Newland et al v. Morgan Stanley Private Bank, N.A. et al (PLR2)

Filing 58

MEMORANDUM AND ORDER the Court GRANTS the Plaintiffs' Motion for Joinder of Party 46 , GRANTS IN PART AND DENIES IN PART the Motion to Strike Amended Complaint 49 and DENIES AS MOOT the Motions Seeking a More Definite St atement 50 , 51 . The Court further FINDS the Amended Complaint 47 to be STRICKEN and ORDERS the Plaintiffs to file their Amended Complaint consistent with the above and the District Judge's Order 45 within fourteen (14) days of entry of this Memorandum and Order. Signed by Magistrate Judge H. Bruce Guyton on 4/11/17. (ADA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
STEVE AND CATHY NEWLAND,
Plaintiffs,
v.
MORGAN STANLEY PRIVATE BANK, N.A.,
et al.,
Defendants.

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No. 3:15-cv-309-PLR-HBG

MEMORANDUM AND ORDER
This case is before the undersigned pursuant to 28 U.S.C. § 636, the Rules of this Court,
and Standing Order 13-02.
Now before the Court is Plaintiffs’ Motion for Joinder of Party, Morgan Stanley Mortgage
Capital Holdings, LLC [Doc. 46], Motion to Strike Amended Complaint [Doc. 49], Defendants’
Motion and Incorporated Memorandum of Law Seeking a More Definitive Statement [Doc. 50],
and Joinder in Motion and Memorandum of Law Seeking a More Definite Statement [Doc. 51].
The Motions are now ripe for adjudication. Accordingly, for the reasons set forth below, the Court
GRANTS the Plaintiffs’ Motion for Joinder of Party [Doc. 46], GRANTS IN PART the Motion
to Strike Amended Complaint [Doc. 49] and DENIES AS MOOT the Motions Seeking a More
Definite Statement [Docs. 50, 51].
I.

BACKGROUND
The Plaintiffs filed their original Complaint [Doc. 1-1] on June 3, 2015, in the Circuit Court

for Sevier County, Tennessee. The Complaint was filed against several Defendants, including
Morgan Stanley Private Bank National Association, Wells Fargo Bank, N.A., PHH Mortgage
Corporation, FV-I, Inc., Shapiro and Ingle, LLP (of Memphis), Specialized Loan Servicing, LLC,

Shapiro and Kirsch, LLP (of Memphis), Shapiro and Ingle, LLP (of Charlotte), Specialized Asset
Management, LLC, and Skye Realty, LLC and/or Skye Realty and Rentals, Inc.
The original Complaint alleges that in March 2002, the Plaintiffs entered into a Tennessee
Open-End Deed of Trust and that Defendant Morgan Stanley Private Bank National Association
(“Morgan Stanley”) falsified the Deed of Trust after the Plaintiffs had executed it. The Complaint
states that Defendant Morgan Stanley failed to acknowledge or correct the falsified Deed of Trust
and began foreclosure proceedings against the Plaintiffs. The Plaintiffs filed a complaint in state
court and that as a result of the state complaint, Defendant Morgan Stanley reached a mediated
settlement agreement wherein it admitted Plaintiffs’ allegations and agreed to a monetary
settlement.
The Complaint states that subsequently, in May 2012, the Plaintiffs entered into a Home
Equity Line of Credit Modification Agreement with Defendants Morgan Stanley and/or Wells
Fargo Bank, N.A. (“Wells Fargo”). The Plaintiffs state that they were induced to enter this
transaction because the parties agreed to a five-year extension of the mortgage security interest in
certain real property. The Plaintiffs executed the Modification Agreement on May 23, 2012, and
they paid $155.00 to complete the record. The Plaintiffs allege that they sent the Modification
Agreement to Defendant Morgan Stanley, but it never recorded the Modification Agreement. The
Plaintiffs allege that due to Defendant Morgan Stanley’s or Wells Fargo’s delay in preparing the
Modification Agreement, the Plaintiffs paid additional money to Defendant Morgan Stanley. The
Complaint states that after Plaintiffs executed and returned the Modification Agreement, they
received a letter from Defendant Morgan Stanley informing the Plaintiffs “of a change in Servicers
to Defendant PHH Mortgage.” [Doc. 1-1 at 13]. The Plaintiffs state that the first statement from
Defendant PHH Mortgage was not in compliance with the Modification Agreement. The Plaintiffs
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allege that Defendant PHH Mortgage continued to send false statements and that Plaintiffs
continued to object when Defendant PHH Mortgage threatened foreclosure. The Plaintiffs state
that Defendants Morgan Stanley, Wells Fargo, PHH Mortgage, Shapiro and Kirsch, LLP (of
Memphis), and Shapiro and Ingle claimed default and acted on the falsified documents.
The Plaintiffs continue that on December 24, 2013, Defendant PHH Mortgage prepared a
Corporate Assignment of Deed of Trust, which assigned the Deed of Trust from Defendant Morgan
Stanley to Defendant Wells Fargo. The Plaintiffs contend that there was no mention of the
Modification Agreement in the document. The Plaintiffs allege such actions constitute a breach
of contract, violations of the Tennessee Consumer Protection Act, and fraud. Subsequently,
Plaintiffs received a notice of transfer advising them of a servicer transfer from Defendant PHH
Mortgage to Defendant Specialized Loan Servicing, LLC (“SLS”). The Plaintiffs state that
Defendant SLS also sent them a letter advising of a “current creditor being Defendant FV-I.” [Doc.
1-1 at 17]. The Plaintiffs allege that they later received letters from Shapiro and Kirsch, LLP, (of
Memphis) stating the Plaintiffs’ debt and identifying Defendant FV-I as the current creditor in
trust for Defendant Morgan Stanley, as serviced by Defendant SLS. Later, Defendant Shapiro and
Ingle, LLP (of Charlotte), acting as if appointed Substitute Trustee, notified the Plaintiffs that the
property was going to be sold by public action. Defendant Skye Realty later offered to make the
transition out of the property as easy as possible for the Plaintiffs.
Among other allegations, the Plaintiffs allege that Defendant Shapiro and Ingle failed to
meet the minimal statutory foreclosure procedures, the sale was based on false information, and
that the Defendants failed to record and abide by the Modification Agreement.
The Complaint was removed [Doc. 1] to this Court on July 20, 2015.

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II.

POSITIONS OF THE PARTIES
(a) Plaintiffs’ Motion for Joinder of Party
In their instant Motion, the Plaintiffs move for an order joining Morgan Stanley Mortgage

Capital Holdings, LLC (“MSMCH”). The Plaintiffs assert that on October 10, 2016, Defendant
PHH Mortgage served its discovery responses, which included a document indicating that the
ownership of the mortgage loan had been assigned, sold, or transferred to MSMCH. The Plaintiffs
assert that based on information, knowledge and belief, MSMCH is yet another subsidiary
company of Defendant Morgan Stanley, along with the other Defendants. The Plaintiffs assert
that all the Defendants who had ownership of the Deed of Trust and/or Note were obligated to
comply with the agreements and terms of the security instruments and law, including providing
the Plaintiffs with accurate billing statements, proper processing, and accounting of payments
remitted by the Plaintiffs. The Plaintiffs state that MSMCH failed to perform its obligations under
the security instruments.
Defendant Morgan Stanley [Doc. 48] filed a Response in opposition to the Motion stating
that the Plaintiffs’ vague and nominal claims against MSMCH would not survive a motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b). Defendant Morgan Stanley asserts that
on February 10, 2017, the Plaintiffs filed an Amended Complaint that included MSMCH despite
having no authority to add it as a party. Defendant Morgan Stanley argues that the Amended
Complaint barely mentions MSMCH and demonstrates that there is no reason to add it as a party.
In addition, Defendant Morgan Stanley submits that motions for leave to amend should be liberally
granted unless the motion would be futile. Defendant Morgan Stanley states that there are no
specific facts or claims that are unique to MSMCH and that the Court should deny the Motion.

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The Plaintiffs filed a Reply [Doc. 52] stating that MSMCH was in fact the owner of record
of the Deed of Trust and Note beginning on July 10, 2014.

The Plaintiffs state that MSMCH

failed to notify them of the assignment, sale or transfer of the security instruments as required and
that MSMCH’s failure to notify them resulted in the non-inclusion of MSMCH as a Defendant in
the original Complaint. The Plaintiffs state that MSMCH failed to provide them with “accurate
billing statements and failed to provide checks to access their obligatory credit line as required by
the Note.” [Doc. 52 at 2]. Further, the Plaintiffs state that MSMCH, in concert with Defendant
FV-I, both of whom are subsidiary companies of Defendant Morgan Stanley, failed to provide
Plaintiffs with a breach/demand letter or 14-day notice of intent to refer the loan for foreclosure as
required by law. The Plaintiffs contend that MSMCH’s failure to comply with the terms of the
security instrument and the law resulted in the wrongful foreclosure of Plaintiffs’ property. The
Plaintiffs state that MSMCH is the current owner of record of the Plaintiffs’ property and owner
of the security instruments beginning on July 10, 2014. Finally, the Plaintiffs state that on February
10, 2017, they filed an amended Complaint subsequent to Plaintiffs’ Motion for Joinder and to
comply with the District Judge’s order to file an Amended Complaint.
(b) Motion to Strike Amended Complaint
Defendants Shapiro & Ingle, LLP and Shapiro & Kirsch, LLP, (collectively “S&I”) filed a
Motion to Strike Amended Complaint [Doc. 49], arguing that Plaintiffs filed an Amended
Complaint that attempted to add or amend allegations as to the S&I Defendants. The S&I
Defendants state that they have not consented to any amendments and that the Court only granted
leave to amend the Complaint for purposes of adding Saxon Mortgage Services, Inc., (“Saxon”)
as an additional party-defendant. The Defendants assert that to the extent the Plaintiffs’ Amended
Complaint seeks to add or amend allegations concerning the S&I Defendants, the same should be
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stricken as beyond the scope of the Court’s leave to amend. The S&I Defendants request an order
dismissing any and all claims asserted against them, striking any impertinent allegations from the
Amended Complaint as beyond the scope of the Court’s leave, and taxing costs to the Plaintiffs.
(c)

Motion for More Definite Statement and Joinder in Motion

Defendants Morgan Stanley, FV-I, SLS, and Specialized Asset Management, LLC, filed a
Motion [Doc. 50] seeking a more definite statement pursuant to Federal Rules of Civil Procedure
8 and 12. The Defendants state that the Amended Complaint fails to appropriately designate
discernible causes of action against the Defendants and that the Complaint “amounts to a rambling
narrative of facts with a number of unspecified causes of action interspersed throughout.” [Doc.
50 at 1-2]. The Defendants assert, “The end-result is a hodge-podge document that leaves the
Defendants guessing as to which causes of action are asserted against which defendants.” [Id. at
2]. The Defendants argue that the Amended Complaint fails to meet the minimum threshold
pleading standards in Rule 8 and that they are entitled to a more definite statement under Rule
12(e).
Further, the Defendants argue that the Amended Complaint is vague and ambiguous and
that the Plaintiffs’ factual assertions are not properly tied to the alleged causes of action. The
Defendants emphasize that paragraph 15 asserts a violation of the “rules and regulations of the
Consumer Financial Protection Bureau,” paragraph 23 asserts a violation of the laws of the State
of Tennessee, and paragraph 33 alleges violations of the Consumer Protection Laws of the United
States and State of Tennessee. In addition, the Defendants argue that paragraph 64 alleges that
“SLS’s actions and inactions constitute a breach of duty and a violation of the consumer protection
laws and regulations of the United States and State of Tennessee.” [Id. at 3]. The Defendants
assert that the Amended Complaint is vague and ambiguous regarding which cause of action is
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being alleged against which Defendant. The Defendants contend that when the Plaintiffs appear
to tie a cause of action to a specific Defendant, the Complaint fails to do so by using the words
“acting through their services, assignees, attorneys, and trustees” and that such language widens
the scope of the allegation and thereby implies that every Defendant is potentially implicated by
such allegations.
Defendants Wells Fargo and PHH Mortgage filed a Joinder in Motion and Memorandum
of Law Seeking a More Definite Statement [Doc. 51]. These Defendants assert that they have
equal difficulty in discerning the causes of action generally being plead against them and that the
Amended Complaint names eleven Defendants but does not discern which causes of action are
pled against each Defendant.
III.

ANALYSIS
There are four motions pending before the Court. The Court will first address the Motion

for Joinder and then turn to the remaining Motions.
The Plaintiffs seek to join MSMCH as a defendant to this lawsuit. Defendant Morgan
Stanley has opposed the Motion. The Plaintiffs assert that MSMCH failed to provide them with
accurate billing statements and that MSMCH acted in concert with the other Defendants. Further,
the Plaintiffs assert that MSMCH is the current owner of record of the property and has been the
owner of the security instruments beginning on July 10, 2014. Given the liberality of Federal
Rule of Civil Procedure 15(a)(1)(2), the Court will allow the Plaintiffs to file an Amended
Complaint adding MSMCH as a party. Although Defendant Morgan Stanley asserts that the
allegations against MSMCH would not survive a Rule 12(b)(6) motion, the Court finds that such
arguments are better raised in dispositive motion practice. See Wiggins v. Kimberly-Clark Corp.,
No. 3:12-cv-115, 2014 WL 1267574, *2 (E.D. Tenn. Mar. 26, 2014) (allowing plaintiff to amend
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the complaint while noting that the related issues raised in the parties’ briefs can be addressed
through the filing of appropriate motions after the plaintiff files an amended complaint).
Accordingly, the Court finds Plaintiffs’ Motion [Doc. 46] well-taken, and it is GRANTED.
Further, Defendants S&I filed a Motion to Strike Amended Complaint [Doc. 49], asserting
that the Plaintiffs attempted to add or amend allegations as to S&I Defendants without their consent
or without leave of Court. By way of background, on December 2, 2016, the District Judge granted
the Plaintiffs leave to join Saxon Mortgage Services [Doc. 43]. The Plaintiffs did not file an
amended complaint, so on February 1, 2017, the District Judge ordered the Plaintiffs to file their
amended complaint within (10) ten days. The Plaintiffs filed an Amended Complaint on February
10, 2017.
As noted above, Defendants S&I argue that the Amended Complaint adds or amends
allegations concerning them. Pursuant to Federal Rule of Civil Procedure 15(a), a party may
amend its pleading as a matter of course within 21 days after serving it, 21 days after service of a
responsive pleading, or 21 days after service of a motion under Rule 12(b), (e), or (f). In addition,
Rule 15(a)(2) provides, “In all other cases, a party may amend its pleading only with the opposing
party’s written consent or the court’s leave.”
In the instant matter, the Plaintiffs failed to request leave to amend their Complaint with
respect to the other Defendants. While the Plaintiffs were granted leave to amend their Complaint
to add Saxon as a Defendant, the Plaintiffs did not request, nor did the Court grant, leave to amend
the Complaint in other respects. Further, the Court notes that the Plaintiffs failed to respond to the
Motion, and the time for doing so has expired. See L.R. 7.2 (“Failure to respond to a motion may
be deemed a waiver of any opposition to the relief sought.”). Accordingly, because the Plaintiffs
did not seek the Court’s permission to assert additional allegations as to the other Defendants and
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they failed to respond to the instant Motion, the Motion to Strike Amended Complaint [Doc. 49]
is GRANTED to the extent it requests that the Amended Complaint be stricken. The S&I
Defendants have also requested, in a conclusionary fashion, “an order dismissing any and all
claims asserted against them,” but the Court notes that these Defendants have filed a dispositive
motion that the District Judge will determine. Finally, because the Court will strike the Plaintiffs’
Amended Complaint, the Defendants’ Motions for a More Definite Statement [Docs. 50, 51] are
DENIED AS MOOT.
IV.

CONCLUSION
Accordingly, for the reasons set forth below, the Court GRANTS the Plaintiffs’ Motion

for Joinder of Party [Doc. 46], GRANTS IN PART AND DENIES IN PART the Motion to
Strike Amended Complaint [Doc. 49] and DENIES AS MOOT the Motions Seeking a More
Definite Statement [Docs. 50, 51]. The Court further FINDS the Amended Complaint [Doc. 47]
to be STRICKEN and ORDERS the Plaintiffs to file their Amended Complaint consistent with
the above and the District Judge’s Order [Doc. 45] within fourteen (14) days of entry of this
Memorandum and Order.
IT IS SO ORDERED.
ENTER:

United States Magistrate Judge

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