Wilson et al v. Regions Bank et al
Filing
11
REPORT AND RECOMMENDATION: The Magistrate Judge RECOMMENDS that Defendants' Motion to Dismiss (Docket Entry 5) and Motion for Joinder (Docket Entry 7) be GRANTED and that this action be DISMISSED with prejudice for failure to state a claim. Signed by Magistrate Judge John S. Bryant on 7/14/2015. (xc: Pro se party by regular and certified mail.) (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(ds)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
JOHN O. WILSON and MARY K. WILSON,
Plaintiffs,
v.
REGIONS BANK, et. al.,
Defendants.
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No: 3:14-cv-02344
Judge Haynes/Bryant
To: The Honorable Senior Judge William J. Haynes, Jr., United States District Judge
REPORT AND RECOMMENDATION
For the reasons stated below, the Magistrate Judge RECOMMENDS that Defendants’
Motion to Dismiss (Docket Entry 5) and Motion for Joinder (Docket Entry 7) be GRANTED
and that this action be DISMISSED with prejudice for failure to state a claim.
I.
Statement of the Case
Plaintiffs, proceeding pro se, filed their Complaint on December 04, 2014 in Davidson
County, Tennessee, alleging claims related to the securitization 1 of the mortgage on their home.
(Docket Entry 1, p. 2; Docket Entry 1-1, p. 4). Plaintiffs alleged that they executed a promissory
note with Regions Bank d/b/a Regions Mortgage (Regions) for $352,000.00 on or about October
30, 2007 and a deed of trust in favor of Regions, secured by Plaintiffs’ property in Tennessee.
(Docket Entry 1-1, p. 7). In June 2009, Plaintiffs entered into a loan modification agreement with
1 Rush v. Mac, No. 14-1476, 2015 WL 4069807, at *5 n.4 (6th Cir. July 6, 2015)(citing Bisson v. Bank of Am., N.A.,
919 F.Supp.2d 1130, 1133 (W.D.Wash.2013))(“Securitization is the packaging of debt into instruments broadly
referred to as ‘mortgage-backed securities.’ One court has described it this way: One could analogize this process to
taking raw ingredients and combining them to make bread then selling the slices individually, or putting different
kinds of meat into a sausage grinder then selling the individual sausages. What is born from this process are new
debt instruments, sold on the open market, that have pooled-and-sliced home loans as their ingredients. Different
debt instruments work in different ways, but the basic concept is that the home loan debt gets repackaged and sold to
other investors rather than being held by the bank that originated the loan.”).
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Regions pertaining to their property and agreed to repay $378,915.01 plus interest. (Docket Entry
5-3). Plaintiffs now seek damages and declaratory relief and seek that Defendants be “estopped
and precluded from asserting an unsecured claim against Plaintiffs[’] estate.” (Docket Entry 1-1.
p. 12). However, as the Chancery Court noted, Plaintiffs fail to submit any foreclosure notice or
allege that a foreclosure is imminent. (Docket Entry 1-1, p. 35). Therefore, it remains unclear if
or when Plaintiffs defaulted on their loan.
Defendants timely filed a Notice of Removal based on diversity jurisdiction and the
federal questions presented. (Docket Entry 1). Plaintiffs are citizens of Tennessee while
Defendants are corporations in Alabama, the District of Columbia, and Delaware, and the
amount in controversy exceeds $75,000.00. (Docket Entry 1, pp. 2-3). Plaintiffs did not file an
amended complaint after removal. Plaintiffs’ original Complaint in Chancery Court lists the
following causes of action:
1. Lack of standing to foreclose;
2. Fraud in the concealment;
3. Fraud in the inducement;
4. Intentional Infliction of Emotional Distress;
5. Quiet title;
6. Slander of title;
7. Declaratory relief;
8. Violations of Truth in Lending Act (TILA);
9. Violations of Real Estate Settlement Practices Act (RESPA);
10. Violations of Home Ownership Equity Protection Act (HOEPA); and
11. Rescission.
Page 2 of 10
(Docket Entry 1-1). Defendants Regions and the Federal National Mortgage Association
(FNMA) filed a Motion to Dismiss with a Memorandum of Law on January 05, 2015. (Docket
Entry 5 and 6). Defendant Mortgage Electronic Registration System (MERS) filed a Joinder in
the Motion to Dismiss. (Docket Entry 7). Plaintiffs failed to file a response and the time to do so
has passed. This failure indicates “that there is no opposition to the motion.” Local Rule 7.01(b).
The District Judge referred this action to the Magistrate Judge on January 16, 2015. (Docket
Entry 8). The matter is now properly before the Court.
II.
Standard of Review
Federal Rule of Civil Procedure (FED. R. CIV. P.) 12(b)(6) governs motions to dismiss for
failure to state a claim. “Rule 12(b)(6) does not countenance . . . dismissals based on a judge's
disbelief of a complaint's factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556
(2007)(quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). Instead, “a well-pleaded
complaint may proceed even if it strikes a savvy judge that actual proof of those facts is
improbable . . . .” Bell Atl. Corp., 550 U.S. at 556. A complaint will survive a motion to dismiss
if it includes: (1) facts to support a plausible claim; (2) more than a recital of elements of a cause
of action; and (3) facts that, taken as true, raise the right to relief above the level of speculation.
Bell Atl. Corp. at 555-56. However, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). Indeed, the pleading standard in FED. R. CIV. P. 8 “marks a notable and
generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not
unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”
Ashcroft, 556 U.S. at 678-79.
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When a plaintiff is pro se, the Court will review the plaintiff’s pleadings under “less
stringent standards than formal pleadings drafted by lawyers . . . .” Haines v. Kerner, 404 U.S.
519, 520 (1972). Still, “even pro se complaints must satisfy basic pleading requirements.” Dallas
v. Holmes, 137 F. App'x 746, 750 (6th Cir. 2005)(citation omitted)(unpublished opinion).
When considering a motion to dismiss, the Court “may consider the complaint along with
any document not formally incorporated by reference or attached to the complaint as part of the
pleadings if the document is referred to in the complaint and is central to the plaintiff's claim.”
Gardner v. Quicken Loans, Inc., 567 F. App'x 362, 364-65 (6th Cir. 2014)(citation and internal
quotation omitted)(unpublished case). Therefore, the Magistrate Judge “may consider documents
relating [to] the note, mortgage, assignment, loan modification process, and foreclosure that are
referenced in the complaint and integral to [Plaintiffs’] claims.” Gardner, 567 F. App'x at 365.
III.
Analysis
Plaintiffs’ claims are based on the execution of their mortgage and the securitization of
their mortgage loan. (Docket Entry 1-1, pp. 13-23). In response, Defendants cite Thompson v.
Bank of Am., N.A., in which the Court noted that the district courts “have entertained a spate of
civil actions” related to mortgages and securitization of the underlying loans. Thompson v. Bank
of Am., N.A., 773 F.3d 741, 748 (6th Cir. 2014), reh'g denied (Dec. 24, 2014). The Court
described many of these cases as “scattershot affairs, tossing myriad (sometimes contradictory)
legal theories at the court to see what sticks.” Thompson, 773 F.3d at 748.
Here, even accepting the allegations as true and liberally construing Plaintiffs’ claims, the
Magistrate Judge finds that none of the claims “stick.” Plaintiffs’ first claim is that Defendants
lack standing to foreclose because “the only individual who has standing to foreclose is the
holder of the note” and the proper holders of Plaintiffs’ mortgage note are “the certificate holders
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of the securitized trust.” (Docket Entry 1-1, p. 14). This argument lacks merit because
“securitization creates ‘a separate contract, distinct from [a p]laintiff's debt obligations under the
reference credit (i.e. the Note).’ ” Dauenhauer v. Bank of New York Mellon, No. 3:12-CV-01026,
2013 WL 2359602, at *5 (M.D. Tenn. May 28, 2013) aff'd, 562 F. App'x 473 (6th Cir.
2014)(citation omitted). In other words, “securitization of a note does not alter the contractual
relationship between the borrower and the note holder.” Dauenhauer, No. 3:12-CV-01026, 2013
WL 2359602, at *6. It is well established that in Tennessee, “the lender, the holder of the note,
has title to the property [and that]. . . [u]ntil the note is satisfied, the holder of the note has
superior title to the property.” Thompson, 773 F.3d at 750-51. Moreover, the mortgage note is a
negotiable instrument which “can be sold or assigned to another party who then receives the
right to enforce the instrument.” Thompson, 773 F.3d at 749 (citing TENN. CODE. ANN. §§ 47–3–
104, 201, 203, 301, 302). Plaintiffs do not plead that they have satisfied the amount due on their
loan. Therefore, Plaintiffs’ debt obligations and the note holder’s standing to enforce those
obligations remain intact and unaffected by the securitization of the mortgage. Therefore,
Plaintiffs’ claim fails as a matter of law.
Plaintiffs also claim that Defendants failed to comply with their own securitization
requirements under the “pooling and servicing agreement (PSA).” 2 (Docket Entry 1-1, p. 14).
This claim fails because Plaintiffs, as borrowers, were not a party to the PSA or a third party
beneficiary and therefore lack standing to bring this claim. Dauenhauer, No. 3:12-CV-01026,
2013 WL 2359602, at *5(citation omitted).
2 Christmas v. CitiMortgage, Inc., No. 3:14-CV-071, 2014 WL 2117453, at *1 n.4 (S.D. Ohio May 21, 2014)( “A
pooling and servicing agreement is a trust agreement required to be filed with the United States Securities and
Exchange Commission (“SEC”) which, along with another document called a mortgage loan purchase agreement,
are the operative securitization documents.”).
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Plaintiffs’ next claim is that MERS “cannot be a real party in interest in a securitized
mortgage.” (Docket Entry 1-1, p. 14). However, as Defendant MERS clarifies by filing a copy of
the Deed of Trust, “MERS is not referenced in any way in the Deed of Trust or any other
documents related to the Plaintiff’s loan.” (Docket Entry 7, pp. 1-2, Docket Entry 71)(emphasis added). Therefore, any claim against MERS fails as a matter of law.
Plaintiffs’ next claims are that Defendants concealed that the loan was securitized and
that Defendants induced them into the loan with misrepresentations. However, these claims for
fraud in the concealment and fraud in the inducement both fail. FED. R. CIV. P. 9(b) provides that
a plaintiff must state “the time, place, and content of the alleged misrepresentation on which [the
deceived party] relied; the fraudulent scheme; the fraudulent intent of the defendants; and the
injury resulting from the fraud . . . .” Campbell v. Inkelaar, No. 2:12-CV-283, 2013 WL 427346,
at *3 (E.D. Tenn. Feb. 4, 2013)(citation omitted). Plaintiffs have failed to plead the basic details
about an impending or completed foreclosure. Plaintiffs attach a “certified forensic loan audit” to
their Complaint, which indicates that there is no recorded foreclosure on the property or notice of
default on the loan. (Docket Entry 1-1, p. 64). Plaintiffs do plead that they have incurred
attorney’s fees, although they ostensibly have always been pro se. (Docket Entry 1-1, pp. 17,
19). Plaintiffs also plead that that they lost equity in their home and that they were unable to
obtain a loan modification, “which has resulted in Plaintiff[s] being permanently burdened by the
fraudulent loan . . . .” (Docket Entry 1-1, p. 24). However, the loan modification that Plaintiffs
entered into in 2009 contradicts this statement. (Docket Entry 5-3). Plaintiffs also plead that
Regions “ignored long standing economic principals” and “sold Plaintiff[s] a deceptive loan
product.” (Docket Entry 1-1, p. 12). Finally, Plaintiffs plead that “had the truth been disclosed,
Plaintiff[s] would not have entered into the Loans.” (Docket Entry 1-1, p. 17). Given these
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conclusory and contradictory allegations, the Magistrate Judge cannot find that Plaintiffs have hit
the mark on pleading an injury or pleading the time, place, or content of the alleged
misrepresentations. Accordingly, these claims must fail.
Plaintiffs’ next claim for intentional infliction of emotional distress (IIED) also fails. In
Tennessee, a plaintiff must establish the following to state a claim for IIED: “(1) the defendant's
conduct was intentional or reckless; (2) the defendant's conduct was so outrageous that it cannot
be tolerated by civilized society; and (3) the defendant's conduct resulted in serious mental injury
to the plaintiff.” Lourcey v. Estate of Scarlett, 146 S.W.3d 48, 51 (Tenn. 2004)(citation omitted).
This is not the first time that a plaintiff has claimed IIED related to a foreclosure. A bankruptcy
court in the Eastern District noted that “the running of foreclosure notices . . . may . . . cause[]
embarrassment . . . .” In re Jenkins, 488 B.R. 601, 617 (Bankr. E.D. Tenn. 2013)(citation
omitted). However, the Court went on to state that such conduct would not be “outrageous
behavior, so extreme in degree, as to go beyond all bounds of decency . . . .” In re Jenkins, 488
B.R. 601, 617 (Bankr. E.D. Tenn. 2013)(citation and internal quotation omitted). Here, Plaintiffs
allege that they “did not default in the manner stated in the Notice of Default” and that they have
“been living under the constant emotional nightmare of losing the Property.” (Docket Entry 1-1,
p. 20). However, the Magistrate Judge is not persuaded that the issuance of a Notice of Default
constitutes outrageous behavior. Therefore, this claim must fail as a matter of law.
Plaintiffs’ next cause of action is slander of title. In Tennessee, a claim for slander of title
requires the plaintiff to show: “ ‘(1) that it has an interest in the property, (2) that the defendant
published false statements about the title to the property, (3) that the defendant was acting
maliciously, and (4) that the false statement proximately caused the plaintiff a pecuniary loss.’ ”
Currie v. JPMorgan Chase Bank, N.A., No. 2:12-CV-02915-JPM, 2013 WL 3776217, at *8
Page 7 of 10
(W.D.
Tenn.
July 16,
2013)(quoting
Brooks
v.
Lambert,
15
S.W.3d
482,
484
(Tenn.Ct.App.1999)). Plaintiffs’ pleadings are long on legal conclusions and short on facts.
Although Plaintiffs plead that Defendants maliciously published a Notice of Default, Notice of
Trustee’s Sale, Trustee’s Deed and documents related to foreclosure of Plaintiffs’ property,
Plaintiffs submit none of these documents. (Docket Entry 1-1, p. 20). There are no dates,
descriptions, quotes, copies or other facts alleged in Plaintiffs’ Complaint by which the
Magistrate Judge can conclude that Defendants published such documents or that they contained
false statements. Therefore, Plaintiffs’ claim fails as a matter of law.
Plaintiffs’ next two causes of action are to quiet title and for declaratory relief. (Docket
Entry 1-1, pp. 20-23). Plaintiffs claim that Defendants “have no right, estate, lien or interest in or
to the property . . . .” (Docket Entry 1-1, p. 22). Plaintiffs also seek declaratory relief for a
determination of whether “any Defendant has authority to foreclose on the property.” (Docket
Entry 1-1, p. 22). These claims fail for the same reasons stated above under Plaintiffs’ first claim
about Defendants’ lack of standing to foreclose.
Plaintiffs’ claims for violations of RESPA, TILA, and HOEPA are time-barred. Plaintiffs
claim that Defendants violated RESPA because Plaintiffs’ mortgage payments were “misleading
and designed to create a windfall.” (Docket Entry 1-1, p. 24). Plaintiffs claim that Defendants
violated TILA and HOEPA because Defendants failed to provide “required disclosures and
notices.” (Docket Entry 1-1, p. 24). As such, the alleged violations occurred during the execution
of the mortgage documents in 2007 or, at the latest, when Plaintiffs entered into a loan
modification agreement in 2009. (Docket Entry 5-1and 5-3). The statute of limitations for
RESPA claims is at most three years from the date of the alleged violation. 3 The statute of
3 12 U.S.C. § 2614 (“Any action pursuant to the provisions of section 2605, 2607, or 2608 of this title may be
brought in the United States district court or in any other court of competent jurisdiction, for the district in which the
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limitations for TILA and HOEPA claims is also, at most, three years from “the date of the
occurrence of the violation.” 4 Girgis v. Countrywide Home Loans, Inc., 733 F. Supp. 2d 835, 845
(N.D. Ohio 2010)(“Since HOEPA is an amendment to TILA, and the former is incorporated into
the latter, the same statute of limitations prescribed under 15 U.S.C. § 1640(e) applies.”).
Therefore, Plaintiffs’ claims would have expired, at the latest, in 2012. Plaintiffs filed their
Complaint in 2014, two years too late. Plaintiffs’ vague tolling arguments are unpersuasive.
Therefore, the claims for violations of RESPA, TILA, and HOEPA fail as a matter of law.
Likewise, Plaintiffs’ claim for rescission fails.
Under the Truth in Lending Act, 82 Stat. 146, 15 U.S.C. § 1601 et seq., when a loan
made in a consumer credit transaction is secured by the borrower's principal dwelling, the
borrower may rescind the loan agreement if the lender fails to deliver certain forms or to
disclose important terms accurately. See 15 U.S.C. § 1635. Under § 1635(f) of the statute,
this right of rescission ‘shall expire’ in the usual case three years after the loan closes or
upon the sale of the secured property, whichever date is earlier.
Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998). Therefore, Ҥ 1635(f) completely
extinguishes the right of rescission at the end of the 3-year period.” Beach, 523 U.S. at 412.
property involved is located, or where the violation is alleged to have occurred, within 3 years in the case of a
violation of section 2605 of this title and 1 year in the case of a violation of section 2607 or 2608 of this title from
the date of the occurrence of the violation, except that actions brought by the Bureau, the Secretary, the Attorney
General of any State, or the insurance commissioner of any State may be brought within 3 years from the date of the
occurrence of the violation.”).
4 15 U.S.C. § 1640(e) (Except as provided in the subsequent sentence, any action under this section may be brought
in any United States district court, or in any other court of competent jurisdiction, within one year from the date of
the occurrence of the violation or, in the case of a violation involving a private education loan (as that term is
defined in section 1650(a) of this title), 1 year from the date on which the first regular payment of principal is due
under the loan. Any action under this section with respect to any violation of section 1639, 1639b, or 1639c of this
title may be brought in any United States district court, or in any other court of competent jurisdiction, before the
end of the 3-year period beginning on the date of the occurrence of the violation. This subsection does not bar a
person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one
year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action,
except as otherwise provided by State law. An action to enforce a violation of section 1639, 1639b, 1639c, 1639d,
1639e, 1639f, 1639g, or 1639h of this title may also be brought by the appropriate State attorney general in any
appropriate United States district court, or any other court of competent jurisdiction, not later than 3 years after the
date on which the violation occurs. The State attorney general shall provide prior written notice of any such civil
action to the Federal agency responsible for enforcement under section 1607 of this title and shall provide the
agency with a copy of the complaint. If prior notice is not feasible, the State attorney general shall provide notice to
such agency immediately upon instituting the action . . . .”).
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Therefore, Plaintiffs’ right to recession also expired in 2012 and Plaintiffs’ claim for rescission is
time-barred.
IV.
Recommendation
For the reasons stated above, the Magistrate Judge RECOMMENDS that Defendants’
Motion to Dismiss (Docket Entry 5) and Motion for Joinder (Docket Entry 7) be GRANTED
and that this action be DISMISSED with prejudice for failure to state a claim.
Under FED. R. CIV. P. 72(b), the parties have fourteen (14) days, after being served with a
copy of this Report and Recommendation (R&R) to serve and file written objections to the
findings and recommendation proposed herein. A party shall respond to the objecting party’s
objections to this R&R within fourteen (14) days after being served with a copy thereof. Failure
to file specific objections within fourteen (14) days of receipt of this R&R may constitute a
waiver of further appeal. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140, 155 reh’g denied,
474 U.S 1111 (1986); Cowherd v. Million, 380 F.3d 909, 912 (6th Cir. 2004).
ENTERED this 14th day of July, 2015
s/John S. Bryant_____________________
John S. Bryant
U.S. Magistrate Judge
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