Malin v. Jpmorgan

• Decision Date: 12 March 2012
• Docket Number: No. 3:11–CV–554.,3:11–CV–554.
• Citation: 860 F.Supp.2d 574
• Parties: Hollis H. MALIN, Jr. and Linda D. Malin, Plaintiffs, v. JPMORGAN; JP Morgan Chase; JPMorgan Chase Bank; JPMorgan Chase, National Association; and Chase Home Finance, LLC, Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

860 F.Supp.2d 574

Hollis H. MALIN, Jr. and Linda D. Malin, Plaintiffs,

v.JPMORGAN; JP Morgan Chase; JPMorgan Chase Bank; JPMorgan Chase, National Association; and Chase Home Finance, LLC, Defendants.

No. 3:11–CV–554.

United States District Court,

E.D. Tennessee,

at Knoxville.

March 12, 2012.

Hollis H Malin, Jr., Knoxville, TN, pro se.

Michael D. Hornback, Wyatt, Tarrant & Combs, LLP, Nashville, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS A. VARLAN, District Judge.

This civil action is before the Court on the Motion to Dismiss [Doc. 3], submitted by defendant JPMorgan Chase Bank, N.A., for itself and as successor by merger to Chase Home Finance, LLC (referred to hereinafter as “Chase” or “defendants”).¹ In the motion, Chase requests that all claims of plaintiffs, Hollis and Linda Malin, proceeding pro se, be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs have submitted a response in opposition [Doc. 7], and Chase has submitted a reply [Doc. 10].

For the reasons set forth herein, the motion to dismiss will be GRANTED in part and DENIED in part.

I. Relevant Facts and Background²

On October 23, 2003, plaintiffs entered into a contract with Washington Mutual Bank (“WAMU”) in which WAMU loaned plaintiffs $525,000.00 to purchase real property consisting of a house and a lot located at 809 Dry Gap Pike, Knoxville, Tennessee (the “Property”) [Doc. 1–1, ¶ 5]. In connection with this loan, plaintiffs granted WAMU a note and a deed of trust [ Id.]. According to the complaint, “WAMU was insured by the Federal Deposit Insurance Corporation (the “FDIC”), which closed WAMU in September 2008 and transferred its assets to one or more of the Defendants.” [ Id., ¶ 4]. Plaintiffs allege that upon information and belief, prior to the closure of WAMU by the FDIC, plaintiffs' loan was assigned to and is currently held by WAMU Mortgage Pass–Through Certificate 2003–AR3 Trust [ Id., ¶ 9].

On February 23, 2011, prior to filing the instant case, plaintiffs filed petitions (the “petitions”) under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Tennessee (the “Bankruptcy Court”) [Docs. 3–2, 3–3]. In the petitions, plaintiffs listed Chase as a creditor holding a secured claim or “First Mortgage” over the Property and that 2003 was the year the claim was incurred [Doc. 3–2, pp. 9, 16, 25; Doc. 3–3, pp. 6, 14]. Chase filed motions for relief from the automatic stay and abandonment in both bankruptcy cases, submitting that Chase “holds a security interest in [the Property] ... by virtue of a Deed of Trust [.]” [Doc. 3–4]. In the motions, Chase asserted that the automatic stay should be terminated for cause due to lack of adequate protection of its security interest, because there was little or no equity in the Property, and because the Property was burdensome and of inconsequential value to the bankruptcy estate [ Id.].

On April 28, 2011, the Bankruptcy Court granted Chase's motions for relief from the automatic stay, noting that Chase had asserted a valid, properly perfected deed of trust in the Property, and finding that sufficient grounds existed for termination of the automatic stay for cause [Doc. 3–5]. Chase submits that following the lifting of the automatic stay in regard to the Property, plaintiffs were discharged from their respective bankruptcy proceedings [Doc. 4, p. 4].

On October 17, 2011, plaintiffs filed this action in the Chancery Court of Knox County, Tennessee, alleging five causes of action: (1) mistaken and erroneous representations as to standing to foreclose; (2) predatory lending practices; (3) a violation of the Fair Debt Collection Practices Act (the “FDCPA”), including a claim under the Real Estate Settlement Practices Act (“RESPA”); (4) unfair business practices; (5) and to quiet title [Doc. 1–1]. In their complaint, plaintiffs allege that Chase is not the holder and is not in possession of the note secured by the Property, that Chase has pursued non-judicial foreclosure “without right under law,” and that Chase has misrepresented that it has the right to payment and to conduct a non-judicial foreclosure sale in place of WAMU [ Id., ¶¶ 6, 7].

Chase removed the state-court action to this Court [ see Doc. 1], and filed the motion to dismiss [Doc. 3], seeking dismissal of plaintiffs' claims on two grounds. First, because plaintiffs' causes of action related to the allegation that Chase lacks the authority to foreclose on the Property are barred by res judicata and/or collateral estoppel given the Bankruptcy Court's orders lifting the automatic stay. Second, because the purchase and assumption agreement (the “PAA”) entered into on September 25, 2008 between Chase and the FDIC, as receiver of WAMU, provides that Chase is not responsible for claims brought by borrowers related to any action and/or inaction of WAMU. Plaintiffs' claims, Chase asserts, with the exception of their first and fifth causes of action, stem entirely from the origination of the loan and/or their interactions with WAMU prior to September 25, 2008.

In response [Doc. 9], plaintiffs contend that given their allegation that Chase is not a holder of the promissory note secured by the Property, their claims do not involve WAMU and Chase cannot escape liability under the PAA. Relying on Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26 (4th Cir.1994), plaintiffs also assert that res judicata and/or collateral estoppel do not preclude them from disputing whether Chase is a holder or is in possession of the promissory note secured by the Property.

In reply, Chase reiterates its argument that based on the terms of the PAA, it is not liable for any alleged actions or inaction of WAMU prior to September 25, 2008. Chase also argues that Grella is distinguishable from the instant case. Finally, Chase raises the argument that plaintiffs' claims are barred by the doctrine of judicial estoppel.

While Chase raised, in its motion to dismiss, the issue of the preclusive effects of res judicata and collateral estoppel on plaintiffs' claims, Chase did not raise the judicial estoppel argument until its reply brief. It is well-settled that a movant cannot raise new issues for the first time in a reply brief because consideration of such issues “deprives the non-moving party of its opportunity to address the new arguments.” Cooper v. Shelby Cnty., No. 07–2283–STA–cgc, 2010 WL 3211677, at *3 n. 14 (W.D.Tenn. Aug. 10, 2010) (collecting Sixth Circuit and district court cases discussing this principle). “Further, the non-moving party ordinarily has no right to respond to the reply brief, at least not until oral argument.” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 553 (6th Cir.2008) (citation omitted). The Local Rules of this District also provide that “reply briefs are not necessary and are not required by Court. A reply brief shall ... directly reply to the points and authorities contained in the answering brief.” E.D. TN. LR 7.1(c).³ Accordingly, as a matter of litigation fairness and procedure, the Court declines, at this time, to address this argument.⁴

II. Standard of Review

Chase has moved for dismissal of plaintiffs' claims pursuant to a Rule 12(b)(6) motion. While Chase has relied on documents outside the pleadings—specifically, documents filed in prior bankruptcy proceedings—the Court concludes that these documents do not convert the motion to dismiss into a motion for summary judgment pursuant to Rule 12(d). The submitted copies of plaintiffs' bankruptcy petitions, the motions for relief from the automatic stay, and the orders of the Bankruptcy Court, are matters of public record and therefore the Court's taking of judicial notice of the bankruptcy filings do not convert this motion into one for summary judgment. Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir.1997); Signature Combs, Inc. v. United States, 253 F.Supp.2d 1028, 1041 n. 5 (W.D.Tenn.2003).

When reviewing a Rule 12(b)(6) motion to dismiss, the Court must construe the complaint in the light most favorable to the plaintiff, accept the complaint's factual allegations as true, Thurman v. Pfizer, Inc., 484 F.3d 855, 859 (6th Cir.2007), and determine whether the plaintiff has pleaded “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint need only contain a “short and plain statement of the claim showing that the pleader is entitled to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009) (quoting Fed.R.Civ.P. 8(a)(2)), but that statement must contain “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

In deciding a motion to dismiss, the question is not whether a plaintiff will ultimately prevail but whether the plaintiff is entitled to offer evidence to support the claims made in the complaint. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). At the same time, bare assertions of legal conclusions are insufficient, and the “complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.” Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988). Unsupported allegations and legal conclusions “masquerading as factual conclusions” are not sufficient. Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir.2005).

III. AnalysisA. Claims Arising Out of the Alleged Conduct of WAMU

In their second cause of action, plaintiffs allege that WAMU engaged in predatory lending practices and that Chase, as successor to WAMU, is liable for its actions [Doc. 1–1, ¶ 15]. Plaintiffs allege that WAMU engaged in misrepresentations that resulted in plaintiffs entering into a loan agreement for which they were not qualified, that WAMU had an...