Barber et al v. Countrywide Home Loans, Inc. et al

Filing 8

MEMORANDUM AND RECOMMENDATIONS re 6 MOTION to Dismiss MOTION to Dismiss Case as Frivolous filed by Jimmy Munoz, Adrian Ely, Countrywide Home Loans, Inc. Objections to M&R due by 10/26/2009. Signed by Magistrate Judge Dennis Howell on 10/07/2009. (thh)

I N THE UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF NORTH CAROLINA B R Y S O N CITY DIVISION 2 :0 9 cv 4 0 W I L L I A M G. BARBER; and M E L I N D A BARBER, P la in t if fs , Vs. C O U N T R Y W I D E HOME LOANS, I N C .; VIP JIMMY MUNOZ; SHEILA Z U C K E R M A N ; and ADRIAN ELY, D efen d an ts. _______________________________ ) ) ) ) ) ) ) ) ) ) ) ) )

M E M O R A N D U M AND R E C O M M E N D A T IO N

T H I S MATTER is before the court on defendants Countrywide Home Loans, In c .'s , Jimmy Munoz's, and Adrian Ely's Motion to Dismiss under Rules 9(b) and 1 2 (b )(6 ). Plaintiffs are proceeding pro se and have been advised of their obligation to respond and the time for doing so. See Roseboro Order, Docket Entry #7. Plaintiffs w e r e allowed up to and inclusive of September 25, 2009, to respond, but no response w a s filed. F I N D I N G S AND CONCLUSIONS I. N a tu r e of Action and Defendants' Motion In this action, which appears to involve a mortgage loan on a residential

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p ro p e rty in the mountains of North Carolina, plaintiffs claim that they are "seeking a re m e d y in Admiralty." Compl., at p. 2&4. They demand cancellation and discharge o f their mortgage loan debt. Id., at p. 6. Plaintiffs allege that a note was created on our credit and signature . . . and was not an asset of C o u n try w id e until we gave it to the bank. *** W h e n Countrywide accepted our mortgage `Note in exchange for credits to [our] borrower's transaction account', it became obligated to us, the T h ir d Party Plaintiffs. Id ., at pp. 4-5 (errors and brackets in the original). Countrywide allegedly "sold the o r i g i n a l note and failed to give credit to our account." Id. , at 4 (emphasis deleted). P la in tif fs demand to "inspect the `Original Mortgage Note', with wet ink signatures, a lo n g with the Title Page that shows whether or not the mortgage has been satisfied." Id . (errors in the original). The Complaint also references an "Agreement" that "did not provide the P la in tiff s with knowledge of the nature of the transaction." Id., at 5. According to P la in tiff s , the Agreement "concealed the fact that Countrywide exchanged our Note [w h ic h was our Asset] for a credit to the borrower's transaction Account." Id. (e m p h a s is deleted; bracketed material in the original). Plaintiffs claim that this " c re d it" loan was unconstitutional. Id., at pp. 2 & 6. They state that they "tendered a lawful offer to Countrywide to settle" their alleged claims, but that Countrywide re fu s e d the "lawful offer and has refused to zero the account." Id.,at 6. Plaintiffs allege
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th a t, as a result, defendants are liable for "a Dishonor in Commerce, Fraud, Theft of P u b lic Funds, Racketeering, and Conspiracy," and the debt has been discharged. Id., a t pp. 5-6. P la in tiffs also assert as a "Counterclaim" a demand for "$1,000,000.00 per c o u n t Per Third Party Defendant." Id., at p. 12. Plaintiffs also demand payment of the " $ 2 ,2 0 0 ,0 0 0 .0 0 Countrywide received when it sold our Note and did not give us the c re d it it exchanged for our Note." Id., at p. 11. W h ile captioning the matter as an action against Countrywide and individual d efe n d a n ts Munoz, Zuckerman, and Ely, plaintiffs' Complaint contains no allegations a g a in s t them. Plaintiffs do make a "demand that . . . Jimmy Munoz, Shelia

Z u c k e rm a n , and Adrian Ely produce their Proof of Claim." Id., at p. 4. II. A p p lic a b le Standards A. R u le 9(b) Standard

W h e n pleading fraud, the notice pleading requirements are inapplicable and s p e cia l rules of pleading come into play. Rule 9(b), Federal Rules of Civil Procedure, p r o v id e s : In all averments of fraud or mistake, the circumstances constituting fraud o r mistake shall be stated with particularity. Malice, intent, knowledge, a n d other condition[s] of mind of a person may be averred generally. T h e specificity required in claiming fraud is an exception to the provisions of notice

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p le a d in g found in Rules 8(a),(e), and (f), Federal Rules of Civil Procedure. See also N .C . Gen. Stat. Chapter 1A-1, Rule 8. The general rule that pleadings are to be given lib e ra l construction does not apply to claims of fraud. Rosenthal v. Perkins, 42 N.C. A p p . 449 (1979). Because review is limited to the face of the pleadings and accompanying a tta ch m e n ts , factual support outside of the record may not be considered and is treated a s if it does not exist. A plaintiff must be particular as to the facts upon which its c la im of fraud arises. Hoyle v. Bagby, 253 N.C. 778 (1961). An allegation which m e re ly states that the acts specified constituted fraud is conclusory. Patuxent

D e v e lo p m e n t Co. v. Bearden, 227 N.C. 124 (1947). Conclusory allegations of fraud a r e insufficient to meet the requirement of particularity. Smith v. Central Soya of A th e n s , Inc., 604 F. Supp. 518 (1985). The issue becomes whether proof of the facts a s alleged in the Complaint would entitle the plaintiffs to relief. Brooks Equipment & Mfg. Co. v. Taylor, 230 N.C. 680 (1949). Reliance on discovery to support a claim o f fraud is inappropriate. "A plaintiff must know about what he is complaining before h e files [a] suit [claiming fraud]." McFarland v. Memorex Corp., 493 F. Supp. 631, 6 5 6 (N.D. Cal. 1980). The district court's opinion in McFarland dovetails with the re q u ire m e n t of Rule 9(b) that "the circumstances constituting fraud or mistake shall b e stated with particularity." Rule 9(b), Fed. R. Civ. P. To allow otherwise would be

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to encourage actions for fraud based on "information and belief" rather than hard facts a n d firsthand knowledge. B. R u le 12(b)(6): Applicable Standard

U n til recently, a complaint could not be dismissed under Rule 12(b)(6) unless it appears certain that the plaintiffs can prove no set of facts which would support their c la im and entitle them to relief. Neitzke v. Williams, 490 U.S. 319 (1989); Conley v. G ib s o n , 355 U.S. 41 (1957). This "no set of facts" standard has been specifically a b ro g a te d by the Supreme Court in recent decisions. First, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Court held th a t the "no set of facts" standard first espoused in Conley, supra, only describes the " b re a d th of opportunity to prove what an adequate complaint claims, not the minimum a d e q u a te pleading to govern a complaint's survival." Id., at 563. The Court

s p e c ific a lly rejected use of the "no set of facts" standard because such standard would im p ro p e rly allow a "wholly conclusory statement of claim" to "survive a motion to d is m is s whenever the pleadings left open the possibility that a plaintiff might later e s ta b lis h some `set of [undisclosed] facts' to support recovery." Id., at 561 (alteration in original). Post Twombley, to survive a Rule 12(b)(6) motion to dismiss, a plaintiff must a lle g e facts in his complaint that "raise a right to relief above the speculative level."

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Id ., at 555. [A] plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic re c ita tio n of the elements of a cause of action will not do . . . . Id. (second alteration in original; citation omitted). Further, a complaint will not s u rv iv e Rule 12(b)(6) review where it contains "naked assertion[s] devoid of further fa c tu a l enhancement." Id., at 557. Instead, a plaintiff must now plead sufficient facts to state a claim for relief that is "plausible on its face." Id., at 570 (emphasis added). W h ile the Court was clear in Twombly that Conley was no longer controlling, s e e Twombly, 550 U.S. at 563, and Felman Production Inc. v. Bannai, 2007 WL 3 2 4 4 6 3 8 , at *4 (S.D.W.Va. 2007), it again visited the Rule 12(b)(6) pleading standard in Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937 (May 18, 2009). In Ashcroft, the C ourt held that Rule 8 "demands more than an unadorned, the

defendant-un law fully -harm ed -m e accusation." Id., S.Ct., at 1949. The Court explained th a t, "to survive a motion to dismiss, a complaint must contain sufficient factual m a tte r , accepted as true, to `state a claim to relief that is plausible on its face.'" Id. (c itin g Twombly, supra; emphasis added). What is plausible is defined by the Court: [a ] claim has facial plausibility when the plaintiff pleads sufficient fa ctu a l content that allows the court to draw the reasonable inference that th e defendant is liable for the misconduct alleged. Id . This "plausibility standard" requires "more than a sheer possibility that a defendant

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h a s acted unlawfully." Id. Thus, a complaint fall short of the plausibility standard w h e r e plaintiff "pleads facts that are `merely consistent with' a defendant's lia b ility . . . ." Id. While the court accepts plausible factual allegations made in the C o m p la in t as true and considers those facts in the light most favorable to plaintiff in r u l in g on a motion to dismiss, a court "need not accept as true unwarranted inferences, u n r e a s o n a b le conclusions, or arguments." Eastern Shore Mkt.'s Inc. v. J.D. Assoc.'s, L L P , 213 F. 3d 175, 180 (4th Cir. 2000). As reflected above in the discussion of the allegations of the Complaint herein, th e court has accepted as true all of the factual allegations contained in the Complaint, a n d , as well, has identified "pleadings that, because they are no more than c o n c lu s io n s , are not entitled to the assumption of truth." Ashcroft, supra, at 1950. As re fle cte d below, the court has assumed the veracity of any well-pleaded factual a lle g a tio n s "and [will] then determine whether they plausibly give rise to an e n title m e n t to relief." Id. (alteration added). III. D is c u s sio n A. I n t r o d u c tio n

T h e court has not accepted as true the legal theories and conclusions which c o n s titu te the bulk of the Complaint in this matter. The court has accepted as true p la in tiffs ' allegations of the existence of a mortgage, a promissory note, a deed of

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tru s t, the sale of the loan to a third party, and the inference that Countrywide is either s e r v i c in g such loan and/or has commenced to foreclose on the loan. Even when those a lle g a tio n s are accepted as true, there simply is no cognizable cause of action alleged. P u t another way, plaintiffs' use of legal terms and importation or phrases from the U n ifo rm Commercial Code cannot create a cause of action that simply does not exist. In d e ed , the court notes that plaintiffs are utilizing terminology and making demands th a t have been utilized by so called "tax protestors" in this court in the past two d e c a d e s . While the court carefully reads and considers every page of every document th a t is filed, plaintiffs are advised that such tactics are a waste of their time as well as th e court's time, which is paid for by hard-earned tax dollars. B. P la in tif fs Fail to State a Cause of Action Upon Which Relief Could b e Granted by this Court. 1. V a p o r and Unlawful Money Claims

T o avoid dismissal based on Rule 12(b)(6) of the Federal Rules of Civil P ro c e d u re , a complaint must provide "more than labels and conclusions . . . ." T w o m b ly , supra, at 1965. Plaintiffs allege that above actions of Countrywide were c o m m itte d `in violation of Article 1 Section 10 of the U.S. Constitution." Compl., at p p . 2 & 4-6. Plaintiffs state that their damages should be paid in U.S. dollars, "defined ... as [] One Ounce Silver coin of .999 pure silver, or the equivalent par value." Id., a t p. 13.
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T h e theories of relief asserted herein are commonly referred to as the "vapor m o n e y theory" and the "unlawful money theory." In Demmler v. Bank One N.A., 2 0 0 6 WL 640499 (S.D. Ohio 2006),1 the district court explained the vapor money th e o ry prevalent in this type of frivolous litigation: P la in tiff alleges that the promissory note he executed is the equivalent of " m o n e y " that he gave to the bank. He contends that [the lender] took his " m o n e y ," i.e., the promissory note, deposited it into his account without h is permission, listed it as an "asset" on its ledger entries, and then e s s e n tia lly lent his own money back to him. He contends that [the lender] ... "created" the money through its bookkeeping procedures. Id ., at 3. Under the "unlawful money" theory, the issuance of "credit" is said to v io la te Article I, Section 10 of the Constitution; thus, the theory goes, only g o v e rn m e n t-is s u e d currency is "legal tender." Rudd v. Keybank, 2006 WL 212096, a t *5 (S.D. Ohio Jan. 25, 2006). Such theories have been soundly rejected by every c o u rt that has considered them, and the undersigned finds as have other courts that it w o u ld be a "waste of judicial resources to delve into the voluminous allegations c o n ta in e d in Plaintiff's . . . complaint" because claims based on the "vapor money th e o ry " were "utterly frivolous" and "patently ludicrous." Demmler, supra, at 3-4. S e e also Nixon v. Individual Head of St. Joseph Mortgage Co., 615 F. Supp. 898, 900 (N .D . Ind. 1985)(holding "unlawful money" allegations were "absurd").
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The

Due to the limits of Electronic Case Filing, a copy of such unpublished decision is placed in the electronic docket through incorporation of the Westlaw citation. -9-

u n d e rs ig n e d will recommend that plaintiffs' vapor and unlawful money claims be s u m m a r ily dismissed as they are not cognizable claims. 2. F r a u d , Racketeering, and Civil Conspiracy.

P la in tiff s also claim that defendants are liable for fraud, racketeering, and civil c o n s p ira cy because Countrywide has refused plaintiffs' "lawful offer and has refused to zero the account." Compl., at p. 6. Such claims fail to satisfy either Rule 12(b)(6) o r Rule 9(b). From the outset, plaintiffs have made absolutely no plausible factual a lle g a tio n s upon which a jury could return a verdict in their favor based on fraud, ra c k e te e r in g , or civil conspiracy. Plaintiffs' allegations fail to meet the pleading r e q u ir e m e n ts of Rule 9(b) by sufficiently alleging specific facts that would support th e s e claims. a. F ra u d

T h e essential elements of fraud under North Carolina law are (1) a false re p re se n ta tio n or concealment of a material fact; (2) reasonably calculated to deceive; (3 ) made with intent to deceive; (4) which does in fact deceive; and (5) resulting in d a m a g e to the injured party. Ragsdale v. Kennedy, 286 N.C. 130, 138 (1974). Rule 9 (b ) requires that "circumstances constituting fraud ... shall be stated with p a rtic u la rity ," Fed. R. Civ. P. 9(b), which requires "alleging time, place, and content o f the fraudulent representation, identity of the person making the representation, and

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w h a t was obtained as a result of the fraudulent act or representations." Terry v. Terry, 3 0 2 N.C. 77, 85 (1981). Plaintiffs allege that Countrywide committed "fraud" by re fu s in g a "lawful offer" and "refus[ing] to zero the account." Compl., at p. 5. Such a lle g a tio n s do not even come close to fraud as plaintiffs have simply alleged that d e fe n d a n t has done a fundamentally lawful thing, refuse an offer. Plaintiffs' fraud c la im must be dismissed and the undersigned will so recommend. b . Racketeering In claiming that defendants are engaged in "racketeering," Compl., at 5, the c o u r t assumes that plaintiffs are attempting to invoke RICO under either federal or N o rth Carolina law. See 18 U.S.C. § 1694 et seq.; and N.C.Gen. Stat. § 75D-1 et seq. U n d e r either statutory scheme, plaintiffs allegations are deficient. Under either federal o r state law, plaintiffs must allege, at a minimum, (1) conduct (2) of an enterprise (3) through a pattern (4) o f racketeering activity, otherwise known as a `predicate act.' Hoke v. E.F. Hutton & Co., Inc., 91 N.C. App. 159, 163 (1988) (citation omitted). P la in tiffs must also allege a direct nexus between the predicate acts and his alleged in ju r y . Id. Plaintiffs fail to allege any facts supporting their conclusory allegation that d e fe n d a n ts engaged in a "pattern of racketeering activity" or any nexus between a p re d ica te act and their alleged injury. Instead, plaintiffs merely allege that their

" te n d e r" of a "lawful offer" was rejected by Countrywide. Compl., at p. 6. The
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u n d e rs ig n e d will, therefore, recommend that plaintiffs' RICO claim be dismissed. c. C iv il Conspiracy

P la in tiffs ' also assert a claim for civil conspiracy against these defendants. As w ith the previous asserted causes of action, plaintiff puts a lot of stock in C o u n try w id e 's supposed rejection of their "lawful offer." This allegation is the only a lle g a tio n tendered in support of this legal theory. While there is no freestanding cause of action for "civil conspiracy," the e le m e n ts of a claim seeking damages for the wrongful acts committed in the course o f a civil conspiracy in North Carolina would appear to be: (1 ) (2) (3 ) a n agreement between two or more persons to commit a wrongful act; a n act in furtherance of the agreement; and d a m a g e to the plaintiff as a result of the wrongful act.

S e e Henderson v. LeBauer, 101 N.C. App. 255, 260 (1991). As the district court has re ce n tly recognized, this claim cannot be brought independent of properly-alleged c la im s for underlying wrongdoing, making such claim subject to dismissal if the u n d e rly in g claims for wrongful conduct are dismissed. Precision Components, Inc. v . C.W. Bearing USA, Inc., 3:06-CV-259 (W.D.N.C. Dec. 16, 2008) (Reidinger, J.). Here, there are no viable underlying claims for anything, subjecting such claim to o u trig h t dismissal. Further, such claim could not survive even on its own merits as

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p la in tiffs have failed to allege that Countrywide has done anything wrongful under a n y recognized law. Plaintiffs' claim for civil conspiracy fails as a matter of law, and th e undersigned will recommend that it be dismissed. R E C O M M E N D A T IO N I T IS, THEREFORE, RESPECTFULLY RECOMMENDED that d e f e n d a n ts Countrywide Home Loans, Inc.'s, Jimmy Munoz's, and Adrian Ely's M o tio n to Dismiss under Rules 9(b) and 12(b)(6) (#6) be ALLOWED, and that this a ctio n be DISMISSED in its entirety with prejudice.

T h e parties are hereby advised that, pursuant to 28, United States Code, Section 6 3 6 (b )(1 )(C ), written objections to the findings of fact, conclusions of law, and re c o m m e n d a tio n contained herein must be filed within ten (10) days of service of s a m e . Failure to file objections to this Memorandum and Recommendation with the d is tric t court will preclude the parties from raising such objections on appeal. Thomas v . Arn, 474 U.S. 140 (1985), reh'g denied, 474 U.S. 1111 (1986); United States v.
Signed: October 1208 (1984). S c h r o n c e , 727 F.2d 91 (4th Cir.), cert. denied, 467 U.S. 7, 2009

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