Luther v. Wells Fargo Bank, N.A. et al
Filing
36
MEMORANDUM OPINION. Signed by District Judge Michael F. Urbanski on 7/24/14. (ham)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
DANVILLE DIVISION
JAMES T. LUTHER,
Plaintiff,
v.
WELLS FARGO BANK, N.A., and
ATLANTIC LAW GROUP, LLC,
Defendants.
)
)
) Case No. 4:13-cv-00072
)
)
)
) By: Michael F. Urbanski
)
United States District Judge
)
)
MEMORANDUM OPINION
This matter is before the court on defendants’ motion to dismiss plaintiff’s complaint for
failure to state a claim (Dkt. # 7). Pursuant to 28 U.S.C. § 636(b)(1)(B), the motion was referred to
the Honorable Robert S. Ballou, United States Magistrate Judge, for proposed findings of fact and a
recommended disposition. On April 18, 2014, the magistrate judge issued a report recommending
that the motion to dismiss be granted, that plaintiff’s motion for summary judgment be denied as
moot, and that plaintiff be given ten days to file an amended complaint.
On May 7, 2014, the court entered an order adopting the report and recommendation in its
entirety, hearing no objection from plaintiff James T. Luther. Luther, who is proceeding pro se,
then filed a motion for reconsideration, claiming he never received a copy of the magistrate judge’s
report. By Order entered May 12, 2014, the court vacated its previous order adopting the report,
construed Luther’s motion for reconsideration as an objection to the report, and ordered defendants
to respond. Defendants have filed their response, and this matter is now ripe for adjudication.
I.
This is the second lawsuit brought by Luther in an attempt to avoid foreclosure of his
Fieldale, Virginia property. In his first case against Wells Fargo (the “2011 case”), Luther alleged
fraud and violations of the Truth in Lending Act (TILA) and the Real Estate Settlement and
Procedures Act (RESPA). See No. 4:11cv0057, Dkt. # 3. Luther filed a motion for temporary
restraining order (TRO) seeking to enjoin the foreclosure of his home. Wells Fargo halted
foreclosure proceedings in order to evaluate Luther’s claims, and the court denied the motion for
TRO. Wells Fargo filed a motion to dismiss the amended complaint that was referred to the
magistrate judge, who recommended the court grant the motion because Luther failed to plead
sufficient facts to support his claims. Accepting this recommendation over Luther’s objection, the
court dismissed Luther’s action with prejudice pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, by Order entered September 25, 2012.
Over a year later, in an effort to halt foreclosure proceedings that had begun yet again,
Luther filed this second action against Wells Fargo and Atlantic Law Group, LLC, alleging fraud,1
mail fraud, wrongful foreclosure, and violations of the Fair Debt Collection Practices Act (FDCPA).
Luther’s complaint references a series of letters2 he exchanged with Wells Fargo between October 4,
2013 and December 13, 2013, beginning with Wells Fargo’s notification that Luther’s mortgage, loan
number 09xxxx5249, had been referred to foreclosure counsel.3 In his correspondence, Luther
disputes the validity of any debt associated with loan number 09xxxx5249, claiming he never had an
account with that number. See Compl., Dkt. # 1-2, 1-5. He also takes issue with Wells Fargo’s
reference in its correspondence to account number xxxxxxxxx51998, accusing Wells Fargo of
changing his account number at random and denying having any debt associated with this account.
Id. at Dkt. # 1-5. Luther appears to contend that the accurate account numbers are those he
referenced in the 2011 case—#68xxxxx040001 and #4386-xxxx-1265-xxxx. Luther also appears to
believe that, in the course of the 2011 case proceedings, “the truth was revealed that [Wells Fargo]
1 The fraud alleged in the instant complaint concerns the account numbers assigned to Luther’s account and differs from
the fraud claim raised in the 2011 case.
2
These letters are attached as exhibits to Luther’s complaint.
3 It appears Atlantic Law Group, LLC is this foreclosure counsel. See Compl., Dkt. # 1-7.
2
willfully ignored and failed to respond to [his Qualified Written Requests for information about his
lending source] and in so doing agreed to give [him] unlimited absolute power of attorney in this
matter.” Compl., Dkt. # 1-5 (citing No. 4:11cv57, Dkt. # 43, at 4).
For its part, Wells Fargo explained to Luther the various account numbers in
correspondence dated December 5, 2013.4 Wells Fargo also explained to Luther that the 2011 case
had been dismissed by the court on September 25, 2012. Compl., Dkt. # 1-7.
In response, Luther asserted that Wells Fargo “changed [his] account numbers two times
and [had] not proved any debt according to the FDCPA and now [had begun] an illegal foreclosure
process with no valid notice from the Atlantic Law Group or any valid debt with which to
foreclose.” Compl., Dkt. # 1-8. Luther threatened legal action and, after notice of foreclosure was
published in the Martinsville Bulletin on December 13, 2013, filed the complaint in the instant case.
In his complaint, Luther asserts that defendants failed to provide notice of the validity of his
debt and answer his communications denying the debt in violation of the FDCPA, 15 U.S.C. §
1692g. Compl., Dkt. # 1, at ¶ 15. Luther advances his claims of fraud and wrongful disclosure by
contending that the defendants have no valid interest in his property, used false account numbers
associated with his loans, and failed to provide notice of the impending foreclosure of his property.
Id. at ¶ 16-18. Luther alleges mail fraud on the basis that defendants conducted fraudulent
communications through the mail. Id. at ¶ 18. Defendants moved to dismiss all four claims under
Federal Rule of Civil Procedure 12(b)(6).
In his report issued April 18, 2014, the magistrate judge concludes that Luther fails to state a
claim for which relief can be granted and recommends that the court dismiss this action but give
4
Luther executed two accounts with Wachovia Bank in February 2007. The first lien position account in the amount of
$128,831.00 was assigned account number 68xxxxx040001 at the time Wachovia was acquired by Wells Fargo. Wells
Fargo states that in October 2013 this account number was referred to foreclosure counsel, Atlantic Law Group, LLC,
and was assigned account number 09xxxx5249. The second account Luther opened in February 2007 was an equity line
with Wachovia, which was originally given account number 4386xxxx1265. This equity line account was assigned a new
account number, xxxxxxxxx51998, when Wells Fargo acquired Wachovia. This account has not been referred to
foreclosure. Compl., Dkt. # 1-7.
3
Luther leave to file an amended complaint. Specifically, the magistrate judge found that Wells Fargo
is not a debt collector under the FDCPA and the allegations against Atlantic Law Group,5 as
currently pled, do not establish that it communicated with Luther in an attempt to collect a debt.
The magistrate judge further found that, to the extent Virginia law even recognizes a cause of action
for wrongful foreclosure, Luther’s claims that defendants lack a security interest in his property are
not supported by the factual allegations in the complaint and are, in fact, refuted by the note and the
exhibits attached to the complaint. Finally, the magistrate judge held that Luther fails to state a
claim for fraud and has no private right of action under the mail fraud statute, 18 U.S.C. § 1341.
Luther filed a motion to reconsider, which the court construes as an objection to the magistrate
judge’s report.
II.
Rule 72(b) of the Federal Rules of Civil Procedure permits a party to “serve and file specific,
written objections” to a magistrate judge’s proposed findings and recommendations within fourteen
days of being served with a copy of the report. See also 28 U.S.C. § 636(b)(1). The Fourth Circuit
has held that an objecting party must do so “with sufficient specificity so as reasonably to alert the
district court of the true ground for the objection.” United States v. Midgette, 478 F.3d 616, 622
(4th Cir.), cert denied, 127 S. Ct. 3032 (2007).
To conclude otherwise would defeat the purpose of requiring
objections. We would be permitting a party to appeal any issue that
was before the magistrate judge, regardless of the nature and scope of
objections made to the magistrate judge’s report. Either the district
court would then have to review every issue in the magistrate judge’s
proposed findings and recommendations or courts of appeals would
be required to review issues that the district court never considered.
In either case, judicial resources would be wasted and the district
5 As the magistrate judge notes, Luther “does not specifically refer to any actions taken by ALG or state which, if any, of
his legal claims are asserted against ALG” in his complaint. Report & Recommendation, Dkt. # 28, at 7. However,
because Luther is proceeding pro se, the court liberally construes his allegations as applying to both Wells Fargo and
Atlantic Law Group.
4
court’s effectiveness based on help from magistrate judges would be
undermined.
Id. The district court must determine de novo any portion of the magistrate judge’s report and
recommendation to which a proper objection has been made. “The district court may accept, reject,
or modify the recommended disposition; receive further evidence; or return the matter to the
magistrate judge with instructions.” Fed. R. Civ. P. 72(b)(3); accord 28 U.S.C. § 636(b)(1).
However, de novo review is not required when a party makes general or conclusory objections that
do not direct the court to a specific error in the magistrate judge’s proposed findings and
recommendations. See Orpiano v. Johnson, 687 F.2d 44, 47-48 (4th Cir. 1982).
III.
Luther’s objections to the report and recommendation consist primarily of facts and
allegations that were not raised in his complaint. For instance, Luther claims he satisfied his Wells
Fargo debt by tendering a check in the amount of $127,150.20. See Pl.’s Mot. to Reconsider, Dkt. #
32, at 2, Ex. 1. Luther fails to allege in his complaint that he paid off his loan balance with Wells
Fargo. To be sure, he denies owing any debt to defendants. However, Luther alleges that he does
not owe a debt associated with certain account numbers he believes are fraudulent, and that the
2011 case somehow gives him power of attorney to release any liens and clear title. See Compl.,
Dkt. # 1. Luther also raises for the first time in his objections an allegation that he made “release of
lien” payments of $30 per loan to Wells Fargo, which kept his check and refused to release his lien.
Pl.’s Mot. to Reconsider, Dkt. # 32, at 2. Again, this allegation appears nowhere in the complaint.
“Plaintiff cannot use his objections to plead new claims or cure the factual defects of his existing
claims. . . .” Fuller v. Bryant, No. 3:12-cv-02755-RBH, 2013 WL 2635689, at *3 (D.S.C. June 11,
5
2013). The court will not consider new claims raised for the first time in Luther’s objections to the
magistrate judge’s report.6
To the extent Luther’s filing can be liberally construed as stating an objection to the
magistrate judge’s findings concerning the various account numbers, the objection is overruled.
Luther argues that the “constant switching of account numbers” shows defendants’ “carelessness
and recklessness” and states a claim for fraud. Pl.’s Mot. to Reconsider, Dkt. # 32, at 2-3. Federal
Rule of Civil Procedure 9(b) requires that a party alleging fraud “must state with particularity the
circumstances constituting fraud.” Under Virginia law, the elements of fraud are: (1) a false
representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to
mislead, (5) reliance by the party misled, and (6) resulting damage to him. Van Deusen v. Snead, 247
Va. 324, 327, 441 S.E.2d 207, 208 (1994). Viewing liberally the allegations raised by Luther in his
complaint, he contends the account numbers referenced by Wells Fargo in its correspondence were
false, that Wells Fargo changed the numbers with the intent to defraud, and that he suffered undue
harm, stress, embarrassment and expense as a result of defendants’ conduct. However, a letter from
Wells Fargo dated December 5, 2013 attached to Luther’s complaint explains the various account
numbers assigned to Luther’s loan accounts. See Compl., Dkt. # 1-7. “Where there is a conflict
between the bare allegations of a complaint and any exhibit attached pursuant to Rule 10(c), the
exhibit prevails. Consistent with these holdings, the Court will examine a 12(b)(6) motion in light of
the facts alleged in the complaint and the exhibits attached, deferring to the exhibits where there is a
conflict.” Davis v. Cole, 999 F. Supp. 809, 812 (E.D. Va. 1998) (citing Fayetteville Investors v.
Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991)). Moreover, Luther fails to plead
two essential elements of fraud— namely, that the account numbers constitute a material fact and
that he relied on this fact to his detriment. See Klar v. Fed. Nat’l Mortgage Ass’n, 3:13CV00462However, Luther is free to raise these new allegations in any amended complaint that he may file, and the court will
consider them in due course.
6
6
JAG, 2014 WL 412533, at *3 (E.D. Va. Feb. 3, 2014) (“If the account statements form the basis of
the fraud, the claim cannot pass muster, because the [plaintiffs] did not rely on those statements to
their detriment.”). Luther has not pled fraud with particularity, and the magistrate judge correctly
held that Luther’s fraud claim should be dismissed.
Luther also asserts in his objections that “Defendant has never started action or has not
taking [sic] any action to foreclose on Plaintiff,”7 and that, “Defendant had no creditor/debtor
relationship” with defendants. Pl.’s Mot. to Reconsider, Dkt. # 32. Liberally construing this
argument as an objection to the magistrate judge’s findings concerning Luther’s wrongful
foreclosure claims, it too is overruled. Luther’s assertion that defendants have never taken action to
foreclose on his property is nonsensical. He attached to his complaint correspondence establishing
that his property has been referred to foreclosure, as well as a newspaper clipping in which notice of
a foreclosure sale is published. See Compl., Dkt. # 1-1, 1-9. Indeed, Luther filed a motion for TRO
in which he states defendants “are seeking to foreclose on Plaintiff’s home in violation of the rights
of the Plaintiff . . . .” Mot. for Temp. Restraining Order, Dkt. # 2. In any event, courts have held
that “Virginia does not recognize a cause of action for wrongful foreclosure.” Hien Pham v. Bank
of N.Y., 856 F. Supp. 2d 804, 811 (E.D. Va. 2012) (citing Sheppard v. BAC Home Loans Servicing,
LP, No. 3:11cv62, 2012 WL 204288, at *7 (W.D. Va. Jan. 24, 2012)). And even if it did, the note
executed by Luther, secured by a deed of trust, proves defendants have a valid security interest in his
Fieldale property. See Ex. 8-1.8 The magistrate judge correctly concluded that Luther’s wrongful
foreclosure claim should be dismissed.
7
Luther attached to his objections a document entitled “Past Due Account Status,” which, according to Luther,
concerns his mortgage loan and proves defendants have taken no foreclosure action. Pl.’s Mot. to Reconsider, Dkt. #
32-2. In disposing of a Rule 12(b)(6) motion, the court may only consider the complaint and the documents attached
thereto. As this document was not attached to Luther’s complaint, it will not be considered.
8 The note, attached as an exhibit to defendant’s memorandum in support of motion to dismiss, is referenced in Luther’s
complaint. When such a document is attached to a motion to dismiss, “‘a court may consider it in determining whether
to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] the plaintiff[] do[es] not
challenge its authenticity.’” Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004)
7
IV.
Having carefully reviewed Luther’s complaint and the magistrate judge’s report and taken a
de novo look at the portions of the report to which Luther objects,9 the court concludes that Luther
fails to state a claim upon which relief can be granted. As such, the court will adopt the magistrate
judge’s recommendation in its entirety and give Luther ten days within which to file any amended
complaint correcting the deficiencies identified by the magistrate judge.
An appropriate Order will be entered.
Entered: July 24, 2014
/s/ Michael F. Urbanski
Michael F. Urbanski
United States District Judge
(quoting Phillips v. LCI Int’l Inc., 190 F.3d 609, 618 (4th Cir. 1999)). Luther does not challenge the authenticity of the
note. As such, the court can consider it here.
9 Luther raises no objection to the magistrate judge’s findings as to the FDCPA and mail fraud claims. Therefore, they
have been reviewed for clear error.
8
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