Flores v. Deutsche Bank National Trust Company, Trustee et al, No. 8:2010cv00217 - Document 32 (D. Md. 2010)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/7/10. (sat, Chambers)
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Flores v. Deutsche Bank National Trust Company, Trustee et al Doc. 32 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : DIGNA FLORES : v. : Civil Action No. DKC 10-0217 : DEUTSCHE BANK NATIONAL TRUST, COMPANY, et al. : MEMORANDUM OPINION Presently pending and ready for resolution in this property case are two motions to dismiss (Papers 12 & 15) and a motion to strike (Paper 30). The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the motions to dismiss will be granted. I. Background This case revolves around the purchase of a home by Plaintiff Digna Flores, and the promissory notes she executed to enable that purchase. In her complaint filed October 26, 2009, Plaintiff asserts that he borrowed $376,000 on June 27, 2006 to purchase 5633 ( property ). the sole Fisher Road in Temple Hills, (Complaint, Paper 6 ¶¶ 12, 15, 16). title-holder of the property. (Id. Maryland Plaintiff is at 19). To accomplish the purchase of the property, Plaintiff executed two promissory notes and two deeds of trust: one in the amount of $300,800 and the second in the amount of $75,200. (Id. at ¶¶ Dockets.Justia.com 15-16). The allegations in the complaint refer only to the first promissory note ( Note ) and deed of trust ( Deed ). The Note and deed named Defendant WMC Mortgage Corporation ( WMC ) as Lender, Richard Cregger as Trustee and Defendant Mortgage Electronic Registration Systems, Inc. ( MERS ) as beneficiary. (Id. at ¶ 14). Sometime after closing on the property, Plaintiff s loan was assigned to Defendant Litton Servicing L.P. ( Litton ) and then later to Defendant Countrywide Home Loans Servicing LP ( Countrywide ). In 2008, Plaintiff began receiving demands for payment and threats of foreclosure from Defendants Cohn, Goldberg & Deutsch, LLC ( Cohn ) Countrywide. (listed as the (Id. at ¶ 20). substitute trustee ) and Plaintiff alleges on information and belief that demands for payment were sent on behalf of Cohn as substitute Trustee, Countrywide as servicer, and Defendant Deutsche Bank National Trust Company ( Deutsch Bank ) as Trustee, under a Pooling and Servicing Agreement dated September 21, 2006. (Id. at ¶ 23). Deutsche Bank and Cohn sent a letter dated August 31, 2009 to Plaintiff advising her that her home would be foreclosed on September 15, 2009 at 11:00 a.m. (Paper 6 ¶ 28). One week prior to the scheduled foreclosure, the action was postponed and the subject loans were reviewed by the lender s loss mitigation 2 department. (Id. at ¶ 29). Deutsche Bank and Cohn then notified Plaintiff by letter dated October 9, 2009 that her home would be foreclosed on October 27, 2009 at 11:16 a.m. (Id. at ¶ 30). Plaintiff filed a complaint in the Circuit Court for Prince George s County in Maryland on October 26, 2009, and the action was removed to this court on January 28, 2010. (Paper 1). Other Defendants named in her complaint are Morgan Stanley Abs Capital I Inc. ( Morgan Stanley ), Empire Financial Services, Inc. ( Empire ), and Luis services agent at Empire. Farago ( Farago ), a financial On February 17 and 18, 2010, claims against Defendants Litton and WMC were dismissed on Plaintiff s notice. The remaining claims are: (I) Violation of the Fair Debt Collection Practices Act ( FDCPA ), 15 U.S.C § 1692 et seq. by Defendants. Plaintiff alleges that Defendants Countrywide, Deutsche Bank, Morgan Stanley Loan Trust, and Cohn have all engaged in practices violating the FDCPA because they do not have the right or authority to enforce the Note; or, alternatively, that their authority has been extinguished or satisfied, or that the Note has been split from the Deed, resulting in an unsecured Note. (II) Declaratory judgment that Defendants have no equitable or legal right or interest in the Note or Deed, or that the obligation has been extinguished, satisfied or is void. Plaintiff also seeks a declaration that 3 Defendants have no standing to effectuate a legal foreclosure. (III) Breach of fiduciary duty against Defendant Cohn, because he failed to perform reasonable due diligence when the request to foreclose was made by other Defendants. (IV) Quiet the title of the property, because Plaintiff is the only party that can prove legal and equitable ownership interest. (V) Fraud against Defendants Countrywide and Cohn. Plaintiff alleges that both Countrywide and Cohn fraudulently misrepresented their authority to conduct a foreclosure because the Deed only mentions the Lender as having any such authority, and they are not the Lender. (VI) Fraud in the inducement against Farago, Empire, Deutsche Bank and potential certificate holders. Plaintiff alleges that these entities expressly or impliedly represented to Plaintiff that they would secure for her the most affordable loan by accurately accounting for her monthly and yearly income. (VII) Violation of the Maryland Consumer Protection Act, Md. Code Ann., Comm. Law § 13-301, against Defendants Farago and Empire. Defendants Farago and Empire answered the complaint jointly on February 22, 2010. (Paper 23). Countrywide, Deutsche Bank, Morgan Stanley and MERS filed a motion to dismiss on February 4, 2010. (Paper 12). Defendant Cohn filed a motion to dismiss which incorporated the first motion to dismiss, on February 4, 2010 as well. (Paper 15). Plaintiff 4 filed responses on February 22, 2010. (Papers 24 & 25). Defendants filed a reply to one of the motions on March 11, 2010. (Paper 28, in support of Paper 12).1 II. Motions to Dismiss A. Standard of Review The purpose of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) is to test the sufficiency of the plaintiff s complaint. See Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th 1999). Cir. Except in certain specified cases, a plaintiff s complaint need only satisfy the simplified pleading standard of Rule 8(a), Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002), which requires a short and plain statement of the claim showing Fed.R.Civ.P. requires a that 8(a)(2). pleader is Nevertheless, showing, entitlement to relief. 544, 555 n.3 (2007). the rather than a entitled Rule blanket to relief. 8(a)(2) still assertion, of 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 1 assertion[s] devoid of further factual enhancement. Plaintiff filed a sur-reply on March 29, 2010 without seeking leave of the court. A party is permitted to file a surreply only upon obtaining leave of the court, see Local Rule 105.2(a), and leave was neither requested nor granted in this case. The surreply will not be accepted and the motion to strike filed by Defendants will be granted. (Paper 30). 5 Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(internal citations omitted). In its determination, the court must consider all well-pled allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and must construe all factual allegations 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)). The court need not, however, accept unsupported legal allegations, Revene v. Charles County Comm rs, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual allegations, Iqbal, 129 S.Ct. at 1950, or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). See also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009). [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged, but it has not show[n] . . . that the pleader is entitled to relief. (quoting Fed.R.Civ.P. 8(a)(2)). Iqbal, 129 S.Ct. at 1950 Thus, [d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 6 Id. This case involves an allegation of fraud, which requires a higher showing provides that to survive in all a motion averments of to dismiss. fraud or Rule 9(b) mistake, the circumstances constituting fraud or mistake shall be stated with particularity. and other Fed.R.Civ.P. 9(b). condition generally. of mind of a person may in the complaint fraudulent behavior. Cigna averred at Not all the causes of action issue include allegations of Only causes of action involving fraud must meet the higher standard imposed by Rule 9(b). v. be Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 n.6 (4th Cir., 1999). alleged Malice, intent, knowledge, Healthcare, 238 2007)(unpublished)(quoting Fed. Vess Appx. v. See Balt. County 914, Ciba-Geigy (4th 922 Corp. Cir. USA, 317 F.3d 1097, 1104 (9th Cir. 2003)). A plaintiff may choose not to allege a unified course of fraudulent conduct in support of a claim, but rather to allege some fraudulent and some non-fraudulent conduct. In such cases, only the allegations of fraud are subject to Rule 9(b) s heightened pleading requirements. Id. at 1104. supporting a Rule claim 9(b) be does stated not with require particularity allegations describe non-fraudulent conduct. 7 that allegations when Id. at 1104. those B. Arguments Plaintiff s complaint challenges the authority possessed by the various Defendants to enforce the Deed that secures the Note executed by Plaintiff. In challenging that authority, Plaintiff advances several arguments that set the foundation for most of her causes of action. First, trustee. Plaintiff She Lender may says argues that remove and that Cohn the although appoint is not Deed actually states the the trustees, substitute that the Lender did not actually file or authorize the Appointment of Substitute Trustee that has been filed, and that named Cohn and his colleagues Plaintiff as contends substitute that, trustees. although (Paper Countrywide 6 ¶¶ asserts 35-6). in the Appointment of Substitute Trustee that it is appointing Cohn as substitute Deutsche trustee Bank, and Deutsche appoint a substitute. that it is Bank is not the a authorized Lender and agent so of cannot (Paper 6 ¶¶ 37-8). Plaintiff also argues that Defendants have failed to prove ownership and possession of the Note, as they must, according to the Uniform Commercial Code as adopted in Maryland. at 4). (Paper 24, She argues that the Note produced by Defendants, which is a purported certified copy of the original contains no endorsement by the transferor WMC and is not payable to Deutsche 8 Bank, Morgan Stanley or any other Defendant. In addition to establishing possession, Plaintiff says, Defendants must prove that the transferor was the holder at the time the transferee acquired the Note to establish a valid transaction took place. (Paper 24, at 6). Finally, Plaintiff argues that Defendants lack standing to enforce the Note because there is no injury in fact. In essence, Plaintiff argues that Defendants have already recovered for Plaintiff s default on her mortgage payments, because various credit enhancement policies compensated the injured parties in full. (Id., at 8-9). These credit enhancement policies refer to placement of the Note into a securitized pool with other mortgages represented by Morgan Stanley, which purchased a credit default swap or default insurance for the securitized pool. There provides is a (Id.). nothing basis for in the relief allegations under the noted law of above that negotiable instruments or enforcement of deeds.2 Defendants, in their motions to dismiss, Plaintiff s challenge is based on false premises. argue that Defendants Deutsche Bank, Morgan Stanley, MERS and Countrywide (and Cohn, 2 Allegations of fraud and violation of the Maryland Consumer Protection Act against the two Defendants who are not a party to either motion to dismiss are not addressed in this opinion. 9 through its own motion) assert that Counts I, II, IV and V of the complaint must be dismissed because the claims are based on an erroneous assertion that Defendants do not have the authority to appoint a substitute trustee. (Paper 12, at 4). They argue that the language of the Note and the Deed allows transfers of the Note, and that when the Note was transferred, Defendants acquired the right to enforce the Deed under the express terms of the Note, and under Maryland law. (Paper 12, at 4-5). They also argue that a transferee of the Note, such as Deutsche Bank, has all of the original lender s rights to enforce the Deed, and that the Deed provides that any subsequently appointed trustee has the right to foreclose. of the Deed of Trust). (Paper 12, at 7, referencing § 22 Maryland Rule of Procedure 14-204 also allows any successor trustee of a deed of trust to file a foreclosure action. Defendants also argue that Plaintiff has failed to allege the elements of fraud against them, because the claims made in the Appointment of Substitute Trustee filed by Countrywide are true. The assertion that the term Lender only refers to the original lender has no merit, Defendants argue, and the Note and Deed inure to the benefit of the original lender s successors. (Paper 12, at 9, referencing Ex. 1 § 13 and Ex. 2 §§ 1, 91, 11). 10 Defendant Cohn argues that it has not breached any fiduciary duty to Plaintiff because it complied with all the requirements in the deed of trust and under Maryland rules of procedure. (Paper 15, at 2-3). Finally, no fraud in the inducement can exist, Defendants argue, because Deutsche Bank made none of the purportedly false statements, Plaintiff s allegations do not meet the Fed.R.Civ.P. 9(b) standards, and Plaintiff s claim is time-barred. 10). (Id. at They argue that Deutsche Bank did not originate the loan WMC did and that Plaintiff initially made payments to WMC. Therefore, Defendant Deutsche Bank could not have made any of the representations alleged. C. (Id.). Analysis Several United States district courts in Maryland and Virginia have recently addressed cases that are similar to this one: they all share several common causes of action and have similar fact situations. See Hammett v. Deutsche Bank National Company, 2010 WL 1225849 (E.D.Va. 2010); Horvath v. Bank of New York, 2010 WL 538039 (E.D.Va. 2010); and Parillon v. Fremont Investment and Loan, 2010 WL 1328425 (D.Md. 2010). Much as in these other cases, Plaintiff in the instant matter has failed to 11 allege facts upon which relief can be granted and therefore Defendants motions to dismiss will be granted.3 Plaintiff s complaint makes several broad claims that are incorrect as a matter of law. transferable. First, the Note and Deed are According to the Note, the Lender may transfer the Note and subsequent lenders may appoint substitute trustees. The Note specifically says that, in signing the document I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the Note Holder. (Paper 12, Ex. 2 ¶ 1). Second, the power to appoint substitute trustees rests with the Lender, whoever that may be. The Appointment of Substitute Trustees notes that Deutsche Bank (acting as trustee for Morgan Stanley) appointed Cohn (and his colleagues) to be substitute trustees. (Paper 12, Ex. 5). The Deed itself notes that Lender, at its option, may from time to time remove Trustee and appoint a successor Trustee appointed hereunder. 3 (Paper 12, The court may rely upon the Deed, Note and other documents attached by Defendants to their motions at this stage of the case because there is no dispute as to the authenticity of these documents. See American Chiropractic Ass n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004). The following documents have been included by the parties as exhibits and referenced by the court: a copy of the Deed, the Note, and the Deed of Appointment of Substitute Trustee. 12 Ex. 2 ¶ 24). Under the terms of the subject Deed, Defendants Countrywide and Deutsche Bank (as trustee for Morgan Stanley Trust) are the Lenders. Specifically, Countrywide is the loan servicer and Deutsche Bank, as trustee, is the holder of the Note. Third, Deutsche Bank and other Defendants may enforce the Deed. Because Deutsche Bank is the holder of the Note, it, and its agents, may enforce the Deed. are inseparable; the former as The note and the mortgage essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. Le Brun v. Frosise, 197 Md. 466, 475 (1951)(internal quotations omitted). Fourth, although creative, Plaintiff s arguments on standing are meritless because Defendants have not been paid the amount owed on the Note. The fact that Plaintiff s mortgage may have been combined with many others into a securitized pool on which a credit default swap, or some other insuring-financial product, was purchased, responsibility for the Note. does not absolve Plaintiff of That transaction by the holder of the Deed is separate from collecting on the Note itself. Thus, although Plaintiff s default may have triggered insurance for 13 any losses caused by that default, she is not discharged from the promissory notes themselves. Finally, any subsequently-appointed trustee has the right to foreclose on the property according to the Deed in this case: Borrower, in accordance with Title 14, Chapter 200 of the Maryland Rules of Procedure, does hereby declare and assent to the passage of a decree to sell the Property in one or more parcels by the equity court having jurisdiction for the sale of the Property, and consents to the granting to any trustee appointed by the assent to decree of all the rights, powers and remedies granted to the Trustee in this Security Instrument together with any and all rights, powers and remedies granted by the decree. (Paper 12, Ex. 1 ¶ 22). Maryland Rule of Procedure 14-204 allows any successor trustee to file an action to foreclose a lien. Therefore, Defendants have the right to enforce the Deed and Note and to foreclose on the property. alleged by Plaintiff do not withstand Many of the counts scrutiny once the aforementioned analyses have been done. In Count I, Plaintiff alleges a violation of the FDCPA. The FDCPA is Congress s response to what it saw as the abusive, deceptive, and unfair debt collection practices [used] by many debt collectors. 15 U.S.C. 1692(a). The statute applies almost exclusively to those who collect debts owed to others. James v. Ford Motor Credit 14 Co., 842 F.Supp. 1202 (D.Minn. 1994), aff d 47 F.3d 961 (8th Cir. 1995). To make a successful claim under the FDCPA, a Plaintiff must show: the plaintiff has been the object of collection activity arising from consumer debt, (2) the defendant is a debtor collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA. Awah v. Donaty, 2009 WL 3747201 (D.Md. 2009), quoting Dikun v. Streich, 369 F.Supp.2d 781, 785 (E.D.Va. 2005). Plaintiff does not allege anywhere that any of the named Defendants are debt collectors as defined under the FDCPA. to debt collectors. The FDCPA only applies The FDCPA defines a debt collector as 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 to another. 15 U.S.C. § 1692a(6). above) that [T]he law is well-settled (as discussed creditors, mortgagors, and mortgage servicing companies are not debt collectors and are statutorily exempt from liability under the FDCPA. Scott v. Wells Fargo Home Mortg. Inc., 326 F.Supp.2d 709, 718 (E.D.Va. 2003). Because Defendants are not debt collectors, the FDCPA does not apply to them. Count I will be dismissed. In Count II, Plaintiff asks for a declaratory judgment declaring as true several of the underlying assertions in her 15 claim, including that Defendants have no standing and no right to the property. Although, as was explained above, Plaintiff s contentions have no merit, it may nevertheless be inappropriate to dismiss the declaratory judgment aspect of the case. party properly seeks a declaratory judgment, the When a court may declare the rights, even if they are adverse to the plaintiff. See, e.g., Glover v. Glendening, 376 Md. 142, 154-56 (2003)(applying Maryland declaratory judgment act.) Plaintiff pleads breach of fiduciary duty against Cohn in Count III. In Maryland, fiduciary duties are recognized and can be enforced, but not through independent actions. Maryland does not recognize a . . . separate tort cause of action for breach of fiduciary duty, and instead treats breach of fiduciary duty as a claim for the tort of negligence. 17 Maryland Law Encyclopedia Partnership § 53 (citing Vinogradova v. Suntrust Bank, Inc., 162 Md. App. 495, 875 A.2d 222 (2005)). Because Plaintiffs have a variety of alternate claims, their claim for breach of fiduciary duty will be dismissed. In Count IV, Plaintiffs ask the court to quiet title to the property secured by the Deed and Note. The purpose of an action to quiet title is to protect the owner of legal title from being disturbed in his possession and from being harassed by suits in regard to his title by persons setting up unjust and 16 illegal pretensions. Wathen v. Brown, 48 Md.App. 655, 658 (1981)(quoting Textor v. Shipley, 77 Md. 473, 475 (1893)). In pressing of such a claim, the plaintiff has the burden establishing both possession and legal title by clear proof. Stewart v. May, 111 Md. 162, 173 (1909). Plaintiff s legal theory to support her quiet title action fails on the basis of the facts alleged. She was not discharged from her obligation because of the sale and transfer of the notes, and Plaintiff is not the only party in this matter who can prove legal and equitable ownership interest. (Paper 6 ¶ 89). Defendants hold both the Note and Deed at this time and have taken no actions that would discharge their ownership interests. Plaintiff claims Countrywide. Substitute She Trustee fraud they Count V that alleges in in their misrepresented against Cohn and Appointment their authority conduct a foreclosure by appointing a substitute trustee. of to The essential elements for a claim of fraud include: (1) Defendant owed a duty to Plaintiff to disclose a material fact; (2) Defendant failed to disclose that fact; (3) Defendant intended to defraud or deceive Plaintiff; (4) Plaintiff took action in justifiable reliance on the concealment; and (5) Plaintiff suffered damages as a result of Defendant s concealment. Lloyd v. General Motors Corp., 397 Md. 108, 138 (2007)(citing Green v. 17 H & R Block, 355 Md. 488, 525 (1999)). as the loan servicer, signed the Defendant Countrywide, appointment for substitute trustee on behalf of Deutsche Bank, acting as Trustee for Morgan Stanley. Although the phrasing in the appointment of substitute trustees differs from that in the Deed, the Deed does provide that the holder of the Note the Lender has the power to appoint substitute trustees. (Paper 12, Ex. 5 compared to Paper 12, Ex. 1 ¶ 24 Substitute Trustee ). Deed, Deutsche Bank, as Trustee for Under the terms of the Morgan Stanley, is the lender in question and thus had the right to appoint a new trustee, which it did through Countrywide. Defendant Deutsche Bank seeks to (Paper 12, Ex. 5). have Count fraudulent inducement dismissed as against it. VI for The tort of fraudulent inducement means that one has been led by another s guile, surreptitiousness or other form of deceit to enter into an agreement to his detriment. Capital Source Finance LLC v. Delco Oil Inc., 608 F.Supp.2d 655, 666 (D.Md. 2009)(citing Rozen v. Greenberg, 165 Md.App. 665, 674 (2005))(internal citations omitted). Plaintiff does not allege that Deutsche Bank made a statement of material fact that was false to Plaintiff upon which she relied and that resulted in her injury. Plaintiff s fraud in the inducement claim revolves around her claim that Farago, WMC, Empire and Deutsche Bank were allegedly supposed to 18 secure the most affordable loan available for accurately accounting for monthly and yearly income. 101). her by (Paper 6 ¶ Plaintiff does not allege facts to show that Deutsche Bank was even a party to the original transaction, however. originated the loan. (Paper 6 ¶¶ 14, 18). WMC Therefore, Count VI will be dismissed as against Defendant Deutsche Bank. Count VII does not concern any Defendants who are party to the motions to dismiss, and it therefore remains intact. III. Conclusion For dismiss the will aforementioned be granted reasons, and Counts Defendants I, III-VI motions as to against Defendants Countrywide, Deutsche Bank, MERS, Morgan Stanley and Cohn will be dismissed. A separate Order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 19
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