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Bryant v. CIT Group/Consumer Finance

United States District Court, S.D. Texas, Houston Division

May 17, 2017

Stanley J. Bryant, Plaintiff,
The CIT Group/Consumer Finance, et al., Defendants.


          Gray H. Miller United States District Judge.

         Pending before the court is a motion to dismiss filed by defendants Ditech Financial, LLC (“Ditech”) and The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the benefit of the Certificateholders of the CWABS, Inc. Asset-Backed Certificates, Series 2006-BC4 (“BONYM”) (collectively, “Defendants”).[1] Dkt. 22. After considering the motion, response, and applicable law, the court is of the opinion that Defendants' motion to dismiss should be GRANTED.

         I. Background

         This case relates to the foreclosure sale of real property located at 2234 Dawn Shadow Way, Fresno, Texas 77545 (the “Property”). Dkt. 20 (first am. compl.). Plaintiff Stanley J. Bryant executed a mortgage note on the Property secured by a deed of trust on December 20, 2005 (collectively, the “Loan”). Dkt. 20, Ex. 1. CIT Group/Consumer Finance, Inc. (“CIT”) was the lender, and the Mortgage Electronic Registration System (“MERS”) was listed as the beneficiary of the deed of trust. Id. MERS assigned the deed of trust to BONYM on August 23, 2011. Dkt. 20, Ex. 10. Bryant claims that at some point in 2011 he had medical problems and struggled to pay his mortgage and medical bills, which resulted in his falling into default on his home loan. Dkt. 20. He attaches six different notices of sale to his complaint, the earliest of which is dated November 2011 and the most recent of which is dated April 2016. Id. & Exs. 2-7. Defendant Bank of America, N.A. (“BOA”) is listed as the acting mortgage servicer on some of the notices, which were served by a substitute trustee or trustees. See, e.g., Dkt. 20, Ex. 2. The final attached notice of sale lists the sale date as April 5, 2016. Dkt. 20, Ex. 7. On April 5, 2016, the house was sold to BONYM via a credit bid. Dkt. 20, Ex. 8. Bryant contends, however, that he holds legal title to the house. Id.

         According to Bryant's amended complaint, the only recorded assignment of the Loan is a fraud and forgery and, even if it were not, there is no complete and unbroken chain of assignments from CIT to BONYM. Dkt. 20. Bryant argues that Chester Levings, an Assistant Secretary of MERS, “purportedly signed” an assignment of the Loan to BONYM on August 23, 2011, but the assignment does not state that MERS was acting as nominee for any entity. Dkt. 20. Bryant asserts that this and other documents related to the chain of assignments are void ab initio because they are forgeries. Id. He also asserts that if the loan was securitized into the 2006-BC4 Trust as BONYM claims, it was not properly and validly transferred according to the Trust's Pooling and Servicing Agreement (“PSA”) and the law of the state in which the Trust was created-New York. Id. He contends the note was not legally or validly assigned and/or transferred as required by Texas and New York law and that BONYM thus had no standing to foreclose as a real party in interest. Id. Bryant raises eleven causes of action: (1) violation of section 12.002 of the Texas Civil Practices and Remedies Code against BOA, MERS, and BONYM; (2) negligence per se against BOA, MERS, and BONYM; (3) gross negligence and gross negligence per se against BOA, MERS, and BONYM; (4) money had and received against BONYM, BOA, and Ditech Financial LLC (“Ditech”); (5) unjust enrichment against BONYM, BOA, and Ditech; (6) declaratory judgment of lack of standing to foreclose against BONYM and Ditech; (7) declaratory judgment against all defendants; (8) quiet title against all defendants; (9) declaratory relief under the statute of limitations against all defendants; (10) fraud against the CWABS, Inc. Asset-Backed Certificates, Series 2006-BC4 Trust (the “CWABS Trust”), BONYM, and Ditech; and (11) violation of the Texas Debt Collection Act (“TDCA”) against BONYM, BOA, and Ditech. Id.

         Ditech and BONYM removed the case to this court on June 27, 2016, alleging diversity jurisdiction. Dkt. 1. They noted that defendants BOA and MERS consented to the removal, and they asserted that no consent was required from the CWABS Trust or CIT because they are nominal parties that had been fraudulently joined. Id. They additionally contended that the consent of the CWABS Trust, CIT, and CWABS, Inc., was not required because these parties have not been served and no citations have been issued to them. Id. Bryant filed a motion to remand, arguing that the case should be remanded because the notice of removal failed to state the citizenship of the CWABS Trust. Dkt. 16. Ditech and BONYM argued that the trustee's citizenship, not the trust's, is what matters in this case. Dkt. 21. The court held that the trustee was the real party in interest whose citizenship counted for diversity purposes and denied the motion to remand. Dkt. 43.

         Defendants filed a motion to dismiss. Dkt. 22. They argue that (1) Bryant lacks standing to assert any violations of the PSA and challenge any assignment that purportedly violates the PSA; (2) Bryant's conclusory forgery allegations do not meet the pleading standards, which require allegations as to who, what, when, where, and how of the alleged fraud; (3) the Fifth Circuit and Texas court have repeatedly held that MERS has the authority to assign deeds as a beneficiary, foreclosing Bryant's argument that MERS did not have the authority to execute the assignments; (4) Bryant's quiet title claim fails because it is based on inadequate allegations of forgery rather than the strength of Bryant's title; (5) Bryant's statutory fraudulent lien claims relating to the filings of the assignment and substitute trustees in the real property records of Fort Bend County are time-barred; (6) even if the statutory fraudulent lien claims were not time-barred, a document assigning a deed of trust does not qualify as a “lien or claim” under the statute; (7) moreover, Bryant's statutory fraudulent lien claims fail because Bryant did not adequately plead that the defendants intended to cause physical or financial injury or mental anguish; (8) the negligence-based claims are time-barred; (9) the negligence-based claims also fail because there is no private right of action under the relevant statute and, regardless, the defendants did not violate the statute because the statute does not require recording of an assignment of a deed of trust; (9) the unjust enrichment and money had and received claims fail because there is a valid contract covering the subject matter of this dispute; (10) the fraud claims fail under the economic loss rule and were not pled with particularity; and (11) the TDCA claim fails because it is based on the deficient lack of standing to foreclose and forgery allegations and also because it is conclusory, lacks specific facts, and is insufficient to plead plausible harm. Dkt. 22. Defendants argue that because all of these claims fail, Bryant's requests for declaratory relief also necessarily fail. Id.

         In response, Bryant contends that he has alleged sufficient facts for all claims that require a heightened pleading standard, that all of his claims are properly pled, and that the statute-of-limitations defense is a red herring. Dkt. 29.

         II. Legal Standard

         “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65 (2007). In considering a Rule 12(b)(6) motion to dismiss a complaint, courts generally must accept the factual allegations contained in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). The court does not look beyond the face of the pleadings, and attachments thereto, in determining whether the plaintiff has stated a claim under Rule 12(b)(6). Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000); Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, [but] a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citations omitted). The “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. The supporting facts must be plausible-enough to raise a reasonable expectation that discovery will reveal further supporting evidence. Id. at 556.

         In addition to meeting the plausibility standard, under Federal Rule of Civil Procedure 9(b), if a party is alleging fraud or mistake, the pleading must “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b); United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 2009) (noting that Rule 9(b) does not “supplant” Rule 8(a)). However, this particularity requirement “does not ‘reflect a subscription to fact pleading.'” Id. (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997)). Instead, pleadings alleging fraud must contain “simple, concise, and direct allegations of the circumstances constituting the fraud, which . . . must make relief plausible, not merely conceivable, when taken as true.” Id. (internal quotations omitted) (referring to the standard enunciated in Twombly).

         The Fifth Circuit interprets Rule 9(b) strictly, “requiring a plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Id. (quoting Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552, 564-65 (5th Cir. 2002)). Thus, Rule 9(b) generally requires the complaint to “set forth ‘the who, what, when, where, and how' of the events at issue.” Id. (quoting ABC Arbitrage Plaintiffs Grp. v. Tchuruk, 291 F.3d 336, 350 (5th Cir. 2002)). However, “Rule 9(b)'s ultimate meaning is context-specific.” Grubbs, 565 F.3d at 185. Thus, “[d]epending on the claim, a plaintiff may sufficiently ‘state with particularity the circumstances constituting fraud or mistake' without including all the details of any single court-articulated standard-it depends on the elements of the claim at hand.” Id.

         III. Analysis

         Bryant has asserted eleven causes of action plus a request for exemplary damages and attorneys' fees. Dkt. 20. The court will first address two overarching themes in Bryant's amended complaint-that the Loan was not properly transferred according to the PSA and that various signatures are forgeries. It will then discuss each claim in the order Bryant asserts them in his complaint and determine whether Bryant has stated any claims for which relief can be granted.

         A. Securitization Challenges

         Bryant contends that the Loan was not properly and validly transferred into the 2006-BC4 Trust according to the Trust's PSA. Id. Defendants argue that Bryant does not have standing to assert violations of the PSA or challenge the assignment for purportedly violating the PSA because Bryant is not a party to the PSA. Dkt. 22. In his response, Bryant makes various arguments relating to standing, but he does not address Defendants' contention that Bryant does not have standing to challenge violations of the PSA. See Dkt. 29. Under Fifth Circuit law, Bryant has no right to challenge the assignments as being in violation of the PSA unless he is a party to the PSA or an intended third-party beneficiary of the PSA. Reinagel v. Deutsche Bank Nat'l Trust Co., 735 F.3d 220, 228 (5th Cir. 2013) (applying Texas law). Since Bryant did not plead any facts indicating that he is an intended third-party beneficiary of the PSA, his claims relating to violations of the PSA cannot stand. See Id. (noting that the plaintiffs had failed to “state any facts indicating that the parties to the PSA intended that” the plaintiffs be third-party beneficiaries and that, regardless, “the fact that the assignments violated the PSA-a separate contract-would not render the assignment void, buy merely entitle [the plaintiffs] to sue for breach of the PSA”). Thus, any claims based on the invalidity of the assignments due to violations of the PSA fail.

         B. Forgery Allegations

         Bryant also contends that he “is informed and believes, and thereon alleges, and alleges upon information reasonably likely to be discovered, that Chester Levings did not personally sign the Assignment, nor did a person with authority from the real Chester Levings sign the Assignment . . . or affix Chester Levings's electronic signature to the Assignment, . . . [which causes] the Assignment to be void ab initio as a forgery.” Dkt. 20 (italics corrected). According to the amended complaint, Bryant based this belief on “out-of-state mortgage assignments in which the signature for Chester Levings is markedly different from the signature on the Assignment in this case.” Id. He attached assignments of properties located in Florida and South Carolina that were purportedly signed by Levings, and in each of these assignments, Levings' signature is an illegible right-slanted signature. See Dkt. 20, Exs. 11-14. The signature in this case is also an illegible right-slanted signature. See Dkt. 20, Ex. 10. The signatures on these assignments are similar but not identical. Compare, Dkt. 20, Exs. 10-14.

         Bryant similarly contends in his complaint that he “is informed and believes, and thereon alleges, or alleges upon information reasonably likely to be discovered, for each of the recorded substitution documents referenced [in the amended complaint], the signatures of each signer [of the substitution of trustee filings] were not signed or affixed by the named signer, nor were the signatures signed or affixed with someone else with the knowledge or authority of the named signers with regard to the Plaintiff's specific loan. Thus, all substitution documents are forgeries and void ab initio.” Dkt. 20. Bryant attached the following to his complaint: an appointment of substitute trustee purportedly signed by Melanie D. Cowan, Vice President of BONYM, relating to the Property, and three appointment of substitute trustee forms or assignments of other properties that are purportedly signed by Cowan. See Dkt. 20, Exs. 16, 18-20. The signatures, like the Levings's signatures, are similar but not identical. Bryant contends the Cowan signatures are “markedly different.” Dkt. 20. Bryant also attaches two additional appointment of substitute trustee forms appointing substitute trustees for the Property, one purportedly signed by Tanyia Hill, assistant vice president of BONYM, and one purportedly signed by Brandon Schildts, a BONYM foreclosure supervisor. Dkt. 20, Exs. 15, 17.

         Defendants assert that Bryant must plead the who, what, where, when, and how of the alleged forgeries and that his conclusory assertions of forgery do not meet this heightened pleading standard. Dkt. 22. The court agrees that Federal Rule of Civil Procedure 9(b) provides the appropriate pleading standard for Bryant's forgery allegations. See Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”); see also Lopez v. Sovereign Bank, N.A., No. H-13-1429, 2014 WL 7446746, at *8 (S.D. Tex. Dec. 31, 2014) (Rosenthal, J.) (explaining that Rule 9(b) applies to claims in which fraud is alleged, even if fraud is not an element of that claim, and applying Rule 9(b) to similar forgery allegations).

         Bryant argues, however, that his forgery allegations are based on information that is peculiarly within the opposing party's knowledge and that, as such, he should be permitted to discovery information about the alleged forgery. Dkt. 29. He also asserts that pleading fraud with particularity does not necessarily mean pleading the date, time, or place of the fraud if the party has “alternative means of injecting precision and some measure of substantiation into its allegations of fraud.” Id. Bryant contends that allegations of fraud may be based on information and belief when the facts in question are peculiarly within the opposing party's knowledge and the complaint sets forth a factual basis for the plaintiff's belief. Id.

         The court agrees that the requirements of Rule 9(b) may be relaxed where the facts relating to the alleged fraud are peculiarly within the opposing party's knowledge; however, this exception “must not be mistaken for license to base claims of fraud on speculation and conclusory allegations.” U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (quoting Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1068 (5th Cir. 1994)); see also Id. (“[E]ven where allegations are based on information and belief, the complaint must set forth a factual basis for such belief.”). Bryant has provided only conclusory statements that the signature on the assignment was forged. See Dkt. 20; see also Reed v. Bank of Am, N.A., No. h-15-2005, 2016 WL 3058303, at *3 (S.D. Tex. May 3, 2016) (Miller, J.) (dismissing almost identical forgery allegations). While he attaches documents that he claims have “markedly different signatures, ” Bryant has provided no information regarding who executed these alleged forgeries, how the forgery scheme was carried out, or why the alleged forged signatures were made. See Tuchman, 14 F.3d at 1068 (“Rule 9(b) requires the plaintiff to allege the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby.” (quoting Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992))). Courts have found allegations similar to Bryant's insufficient in many cases. See, e.g., Jemison v. Citimortgage, Inc., No. H-13-2475, 2015 WL 251754, at *2 (S.D. Tex. Jan. 20, 2015) (Rosenthal, J.) ...

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