Duffy v. Bank of America, N.A. ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SEAN DUFFY,
Plaintiff,
v. Civil Action No. 13-696 (GK}
BANK OF AMERICA, N.A., et al.,:
Defendants.
MEMORANDUM OPINION
Plaintiff Sean Duffy ("Plaintiff" or "Duffy") brings this
diversity action against Defendants Bank of America, N. A. ("Bank
of America"), Wells Fargo Bank, N .A. ("Wells Fargo"), Mortgage
Electronic Registration Systems, Inc. ( "MERS") , Deutsche Alt-A
Securities Mortgage Loan Trust, Series 2006-0Al ("Deutsche
Bank") , and HSBC Bank USA, N.A. ( "HSBC") (collectively,
"Defendants")
This matter is presently before the Court on Defendants'
Motion to Dismiss Plaintiff's Complaint [Dkt. No. 3] and
Plaintiff's Motion for Leave to File an Amended Complaint [Dkt.
No. 16]. Upon consideration of the Motions, Oppositions, and
Replies, the entire record herein, and for the reasons stated
below, Defendants' Motion to Dismiss is granted and Plaintiff's
Motion for Leave to File an Amended Complaint is denied.
I. BACKGROUND 1
Duffy is the resident and owner in fee simple of real
property located in the District of Columbia. Compl. ~ 1. On
October 31, 2006, Aegis Wholesale Corporation ("Aegis") made a
loan to Duffy. Id. ~ 2. To evidence and secure the loan,
Plaintiff signed an Adjustable Rate Note ("Note") Id. The Note
identified Aegis as the Lender and attached the Deed of Trust
("Deed") to secure Duffy's obligation. Id. The Deed also names
MERS as "the nominee for Lender and Lender's successors and
assigns." Id.; see also Compl. Ex. 1, p. 2.
In 2007, Aegis filed for bankruptcy, and on December 15,
2012, its final liquidation and dissolution was completed.
Compl. ~ 3. It is undisputed that there is an unsatisfied note
and deed of trust encumbering the property.
On September 29, 2011, MERS assigned the Deed to Bank of
America. Id. ~ 16; see also Compl. Ex. 2. This Assignment was
recorded with the Land Records in the District of Columbia. Id.
~ 16.
1
For purposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in. favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat'l Rifle Ass'n, 606 F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
the Complaint ( "Compl. ") [Dkt. No. 1-1] .
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On January 10, 2013, Bank of America assigned the Deed to
HSBC as Trustee for Holders of the Deutsche Bank Mortgage Pass
Through Certificates. Id. ~ 20; see also Compl. Ex. 3. On
January 11, 2013, this Assignment was recorded with the Recorder
of Deeds for the District of Columbia. Id. ~ 7.
Bank of America now services the Loan. Id. ~ 6. In January
2013, Bank of America informed Duffy that it intended to
foreclose on his home on behalf of HSBC. Id. ~ 23.
On March 26, 2013, Duffy filed a complaint in the Superior
Court for the District of Columbia [Dkt. No. 1-1]. On May 13,
2013, Defendants removed the action to this Court alleging
diversity jurisdiction [Dkt No. 1] .
On May 13, 2013, Defendants filed a Motion to Dismiss
Plaintiff s Complaint
1
[Dkt. No. 3] On May 3 0, 2 013, Plaintiff
filed an Opposition [Dkt. No. 11]. On June 10, 2013, Defendants
filed a Reply [Dkt. No. 13].
II. STANDARD OF REVIEW
To survive a motion to dismiss under Rule 12(b) (6), a
plaintiff need only plead "enough facts to state a claim to
relief that is plausible on its face 11
and to "nudge [ [his or
her] claims across the line from conceivable to plausible. 11
Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "[O]nce a
claim has been stated adequately, it may be supported by showing
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any set of facts consistent with the allegations in the
complaint." Id. at 563.
Under the Twombly standard, a "court deciding a motion to
dismiss must not make any judgment about the probability of the
plaintiffs' success . [,] must assume all the allegations in
the complaint are true (even if doubtful in fact) [, and]
must give the plaintiff the benefit of all reasonable inferences
derived from the facts alleged." Aktieselskabet AF 21, 525 F.3d
at 17 (internal quotation marks and citations omitted) . A
complaint will not suffice, however, if it "tenders 'naked
assertion[s]' devoid of 'further factual enhancement.'" Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at
557) (alteration in Iqbal) .
III. ANALYSIS
Duffy seeks three things. First, he seeks a declaration
that he "owns the Property free and clear of all encumbrances."
Compl. p. 14. Second, he seeks a declaration "that none of the
Defendants has any interest in his property." Opp' n at 1, 8.
Third, he requests that the Court declare the two Assignments of
the Deed void. Id.
Duffy's first request must be denied because the existence
of an encumbrance on his property is undisputed. Compl. ~ 1.
Because Duffy alleges no facts that chal,lenge the existence of
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the encumbrance, there is no factual support for a declaration
that Plaintiff uowns the Property free and clear of all
encumbrances."
Duffy's second and third requests are based on his
assertion that the original holder of the Deed, MERS, did not
have the authority to transfer the Deed to Bank of America. He
alleges that uMERS is not now nor has it ever been the holder of
the Deed of Trust," and that uthe Deed of Trust does not
authorize MERS to sell or convey it." Compl. ~ 17. In his
Opposition, Duffy insists that uthe Deed of Trust does not
provide to MERS or the beneficiary any rights with respect to
the Deed of Trust." Opp'n at 4. He repeatedly insists that MERS
is only mentioned twice in the Deed, on page one and page two,
and that u [t] here is no other mention of MERS in the document."
Id. at 10-11.
This is incorrect. If Duffy (or, for that matter, any of
the Defendants) had turned to page three of the Deed, he would
have observed that it specifically grants the right to foreclose
on the property to MERS:
Borrower understands and agrees that MERS holds only
legal title to the interests granted by Borrower in
this Security Instrument, but, if necessary to comply
with law or custom, MERS (as nominee for Lender and
Lender's successors and assigns) has the right to
exercise any or all of those interests, including, but
not limited to, the right to foreclose and sell the
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Property; and to take any action required of Lender
including, but not limited to, releasing and canceling
this Security Instrument.
Compl., Ex. 1, p. 3 (emphasis added) . 2 Thus, contrary to Duffy's
assertions, the Deed explicitly provided MERS with the right to
exercise the Lender's interests, including, but not limited to,
the right to foreclose on his property.
The D.C. Code provides that "[t]ransfer of an instrument
vests in the transferee any right of the transferor to
enforce the instrument." Leake v. Prensky, 798 F. Supp. 2d 254,
257 (D.D.C. 2011) (quoting D.C. Code § 28:3-203 (b)). Thus, the
rights vested in MERS could be and were transferred by valid
assign~ent to Bank of America. Se~ Compl., Ex. 2. Those rights
were then transferred by valid assignment to HSBC as Trustee for
Deutsche Bank. Compl., Ex. 3. Therefore, Duffy is not entitled
to either a declaration that the Assignments of the Deed are
void or a declaration "that none of the Defendants has any
interest in his property." Opp'n at 1, 8.
2
In deciding a motion under Federal Rule of Civil Procedure
12(b) (6), "a court may consider 'the facts alleged in the
complaint, documents attached as exhibits or incorporated by
reference in the complaint,' or 'documents upon which the
plaintiff's complaint necessarily relies even if the document is
produced not by [the parties] . '" Cannon v. Wells Fargo Bank,
N.A., F. Supp. 2d 2013 WL 3306156, at *6 (D.D.C. July 1,
2013) (citation omitted). Thus, the Court can consider the Deed
of Trust, attached to the Complaint as Exhibit 1, and the two
Assignments of the Deed, attached as Exhibits 2 and 3.
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None of Duffy's additional arguments in any way affect the
rights of Bank of America, acting on behalf of HSBC, to exercise
the power-of-sale clause in the Deed.
First, Duffy is incorrect that District of Columbia law
requires a foreclosing institution to be the holder of the
underlying Note. See Diaby v. Bierman, 795 F. Supp. 2d 108, 113
(D.D.C. 2011) (holding that "whether or not defendants are
holders of the note is not dispositive as to whether they have
standing to foreclose on the property"). The District of
Columbia is a non-judicial foreclosure jurisdiction, which
allows for a power-of-sale to be located in a deed of trust and
then executed by the lender or its representative. See id.; see
also Carter v. Bank of America, N.A., 888 F. Supp. 2d 1, 14
(D.D.C. 2012) (noting that District of Columbia is a non-
judicial foreclosure jurisdiction, which "allows foreclosure
pursuant to a 'power of sale provision contained in any deed of
trust"') (quoting Leake, 798 F. Supp. 2d at 256).
Second, Duffy alleges that there was a violation of D.C.
Code § 47-1431 when the Note was sold in September of 2011
without being recorded. Compl. ~~ 13-14. There is no requirement
that an assignment of a note be recorded to be valid. See
Robinson v. Deutsche Bank Nat'l Trust Co., Case No. 12-0732,
2013 WL 1191034, at *5 (D.D.C. Mar. 25, 2013) (noting that
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"District of Columbia law does not require an assignment of a
note or deed of trust to be recorded in order for the transfer
to be valid") ; Leake, 798 F. Supp. 2d at 257 (concluding that
bank could enforce note's foreclosure provision under District
of Columbia law, despite its failure to record the assignment of
the note); Diaby, 795 F. Supp. 2d at 112 (holding that "failure
to record an assignment does not give rise to a cause of
action") Thus, Duffy's argument regarding the failure to record
a transfer of the Note is unavailing. 3
In sum, Duffy signed a Deed which granted MERS a power-of-
sale over his property if he failed to make payments in
accordance with the agreement. Duffy has raised no fact or law
which challenges the validity of the power-of-sale clause,
MERS's ability to assign that right to Bank of America, Bank of
America's ability to assign that right to HSBC as Trustee for
3
Moreover, D.C. Code § 47-1431 does not expressly confer a
private right of action. The burden is on the plaintiff to show
that "the D.C. Council intended to imply a right to sue for
damages for violations" of the statute. Koker v. Aurora Loan
Servicing, LLC, Case No. 12-1069, 2013 WL 40320, at *7 (D.D.C.
Jan. 3, 2013) (quoting Coates v. Elzie, 768 A.2d 997, 1001 (D.C.
2001)). Duffy has failed to address this issue, much less carry
his burden of proof. His failure to respond to the argument is
enough to consider the issue conceded. See Koker, 2013 WL 40320,
at *7 (dismissing claim when plaintiff "provide [d] no analysis
on the point and simply assume[d] that she may sue for a
violation of the statute"); see also Henok v. Chase Home Fin.,
LLC, Case No. 12-292, 2013 WL 151173, at *7 (D.D.C. Jan. 15,
2 0 13 ) ( sa me) .
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Deutsche Bank, or Bank of America's ability to enforce that
right on HSBC's behalf. Thus, Duffy has failed to "state a claim
to relief that is plausible on its face, 11
Twombly, 550 U.S. at
570, and Defendants' Motion to Dismiss must be granted.
IV. MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT
Plaintiff filed a Motion for Leave to File Amended
Complaint [Dkt. No. 16] , and that Motion is now ripe. Because
the proposed Amended Complaint is based on the same mistaken
premise as the original Complaint, namely, that there is no
power-of-sale clause in the Deed, the amendment the Plaintiff
seeks is futile. See Hettings v. United States, 677 F.3d 471,
480 (D.C. Cir. 2012) (per curiam) ("A district court may deny a
motion to amend a complaint as futile if the proposed claim
4
would not survive a motion to dismiss. 11
) • Thus, Plaintiff's
Motion is denied.
V. CONCLUSION
For the foregoing reasons, the Defendants' Motion to
Dismiss is granted, and the Plaintiff's case is dismissed
4
In Plaintiff's Reply in Support of its Motion for Leave to
Amend Complaint [Dkt. No. 21], Plaintiff mentions for the first
time "the power of sale contained in the Deed of Trust" without
citation or explanation. Pl.'s Reply Mem. of Law in Support of
His Mot. to Amend the Compl. 4. The rest of Plaintiff's reply
suggests that, even if Plaintiff has now recognized that a
power-of-sale clause is present in the Deed, he does not
understand the legal significance of that fact.
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without prejudice. " [T] he standard for dismissing a complaint
with prejudice is high: 'dismissal with prejudice is warranted
only when a trial court determines that the allegation of other
facts consistent with the challenged pleading could not possibly
cure the deficiency.'" Belizan v. Herson, 434 F.3d 579, 583
(D.C. Cir. 2006) (quoting Firestone v. Firestone, 76 F.3d 1205,
1209 (D.C. Cir. 1996)) (emphasis in original). Because neither
the Plaintiff nor the Defendant identified the power-of-sale
clause in the Deed, the possibility that Plaintiff could allege
facts consistent with the presence of a power-of-sale clause
that could justify relief has never been addressed. Thus, in an
abundance of caution, the Court will dismiss the case without
prejudice.
An Order shall accompany this Memorandum Opinion.
January 30, 2014
Copies to: attorneys on record via ECF
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