Clarke et al v. Dunn et al, No. 8:2013cv02330 - Document 49 (D. Md. 2014)
Court Description: MEMORANDUM OPINION (c/m to Defendants Carlvern Dunn and Paula Graham-Dunn 9/4/14 sat). Signed by Chief Judge Deborah K. Chasanow on 9/4/14. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : JAMES E. CLARKE, et al. : v. : Civil Action No. DKC 13-2330 : CALVERN M. DUNN, et al. : MEMORANDUM OPINION Presently foreclosure pending case and are counterclaim/third-party Counter-Defendants Menapace three for resolution motions filed Clarke, Trustees ) in this dismiss to the by: complaint James ( Substitute ready Renee (ECF Plaintiffs/ Dyson, No. and 26); Shannon Third-Party Defendants Nationstar and Mortgage Electronic System ( MERS ) (ECF No. 30); and Third-Party Defendant Corporation ( First Home ) (ECF No. 38). briefed, and necessary. Home s the court now Local Rule 105.6. motion to dismiss rules, no First Home Mortgage The issues have been hearing being deemed For the following reasons, First will be granted; the Substitute Trustees motion to dismiss will be granted in part and denied in part; and Nationstar and MERS s motion to dismiss will be granted in part and denied in part. I. Background On May 2, 2005, Defendants/Counter-Plaintiffs Carlvern M. Dunn and Paula promissory note N. in Graham-Dunn favor of ( the First Dunns ) Home in executed a amount of the $468,000.00 ( the Note ) and a deed of trust ( DOT ) on real property located at 11941 Saint Francis Way, Bowie, Maryland. The DOT was executed in favor of MERS solely as nominee for Lender and Lender s successors and assigns, meaning MERS was given authority to transfer the mortgage on behalf of First Home and any subsequent lenders. (ECF No. 2-1, at 3). First Home sold the Note to Lehman Brothers Bank, which then sold the Note to Lehman Brothers Holdings. According to later filings, the Note and DOT were purportedly sold/assigned to Associated Bank, N.A., and subsequent to these transfers, Nationstar (formerly Aurora Loan Services) began servicing the Dunns loan. On April Appointment of 11, 2013, Substitute Nationstar Trustees, executed naming James a Deed E. of Clarke, Renee Dyson, and Shannon Menapace as substitute trustees of the DOT. (ECF No. 2-3). On July 22, 2013, Substitute Trustees brought a foreclosure action against the Dunns in the Circuit Court for Prince George s County. Among the filings in the foreclosure docket was an Affidavit of Note Ownership (ECF No. 2-2, at 2), filed by the Substitute Trustees on July 12, 2013, certifying that Associated Bank, N.A. is the owner of the debt 2 instrument and has authorized Nationstar Mortgage, LLC to be the holder of the Note[.] (ECF No. 18 ¶ 29; No. 18-10). On August 12, 2013, the Dunns, proceeding pro se, removed the foreclosure action to this court pursuant to 28 U.S.C. § 1441, asserting diversity of citizenship jurisdiction under 28 U.S.C. § 1332. (ECF No. 1). The Substitute Trustees are citizens of Virginia, and the Dunns are citizens of Maryland.1 1 28 U.S.C. § 1441(b)(2) prohibits a case to be removed solely on the basis of diversity jurisdiction if any of the parties properly joined and served as defendants is a citizen of the state in which such action is brought. The Dunns, as citizens of Maryland, would appear to fall within this rule, making removal improper. But as Judge Hollander recently noted: The forum-state defendant rule found in 28 U.S.C. § 1441(b)(2) is widely regarded as procedural, rather than jurisdictional. Although the United States Court of Appeals for the Fourth Circuit has yet to rule on this question, ten circuit courts have had occasion to address it and, of those ten circuits, nine have found that removal by a forum defendant is a procedural defect, and thus waivable. Councell v. Homer Laughlin China Co., 823 F.Supp.2d 370, 378 (N.D.W.Va. 2011) (citing cases). Ross v. Mayor & City Council of Balt., No. ELH-14-369, 2014 WL 2860580, at *7 (D.Md. June 20, 2014). Pursuant to 28 U.S.C. § 1447(c), [a] motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. The Dunns removed the case on August 12, 2013, and no motion to remand has been filed. On October 8, 2013, the Substitute Trustees filed a status report stating that removal is inappropriate in a foreclosure docket. (ECF No. 20). The undersigned noted on October 28, 2013 that [b]ecause 30 days have passed since this case was removed, the only basis on which a case can be remanded to state court is if subject matter 3 On September against 26, 2013, the Dunns Counter-Defendants 2 the Substitute Home, Nationstar, and MERS. filed counterclaim Trustees, (ECF No. 18). contains four causes of action. a First The counterclaim First, the Dunns request a declaratory judgment pursuant to 28 U.S.C. § 2202 as to all Counter-Defendants stating that none of them have any right or interest in authorizes the them Note, to the collect DOT, or the mortgage terms of the Note or the DOT. Bowie payments property or that enforce the Second, the Dunns assert a claim of unjust enrichment against Nationstar. Third, they make a claim alleging violations of the Fair Debt Collection Practices Act ( FDCPA ), Substitute 15 U.S.C. Trustees. § 1692, Fourth, against they Nationstar assert a claim and for the an accounting against First Home, Nationstar, and the Substitute Trustees. Although Nationstar purported to be the Dunns loan servicer as early as 2009, the Dunns contend that MERS never properly assigned, Nationstar. transferred, or granted the DOT to The Dunns allegation is based on the fact that jurisdiction is lacking. 14 days. (ECF No. 22). Any such motion should be filed within No such motion was filed. 2 Although MERS, Nationstar, and First Home are technically third-party defendants in this action, for ease of reference, they will be referred to as Counter-Defendants along with Substitute Trustees, the only true counter-defendants. 4 Nationstar informed them that it was servicing the loan on behalf of Associated Bank, the owner of the loan, but Associated Bank later disclaimed ownership.3 The Dunns further allege that Nationstar knew that the assignment of the loan was improper, and attempted to cover up this fact by having Ms. Stacy Sandoz, a purported Vice President of MERS, execute the alleged Corporate Assignment of Deed of Trust on or around January 12, 2012, in order to foreclose of the Dunns mortgage.4 On dismiss. November 25, 2013, (ECF No. 26). the Substitute Trustees moved to Nationstar and MERS filed a motion to dismiss on December 6, 2013. (ECF No. 30). motion to dismiss on December 23, 2013. First Home filed a (ECF No. 38). In accordance with Roseboro v. Garrison, 528 F.2d 309, 310 (4th Cir. 1975), the clerk of court mailed letters to the Dunns on the 3 Specifically, on June 25, 2012, the Dunns requested that Nationstar provide them a copy of the original Note and a complete life of the loan transaction history. (ECF No. 18 ¶ 25). Nationstar sent the Dunns a letter on July 15, 2012, which identified Associated Bank as the owner of the loan and Nationstar as the loan servicer. On May 30, 2013, nearly a year later, Mr. Dunn called Associated Bank to verify the information he had received from Nationstar. On May 31, 2013, Associated Bank responded with a letter stating that [a]fter a thorough review of our account records we are unable to locate any consumer mortgage loans for residential property in your name. The account numbers you provided are not valid and we have no records that indicate you are or were a customer of Associated Bank. (ECF No. 18 ¶ 28; ECF No. 18-9). 4 The Dunns contend that this assignment is void because Ms. Sandoz had no corporate authority to assign the Note or DOT to Nationstar. (ECF No. 18 ¶ 24). 5 same day motion as had opposition each been filing, filed material or notifying and that risk (ECF Nos. 32, 36, and 43). they entry (ECF Nos. 27, 31, 41, and 42). them of that were a dispositive entitled judgment to against file them. The Dunns opposed each motion. Only First Home filed a reply. (ECF No. 44). II. Standard of Review The Substitute Trustees, Nationstar and MERS, and First Home, filed three separate motions to dismiss (ECF Nos. 26, 30, and 38). The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). A complaint need only satisfy the standard of Rule 8(a), which requires a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2). Rule 8(a)(2) still requires a showing, rather than a blanket assertion, of entitlement to relief. 544, 555 n.3 (2007). Bell Atl. Corp. v. Twombly, 550 U.S. That showing must consist of more than a formulaic recitation of the elements of a cause of action or naked assertion[s] devoid of further factual enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted). At this stage, all well-pleaded allegations in a complaint must be considered as true, Albright v. Oliver, 510 U.S. 266, 6 268 (1994), and all factual allegations must be construed in the light most favorable to the plaintiff. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). In evaluating the complaint, unsupported legal allegations not need be accepted. Revene Comm rs, 882 F.2d 870, 873 (4th Cir. 1989). v. Charles Cnty. Legal conclusions couched as factual allegations are insufficient, Iqbal, 556 U.S. at 678, as are conclusory factual allegations devoid of any reference to actual events. United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). Finally, pleadings while less to courts generally stringent standards should than hold formal pro se pleadings drafted by lawyers, they may nevertheless dismiss complaints that lack a cognizable legal theory or that fail sufficient facts under a cognizable legal theory. to allege Haines v. Kerner, 404 U.S. 519, 520 (1972); Turner v. Kight, 192 F.Supp.2d 391, 398 (D.Md. 2002), aff d, 121 F.App x. 9 (4th Cir. 2005). III. Analysis A. Fair Debt Collection Practices Act The Dunns Trustees allege violated the that FDCPA, Nationstar (ECF No. and 18, the at Substitute 14-16), which protects consumers from abusive and deceptive debt collection practices by debt collectors. Akalwadi v. Risk Mgmt. Alts., 7 Inc., 336 F.Supp.2d 492, 500 (D.Md. 2004). They contend that Nationstar is a debt collector under the FDCPA and has violated the FDCPA by using fraudulent representations and unlawful actions in its attempt to collect on the Dunns debt obligation.5 The Dunns allege that the Substitute Trustees attempted to collect on their debt by foreclosing on their Property using false pretenses.6 The FDCPA forbids the use of any false, deceptive, or misleading representation or means in debt collection provides a non-exhaustive list of prohibited conduct. and United States v. Nat l Fin. Servs., Inc., 98 F.3d 131, 135 (4th Cir. 1996). The Dunns allege that both Nationstar and the Substitute Trustees violated 15 U.S.C. § 1692e, which states that: [a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. . . . [T]he following conduct is a violation of this section: 5 Specifically, the Dunns allege that Nationstar has: (1) falsely represented that it has authority to demand payments from the Dunns; (2) attempted fraudulently to conceal the fact that it does not have this authority; and (3) unlawfully authorized the Substitute Trustees to engage in the foreclosure action. (ECF No. 18 ¶¶ 66-67, 69-77). 6 The Dunns contend that the Substitute Trustees falsely represented that: Nationstar had been assigned the debt; they were lawfully appointed as substitute trustees; and they were entitled to enforce the Note via the foreclosure action. (ECF No. 18 ¶¶ 68, 71, 73). 8 - The false representation of the character, amount, or legal status of any debt; - The threat to take any action that cannot legally be taken or that is not intended to be taken. 15 U.S.C. § 1692e(2)(A),(5). To state a claim for relief under § 1692e, the Dunns must allege that: (1) they have been the object of collection activity arising from consumer debt, (2) the Counter-Defendants are debt collectors as defined by the FDCPA, and (3) the Counter-Defendants have engaged in an act or omission prohibited by the FDCPA. Sterling v. Ourisman Chevrolet of Bowie Inc., 943 F.Supp.2d 577, 585 (D.Md. 2013). Nationstar defined by requirements. argues the that FDCPA and it is thus (ECF No. 30 ¶ 29). not not a debt subject collector to the as Act s It further states that it is an undisputed material fact that [it] is the holder of the note and the servicer of the loan at issue[,] and thus argues it is statutorily exempt from the FDCPA. (ECF No. 30 ¶ 29-30). In response, the Dunns provide a letter sent from Nationstar to them which states that Nationstar is a debt collector. No. 36-4). The FDCPA defines debt collector, in part, as: 9 (ECF any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. 15 U.S.C. § 1692a(6) (emphasis added). Debt collectors are distinguished from creditors under the FDPA by the fact that they collect debts that are not owed to them but to another creditor, and by the fact that the primary purpose of their businesses is to collect debts. A creditor becomes a debt collector, under the FDCPA, if he receives an assignment of a debt already in default for the sole purpose of collecting it. Id. § 1692a(4). 1. Nationstar Nationstar contends that it acted as a loan servicer not a debt collector in this transaction. Ordinarily, mortgage servicers are not debt collectors under the [FDCPA] because they are not persons who attempt to collect debts owed or due or asserted to be owed or due another. Allen v. Bank of Am., N.A., 933 F.Supp.2d 716, 729 (D.Md. 2013) (emphasis in original) (internal quotation marks omitted). Importantly, the FDCPA excludes from its definition of debt collector any person collecting or attempting to collect any debt owed . . . which was not in default at the time it was obtained by such person. 15 U.S.C. § 1692a(6)(F)(iii) (emphasis added). 10 Courts across the country mortgage have servicer consistently such as held that Nationstar the would actions only be of a covered under the FDCPA if the debt at issue was acquired after the customer or debtor defaulted on the loan in question. Diaz v. Residential Credit Solutions, Inc., 297 F.R.D. 42, 49 (E.D.N.Y. 2014); Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 360 n.4 (6th Cir. 2012) ( a loan servicer will become a debt collector under 1692a(6)(F)(iii) if the debt was in default or treated as such when it was acquired. ); Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985) (noting that the legislative history of § 1692a(6) indicates that a debt collector does not include the consumer s creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned ); Casault v. Fed. Nat l Mortg. Ass n, 915 F.Supp.2d 1113, 1126 (C.D.Cal. 2012) (noting that to have a properly pled claim under the FDCPA a plaintiff must not only allege that loan services was a debt collector but also show that loan servicer was assigned defaulted loans for the purpose of collection ). Furthermore, an entity that refers to itself as a debt collector does not become one for purposes of the FDCPA if definition. 1249 it does not otherwise fall within that law s Prickett v. BAC Home Loans, 946 F.Supp.2d 1236, (N.D.Ala. 2013) (explaining that the relevant test of whether an entity is a debt collector under the FDCPA is whether 11 the statutory definition applies, not whether the entity has ever stated in a document that it is a debt collector ); see also Laccinole v. Twin Oaks Software Dev., Inc., No. CA 13-716 ML, 2014 WL 2440400, at *10 (D.R.I. May 30, 2014) (citing cases that have rejected the self-identification argument, namely that entities which send letters stating that they are debt collectors or attempt[ing] necessarily debt to collectors collect within a the debt FDCPA s are not definition (internal quotation marks omitted)). Here, the Dunns have pled facts sufficient to show that Nationstar, a mortgage servicer, is a debt collector under the FDCPA. Although Nationstar s letter to the Dunns stating that it is a debt collector is immaterial, there is documentation from Nationstar in the foreclosure record, showing that Dunns mortgage was in default as of October 2, 2011. 2-6, at 3). Dunns stating Nationstar The have that also provided [e]ffective a (ECF No. letter 07/01/12 the from Nationstar Mortgage is now the servicer for your mortgage account[,] (ECF No. 36-4), indicating the approximate date that Nationstar was assigned their mortgage. attached as an exhibit A separate letter from Nationstar, supporting the Dunns counterclaim, states that the Dunns debt is owed to ASSOCIATED BANK, N.A., but is being serviced by Nationstar. (ECF No. 18-5). Construing the facts in the light most favorable to the Dunns, 12 they have adequately supported an accusation that Nationstar may be a debt collector under the FDCPA because it acquired the Dunns account after their debt was in default, and it attempted to collect on the debt obligation for Associated Bank. The Dunns have also alleged facts sufficient to show that Nationstar may have violated the FDCPA by making false representations regarding their loan, namely that it is servicing the loan on behalf of Associated Bank (ECF No. 18-5), when Associated Bank refutes that the Dunns are or ever were its customer, (ECF No. 18-9), and fraudulently attempting to collect payments and foreclose on the loan under this same premise. 2. The Substitute Trustees The Substitute Trustees argue that the FDCPA claim should also be dismissed as to them. The Dunns contend that the Substitute Trustees acting as agents of Nationstar attempted to collect on the Note under false pretenses, namely that Nationstar was assigned the Dunns debt when in fact it was not, and that the Substitute Trustees were appointed substitute trustees, when in fact they were not. 68). as lawful (ECF No. 18 ¶ The Dunns also allege that the Substitute Trustees knew they were not legally authorized agents, (Id. ¶ 74), implying that their actions were fraudulent. The Substitute Trustees argue that Nationstar is the current holder of the mortgage loan and appointed the Substitute Trustees pursuant to the Deed of 13 Appointment of Substitute Trustees, which was filed in the court docket and land records. (ECF No. 26 ¶ 23). They contend that their actions were authorized by law due to Nationstar s rights as a holder to collect on the debt and appoint them as rejected, as substitute trustees to enforce the debt. The Substitute Trustees arguments will be they rely on documents extrinsic to the counter-complaint. The Dunns and dispute the authenticity of the appointments affidavits in the foreclosure action and rely on them only to show that they are legally invalid. (ECF No. 18 ¶¶ 29-41). Furthermore, the Substitute Trustees do not dispute that they are a debt collector subject to the FDCPA.7 The Dunns have pled with sufficient particularity that the Substitute Trustees violated the FDCPA by alleging that they attempted to collect 7 The United States Court of Appeals for the Fourth Circuit has held that lawyers appointed by a lender as substitute trustees, who attempt to foreclose on a deed of trust, can be liable under the FDCPA as debt collectors. See Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 378-79 (4th Cir. 2006) (finding that the substitute trustees foreclosure action was an attempt to collect a debt, [and that substitute trustees] are not excluded from the definition of debt collector under 15 U.S.C.A. § 1692a(6)(F)(i) merely because they were acting as trustees foreclosing on a property pursuant to a deed of trust ); see also Glazer v. Chase Home Finance LLC, 704 F.3d 453, 464 (6th Cir. 2013) ( [W]e hold that mortgage foreclosure is debt collection under the [FDCPA]. Lawyers who meet the general definition of a debt collector must comply with the FDCPA[,] . . . [a]nd a lawyer can satisfy this definition if his principal business purpose is mortgage foreclosure or if he regularly performs this function. ). 14 the debt under a false pretense, namely that they were the lawful substitute trustees of Nationstar. B. Quasi-Contract Count II of the Dunns counterclaim is a quasi-contract claim against Nationstar. In its motion to dismiss, Nationstar construes this as a claim for unjust enrichment, (ECF No. 30 ¶ 26), and the Dunns respond in kind. Unjust enrichment (ECF No. 36, at 9-10). consists of three elements: (1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such defendant value. circumstances to retain the as to make benefit it inequitable without the for the of its payment Hill v. Cross Country Settlements, LLC, 402 Md. 281, 295 (2007) (citations omitted). The Dunns contend that Nationstar accepted payments from them, knowing that it had not acquired an interest in the Note and therefore that it was not entitled to keep the payments and has been challenge unjustly the enriched. assignment (ECF of the No. 18 debt Nationstar s authority to collect payments. The Dunns state that they are seeking ¶ and 61-62). They correspondingly, (ECF No. 36 ¶ 25). restitution for any payments made to Nationstar that were not paid to First Home or another beneficiary of the Note. 15 (ECF No. 18 ¶ 64). In response, Nationstar argues that it services the mortgage loan and is the holder of the loan, and therefore has authority to collect payments. This contention, however, illustrates the crux of the dispute between the parties, which is largely evidentiary motion to dismiss. and not ripe for determination on a Furthermore, Nationstar relies on evidence outside the four corners of the Dunns counterclaim to support its arguments. As a general rule, extrinsic evidence cannot be considered at the Rule 12(b)(6) stage. There is an exception to this rule where the plaintiff has notice of the evidence, does not dispute its authenticity, and relies on it in framing the complaint. 367 F.3d Am. Chiropractic Ass n v. Trigon Healthcare, Inc., 212, 234 (4th Cir. 2002). The Dunns dispute the authenticity of the appointments and affidavits regarding the Note, DOT, and who has holder status, and rely on them only to the extent of alleging that they are invalid. C. Declaratory Judgment The Dunns seek a declaratory judgment against all CounterDefendants that none of the named Counter-Defendants have any right or interest in [their] Note, Deed of Trust, or the Property which authorizes them, in fact or as a matter of law, to collect mortgage payments or enforce the terms of the Note or DOT in any manner whatsoever. (ECF No. 18 ¶ 56). 16 The Declaratory Judgment Act provides that [i]n a case of actual controversy within its jurisdiction . . . any court of the United relations States of any . . . declare may interested party the seeking whether or not further relief is sought. (emphasis added). rights such and other declaration, 28 U.S.C. § 2201(a). The United States Court of Appeals for the Fourth Circuit has further explained that a federal court may properly exercise criteria are controversy jurisdiction met: between (1) the the parties in such complaint of cases where alleges sufficient an three actual immediacy and reality to warrant issuance of a declaratory judgment; (2) the court possesses an independent basis for the jurisdiction over the parties (e.g., federal question or diversity jurisdiction); and (3) the court does not abuse its discretion in its exercise of jurisdiction. Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004) (citing 28 U.S.C. § 2201; Cont l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994)). 1. First Home First Home argues that the Dunns have failed to state a claim under the Declaratory Judgment Act because they have alleged no facts showing a controversy between the Dunns and First Home. allegation First Home argues that the Dunns have made no that it has an adverse 17 interest in the Subject Property or that it has any legal relationship that would create a justiciable controversy. First Home maintains that the Dunns counterclaim concedes this fact as it states that First Home sold the Note (and thus all of its rights) to Lehman Brothers Bank, who then sold it to Lehman Brothers Holdings. ¶ 17). (ECF No. 18 The Dunns attached, as an exhibit to their counterclaim, the Note which evidences First Home s sale of its rights to Lehman Brothers. First Home (ECF No. 18-1). also asserts that the Dunns are essentially asking the court to declare the rights of the parties to the underlying foreclosure action an action in which it is not involved. Consequently, it alleges that there is no controversy or adverse interests between it and the Dunns; and thus, the Dunns have judgment. is made Property, not shown they are entitled to a declaratory The Dunns counter that unless a judicial declaration that First First Home Home can does not attempt have to sue an interest them in the in the future because the Note bears First Home as the lender. A declaratory judgment is authorized only in a case with an actual controversy between the parties. The Dunns allegations do not demonstrate a controversy with First Home. Their fear that absent a declaratory judgment First Home could sue them in the future does not have the sufficient immediacy and concreteness necessary to invoke the Declaratory Judgment Act. 18 See Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (noting that the facts alleged, under all the circumstances, [must show] that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment ). The Dunns counterclaim for a declaratory judgment against First Home will be dismissed. 2. MERS MERS contends that the counterclaim against it must be dismissed because its interest in the chain of title was never more than as nominee for a mortgage. sought by the necessary party. Dunns would affect Furthermore, no remedy MERS, (ECF No. 30, at 10). and MERS is not a In response, the Dunns argue that MERS is a necessary party because MERS, having no interest in the property, executed an assignment of the DOT to Nationstar, which they contend is void. Just as the Dunns have not shown a true controversy with First Home, they similarly have not shown a true controversy with MERS. The Dunns allegation regarding the void transfer implicates whether Nationstar had a legal right to collect on the mortgage and foreclose, but does not suggest that MERS has any rights to the Dunns property, the Note, or the DOT. Furthermore, MERS is not a party to the foreclosure action and 19 is not claiming any right in the Dunns Property, the Note, or the DOT. Courts have consistently recognized in factually similar cases that MERS does not have a beneficial interest in mortgage debts or the borrower s property. very limited way as a Instead, it merely acts in a nominee for lenders and their successors and assigns in order to transfer bare legal title on behalf of beneficial owners. Kiah v. Aurora Loan Services, LLC, CIV.A. 10-40161-FDS, 2011 WL 841282, at *8 (D. Mass. Mar. 4, 2011); Bank of New York v. Raftogianis, 418 N.J. Super. 323, 347 (Ch. Div. 2010) ( MERS, as nominee, does not have any real interest in the underlying debt, or the mortgage which secured that debt. It acts simply as an agent or straw man for the lender. ); cf. Landmark Nat. Bank v. Kesler, 289 Kan. at 545 (noting that MERS did not have the right to intervene in the suit because it did not demonstrate . . . that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor [-] [i]t lent no money and received no payments from the borrower ); cf. In re Mortgage Elec. Registration Sys. (MERS) Litig., MDL 09-2119-JAT, 2011 WL 4550189, at *4 (D.Ariz. Oct. 3, 2011) ( MERS holds legal title to the secured interests and is the beneficiary or lienholder of record, as the nominee or agent for Plaintiffs lenders and the lenders successors and assigns. That is, MERS serves as . . . the nominee or agent for 20 any valid note holder. ). Courts have classified MERS s relation to lenders as that of agent acting on behalf of a principal, rather than finding MERS to interest in the mortgages it transfers. have any ownership See Landmark Nat. Bank, 289 Kan. at 539 (citing several cases finding the relationship of MERS and the lender as an agency relationship ). Accordingly, MERS, as nominee for whichever lender holds the Note, does not have any interest in the underlying debt or the foreclosure; it merely acted as a straw man in transferring the Note and DOT. The validity or invalidity of MERS s assignment of the Note does not change the fact that MERS at no point held an interest in the Dunns property. The Dunns have not shown that there is a controversy between them and MERS that would be impacted by a declaratory judgment from the court. Thus, the sole claim against MERS for a declaratory judgment will be dismissed.8 3. Substitute Trustees & Nationstar The Substitute Trustees and Nationstar argue that the Dunns have failed to state a claim that would entitle them to the 8 After filing its initial motion to dismiss with Nationstar (ECF No. 30), MERS moved to amend its initial motion to add more support. (ECF No. 45). The Dunns subsequently moved to strike this motion. (ECF No. 47). Because the arguments in MERS s original motion to dismiss the Dunns third-party claim (ECF No. 30, at 10-11), provided sufficient information for the court to resolve it, both motions will be denied as moot. 21 relief requested, a declaratory judgment that aims to stop the foreclosure and quiet title in their favor. The Substitute Trustees argue that the Dunns allegations that they do not have any right to foreclose on the subject property because of an imperfect assignment are unsupported by facts or law. Substitute Trustees maintain that all assignments were proper and all procedures necessary to foreclose have been satisfied. (ECF No. 26, at 7-8). undisputed that entitled to Nationstar enforce proceeding. the is Deed They also contend that it is the of (ECF No. 26 ¶ 20). holder Trust in of the this Note and foreclosure The Dunns disagree, stating that [they] specifically dispute the fact that any party to the foreclosure is the holder or owner of the note. (ECF No. 32, at 5). Nationstar adopts all of Substitute Trustees arguments and similarly maintains regarding the that lender s the merits right to of the foreclose Dunns are arguments erroneous.9 Problematically, the Substitute Trustees and Nationstar again 9 Nationstar further states that [o]ther borrowers in the foreclosure process have made similar if not identical arguments attempting to dismiss the foreclosure action without any success. (ECF No. 30, at 7). Nationstar and Substitute Trustees fail to realize that currently pending are their motions to dismiss the Dunns counterclaim, not the Dunns motion to dismiss the foreclosure action. Consequently, at this stage in the case, the Dunns must only show that they have stated a valid claim for relief under the Declaratory Judgment Act, not that they have a meritorious defense under Maryland s foreclosure laws for dismissal of the foreclosure. 22 rely on documents, the authenticity of which the Dunns dispute, outside the four corners of the Dunns counterclaim to support their arguments. authenticity Specifically, of Substitute the Dunns Trustees dispute and the Nationstar s appointments and affidavits regarding the Note, DOT, and who has holder status, and rely on them only to the extent of alleging that they are invalid. at 3). (ECF No. 18 ¶ 22-29, 53-54; ECF No. 32, Thus, based on the four corners of the counterclaim, the Dunns have alleged a genuine controversy with Nationstar and Substitute Trustees regarding these parties respective rights in the Note and the DOT. Additionally, the Dunns declaratory judgment action is ripe for review, because Substitute Trustees are attempting to foreclose. Cf. Horvath v. Bank of N.Y., 641 F.3d 617, 622 n.2 (4th Cir. 2011) (concluding that plaintiff s request for a declaratory judgment regarding lender s ability to foreclose on a mortgage contract is not ripe for adjudication when there has been no attempt to foreclose ). the first and second requirements for In this case, the exercise of jurisdiction under the Declaratory Judgment Act are met. The only question remaining is whether it would be a proper exercise judgment. of the In court s the discretion declaratory to judgment issue a context, declaratory the normal principle that federal courts should adjudicate claims within their jurisdiction yields to considerations of practicality and 23 wise judicial administration. New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 296 (4th Cir. 2005) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995)). Accordingly, the court may, in the exercise of its broad discretion, S.C. Dep t of Health & Envtl. Control v. Commerce & Indus. Ins. Co., 372 F.3d 245, 260 (4th Cir. 2004), decline to exercise its jurisdiction and dismiss the action, Volvo Constr. Equip., 386 F.3d at 594. A court must be cautious, however, as it should only decline to exercise jurisdiction where there is a good reason to do so. For Id. instance, a court should normally entertain a declaratory action where the relief sought (i) will serve a useful purpose in clarifying and settling the legal relations in issue, and (ii) will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding. Cont l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994) (quoting Nautilus Ins. Co. v. Winchester Homes, 15 Inc., [C]onsiderations of F.3d 371, federalism, 375 (4th efficiency, Cir. and 1994)). comity also significant factors for courts to contemplate. are Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422 (4th Cir. 1998). It is in the interest of efficiency to adjudicate in one action what Trustees is and essentially Nationstar s the Dunns defense foreclosure action. 24 to Substitute There is a genuine controversy between the Dunns, Nationstar, and Substitute Trustees regarding which entity has rights in the Note and DOT, which ultimately impacts the foreclosure action. Accordingly, the Dunns claim for a declaratory judgment as to Nationstar and Substitute Trustees survives this motion to dismiss. D. Accounting The Dunns also seek an accounting Nationstar, and the Substitute Trustees. from First Home, From First Home, they would like an accounting as evidence that a loan was given because they maintain that they have no record of receipt of a loan[.] because (ECF No. 18 ¶ 80). of Nationstar s The Dunns also contend that fraudulent conduct, mortgage payments that were not owed to it. As a result, they argue that these the Dunns made (ECF No. 18 ¶ 81). monies should either be credited back to them in full or credited back to the rightful owner of the Dunns Note and DOT. Finally, they allege that the amount of money owed from First Home and/or Nationstar to them is unknown and cannot be ascertained without an accounting of the receipts transactions. and disbursements of the aforementioned (Id. ¶¶ 79-82). A suit for an accounting arises in equity and may be maintained when the remedies at law are inadequate. Gephardt v. Mortgage Consultants, Inc., CIV. JFM-10-1537, 2011 WL 531976, 25 at *4 (D.Md. Feb. 8, 2011) (quoting P.V. Props. Inc. v. Rock Creek Vill. Assocs. Ltd. P ship, 77 Md.App. 77, 89 (1988)). In Maryland, a claim for an accounting is available when one party is under [an] obligation to pay money to another based on facts and records that are known and kept exclusively by the party to whom the obligation is owed, or where there is a [confidential or] fiduciary relationship between the parties. Polek v. J.P. Morgan Chase Bank, N.A., 424 Md. 333, 365 (2012) (quoting P.V. Props., Inc. v. Rock Creek Vill. Assocs. Ltd. P Ship, 77 Md.App. 77, 89 (1988)); see also see also Goldstein v. F.D.I.C., CIV.A. ELH-11-1604, 2012 WL 1819284, at *13 (D.Md. May 16, 2012) (noting that [a]lthough assertion of an independent cause of action for accounting is no longer necessary in most cases [due to modern discovery rules], it has not been entirely abolished in Maryland ). Because the relief sought in an accounting claim is access to information, discovery is the remedy given to plaintiffs who prove they are entitled to an accounting. Golub ex rel. Golub v. Cohen, 138 Md.App. 508, 523 (2001). First Home argues that the Dunns have failed to state a valid claim for an accounting from First Home, because it no longer has a relationship with the Dunns considering that it transferred their Note and DOT. (ECF No. 38, at 8). Furthermore, First Home states that the Dunns have failed to allege that First Home maintains 26 any records exclusively. (Id.). are Substitute Trustees and Nationstar argue that the Dunns not entitled to an accounting from them because the Substitute Trustees have already filed in the foreclosure action all documents default date, pertinent principal to the mortgage balance, loan interest, including escrow the advances, corporate advances and total pay off amount of the loan. (ECF No. 26 ¶ 25; ECF No. 30 ¶ 32). The Dunns argue that up until the time it sold the Note, First Home held itself out as being their true creditor, (ECF No. 32, at 8), and that Nationstar held itself out as being their mortgage servicer and the Substitute Trustees themselves out as being authorized substitute trustees. held They allege that on account of these purported relationships, these Counter-Defendants have a fiduciary duty to provide the Dunns an accounting. (Id.). They further contend that the origination of the debt began with First Home, therefore, the accounting should begin with First Home. They maintain that the amount due from First Home and Nationstar to them is unknown and cannot be ascertained without an accounting of the disbursements of the aforementioned transactions. receipts and (ECF No. 36 ¶ 29). Maryland courts, however, have demonstrated a reluctance to permit accounting claims where the records could have been kept by the party seeking the accounting. 27 See Polek, 424 Md. at 366 ( We have said that [t]he butcher, the baker and the candlestick maker do not occupy a fiduciary relation toward every customer who has too much faith in human nature or is too busy or too careless (whichever way he may properly be characterized) to count his change. (quoting Johnson v. Bugle Coat, Apron & Linen Serv., 191 Md. 268, 276-77 (1948)); see also Goldstein, 2012 WL 1819284, at *15 ( accounting claims have been rejected where the plaintiff was fully capable of ascertaining, through its own efforts, the information it sought from the defendant by way of an accounting, where discovery was otherwise available, or where there was no basis for inferring that [defendant] was in any sort fiduciary of duty confidential toward relationship [plaintiff] with (quoting or Alts. bore any Unlimited, Inc. v. New Balt. City Bd. of School Comm rs, 155 Md.App. 415, 508, 510-11 (2004))). held that it would In Polek, the Maryland Court of Appeals not require, as a matter of law, that assignees of secondary mortgage loans provide a record-keeping service for many years after the contractual obligation to pay money has been concluded, simply because borrowers failed to maintain their own records. 424 Md. at 366. The Dunns have not alleged facts showing they are owed an accounting from First Home. First Home and the Dunns relationship was contractual, not fiduciary; in addition, the Dunns are no longer obligated to make payments to First Home, as 28 this relationship expired long ago when First Home sold its interest in the Note and DOT. Finally, the Dunns assertion that they need an accounting to show that they actually received the loan is without merit. These records are not within the exclusive control of First Home, as the Dunns can check their own bank accounts to verify whether or not they received a loan disbursement. The Dunns claim for an accounting from First Home will be dismissed. Nor is an accounting warranted with regard to Nationstar and the Substitute Trustees. to show that fiduciary they are relationship The Dunns have not alleged facts entitled with to these an accounting parties, nor through that a these Counter-Defendants are in exclusive control of the information sought by the Dunns. Thus, the Dunns counterclaim for an accounting against Nationstar and Substitute Trustees will be dismissed.10 IV. Conclusion For the foregoing reasons, First Home s motion to dismiss will be granted; the Substitute Trustees motion to dismiss will 10 Moreover, [a]n accounting is unnecessary where discovery is sufficient to determine the amounts at issue. Doe v. CinLan, Inc., 08-CV-12719, 2010 WL 726710, at *8 (E.D.Mich. Feb. 24, 2010); accord Goldstein, 2012 WL 1819284 at *14. Because the Dunns have properly pled other counterclaims against Nationstar and the Substitute Trustees, they will be entitled to discovery; thus, their accounting claim which if properly pled would have entitled them to discovery is superfluous. Id. 29 be granted in part and denied in part; and Nationstar and MERS s motion to dismiss will be granted in part and denied in part. separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 30 A
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