O'Dell v. Deutsche Bank National Trust Company
Filing
25
MEMORANDUM OPINION re: Deft's Motion to Dismiss and/or for Summary Judgment. Signed by District Judge James C. Cacheris on 05/30/13. (pmil)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
(
(
(
Plaintiff,
(
(
v.
(
(
DEUTSCHE BANK NATIONAL TRUST (
COMPANY, AS TRUSTEE OF THE
(
INDYMAC MORTGAGE LOAN TRUST (
2006-1, ASSET-BACKED
(
CERTIFICATES, SERIES INDB
(
2006-1,
(
(
Defendant.
(
SCHAWNITA N. O’DELL,
1:12-cv-985
M E M O R A N D U M
(JCC/IDD)
O P I N I O N
This matter is before the Court on the Motion to
Dismiss and/or for Summary Judgment
[Dkt. 13] (hereafter
referred to as the “Motion”) of Deutsche Bank National Trust
Company, as Trustee of the IndyMac Mortgage Loan Trust 2006-1,
Asset-Backed Certificates, Series INDB 2006-1 (hereafter
referred to as “Defendant”).
For the following reasons, the
Court will grant summary judgment in favor of Defendant as to
all counts of the Amended Complaint.
I. Background
This dispute is, in essence, predicated upon a
residential foreclosure.
On or about March 6, 2006, Home
Savings & Trust Mortgage (hereafter referred to as “Home
1
Savings”) agreed to make a loan to Plaintiff Schawnita N. O’Dell
in the amount of $295,920.000.
A promissory note was executed
(hereafter referred to as the “Note”), secured by her principal
residence. 1 [Dkt. 13-2.]
the Note. (Note ¶ 1.)
Home Savings is listed as “Lender” on
The terms of the Note allowed for it to
be transferred freely. (Id.)
The portion of the Note entitled
“Borrower’s Promise to Pay” and states:
[Borrower] will make all payments under this
Note in the form of cash, check or money
order. [Borrower] understand[s] that the
Lender may transfer this Note. The Lender
or anyone who takes this Note by transfer
and who is entitled to receive payments
under this Note is called the “Note Holder.” 2
(Id.)
The Note also provided that “anyone who takes [the] Note
by transfer and who is entitled to receive payments” would
inherit the powers of the Note Holder. (Id.)
A Deed of Trust (hereafter referred to as the “Deed of
Trust”) was also executed.
[Dkt. 13-3.]
Mortgage Electronic
Registration System, Inc. (hereafter referred to as “MERS”) is
named as beneficiary in the Deed of Trust, acting as nominee for
Home Savings and their “successors and assigns.” 3
1
(Deed of Trust
Although the original Note itself was subsequently lost, copies of the Note
remain, one of which was submitted by Plaintiff in accompaniment with their
Amended Complaint. Neither party disputes its authenticity as a true copy of
the original Note.
2
It bears mentioning that the same section of the Note also included an
express promise to pay the principal plus interest in return for the loan.
(Id.)
3
MERS is a national electronic registry system that tracks the holders of the
beneficial ownership interests in mortgage loans and services the loans that
are registered with it.
2
1.)
Gary P. McInturff (hereafter referred to as “Mr.
McInturff”) was named as trustee, for the benefit of MERS, as
beneficiary.
(Id.)
The section in the Deed of Trust entitled
“TRANSFER OF RIGHTS IN THE PROPERTY” reads in part:
Borrower understands and agrees that MERS
holds only legal title to the interests
granted by Borrower in this Security
Instrument, but, if necessary to comply with
law or custom, MERS (as nominee for Lender
and Lender’s successors and assigns) has the
right: to exercise any or all of those
interests, including, but not limited to,
the right to foreclose and sell the
Property; and to take any action required of
Lender including, but not limited to,
releasing and canceling this Security
Instrument.
(Deed of Trust 2-3.)
The Deed of Trust employed straightforward
language regarding transferability, providing that:
The Note or a partial interest in the Note
(together with this Security Instrument) can
be sold one or more times without prior
notice to Borrower. A sale might result in a
change in the entity (known as the Loan
Servicer) that collects Periodic Payments
due under the Note and this Security
Instrument and performs other mortgage loan
servicing obligations under the Note, this
Security Instrument, and Applicable Law...
(Id. at 8.)
Similarly, the section entitled “Substitute
Trustee” states:
Lender, at its option, may from time to time
remove Trustee and appoint a successor
trustee to any Trustee appointed hereunder.
Without conveyance of the Property, the
successor trustee shall succeed to all the
3
title, power and duties conferred upon
Trustee and by Applicable Law.
(Id. at 6.)
The Deed of Trust bears Plaintiff’s signature as
Borrower. (Id. at 11.)
A “Fixed/Adjustable Rate Rider –
Interest Only Period” is also appended to the Deed of Trust.
(Id. at 12-18.)
It was, by its terms, also executed on March 6,
2006, and bears Plaintiff’s signature. (Id. at 18.)
Although there is little disagreement regarding the
initial origination and execution of the loan, the parties
disagree as to what took place thereafter.
Defendant states
that the Note was “endorsed in blank by Home Savings” and
assigned to IndyMac Bank, F.S.B. (hereafter referred to as
“IndyMac Bank”). (Def. Mem. 5; Note 6.)
According to Defendant,
“Home Savings... sold the Loan to IndyMac Bank... on March 24,
2006, without recourse.” (Def. Supp. Mem. 2.)
In the sworn
affidavit of Charles Boyle (hereafter referred to as “Mr.
Boyle”), Vice President of Default Risk Management Litigation
for OneWest Bank, F.S.B. (hereafter referred to as “OneWest”),
Mr. Boyle states that the following actions took place with
regard to the loan:
At the time the loan was made to O’Dell on
March 6, 2006, the beneficial interest
holder was Home Savings & Trust Mortgage.
M.E.R.S. is listed on the Deed of Trust as
the beneficiary, acting for the benefit of
the lender. Thereafter, in 2006, the Note
was sold to an investor, Deutsche Bank, as
Trustee of the IndyMac Mortgage Loan Trust
4
2006-1, Asset-Back Certificates, Series INDB
2006-1.
(Boyle Aff. 2.)
In response to this Court’s request for
supplemental briefing, Defendant submitted an affidavit on
behalf of Robert G. McKeever II (hereafter referred as “Mr.
McKeever”), an employee of JAMS01, Inc., which does business as
“Home Savings & Trust Mortgage.” (McKeever Aff. ¶ 1.)
Mr.
McKeever has worked in their closing/post-closing department
since 2003 and “personally worked on the closing and postclosing of the mortgage loan made by Home Savings & Trust
Mortgage to Schawnita N. O’Dell.” 4 (Id. at ¶ 5.)
Mr. McKeever
states that “on March 24, 2006, Home Savings & Trust Mortgage
sold the loan to IndyMac Bank, F.S.B.” 5 (Id. at ¶ 6.)
Mr.
McKeever also states that “[o]n or about March 28, 2006, a goodbye letter notifying the borrower of the loan sale was mailed to
the borrower at the property address.” (Id. at ¶ 8.)
Defendant
also emphasizes the presence of the allonge to the Note, which
states that it is payable to IndyMac Bank, as evidencing the
transfer. 6
(Def. Supp. Mem. 2.)
4
Mr. McKeever states that he has “personal knowledge of the facts set forth
[therein the affidavit] and/or [he has] reviewed the books and records of
Home Savings & Trust Mortgage with regard to the statements made...”
(McKeever Aff. ¶ 2.)
5
Mr. McKeever also states that “Home Savings & Trust Mortgage registered the
change of ownership to IndyMac Bank, F.S.B. with [MERS] on March 28, 2006 in
batch #3269091 and transmitted the loan file to IndyMac, F.S.B.” (Id. at ¶
7.)
6
Plaintiff objects to and disputes the authenticity of the allonge to the
Note. (Pl. Opp’n 3.)
5
The record demonstrates that, at closing, Home Savings
notified Plaintiff of the intended transfer of the loan to
IndyMac Bank.
Notice is reflected in a document entitled
“Notice of Assignment, Sale or Transfer of Servicing Rights.”
The document, scheduled to take effect April 1, 2006, bears the
signature of Mrs. O’Dell.
[Dkt. 21-2.]
After Plaintiff’s loan was transferred to IndyMac
Bank, IndyMac Bank thereafter securitized the loan.
It was
pooled together with other mortgages into a trust, ultimately
becoming an asset in the IndyMac Mortgage Loan Trust 2006-1,
Asset-Backed Certificates, Series INDB 2006-1 (hereafter
referred to as “the IndyMac 2006-1 Trust” or “the Trust”). (Def.
Mem. 4.)
IndyMac Bank, F.S.B., as Seller and
Servicer, placed the loan into a trust, as
evidence by that certain Pooling & Servicing
Agreement dated as of June 1, 2006, and the
IndyMac Mortgage Loan Trust 2006-1, AssetBacked Certificates Series INDB 2006-1.
Deutsche Bank National Trust Company was the
Trustee and Supplemental Interest Trust
Trustee under the PSA.
(Def. Mem. 4.)
The IndyMac 2006-1 Trust was formed under a June
1, 2006 Pooling and Servicing Agreement [Dkt. 16-1] (hereafter
referred to as “the PSA”) and intended to “consist of a
segregated pool of assets consisting of the Mortgage Loans and
certain other related assets subject to [the PSA].” (PSA. 2.)
Under the terms of the PSA, IndyMac Bank remained loan servicer
6
of loans placed in the Trust, which would have included
Plaintiff’s loan. [Dkt. 21-3.]
Deutsche Bank was to serve as
trustee and supplemental interest trust trustee for the Trust. 7
Subsequently, beginning in 2006, IndyMac Bank performed all of
the servicing obligations required by the PSA, which included
the processing of payments made on loans in the IndyMac 2006-1
Trust. (Def. Supp. Mem. 3.)
In 2007, Plaintiff requested a loan modification from
IndyMac Bank, which granted her request. [Dkt. 21-4.]
A Loan
Modification Agreement, bearing Plaintiff’s signature, was
executed. (2007 Loan Modif. Agree. 1-2.)
Plaintiff ardently disputes Defendant’s version of the
facts, and denies that any such sale or transfer of the Note
from Home Savings to IndyMac took place.
Plaintiff also denies
that the loan was securitized and placed in the IndyMac 2006-1
Trust took place. 8
The parties agree that IndyMac Bank was subsequently
closed by the Office of Thrift Supervision (hereafter referred
to as “the OTS”) of the Federal Deposit Insurance Corporation
(hereafter referred to as “the FDIC”) on July 11, 2008 and the
7
Deutsche Bank is also the principal Certificateholder of the Trust assets
under the PSA. (Def. Supp. Mem. 6.)
8
In disputing Defendant’s version of the facts, Plaintiff relies in large
part upon the argument that “there is no evidence to support [Defendant’s
version of the facts] other than the self-serving hearsay statement of the
affiant, and those facts are contradicted by other documents.” (Pl. Opp’n
3.)
7
FDIC was appointed as receiver of IndyMac Bank.
On the same
day, July 11, the OTS chartered a new institution, IndyMac
Federal Bank, F.S.B. (hereafter referred to as “IndyMac Federal
Bank”), and appointed the FDIC as conservator of those assets.
[Dkt. 21-5.]
IndyMac Federal Bank assumed the duty to perform
the obligations of the failed financial institution, IndyMac
Bank, including the obligation to serve as loan servicer with
respect to Plaintiff’s loan. (Def. Supp. Mem. 8.)
As
conservator for IndyMac Federal Bank, the FDIC itself continued
to perform the functions that IndyMac Bank had performed prior
to receivership, which included the servicing of Plaintiff’s
loan. (Id. at 3.)
On November 24, 2008, the FDIC appointed a
substitute trustee of the Deed of Trust.
[Dkt. 11-4.]
In disputing Defendant’s version of the facts,
Plaintiff cites the November 24, 2008 Deed of Appointment of
Substitute Trustee (hereafter referred to as “the 2008
Appointment”), through which the FDIC, as conservator for
IndyMac Federal Bank, F.S.B., successor to IndyMac Bank, F.S.B.,
defined in the document as “party of the first part,”
substituted Equity Trustees, L.L.C. (hereafter referred to as
“Equity Trustees”), defined in the document as “party of the
second part,” as substitute trustee for Mr. McInturff.
Plaintiff calls particular attention to language in the 2008
Appointment that states that “WHEREAS, the party of the first
8
part is the owner and holder of the note secured by said Deed of
Trust.” (2008 Appointment 1.)
Plaintiff contends that this is
proof positive that the FDIC was the owner of the loan at that
time, and argues that “[i]f the FDIC was the owner and holder of
the note in 2008, it is a legal impossibility for the Defendant
INDB 2006-1 trust to have owned the Note in 2006 (which it was
legally required to do per its sworn SEC filings).” (AC 4.)
Defendant contends that the 2008 Appointment’s
representation that the FDIC is the owner and holder of the Note
is erroneous, stating that the “document states, in error, that
the FDIC was in fact the owner of the Note, which it was not.
The Trust was the owner of the Loan.” (Def. Supp. Mem. 4.)
Defendant also contends that the “FDIC’s conservatorship did not
operate as a legally significant event with respect [to] the
fundamental rights and obligations of the Plaintiff with regard
to the Note and Deed of Trust.” (Id. at 9.)
Defendant states
that IndyMac Bank was not the owner of the Note at the time of
FDIC receivership, but rather the loan servicer according to the
PSA.
The loan itself was an asset of the IndyMac 2006-1 Trust.
Therefore, the FDIC, acting as conservator for IndyMac Federal
Bank, as successor to IndyMac Bank, could not have become owner
of the Note in 2008. 9 (Id. at 8-9.)
9
According to Defendant, “[t]he Plaintiff still owed the amounts due under
the Note, and the property encumbered by the Deed of Trust continued to
9
Defendant states that the new institution, IndyMac
Federal Bank, began to collect and process Plaintiff’s payments
made under the Note. (Def. Supp. Mem. 9.)
In 2008, Plaintiff
once again failed to make requisite payments on the Note. (Id.
at 4.)
According to Defendant, “[a]s a result of the default,
the Loan Servicer (then, the FDIC, as Conservator for IndyMac
Federal Bank, ... as Successor to IndyMac Bank...) had the right
to initiate foreclosure proceedings on behalf of the owner, the
Trust.” (Id.)
Thereafter, the FDIC, as conservator of IndyMac
Federal Bank, “took steps to initiate a foreclosure proceeding
(i.e. appointed a substitute trustee under the Deed of Trust.)” 10
(Id.)
On March 19, 2009, OneWest Bank became the servicer of
Plaintiff’s loan when it acquired substantially of the assets
and the mortgage servicing rights of IndyMac Federal Bank from
the FDIC, as conservator for IndyMac Federal Bank, as successor
to IndyMac Bank. 11 [Dkt. 21-7.]
After OneWest became the
servicer of Plaintiff’s loan, in August of 2009, Plaintiff
signed another Loan Modification agreement with IndyMac Mortgage
secure Plaintiff’s obligations under the Note. The Trust assets were not
affected.” (Id.)
10
However, Defendant represents that the “FDIC...did not – and could not –
own the Note, because IndyMac Bank ... did not own it at the time the FDIC
stepped into its shoes.” (Id.)
11
Plaintiff concedes the truthfulness of this factual statement with the
caveat that the statement reflects the truth “as long as [OneWest Bank] was
lawfully servicing the loan on behalf of the owner of the loan – not an
imposter.” (Pl. Opp’n 4.)
10
Services, a division of OneWest Bank, F.S.B. [Dkt. 21-8] (2009
Loan Modif. Agree. 1-2.)
The parties agree that, in 2011, Plaintiff was in
default of the loan and was unable to reach any resolution to
avoid foreclosure with OneWest Bank, i.e., the servicer of her
loan. 12 (AC 2.)
In August of 2011, the Deed of Trust associated with
Plaintiff’s loan was transferred from assignor MERS, as nominee
for Home Savings, to assignee Deutsche Bank National Trust
Company, as trustee for the IndyMac 2006-1 Trust. (2011
Assignment 1.)
The Assignment of Deed of Trust (hereafter
referred to as “the 2011 Assignment”) [Dkt. 11-5] purports to
have become effective on August 25, 2011.
Mr. Boyle represents
that:
In August of 2011, M.E.R.S. assigned the
Deed of Trust to Deutsche Bank, as Trustee
of the IndyMac Mortgage Loan Trust 20061 ... so that the servicer, OneWest Bank
FSB, could initiate foreclosure proceedings
against the property securing the Note due
to a substantial payment default by O’Dell.
(Boyle Aff. 2-3.)
On August 27, 2011, Deutsche Bank, as trustee for the
IndyMac 2006-1 Trust, appointed a successor trustee under the
12
Plaintiff concedes the truthfulness of this factual statement with the
caveat “that One[W]est was, given all the information Plaintiff had, the
lawful servicer of the loan.” (Pl. Opp’n 4.)
11
Deed of Trust. 13 [Dkt. 11-2.]
Wittstadt Title & Escrow Company,
L.L.C. (“Wittstadt”) was appointed by Defendant as substitute
trustee for “Gary P. McInturff, and all others who may have been
appointed prior to the effective date hereof.”
Appointment 1.)
(Witt.
Defendant is described in the document as “the
current holder[] of the Note described [therein] or secured by
the aforesaid Deed of Trust” and “Noteholder[]” (Witt.
Appointment 1-2.)
The document itself was executed by OneWest
Bank as attorney in fact for Deutsche Bank, as trustee of the
IndyMac 2006-1 Trust. 14 (Witt. Appointment 2.)
Thereafter, on August 29, 2011, prior to foreclosure
and pursuant to Va. Code § 55-59.1, OneWest Bank provided notice
to Plaintiff that the original Note was unavailable, lost, or
could not be produced. 15
The Notice of Unavailable Note [Dkt.
11-3] (hereafter referred to as the “Notice Letter”) was sent on
behalf of OneWest Bank, described therein as attorney in fact
for Deutsche Bank, as trustee of the IndyMac 2006-1 Trust under
the PSA, the “present owner and holder of the Note made by
you...” (Lost Note Not. 1.)
The Notice Letter informed
13
This Deed of Appointment of Substitute Trustees “was recorded in the land
records office for Prince William County as Instrument number 201109270079088
on August 27, 2011.” (Def. Mem. 5.)
14
Plaintiff agrees that this action took place, though they deny “that
Deutsche Bank was legally entitled to so act.” (Pl. Opp’n 4.)
15
Plaintiff concedes that this factual statement is true, though they dispute
the content of the notice to the extent that their concession of truthfulness
“does not in and of itself make the hearsay statement within the notice is /
was true (sic): that the Deutsche Trust was the owner and holder of the note
(a legal determination)(it was not the holder as the note is lost – see Ex E
¶6, lost note affidavit, AC Ex C – lost note letter). (Pl. Opp’n 4.)
12
Plaintiff that the letter was an attempt to collect her debt and
that a request for sale pursuant to the terms of the Deed of
Trust would be made to the substituted trustee within fourteen
days of the mailing of the Notice Letter. (Id.)
The Notice
Letter further informed Plaintiff that if she believed that she
was subject to a claim by a person other than the beneficiary
described therein, Plaintiff could petition the Circuit Court of
the county or city where the secured property lies for an order
requiring the beneficiary to provide protection against any such
claim. (Id.)
On January 19, 2012, Plaintiff, through retained
counsel in this matter, submitted a Qualified Written Request
[Dkt. 15-8] (hereafter referred to as the “QWR”) to Wittstadt
pursuant to 12 U.S.C. § 2605(e) of the Real Estate Settlement
Procedures Act (hereafter referred to as “RESPA”), and a request
for Validation of Debt (hereafter referred to as “VoD”) pursuant
to 15 U.S.C. 1692(g) of the Fair Debt Collection Practices Act
(hereafter referred to as the “FDCPA”).
Therein, Plaintiff
requested a copy of the Note, as well as any documents
evidencing an assignment of the Note or Deed of Trust.
Plaintiff also requested the name, address, and telephone number
of the present owner of the obligation, or, in the event that
the then-creditor differed from the original creditor, a chain
of ownership of the Note and Deed of Trust. (QWR/VoD 1.)
13
Wittstadt responded to Plaintiff’s requests on January 20, 2012,
providing copies of the Note, Deed of Trust, and 2011 Assignment
of the Deed of Trust from MERS to Defendant.
Wittstadt also
provided a pay-off ledger indicating a principal balance of
$344,273.67 to Plaintiff’s account. [Dkt. 15-9.]
According to Defendant, a Lost Note Affidavit “was
provided to the Plaintiff from the attorney conducting the
foreclosure advising that the original Note could not be found.”
(Def. Supp. Mem. 7.)
Although the document itself is undated,
it bears a notary stamp dated March 30, 2012.
The Lost Note
Affidavit is based upon the statements of Aaron Brown (hereafter
referred to as “Mr. Brown”), Vice President for OneWest, and
explains that the Note was sold by Home Savings and made part of
the IndyMac 2006-1 Trust, “the legal and lawful owner of the
note.” 16 (Lost Note Affidavit 1.)
On April 30, 2012, Plaintiff’s property was
foreclosed.
(AC 2.)
Wittstadt. (Id.)
The foreclosure auction was conducted by
According the Amended Complaint, MHZTH
Investments, L.L.C. (hereafter referred to as "MHZTH") and
Carderock Enterprises, L.L.C. (hereafter referred to as
“Carderock”) “purchased the Property at the foreclosure sale,
were grantees on the Trustees' Deed, and [MHZTH] evicted
16
Defendant states that, although the Lost Note Affidavit does not fully
articulate chain of ownership, it nevertheless achieved the intended end
result of informing Plaintiff of the IndyMac 2006-1 Trust’s ownership of the
Note. (Def. Supp. Mem. 7 fn. 6.)
14
Plaintiff from the Property.” (AC 4.)
Neither MHZTH nor
Carderock are parties to the instant proceeding.
II. Standard of Review
Federal Rule of Civil Procedure 12(b) (6) allows a
court to dismiss those allegations which fail “to state a claim
upon which relief can be granted.”
Fed. R. Civ. P. 12(b)(6).
A
Rule 12(b)(6) motion tests the legal sufficiency of the
complaint.
2008).
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.
A court reviewing a complaint on a Rule 12(b)(6) motion
must accept well-pleaded allegations as true and must construe
factual allegations in favor of the plaintiff.
See Randall v.
United States, 30 F.3d 518, 522 (4th Cir. 1994).
A court must also be mindful of the liberal pleading
standards under Rule 8, which require only “a short and plain
statement of the claim showing that the pleader is entitled to
relief.”
Fed. R. Civ. P. 8.
While Rule 8 does not require
“detailed factual allegations,” a plaintiff must still provide
“more than labels and conclusions” because “a formulaic
recitation of the elements of a cause of action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)
(citation omitted).
To survive a Rule 12(b)(6) motion, “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’”
15
Ashcroft v.
Iqbal, 556 U.S. 662 (2009) (quoting Twombly, 550 U.S. at 570).
“A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.”
Id.
However, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements,
do not suffice” to meet this standard, id., and a plaintiff’s
“[f]actual allegations must be enough to raise a right to relief
above the speculative level . . . .”
Twombly, 550 U.S. at 555.
Moreover, a court is “not bound to accept as true a legal
conclusion couched as a factual allegation.”
Iqbal, 556 U.S. at
678.
Defendant has moved to dismiss the Amended Complaint
or, alternatively, for summary judgment.
In their Opposition to
Defendant’s Motion, Plaintiff determined that they would treat
the Motion as moving solely for dismissal.
Defendant maintains
in their Response to Defendant’s Opposition that their motion
constitutes movement for both dismissal and summary judgment.
Consequently, the Court must make a determination as to whether
it is appropriate to broach summary judgment at this time.
The Court believes that the instant matter presents a
nearly analogous scenario to those posed in Laughlin v.
Metropolitan Washington Airports Authority, 149 F.3d 253 (4th
Cir. 1998) and Tsai v. Maryland Aviation, 306 F. App'x 1 (4th
16
Cir. 2008).
The defendant in Laughlin captioned its pleading as
a “Motion to Dismiss, or, in the alternative, Motion for Summary
Judgment,” and submitted affidavits and other materials with its
motion.
Upon appeal, the Fourth Circuit reasoned that “[o]n the
basis of [Laughlin's] own actions - captioning her memorandum
and filing affidavits - it appears that Laughlin had actual
notice that the motion could be disposed of as one for summary
judgment.”
Laughlin, 149 F.3d at 261.
Similarly, in Tsai, the
defendant captioned its motion as a “Motion to Dismiss, or in
the Alternative, Motion for Summary Judgment,” and attached
seven exhibits.
Defendant in that case responded by filing a
“Plaintiff's Memorandum of Points and Authorities In Opposition
To Defendant's Motion to Dismiss or For Summary Judgment,” and
attached an EEOC record as an exhibit to his memorandum.
The
Fourth Circuit held that “[the plaintiff] cannot plausibly argue
that he lacked notice that [the defendant] was moving for
summary judgment, given that he acknowledged as much in the
title of his responsive pleading and even put additional
evidence before the court of his own volition.”
Tsai, 306 F.
App'x at 5.
In this case, Plaintiff filed an “Opposition to Motion
to Dismiss and/or Summary Judgment,” a clear indication that
they had notice that Defendant was moving for summary judgment.
Although the Opposition contains a footnote stating that
17
Plaintiff would treat Defendant’s Motion as one for dismissal
because “no standard of review for summary judgment is provided,
nor is summary judgment at any time later addressed,” it is
clear on the face of Defendant’s Motion that they are also
moving for summary judgment.
Simply because Plaintiff has
unilaterally decided to treat Defendant’s Motion solely as a
12(b)(6) motion to dismiss does not annul the fact that
Defendant has moved for summary judgment in the alternative and
has submitted several exhibits in support of summary judgment.
Furthermore, Plaintiff submitted additional evidence before the
Court of his own volition.
The foregoing considerations lend
significant credence to the notion that Plaintiff had actual
notice that the motion could be disposed of as one for summary
judgment.
Under the circumstances of the instant proceeding,
Plaintiff cannot plausibly argue that they lacked notice that
Defendant was moving for summary judgment. Plaintiff
acknowledged as much in the title of their responsive pleading
and even put additional evidence before the court of their own
volition. 17
If Plaintiff’s counsel thought they needed
additional discovery, they could have made a motion under Rule
56(f), which permits a court to order additional discovery where
a party lacks sufficient facts to oppose a motion for summary
17
The Court also notes that both parties were provided with an opportunity to
submit supplemental briefing.
18
judgment. See Fed.R.Civ.P. 56(f).
Indeed, the Fourth Circuit
has held that the nonmoving party cannot complain that summary
judgment was granted without discovery unless that party had
made an attempt to oppose the motion on the grounds that more
time was needed for discovery or moved for a continuance to
permit discovery before the district court ruled. See Evans v.
Technologies Applications & Serv. Co., 80 F.3d 954, 961 (4th
Cir. 1996)(citing Nguyen, 44 F.3d at 242).
Counsel failed to
make such a motion or oppose Defendant’s motion on those
grounds, and in doing so has waived any argument for additional
discovery. 18 See Laughlin, 149 F.3d at 261 (citing Nguyen v. CNA
Corp., 44 F.3d 234, 242 (4th Cir. 1995)).
Furthermore, Plaintiff may not successfully argue that
the Court had an obligation to formally notify them that the
motion would be treated as one for summary judgment. “The
district court, while it clearly has an obligation to notify
parties regarding any court-instituted changes in the pending
proceedings, does not have an obligation to notify parties of
the obvious.”
Tsai, 306 F. App'x at 5 (citing Laughlin, 149
F.3d at 261).
18
The Second Circuit Court of Appeals has similarly explained that “[a]
reference to Rule 56(f) and to the need for additional discovery in a
memorandum of law in opposition to a motion for summary judgment is not an
adequate substitute for a Rule 56(f) affidavit ... and the failure to file an
affidavit under Rule 56(f) is itself sufficient grounds to reject a claim
that the opportunity for discovery was inadequate.” Paddington Partners v.
Bouchard, 34 F.3d 1132, 1137 (2d Cir. 1994)
19
Summary judgment is appropriate only if the record
shows that “there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986); Evans v. Techs. Apps. & Serv. Co.,
80 F.3d 954, 958-59 (4th Cir. 1996) (citations omitted).
The
party seeking summary judgment has the initial burden of showing
the absence of a material fact.
U.S. 317, 325 (1986).
Celotex Corp. v. Catrett, 477
A genuine issue of material fact exists
“if the evidence is such that a reasonable jury could return a
verdict for the non-moving party.”
Anderson, 477 U.S. at 248.
Once a motion for summary judgment is properly made
and supported, the opposing party must come forward and show
that a genuine dispute exists.
See Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
The
party opposing summary judgment may not rest upon mere
allegations or denials.
Rather, the non-moving party “must set
forth specific facts showing that there is a genuine issue for
trial.”
Anderson, 477 U.S. at 250 (quotation omitted).
Unsupported speculation is not enough to withstand a
motion for summary judgment.
See Ash v. United Parcel Serv.,
Inc., 800 F.2d 409, 411-12 (4th Cir. 1986).
In reviewing the
record on summary judgment, the court “must draw any inferences
in the light most favorable to the non-movant” and “determine
20
whether the record taken as a whole could lead a reasonable
trier of fact to find for the non-movant.”
Brock v. Entre
Computer Ctrs., Inc., 933 F.2d 1253, 1259 (4th Cir. 1991)
(citations omitted).
III. Analysis
In their Amended Complaint, Plaintiff alleges four
causes of action: Count I, violation of the Truth in Lending Act
notice requirement (pled in the alternative to Count II), Count
II, equitable action to rescind foreclosure (pled in the
alternative to Count I), Count III, fraud, and Count IV, unjust
enrichment. 19
The Court will address Plaintiff’s causes of
action in the order in which they have been alleged in the
Amended Complaint.
1. Count I: Violation of TILA Notice Requirement
The stated purpose of the Truth in Lending Act
(hereafter referred to as “TILA”) is to provide for the informed
use of credit by consumers. See 15 U.S.C. § 1601(a).
TILA
provides for a private right of action for civil liability
against any creditor that fails to comply with any requirement
imposed under TILA. 20 See 15 U.S.C. § 1640(a).
19
Of particular
In addition to the stated claims of the Complaint and Amended Complaint,
Plaintiff has accused Defendant of various unjust and unlawful actions
undertaken in order effectuate the sale of her residence, including the
creation of fraudulent documents and misleading market regulators.
20
Section 1602(g) states in part that “[t]he term ‘creditor’ refers only to a
person who both (1) regularly extends, whether in connection with loans,
sales of property or services, or otherwise, consumer credit which is payable
by agreement in more than four installments or for which the payment of a
21
relevance to the instant proceeding, Section 131(g), codified at
15 U.S.C. § 1641(g), and entitled “Liability of Assignees,”
requires that an entity notify the borrower in writing when it
purchases or is assigned the beneficial interest in their loan
on a property within thirty days of when the loan is
transferred. See 15 U.S.C. § 1641(g)(1) (“not later than 30 days
after the date on which a mortgage loan is sold or otherwise
transferred or assigned to a third party, the creditor that is
the new owner or assignee of the debt shall notify the borrower
in writing of such transfer,” including identity and contact
information for new creditor, date of transfer, and instructions
for how to reach an agent with authority to act on behalf of new
creditor).
Added as part of the 2009 amendments to TILA, §
1641(g) provides the statutory parallel to 12 C.F.R. § 226.39,
the attendant implementation regulation.
However, this
subsection only applies to the “new owner or assignee of the
debt.”
15 U.S.C. § 1641(g).
It also bears mentioning that §
1641(g) applies only to transfers prior to the May 20, 2009
effective date of the amendments to TILA that added it. See
Bradford v. HSBC Mortg. Corp., 829 F.Supp.2d 340, 353 (E.D.Va.
finance charge is or may be required, and (2) is the person to whom the debt
arising from the consumer credit transaction is initially payable on the face
of the evidence of indebtedness or, if there is no such evidence of
indebtedness, by agreement ... Any person who originates 2 or more mortgages
referred to in subsection (aa) of this section in any 12–month period or any
person who originates 1 or more such mortgages through a mortgage broker
shall be considered to be a creditor for purposes of this subchapter ...”
22
2011)(stating that “[n]othing in TILA indicates that this
provision should be applied retroactively.”)
If a new creditor fails to make this written
disclosure, a borrower may seek actual damages sustained so long
as the borrower is able to show detrimental reliance on the
faulty disclosure. See 15 U.S.C. § 1640(a)(1); see also Turner
v. Beneficial Corp., 242 F.3d 1023, 1028 (11th Cir. 2001)(en
banc)(requiring a showing of detrimental reliance when seeking
actual damages under TILA).
With regard to statutory damages, §
1641 provides that those damages “may not exceed with respect to
actions based upon a violation of [§ 1641], the amount specified
in [§] 1640 of this title; and with respect to all other causes
of action, the sum of the amount of remaining indebtedness ...
and the total amount paid by the consumer in connection with the
transaction.” See 15 U.S.C. § 1641(d)(2). Claims raised under
TILA must be brought within one year of the occurrence of the
alleged violation or they are therefore barred by the statute of
limitations. See 15 U.S.C. § 1640(e).
Plaintiff’s pleadings, although highly contentious and
somewhat disarrayed, seemingly delineate multiple factual
scenarios that would bear upon the significance of the 2011
Assignment. See Fed.R.Civ.P. 8(d)(3) (“A party may state as many
separate claims or defenses as it has, regardless of
consistency.”).
To be sure, Plaintiff has alleged manifold
23
wrongdoing on behalf of the entities that became associated with
Plaintiff’s loan.
In rejecting Defendant’s version of the
facts, Plaintiff has posited several distinct theories as to
what they believe might have taken place with regard to the
loan.
Plaintiff denies that the loan’s purported transfer
away from Home Savings in 2006 took place, and argues that the
notion that the Deed of Trust could be properly assigned
independent of the Note is “inconsistent with a well[]established principle of law - an assignment of the deed of
trust without the note is a nullity. Given Deutsche Bank,
itself, proclaims this is an assignment of the deed of trust
alone, it is a nullity.” (AC 6.)
Plaintiff has also alleged
that the 2011 Assignment is a fraudulent document, allegedly
having been forged by employees of OneWest without the knowledge
of MERS and Home Savings. (Id. at 4.)
It is the position of
Plaintiff that, if the 2011 Assignment is fraudulent, “then
Deutsche Bank did not become the successor in interest to the
Lender and had no authority to invoke the power of sale and to
appoint the substitute trustee.” (Id. at 7.)
Plaintiff also
contends that “[i]t is apparent from the exhibits that the FDIC
owned the loan as of 2008, making an assignment in 2006 or in
2011 from [Home] Savings a legal impossibility.”
(AC 9-10.)
Plaintiff cites where 2008 Appointment states that “WHEREAS, the
24
party of the first part is the owner and holder of the note
secured by said Deed of Trust.” 21 (2008 Appointment 1.)
According to Plaintiff, Defendant first received an
assignment of the beneficial interest in the loan through the
2011 Assignment, which purports to transfer the Deed of Trust
from MERS, as nominee for Home Savings, to Defendant Deutsche
Bank, as trustee for the IndyMac 2006-1 Trust.
Plaintiff thus
alleges that Defendant violated 15 U.S.C. § 1641(g) of TILA by
failing to provide Plaintiff with the necessary notification of
the transfer or assignment of her loan.
Plaintiff states that
“Deutsche Bank received an assignment of the beneficial interest
in Plaintiff's mortgage on August 25, 2011” and that “[i]f the
Assignment was, in fact, an assignment of any beneficial
interest, then Deutsche Bank was required to give Plaintiff the
required notice” within thirty days of receipt and make all the
disclosures required by § 1641(g). (AC 8.)
Plaintiff concludes
that “Deutsche Bank failed to notify Plaintiff at all and
therefore failed to make the requisite disclosures.” (Id.)
Plaintiff also states that the loan secures an interest in real
estate which is used by Plaintiff as their principal dwelling
21
As this Court recounted in its foregoing discussion of the factual
background of this proceeding, Plaintiff bases this assertion on the text of
the 2008 Appointment, through which the FDIC, as conservator for IndyMac
Federal Bank, F.S.B., successor to IndyMac Bank, F.S.B., defined therein as
“party of the first part,” substituted Equity Trustees, defined therein as
“party of the second part,” as substitute trustee for Gary P. McInturff.
(2008 Appointment 1.)
25
and contends that Defendant is a creditor within the meaning of
§ 1641(g).
If this Court is to believe the representations of
the Plaintiff that the 2011 Assignment constitutes a transfer
sufficient to trigger the § 1641(g) notice requirement,
Plaintiff alleges that “Deutsche Bank was required to give
Plaintiff the required notice.” (AC 9.)
It is the position of Defendant that the “revised TILA
provision on which Plaintiff relies – 15 U.S.C. § 1641 – does
not apply to the facts of this case.” (Def. Supp. Mem. 9.)
Defendant argues that the triggering event for an obligation
under § 1641 is that the mortgage loan itself be “sold or
otherwise transferred or assigned to a third party.” See 15
U.S.C. § 1641.
Defendant argues that “[Plaintiff]’s legal
conclusions are erroneous” to the extent that Plaintiff asserts
that TILA obligations arose as a consequence of the 2011
Assignment.
Defendant contends that Plaintiff’s Note was
securitized and assigned to Defendant in 2006, and that there
was no assignment, sale, or other transfer of the Loan in 2011
to support a cause of action under TILA. (Def. Mem. 7; Def.
Supp. Mem. 10.)
Defendant notes that, under Virginia law, a
note holder has the right, but not obligation, to record an
assignment at the time the loan was sold. See Va. Code § 5566.01.
Defendant states that, in its discretion, IndyMac Bank
“did not record an assignment of the Deed of Trust in the land
26
records office in 2006.
Pursuant to the PSA, neither did the
Trust, because the Loan was a [MERS] loan.” (Def. Supp. Mem.
10.)
Defendant contends that the 2011 Assignment entailed
MERS, as nominee for Home Savings, merely assigning Plaintiff’s
Deed of Trust to Deutsche Bank, as trustee for the IndyMac 20061 Trust, and that such an action is insufficient to trigger the
TILA notice requirement.
1.)
(Def. Supp. Mem. 9-11; 2011 Assignment
Regarding § 1641(g) of TILA, Defendant argues that “[t]he
clear purpose behind the provision is to put homeowners on
notice of the party who is holding their mortgage loan – i.e.
the new creditor to whom the debt is owed.” (Def. Mem. 7.)
Citing TILA’s implementation regulations in support of their
position, Defendant specifically points to 12 C.F.R. § 226.39,
relating to mortgage transfer disclosures, and defining “covered
persons,” i.e., those entities required to provide disclosure,
as:
any person, as defined in § 226.2(a)(22),
that becomes the owner of an existing
mortgage loan by acquiring legal title to
the debt obligation, whether through a
purchase, assignment or other transfer, and
who acquires more than one mortgage loan in
any twelve-month period. 22
22
“Person means a natural person or an organization, including a corporation,
partnership, proprietorship, association, cooperative, estate, trust, or
government unit.” 12 C.F.R. § 226.2.
27
12 C.F.R. § 226.39(a)(1).
Thus, Defendant argues that “to be
obligated to give the require notice, the covered person must
obtain legal title to the debt obligation – i.e. the entire
loan, not just a deed of trust.” (Def. Mem. 7-8.) Defendant
believes that this position is supported by the exceptions to
the notice requirement, which provide that no notice is required
when:
[t]he covered person acquires only a partial
interest in the loan and the party
authorized to receive the consumer's notice
of the right to rescind and resolve issues
concerning the consumer's payments on the
loan does not change as a result of the
transfer of the partial interest.
12 C.F.R. §226.39(c)(3).
Consequently, it is the position of
Defendant that the 2011 Assignment, which Defendant has asserted
merely involved the assignment of the Deed of Trust, does not
constitute an assignment, sale, or other transfer sufficient to
trigger TILA’s § 1641(g) notice requirement, as Plaintiff’s loan
itself had previously been transferred by Home Savings to
IndyMac Bank and subsequently placed in the IndyMac 2006-1 Trust
in 2006.
i. Discussion
The Court will first address Plaintiff’s denial that
the 2006 transfer from Home Savings to IndyMac Bank took place.
Plaintiff contends that Defendant’s factual representations are
“self-serving” and their supporting documentation represents
28
“blatant fraud.” (AC 12.)
Plaintiff’s threadbare, conclusory
allegations that the various documents that have been submitted
by Defendant are somehow fraudulent are not worthy of credence.
The Court has not found any factual basis to support Plaintiff’s
allegations of documentary fraud.
See United States ex rel.
Constructors, Inc. v. Gulf Ins. Co., 313 F.Supp.2d 593, 596
(E.D.Va. 2004)(noting that “[i]n the event of conflict between
the bare allegations of the complaint and any attached exhibit,
the exhibit prevails”)(citing Fayetteville Investors v.
Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991));
see also Felty v. GravesHumphreys Co., 818 F.2d 1126, 1128 (4th
Cir. 1987)(“Trial judges have an affirmative obligation ... to
prevent factually unsupported claims and defenses from
proceeding to trial”).
Plaintiff has not provided citation to
any material capable of supporting their allegations regarding
the nonexistence of the 2006 transfer from Home Savings to
IndyMac Bank.
Indeed, the record sufficiently demonstrates that
the 2006 transfer from Home Savings to IndyMac Bank took place,
and Plaintiff has not offered any substantive indication to
suggest otherwise.
The Court will reject and discount those
portions of Plaintiff’s arguments as to all Counts that rely on
the non-existence or fraudulence of that transfer.
Addressing another threshold issue, Plaintiff contends
that “it is clear from a review of the Deutsche Bank (sic) sworn
29
SEC filings and recently repudiated Assignment that this trust
does not own the subject Loan.” 23 (AC 9.)
To the extent that
Plaintiff relies on the nonexistence of the 2006 transfer as a
means to deny the IndyMac 2006-1 Trust’s ownership of the loan,
the Court will reject that argument on the basis of its
preceding analysis of the issue.
This Court has reviewed the
record, including the pleadings of the parties, exhibits, and
sworn affidavits that have been submitted to the Court.
The
Court finds that the IndyMac 2006-1 Trust’s ownership of the
subject loan has been satisfactorily established. 24
The record
discloses no factual basis for concluding that any other entity
besides Defendant held the Note. 25
As to Plaintiff’s argument that the FDIC is the owner
of the subject loan, the Court concludes that the 2008
Appointment mistakenly states that the FDIC owner and holder of
the Note.
As the Court has found in its preceding analysis, at
the time of FDIC receivership, the IndyMac 2006-1 Trust, not
23
It is not clear to the Court why Plaintiff believes that Defendant has
repudiated the 2011 Assignment. Nevertheless, Defendant states that
“Deutsche Bank did not repudiate the Assignment of Deed of Trust.” (Def.
Mot. 11.) The Court will reject Plaintiff’s allegations that Defendant has
repudiated the 2011 Assignment as having been insufficiently supported and
delineated.
24
Plaintiff relies substantially on the notion that the various documents
indicating Defendant’s ownership of the loan are “fraudulent...” (AC 6.) As
this Court has stated in its preceding analysis, the Court has not found any
factual or evidentiary basis that supports Plaintiff’s allegations of
documentary fraud.
25
To the extent that Plaintiff alleges that the subject loan was added to the
IndyMac 2006-1 Trust after the cut-off date for the addition of new assets,
Plaintiff has failed to support that allegation with evidence or relevant
affidavits. The current record offers no evidentiary or factual support for
this allegation.
30
IndyMac Bank, was the owner of Plaintiff’s loan.
This notion is
supported by the overwhelming strength of the record. 26
As
IndyMac Bank was not then the owner of Plaintiff’s loan at the
time of FDIC receivership, the FDIC could not have thereafter
become “owner and holder” as receiver.
“[W]hen the FDIC becomes
receiver of a failed institution, it steps wholly in the shoes
of that institution, and accepts all assets and liabilities
thereof.”
Gulf Coast Bank & Trust Co. v. Valentine, No.
5:11CV75, 2012 WL 1071277 at *9 (N.D.W.Va. March 29, 2012).
As
IndyMac Bank was then the loan servicer of Plaintiff’s loan
pursuant to the PSA, the FDIC would have continued in that
capacity as Conservator for IndyMac Federal Bank. See Pollard &
Bagby, Inc. v. Pierce Arrow, L.L.C., III, 258 Va. 524, 528
(1999)(“It is well settled that an assignee of a contract
obtains his rights from the assignor and, thus, ‘stands in the
shoes’ of the assignor and acquires the same rights and
liabilities as if he had been an original party to the
contract”).
Consequently, it is simply not possible that the
FDIC could have been the owner and holder of the Note at the
time of receivership, as the loan was then an asset of the
IndyMac 2006-1 Trust.
26
Plaintiff’s allegations of impropriety on behalf of Defendant with regard
to the various documents, exhibits, and affidavits that have been submitted
in support of Defendant’s position constitute the very sort of allegations,
denials, and unsupported speculation incapable of withstanding a motion for
summary judgment.
31
When questioned at hearing as to what entity Plaintiff
believes to be the “actual owner” of Plaintiff’s loan, Plaintiff
was not even able to posit an alternative theory as to the
identity of the entity that they now believe to be the owner.
Plaintiff’s conclusory assertions that the IndyMac 2006-1 Trust
is not the owner of the loan are unsupported by the record, and
Plaintiff has not presented any credible support for the notion
that the subject loan was not placed in the IndyMac 2006-1 Trust
in 2006.
The Court will now address Plaintiff’s allegation that
Defendant Deutsche Bank violated 15 U.S.C. § 1641(g) of TILA by
failing to provide Plaintiff with the necessary notification of
the 2011 Assignment, which purports to transfer the Deed of
Trust from MERS, as nominee for Home Savings, to Defendant
Deutsche Bank, as trustee for the IndyMac 2006-1 Trust.
The Court notes that the TILA provision relied upon by
Plaintiff, requiring notice to borrowers of the sale, transfer,
or other assignment of a loan, is a relatively recent addition,
having only come into existence in 2009.
Plaintiff’s loan was
transferred to IndyMac, and subsequently placed in the IndyMac
2006-1 Trust, in 2006. 27
As 15 U.S.C. § 1641(g) had not yet been
implemented, there would have been no need for notice under that
27
The Court notes that the 2006 transfer likely constitutes the sort of
transaction that would have required TILA notice had § 1641(g) been in effect
at the time, though the Court need not reach that issue within the context of
the instant proceeding.
32
TILA provision.
At that time, the notice required to be
provided to a borrower was a notice of transfer of servicing
rights, pursuant to 12 U.S.C. § 2605 of RESPA.
It is also clear
from the record that the required RESPA notice was provided to
Plaintiff. 28
It is equally clear that there was no assignment,
sale, or other transfer of the loan in 2011 capable of
sustaining the present cause of action under TILA.
By the time
of the 2011 Assignment, as well as the implementation of the
TILA provision upon which Plaintiff relies, Plaintiff’s loan had
long since been transferred by Home Savings to IndyMac Bank, and
subsequently pooled by IndyMac Bank into the IndyMac 2006-1
Trust, for which Deutsche Bank serves as trustee under the PSA.
TILA’s implementation regulations, 12 C.F.R. § 226.39, relating
to mortgage transfer disclosures, and defining “covered
persons,” i.e., individuals required to provide disclosure, as:
any person, as defined in § 226.2(a)(22),
that becomes the owner of an existing
mortgage loan by acquiring legal title to
the debt obligation, whether through a
purchase, assignment or other transfer, and
who acquires more than one mortgage loan in
any twelve-month period.
12 C.F.R. § 226.39(a)(1).
It is clear that the 2011 Assignment
of Deed of Trust is not a sale, transfer, or other assignment of
the loan, and incapable of sustaining a cause of action for a
28
The Court need not discuss this issue further, as Plaintiff has not alleged
a cause of action under RESPA in their Amended Complaint.
33
TILA violation.
Defendant was, at the time of the 2011
Assignment, already the legal and lawful holder of Plaintiff’s
loan.
Furthermore, neither the note, nor the deed of trust,
nor any Virginia law cited by Plaintiff requires that
assignments of transfers of such instruments be recorded in the
county land records. See Daugherty v. Diment, 238 Va. 520, 385
S.E.2d 572, 574–575 (1989)(noting that the assignor was “not
required to obtain the consent of anyone” when the subject
contract included a clause specifying free assignability).
Plaintiff has argued that “the Deed of Trust cannot be
transferred without the Note” and that “assignment of the deed
of trust without the note is a nullity.”
(Pl. Opp’n 3; AC 6.)
However, “the Fourth Circuit has rejected the notion that the
validity of a note or deed of trust is compromised by transfer
to another party.” Horvath v. Bank of N.Y., N.A., 641 F.3d 617,
619 (4th Cir. 2011).
For over a century, it has been settled
that under Virginia law, interests in deeds of trust accompany
the promissory notes that they secure. In other words, “deeds of
trust and mortgages are regarded in equity as mere securities
for the debt, and whenever the debt is assigned the deed of
trust or mortgage is assigned or transferred with it.” Williams
v. Gifford, 139 Va. 779, 124 S.E. 403, 404 (Va. Special Ct.App.
1924)(citing McClintic v. Wise's Adm'rs, 66 Va. (25 Gratt.) 448,
34
1874 WL 5664 (1874)); see Stimpson v. Bishop, 82 Va. 190, 1886
WL 2987, at *7 (Va. 1886)(“It is undoubtedly true that a
transfer of a secured debt carries with it the security without
formal assignment or delivery.”).
Plaintiff also argues that “Deutsche Bank is not the
holder of the note – it is lost.”
(Pl. Opp’n 8.)
However,
Section 55–59.1 of the Virginia Code specifically states that:
If a note or other evidence of indebtedness
secured by a deed of trust is lost or for
any reason cannot be produced ..., the
trustee may nonetheless proceed to sale,
provided the beneficiary has given written
notice to the person required to pay the
instrument that the instrument is
unavailable and a request for sale will be
made of the trustee upon expiration of 14
days from the date of mailing of the notice.
Va.Code § 55–59.1(B).
It is clear from Plaintiff's own
submissions that they received adequate notice of the fact that
the original Note could not be produced.
Indeed, Plaintiff
submitted with their Complaint a copy of the letter notifying
her that the original Note could not be produced by Defendant,
and that Defendant nonetheless intended to initiate foreclosure
proceedings against Plaintiff, as required by Virginia Code §
55–59.1(B). 29
29
To the extent that Plaintiff may argue that production of the original Note
should have been a prerequisite to foreclosure, Plaintiff merely espouses a
recast “show me the note” theory, which has been widely rejected as “contrary
to Virginia's non-judicial foreclosure laws.” Gallant v. Deutsche Bank Nat'l
Trust Co., 766 F.Supp.2d 714, 721 (W.D.Va.2011) (citation omitted). Accord
Minix v. Wells Fargo Bank, 81 Va. Cir. 130, 2010 WL 7765589, at *4 (Fairfax
35
Finally, federal law explicitly allows for the
creation of mortgage-related securities, such as the Securities
Act of 1933 and the Secondary Mortgage Market Enhancement Act of
1984.
Pursuant to 15 U.S.C. § 77r-1, “[a]ny person, trust,
corporation, partnership, association, business trust, or
business entity ... shall be authorized to purchase, hold, and
invest in securities that are ... mortgage related securities.”
Id. § 77r-1(A)(1)(B).
Significantly, foreclosures are routinely
and justifiably conducted by trustees of securitized mortgages.
See Larota-Florez v. Goldman Sachs Mortgage Co., 719 F.Supp.2d
636, 641 (E.D.Va. 2010) aff'd, 441 F.App'x 202 (4th Cir. 2011).
Furthermore, “[t]here is no legal authority that the sale or
pooling of investment interest in an underlying note can relieve
borrowers of their mortgage obligations or extinguish a secured
party's rights to foreclose on secured property.” Zambrano v.
HSBC Bank USA, Inc., Civil Action No. 01:09–cv996, 2010 WL
2105164, at *2 (E.D.Va. May 25, 2010), aff'd, 442 Fed.App'x. 861
(4th Cir. 2011)(per curiam).
To survive summary judgment, a plaintiff must present
“‘specific facts showing that there is a genuine issue for
trial.’” Matsushita Electric Indust. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986)(quoting Fed.R.Civ.P. 56(e)). It
Cnty. Aug. 24, 2010)(cautioning that courts should not “be creating a
judicial foreclosure procedure when the legislature has mandated a nonjudicial procedure to be appropriate”).
36
is not enough “simply [to] show that there is some metaphysical
doubt as to the material facts.” Id. at 586.
Perhaps
recognizing the weakness of their TILA claim, Plaintiff
essentially conceded at hearing that it would be difficult to
sustain a cause of action under § 1641(g).
As a consequence of
the foregoing considerations, the Court grants summary judgment
for Defendant as to Count I. 30
2. Count II: Equitable Action for Rescission of
Foreclosure
Plaintiff has also moved to rescind the foreclosure of
the subject property through an equitable action.
The Court
will now address Count II of Plaintiff’s Amended Complaint.
To
the extent that Plaintiff relies upon legal or factual
circumstances rejected by this Court in its preceding discussion
of Count I, the Court rejects those arguments while declining to
recount the breadth of its analysis as to those issues.
Plaintiff has argued that Virginia law is inapplicable
where a deed of trust provides “that there is one entity that
can appoint a substitute trustee - the Lender, or its successor
in interest.”
(AC 3.)
This Court has found in its preceding
analysis that, based on the current record, Defendant was the
legal and lawful owner of the Note at the time of Wittstadt’s
appointment.
Furthermore, while parties may contract around the
30
To the extent that Plaintiff argues that the 2011 Assignment is a forged or
fraudulent document, the Court rejects that argument as unsupported.
37
standard rules applicable to negotiable instruments, both the
Note and the Deed of Trust demonstrate that the parties intended
to allow the documents to be freely transferable. See Va. Code
Ann. § 8.1A–302(a).
To the extent that Plaintiff argues that
the IndyMac 2006-1 Trust should have been unable to foreclose
due not having been the named “Lender” on the Deed of Trust
document itself, that argument is foreclosed by Fourth Circuit
precedent. See Horvath, 641 F.3d at 625 (under similar
circumstances, reading the term “Lender” as applying to any
subsequent purchaser in order to harmonize appointment provision
with other provisions of the deed of trust); see also Hien Pham
v. Bank of New York, 856 F. Supp. 2d 804, 814 (E.D.Va. 2012).
Plaintiff further contends that “[i]f the [August
2011] Assignment was not of the beneficial interest in the Note,
then Deutsche Bank did not become the successor in interest to
the Lender and had no authority to invoke the power of sale and
to appoint the substitute trustee.”
(Id. at 7.)
Therefore,
Plaintiff concludes, “the trustee was appointed by one with no
authority to so act, the appointment is void, the trustee did
not hold any valid interest, and the April 30, 2012, foreclosure
is voidable, if not void.”
(Id.)
Plaintiff further argues that
therefore “Wittstadt was not properly appointed as substitute
trustee and had no authority to conduct the foreclosure sale,
and Deutsche Bank had no right to invoke the power of sale.”
38
(Id. at 10.)
Plaintiff concludes that “[i]f the documents were
unauthorized then the foreclosure sale of the Property was
invalid and void ab initio and the sale must be rescinded ...” 31
(Id.)
Plaintiff’s arguments are fatally flawed, as the
factual predicate upon which Plaintiff relies to impeach
Wittstadt’s appointment does not represent the exclusive means
by which Defendant could have attained authority to appoint a
substitute trustee.
As this Court has noted in its preceding
analysis, based on the current record, Defendant had long since
become the lawful owner and holder of the Note by the time of
the 2011 Assignment, the action of which Plaintiff now
complains.
As the lawful owner and holder of the Note,
Defendant was authorized under the plain terms of the Note and
the Deed of Trust, as well as under well-established Virginia
law, (i) to appoint a substitute trustee, and (ii) to invoke the
power of sale given Plaintiff’s default and thereby to direct
the trustee to initiate foreclosure.
In that sense, the Court
has not found any misconduct in Defendant’s appointment of
Wittstadt as substitute trustee, either in the actions that
preceded that appointment or in the appointment itself.
31
Plaintiff concedes that “[a]ny subsequent purchaser may be deemed a bona
fide purchaser without notice ... In the event that occurs, Plaintiff pleads
in the alternative for damages.” (Id.)
39
Plaintiff’s allegations of inequity rely on factual
circumstances the veracity of which is simply lacking in factual
and evidentiary support.
As no jury could return a verdict for
Plaintiff on Count II, the Court grants summary judgment for
Defendant.
3. Count III: Fraud
With regard to their allegations of fraud, Plaintiff
argues that “[g]iven the factual allegations of this Amended
Complaint, it is clear Deutsche Bank has committed blatant fraud
in an attempt to sell this house, profit from said sale, and
seek dismissal of the Original Complaint.”
(AC 11.)
Plaintiff
seeks an award of costs and damages against Deutsche Bank for
“reckless disregard for the law, for this Court, for the blatant
fraud committed in documents of record, in pleadings before this
Court, in the Affidavit filed with this Court in support of the
Motion to Dismiss, for unlawfully foreclosing on her home, and
for claiming authority it knew that it did not have.”
(Id.)
Virginia law recognizes both actual and constructive
fraud. See, e.g., Diaz Vicente v. Obenauer, 736 F. Supp. 679,
690 (E.D.Va. 1990)(citing Moore v. Gregory, 146 Va. 504, 131
S.E. 692 (1925)).
Constructive fraud is “a breach of legal or
equitable duty, which, irrespective of moral guilt ... the law
declares fraudulent because of its tendency to deceive others,
to violate public or private confidence, or to injure public
40
interests.” Moore, 131 S.E. at 697. Thus, constructive fraud
does not require scienter or intent to mislead; it can be
established whether the representation is innocently or
knowingly made. Obenauer, 736 F. Supp. at 690; see also Chandler
v. Satchell, 160 Va. 160 (1933); Mears v. Accomac Banking Co.,
160 Va. 311 (1933). In contrast, to prove actual fraud, a
plaintiff must show (i) a false representation by defendant,
(ii) of a material fact, (iii) made intentionally and knowingly,
(iv) with intent to mislead, (v) reliance by the misled party,
and (vi) resulting injury to the party misled. Pennsylvania Life
Ins. Co. v. Bumbrey, 665 F.Supp. 1190, 1200 (E.D.Va. 1987);
Saunders v. General Services Corp., 659 F.Supp. 1042 (E.D.Va.
1986); Winn v. Aleda Constr. Co., 227 Va. 304, 315 (1984).
The Court believes that its preceding analysis has, in
large part, dispensed with much of the basis for Plaintiff’s
allegations of fraud on the part of Defendant, as there has been
no showing by Plaintiff that Defendant exceeded their legal
rights in connection with the subject loan.
The remainder of
Plaintiff’s allegations is completely contradictory to the
undisputed facts evidenced by sworn affidavits and supporting
documents.
The Court has also found that, contrary to the
allegations of Plaintiff, Defendant was the owner and holder of
Plaintiff’s Note at the time of foreclosure. The Court has found
that Wittstadt was properly appointed substitute trustee by
41
Defendant, who was empowered to make such an appointment by the
Note and Deed of Trust.
The Court reiterates that it has
rejected Plaintiff’s allegations of documentary fraud, having
found them to be conclusory, factually unsupported, and lacking
evidentiary corroboration.
Additionally, the Court has not
found that any “fraud of the Court” has occurred either through
Defendant’s pleadings or through their movement for dismissal of
the Amended Complaint.
(AC 6.)
The Court finds Plaintiff’s
allegations that Defendant committed fraud in endeavoring to
“sell this house, profit from said sale, and seek dismissal of
the Original Complaint” to be unsupported and conclusory, and
Plaintiff has not come forward with any evidence to show that
Defendant has done anything other than exercise their lawful
rights. (AC 11.)
Plaintiff has provided insufficient citation to
sources or material capable of supporting their allegations of
fraud.
Indeed, Plaintiff has not provided any affidavits or
named other credible evidence supportive of those allegations.
There is no genuine issue of material fact as whether Defendant
has committed fraud and no jury could return a verdict for
Plaintiff.
Consequently, the Court grants summary judgment in
favor of Defendant as to Count III.
4. Count IV: Unjust Enrichment
42
Count IV represents a continuation of the Plaintiff's
objections to the foreclosure of their property and payments
associated with the subject loan.
In addition to the other
allegations of the Amended Complaint, Plaintiff argues that,
based on the 2011 Assignment and Defendant’s appointment of
Wittstadt as substitute trustee, “Defendant sold Plaintiff's
home - essentially stole Plaintiff's Property, sold it to the
highest bidder, which resulted in her eviction from the
Property.”
(AC 13.)
Plaintiff further contends that “Deutsche
Bank sold the Property at auction and took the profits for its
own use and benefit, when it was not entitled to said profits.”
(Id.)
Under Virginia law, unjust enrichment is a quasicontract claim based on equity. See Kern v. Freed Co., 224 Va.
678, 680-81 (1983).
Under Virginia law, the elements of unjust
enrichment are (1) the plaintiff's conferring of a benefit on
the defendant, (2) the defendant's knowledge of the conferring
of the benefit, and (3) the defendant's acceptance or retention
of the benefit under circumstances that “render it inequitable
for the defendant to retain the benefit without paying for its
value.”
Microstrategy, Inc. v. Netsolve, Inc., 368 F. Supp. 2d
533, 537 (E.D.Va. 2005).
The Court has already granted summary judgment in
favor of Defendant on Plaintiff’s foregoing causes of action and
43
explained in its analysis that Plaintiff’s allegations of
impropriety are simply unsupported by the record.
Similarly,
the Court believes that no reasonable jury could return a
verdict for Plaintiff as to Count IV, as there has been no
showing that Defendant exceeded their rights with regard to the
subject loan.
To the extent that Plaintiff relies on the
securitization of the loan as a basis for the cause of action
for unjust enrichment, Plaintiff’s cause of action must fail.
Such securitization was neither unlawful nor unauthorized by the
terms of the Note or Deed of Trust.
Furthermore, the Court has
not been apprised of any substantive reason why Defendant, as
owner and holder of the Note, would not have been entitled to
initiate foreclosure proceedings.
The Court also notes that,
although Plaintiff implies in the Amended Complaint that
payments were made on the subject loan, Plaintiff has not
detailed any of the factual circumstances surrounding any of
those payments.
Without having been apprised of the factual
circumstances surrounding the alleged payments, there is simply
no means for the Court to evaluate Plaintiff’s argument that any
such payments have allegedly been misappropriated.
In addition, Plaintiff argues that Defendant and those
working at their behest “denied Plaintiff the opportunity to
deal with the true owner of her loan and work out an alternative
to foreclosure ... perhaps committed fraud on the true owner
44
(the FDIC), and through its fraudulent actions has been unjustly
enriched.” 32
(Id.)
It is not clear in what manner Plaintiff was
“denied Plaintiff the opportunity to deal with the true owner of
her loan.” (Id.)
Plaintiff was notified in writing that the
IndyMac 2006-1 Trust, for which Deutsche Bank serves as Trustee,
was the legal and lawful owner of Plaintiff’s Note.
To the
extent that Plaintiff believes that any other wrongdoing on the
part of Defendant denied Plaintiff an opportunity to discuss an
alternative to foreclosure, the Court finds that wrongdoing to
be insufficiently delineated by Plaintiff in their pleadings or
otherwise.
IV. Conclusion
For the foregoing reasons, the Court will grant
Defendant’s Motion to Dismiss and/or for Summary Judgment,
granting summary judgment in favor of Defendant as to Count I,
Count II, Count III, and Count IV of the Amended Complaint.
An appropriate Order will issue.
/s/
May 30, 2013
Alexandria, Virginia
32
Despite
that this
stated at
owners of
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
the representation that the FDIC is the “true owner,” an argument
Court has rejected in its foregoing analysis, Plaintiff essentially
hearing that they were unsure of the identity of the owner or
either the Note or Deed of Trust at the time Plaintiff’s property
was foreclosed.
45
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