Traber v. Mortg. Elec. Registration Sys., Inc.
| Decision Date | 06 August 2012 |
| Docket Number | 1:11cv126 |
| Court | U.S. District Court — Western District of North Carolina |
| Parties | LAWRENCE J. TRABER and ELGE L. TRABER, Plaintiffs, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., et al. Defendants. |
Pending before the Court are Defendant iMortgage Services LLP's ("iMortgage") Motion to Dismiss [# 53] and the Motion to Dismiss [# 52] filed by Defendants Mortgage Electronic Systems Inc. ("MERS") and Federal National Mortgage Association, named as Fannie Mae in the Second Amended Complaint. Plaintiffs brought this action against Defendants asserting a claim for quiet title under North Carolina law and a claim pursuant to the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"). Defendants iMortgage, MERS and Fannie Mae move to dismiss all the claims asserted against them in the Second Amended Complaint. The Court RECOMMENDS that the District Court GRANT the Defendants' motions [# 52 & # 53].
I. Background
Plaintiffs Lawrence L. Traber and Elge L. Traber are residents of North Carolina. (Pls.' Second Am. Compl. ¶¶ 2, 4.) In 2006, Plaintiffs refinanced theirmortgage with Defendant Mid-Atlantic Financial Services Inc. ("Mid-Atlantic") for $417,000. (Id. ¶¶ 11, 26.) Defendant iMortgage was the trustee of the Note and Defendant MERS was the nominee and beneficiary of the security interest. (Id.) A Deed of Trust was recorded with the Register of Deeds. (Id. ¶ 13.) Plaintiffs allege that there have been no further recordings regarding the property. (Id. ¶ 14.)
In 2009, Plaintiffs became concerned because of changes in the servicing agent and ownership of the Note. (Id. ¶ 15.) Plaintiffs allege that Defendant MERS bifurcated the loan by retaining the security interest while selling the Note, thereby causing the loan on the property to become unsecured. (Id.) Specifically, Plaintiffs allege that ownership of the Note was transferred from Defendant Mid-Atlantic to Washington Mutual Bank ("Washington Mutual"), who was the successor in interest to Defendant Mid-Atlantic. (Id. ¶¶ 20, 26.) In 2008, the Federal Deposit Insurance Corporation took over Washington Mutual and subsequently sold its assets. (Id. ¶ 28.) Plaintiffs also allege that they received a letter from Safeco in 2008 stating that it owned the Note. (Id. ¶ 29.)
Meanwhile, Plaintiffs received a letter from the foreclosure department of a law firm listing their property as a foreclosure property address and indicating a notice of intention to collect attorneys' fees. (Id. ¶ 16.) Plaintiffs then received a letter from Bank of America Home Loans Serving stating that the loan was in foreclosure. Plaintiffs, however, contend that none of the communications regarding the foreclosure of the propertyidentified who owned the Note or the Deed of Trust. (Pis.' Second Am. Compl. ¶¶ 16, 19.)
Plaintiffs now contend that sometime between 2010 and the filing of the Second Amended Complaint, someone materially altered the Note in a fraudulent manner because it should have contained an assignment from Defendant Mid-Atlantic to Washington Mutual. (Id. ¶¶ 25, 27, 33.) Plaintiffs allege that during this time period the note was endorsed to show the assignment of the Note from Defendant Mid-Atlantic to Countrywide, even though this should have been done prior to 2010. (Id. ¶¶ 32-36.)
On December 17, 2010, Plaintiffs initiated an action against MERS, Fannie Mae, Bank of America, and various other corporate entities in the Superior Court of Polk County, North Carolina.1 (Ex. A to Mot. Dismiss.) The Complaint asserted various claims against the defendants arising out the mortgage at issue in this dispute. (Id.) Subsequently, the Superior Court allowed Plaintiffs to amend their Complaint and assert a Quit Title claim. (Ex. E to Mot. Dismiss.) At its root, however, the Complaint and Amended Complaint were essentially an action requesting that the Court declare that the defendants have no interest in the property as a result of the various transfers of the Note among corporate entities and their failure to provide Plaintiffs with documentation demonstrating ownershipof the Note. The defendants then moved to dismiss the state court action, and the Superior Court held a hearing on the motion. After hearing from the parties, the Court granted the defendants' motion and dismissed the action pursuant to rule 12(b)(6). (Ex. D and E to Mot. Dismiss.) The Court entered an Order dismissing the action pursuant to Rule 12(b)(6). (Ex. E. to Mot. Dismiss.)
Plaintiffs then brought this action in federal court asserting claims for quiet title and RICO. Defendants iMortgage, MERS, and Fannie Mae now move to dismiss the claims asserted against them in the Second Amended Complaint.
III. Legal Standard
The central issue for resolving a Rule 12(b)(6) motion is whether the complaint states a plausible claim for relief. See Francis v. Giacomelli, 588 F.3d 186, 189 (4th Cir. 2009). In considering a defendant's motion to dismiss, the Court accepts the allegations in the complaint as true and construes them in the light most favorable to plaintiff. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009); Giacomelli, 588 F.3d at 190-92. Although the Court accepts well-pled facts as true, it is not required to accept "legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement . . . ." Consumeraffairs.com, 591 F.3d at 255; see also Giacomelli, 588 F.3d at 189.
The complaint need not contain "detailed factual allegations," but must contain sufficient factual allegations to suggest the required elements of a cause of action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964-65 (2007); see also Consumeraffairs.com, 591 F.3d at 256. "[A] formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S. Ct. at 1965. Nor will mere labels and legal conclusions suffice. Id. Rule 8 of the Federal Rules of Civil Procedure "demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. ___, 129 S. Ct. 1937, 1949 (2009).
The complaint is required to contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S. Ct. at 1974; see also Consumeraffairs.com, 591 F.3d at 255. "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." Iqbal, 556 U.S. ___, 129 S. Ct. at 1949; see also Consumeraffairs.com, 591 F.3d at 255. The mere possibility that the defendants acted unlawfully is not sufficient for a claim to survive a motion to dismiss. Consumeraffairs.com, 591 F.3d at 256; Giacomelli, 588 F.3d at 193. Ultimately, the well-pled factual allegations must move a plaintiff's claims from possible to plausible. Twombly, 550 U.S. at 570, 127 S. Ct. at 1974; Consumeraffairs.com, 591 F.3d at 256.
Where a party's allegations sound in fraud, however, the allegations must also satisfy the heightened pleading standards of Rule 9. Cozzarelli v. Inspire Pharmaceuticals Inc., 549 F.3d 618, 629 (4th Cir. 2008); Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007). Rule 9(b) provides that when Fed. R. Civ. P. 9(b). Rule 9 applies not only to claims asserting common law fraud, but to all claims where the allegations have the substance of fraud. Cozzarelli, 549 F.3d at 629. A claim is subject to dismissal under Rule 12(b)(6) for failure to state a claim if it does not comply with Rule 9(b). Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 n.5 (4th Cir. 1999).
IV. Analysis
The doctrine of res judicata or claim preclusion prohibits a party from relitigating a claim that was either decided or could have been decided in a prior legal proceeding. Laurel Sand & Gravel, Inc. v. Wilson, 519 F.3d 156, 161 (4th Cir. 2008). "The doctrine was designed to protect 'litigants from the burden of relitigating an identical issue with the same party or his privy and [to promote] judicial economy by preventing needless litigation.'" Id. at 161-62 (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S. Ct. 645 (1979)). In order to determine the preclusive effect of a state court judgment, the Court must look to the law of the state where the judgment was entered. Id. at 162; Davenport v. N.C. Dep't of Transp., 3 F.3d 89, 92 (4th Cir. 1993); Cannon v. Durham Cnty Bd. of Elections, 959 F. Supp. 289, 292 (E.D.N.C. 1997); In re Helms, 467 B.R. 374, 380 (Bankr. W.D.N.C. 2012); see also Whitaker v. Nash-Rocky Mount Bd. of Educ.,No. 11-2060, 2012 WL 1142248, at *1 (4th Cir. Apr. 6, 2012) (unpublished).
In order for the doctrine of res judicata to bar a subsequent claim under North Carolina law, the party asserting the defense must show: (1) a final judgment on the merits in an earlier action; (2) that both actions involve the same causes of action; and (3) that the subsequent action involves either the same parties as the earlier suit or their privies. Tucker v. Frinzi, 474 S.E.2d 127, 128 (N.C. 1996); Williams v. Peabody, 719 S.E.2d 88, 92 (N.C. Ct. App. 2011). Res judicata, however, not only applies to the claims actually presented in the first action, but to all matters that could have been litigated in the prior proceeding. Williams, 719 S.E.2d at 93-94.
Plaintiffs' claims against Defendants MERS and Fannie Mae are barred by the doctrine of res judicata. Both Plaintiffs and Defendants MERS and Fannie Mae were parties to the original action...
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