Sparks v. Countrywide Home Loans, Inc., Action No. 5:15-cv-99-JMH

CourtUnited States District Courts. 6th Circuit. United States District Court of Eastern District of Kentucky
Writing for the CourtJoseph M. Hood Senior U.S. District Judge
PartiesELLEN SPARKS, Plaintiff, v. COUNTRYWIDE HOME LOANS, INC., et al., Defendants.
Decision Date29 October 2015
Docket NumberAction No. 5:15-cv-99-JMH

ELLEN SPARKS, Plaintiff,
COUNTRYWIDE HOME LOANS, INC., et al., Defendants.

Action No. 5:15-cv-99-JMH


October 29, 2015



This matter is before the Court on two Motions to Dismiss filed by six Defendants pursuant to Federal Rule of Civil Procedure 12(b)(6). The first Motion to Dismiss was filed by Defendants Select Portfolio Servicing, Inc. ("SPS"), Deutsche Bank National Trust Company, as Trustee for holders of the Harborview 2004-09 Trust a/k/a Deutsche Bank National Trust Company, as Trustee, on behalf of the registered Certificate Holders of Harbor View Mortgage Loan Trust 2004-09, Mortgage Loan Pass-Through Certificates, Series 2004-09 ("Deutsche Bank"), Mortgage Electronic Registration Systems, Inc. aka MERS ("MERS"), and Mary Ann Hierman, a MERS agent ("Hierman")1 (collectively referred to

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as "SPS et al."). [DE 18]. The second Motion to Dismiss was filed by Defendants Countrywide Home Loans, Inc. ("Countrywide") and Bank of America, N.A. ("BANA"). [DE 19].

Plaintiff filed Responses in Opposition to both Motions to Dismiss [DE 21, 22], and Defendants replied [DE 23, 24]. Without leave of Court, Plaintiff also filed a Supplemental Joint Response in Opposition to Defendants' Motions to Dismiss. [DE 25]. The Federal Rules of Civil Procedure do not permit the filing of a surreply without leave of the Court, nevertheless, the Court will regard Plaintiff's Supplemental Response as a Motion for Leave of Court. No new arguments having been made by Defendants in their Replies, the Court declines to consider Plaintiff's Supplemental Response. The Court being adequately advised, Defendants' Motions are ripe for decision.

After careful consideration of the Complaint, motions, responses, replies, and applicable law, the Court grants Defendants' Motions to Dismiss in their entirety.


On April 14, 2015, Plaintiff, Ellen Sparks, appearing pro se, filed a Complaint against Defendants for various claims that stem from the origination and servicing of a refinance loan for her residence located at 214 South Hanover Avenue in Lexington, Kentucky. [DE 1]. Plaintiff set forth the following allegations in her Complaint.

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A. The 2004 Loan Agreement

Plaintiff alleges that, in or about 2004, seeking to refinance her single family home, she was promised certain terms and conditions by America's Wholesale Lender ("AWL")2 for a loan agreement, most notably, a fixed interest rate of 4.25 percent for 30 years. [DE 1 at ¶12b-h]. Plaintiff alleges that on or about September 22, 2004, she signed various documents originated by AWL ("the 2004 Loan Agreement") to close her loan. [DE 1, ¶12b]. Plaintiff makes various allegations about the improper notarization of the loan documents surrounding the 2004 Loan Agreement. [DE 1, ¶12c,d,e,f]. Plaintiff also alleges that she did not receive copies of the signed, loan documents on the day of signing or thereafter despite requests to the notary but had to request the documents from the escrow company. [DE 1, ¶12e,f].

Plaintiff further alleges that, in 2007, upon receiving the loan documents from the escrow company, she discovered that the documents, including a Note, Mortgage, and Rider to the Note, were "defective" and not the documents she had agreed to or signed in September of 2004. [DE 1, ¶12f,g]. In particular, Plaintiff alleges that instead of including a fixed rate as promised by

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Defendants, the loan documents included an adjustable interest rate, as well as penalty and interest charge terms to which she allegedly did not agree. [DE 1, ¶12g]. Plaintiff alleges that the loan documents she actually signed in or about September 22, 2004, which Plaintiff believed contained a fixed interest rate, were "substituted cryptically and clandestinely" with forged loan documents containing an adjustable interest rate. [DE ¶12g].

Plaintiff further alleges that in an attempt to determine the authenticity of the loan documents from the escrow company, she then obtained copies of her mortgage records from the Fayette County Clerk's office, which she alleges included: (1) a Mortgage that contained forged signatures and improper notarization, (2) an Adjustable Rate Note, also not notarized and containing what Plaintiff believes to be a forged signature, (3) an Adjustable Rate Rider "purporting to be signed" but "neither signed nor initialed by plaintiff" and (4) an Assignment of Mortgage transferring the mortgage from MERS to Deutsche Bank. [DE 1, ¶12h]. Although not entirely clear from the Complaint, it appears that Plaintiff is pleading in the alternative: either (a) she was duped into signing a loan agreement with an adjustable interest rate when she believed she was getting a fixed interest rate or (b) the loan documents she signed, which she alleges included a fixed interest rate, were switched out for documents with forged

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signatures that include a variable interest rate. [DE 1, ¶12f,g,h].

B.Loan Payments

Plaintiff alleges that from 2005 to 2008, her monthly mortgage payments increased from $1,711.12 to over $4,000.00 as a result of the variable interest rate on her loan. [DE 1, ¶16.1]. However, as the Court understands, Plaintiff alleges to not have discovered the increased payment amounts until on or about November 10, 2007 when her payments began increasing and when Plaintiff was allegedly contacted by Defendant BANA with a threat of foreclosure if she did not make her payments current. [DE 1, ¶16]. Plaintiff then alleges that BANA informed her that her outstanding Note was $589,000 and could not explain the increase from the original loan amount of $532,000 despite Plaintiff's payments over the prior four years. Id.

Plaintiff alleges to have demanded a loan validation and confirmation from BANA under the Fair Debt Collection Practices Act but claims BANA did not provide the information and continued to threaten foreclosure if Plaintiff did not pay the full amount owed. Id. Plaintiff also alleges to have contacted BANA in writing seeking information regarding the variable interest rates and that BANA never responded. [DE 1, ¶17].

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C.Loan Modifications

Plaintiff alleges that in an attempt to obtain a better loan arrangement, she entered into a series of "novations" or loan modifications with BANA. [DE ¶18, 19]. The first modification indicates that Plaintiff entered into a modification agreement with Countrywide on June 13, 2008, effective August 1, 2008, converting the adjustable interest rate to a fixed rate of 5.25 percent and keeping the October 1, 2034 maturity date. [DE 18-4].

Plaintiff also alleges to have attempted to enter into a loan modification with BANA on or about October 7, 2008. [DE 1, ¶76]. Plaintiff alleges to have been contacted by BANA and instructed that if she did not pay her mortgage for three consecutive months, BANA guaranteed a new note with better terms and a decreased monthly rate, and that Plaintiff would not be defaulted or foreclosed upon by her three month failure to pay. Id. Plaintiff alleges that in reliance on BANA's promise of a $772.39 decrease in her monthly mortgage payment, she failed to pay her mortgage for three months. [DE 1, ¶76a-b]. Plaintiff further alleges that when she made the decreased payment amount in the fourth month, she was told by BANA that they had no record of her loan being novated, she was in default, and that she would be foreclosed upon because her default was over 90 days without payment. [Id., ¶76c-d].

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A second modification occurred in or about April of 2010. [DE 1, ¶19]. This modification was executed by Plaintiff on April 1, 2010 as part of the Home Affordable Modification Program in which a series of scheduled reduced fixed interest rates were established. [DE 18-5].

D.Plaintiff's Claims

On the basis of the facts alleged above, Plaintiff asserts violations against all Defendants under the Fair Credit Reporting Act, 15 U.S.C. § 1688 et seq.; the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.; the Racketeering Influenced Corrupt Organization Act, 18 U.S.C. §§ 1961 et seq.; the Truth in Lending Act, 15 U.S.C. § 1601, et seq.; the Real Estate Procedures Act, 12 U.S.C. § 2607; and also claims Defendants are jointly and severally liable to her on the theories of fraudulent intentional misrepresentation, breach of contract, negligence, and defamation. In addition to monetary damages, Plaintiff seeks a declaratory judgment as to the rights and duties of the parties regarding the mortgage and note at issue and an accounting of Plaintiff's loan account from Defendants.


A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the plaintiff's complaint. If the plaintiff fails to state a claim upon which relief can be granted, a court may grant the motion to dismiss.

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Fed. R. Civ. P. 12(b)(6). Rule 8(a)(2) states that, at a minimum, a pleading should contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court explained that in order to survive a Rule 12(b)(6), a complaint need not contain "detailed factual allegations," but must present something more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action's elements will not do." Id. at 555.

Although a court must accept as true all of the well-pleaded factual allegations contained in the complaint, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570), courts are not bound to accept conclusory allegations as true. Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265 (1986)). The factual allegations in a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations...

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