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Smallwood v. Nationstar Mortgage, LLC

United States District Court, D. Maryland

December 21, 2017

MICHAEL SMALLWOOD, et al., Plaintiffs,
v.
NATIONSTAR MORTGAGE, LLC, et al., Defendants.

          MEMORANDUM OPINION

          Paula Xinis United States District Judge.

         On December 28, 2016, pro se Plaintiffs Michael and Melinda Smallwood asserted a variety of statutory and common law claims against the Defendants, Nationstar Mortgage, LLC (“Nationstar”), Bank of America, NA (“Bank of America”), Thomas Montag (“Montag”), LaSalle Bank, NA (“LaSalle Bank”), Rosenberg & Associates, LLC (“Rosenberg LLC”), Diane Rosenberg (“Rosenberg”), and Wilmington Trust, National Association, as Successor Trustee to Citibank, N.A., as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-FF12 (“Wilmington Trust”), [1] in connection with a pending foreclosure on Plaintiffs' home. In their Amended Complaint, submitted January 3, 2017, Plaintiffs allege violations of the Racketeer Influenced and Corrupt Organizations Act (“Civil RICO”), the Fair Debt Collection Practices Act (“FDCPA”), and common law claims of unjust enrichment, insurance fraud, breach of contract and bad faith. Plaintiffs request declaratory and injunctive relief against Defendants' foreclosure on their home and damages “in the amount of $80, 000.00 Silver one ounce coins” from each Defendant. ECF No. 2 at ¶ 168. Plaintiffs are also currently appealing the ratification of foreclosure rendered in the Circuit Court for Prince George's County, Maryland, [2] BSBSC v. Smallwood, et al, Case No. CAEF15-25056 (Prince George Country Cir. Ct.), and have filed a civil suit against all defendants in the United States District Court for the District of Columbia on similar, but not identical, grounds. See ECF No. 21-6.

         Pending before the court are three motions. On March 8, 2017, Defendants Nationstar and Wilmington Trust moved to dismiss all claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6). See ECF No. 9-1. Defendant Rosenberg joined this motion and adopted its arguments on March 15, 2017. See ECF No. 13. Defendants Bank of America, LaSalle Bank, and Montag filed a Motion to Dismiss and Motion to Quash Service on May 12, 2017, pursuant to Federal Rules of Civil Procedure 8(a), 12(b)(4), 12(b)(5), and 12(b)(6). See ECF No. 21-1. For the following reasons, all motions to dismiss are GRANTED.

         I. Background

         In September 2005, Plaintiffs purchased a home located at 8113 Elora Lane, Brandywine, Maryland, with a mortgage loan of $379, 550.00 (“the Loan”) from First Franklin, a Division of National City Bank of Indiana. See ECF No. 9-2. A Deed of Trust secured the obligations on the Loan. ECF No. 9-2. The Deed of Trust includes a power of sale provision, which states that in the event of Plaintiffs' default, the lender is entitled to institute foreclosure proceedings against the Property and collect all costs incurred to foreclosure. Id. The Deed of Trust also includes a provision that the “Note or partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower, ” id. at ¶ 20, and that “Lender, at its option, may from time to time remove Trustee and appoint a successor trustee” who “shall succeed to all title, power and duties conferred upon Trustee herein any by Applicable Law.” Id. at ¶ 24.

         On April 4, 2006, First Franklin assigned its interest in the Deed of Trust to First Franklin Financial Corporation (“FFFC”). ECF No. 21-3. On February 19, 2009, FFFC assigned its rights in the Deed of Trust to Citibank, acting as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-backed Certificates, Series 2005-FF12 (“Citibank”). See ECF No. 21-4. On June 14, 2014, Nationstar was appointed as attorney-in-fact for the current Trustee, Citibank, by Citibank's successor trustee, Wilmington Trust. See ECF No. 9-6.[3] Citibank then assigned its interest to in the Deed of Trust to Wilmington Trust on January 13, 2015. ECF No. 21-5. Wilmington Trust is the current holder of the beneficial interest under the Deed of Trust. Id. Nationstar is Wilmington Trust's servicer for the Loan.

         In 2012, the Plaintiffs fell behind on their loan payments. Nationstar initiated foreclosure proceedings in the Circuit Court for Prince George's County, Maryland. ECF Nos. 9-7 & 9-8. Plaintiffs' various legal challenges to the foreclosure in Circuit Court were unsuccessful, ECF No. 9-9, and the Property was sold at auction on January 19, 2017. Plaintiffs have filed two federal actions against Defendants; this case was filed on December 26, 2016, ECF No. 1, and a separate case was filed against all of the present Defendants in the United States District Court for the District of Columbia in January 2016, Smallwood v. Wilmington Trust, Nat'l Assoc'n, et al, No. 16-00080-EGS-RMM. Plaintiffs submitted an Amended Complaint in this action on January 3, 2017. Plaintiffs assert seven claims, arising under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Fair Debt Collection Practices Act (“FDCPA”), and common law claims of negligent misrepresentation, unjust enrichment, insurance fraud, breach of contract, and bad faith. Plaintiffs request damages and equitable relief. Defendants assert an array of challenges. Each is addressed below.

         I. Insufficient Service

         Defendants Bank of America and LaSalle (“Bank Defendants”) move to quash service under Federal Rule of Civil Procedure 12(b)(4) because service did not satisfy the requirements of Rule 4(h). ECF No. 21. Plaintiff “bears the burden of establishing its validity” under Rule 4 of the Federal Rules of Civil Procedure.

         Rule 4(h) requires that service on a corporate entity occur:

(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or
(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and - if the agent is one authorized by statute and the statute so requires-by also mailing a copy of each to the defendant.

Fed. R. Civ. P. 4(h); ECF No. 21-1 at 7-9. Rule 4(e)(1) provides for service by any means allowed by the state where the district court is located or the state where service is to be effected. See Fed. R. Civ. P. 4(e). Thus, Plaintiffs could execute service either through compliance with Rule 4(h)(1)(A) through the law of North Carolina or Maryland or under the terms of 4(h)(1)(B). Courts generally “construe Rule 4 liberally to effect service of process and uphold the jurisdiction of the court, ” so long as service sufficiently gave the defendant(s) actual notice of the pending action. Archie v. Lavonne Elenora Ager Booker, No. DKC-14-0330, 2015 WL 9268572 at *2 (D. Md. Dec. 21, 2015) (citing Karlsson v. Rabinowitz, 318 F.2d 666, 668 (4th Cir. 1963).

         Plaintiffs delivered the summons for Bank Defendants to T.J. Bishop, an “Operations Manager” in Charlotte, North Carolina. ECF No. 17 at 6; see also ECF No. 24 at 6-7. Plaintiffs' summons states that TJ Bishop was “designated by law to accept service of process” on behalf of Bank of America and LaSalle. ECF No. 17 at 6, 10. Bank Defendants do not allege that TJ Bishop is not an “officer, managing or general agent, or any other agent authorized by appointment or by law to receive service” on behalf of Bank Defendants. See ECF No. 21-1 at 8-9. Bank Defendants only allege that service of process did not comply with the requirements of North Carolina law. Accordingly, service of process complies with Rule 4(h)(B).

         As to Defendant Montag, Defendants request dismissal under 12(b)(5) on the grounds that Montag “has never been personally served.” ECF No. 21-1 at 7. However, Rule 4 allows summons to be delivered to an individual personally or “to an agent authorized by appointment or by law to receive service of process.” Fed.R.Civ.P. 4(e)(2). Bank Defendants do not allege that TJ Bishop was not authorized by appointment or by law to receive service on behalf of Montag. See ECF No. 21-1 at 7-8. Plaintiffs' summons states that Bishop “is designated by law to accept service of process on behalf of Thomas Montag.” ECF No. 17 at 8. In light of Defendants' failure to challenge Bishop's authorization, the Court finds service of process on Montag complied with Rule 4(e)(2)C).

         II. Younger Abstention

         Defendants next argue that because Plaintiffs' appeal is still pending in the underlying state foreclosure proceedings, BSBSC v. Smallwood, CAEF15-25056 (Cir. Ct. of Prince George's Cty Apr. 5, 2017), the Court abstain from hearing this case under Younger abstention doctrine. ECF No. 21-1 at 14. Younger abstention is a “mandatory rule of equitable restraint, requiring the dismissal of a federal action”, Nivens v. Gilchrist, 444 F.3d 237, 247 (4th Cir. 2006) (citation omitted), when four elements are satisfied: “1) an ongoing state judicial proceeding, instituted prior to any substantial progress in the federal proceeding; that (2) implicates important, substantial, or vital state interests; and (3) provides an adequate opportunity for the plaintiff to raise the lawsuit.” Laurel Sand & Gravel, Inc. v. Wilson, 519 F.3d 156, 165 (4th Cir. 2008). “Circumstances fitting within the Younger doctrine . . . are exceptional, ” and as a general rule “[t]he pendency of an action in [a] state ...


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