Davis v. Wells Fargo Bank, N.A. et al
Filing
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MEMORANDUM OPINION. Signed by District Judge Henry E. Hudson on 1/8/2014. (tjoh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
ANDREW B. DAVIS,
Plaintiff,
Civil Action No. 3:13CV586-HEH
WELLS FARGO BANK, N.A., et ai,
Defendants.
MEMORANDUM OPINION
(Granting Defendants' Motion to Dismiss)
THIS MATTER is before the Court on Defendants' Motion to Dismiss (ECF No.
9) ("Motion") and accompanying Memorandum in Support (ECF No. 10)
("Memorandum"), filed on October 14, 2013.' Plaintiff was granted an extension oftime
until November 18, 2013, to file a response to Defendants' Motion, but has failed to do
so. For the following reasons, Defendants' Motion will be granted as to all counts
contained in Plaintiffs Complaint (ECF No. 3).
I.
BACKGROUND
On September 18, 1998, Andrew B. Davis ("Plaintiff) obtained a mortgage in
connection with the purchase of real property located at 3040 Oakley Points Terrace,
Richmond, Virginia (the "Property"). Plaintiff executed a Note in the amount of
$124,745.00 with Charter One Mortgage Corporation ("Charter One") as lender.
(Compl. Ex. H) Plaintiff then executed a Deed of Trust as a security interest. (Compl.
Defendants' Motion contains a Roseboro Notice, as required by Local Rule 7(K).
Ex. HI) The Note was subsequently transferred to Norwest Mortgage, Inc. (See Compl.
127.)
On May 8, 2013, Plaintiff received a Appointment of Substitute Trustee Notice
from Defendant Wells Fargo Bank, N.A. ("Wells Fargo"). (Compl. Ex. J.) On or about
June 11,2013, Plaintiff received a Notice of Foreclosure Sale (the "Notice") from BWW
Law Group, LLC ("BWW"). (Compl. H7) The Notice stated that, pursuant to the Deed
of Trust between Plaintiff and Charter One, the Property would be offered for sale at a
public auction on June 28, 2013. (Compl. Ex. A) On June 27, in response to the Notice,
Plaintiff sent a "Qualified Written Request" ("QWR") via facsimile to BWW. (Compl. U
8) At the foreclosure sale on June 28, Plaintiff presented the same QWR to "the
Authorized Representative from BWW." (Compl. U10) The representative conferred via
telephone "with someone from the office of BWW," and then notified Plaintiff that the
foreclosure sale would proceed. (Compl. ^ 12) The auction resumed and the Property
was sold. (Compl. 113)
On August 29, Plaintiff filed his Complaint with this Court to challenge the
Defendants' actions in connection with the foreclosure sale. Liberally construed, the
Complaint asserts seven claims against the Defendants: (1) violation of the Seventh
Amendment to the U.S. Constitution; (2) violations of 12 U.S.C. § 92a(a) and Code of
Virginia §§ 55-66.3 and 55-66.6; (3) violation of 12 C.F.R. § 226.23; (4) violations of
various provisions of the Fair Debt Collection Practices Act, including 15 U.S.C. §§
1601, 1692, and 1693; (5) common law fraud by omission or concealment; (6) unlawful
notarization and alteration of a deed of trust and a promissory note; and (7) a declaratory
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judgment to void the foreclosure sale. On October 14, the Defendants moved this Court
to dismiss these claims pursuant to Federal Rule of Civil Procedure 12(b)(6).
II.
STANDARD OF REVIEW
"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 ofN.C. v. Martin, 980 F.2d 943, 952
(4th Cir. 1992) (citation omitted). The Federal Rules of Civil Procedure "require[] only
'a short and plain statement of the claim showing that the pleader is entitled to relief,' in
order to 'give the defendant fair notice of what the ... claim is and the grounds upon
which it rests.'" BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41,47 (1957)). A complaint need not assert "detailed factual
allegations," but must contain "more than labels and conclusions" or a "formulaic
recitation of the elements of a cause of action." Id. (citations omitted). Thus, the
"[fjactual allegations must be enough to raise a right to reliefabove the speculative
level," id. (citation omitted), to one that is "plausible on its face," id. at 570,rather than
merely "conceivable." Id. In considering such a motion, a plaintiffs well-pleaded
allegations are taken as true, and the complaint is viewed in the light most favorable to
the plaintiff. T.G. Slater &Son v. Donald P. &Patricia A. Brennan LLC, 385 F.3d 836,
841 (4th Cir. 2004) (citation omitted). However, legal conclusions enjoy no such
deference. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Although courts are not required to "conjure up questions never squarely
presented to them ... [or] construct full blown claims from sentence fragments,"
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Beaudettv. CityofHampton, 775 F.2d 1274, 1278 (4th Cir. 1985), pro se complaints
must be "liberally construed." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (quoting
Estelle v. Gamble, 429 U.S. 97, 106 (1976)). However "inartfully pleaded," pro se
complaints must be held to less stringent standards than those drafted by skilled lawyers.
Id.
III.
ANALYSIS
Employing the standard of review presented and allowing the pro se Plaintiff
broad latitude in the construction of his Complaint, the Court will address each Count
individually.
A. Seventh Amendment (Count I)2
Count I alleges that Defendants violated the United States Constitution.
Specifically citing the Seventh Amendment, Plaintiffargues that Defendants were
required to "afford[] the Plaintiff a trial by jury" prior to foreclosing on the Property.
(Compl. H15.) This argument, however, is inconsistent with Virginia's statutory
framework. Section 55-59(7) of the Code of Virginia sets forth the requirements for non
judicial foreclosure and provides that in the event of default, the trustee may declare all
the debts secured by the deed of trust due and '" may take possession of the property and
proceed to sell the same at auction' without any need to first seek a court decree."
Horvath v. Bank ofNew York, N.A., 641 F.3d 617, 623 n.3 (4th Cir. 2011) (quoting Va.
Code. Ann. § 55-59(7)). Plaintiffs argument is contrary to Virginia's well-established
2The Court retains the numbering originally used by Plaintiff inhis Complaint and
subsequently followed by Defendants in their Memorandum, even though the Complaint
includes duplicate Count IVs and skips from Count V to Count IX.
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non-judicial foreclosure scheme. Davis had no right to a trial before the foreclosure, and
therefore, Count I fails to state a claim upon which relief can be granted and cannot go
forward.3
B. 12 U.S.C. § 92a(a) (Count II)
Count II contains two allegations of wrongdoing. First, Plaintiff asserts that
Defendants violated their duty to properly record a certificate of satisfaction with the
Clerk upon the transfer of the Note in accordance with Code of Virginia sections 55-66.3
and 55-66.6. (Compl. ffi| 21-22.) Second, Plaintiff argues that, by virtue of Defendants'
violations of the Code of Virginia, Defendants also violated 12 U.S.C. § 92a(a). (Id.)
The Code of Virginia provisions cited by the Plaintiff govern the release of deeds
rather than the transfer of deeds. The Plaintiff contends that the Defendants had an on
going duty to ensure that information about the Deed of Trust was registered with the
Clerk of Court, including a duty to record a Certificate of Satisfaction when the Note was
purchased. However, the purchase of the Note does not constitute the release of the
Note's obligations, but rather a transfer of the rights and obligations under the Note.
Plainly, the Code of Virginia sections quoted by the Plaintiff do not impose a duty to
record with the clerk each time a note is transferred. See Va. Code Ann. §§ 55-66.3, 55-
66.6. Plaintiff goes on to aver that he did not know "to whom the mortgage is to be paid
since there has never been a certificate of satisfaction filed ...." (Compl. ^ 23.) This
3Count I also contains allegations of error by Defendants for proceeding with the
foreclosure sale after the QWR was filed. The Court construes these allegations to be
supportive of Count IV (first) and Count IV (second), and accordingly will be addressed
infra.
argument falls by its own contradiction: a certificate of satisfaction is only filed once the
note has been paid and serves as a release of the encumbrance, but does not function as
an indication of where to direct a payment on a note. Thus, Plaintiffs claim fails.
The Code of Virginia does contain provisions with language relevant to Plaintiffs
allegations, but the language of Section 55-66.01 still provides no relief for the Plaintiff.
The Code provides that "[wjhenever a debt or other obligation secured by a deed of trust,
mortgage or vendor's lien on real estate has been assigned, the assignor or the assignee, at
its option, may cause the instrument of assignment to be recorded
Nothing in this
statute shall imply that recordation of the instrument of assignment or a certificate of
transfer is necessary in order to transfer to an assignee the benefit of the security ...."
Thus, contrary to Plaintiffs position, neither Charter One nor Norwest Mortgage was
obligated to record the transfer of the Note. As such, this particular claim fails even
when viewed under a more appropriate Code provision.
Plaintiff asserts that Defendants' alleged violation of the Code of Virginia
provisions also places them in violation of 12 U.S.C. § 92a(a). Notwithstandingthe fact
that the underlying provisions of the Code of Virginia provide no shelter for the Plaintiff,
his claim under § 92a(a) nonetheless fails because no private right of action is available.
Section 92a(a) limits the authority of the Comptroller of Currency to authorize national
banks to act as fiduciaries when not in contravention of state law. This provision was
enacted to provide competitive equality between national banks and state banks in the
provision of banking and trust services in the respective states. See Am. Trust Co., Inc. v.
S. Carolina State Bd. ofBank Control, 381 F. Supp. 313, 323 (D.S.C. 1974) (citations
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omitted). The statute, however, does not present a private right of action for alleged
failures by bank fiduciaries during the course of providing services as Plaintiff suggests.
There is no plausible claim under the Virginia or federal statutes relied upon by the
Plaintiff in Count II.
C. 12 C.F.R. § 226.23 (Count III)
Count III alleges that Defendants violated 12 C.F.R. § 226.23 by failing to provide
full disclosure of the lender's identity. Specifically, he claims that Defendants lead him
to believe that Charter One was the actual lender, rather than Norwest, and this alleged
misinformation caused the Plaintiff to make payments to the wrong lender. He further
claims that the transfer of the Note from Charter One "zeroed" his original underlying
debt and relieved his obligation to repay.
The regulations promulgated inl2 C.F.R. § 226.23 under the Truth in Lending Act
provide for the rescission of certain agreements. The right of the consumer to rescind,
however, is explicitly prohibited for residential mortgage transactions. 12 C.F.R. §
226.23(f)(1). Therefore, Plaintiffs pursuit of rescission fails.
Notwithstanding Plaintiffs misapplication of 12 C.F.R. § 226.23 for a right of
rescission, his additional allegations under this Count also fail to state a claim upon
which the Court can grant relief. Plaintiff asserts that he was never aware that the Note
would be transferred, that the lack of disclosure renders the contract unconscionable, and
that the transfer renders the debt relieved. However, under the Truth in Lending Act, or
any other pertinent authority, no duty of disclosure is imposed on the Defendants.
While the Plaintiff recognizes in the Complaint that his Note qualifies as a
negotiable instrument (see Compl. \ 29), he fails to recognize the nature of negotiable
instruments and the broad transferability of Notes that qualify as such. "[Virginia] has
ensured that notes remain easy to transfer.... [and] the recipient of an instrument
obtains whatever rights the transferor had ... amounting] to plenary power to enforce
the instrument." Horvath, 641 F.3d at 621 (citation omitted). The transfer of this Note,
routine in the mortgage market, neither renders the Note unconscionable nor relieves the
Plaintiffs debt obligations. Therefore, Count III cannot go forward.
Contrary to Plaintiffs assertion, neither the Truth in Lending Act, Defendant's
supposed duty of disclosure, nor the transfer of the Note provide Plaintiff with any
possible relief, and therefore Count III cannot proceed and will be dismissed.
D. Fair Debt Collection Practices Act (Count IV (first))
Next, Plaintiff claims that Defendants violated various provisions of the Fair Debt
Collection Practices Act ("FDCPA"), including 15 U.S.C. §§ 1601, 1692, and 1693.
Plaintiff alleges that "[pursuant to the FDCPA, once a CEASE and DESIST of any kind,
including a QWR has been submitted, any and all collection activity, in any and every
form, must cease until 'such verification' is provided." (Compl. ^f 33) Thus, Plaintiff
believes that Defendant violated the FDCPA by neither "providing] ALL of the
requested information nor ... ceas[ing] their collection activities after receiving the
QWR." (Id.)
The FDCPA clearly defines "debt collector," and under the statute, "any person
collecting or attempting to collect any debt owed or due or asserted to be owed or due
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another to the extent such activity ... is incidental to a bona fide fiduciary obligation" is
exempt from liability. 15 U.S.C. § 1692a(6)(F)(i). Accordingly, "creditors, mortgagors,
and mortgage servicing companies are not debt collectors and are statutorily exempt from
liability under the FDCPA." Ruggia v. Washington Mut., 719 F. Supp. 2d 642, 648 (E.D.
Va. 2010) (quoting Scott v. Wells Fargo Home Mortg. Inc., yi6 F. Supp. 2d 709, 718
(E.D. Va. 2003), affd, 67 Fed. App'x 238 (4th Cir. 2003)). In this case, Defendant Wells
Fargo is the holder of the Note and a mortgage servicing company, and thus it is exempt
from liability under the FDCPA.
With respect to Defendant BWW, "the Fourth Circuithas held that a trustee acting
in connection with a foreclosure can be a 'debt collector' under the FDCPA." Blick v.
Wells Fargo Bank, N.A., No. 3:1 l-cv-00081, 2012 U.S. Dist. LEXIS 41266, at *25 (W.D.
Va. Mar. 27, 2012) (citing Wilson v. Draper & Goldberg, P.L.L.C, 443 F.3d 373, 378-80
(4th Cir. 2006)), affd, 475 Fed. App'x 852 (4th Cir. 2012). Whether BWW is a nonexempt debt collectorgenerally depends on whether BWW can be said to "regularly"
engage in consumer-debt-collection activity. See id. At this stage, the Court does not
have enough information to make such a determination.
Assuming without deciding that BWW "regularly" engages in consumer-debtcollection activity, Plaintiff nonetheless fails to state a claim because the Complaint does
not sufficiently allege that BWW's Notice was an attempt to collect a debt. In
determining whether a person attempts to collect a debt, the court looks at the nature and
content of the communication. In Wilson, the Fourth Circuit decided that a law firm's
letters to a debtor was an attempt to collect debt because the law firm's correspondence
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"contained clear references to the [FDCPA], including the notice 'this is an attempt to
collect a debt.'" 443 F.3d at 379. In Blick, the court held that a law firm did not make an
attempt to collect debt on the grounds that
[The law firm] neither made an express demand for payment nor provided
Plaintiffs with any information regarding who was claiming current
ownership of the debt or how the debt could be satisfied. On the contrary,
[the law firm's] notice to Plaintiffs merely informed Plaintiffs that a
foreclosure sale would proceed 14 days from the date of the letter's
mailing, and alerted Plaintiffs that they could petition the circuit court if
they believed they may be subject to a claim by a person other than the
Beneficiary to enforce the note and the deed of trust.
2012 U.S. Dist. LEXIS 41266, at *27.
In distinguishing Blick from Wilson, the court emphasized that "the notice in
Wilson contained specific information about the debt, including the amount, the creditor
to whom the debt was owed, a procedure for validating the debt, and to whom the debt
should be paid." Id. Likewise, in Blagogee v. Equity Trustees, LLC, the court did not
consider a trustee's correspondence to be an attempt to collect debt because "the [debtor]
never received an express demand for payment, notice of the person to whom their debt
shouldbe paid, or a statement indicating that [the defendant] was attempting to collect a
debt." No. L10-CV-13,2010 U.S. Dist. LEXIS 114233, at *16 (E.D. Va. July 26, 2010).
Similar to these cases, it is clear that BWW's Notice was not an attempt to collect debt.4
Like the letters sent to the debtors in Blick and Blagogee, the Notice from BWW to
4This Court notes that the top of the BWW Notice contains a disclaimer that states,
"THIS IS A COMMUNICATION FROM A DEBT COLLECTOR." (Compl. Ex. A.) In
both Wilson and Blagogee, the top of each letter at issue contained a disclaimer that was
identical to the one in the present case. Such disclaimer, however, was not dispositive in
either Wilson or Blagogee; rather, both courts focused on the content of the letters.
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Plaintiff did not make an express demand for payment, did not provide notice of the
person to whom the debt should be paid, did not indicate how the debt could be satisfied,
and did not indicate that the firm was attempting to collect a debt. (See Compl. Ex. A.)
Rather, like the correspondence in Blick, the BWW Notice merely informed Plaintiff of
the date and time of the foreclosure sale. (Id.) Because this Notice is not an attempt to
collect debt, Plaintiff has not sufficiently claimed a violation of 15 U.S.C. § 1692c(a) by
BWW. Therefore, without Wells Fargo or BWW qualifying as a debt collector, the
alleged FDCPA violations following the QWR do not sufficiently state a claim.
Plaintiff cites additional statutes under this Count which similarly provide no relief
and appear irrelevant to the allegations. To the extent that 15 U.S.C. § 1601 applies, 15
U.S.C. § 1601 is implemented by 12 C.F.R. § 226.23, which the Court previously
addressed. Additionally, 15 U.S.C. § 1963 governs the electronic transfer of funds, and
the Complaint does not mention electronic fund transfers. For these reasons, Plaintiffs
claims under the first Count IV will be dismissed.
E. Non-Disclosure or Concealment (Count IV (second))
Very liberally construed, Plaintiffs second Count IV appears to assert common
law fraud. Like Plaintiffs first Count IV, the second Count IV hinges on Defendants'
lack of response to Plaintiffs QWR prior to foreclosure. Although this same lack of
response forms the basis for both claims, Count IV (second) differs in that Plaintiff
explicitly alleges that Defendants' lack of response was a result of "the information
requested ... being concealed." (Compl. ^| 37). The Complaint then provides a basic
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definition of "Active Concealment," which describes the general circumstances in which
active concealment constitutes fraud. (Id.)
Virginia recognizes "fraud by omission, sometimes called 'concealment^]' where
'[cjoncealment of a material fact by one who knows that the other party is acting upon
the assumption that the fact does not exist constitutes actionable fraud.'" Bank of
Montreal v. Signet Bank, 193 F.3d 818, 827 (4th Cir. 1999) (quoting Allen Realty Corp.
v. Holbert, 227 Va. 441,450 (1984)). Silence, however, "does not constitute
concealment in the absence of a duty to disclose." Id. (citation omitted). Because
Plaintiffs claim rests on Defendants' silence—Defendants' failure to respond to the
QWRprior to foreclosure—Defendants' liability can only exist where Defendants had a
duty to disclose the information requested by the QWR. As the Court previously stated
in its discussion of the first Count IV, Defendants had no duty to respond to Plaintiffs
QWR because Defendant Wells Fargo is exempt from the definition of "debt collector"
under the FDCPA and Defendant BWW did not attempt to collect a debt when it sent
Plaintiff the Notice. Because neither Defendant had a duty to disclose the information
requested by Plaintiffs QWR, the Defendants' collective silence in response to the QWR
does not constitute concealment by omission. Accordingly, Plaintiff again fails to state a
claim.
F. Unlawful Notarization and Alteration (Count V)
In Count V, Plaintiff contends that Defendants had a "duty to sign the Note ... in
the presence of the Plaintiff to ensure that there were no unauthorized changes or
modifications of any words or numbers ... relating to the obligation of a party." (Compl.
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U42) Plaintifffurther alleges that Defendants breached this duty and violated UCC § 3407(a), "by signing and notarizing [the Promissory Note] not it [sic] the presence of the
Plaintiff." (Id.) Additionally, Plaintiff claims that Defendants altered the Deed of Trust
and Note after Plaintiff executed the two documents by applying the stamp stating,
"Without Recourse Pay to the Order of Norwest Mortgage, Inc.," the signature of Darlene
L. Waller, and the notarization of Katherine N. Kolia. (Id. ffl| 47-49)
UCC § 3-407(a), which governs negotiable instruments, defines "alteration" as
either "(i) an unauthorized change in an instrument that purports to modify in any respect
the obligation of a party, or (ii) an unauthorized addition of words or numbers or other
change to an incomplete instrument relating to the obligation of a party." Assuming
without deciding that the alleged changes were made, Plaintiff nonetheless fails to
specify how the alleged changes modified his obligations in any respect. Plaintiff alleges
that he was "lead to believe that he had a meeting of the minds with whom he believed to
be Lender of the mortgage ... only for it to have been revealed ... that he had been
paying for a mortgage that had already been paid in full." (Compl. ^[ 51) Simply put,
Plaintiffs obligation was to make payments under the terms of the Note until his
obligation was either satisfied or discharged. Plaintiff has not, and cannot, reasonably
argue that the alleged added stamp, signature, or notarization modified his obligation to
pay.
Plaintiff then alleges that the Deed of Trust and the Note were improperly
notarized. The Virginia Code does not require the notarization of deeds. Even if the
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notarization was improper, absent a requirement that deeds be notarized, the Court cannot
void a deed on such grounds. As a result, Plaintiffs claim fails.
G. Declaratory Judgment (Count IX)
Plaintiffs final claim asks the Court to declare the foreclosure as void. The
Property in this case was foreclosed on June 28, 2013. (Compl. U13) Any wrong
Plaintiff suffered as a result of the foreclosure has already occurred. "'[Declaratory
judgments are designed to declare rights so that parties can conformtheir conduct to
avoid future litigation,' and are untimely if the questionable conduct has already occurred
or damages have already accrued." Tapia v. U.S. Bank, N.A., 718 F. Supp. 2d 689, 695
(E.D. Va. 2010) (quoting The Hipage Co., Inc. v. Access2Go, Inc., 589 F. Supp. 2d 602,
615 (E.D. Va. 2008)). Because the Property was already foreclosed on June 28, 2013,
any wrong suffered as a result of the allegedly deficient foreclosure has already occurred.
As a result, a declaratory judgment at this stage is inappropriate.
IV.
CONCLUSION
Based on the foregoing analysis, the Motion to Dismiss will be granted and all
counts will be dismissed with prejudice. An appropriate Order will accompany this
Memorandum Opinion.
W
/s/
Henry E. Hudson
Date: ZWv.8"36/ V
United States District Judge
Richmond, VA
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