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Brooks v. Cama Self Directed Ira, LLC

United States District Court, D. Maryland

January 31, 2019

MICHAEL M. BROOKS, JR., et al., Plaintiffs,
CAMA SELF DIRECTED IRA, LLC, et al., Defendants.



         Michael and Stasia Brooks (“Plaintiffs”) filed suit against multiple defendants alleging violations of the Fair Debt Collection Practices Act (FDCPA) and state law stemming from attempts to collect payments on a home equity loan and to foreclose on their residence. Plaintiffs seek compensatory, statutory, and declaratory relief. Defendants Gerald O'Brien, the substitute trustee who initiated foreclosure, and John Hanrahan, O'Brien's lawyer in the state foreclosure action (collectively, the “Foreclosure Defendants”), filed a motion to dismiss. (Mot. Dismiss, ECF No. 5.) Defendants Cama Plan SDIRA FBO R1551124-02, the purported noteholder (“Cama 15”), SN Servicing Corporation, the loan servicer (“SN Servicing”), Cama Self Directed IRA, LLC (“Cama”), and Cama Plan SDIRA FBO R090930-01 (“Cama 09”) (collectively, the “Cama Defendants”) filed a separate motion for judgment on the pleadings. (Mot. J. Pleadings, ECF No. 18.) Both motions are fully briefed. No. hearing is required. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, both motions will be granted in part and denied in part.

         I. Background[1]

         The plaintiffs in this case are Michael M. Brooks, Jr., and Stasia V. Brooks. In 2005, Ms. Brooks executed an Equity Reserve Agreement with a $189, 420.00 line of credit with National City Bank for “personal, family and/or household purposes.” (Compl. ¶¶ 11-12, ECF No. 1; see also Note at 1, Compl. Exh. 1, ECF No. 1-7.[2]) The Note was secured by a lien on the Brookses' home in Lutherville-Timonium, Maryland. (Compl. ¶ 13; Deed of Trust, Compl. Exh. 2, ECF No. 1-8 (executed by both Mr. and Ms. Brooks).)

         In 2009, the Brookses experienced financial troubles, and they concede that they defaulted on the National City loan in July 2009. (Compl. ¶¶ 14-15.) In December 2009, National City sent a bill showing a total balance of $187, 078.47 and stating, “[y]our account will be charged off unless payment is received immediately.” (Id. ¶¶ 16, 20; National City Final Bill at 1-2, Compl. Exh. 3, ECF No. 1-9.) Plaintiffs made no further payments and received no further bills from National City. (Compl. ¶ 17.) Plaintiffs argue that, by charging off the debt and ceasing to send billing statements, National City waived the right to charge additional interest or fees on the debt. (Id. ¶¶ 16-19.)

         At some time after 2009, National City merged with PNC Bank. (Id. ¶ 19.) As successor in interest to the loan, PNC attempted to collect in February 2013, sending Ms. Brooks a letter demanding payment on a total balance of $187, 135.68-an amount equal to the balance stated on the final National City bill, plus a late fee of $57.21. (Id. ¶ 27; compare PNC Bank Letter at 1, Compl. Exh. 4, ECF No. 1-10, with National City Final Bill at 1.) Plaintiffs, believing they did not have a loan with PNC Bank, made no payment and received no further communication from PNC Bank. (Compl. ¶ 28.) (Neither National City nor PNC Bank is a party to this case.)

         The debt was subsequently transferred multiple times. On December 8, 2015, the Deed of Trust was assigned to Cama 09. (Id. ¶ 48; see also Record of Assignment at 1, Compl. Exh. 6, ECF No. 1-12.) On December 3, 2015, five days before the assignment to Cama 09, Cama 09 purported to assign the Deed to Cama 15. (Compl. ¶ 48; Record of Assignment at 2.) The assignment to Cama 15 was notarized two days before the date on which it was signed. (Compl. ¶ 48; Record of Assignment at 2.) According to Plaintiffs, these inconsistencies render the assignment defective, and, thus, “Cama 15 does not own the Note.” (Compl. ¶ 48.)

         In 2016, Plaintiffs hired a broker to refinance a separate property and discovered that the National City loan, which they believed had been consolidated during a 2011 modification process, had not been consolidated and that a separate lien continued to exist on their home. (Id. ¶¶ 21, 29-35.) Shortly after being contacted by Plaintiffs' broker, SN Servicing began sending bills to Ms. Brooks. (Id. ¶¶ 36-37; see also SN Servicing Bills, Compl. Exh. 5, ECF No. 1-11.) From July 2016 to March 2018, Ms. Brooks received bills from SN Servicing seeking between $59, 199.19 and $82, 245.76[3] in outstanding amounts, which included claims for unpaid interest dating back to July 2009. (See SN Servicing Bills at 1, 19.) The bills named Cama 15 as a sending entity. (See, e.g., id. at 1; see also Compl. ¶ 41.) Plaintiffs allege that the interest and late fees charged on the bills are “obvious falsehood[s], ” because the Cama Defendants had no right to collect interest and fees waived by National City. (Compl. ¶ 45.) Plaintiffs also contend that the Note and Deed of Trust became unenforceable in 2012 under a three-year statute of limitations and that SN Servicing had “constructive knowledge” of that fact. (Id. ¶¶ 22-26, 38.) Further, they argue that SN Servicing and Cama 15 had no right to collect on the debt because of the defects in assignment (id. ¶ 48) and because Cama, Cama 09, and Cama 15 were not licensed under Maryland debt collection laws (id. ¶¶ 42-44).

         In October 2016, Cama 15 appointed Gerald O'Brien as substitute trustee on the Deed of Trust. (Deed of Appointment, Compl. Exh. 6 at 3-4.) According to Plaintiffs, the appointment was a “legal nullity” because of defects in the assignment to Cama 15. (Compl. ¶¶ 48-50.)

         In September 2017, O'Brien docketed a foreclosure in the Circuit Court in Baltimore County, with Hanrahan as his lawyer. (Id. ¶ 46; see also Foreclosure Docket at 1, Mot. Dismiss Exh. D, ECF No. 5-6.[4]) Plaintiffs did not receive notice of the foreclosure until early 2018. (Compl. ¶ 47.) Plaintiffs argue that Defendants had no right to foreclose because of the lack of licenses (id. ¶¶ 51-52), the assignment defects (id. ¶ 52), and the statute of limitations (id. ¶ 53).

         Plaintiffs also allege that the affidavit of default filed in conjunction with the foreclosure is “replete with deliberate misstatements, misrepresentations and omissions” about the amounts owed and the legal status of the debt. (Id. ¶ 54.) Plaintiffs contest the claims for $182, 727.00 in unpaid principle, for $99, 488.59 in unpaid interest, for $5, 035.00 in late fees, and for $3, 040.00 in legal fees. (Id.; see also Affidavit of Default at 2, Compl. Exh. 7, ECF No. 1-13.) They also contend that the amount to cure, $53, 659.09, is “random to the point of recklessness, ” and that, because of a superior lien, foreclosure is “not based on business judgment.” (Compl. ¶¶ 54-55.)

         Plaintiffs allege that they incurred over $10, 000 in attorney's fees and suffered “emotional distress and mental anguish” as a result of Defendants' violations. (Id. ¶¶ 56-58.)

         The Complaint puts forward five counts: Count I seeks a declaratory judgment that the Note and Deed of Trust are “unenforceable, and of no legal force or effect” (id. ¶ 59); Count II claims violations of the Fair Debt Collection Practices Act (FDCPA) (id. ¶ 60); and Counts III through V claim violations of Maryland law (id. ¶¶ 61-63).

         II. Legal Standard

         Before the Court are the Foreclosure Defendants' motion to dismiss under Rule 12(b)(6) and the Cama Defendants' motion for judgment on the pleadings under Rule 12(c). The same standard governs motions under both rules. See Walker v. Kelly, 589 F.3d 127, 139 (4th Cir. 2009); Green v. Sw. Credit Sys., L.P., 220 F.Supp. 623, 624 (D. Md. 2016).

         A complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists “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. at 678. An inference of the mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. Courts must “accept the well-pled allegations of the complaint as true, . . . constru[ing] the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff.” Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). Nevertheless, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. “A pleading that offers ‘labels and conclusions' or . . . ‘naked assertion[s]' devoid of ‘further factual enhancement'” will not suffice. Iqbal, 556 U.S. at 678 (alteration in original) (citation omitted) (quoting Twombly, 550 U.S. at 555, 557). Courts need not accept legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.

         III. Analysis

         A. Sufficiency of Factual Allegations

         Before turning to the specific counts alleged, the Court will first address the basic sufficiency of the factual allegations with respect to Cama and Cama 09.

         There are few allegations specific to these Defendants. Cama is alleged to be a Pennsylvania LLC, and Cama 09 an “unknown legal entity.” (Compl. ¶¶ 5-6.) Both are alleged to be “collectors” under relevant statutes. (Id.) Cama 09 is also alleged to have made a defective assignment of the Deed to Cama 15. (Id. ¶ 48.) All other allegations lump these Defendants together, as acting collectively with others. Plaintiffs allege that the Cama Defendants collectively “caused demands for payment” to be sent (id. ¶ 44), that the foreclosure was “a collaborative effort on the part of [all] Defendants, jointly and severally” (id. ¶ 46), that all Defendants “had at least constructive knowledge” of legal defects in the foreclosure (id. ¶ 52), and that they knowingly omitted material facts from the foreclosure (id. ¶ 53). These allegations are insufficient to create an inference that Cama or Cama 09 would be legally responsible for any of the alleged violations. According to the Complaint, Cama 15 is the entity holding itself out as the noteholder and on whose behalf the foreclosure suit was initiated. (Id. ¶¶ 41, 49.) The billing statements name only Cama 15 and SN Servicing. (E.g., SN Servicing Bills at 1.) Plaintiffs allege no specific action taken by Cama or Cama 09 with respect to either the bills or the foreclosure, and there are no allegations about the legal relationship of either Defendant to Cama 15 or SN Servicing. Without such facts, the Court cannot plausibly infer that Cama or Cama 09 would be legally responsible, even if statutory violations occurred. The allegation about Cama 09's role in the purportedly defective assignment does not give rise to a plausible claim, either. If Plaintiffs' argument is correct, Cama 09 might be the true noteholder, but that fact alone would not make it responsible for Cama 15's attempts to collect. Because Plaintiffs failed to allege facts about Cama or Cama 09 that “raise the right to relief above a speculative level, ” Twombly, 550 U.S. at 555, all claims against these Defendants will be dismissed.

         The Court will next address the allegations against the remaining Cama Defendants (Cama 15 and SN Servicing) and against the Foreclosure Defendants, taking each count in turn.

         B. Declaratory Judgment (Count I)

         In the first count, Plaintiffs seek a declaration that the “Note and Deed of Trust are unenforceable, and of no legal force or effect.” (Compl. at 12.) The Anti-Injunction Act (AIA) does not permit this Court to issue such a declaration, even if Plaintiffs were to succeed on their other federal or state claims.[5]

         The AIA limits the power of federal courts to enjoin or stay state court proceedings. 28 U.S.C. § 2283. In a 2015 case, Judge Grimm succinctly explained why the AIA similarly bars declaratory judgments in cases where plaintiffs challenge a foreclosure under the FDCPA:

“[W]here the Anti-Injunction Act bars an injunction[, ] it ‘also bars the issuance of a declaratory judgment that would have the same effect as an injunction.'” Lovett v. Deutsche Bank Nat'l Trust Co., No. 12-1816-MBS-SVH, 2013 WL 841679, at *6 (D.S.C. Feb. 12, 2013) (quoting Denny's, Inc. v. Cake, 364 F.3d 521, 528 (4th Cir. 2004) . . . . This is because “‘even if a declaratory judgment is not used as a basis for actually issuing an injunction, declaratory relief alone has virtually the same practical impact as a formal injunction would.'” Id. (quoting Samuels v. Mackell, 401 U.S. 66, 73 (1971)). For example, if a plaintiff requests “a declaration that the [plaintiff's] mortgage and note are unenforceable, ” the request “preempts the foreclosure and has ‘the same effect' as [a] request for an injunction to prevent foreclosure; both ‘result in precisely the same interference with and disruption of state proceedings that the long-standing policy limiting injunctions was designed to avoid.'” Id. (quoting Samuels, 401 U.S. at 72).

Tucker v. Specialized Loan Servicing, LLC, 83 F.Supp.3d 635, 641 (D. Md. 2015).

         The remedy sought by Plaintiffs in Count I-a declaration that the Note and Deed of Trust are “unenforceable” and “of no legal force or effect” (Compl. at 12)-would have “the same effect” as a request for an injunction to stay the foreclosure. Samuels, 401 U.S. at 72; see also Jones v. Specialty Lending Grp., Civ. No. RWT-17-1577, 2017 WL 6997840, at *1 (D. Md. June 12, 2017) (holding that the AIA bars injunctive relief to prevent foreclosure); Hayes v. JP Morgan Chase Bank, No. 13-1884-JFA, 2014 WL 4198897, at *5 (D.S.C. Aug. 20, 2014) (“Plaintiff's request to declare the mortgage and note unenforceable runs afoul of the [AIA].”). Thus, the Court cannot consider the claim for declaratory judgment. Count I will be dismissed.

         C. Fair Debt Collection Practice Act ...

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