Hughes v. J.P. Morgan Chase & Related Subsidiaries, Seterus, Inc. (In re Hughes)

Decision Date13 April 2018
Docket NumberBANKRUPTCY CASE 17-52260-LRC,ADVERSARY PROCEEDING NO. 17-5169-LRC
PartiesIN THE MATTER OF: LESLIE D. HUGHES, Debtor. LESLIE D. HUGHES, Plaintiff, v. J.P. MORGAN CHASE AND RELATED SUBSIDIARIES, SETERUS, INC., FEDERAL NATIONAL MORTGAGE ASSOCIATION, BROCK & SCOTT, PLLC (LLC), and, FIRST AMERICAN TITLE, Defendants.
CourtU.S. Bankruptcy Court — Northern District of Georgia

IT IS ORDERED as set forth below:

IN PROCEEDINGS UNDER CHAPTER 13 OF THE BANKRUPTCY CODE

ORDER

Before the Court are several motions to dismiss (the "Motions") filed by Brock & Scott ("B&S") (Doc. 16), First American Title Insurance Company ("First American Title") (Doc. 17), Federal National Mortgage Association ("Fannie Mae") and Seterus, Inc. ("Seterus") (Doc. 24), and JPMorgan Chase Bank, N.A. ("JPMC")1 (Doc. 26) (collectively, the "Motions"). The Motions seek dismissal of a sixteen-count complaint (the "Complaint") filed by Leslie D. Hughes ("Plaintiff") against the Defendants. The allegations in the Complaint center around real property located at 2270 Charleston Place, Lithia Springs, GA (the "Property").

The Motions generally state that the Complaint is a "shotgun pleading" that fails to state a claim for relief and must, therefore, be dismissed under Rule 12(b)(6).2 Debtor opposes the Motions, and the Parties have extensively briefed the issues.3

I. Standard for Motion to Dismiss

Under Rule 7012 of the Federal Rules of Bankruptcy Procedure (the "Rules"), the Court may dismiss a complaint if it fails "to state a claim upon which relief can be granted." See Fed. R. Bankr. P. 7012 (incorporating Fed. R. Civ. P. 12(b)(6)). "Rule 8(a)(2) of the Federal Rules of Civil Procedure [the "Federal Rules"] requires that a pleading contain 'a short and plain statement of the claim showing that the pleader is entitled to relief.' The complaint need only provide enough information to give a defendant fair notice of the plaintiff's claim and the grounds the claim is based on." Broner v. Wash. Mut. Bank, Fa, 258 F. App'x 254, 256 (11th Cir. 2007) (quoting Fed. R. Civ. P. 8(a)(2)).4

When considering dismissal of a complaint due to the plaintiff's failure to state a claim upon which relief can be granted, the Court must accept as true all factual allegations set forth in the complaint and, on the basis of those facts, determine whether the plaintiff is entitled to the relief requested. The Court must also draw all reasonable inferences in the light most favorable to the non-moving party. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-56 (2007); Daewoo Motor America, Inc. v. General Motors Corp., 459 F.3d 1249, 1271 (11th Cir. 2007); Hill v. White 321 F.3d 1334, 1335 (11th Cir. 2003); Grossman v. Nationsbank, Nat'l Ass'n, 225 F.3d 1228, 1231 (11th Cir. 2000); Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). Legal conclusions, labels, and unsupportable assertions, however, are not entitled to a presumption of truth and "must be supported by [specific] factual allegations." See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Accordingly, "conclusory allegations, unwarranted factual deductions or legal conclusions masquerading as facts will not prevent dismissal." Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).

Moreover, in Twombly, the Supreme Court held that the Court must dismiss a case where the well pled facts do not state a claim that is plausible on its face. See Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 554-56). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged," or when the plaintiff can establish the necessary elements of the cause of action. Id.; see also In re Clower, 463 B.R. 573, 576 (Bankr. N.D. Ga. 2011) (Drake, J.). The factual allegations in the complaint need not be fully developed, but they must include sufficient factual information to provide the grounds on which the claim rests, and they "must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555. Nonetheless, the Court need not accept as true "formulaic" or "threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Twombly, 550 U.S. at 545; Iqbal, 556 U.S. at 663-64.

Additionally, when alleging fraud, a plaintiff must comply with Federal Rule 9(b).5 Perkins v. Crown Financial LLC (In re International Management Assocs. LLC), 2007 WL 7141787, at *2 (Bankr. N.D. Ga. Mar. 6, 2007) (Bonapfel, J.). Rule 9(b) requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake," Fed. R. Civ. P. 9(b); thereby "alerting defendants to the 'precise misconduct with which they are charged' and protecting defendants 'against spurious charges of immoral and fraudulent behavior.'" Kipperman v. Onex Corp., 2007 WL 2872463, at *6 (N.D. Ga. Sept. 26, 2007) (quoting Durham v. Bus. Management Assocs., 847 F.2d 1505, 1511 (11th Cir. 1998)). Rule 9(b) further provides that "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b).

Although pro se pleadings are governed by less stringent standards than pleadings prepared by attorneys, see Haines v. Kerner, 404 U.S. 519, 520 (1972); Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 1998), pro se parties are still required to comply with minimum pleading standards set forth in the Federal Rules of Civil Procedure and this district's Bankruptcy Local Rules, Grew v. Hopper, 2008 WL 114915, at *2 (M.D. Fla. Jan. 9, 2008); see also Beckwith v. Bellsouth Telecomms., Inc., 146 F. App'x 368, 371 (11th Cir. 2005) (unpublished) ("Although we construe them liberally, pro se complaints also must comply with the procedural rules that govern pleadings."). The Court does not have a "license to serve as de facto counsel for a party or to rewrite an otherwise deficient pleading in order to sustain an action." Smith v. Ocwen Fin., 488 F. App'x 426, 427 (11th Cir. 2012) (unpublished) (internal marks and citations omitted).

Consideration of Materials Extraneous to the Complaint and the Motions

Plaintiff attached to the Complaint 209 pages of exhibits. Included in these exhibits are communications (or at least partial communications) between Plaintiff and Defendants, loan statements, certain real property records related to the Property and other unrelated properties, Consumer Financial Protection Bureau ("CFPB") complaints against Defendants, pleadings from other cases unrelated to the Property or Plaintiff, and foreclosure notices related to the Property (Doc. 1, Exhibits 1-20).

Seterus attached to its motion to dismiss a copy of the recorded security deed related to the Property (Doc. 24, Exhibit 1) (the "Security Deed"). JPMC attached to its motion to dismiss a copy of the Security Deed and a copy of an UCC cancellation statement related to the Property (Doc. 26, Exhibits A-B). Debtor objects to the Court's considering the exhibits JPMC and Seterus attached to their motions to dismiss because they are "void" and not included with the Complaint (Doc. 29, Pg. 3 Lns 7-9; Doc. 34 Pg. 5, Lns 2-3).

"Generally, the Court must convert a motion to dismiss under Rule 12(b)(6) to a motion for summary judgment under Rule 56 if it considers materials outside of a complaint."6 Green v. Bank of Am. Corp., 2013 U.S. Dist. LEXIS 196950, at *6 (citing Fed. R. Civ. P. 12(d); Day v. Taylor, 400 F.3d 1272, 1275-76 (11th Cir. 2005)) adopted by 2013 U.S. Dist. LEXIS 196943 (N.D. Ga., Sept. 6, 2013). However, if the attached documents are undisputed and central to Plaintiff's claim, the Court may consider it. Green, 2013 U.S. Dist. LEXIS 196950, at *6; Day, 400 F.3d at 1276; see also Clark v. Bibb Cty. Bd. of Educ., 174 F. Supp. 2d 1369, 1370 (M.D. Ga. 2001) ("Additionally, any documents referenced in the complaint that are central to the plaintiff's case may be considered.") "A document is 'undisputed' when its authenticity is unchallenged." Green, 2013 U.S. Dist. LEXIS 196950, at *8.

The Court "may also consider any . . . matters of public record, orders, and items appearing in the record." Clark, 174 F. Supp. 2d at 1370. "The court may take judicial notice of public records not attached to the Complaint, including in this case the Security Deed, when considering a motion to dismiss." Ricketts v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 87175, at *2 n.1 (N.D. Ga. June 21, 2013).

Plaintiff's objection to the documents Seterus and JPMC attached to their Motions is not based on authenticity. Furthermore, these documents are central to Plaintiff's claim and are matters of public record. Most importantly, Plaintiff refers to the Security Deed in the Complaint. It is therefore appropriate for the Court to consider these documents when analyzing the Motions.

Defendants encouraged the Court to consider the exhibits attached to the Complaint because some of them contradict the Complaint. The Court has considered only the relevant exhibits that were central to Plaintiff's claims and has notated throughout this opinion when it has relied upon an exhibit.

II. Facts7

Applying the standards of Twombly and Iqbal, supra, the Court has examined the Complaint and the exhibits attached to it and determined the well pled facts. Accepting all of Plaintiff's well pled factual allegations as true, and construing all reasonable inference in her favor, the facts are as follows:

• On or about July 5, 2006, Plaintiff entered into two "Federally-related mortgage loans" with Washington Mutual Bank ("WAMU") - Loan numbers XXXXXX8896 ("Loan 8896") and XXXXXX5575 (the "Loan", and collectively with Loan 8896, the "Transactions").8
• The Transactions were secured by an interest in Plaintiff's principal dwelling.9 The proceeds from the Transactions were
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