Modderno et al v. Surety Trustees, LLC et al

Filing 11

MEMORANDUM OPINION re: Motions to Dismiss. Signed by District Judge James C. Cacheris on 04/04/17. (pmil, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division

M. FRANCINE MODDERNO, et al.,
Plaintiffs,
v.
OCWEN LOAN SERVICING, LLC,
et al.,
Defendants.

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Case No. 1:17-cv-77 (JCC/TCB)

M E M O R A N D U M

O P I N I O N

This matter is before the Court on Defendant Ocwen
Loan Servicing, LCC’s (“Ocwen”) Motion to Dismiss [Dkt. 3] and
Defendant Surety Trustees, LLC’s (“Surety”) (collectively,
“Defendants”) Motion to Dismiss [Dkt. 6].

For the reasons that

follow, the Court will grant both motions and dismiss
Plaintiff’s Complaint with prejudice.
I.

Background

M. Francince Modderno brings this suit pro se on
behalf of herself and the estate of Claude V. Bache 1
(collectively, “Plaintiffs”) against Defendants, seeking damages
and equitable relief in connection with a non-judicial
foreclosure sale of real property located in Loudoun County,

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Plaintiff Bache died testate on or about June 29, 2010. Ocwen Mot. to
Dismiss, Exh. D. Plaintiff Modderno was appointed as executrix of his estate
on August 20, 2010, pursuant to an Order entered by the Loudoun County
Circuit Court. Id.

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Virginia.

The Complaint alleges specific violations of “the

laws prohibiting unfair and deceptive loan practices, including
the Consumer Financial Protection Act (“CFPA”) of 2010, 12
U.S.C. §§ 5481 et. seq., with regard to loan servicing . . . and
foreclosure processing.”

Compl. ¶ 4.

The following facts are

taken from Plaintiff’s Complaint and the original documents
referenced by that Complaint.

For the purposes of this motion,

the facts are presumed true.
On or about October 20, 2003, Plaintiffs obtained a
home mortgage loan, as evidenced by a promissory note in the
original principal amount of $600,000, which was made payable to
First Savings Mortgage Corporation (“First Savings”) as the
original lender (the “Note”).

Compl. ¶ 2.

The Note, which

Plaintiffs signed, included specific language regarding the
possibility of transfer.
Exh. A, ¶ 1.

Id.; Ocwen Mot. to Dismiss [Dkt. 3],

To secure repayment of this debt, Plaintiffs

executed a deed of trust on October 20, 2003, encumbering the
real property known as 17417 Needles Court, Leesburg, Virginia
20176 (the “Property”).

Id.

This security instrument was then

recorded in the public land records of Loudoun County, Virginia
(the “Deed of Trust”).

Id.

The Deed of Trust identified First

Savings as the original lender and Mortgage Electronic
Registration Systems, Inc. (“MERS”) as the original beneficiary.
Ocwen Mot. to Dismiss, Exh. B at 2.
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It also included the

following language: “The Note or partial interest in the Note
(together with this Security Instrument) can be sold one or more
times without prior notice to the Borrower” and that any such
transactions “shall bind . .
assigns of Lender.”

.

and benefit the successors and

Id., ¶¶ 13, 20.

After the Note and Deed of Trust were executed, First
Savings, the original lender, transferred its interest in the
loan to Residential Funding Corporation.

Compl. ¶ 3.

Two

endorsements appear on the Note: (1) a specific endorsement from
First Savings to Residential Funding Corporation signed by Peggy
Cliff (the “First Savings Endorsement”) and (2) a blank
endorsement signed by Judy Faber, a Vice President of
Residential Funding Corporation (the “RFC Endorsement”).
Mot. to Dismiss, Exh. A at 4.

Ocwen

On June 23, 2011, MERS, acting as

nominee for First Savings, executed and acknowledged an
assignment of the Deed of Trust to Residential Funding Company,
LLC, f/k/a Residential Funding Corporation (hereafter “RFC”).
Id., Exh. C.

This instrument was recorded in the Loudoun County

land records on June 30, 2011 (the “Assignment”).
On September 6, 2011, Plaintiff Modderno filed a
“Complaint of Wrongful Foreclosure” in the Loudoun County
Circuit Court, naming RFC and ETS of Virginia, Inc. (“ETS”) as
defendants (the “2011 Lawsuit”).

Ocwen Mot. to Dismiss, Exh. E.

She chose not to include the estate of Plaintiff Bache at that
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time, although he was deceased and she had already been
appointed as executrix of his estate.

On September 29, 2011,

the named defendants removed the 2011 Lawsuit to this Court.

On

December 20, 2011, after briefing, Plaintiff’s claims were
dismissed for failure to state a claim upon which relief can be
granted.

Id., Exh. F.
On July 2, 2012, RFC executed an instrument appointing

Surety as substitute trustee in place of ETS under the Deed of
Trust.

Ocwen Mot. to Dismiss, Exh. G.

This instrument was

thereafter recorded in the Loudoun County land records.

Id.

Surety then sent Plaintiffs a notice that included a copy of a
lost note affidavit signed by Jeffrey Dunn on behalf of Ocwen on
April 29, 2013.

Compl. ¶ 6; Ocwen Mot. to Dismiss, Exh. H.

Plaintiffs describe the notice they received as a “notice letter
of foreclosure.”

Compl. ¶ 6.

The Complaint fails to provide

any additional details, however, including who scheduled the
foreclosure sale and the date of the alleged sale.

See id.

In addition, Plaintiffs’ Complaint alleges that they
recently received an account history from Ocwen covering the
period from July 13, 2015 to July 11, 2016.

Compl. ¶ 7.

The

account history shows that Ocwen paid Loudoun County real estate
taxes for the Property on behalf of Plaintiffs.

Id.

Plaintiffs

claim that they qualified for tax relief “for five out of the
last six years.”

Id.

No additional details are given.
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On January 4, 2017, Plaintiffs filed the instant
Complaint against Ocwen and Surety in the Loudoun County Circuit
Court.

The Complaint seeks injunctive relief to stop

foreclosure of the Property, quiet title to the Property, and
$1,000,000 in damages.

Compl. at 3.

Defendant Ocwen filed a

notice of removal on January 20, 2017.

[Dkt. 1.]

On January

27, 2017, Ocwen filed a motion to dismiss, based primarily on
the doctrine res judicata.

[Dkt. 3.]

Defendant Surety filed

its own motion to dismiss on February 13, 2017, arguing improper
service of process and failure to state a claim.

[Dkt. 6.]

Rather than filing a memorandum in opposition, Plaintiffs filed
a Motion to Extend Time to File Answer to Motion to Remove.
[Dkt. 9.]

The Court ordered Plaintiffs to file an appropriate

response by March 15, 2017.
filed.

[Dkt. 10.]

No response was ever

Following the waiver of oral argument by both

Defendants, this matter is now ripe for disposition.
II.

Legal Standard

“A motion to dismiss under Rule 12(b)(6) tests the
sufficiency of a complaint; importantly, it does not resolve
contests surrounding the facts, the merits of a claim, or the
applicability of defenses.”

Republican Party of N.C. v. Martin,

980 F.2d 943, 952 (4th Cir. 1992) (citation omitted).

The

Supreme Court has stated that in order “[t]o survive a motion to
dismiss, a [c]omplaint must contain sufficient factual matter,
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accepted as true, to ‘state a claim to relief that is plausible
on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“A claim has facial plausibility when the pleaded factual
content allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”

Id.

“Determining whether a complaint states a plausible
claim for relief [is] . . . a context-specific task that
requires the reviewing court to draw on its judicial experience
and common sense.”

Iqbal, 556 U.S. at 679 (citations omitted).

While legal conclusions can provide the framework for a
complaint, all claims must be supported by factual allegations.
Id.

Based upon these allegations, the court must determine

whether the plaintiff’s pleadings plausibly give rise to an
entitlement to relief.

Id.

Legal conclusions couched as

factual allegations are not sufficient, Twombly, 550 U.S. at
555, nor are “unwarranted inferences, unreasonable conclusions,
or arguments,” E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P’ship,
213 F.3d 175, 180 (4th Cir. 2000).

The plaintiff, however, does

not have to show a likelihood of success; rather, the complaint
must merely allege - directly or indirectly - each element of a
“viable legal theory.”

Twombly, 550 U.S. at 562-63.

At the motion to dismiss stage, the court must
construe the complaint in the light most favorable to the
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plaintiff, read the complaint as a whole, and take the facts
asserted therein as true.

Iqbal, 556 U.S. at 678.

Generally, a

district court does not consider extrinsic materials when
evaluating a complaint under Rule 12(b)(6).

It may, however,

consider “documents incorporated into the complaint by
reference.”

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551

U.S. 308, 322 (2007); see also Blankenship v. Manchin, 471 F.3d
523, 526 n.1 (4th Cir. 2006).

In addition, the court may

consider documents attached to the defendant’s motion to dismiss
if those documents are central to the plaintiff’s claim or are
“sufficiently referred to in the complaint,” so long as the
plaintiff does not challenge their authenticity.

Witthohn v.

Fed. Ins. Co., 164 F. App’x 395, 396–97 (4th Cir. 2006).
The Court construes the pro se Complaint in this case
more liberally than those drafted by an attorney. See Haines v.
Kerner, 404 U.S. 519, 520 (1972).

Further, the Court is aware

that “[h]owever inartfully pleaded by a pro se plaintiff,
allegations are sufficient to call for an opportunity to offer
supporting evidence unless it is beyond doubt that the plaintiff
can prove no set of facts entitling him to relief.”

Thompson v.

Echols, No. 99–6304, 1999 WL 717280, at *1 (4th Cir. 1999)
(citing Cruz v. Beto, 405 U.S. 319 (1972)).

Nevertheless, while

pro se litigants cannot “be expected to frame legal issues with
the clarity and precision ideally evident in the work of those
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trained in law, neither can district courts be required to
conjure up and decide issues never fairly presented to them.”
Beaudett v. City of Hampton, 775 F.2d 1274, 1276 (4th Cir.
1985).

Thus, even in cases involving pro se litigants, the

Court “cannot be expected to construct full blown claims from
sentence fragments.”

Id. at 1278.

Further, the Court may not

construct a plaintiff's legal arguments for him or her. See,
e.g., Small v. Endicott, 998 F.2d 411, 417–18 (7th Cir. 1993).
III. Analysis
A.

Ocwen’s Motion to Dismiss under Rule 12(b)(6)
Ocwen asserts that Plaintiffs’ claims that her

mortgage lender and its agents are not entitled to enforce the
Note and Deed of Trust through foreclosure are barred by res
judicata.

Ocwen Mot. to Dismiss at 8-10.

Under this doctrine,

a final judgment on the merits in a prior suit precludes another
suit between the same parties or their privies on the same cause
of action.

Nash Cnty. Bd. of Educ. v. Biltmore Co., 640 F.2d

484, 486 (4th Cir. 1981).

For res judicata to bar an action,

the moving party must establish: (1) the prior judgment was
final and on the merits; (2) the parties are identical, or in
privity, in both actions; and (3) the claims in the subsequent
action are based upon the same cause of action as in the prior
matter.

Pittston Co. v. United States, 199 F.3d 694, 704 (4th

Cir. 1999).

Res judicata bars claims brought in a previous suit
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and any claims that could have been brought.

Pueschel v. United

States, 369 F.3d 345, 354 (4th Cir. 2004).
Here, all three elements of res judicata are
satisfied.

As a result, Plaintiffs fail to state a claim upon

which relief can be granted.
First, there was a final judgment on the merits in
Plaintiff’s prior lawsuit, which was filed in 2011.

The 2011

Lawsuit questioned whether RFC was the holder of the Note
entitled to foreclose, as well as the validity of the Note
endorsements.

It was dismissed with prejudice by this Court for

failure to state a claim on December 20, 2011.
Second, the parties to this lawsuit are in privity
with the parties from the 2011 Lawsuit.

“The touchstone of

privity for purposes of res judicata is that a party’s interest
is so identical with another that representation by one party is
representation of the other’s legal right.”

State Water Control

Bd. v. Smithfield Foods, Inc., 542 S.E.2d 766, 769 (Va. 2001).
Loan servicers are regularly found to be in privity with the
lender on whose behalf they are servicing the loan, placing
Ocwen (the servicer) in privity with RFC (the lender).

See,

e.g., Streza v. Fed. Nat’l Mortgage Ass’n, Civil No. 3:15-cv168, 2015 WL 4988482, at *6 (E.D. Va. Aug. 19, 2015); Buzzell v.
JP Morgan Chase Bank, Civil No. 3:13-cv-668, 2014 WL 3767118, at
*6 (E.D. Va. July 31, 2014).

Substitute trustees under a deed
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of trust are also deemed to be in privity with any predecessor
trustees under that same instrument, putting Surety (the new
trustee) in privity with ETS (the prior trustee).

Blick v.

Shapiro & Brown, LLP, Civil No. 3:16-cv-70, 2016 WL 7046842, at
*7 (W.D. Va. Dec. 2, 2016).

Modderno and the Bache estate are

similarly in privity with each other, as both co-owners and comortgagors.

See, e.g., Tarhawi v. Ocwen Loan Servicing, Civil

No. 1:14-cv-1028, 2014 U.S. Dist. LEXIS 131980, at *2 n.4 (E.D.
Va. Sept. 18, 2014) (finding that a wife was estopped from relitigating her husband’s unsuccessful foreclosure challenge in a
new lawsuit because they were co-owners and were in privity).
Furthermore, Modderno was already the executrix of the Bache
estate when she filed the 2011 Lawsuit.

She could have brought

the estate’s claims at that time, but chose not to do so.
Pueschel, 369 F.3d at 354.

Accordingly, the Court finds the

parties here to be in privity with those from the 2011 Lawsuit.
Third, the causes of action in Plaintiff’s prior
lawsuit and the present lawsuit are the same.

In the Fourth

Circuit, a cause of action is identical for claim preclusion
purposes if the "claim presented in the new litigation arises
out of the same transaction or series of transactions as the
claim resolved by the prior judgment."
704.

Pittston, 199 F.3d at

In the instant case, Plaintiffs’ allegations involve the

same transaction or series of transactions as the 2011 Lawsuit.
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Notwithstanding any differences in how the claims are titled,
Plaintiffs’ essential challenge remains the same: the financial
entities' authority to enforce the loan documents and foreclose
on the Property.

“By merely offering slight changes to the

articulation of [her] claims, Plaintiff has not insulated [her]
Complaint from the consequences of res judicata.”

Podgoretsky

v. Ocwen Loan Servicing, LLC, Civil Action No. 1:16-cv-1255,
2016 U.S. Dist. LEXIS 172182, at *5-6 (E.D. Va. Dec. 12, 2016)
(citing Pueschel, 369 F.3d at 355 (holding that focusing on the
form over the substance of a claim "would allow parties to
frustrate the goals of res judicata through artful pleading and
claim splitting")).
Accordingly, the Court will grant Ocwen’s motion to
dismiss Plaintiffs’ claims regarding the Note, the Note
endorsements, and Defendants’ authority to foreclose, based on
the doctrine of res judicata.

This includes Plaintiffs’ claim

that Judy Faber’s “robo-signed” signature violates the CFPA.
Even after being liberally construed, this claim is nothing more
than another way to describe Plaintiffs’ objections to the Note
endorsements, which this Court has already determined to be
barred by res judicata.

For that reason, the Court will also

grant Ocwen’s motion to dismiss this claim.
Plaintiffs’ Complaint also mentions, without any
supporting factual allegations, two other possible claims for
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relief.

Neither states a claim upon which relief can be

granted.
First, Plaintiffs request that the Court award them
quiet title to the Property.

“An action to quiet title is based

on the premise that a person with good title to certain real or
personal property should not be subjected to various future
claims against that title.”
(2009).

Maine v. Adams, 277 Va. 230, 238

To survive a motion to dismiss, the party asserting

quiet title must plead that she has superior title to that
property.

Id.

Furthermore, when a deed of trust is involved, a

plaintiff must also assert that she “has fully satisfied all
legal obligations to the party in interest.”

Bagley v. Wells

Fargo Bank, N.A., Civil No. 3:12-cv-617, 2013 U.S. Dist. LEXIS
11880, at *24 (E.D. Va. Jan. 29, 2013); see also Tapia v. U.S.
Bank, N.A., 718 F. Supp. 2d 689, 700 (E.D. Va. 2010) (dismissing
quiet title claim because the complaint did not allege that the
note obligations were fully satisfied or forgiven).
Here, Plaintiffs’ Complaint is devoid of any facts to
suggest that the obligations secured by the Deed of Trust have
been paid in full or otherwise forgiven.

As a result,

Plaintiffs have pled insufficient facts to state a plausible
claim for relief to quiet title.

Moreover, Plaintiffs’

assertion that the Deed of Trust is somehow unenforceable due to
transfer and securitization likewise fails.
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Plaintiffs

expressly agreed to the possible transfer of the Note and the
Deed of Trust when they bought the Property.
Dismiss, Exhs. A-B.

Ocwen Mot. to

Such transfers have also not been

previously viewed by courts in this judicial district as
rendering notes or deeds of trust unenforceable.

See, e.g.,

Horvath v. Bank of N.Y., N.A., 641 F.3d 617, 623 (4th Cir.
2011); Pham v. Bank of N.Y., 856 F. Supp. 2d 804, 810 (E.D. Va.
2012).

Accordingly, the Court will dismiss this claim.
Finally, Plaintiffs’ Complaint includes a request for

damages to compensate them for the “emotional and physical
damage” caused by “the long-term worry about losing [their]
home.”

Compl. at 3.

To survive a motion to dismiss in Virginia

on this kind of claim, the plaintiff must allege that the
defendant intentionally or recklessly engaged in “outrageous”
conduct that resulted in severe emotional distress.
Grisham, 273 Va. 68, 77 (2007).

Almy v.

However, “courts have

overwhelmingly held that foreclosure on a home does not support
an intentional infliction of emotional distress claim.”

Suggs

v. M&T Bank, Civil No. 3:15-cv-396, 2017 U.S. Dist. LEXIS 7139,
at *10 (E.D. Va. Jan. 18, 2017).

Plaintiffs failed to allege

any facts suggesting that Defendants engaged in outrageous
conduct during the otherwise routine foreclosure of their home.
Consequently, the Court will dismiss this claim.

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B.

Surety’s Motion to Dismiss under Rule 12(b)(6)
Surety also filed a motion to dismiss Plaintiffs’

Complaint.

Surety asserts that the Complaint fails to allege

any specific wrongdoing, only mentioning Surety once for mailing
Plaintiffs a “notice of foreclosure” letter, Compl. ¶ 6, and
includes a request for injunctive relief to stop a foreclosure
sale that has already taken place, Surety Mot. to Dismiss at 4.
Surety also claims that it never received service of process
from Plaintiffs, only becoming aware of the lawsuit once Ocwen
removed it to federal court.

Id. at 3.

In the instant case, Plaintiffs’ single factual
allegation regarding Surety is not sufficient to state a
plausible claim for relief.

Although Plaintiffs’ theory appears

to be that Surety did not have the authority to conduct a
foreclosure sale of her home, as noted above, this type of claim
is barred by the doctrine of res judicata.

Thus, the Court will

grant Surety’s motion to dismiss under Rule 12(b)(6).
Additionally, Virginia law states that service is
proper on a domestic corporation “by personal service on any
officer, director, or registered agent of such corporation.”
Va. Code § 8.01-299.

Surety alleges that it never received

service, Surety Mot. to Dismiss at 3, and no proof of service
has been filed with this Court to suggest otherwise.

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Given that

the Court has already dismissed the Complaint against Surety,
the Court finds it unnecessary to decide this issue.
IV. Conclusion
For the reasons set forth above, the Court will grant
Defendant Ocwen’s motion to dismiss.

The Court will also grant

Defendant Surety’s motion to dismiss.
An appropriate order will follow.

April 4, 2017
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

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