Mahan et al v. American Security Mortgage Corporation et al

Filing 33

ORDER granting 19 Motion to Dismiss for Failure to State a Claim; granting 22 Motion to Dismiss for Failure to State a Claim. This action is dismissed with prejudice in its entirety. Clerk is instructed to enter Judgment consistent with this Order. Signed by District Judge Max O. Cogburn, Jr on 2/6/2015. (Pro se litigant served by US Mail.)(cbb)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
DOCKET NO. 5:14-cv-00176-MOC
BRANDON HOLLAND
LINDSAY H. MAHAN,
Plaintiffs,

Vs.
WELLS FARGO HOME MORTGAGE
AMERICAN SECURITY MORTGAGE
CORPORATION
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
DOES 1 THROUGH 100, INCLUSIVE
FANNIE MAE,
Defendants.

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MEMORANDUM OF DECISION
AND
ORDER OF DISMISSAL

THIS MATTER is before the court on defendants Fannie Mae’s, Federal National
Mortgage Association’s, Mortgage Electronic Registration Systems, Inc.’s, and Wells Fargo
Home Mortgage’s Motion to Dismiss for Failure to State a Claim (#19) and defendant American
Security Mortgage Corporation’s Motion to Dismiss for Failure to State a Claim (#22). After
initial review of those motions, the court entered Orders advising the pro se plaintiffs of their
opportunity to file a response. Thereafter, plaintiffs timely filed responses and no Replies have
been filed. It appearing that such motions are ripe for disposition, the court enters the following
findings, conclusions, and Order dismissing this action in its entirety.

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I.
As in a number of similar cases filed by other pro se litigants in this district and in other
districts within the Fourth Circuit,1 plaintiffs have used a form Complaint to sue lenders,
mortgage loan consolidators, and mortgage loan servicers in what appears to be a general
indictment of the lending industry rather than a claim that these plaintiffs were unlawfully
harmed by any of these defendants in any manner. The implausibility of these plaintiffs’ claims
and the misuse of a form Complaint are readily apparent as plaintiffs: make claims seeking to
stop foreclosure, where no foreclosure occurred; rescission of a loan, that has been paid off; and
claim slander of the title to property in which they hold no interest, among other claims.
Indeed, plaintiffs sold the property to a third party and paid off the underlying loan well
before this action was filed, which has wasted not only the defendants’ and the public’s
resources, but has wasted plaintiffs own money as they paid a substantial filing fee. While the
court will consider each of the plaintiffs’ claims under rubric of Rule 12(b)(6), it is readily
apparent from the pleadings that plaintiffs’ action would have been deemed patently frivolous
had such Complaint been subject to review under 28 U.S.C. § 1915(e)(2) review. While public
outrage at the abuses of the lending industry which lead to the financial meltdown in 2009 are
understandable, such abuses are not a license for litigants to abuse the process of this court.
Federal civil actions are serious matters, not to be undertaken lightly, and will seldom be
successful where the complaint is downloaded off the internet. Despite what potential litigants
may read in a blog or hear at a meeting, the mess created by the subprime lending industry in
originating loans destined to fail does give everyone with a mortgage license to simply stop

1
See Steele v. Capital One Home Loans, LLC, 2014 WL 3748928 (W.D.N.C. July 30, 2014); Simmons v,
Bank of America, N.A., 2014 WL 509386, at *2 (D.Md. Feb., 6, 2014).

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paying their home loans.

While it is certainly possible that some homeowners will have

actionable claims, the shotgun approach utilized here is not only ineffective, it compounds the
problem as it makes it more difficult for with actual claims from having their day in court.
II.
In their Complaint - - which appears to be a form customized to add the particulars of
plaintiffs’ loan2 - - plaintiffs contend, among manner other claims, that the defendants did not
comply with the terms of a Pooling and Servicing Agreement ("PSA"), do not have the right to
foreclose plaintiffs' home located in this district, slandered their title, and have caused plaintiffs a
variety of damages. Plaintiffs have also claimed that the loan products they were sold were
provided without analysis of whether they had the ability to repay the loan and that some of the
defendants engaged in fraud because they failed to disclose that the loans would be secured by
way of a Deed of Trust. While plaintiffs have filed claims for wrongful foreclosure, quiet title,
and declaratory relief, it appears that plaintiffs sold their home and paid off their loan(s) well
before this action was even commenced. Defendants have moved to dismiss contending that
plaintiffs have failed to state a cause of action.
III.
In determining whether a claim can survive a motion under Rule 12(b)(6), the Supreme
Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) that the “no set of facts”
standard only describes the “breadth of opportunity to prove what an adequate complaint claims,
not the minimum adequate pleading to govern a complaint’s survival.” Id. at 563. In so holding,
the Court specifically rejected use of the “no set of facts” standard because such standard would
improperly allow a “wholly conclusory statement of claim” to “survive a motion to dismiss
2

Compare Complaint herein with Complaint (#1) in Steele , supra.

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whenever the pleadings left open the possibility that a plaintiff might later establish some ‘set of
[undisclosed] facts’ to support recovery.” Id. at 561 (alteration in original). Post Twombly, to
survive a Rule 12(b)(6) motion to dismiss, a claimant must allege facts in his complaint that
“raise a right to relief above the speculative level.” 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 recitation of the
elements of a cause of action will not do . . . .
Id. (second alteration in original; citation omitted). Further, a complaint will not survive Rule
12(b)(6) review where it contains “naked assertion[s] devoid of further factual enhancement.”
Id., at 557. Instead, a claimant must plead sufficient facts to state a claim for relief that is
“plausible on its face.” Id. at 570 (emphasis added).
Post-Twombly, the Court revisited the Rule 12(b)(6) pleading standard in Ashcroft v.
Iqbal, 556 U.S. 662 (2009). In Iqbal, the Court determined that Rule 8 “demands more than an
unadorned, the defendant-unlawfully-harmed-me accusation.” Id. at 678. The Court explained
that, “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.’” Id. (citing Twombly, supra;
emphasis added). What is plausible is defined by the Court:
[a] claim has facial plausibility when the plaintiff pleads sufficient factual content
that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.
Id. This “plausibility standard” requires “more than a sheer possibility that a defendant has acted
unlawfully.” Id. Thus, a complaint falls short of the plausibility standard where a plaintiff pleads
“facts that are ‘merely consistent with’ a defendant’s liability ....” Id. While the court accepts
plausible factual allegations made in a claim as true and considers those facts in the light most

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favorable to plaintiff in ruling on a motion to dismiss, a court “need not accept as true
unwarranted inferences, unreasonable conclusions, or arguments.” Eastern Shore Mkt.’s Inc. v.
J.D. Assoc.’s, LLP, 213 F. 3d 175, 180 (4th Cir. 2000).
In sum, when ruling on a Rule 12(b)(6) motion, “a judge must accept as true all of the
factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per
curiam) (citations omitted). A complaint “need only give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Id. at 93 (alteration and internal quotation marks
omitted). However, to survive a motion to dismiss, the complaint must “state[ ] a plausible claim
for relief” that “permit[s] the court to infer more than the mere possibility of misconduct” based
upon “its judicial experience and common sense.” Iqbal, 129 S. Ct. at 1950.

While a

complainant is not required to plead facts that constitute a prima facie case in order to survive a
motion to dismiss, see Swierkiewicz v. Sorema N.A., 534 U.S. 506, 510-15 (2002), “[f]actual
allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic
Corp. v. Twombly, 550 U.S. at 555.
IV.
The court has construed the facts alleged by plaintiffs in their Complaint in a light most
favorable to them. On July 30, 2012, plaintiffs obtained a mortgage loan from defendant
American Security Mortgage, which was secured by a promissory Note in the amount of
$294,500.00, Complaint, ¶ 29, and a Deed of Trust (the "Deed of Trust"), which encumbered
their residence in Denver, North Carolina. Pursuant to the Deed of Trust, plaintiffs claim that
they granted MERS, as grantee and nominee for American Security and its successors and
assigns, title to the property, with the power of sale. Id. at ¶¶ 7, 29. Plaintiffs allege that the Note

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was then transferred to Fannie Mae as Trustee for REMIC Trust 2012-83 along with loans of
others, totaling nearly a billion dollars. Id. at ¶ 30. In conjunction with the transfer, plaintiffs
claim that American Security entered into the Pooling and Servicing Agreement ("PSA")
pursuant to which plaintiffs' loan was to be securitized by means of assigning the loan documents
in a specified set of transactions. Id. at ¶¶ 21, 30-32. In this securitization process, American
Security was the mortgage originator, Fannie Mae was Trustee for the REMIC Trust that held
title to the plaintiffs' loan documents, Wells Fargo acted as the servicer for Plaintiffs' loan, and
MERS acted as an electronic database that tracked the assignment of the loan documents. Id. at
¶¶ 2-7, 24. Prior to any foreclosure, plaintiffs sold the property to a third party on September 11,
2014. Motion to Dismiss (#19), Ex. C (#19-3).

As the plaintiffs paid off the underlying

obligation at the time of transfer, the Deed of Trust was cancelled by a Satisfaction of Security
Instrument. Id. at Ex. D (#19-4). 3
V.
A. Claims Based on Alleged Foreclosure
As there is no plausible factual contention that a foreclosure ever occurred, all of
plaintiffs’ claims based upon such supposed foreclosure fail.
Under North Carolina law, a claim for wrongful foreclosure accrues when the lender
conveys the real property to a third party. Steele, 2014 WL at *3. As there is no allegation in the
Complaint that the lender conveyed plaintiffs’ property to anyone, and no such claim is plausible
as it appears that plaintiffs conveyed the property to a third party, no such allegation is plausible.
All of plaintiffs’ wrongful foreclose claims, and all claims having as an element foreclosure
3
The court has considered these materials, which are outside of the Complaint, as public records and
because they bear on issues raised in the Complaint. American Chiropractic Ass'n., Inc. v. Trigon Healthcare, Inc.,
367 F.3d 212, 234 (4th Cir. 2004)

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(including claims for Lack of Standing/Wrongful Foreclosure, and so called Note Splitting), are
dismissed for failure to state a claim as to any defendant.
B. Fraudulent Concealment, Fraudulent Omission, and Fraudulent Inducement
When pleading fraud, the notice pleading requirements are inapplicable and special rules
of pleading come into play. Rule 9(b), Federal Rules of Civil Procedure, provides:
In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall
be stated with particularity. Malice, intent, knowledge, and other condition[s] of mind of
a person may be averred generally.
Fed.R.Civ.P. 9(b). The specificity required in claiming fraud is an exception to the provisions of
notice pleading found in Rules 8(a),(e), and (f). See also N.C.Gen.Stat. Chapter 1A-1, Rule 8.
The general rule that pleadings are to be given liberal construction does not apply to claims of
fraud. Rosenthal v. Perkins, 42 N.C. App. 449 (1979).
A plaintiff must be particular as to the facts upon which its claim of fraud arises. Hoyle
v. Bagby, 253 N.C. 778 (1961). An allegation which merely states that the acts specified
constituted fraud is conclusory. Patuxent Development Co. v. Bearden, 227 N.C. 124 (1947).
Conclusory allegations of fraud are insufficient to meet the requirement of particularity. Smith
v. Central Soya of Athens, Inc., 604 F. Supp. 518 (E.D.N.C. 1985). The issue becomes whether
proof of the facts as alleged in the Complaint would entitle the plaintiffs to relief. Brooks
Equipment & Mfg. Co. v. Taylor, 230 N.C. 680 (1949).
In particular, plaintiffs do not allege the time or place of the concealment or omission, or
specifically allege which party concealed the fact that their loan would be securitized. Indeed,
plaintiffs have failed to plead any aspect of their fraud claims with particularity.

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Plaintiffs’

fraud claims against all defendants will be dismissed under Rule 12(b)(6) for lack of specificity
as required by Rule 9(b).
C. Intentional Infliction of Emotional Distress
Defendants have also moved to dismiss plaintiffs’ claims for intentional infliction of
emotional distress (“IIED”). The elements of that tort are “(1) extreme and outrageous conduct,
(2) which is intended to cause and does cause (3) severe emotional distress.” Hogan v. Forsyth
Country Club, 79 N.C. App. 483, 488, disc. rev. denied, 317 N.C. 334 (1986). “It is a question
of law for the court to determine, from the materials before it, whether the conduct complained
of may reasonably be found to be sufficiently outrageous as to permit recovery.” Id. at 490.
Plaintiffs base their IIED claim on the conclusion that "Defendants intentionally,
knowingly, and recklessly represented to the Plaintiff [sic] those Defendants were entitled to
exercise the power of sale provision contained in the Mortgage/Deed of Trust." Complaint at ¶
95. A person who threatens to do that which he or she may lawfully do cannot be held to have
intentionally inflicted emotional distress. United States v. Twenty Miljam-350 IED Jammers,
669 F.3d 78 (2d Cir. 2011); Radford v. Keith, 160 N.C.App. 41 (2003).

Plaintiffs have,

therefore, failed to state any cognizable IIED claim against any defendant.
D. Slander of Title
To state a claim for Slander of Title, plaintiffs must allege that an individual maliciously
and in bad faith made false statements about the title to plaintiffs’ property, causing special
damages. Joy v. MERSCORP, Inc., 935 F. Supp. 2d 848, 867 (W.D.N.C. 2013). Plaintiffs’
allegations underlying their slander of title claims rest are legal conclusions which, as discussed
above, are in and of themselves without any legal or factual basis. Further, plaintiffs lack any

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title to slander as they have sold the property. Thus, the allegations on which plaintiffs’ slander
of title claim rest are facially implausible.
E. Quiet Title
In North Carolina, an individual can bring a quiet title action against one who claims an
adverse interest in real property, but an aggrieved party must allege that: (1) the plaintiff owns
the land in question or has some estate or interest in the land; and (2) the defendant asserts a
claim to the land that is adverse to a plaintiff’s title, estate, or interest. See N.C.Gen.Stat. § 4110; Ronald-Francis v. Ocwen Loan Servicing, LLC, 2014 WL 202583 at *3 (W.D.N.C. Jan. 16,
2014). As plaintiffs sold the real property before bringing the quiet title action, they have failed
to state a cause of action because they have absolutely no remaining interest to protect. This
claim will be dismissed.
F. Declaratory Relief
Plaintiffs also seek the remedy of declaratory relief, asking that the court declare that
defendants had no right, title, or interest in the property under the Deed of Trust. As a remedy is
not a cause of action, plaintiffs do not state a claim. In any event, this claim does not survive
Rule 12(b)(6) review because plaintiffs lack any interest in the property, making declaratory
relief a nullity. Further, the legal conclusions upon which claim is made are premised on
implausible allegations of fact, as discussed above. Put another way, the entire premise of
plaintiffs Complaint is flawed as a Deed of Trust, by its very nature, conveys to the grantee or its
assigns an interest in real property which may ultimately lead to foreclosure against the grantor
of that deed.

A Deed of Trust is an enforceable contract, McIver v. Smith, 118 N.C. 73, 75

(1896), and is enforceable against the grantor even before it is recorded. N.C.Gen.Stat. § 47-20.

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By signing the Deed of Trust, the grantor conveys or pledges its interest in the real property,
contingent on timely repayment of the debt such instrument ultimately secures. In re Manning,
747 S.E.2d 286, 291 (N.C.App. 2013). This claim is dismissed.
G. Federal Claims
1. TILA and HOEPA
Plaintiffs also assert claims under the federal Truth in Lending Act (“TILA”). TILA
assures consumers of
a meaningful disclosure of credit terms so that the consumer will be able to
compare more readily the various credit terms available to him and avoid the
uninformed use of credit, and to protect the consumer against inaccurate and
unfair credit billing and credit card practices.
Premier Fed. Credit Union v. Douglas, 121 N.C.App. 341, 343 (1996). Under TILA, certain loan
disclosure criteria is applicable, including: the amount financed, itemization of the amount
financed, the total number of payments, finance charges, the annual percentage rate, and the
identity of the creditor. Comer v. Pers. Auto Sales, Inc., 368 F. Supp. 2d 478, 484 (M.D.N.C.
2005).

Under HOEPA, which is a part of TILA, a creditor is required to make certain

disclosures to borrowers of high cost or high rate loans. 15 U.S.C. § 1639; Kataviravong V.
Mirabella Mortg., LLC, 2012 WL 2045957 *2 (D.Minn. June 6, 2012). To bring an action under
either TILA or HOEPA, plaintiffs are required to specify the exact disclosures that their lenders
were required to provide, but which they failed to provide. Fisher v. Chase Home Finance, LLC,
2011 WL 2268474 *3 (E.D. Va. June 7, 2011). The Complaint here fails to detail what
disclosures any lender failed to make or that the loan they took out was a high-interest loan; thus,
plaintiffs fail to state a cause of action under either TILA or HOEPA.

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2.

RESPA

The Real Estate Settlement Procedures Act ("RESPA") prohibits persons from giving and
accepting kickbacks or referral fees incident to or as part of a real estate settlement service,
including the origination of a federally related mortgage loan. 12 U.S.C. § 2607. Borrowers
injured by an improper kickback agreement have a right to sue and recover treble the amount
paid for any improper settlement services. Id. at § 2607(d)(2).
While plaintiffs generally allege that “payments between the Defendants” were made,
Complaint at ¶142, plaintiffs must plead how they have been subjected to settlement services that
were tainted by kickbacks. Bergman v. Fidelity Nat'l Financial, Inc., 2012 WL 4364327 *3 (C.D.
Cal. Sept. 24, 2012). Because RESPA only prohibits unlawful transactions, plaintiffs’ burden is
to allege not just that payments were made, but what those payments were and why those
payments were unlawful under RESPA. Plaintiffs fail to plead facts that would support a
RESPA claim and, in any event, their RESPA claim is time barred. Zanmeski v. Keystone Title
Associates, Inc., 884 F.2d 1391 (4th Cir. March 6, 1989); Ray v. HSBC Bank, NA., 2010 WL
3528554, at * 1, n.3 (W.D.N.C, Sept. 3, 2010). This claim will also be dismissed.
H. Rescission Claim
Plaintiffs have also made a claim for “rescission” of the loan agreement. As rescission is
a remedy and not a cause of action, such claim is dismissed for failure to state a cause of action.
In any event, with plaintiffs’ loan having been paid off, there is no contract to rescind. 15 U.S.C.
§ 1635(f) (“An obligor’s right of rescission shall expire three years after the date of
consummation of the transaction or upon the sale of the property, whichever occurs first ….”).
Thus, this claim is also dismissed because “all facts necessary to the affirmative defense [of the

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bar of the statute of limitations] clearly appear on the face of the complaint.” Steele, 2014 WL
3748928 at * 2.

ORDER
IT IS, THEREFORE, ORDERED that defendants Fannie Mae’s, Federal National
Mortgage Association’s, Mortgage Electronic Registration Systems, Inc.’s, and Wells Fargo
Home Mortgage’s Motion to Dismiss for Failure to State a Claim (#19) and defendant American
Security Mortgage Corporation’s Motion to Dismiss for Failure to State a Claim (#22) are
GRANTED, and this action is DISMISSED WITH PREJUDICE in its entirety.

The Clerk of Court is instructed to enter Judgment consistent with this Order.

Signed: February 6, 2015

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