Opinion
C. A. 6:24-cv-00834-TMC-KFM
06-27-2024
Erica Davis and Austin Davis, Plaintiffs, v. Synovus Bank, Defendant.
REPORT OF MAGISTRATE JUDGE
Kevin F. McDonald United States Magistrate Judge
This matter is before the court on the defendant's motion to dismiss (doc. 11). Pursuant to the provisions of 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B)(2) (D.S.C.), this magistrate judge is authorized to review all pretrial matters in this case and submit findings and recommendations to the district court.
PROCEDURAL HISTORY
This case arises from a civil action filed by the plaintiffs in the Greenville County Court of Common Pleas (Case Number 2024-CP-23-00341) (docs. 1; 1-1 at 1-8). On February 19, 2024, the defendant's notice of removal was filed in this court (doc. 1). The defendant's notice of removal asserts both federal question jurisdiction and diversity jurisdiction (id.). On February 26, 2024, the defendant filed a motion to dismiss (doc. 11). On February 27, 2024, the court issued an order in accordance with Roseboro v. Garrison, 528 F.2d 309 (4th Cir. 1975), advising the plaintiffs of the summary judgment/dismissal procedure and of the possible consequences if they failed to adequately respond to the motion (doc. 12). On March 29, 2024, the plaintiffs responded to the defendant's motion (doc. 17), to which the defendant replied on April 10, 2024 (doc. 24). The plaintiffs filed a sur-reply on April 17, 2024 (doc. 29).1 Thus, the defendant's motion to dismiss is now ripe for review.
During this same time, the plaintiffs filed a motion to compel and a motion to strike (docs. 18; 19), which have been addressed in an order filed herewith. Nevertheless, to the extent the plaintiffs' filings addressing the motion to compel and to strike address matters relating to the defendant's motion to dismiss, they have been considered herein.
ALLEGATIONS
On December 13, 2019, the plaintiffs purchased the property located at 131 Roundtree Drive, Simpsonville, South Carolina 29681 (“the Subject Property”) for $197,080.00 secured by a mortgage and note executed that same day (see doc. 11-1 at 7-22). The defendant is the current owner and holder of the mortgage and note on the Subject Property (docs. 1-1 at 3; 11-1 at 7-20; 24-1).
On January 18, 2024, the plaintiffs filed this action seeking injunctive relief and money damages from the defendant (doc. 1-1 at 2-8). The plaintiffs allege that they entered into a “loan agreement” secured by a promissary note and mortgage with the defendant to purchase the Subject Property (id. at 3). The plaintiffs sent a notice of rescission to the defendant on April 19, 2023, based upon the defendant's violations of the Truth in Lending Act (“TILA”) (id.). The defendant did not respond to the notice of rescission, so the plaintiffs submitted “non-negotiable instruments” to the defendant in satisfaction of the note and mortgage (id.). Each of the thirteen payments submitted by the plaintiffs from April 26, 2023, to December 4, 2023, indicated that the payment was “full and final settlement of all sums owed” (id.). Despite accepting each of the plaintiffs' payments as “full and final settlement of all sums owed,” the defendant did not refund any amounts to the plaintiffs (id. at 4). The defendant then sent a letter to the plaintiffs indicating that “[i]f the Note is not paid in full in 30 days[,] Synovus will exercise all rights available to it under the Note, Mortgage, and South Carolina law” (id. at 4; see doc. 17-1 at 93-95). The plaintiffs' first cause of action is lack of standing to foreclose because the Subject Property has been sold and transferred to “Remic Trust” (doc. 1-1 at 4-5). The plaintiffs' second cause of action is fraud in the concealment because the defendant failed to make proper disclosures under the TILA (id. at 5-6). The plaintiffs' third cause of action is fraud in the inducement (id. at 6). The plaintiffs' fourth cause of action is intentional infliction of emotional distress (“IIED”) because the defendant has threatened the plaintiffs with the sale of the Subject Property if they did not pay the note (id. at 6-7). For relief, the plaintiffs seek a declaratory judgment finding that the defendant has no enforceable claim against the Subject Property and that the plaintiffs own the Subject Property outright; preventing the defendant from pursuing foreclosure of the Subject Property; having negative information removed from the plaintiffs' credit reports; and to quiet title of the Subject Property into the plaintiffs' names (id. at 7-8).
APPLICABLE LAW & ANALYSIS
Standard of Review
“‘The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint.'” Williams v. Preiss-Wal Pat III, LLC, 17 F.Supp.3d 528, 531 (D.S.C. 2014) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). Federal Rule of Civil Procedure 8(a) sets forth a liberal pleading standard, which requires only a “short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell At. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citation and quotation marks omitted). “In assessing the sufficiency of a complaint, [the court] assume[s] as true all its well-pleaded facts and draw[s] all reasonable inferences in favor of the plaintiff.” Nanni v. Aberdeen Marketplace, Inc., 878 F.3d 447, 452 (4th Cir. 2017) (citing Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009)). “[T]he facts alleged ‘must be enough to raise a right to relief above the speculative level' and must provide ‘enough facts to state a claim to relief that is plausible on its face.'” Robinson v. Am. Honda Motor Co., Inc., 551 F.3d 218, 222 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 555, 570). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citation and quotation marks omitted). The court must liberally construe pro se complaints to allow the development of a potentially meritorious case, Hughes v. Rowe, 449 U.S. 5, 9 (1980), and such pro se complaints are held to a less stringent standard than those drafted by attorneys, Gordon v. Leeke, 574 F.2d 1147, 1151 (4th Cir.1978).
“In deciding whether a complaint will survive a motion to dismiss, a court evaluates the complaint in its entirety, as well as documents attached or incorporated into the complaint.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011) (internal citation omitted). The court may consider such a document, even if it is not attached to the complaint, if the document “was integral to and explicitly relied on in the complaint” and there is no authenticity challenge. Id. (internal citation and quotation marks omitted); see Int'l Assn of Machinists & Aerospace Workers v. Haley, 832 F.Supp.2d 612, 622 (D.S.C. 2011) (“In evaluating a motion to dismiss under Rule 12(b)(6), the Court . . . may also consider documents attached to the complaint. . . as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic.” (internal quotation marks omitted) (quoting Secy of State for Def. v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007))). Rule 12(d) states: “If on a motion under Rule 12(b)(6) . . ., matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.” Fed.R.Civ.P. 12(d).
Documents under Consideration
As noted above, documents can be incorporated into a complaint by reference; thus, the mortgage (doc. 11-1 at 7-20), the note (doc. 24-1), correspondence sent by the defendant to the plaintiffs (doc. 17-1 at 93-95), and correspondence sent by the plaintiffs to the defendant (doc. 17-1 at 70-73), all of which are referenced extensively in the plaintiffs' complaint, will be considered in considering the defendant's motion to dismiss without conversion of the motion to a motion for summary judgment. Pendleton v. Jividen, 96 F.4th 652, 656 (4th Cir. 2024) (recognizing that documents can be incorporated into the complaint by reference) (internal citation and quotation marks omitted). Additional documents submitted by the plaintiffs (not referenced in the complaint) will not be considered at this time.
Lack of Standing to Foreclose Claim
The plaintiffs' first cause of action is lack of standing to foreclose (doc. 1-1 at 4-5). The plaintiffs allege that the defendant cannot establish chain of title or possession of the original note/mortgage for the Subject Property (id.). The plaintiffs also allege that the note has been securitized into a “Remic trust” (id.). The plaintiffs further allege that “any other banks or financial entities holding the Note in the middle of the chain of transfers have been paid in full” and request that the defendant be enjoined from being able to force a sale of the Subject Property (id. at 5). The plaintiffs seek a declaratory judgment declaring that the Subject Property belongs to the plaintiffs and that any attempted sale by the defendant would be unlawful (id.). The defendant argues that this claim should be dismissed because there is no foreclosure pending at this time (meaning that the plaintiffs' request to prevent the foreclosure is premature) as well as because the defendant (as acknowledged in the plaintiffs' complaint) is the owner and holder of the note and mortgage (doc. 11-1 at 2-3). The undersigned agrees with the defendant that this claim should be dismissed.
Article III of the United States Constitution limits the subject matter jurisdiction of the federal courts to cases or controversies. U.S. Const. art. III, § 2, cl. 1. However, the Declaratory Judgment Act allows a district court, in a case or controversy otherwise within its jurisdiction, to “declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). A federal court thus has subject matter jurisdiction to issue a declaratory judgment if three requirements are met: (1) the complaint alleges a justiciable Article III case or controversy; (2) the court possesses an independent basis for 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. See Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581,592 (4th Cir. 2004) (internal citations omitted). To satisfy the case or controversy requirement of Article III in a declaratory judgment action, 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.” MedImmune, Inc. v. Genentech, Inc ., 549 U.S. 118, 127 (2007) (internal citation omitted). “The jurisdictional demand that a declaratory judgment action be of sufficient immediacy and reality” is akin to the ripeness requirement of Article III. See Santiago v. Pro. Foreclosure Corp. of Va., C/A No. 3:23-cv-00378 (RCY), 2023 WL 6964746, at *4 (E.D. Va. Oct. 20, 2023) (internal citation and quotation marks omitted); see also Scoggins v. Lee's Crossing Homeowners Assn, 718 F.3d 262, 269 (4th Cir. 2013) (“The ‘ripeness' requirement originates in the ‘case or controversy' constraint of Article III, and presents a ‘threshold question [] of justiciability.'” (alterations in original) (internal citation omitted)). However, a “claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998) (internal citation and quotation marks omitted). For example, courts within this circuit have found that when there is no foreclosure proceeding pending (even when one had been attempted and cancelled) there is no actual, ripe controversy for adjudication by the court. Johnson v. Countrywide Home Loans, Inc., C/A No. 2:15-cv-00513, 2016 WL 7042944, at *5 (E.D. Va. Jan. 26, 2016), aff'd 669 Fed.Appx. 117 (4th Cir. 2016). Here, the plaintiffs have presented no actual, ripe controversy for adjudication because there are no foreclosure proceedings involving the Subject Property pending; the plaintiffs have simply received notification from the defendant that the defendant will exercise rights available to it (at some future point) if the plaintiffs do not pay the amount due under the note (see docs. 1-1 at 4; 17-1 at 93-95). Based on the foregoing, the plaintiffs seek an advisory opinion from the court about whether future foreclosure proceedings would be valid; however, declaratory judgment actions present no justiciable controversy when seeking to “decide future rights in anticipation of an event [that] may never happen.” Lomp v. U.S. Mortg. Fin. Corp., C/A No. WMN-13-1099, 2013 WL 6528909, at *4 (D. Md. Dec. 11, 2013) (internal citation and quotation marks omitted) (finding that claims seeking “‘an advisory opinion as to whether any future attempt at . . . foreclosure would be valid'” were not justiciable because such claims were not within the purposes of declaratory judgment actions (internal citations omitted)). As such, a ruling as to the propriety of any potential future attempt to foreclose on the Subject Property in this action (a matter that may or may not occur at some point in the future) would be premature “and tantamount to an advisory opinion in contravention of Article III.” Hanover Ins. Co. v. C. David Venture Mgmt., LLC, C/A No. 1:21-cv-00790, 2022 WL 3924264, at *4 (E.D. Va. Aug. 30, 2020).
Even aside from the foregoing, the plaintiffs' claims involving the mortgage/note rely on theories espoused in publically available “foreclosure prevention” complaints from entities claiming to be certified forensic loan auditors, which have been repeatedly rejected by courts in this circuit. See Biggers v. Wells Fargo Bank, N.A., C/A No. 3:16-cv-00431-JAG, 2017 WL 465855, at *2-3 (E.D. Va. Feb. 3, 2017), aff'd 690 F. App'x 816 (4th Cir. 2017); Webb v. Equifirst Corp., C/A No. 7:15-cv-00413, 2016 WL 1274618, at *5-10 (W.D. Va. Mar. 31,2016). For example, as recognized by the court in Webb, there is nothing in the securitization of the note/mortgage that alters the plaintiffs' obligations to pay (or otherwise prevents the note holder from seeking to enforce the note). 2016 WL 1274618, at *5 (internal citations omitted). Similarly, claims that “split” notes are unenforceable (such as the plaintiffs' assertion herein that the note has been split amongst several parties because it was transferred into the Remic trust) have been flatly rejected. Id. (collecting cases rejecting the “split-the-note theory”).
The defendant disputes whether the note has been transferred into the Remic trust (see doc. 24 at 1-3); however, even if the note had been transferred (as alleged by the plaintiffs), the plaintiffs still have no claim for relief. Webb, 2016 WL 1274618, at *5.
Further, the plaintiffs' claim based on the Real Estate Settlement Procedures Act (“RESPA”) that the defendant failed to respond to written complaints submitted by the plaintiffs is subject to dismissal because the letters submitted by the plaintiffs do not address errors covered by RESPA. Instead, the letters espouse the same “foreclosure prevention” allegations asserted in the instant matter (see doc. 17-1 at 70-73). See 12 C.F.R. § 1024.35(b) (listing “covered errors” under RESPA). In light of the foregoing, the undersigned recommends that the defendant's motion to dismiss the plaintiffs' first cause of action be granted.
Courts are also split on whether RESPA creates a private right of action for alleged violations of 12 C.F.R. § 1024.35 relating to duties of a mortgage servicer when a borrower asserts an error in the mortgage servicing. See e.g. Hutten v. Specialized Loan Servicing, C/A No. 2:23-cv-00031-FL, 2023 WL 6847112, at *10 (E.D. N.C. Oct. 17, 2023) (collecting cases recognizing that courts disagree whether RESPA provides a private right of action for alleged § 1024.35 violations). For purposes of this report and recommendation, the undersigned addresses this claim assuming there is a recognized private right of action under this RESPA provision.
Truth in Lending Act Claim
The plaintiffs' second and third causes of action, entitled fraud in the concealment and fraud in the inducement, liberally construed, (at least in part) seek relief pursuant to the TILA (doc. 1-1 at 5-6). The plaintiffs contend that the defendant violated the TILA by failing to provide the plaintiffs with certain disclosures required by the TILA, including a loan estimate disclosure and rescission disclosures required under the TILA (id. at 5). The defendant argues that this claim should be dismissed based on the statute of limitations (doc. 11-1 at 4 n.1). The undersigned agrees with the defendant that the TILA claim should be dismissed.
The TILA was enacted to “‘assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to [her] and avoid the uninformed use of credit.'” Mourning v. Fam. Publ'ns Serv., Inc., 411 U.S. 356, 364-65 (1973) (quoting 15 U.S.C. § 1601(a)). The statute “requires creditors to provide borrowers with clear and accurate disclosures of terms” and imposes criminal penalties and civil liability on creditors who fail to do so. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998) (citing 15 U.S.C. § 1640(a)). However, “any action for monetary damages under TILA can be brought . . . within one year from the date of the occurrence of the violation. 15 U.S.C. § 1640(e); Rice v. PNC Bank, N.A., C/A No. PJM 10-07, 2010 WL 1711496, at *2 (D. Md. Apr. 26, 2010). Here, the plaintiffs' deficient disclosures claim revolves around the required TILA disclosures when the Note and Mortgage were signed, which took place on December 13, 2019 (docs. 1-1 at 5; 11-1 at 7-20; 24-1). This action was filed in the Greenville County Court of Common Pleas on January 18, 2024, more than four years later (see doc. 1-1 at 2-8). As such, any claims based upon the alleged deficiencies in the disclosure are barred by the statute of limitations.
In response to the motion to dismiss, the plaintiffs do not address the defendant's assertion that the claims under the TILA are time-barred; however, liberally construed, they may argue that the statute of limitations has been tolled based on fraudulent concealment. See Fowose v. Bank of Am., N.A., C/A No. MJM-22-2784, 2024 WL 2955824, at *5 n.12 (D. Md. June 12, 2024) (recognizing that fraudulent concealment can toll the statute of limitations for TILA claims). However, there is nothing in the plaintiffs' complaint or the documents referenced therein indicating that the plaintiffs were prevented from discovering the alleged TILA breach or violation within the one year period as a result of concealment by the defendant (see docs. 1-1 at 3; 11-1 at 7-20; 24-1). See Browning v. Tiger's Eye Benefits Consulting, 313 Fed.Appx. 656, 663 (4th Cir. 2009) (noting that “the fraudulent concealment doctrine [only] tolls the statute of limitations ‘until the plaintiff in the exercise of reasonable diligence discovered or should have discovered the alleged fraud or concealment'” (citation omitted)). Here, the plaintiffs allege that various “fraudulent” actions were taken by the defendant, but they have not alleged how those alleged fraudulent acts prevented them from discovering the alleged TILA violations within the statute of limitations (see doc. 1-1 at 5-6). Therefore, even considering the plaintiffs' assertions of fraudulent concealment, the plaintiffs' TILA claims are time barred and should be dismissed.
Even construing the plaintiffs' complaint as asserting claims of fraud in the concealment and fraud in the inducement outside of the TILA (as argued in their response in opposition, see doc. 17 at 4-5), such claims still fail. Under Federal Rule of Civil Procedure 9, fraud claims have a higher pleading standard and must be stated with particularity. Fed.R.Civ.P. 9 (emphasis added). Here, the plaintiffs' complaint contains only vague and conclusory allegations consisting of nothing beyond vague inferences and legal conclusions of fraudulent behavior. See Turner v. Thomas, 930 F.3d 640, 644 (4th Cir. 2019) (noting that in evaluating a complaint's allegations, the court “need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments” (internal citations and quotation marks omitted)). Indeed, the plaintiffs' complaint in this action largely mirrors the complaint evaluated in Biggers, which was dismissed for “wholly” failing to state a claim. Biggers, 2017 WL 465855, at *2-3. Moreover, the court in Biggers recognized that the claims presented in that action mirrored those in so-called “foreclosure prevention” complaints, and those claims (as noted above) had been previously rejected in this circuit and others. Id. at *2 n.6; Webb, 2016 WL 1274618 (collecting cases recognizing the repeated rejection of claims in “foreclosure prevention” complaints). Additionally, here, the plaintiffs' claims based in fraud fail because they have not alleged who made any fraudulent statements or when such statements were made. Biggers, 2017 WL 465855, at *3 (citing Fed.R.Civ.P. 9(b); Webb, 2016 WL 1274618, at *9). Accordingly, the undersigned recommends that the defendant's motion to dismiss be granted with respect to the plaintiffs' fraud/TILA claims.
Intentional Infliction of Emotional Distress
The plaintiffs' fourth cause of action is for IIED (doc. 1-1 at 6-7). The plaintiffs allege that plaintiff Erica was pregnant when this action was initiated and asserts that the improper threats to foreclose put forth by the defendant caused plaintiff Erica emotional distress and loss of sleep (id. at 7). The defendant argues that this claim should be dismissed because the plaintiffs have failed to allege extreme and outrageous conduct as required for an IIED claim (doc. 11-1 at 4-5). The undersigned agrees with the defendant that this claim should be dismissed.
First, of note, the plaintiffs' complaint contains no allegations regarding plaintiff Austin; thus, the analysis will focus on whether plaintiff Erica has sufficiently alleged an IIED claim in the complaint (see doc. 1-1 at 6-7). IIED “claims require a showing of conduct so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Steele v. Capital One Home Loans, LLC, C/A No. 3:13-CV-704-RJC-DSC, 2014 WL 3748928, at *4 (W.D. N.C. July 30, 2014) (internal citation and quotation marks omitted), aff'd, 594 Fed.Appx. 215 (4th Cir. 2015). “[T]he court plays a significant gatekeeping role to prevent claims for intentional infliction of emotional distress from becoming a panacea for wounded feelings rather than reprehensible conduct.” Wall v. Enter. Leasing Co. - Se., LLC, C/A No. 3:18-1225-TLW-SVH, 2019 WL 4935631, at *2 (D.S.C. Jan. 30, 2019) (citation and internal quotation marks omitted), Report and Recommendation adopted by 2019 WL 4931316 (D.S.C. Oct. 4, 2019). Here, plaintiff Erica's allegations, that the defendant threatened her with the loss of the Subject Property if the mortgage was not paid as required under the note (doc. 1-1 at 7) falls far short of the “extreme” and “outrageous” standard required to state an IIED claim. Indeed, carrying “out a legal remedy is not the kind of severe or outrageous conduct [that] supports an [IIED] claim.” Biggers, 2017 WL 465855, at *3; see Nolan v. U.S. Bank Nat'l Assn, C/A No. 2:23-cv-1443-RMG, 2024 WL 621082, at *1 (D.S.C. Feb. 14, 2024) (noting that claims that a party pursued a foreclosure action do not meet the “high standard for stating an [IIED] claim under South Carolina law”). In light of the foregoing, the defendant's motion to dismiss the IIED claim should be granted.
CONCLUSION AND RECOMMENDATION
Now, therefore, based upon the foregoing, IT IS HEREBY RECOMMENDED that the defendant's motion to dismiss (doc. 11) be granted.
IT IS SO RECOMMENDED.