment on the Pleadings or for Summary
Judgment [DE-12] filed by Defendant Ocwen Loan Servicing, LLC. The motion is ripe for ruling.

I. PROCEDURAL HISTORY
The pro se Plaintiff Christine Konar ("Plaintiff' or "Konar") initiated this action by filing a
Complaint in the North Carolina General Court of Justice, District Court Division, Pender County,
on June 15, 2011. The Complaint names Ocwen Loan Servicing, LLC ("Owen") and New Century
Mortgage Corporation ("New Century") as Defendants.
On July 29, 2011 , Ocwen filed a Notice of Removal in this court, asserting that it had
received a copy of the Complaint and SUm.mons on June 30, 2011, and asserting that this court had
subject matter jurisdiction in this case under 28 U.S.C. §§ 1331 , 1332 and 1367. After receiving an
extension of time, Ocwen filed an Answer [DE-7] on August 25, 2011 , and the court issued a
Scheduling Order [DE-ll] on October 21 , 2011. The Scheduling Order provided, inter alia, that
discovery had to be completed by June 29, 2012, and dispositive motions filed by July 27, 2012.
On July 27, 2012, Ocwen filed its Motion for Judgment on the Pleadings or for Summary

Judgment [DE-12] . Three days later, the Clerk of Court issued aNotice to Plaintiff ofF ailure to Make
Service on Defendant New Century [DE-14] . Plaintiff filed a Response [DE-16] to the Notice,
wherein she stated that she had made two certified mailings to New Century, one of which was
accepted and the other of which was returned to her, and enclosed her receipts. She also stated that
she did not realize that in June 2011 , "New Century was in bankruptcy." She stated the "Trustee of
New Century" now has "a copy of the original complaint and the removal" to this court. Thereafter,
Ocwen filed a Corrected Motion for Extension of Time to Extend Trial Date, noting that Ocwen' s
Motion for Judgment on the Pleadings or for Summary Judgment [DE-12] is pending before the court,
and a ruling on the motion may obviate the need for trial.
In an Order [DE-25] filed on October 12, 2012, the court recounted the parties' various filings,

and also observed that the parties' briefings with regard to Ocwen' s Motion for Judgment on the
Pleadings or Summary Judgment [DE-12] and attachments thereto indicate that Plaintiffhas filed a
claim in New Century' s bankruptcy proceeding in the United States Bankruptcy Court for the District
of Delaware and initiated an adversary proceeding against New Century. See Ocwen' s Mem. in
Support, Ex. B [DE-13-2] (complaint filed in Adversary Proceeding Case# 07-1 0416KJC); Pl. ' s Resp.
in Opp. [DE-19] at p. 10 (stating that she filed claim in "the Delaware bankruptcy court").
Accordingly, the court stayed this action as to Defendant New Century only pending the resolution of
its bankruptcy action in the Bankruptcy Court for the District of Delaware. The court also allowed
Ocwen' s Motion to Extend in part, and continued the bench trial in this matter to the term of court
commencing on March 11 , 2013.

II. ALLEGATIONS IN THE COMPLAINT AND RECORD EVIDENCE
The Complaint is captioned "Action to Quiet Title- Fraudulent Conveyance, Trespass to Try
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Title." Therein, Plaintiff alleges that on February 27, 2007, she entered into a home mortgage, secured
by a deed of trust, with New Century, for her home located at 322 Lafayette Street, Wilmington, North
Carolina, 28411 . Compl. [DE-1 .2] ~~ 3,8. The record evidence supports that Plaintiff executed a note
and deed of trust securing the repayment of a $11 7,600 loan from New Century Mortgage Corporation.
Compl. [DE-1.2. ], Ex. A (Deed of Trust); Ex. B (Note); Reply, Ex. A [DE-24.1] (Deed ofTrust); Aff.
of Ryan Bradley, Ex. A [DE-24.3] (Note). Plaintiff alleges she was "never given a Consumer' s right
to rescind in the original mortgage documents, nor did the Plaintiff realize or was it disclosed she
could rescind the transaction, per Reg. Z. § 226.23(a)(3)." Id

at~

11 .

She alleges that the mortgage or deed of trust that secures the note is invalid, under "TILA," 1
and that "Defendant(s)[sic] liens are invalid." Id

at~~

13-14. She also contends that Ocwen has

"misrepresented true and legal conveyance by . . . [New Century] to [Ocwen], by denying and
misrepresenting ' collateral rights' to sell the property or act as its lien holder." Id

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15. Plaintiff

further alleges there is a "cloud on the title" because "the chain of title has been broken by passing the
rights of ownership without legal documentation, by MERS" and that Ocwen acquired the mortgage
from MERS. Jd

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17-18. She also alleges that Ocwen has failed to register as a trustee under North

Carolina, and has violated various state and federal laws.

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21-28.

In addition to these allegations, the record evidence also shows that the Note contains the
following provision: "I understand that the Lender may transfer this Note. 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.' " Aff. of Ryan Bradley, Ex. A [DE-24.3] at p.l. The Deed of Trust named Mortgage

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The court assumes Plaintiff is referencing the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601
et seq.
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Electronic Registration Systems ("MERS") as the beneficiary of the Deed of Trust solely as nominee
for the Lender, New Century. Reply, Ex. A [DE-24.1] (Deed of Trust). At some point after the
closing, New Century sold the Note, and U.S. Bank N.A. as Trustee for the registered holders of
CSMC Asset-Backed Trust 2007-NCI OSI, CSMC Asset-Backed Pass-Through Certificates, Series
2007-NCI OSI ("U.S. Bank") is the current owner. Reply, Aff. ofOcwen [DE-24.2] ,-r 2. U.S. Bank
granted a limited power of attorney to Ocwen, and Ocwen now services the loan. Id ,-r,-r 3-4.
Beginning in February 2011 , three separate foreclosure proceedings were commenced and
subsequently dismissed without prejudice for reasons unclear from the record before the court. With
regard to at least one of these proceedings, Plaintiff, through counsel, file a Complaint for Injunctive
Relief in Pender County Superior Court, seeking to enjoin the foreclosure hearing and sale based on
the litigation in the instant court. It is unclear what action, if any, the state court has taken on
Plaintiffs Complaint for Injunctive Relief.
It is undisputed that Plaintiff has not made a mortgage payment on the subject property since
September 1, 2009. See Reply, Aff. ofOcwen, [DE-24.2] ,-r,-r 5, 6; In reNew Century TRS Holdings,

Inc., Case No. 07-10416 (KJC), Transcript of July 12, 2012, Hearing at p. 210 (located in case at
docket entry 10994) (Bankr. Del. July 24, 2012) (in response to the presiding bankrupty judge' s
questions, plaintiff admitted that the last time she made a mortgage payment on the subject property
was in late 2009). 2
III. STANDARD OF REVIEW
A motion for judgment on the pleadings pursuant to Rule 12(c) is intended to test the legal

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Plaintiff filed a portion of this transcript along with her response. The court has accessed the
entirety of the transcript which is publicly available from the United States Bankruptcy Court for the
District of Delaware.
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sufficiency of the complaint. In considering -such a motion, the court must accept well-pleaded facts
as true and draw all factual inferences in favor on the non-moving party. See Edwards v. City of

Goldsboro, 178 F .3d 231, 244 (4th Cir. 1999). Judgment on the pleadings should be granted only if
it is clear that there is no genuine issue of material fact and that judgment is appropriate as a matter
of law.
However, if"matters outside the pleadings are presented to and not excluded by the court, the
motion shall be treated as one for summary judgment under Rule 56 .... " FED. R. CIV. P. 12(d).
Thus, when a party files a motion for judgment on the pleadings, the district court may, sua sponte,
convert the motion to one for summary judgment if (i) matters outside the pleadings are presented to
the court, and (ii) all parties are given notice that the dismissal motion may be treated as one for
summary judgment. See FED.R.Civ.P. 12(d); Pachaly v. City of Lynchburg, 897 F.2d 723, 177 (4th
Cir.1990). In an analogous situation, the Court of Appeals for the Fourth Circuit has held that "when
a party is aware that material outside the pleadings is before the court, the party is on notice that a Rule
12(b)(6) motion may be treated as a motion for summary judgment." Gay v. Wall, 761 F.2d at 177.
In the instant case, all parties have submitted exhibits not referenced in the pleadings, and the time
period for discovery has closed. Accordingly, the court will analyze Ocwen's motion as one for
summary judgment.

IV. ANALYSIS
In its memorandum in support of its motion, Ocwen first argues that (1) any claim Plaintiff
asserts against it under TILA fails as a matter of law; (2) Plaintiffs allegations as to MERS and the
assignment of the security instrument fail to state a claim, and (3) Plaintiffs references to various
statutes, including alleged violations of the Clayton Act, 15 U.S.C. § 15, and the Sherman Anti-Trust

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Act, 15 U.S.C. § 1 et seq., are without factual support and fail to state a claim. In response, Plaintiff
makes many assertions with regard to Defendant New Century' s actions, and asserts her allegations
regarding TILA are "part of the New Century claim" and are not directed at Ocwen. She also asserts
that the relief she requests is clearly stated in the caption. Again, the caption states "Action to Quiet
Title- Fraudulent Conveyance, Trespass to Try Title."
Based on the foregoing, the court construes Plaintiffs response as conceding that she has failed
to support any claims under TILA, the Clayton Act, and the Sherman Anti-Trust Act that may have
been alleged against Ocwen in the Complaint. The court also construes Plaintiffs response as
asserting that the claims she actually pursues against Ocwen are (1) a claim to quiet title; (2) a claim
of "trespass to try title", and (3) a claim for fraudulent conveyance.

A. Quiet Title Action
"An action [to quiet title] may be brought by any person against another who claims an estate
or interest in real property adverse to him for the purpose of determining such adverse claims." N.C.
Gen. Stat.§ 41-10. The purpose ofthe statute creating a cause of action to quiet title is to " ' free the
land of the cloud resting upon it and make its title clear and indisputable, so that it may enter the
channels of commerce and trade unfettered and without the handicap of suspicion . . . . ' " Resort

Development Co., Inc. v. Phillips, 278 N.C. 69, 77, 178 S.E.2d 813, 818 (1971) (quoting Christman
v. Hilliard, 167 N.C. 4, 8, 82 S.E.2d 949, 951 (1914)). "'A cloud upon the title is, in itself: a title or
encumbrance, apparently valid, but in fact invalid. It is something which, nothing else being shown,
constitutes an encumbrance upon it or a defect in it- something that shoes prima facie the right of a (
third party either to the whole or some interest in it, or to alien upon it. '" Yorkv. Neman, 2 N.C. App.
484, 488, 163 S.E.2d 282, 285 (1968) (quoting McArthur v. Griffith, 147 N.C. 545, 549, 61 S.E.519,

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521 (1908)).
Ocwen asserts that Plaintiff is not asking this court to free the subject property from a cloud
on its title so the subject property can "enter the channels of commerce and trade unfettered and
without the handicap of suspicion." Resort Development Co. , 278 N.C. at 77, 178 S.E.2d at 818.
Rather, Plaintiff is asking the court to order that Ocwen, the servicer of the loan, does not have right
to enforce an encumbrance on the subject property. She, however, has proffered no viable legal theory,
supported by evidence, that the encumbrance is invalid.
Specifically, it is undisputed that Plaintiff signed the Note, promising to repay the amount of
the Loan by New Century, and that she executed a Deed of Trust. As best as the court can discern
from Plaintiffs filings before it, she is arguing that the encumbrance is invalid because of TILA
violations committed by New Century and because she is requesting the remedy of rescission under
TILA. Under TILA, however, a borrower has, at most, "three years after the date of consummation
of the transaction" to exercise his or her right to rescission. 15 U.S.C. § 1635(±). Here, the only
indication in the record that Plaintiff exercised her right to rescission was her filing of the instant
lawsuit on June 5, 2011 , which is more than three years after the date of consummation of her
mortgage on February 27, 2007. Thus, even if a TILA violation and its attending right to rescission
could serve as a basis for finding that the encumbrance is invalid, it is no longer a viable theory. See
Gilbertv. Residential Funding, LLC, 678 F.3d271 , 277 (4thCir. 2012) (explainingthatborrowermust
take some action to exercise her right to rescind the transaction within three years). Plaintiff has
advanced no other legal theory why the encumbrance is invalid.
Rather, at bottom, Plaintiff appears to seek a declaration from the court that a servicer, in this
case Ocwen, may not enforce the encumbrance for any variety of reasons not concerning the validity
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of the encumbrance. This is not the purpose of a quiet title action, and Ocwen' s motion is therefore
ALLOWED as to Plaintiffs quiet title claim. 3 Cf Lancaster v. Suntrust Mortg., Inc. , 7:09-CV-134BO 2011 WL 3104951 , at *2 (E.D.N.C. July23 2011) (dismissing plaintiffs ' quiet title claim because
plaintiffs were not seeking to remove an invalid encumbrance from the property, but instead were
asking the court "to declare that service cannot cause foreclosure proceedings to be initiated on behalf
of the owner of a security interest in a piece of property"). See also Brown v. Wilmington Finance,
Civil No. CCB-11-669, 2012 WL 875541 , at *6 (D. Md. March 21 , 2012) (dismissing a plaintiffs
claim to quiet title under Maryland law where plaintiff admitted that she took out two loans,
encumbered her property by a deed of trust, and failed to satisfy the encumbrances, and her claim for
rescission was "barred by the TILA statute of repose, and she ha[d] articulated no other reason under
law why defendants' purported interest in her property should be voided").

B. Trespass to Try Title
To the extent that Plaintiffs reference to "trespass to try title" in the caption and first sentence
in the Complaint attempts to state such a claim, Ocwen is entitled to judgment thereon. In an action
for trespass to try title, a plaintiff must allege and prove both title in herself and trespass by a
defendant. See Keller v. Hennessee , 11 N.C. App. 43 , 46, 180 S.E.2d 452, 454 (1971). Here, even
ifthere admissible evidence oftrespass,4 there is no dispute about the title to the subject property, for
the reasons the court already has stated. Accordingly, Ocwen' s motion for summary judgment is

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Should foreclosure proceedings be instituted against the subject property again, this court notes
that it has not issued any ruling or judgment on any trustee ' s right to close on the subject property.

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The only evidence in the record concerning trespass is an unsworn statement ostensibly by Plaintiff
in an email by her regarding settlement of the matter. See Response, Ex. F, April20, 2012 Email
[DE-19.6] ("We have trespassers on the property of ' unknown and unidentified' persons on the
property on a Sunday @ 9:00 AM trying to [illegible] locks and ' winterize the property.' ").
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ALLOWED as to Plaintiffs claim for trespass to try title.

C. Fraudulent Conveyance
The final "claim" listed in the caption ofthe Complaint is "fraudulent conveyance." This claim
is simply inapplicable to the facts alleged in the Complaint and the admissible evidence in the record.

An action for a fraudulent transfer, or conveyance, is generally brought by a creditor against a debtor
to set aside a transfer of property or to obtain other similar relief. See N.C. Gen. Stat. § 39-23.4.
Plaintiff, of course, is not a creditor of Ocwen. The court can discern no conceivable basis for this
claim, and therefore Ocwen' s motion for summary judgment is ALLOWED as to this claim.

V. CONCLUSION
For the foregoing reasons, Ocwen' s Motion for Judgment on the Pleadings or for Summary
Judgment [DE-12] is ALLOWED, and Plaintiffs claims against Ocwen are DISMISSED. The stay
of Plaintiffs claims against Defendant New Century remains in effect; however, the Clerk of Court
is DIRECTED to administratively close this case from the active docket, subject to the same being
reopened by any party upon the resolution of New Century' s bankruptcy action in the Bankruptcy
Court for the District of Delaware, or otherwise upon good cause shown.
SO ORDERED. This the 4th day of February, 2013.

esC. Fox
enior United States District Judge

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