Stout et al v. Equicredit Corporation of America et al
Filing
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ORDER adopting DE 18 Report and Recommendations, Dismissing case with prejudice and certifying that Plaintiffs may not proceed in forma pauperis on appeal signed by Judge John T. Fowlkes, Jr. on 4/15/16. (Fowlkes, J.)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
CHARLES E. STOUT and,
DEBRA D. STOUT,
Plaintiffs,
EQUICREDIT CORPORATION OF
AMERICA, SELECT PORTFOLIO
SERVICING, INC., and THE BANK OF
NEW YORK,
Defendants.
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Case No. 15-cv-2665-JTF-cgc
ORDER ADOPTING THE MAGISTRATE JUDGE’S REPORT
AND RECOMMENDATION, DISMISSING THE COMPLAINT AND CERTIFYING THAT
PLAINTIFFS MAY NOT PROCEED IN FORMA PAUPERIS ON APPEAL
On December 10, 2014, the Court referred this matter to the United States Magistrate
Judge by Administrative Order for management of all pretrial matters within the Magistrate
Judge’s jurisdiction for determination or for report and recommendation pursuant to 28 U.S.C.
§§ 636 (b)(1)(A) and 636(b)(1)(B) - (C). (ECF No. 8). In accordance with the Plaintiffs’
application and supporting affidavits to proceed in forma pauperis, the Magistrate Judge
screened the matter as required under 28 U.S.C. § 1915(e)(2). On March 7, 2016, the Magistrate
Judge determined that the Plaintiffs may proceed in forma pauperis but issued a report and
recommendation that Plaintiffs’ Amended Complaint be dismissed in its entirety. (ECF No. 18).
On March 21, 2016, the Plaintiffs filed timely objections to the report and recommendation.
Upon a de novo review, the Court finds the Magistrate Judge’s report and recommendation
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should be adopted and the case Dismissed.
I.
FINDINGS OF FACT
For purposes of the 28 U.S.C. § 1915(e)(2) screening process, the Magistrate Judge
summarized the facts of this case. In pertinent part, the case involves the assignment of the
mortgage loan and deed of trust, a subsequent default on the mortgage loan and resulting
foreclosure sale of property located at 4799 Harvest Knoll Cove in Memphis, Tennessee on
February 20, 2015. (ECF No. 18, pp. 2-3). 1 While the Plaintiffs have filed objections that
reiterate their allegations, none of the objections appear to specifically relate to the Magistrate
Judge’s factual findings. Therefore, the Court adopts the factual findings of the report and
recommendation.
II.
STANDARD OF REVIEW
The district court has the authority to “designate a magistrate judge to conduct hearings,
including evidentiary hearings, and to submit to a judge of the court proposed findings of fact
and recommendations for the disposition, by a judge of the court, of any motion.” 28 U.S.C. §
636(b)(1)(B). “The district judge may accept, reject, or modify the recommended disposition;
receive further evidence; or return the matter to the magistrate judge with instructions.” Fed. R.
Civ. P. 72(b)(3).
The district court has appellate jurisdiction over any decisions the magistrate judge issues
pursuant to such a referral. 28 U.S.C. § 636 (b); Fed. R. Civ. P. 72. The standard of review that
is applied by the district court depends on the nature of the matter considered by the Magistrate
Judge. See Fed R. Civ. P. 72(b)(3) (“The district judge must determine de novo any part of the
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The parties named on the mortgage note and deed of trust, proceeding pro se, filed suit under the FDCPA
requesting to proceed in forma pauperis. The original mortgage note and deed of trust was assigned to Equicredit
Corporation of America and the loan was serviced by Select Portfolio Servicing. See attachments to Plaintiffs’
objections to the Magistrate Judge’s report and recommendation. (ECF No. 19-1, pp. 1-3).
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magistrate judge’s disposition that has been properly objected to.”); Baker v. Peterson, 67 Fed.
App’x 308, 310 (6th Cir. 2003) (“A district court normally applies a ‘clearly erroneous or
contrary to law’ standard of review for non-dispositive preliminary measures. A district court
must review dispositive motions under the de novo standard.” (internal citations omitted)).
III.
ANALYSIS
The Magistrate Judge recommended that the undersigned Court dismiss this case in its
entirety, finding that the complaint: 1) did not comply with Fed. R. Civ. P. 8(a)(2) and, 2) failed
to state a claim upon which relief may be granted pursuant to 28 U.S.C. § 1915 (e) (2)(B)(ii).
The vast majority of the 115 paragraph Amended Complaint is comprised of
conclusory statements and does not clearly state a coherent claim.
Alternatively, from what the undersigned is able to glean from the attached
documents, it does not appear that Plaintiffs are stat[ing] a claim for which relief
can be granted.
(ECF No. 18, p. 6). The Magistrate Judge noted that the Defendant, as assignee of a debt owed
to one of Plaintiffs’ prior creditors, is not a “debt collector,” for purposes of the Fair Debt
Collection Practices Act (“FDCPA”). Moreover, she determined that the Plaintiffs have not
alleged that the debt at issue was in default on the date of underlying assignment November 7,
2008, or on the date in which the assignment was recorded, on August 10, 2008. 2 Therefore, she
concluded that the complaint fails to assert facts in support of the Plaintiffs’ claims under the
Fair Debt Collection Practices Act, 15 U.S.C. § 1692, and should be dismissed. Id. at p. 7.
The Plaintiffs filed objections to the Magistrate Judge’s report and recommendation on
March 21, 2016. Within the objections, Plaintiffs primarily re-allege their prior assertions and
claims for damages found in the Amended Complaint. (ECF No. 19).
They again make
conclusory and irrelevant statements. In addition, Plaintiffs filed a copy of an amici curiae brief
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The Magistrate Judge indicated however, that Plaintiffs referenced a notice of default dated December 9, 2014, a
date that is five years after the assignment was recorded. (ECF No. 18, p. 7).
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submitted in another matter before the Sixth Circuit. 3
The Sixth Circuit has emphasized that objections are to be specific in order to narrowly
focus the district court’s attention on the dispositive and contentious issues. Howard v. Sec’y of
Health and Human Servs., 932 F.2d 505, 509 (6th Cir. 1991) (citing Thomas v. Arn, 474 U.S.
140, 147-48 (1985)) ([O]bjections were to address specific concerns[,which is] . . . ‘supported by
sound considerations of judicial economy. . . . [This] thereby prevent[s] the district court from
being ‘sandbagged’ [on appellate review] by a failure to object.”). Without a specific objection,
it is difficult for the Court to construe how the Magistrate Judge’s report and recommendation
misrepresented the facts of this case or what cause or issue the Plaintiff could find objectionable.
The failure to identify specific concerns with a Magistrate Judge’s report and recommendation
allows the party’s objection to be deemed a general objection, or a failure to object entirely.
McCready v. Kamminga, 113 F. App’x 47, 49 (6th Cir. 2004) (citing Howard, 932 F.2d at 509).
The Magistrate Judge’s legal determinations are that: 1) the Defendant, as a creditor, is
not a debt collector under the purview of FDCPA; and 2) the complaint does not allege that the
loan was in default at the time of the mortgage loan assignment. After discarding the conclusory
and unfounded objections, the Court finds the Plaintiffs reiterate the following assertions from
their Amended Complaint in an attempt to address the Magistrate Judge’s legal conclusions: 1)
the Defendant is a debt collector as defined in 15 U.S.C. § 1692(a)(4) and (6), while Plaintiff is a
consumer; and 2) that the December 9, 2014 letter issued by Portfolio Servicing, Inc., shows that
the account was paid through June 15, 2007, but at that time was in default. (ECF No. 19, ¶¶ 79 and ECF No. 7, ¶¶ 3-4).
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The Court assumes that, similar to that case, Plaintiffs filed “this brief . . . to aid th[is] Court in its interpretation
of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. (ECF No. 19-2, p. 7, pp. 2-29).
However, the amicus brief pertains to a class action regarding misleading collection efforts made for time-barred
debts. (ECF No. 19-2, Doc. No. 0061119892077, filed in Esther Buchanan v. Northland Group, Inc., No. 1:12-cv1011 (6th Cir. 2014).
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Title 15 U.S.C. § 1692a(4) offers the following definition:
The term “creditor” means any person who offers or extends credit creating a debt
or to whom a debt is owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a debt in default solely for the
purpose of facilitating collection of such debt for another.
Title 15 U.S.C. § 1692a(6)(F)(iii) and (iv) excludes as debt collectors, any person
collecting a debt owed or due which is not in default at the time it was obtained by such person
or concerns a debt obtained by such person as a secured party in a commercial credit transaction
involving the creditor. Documentation in the record shows the loan went into default well after
June 15, 2007. The last payment received by Select Portfolio Servicing, Inc. (“SPS”) was on
October 9, 2009. This resulted in the notice regarding possible foreclosure proceedings. (ECF
No. 1-3). Subsequently, a detainer warrant pursuant to foreclosure was served on the Plaintiffs
on July 31, 2015. A hearing date was scheduled for August 24, 2015, in Shelby County General
Sessions Court. (ECF No. 1-9).
As correctly noted in the report and recommendation, Congress intended that private
causes of action for violations of the Truth in Lending Act pertain only to creditors, 15 U.S.C. §
1640, et seq. See Marais v. Chase Home Finance, LLC, 736 F.3d 711, 716 (6th Cir. 2013)(an
action may not be maintained against a mere servicer for foreclosing on a borrower’s loan or for
fraud and misrepresentation). Secondly, liability does not extend to an assignee of a mortgage
loan under the FDCPA as a creditor unless the assignees were involved or participated in the
decision by the original lender to extend credit to the mortgagors. In re Simmerman, 463 B.R.
47, 62-63 (S.D. Ohio 2011). See 15 U.S. C. §§ 1691(d) and 1691a(e). However, a debt collector
may include a non-originating debt holder under 15 U.S.C. § 1692a(6)(F)(iii) that either acquired
a debt in default or treated the debt as if it were in default at the time of the acquisition by
assignment. Bridge v. Ocwen Federal Bank, FSB, 681 F.3d 355, 362-63 (6th Cir. 2012).
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The report and recommendation properly concludes that no claims were made that the
note was in default at the time of the assignment or recording. Moreover, the Plaintiffs clearly
allege that they were not parties to the assignment. As such, the assignee was not a party to the
original loan and therefore not a creditor under FDCPA. (ECF No. 7, pp. 3-4). The Complaint
alleges, “The assignment was not known to the consumer Plaintiff(s) in violation of the Fair Debt
Collections Practices Act here after “FDCPA.”
(Id. at ¶ 13). Therefore, Plaintiffs’ objection
that the Defendants are not creditors under the FDCPA is overruled.
Secondly, the Amended Complaint and the objections fail to assert that the loan was in
default at the time of the assignment. The Plaintiffs contend they received notice of the detainer
warrant, complaint and foreclosure sale. (ECF No. 7, p. 5). As correctly noted in the report and
recommendation, the December 9, 2014 letter from EquiCredit indicated that the loan was in
default. However, the note had been assigned prior to December 9, 2014. Thus, the Plaintiffs
have failed to show that the loan was in default at the time of the assignment, as required by
FDCPA. See Bridge, 681 F.3d at 362-63. This objection is also overruled.
Finally, the Corporate Assignment of Deed of Trust, which is attached to Plaintiffs’
objections, merely confirms the parties to the assignment. The documents further show the date
of said assignment as October 20, 2007, which was recorded on December 19, 2007. This
material does not support Plaintiffs’ objections to the report and recommendation. (ECF No. 191, p. 3).
IV. CONCLUSION
After de novo review of the Amended Complaint, the Magistrate Judge’s report and
recommendation and Plaintiffs’ objections thereto, the Court finds that the Plaintiffs’ objections
should be overruled and that the Magistrate Judge’s report and recommendation should be
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adopted. Accordingly, the Court finds the case should be DISMISSED with prejudice for failure
to state a claim upon which relief may be granted pursuant to 28 U.S.C. § 1915 (e)(2)(B)(ii).
The Court must also determine pursuant to 28 U.S.C. § 1915(a) whether Plaintiffs should
be allowed to appeal this decision in forma pauperis. Courts must apply an objective standard in
determining whether an appeal would be taken in good faith as required in order for an appellant
to proceed in forma pauperis. See 28 U.S.C. § 1915(a)(3) and Coppedge v. United State, 369
U.S. 438, 445 (1962). An appeal is not taken in good faith if the issue presented is frivolous. Id.
It would be inconsistent for the undersigned Court to determine that the complaint should be
dismissed for failure to state a claim prior to service on the Defendants but has sufficient merit to
support an appeal in forma pauperis. See Williams v. Kullman, 722 F.2d 1048, 1050 n.1. (2d
Cir. 1983). The same considerations that persuaded the Court to agree with the Magistrate
Judge’s report and recommendation, overrule the Plaintiffs’ objections, and dismiss the case for
failure to state a claim also justify that any appeal of this matter may not be taken in good faith.
IT IS THEREFORE CERTIFIED that pursuant to 28 U.S.C. § 1915(a)(3), that any
appeal of this matter would not be taken in good faith and that the Plaintiffs may not proceed in
forma pauperis on appeal. If the Plaintiffs file a notice of appeal, they must pay the entire filing
fee of $505 as dictated by 28 U.S.C. §§ 1913 and 1917. McGore v. Wrigglesworth, 114 F.3d
601, 612-13 (6th Cir. 1997) and Floyd v. United States Postal Serv., 105 F.3d 274, 276 (6th Cir.
1997).
IT IS SO ORDERED on this 15th day of April, 2016.
s/John T. Fowlkes, Jr.
JOHN T. FOWLKES, JR.
UNITED STATES DISTRICT JUDGE
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