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SHOUP vs. McCurdy & CANDLER, LLC | 11th Cir. Court of Appeals “MERS is NOT a CREDITOR, The complaint states a plausible claim for relief under the FDCPA”

SHOUP vs. McCurdy & CANDLER, LLC | 11th Cir. Court of Appeals “MERS is NOT a CREDITOR, The complaint states a plausible claim for relief under the FDCPA”


IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_________________________
No. 10-14619
__________________________
D.C. Docket No. 1:09-cv-02598-JEC

JONI LEE SHOUP,
on behalf of herself and all others similarly situated,
Plaintiff – Appellant,

versus

MCCURDY & CANDLER, LLC,
Respondent – Appellee.
__________________________
Appeal from the United States District Court
for the Northern District of Georgia

___________________________
(March 30, 2012)

Before DUBINA, Chief Judge, CARNES, Circuit Judge, and FORRESTER,*
District Judge.

*Honorable J. Owen Forrester, United States District Judge for the Northern District of
Georgia, sitting by designation.

PER CURIAM:

Joni Shoup filed a lawsuit against McCurdy & Candler, LLC alleging a
violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e. The
district court dismissed her complaint for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6), and Shoup appeals, contending that her
complaint stated a valid claim for statutory damages under the FDCPA because
McCurdy & Candler’s initial communication letter falsely said that its client,
Mortgage Electronic Registration Systems, Inc. (MERS), was Shoup’s “creditor.”

I.

Shoup bought a home in Georgia in 2003. To finance her new home, she
entered into a mortgage contract with America Wholesale Lender. The contract
stated that America Wholesale Lender was the “Lender,” but it also described
MERS as “the grantee under” the mortgage contract and as “a separate corporation
that is acting solely as a nominee for Lender and Lender’s successors and assigns.”
Shoup defaulted on her mortgage, and MERS’ law firm, McCurdy &
Candler, sent Shoup an initial communication letter. That letter was entitled,
“NOTICE PURSUANT TO FAIR DEBT COLLECTION PRACTICES ACT 15
USC 1692,” and stated that its purpose was “an attempt to collect a debt.” The
letter identified MERS as “the creditor on the above referenced loan.” (Emphasis
added.)

Soon after receiving that letter, Shoup filed a complaint against McCurdy &
Candler under the FDCPA. She alleged that MERS is not a “creditor” as defined
in the FDCPA because it did not offer or extend credit to Shoup and she does not
owe MERS a debt. Instead, according to the complaint, MERS is “a company that
tracks, for its clients, the sale of promissory notes and servicing rights.” Shoup,
therefore, alleged that McCurdy & Candler violated the FDCPA by falsely stating
in the initial communication letter that MERS was Shoup’s “creditor.”1
McCurdy & Candler filed a motion to dismiss under Rule 12(b)(6), which
the district court granted. Finding that MERS was a “creditor” under the FDCPA,
the court concluded that Shoup’s complaint did not state a claim for statutory
damages under the FDCPA. The court also concluded that, even if MERS was not
a “creditor,” calling MERS one was harmless. This is Shoup’s appeal.

II.

We review de novo the grant of a motion to dismiss under Rule 12(b)(6) for
failure to state a claim, “accepting the allegations in the complaint as true and
construing them in the light most favorable to the plaintiff.” Belanger v. Salvation
Army, 556 F.3d 1153, 1155 (11th Cir. 2009). “A complaint must state a plausible
claim for relief, and ‘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.’” Sinaltraninal v. Coca-Cola Co.,
578 F.3d 1252, 1261 (11th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662,
129 S.Ct. 1937, 1949 (2009)) (alteration omitted). We also review de novo
matters of statutory interpretation. Belanger, 556 F.3d at 1155.

Under the FDCPA, “[a] debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt,”
15 U.S.C. § 1692e, which includes “[t]he use of any false representation or
deceptive means to collect or attempt to collect any debt or to obtain information
concerning a consumer,” id. § 1692e(10). The statute defines “creditor” as “any
person who offers or extends credit creating a debt or to whom a debt is owed, but
such term does not include any person to the extent that he receives an assignment
or transfer of a debt in default solely for the purpose of facilitating collection of
such debt for another.” Id. § 1692a(4). And “[t]he FDCPA provides that ‘any
debt collector who fails to comply with any provision of this subchapter with
respect to any person is liable to such person’ for [actual and statutory] damages
and costs.” Bourff v. Lublin, __ F.3d __, slip op. at 6, No. 10-14618 (11th Cir.
Mar. 15, 2012) (quoting 15 U.S.C. § 1692k(a)).

Our decision in this case is controlled by our recent decision in Bourff. In
that case a law firm sent a letter to the plaintiff in “AN ATTEMPT TO COLLECT
A DEBT.” Id. at __, slip op. at 3 (quotation marks omitted). That letter identified
a loan servicer as “the creditor on the above-referenced loan.” Id. at __, slip op. at
3 (quotation marks omitted). The plaintiff’s complaint alleged that the loan
servicer was not a “creditor” under the FDCPA, id., and that the law firm violated
the FDCPA’s “prohibition on false, deceptive or misleading representations by
falsely stating in its collection notice that [the servicer] was the ‘creditor’ on [the
plaintiff’s] loan,” id. at __, slip op. at 5 (some quotation marks omitted). The
allegation that the loan servicer was not a “creditor” was enough to state a
plausible claim for relief under the FDCPA. Id. at __, slip op. at 6–7.

Here, viewing the allegations in the complaint in the light most favorable to
Shoup, she has alleged that MERS did not offer or extend credit to her and that she
does not owe a debt to MERS. Because the FDCPA defines a “creditor” as “any
person who offers or extends credit creating a debt or to whom a debt is owed,” 15
U.S.C. § 1692a(4), Shoup has alleged that MERS is not a “creditor” under the
FDCPA. Finally, because the complaint alleges that McCurdy & Candler’s initial
communication letter falsely identified MERS as her “creditor,” the complaint
states a plausible claim for relief under the FDCPA. See Bourff, __ F.3d at __,
slip op. at 6–7. And because the FDCPA provides a claim for statutory damages
based on any violation of the statute, see 15 U.S.C. § 1692k(a)(2), McCurdy &
Candler’s alleged violation of the FDCPA is not harmless. See Muha v. Encore
Receivable Mgmt., Inc., 558 F.3d 623, 629 (7th Cir. 2009) (“Were the plaintiffs
seeking actual damages rather than just statutory damages, they would have to
present some evidence that they were misled to their detriment.”); Baker v. G.C.
Servs. Corp., 677 F.2d 775, 780 (9th Cir. 1982) (“The statute clearly specifies the
total damage award as the sum of the separate amounts of actual damages,
statutory damages and attorney fees. There is no indication in the statute that
award of statutory damages must be based on proof of actual damages.”). The
district court erred in dismissing Shoup’s complaint under Rule 12(b)(6).

REVERSED AND REMANDED.

footnote:

1 Shoup also brought her claim on behalf of a putative class and sought class certification.
The district court did not rule on that issue, so it is not before us on appeal.

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BOURFF vs. RUBIN LUBLIN, LLC | GA 11th Cir. Appeals Court “The identity of the “creditor” in these notices is a serious matter, FDCPA”

BOURFF vs. RUBIN LUBLIN, LLC | GA 11th Cir. Appeals Court “The identity of the “creditor” in these notices is a serious matter, FDCPA”


IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

________________________
No. 10-14618
________________________
D.C. Docket No. 1:09-cv-02437-JEC

MICHAEL BOURFF,
Plaintiff – Appellant,

versus

RUBIN LUBLIN, LLC,
Defendant – Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(March 15, 2012)

Before EDMONDSON and PRYOR, Circuit Judges, and BOWDRE,* District
Judge.
*

PER CURIAM:
This appeal involves a Fair Dept Collection Practices Act claim in which a
“false representation” has been alleged. Michael Bourff appeals the district
court’s dismissal of his civil action under 15 U.S.C. §1692, the Fair Debt
Collection Practices Act (“FDCPA”), for failure to state a claim. The district court
concluded that Bourff’s claim was covered by the FDCPA but that Bourff did not
allege acts that violated the FDCPA. We vacate the dismissal and remand the case
for further proceedings.

Background

This case involves a $195,000 loan by America’s Wholesale Lender
(“AWL”) to Michael Bourff. The loan was evidenced by a note, was used to
purchase property in Fulton County, Georgia, and was secured by a deed to the
property purchased.1

The basics of this case are not in dispute. In April 2009 Bourff failed to
make a payment on the loan and caused default under the terms of the note. AWL
later assigned the loan and the security deed to BAC Home Loan Servicing, LP
f/k/a Countrywide Home Loans Servicing, LP (“BAC”) for the purpose of
collecting on the note. BAC in turn hired defendant law firm, Rubin Lublin, LLC
(“Rubin Lublin”), to assist in collection efforts. In late May 2009 Rubin Lublin
sent a notice to Bourff stating that they had been retained to help collect on the
loan. The notice clearly stated that it was being sent as “NOTICE PURSUANT
TO FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. § 1692[,]” and that
it was “AN ATTEMPT TO COLLECT A DEBT.” The notice also identified BAC
as “the creditor on the above-referenced loan.” (Compl. Ex. A.)

Shortly after receiving the notice, Bourff filed this civil action against Rubin
Lublin pursuant to the FDCPA. Bourff claimed that the notice sent by Rubin
Lublin violated §1692e of the FDCPA by falsely representing that BAC was the
“creditor” on the loan, despite entities in BAC’s position being specifically
excluded from the definition of “creditor” by the language of the FDCPA. Rubin
Lublin filed a motion to dismiss under Rule 12(b)(6), and the district court
dismissed the action for failure to state a claim under the FDCPA. The district
court concluded that BAC was a “creditor” according to the ordinary meaning of
the term and that, even if BAC was no creditor, the error in listing it as such was a
harmless mistake in the use of the term because BAC had the power to foreclose
on the property or otherwise to act as the creditor on the loan. (Order 11.)

Standard of Review

We review the grant of a motion to dismiss de novo; and in so doing, we
accept the allegations in the complaint as true while construing them in the light
most favorable to the Plaintiff. Powell v. Thomas, 643 F.3d 1300, 1302 (11th Cir.
2011). The interpretation of a statute is likewise reviewed de novo as a purely
legal matter. Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009).
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, 129 S.Ct.
1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974
(2007)). Stating a plausible claim for relief requires pleading “factual content that
allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged”: which means “more than a sheer possibility that a
defendant has acted unlawfully.” Id.

DISCUSSION

The FDCPA limits what is acceptable in attempting debt collection. The
FDCPA applies to the notice here in question because the notice was an attempt at
debt collection. The notice stated that Rubin Lublin had been retained to “collect
the loan,” stated in bold capital letters that it was “an attempt to collect a debt,”
and advised Bourff to contact Rubin Lublin to “find out the total current amount
needed to either bring your loan current or to pay off your loan in full.” (Compl.
Ex. A.)

The FDCPA, among other things, mandates that, as part of noticing a debt, a
“debt collector” must “send the consumer a written notice containing” — along
with other information — “the name of the creditor to whom the debt is owed[.]”
15 U.S.C. §1692g(a)(2). In addition, the Act prohibits a “debt collector” from
using “any false, deceptive, or misleading representation or means in connection
with the collection of any debt.” 15 U.S.C. §1692e. The use of “or” in §1692e
means that, to violate the FDCPA, a representation by a “debt collector” must
merely be false, or deceptive, or misleading. A false representation in connection
with the collection of a debt is sufficient to violate the FDCPA facially, even
where no misleading or deception is claimed.

Plaintiff claims that Rubin Lublin violated the prohibition on “false,
deceptive, or misleading representation[s]” by falsely stating in its collection
notice that BAC was the “creditor” on Bourff’s loan. The identity of the
“creditor” in these notices is a serious matter. For the FDCPA, “creditor” is
defined this way:

“The term ‘creditor’ means any person who offers or extends credit
creating a debt or to whom a debt is owed, but such term does not include
any person to the extent that he receives an assignment or transfer of a debt
in default solely for the purpose of facilitating collection of such debt for
another.” 15 U.S.C. §1692a(4).

Plaintiff’s complaint alleges that Bourff defaulted on the loan in April 2009
by failing to tender the required monthly payment. The complaint further alleges
that BAC “received an assignment of the security deed and debt on June 19, 2009 .
. ., while the Plaintiff’s loan was in default, for the purpose of facilitating
collection of such debt for another, presently unknown, entity.” (Compl. ¶13)
Accepting Plaintiff’s allegations as true and construing them in the light most
favorable to the Plaintiff, the statement on the May 2009 notice that BAC was
Plaintiff’s “creditor” was a false representation and was made by a “debt collector”
as defined in §1692a of the FDCPA.

The FDCPA provides that “any debt collector who fails to comply with any
provision of this subchapter with respect to any person is liable to such person…”
for potential damages and costs. 15 U.S.C. §1692k(a). The complaint on its face,
taken as true and viewed in the light most favorable to Plaintiff, states a claim
upon which relief may be granted under the FDCPA. As such, we vacate the
dismissal and remand this case to the district court for further proceedings.

VACATED and REMANDED.

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KCSG Television – Utah Federal Judges Decisions Conflict in ReconTrust Utah Home Foreclosure Actions

KCSG Television – Utah Federal Judges Decisions Conflict in ReconTrust Utah Home Foreclosure Actions


There are some judges that get it and some that maybe still do but side the other way!

KCSG-

Utah senior federal Judges Dee Benson and Bruce Jenkins have ruled Bank of America’s foreclosure arm, ReconTrust Company, N.A. (NYSE: “BAC”) may not be qualified to perform non-judicial foreclosures in Utah. However, this week senior federal Judge David Sam ruled that ReconTrust is operating under the National Bank Act regulated by the Office of the Comptroller of the Currency (OCC), is a trustee under the Texas law where ReconTrust is located rendering Utah Code 57-1-21(3) inapplicable. Ruling

The ruling comes in a case filed by attorney John Christian Barlow, in which ReconTrust is being sued by Utah homeowner Garry Franklin Garrett and accused of conducting an unlawful foreclosure sale because ReconTrust is not a qualified trustee under Utah Law.

[KCSG]

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UT Class Action Lawsuit Alleging Fair Debt Collection Violations to Proceed Against Bank of America and Recontrust Company

UT Class Action Lawsuit Alleging Fair Debt Collection Violations to Proceed Against Bank of America and Recontrust Company


KCSG-

US District Judge Dee Benson ruled Tuesday that a class action lawsuit can proceed against ReconTrust and Bank of America (NYSE: “BAC”).

.

IN THE UNITED STATES DISTRICT COURT, DISTRICT OF UTAH,

CENTRAL DIVISION

JEREMY COLEMAN, DWAYNE WATSON, SAMUEL ADAMSON, ETHNA LYNCH,

Plaintiffs,

vs.

RECONTRUST COMPANY, N.A.,

[…]

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11th Circuit Reversed/Remands “the federal court lacked jurisdiction because although the petition referenced federal laws, none of the claims relied on federal law”

11th Circuit Reversed/Remands “the federal court lacked jurisdiction because although the petition referenced federal laws, none of the claims relied on federal law”


IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

WEKESA O. MADZIMOYO,
Plaintiff-Appellant,

versus

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., f.k.a. The Bank of New York Trust Company, N.A.,
JP MORGAN CHASE BANK, N.A.,
GMAC MORTGAGE, LLC,
MCCURDY & CANDLER, LLC,
ANTHONY DEMARLO, Attorney,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(September 7, 2011)

Before TJOFLAT, CARNES and KRAVITCH, Circuit Judges.

PER CURIAM:

Wekesa Madzimoyo, proceeding pro se, appeals the district court’s
judgment on the pleadings in favor of the defendants. Because we conclude that
the district court lacked removal jurisdiction, we vacate and remand.

In July 2009, Madzimoyo filed an emergency petition in state court seeking
a temporary restraining order (TRO) to stop foreclosure proceedings on his home
by defendants Bank of New York Mellon Trust Company, JP Morgan Chase Bank,
McCurdy & Candler, and attorney Anthony DeMarlo. According to the petition,
none of the defendants was the original lender and there was no evidence that the
original lender had transferred its rights to any defendant. In support of his
petition, Madzimoyo submitted correspondence sent to the defendants in which he
sought to verify their rights over the mortgage. Some of the correspondence
referenced the Fair Debt Collection Practice Act (FDCPA) and Regulation Z, the
Truth-in-Lending regulations. The state court issued the TRO and scheduled a
hearing on the petition to stop the foreclosure.

The day before the scheduled hearing in state court, the defendants removed
the petition to federal district court in the Northern District of Georgia, asserting
federal-question jurisdiction because Madzimoyo had alleged violations of the
FDCPA and Regulation Z. Madzimoyo moved to remand to state court, disputing
that he raised any basis for federal jurisdiction.

The magistrate judge denied the motion to remand, finding that
Madzimoyo’s petition raised federal questions under the FDCPA and Regulation
Z. The defendants then moved for judgment on the pleadings. In a brief in
support of the motion, the defendants argued that the FDCPA and Regulation Z
claims failed because Madzimoyo had not alleged any violation of these statutes.
The magistrate judge recommended that the motion for judgment on the
pleadings be granted. The district court adopted the recommendation, over
Madzimoyo’s objections, and granted judgment on the pleadings. This appeal
followed.

On appeal, both parties address the merits of the order granting judgment on
the pleadings, and there is no discussion of the district court’s jurisdiction over
Madzimoyo’s action. Nevertheless, we are “obliged to notice any lack of
jurisdiction regardless of whether the question is raised by the parties themselves.”
Edge v. Sumter Cnty. Sch. Dist., 775 F.2d 1509, 1513 (11th Cir. 1985).

We review questions of subject-matter jurisdiction de novo. Romero v.
Drummond Co., 552 F.3d 1303, 1313 (11th Cir. 2008). We consider sua sponte
whether the district court had removal jurisdiction. Cotton v. Mass. Mut. Life Ins.
Co., 402 F.3d 1267, 1280 (11th Cir. 2005).

Under the removal statute:
Any civil action of which the district courts have original jurisdiction
founded on a claim or right arising under the Constitution, treaties or
laws of the United States shall be removable without regard to the
citizenship or residence of the parties. Any other such action shall be
removable only if none of the parties in interest properly joined and
served as defendants is a citizen of the State in which such action is
brought.

28 U.S.C. § 1441(b). In other words, to be removable on federal-question
jurisdiction grounds, the case must arise under federal law. See Merrell Dow
Pharm. Inc. v. Thompson, 478 U.S. 804, 807-08 (1986). The “well-pleaded
complaint” rule instructs that a case does not arise under federal law unless a
federal question is presented on the face of the plaintiff’s complaint. Id. at 808;
Kemp v. Int’l Bus. Mach. Corp., 109 F.3d 708, 712 (11th Cir. 1997) (citing
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 11 (1983)).

A federal question is presented by the complaint when the suit relies on a
federal cause of action or where “the vindication of a right under state law
necessarily turned on some construction of federal law.” See Merrell Dow, 478
U.S. at 808. Under this latter analysis, federal question jurisdiction should be
narrowly construed. See id. at 810-14. “[T]he mere presence of a federal issue in
a state cause of action does not automatically confer federal-question jurisdiction,”
even where the interpretation of federal law may constitute an element of the state
cause of action. Id. at 813. More recently, the Supreme Court fashioned another
test for deciding whether federal courts should exercise federal question
jurisdiction over removed state court proceedings: “does a state-law claim
necessarily raise a stated federal issue, actually disputed and substantial, which a
federal forum may entertain without disturbing any congressionally approved
balance of federal and state judicial responsibilities.” Grable & Sons Metal
Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). “If the plaintiff
elects to bring only state law causes of action in state court, no federal question
will appear in the complaint that could satisfy the well-pleaded complaint rule, and
the case may not be removed to federal court.” Kemp, 109 F.3d at 712.

Upon review of the record, we conclude that the district court should not
have exercised federal-question jurisdiction upon the removal of this case.
Although Madzimoyo’s petition referenced federal laws in passing, none of his
causes of action relied on even the interpretation of federal law. Rather,
Madzimoyo merely asserted that he requested his loan information from the
mortgage companies in accordance with federal law to show that he had acted
diligently and merited state relief. Accordingly, we vacate the judgment of the
district court and remand with instructions that the district court remand the
proceeding to the state court.

VACATED AND REMANDED.

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READ | Letter from Utah Attorney General Mark Shurtleff to Bank of America President Brian T. Moynihan re: ReconTrust “ILLEGAL”

READ | Letter from Utah Attorney General Mark Shurtleff to Bank of America President Brian T. Moynihan re: ReconTrust “ILLEGAL”


“All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal”

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Montana Appeals Court Affirms $311K Award Against Law Firm, Debt Collectors. MCCOLLOUGH v. JOHNSON, RODENBURG & LAUINGER

Montana Appeals Court Affirms $311K Award Against Law Firm, Debt Collectors. MCCOLLOUGH v. JOHNSON, RODENBURG & LAUINGER


TIMOTHY MCCOLLOUGH

V.

JOHNSON, RODENBURG & LAUINGER,

Appeal from the United States District Court
for the District of Montana
Carolyn S. Ostby, Magistrate Judge, Presiding

Argued and Submitted
July 29, 2010—Billings, Montana

Filed March 4, 2011

Before: Sandra Day O’Connor, Associate Justice,*
Sidney R. Thomas and William A. Fletcher, Circuit Judges.

Opinion by Judge Thomas
*

OPINION

THOMAS, Circuit Judge:

Debt collection law firm Johnson, Rodenburg & Lauinger
(“JRL” or “the law firm”) appeals from the entry of summary
judgment against it under the federal Fair Debt Collection
Practices Act (“FDCPA”), and from a subsequent jury verdict
awarding damages under the FDCPA, the Montana Unfair
Trade Practices and Consumer Protection Act (“MCPA”), and
state torts of malicious prosecution and abuse of process. We
have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm.

continue below…

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CA Judge Grants ‘TRO, Serious Questions Respect To Fraud Claims” CRUZ v. WAMU

CA Judge Grants ‘TRO, Serious Questions Respect To Fraud Claims” CRUZ v. WAMU


Excerpt:

In his motion for a TRO, Plaintiff argues he has shown a likelihood of success on the merits
of his claims for violation of California Business and Professions Code § 17200 and promissory
estoppel. The Court interprets Plaintiff’s argument regarding his claim for promissory estoppel as
applying to his claim for fraud. The elements of a fraud claim are false representation, knowledge of
falsity, intent to defraud, justifiable reliance, and damages
. Vess v. Ciba-Geigy Corp. USA, 317 F.3d
1097, 1106 (9th Cir. 2003). Plaintiff alleges in a verified Complaint and in his motion for a TRO that
a WAMU representative made a knowingly false statement to him with the intent to defraud, upon
which he justifiably relied, causing damages
. Accordingly, Plaintiff has at least raised serious
questions going to the merits with respect to his fraud claim
.

<SNIP>

CONCLUSION

For the foregoing reasons, Plaintiff’s application for a TRO is granted. Defendants and their
agents, employees, representatives, successors, partners, assigns, attorneys, and any and all acting in
concert or participation with them are enjoined from engaging in or performing any act to deprive
Plaintiff of ownership or possession of Plaintiff’s real property located at 919 Brass Way, Encinitas,
California 92024, including, but not limited to, proceeding with the non-judicial foreclosure sale
scheduled for March 18, 2011 and recording any deeds relating to the property. Defendants are
ordered to show cause, on or before March 22, 2011, why a preliminary injunction should not be
issued enjoining Defendants from taking such actions until termination of this case. A hearing shall
be held on Plaintiff’s motion for a preliminary injunction on March 24, 2011 at 2:30 p.m. in
Courtroom 10. This temporary restraining order shall remain in place for 14 days or until this Court
issues an Order on Plaintiff’s motion for a preliminary injunction, whichever shall first occur. The
Court notes, pursuant to Federal Rule of Civil Procedure 65(a)(1), the Court “may issue a preliminary
injunction only on notice to the adverse party.” Furthermore, the Court points out a TRO is binding
only upon parties and their officers, agents, and employees or those acting in concert with them “who
receive actual notice of [the TRO] by personal service or otherwise.” Fed. R. Civ. P. 65(d)(2).
Accordingly, Plaintiff shall forthwith serve a copy of this Order upon all Defendants.

IT IS SO ORDERED.
DATED: March 14, 2011

Continue below…

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OH Judge Denies MTD “FDCPA, Ohio Consumer Sales Practices Act” TURNER v. Ohio Consumer Sales Practices Act

OH Judge Denies MTD “FDCPA, Ohio Consumer Sales Practices Act” TURNER v. Ohio Consumer Sales Practices Act


TAMARA TURNER, et al., Plaintiffs,
v.
LERNER, SAMPSON & ROTHFUSS, Defendant.

Case No. 1:11-CV-00056.United States District Court, N.D. Ohio.

March 4, 2011.

OPINION & ORDER

[Resolving Doc. No. 8]

JAMES S. GWIN, District Judge.

The Defendant, Lerner, Sampson & Rothfuss (“Lerner”), moves the Court to dismiss this action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. [Doc. 8.] The Plaintiffs oppose the motion. [Doc. 14.] The Defendant replied. [Doc. 19.]

For the following reasons, the Court GRANTS IN PART and DENIES IN PART the Defendant’s motion to dismiss.

I. Background

In this putative class action, Plaintiffs Tamara Turner, Phillip Turner, Mary Sweeney, James Unger, and Kelly Unger file suit alleging violations of state and federal consumer protection statutes. [Doc. 1-1.] The Plaintiffs bring claims under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §1692, as well as a variety of Ohio state law claims, including the Ohio Consumer Sales Protection Act, O.R.C. Chapter 1345. [Doc. 1-1.]

This action stems from a number of mortgage foreclosure suits that Defendant Lerner initiated in Ohio state court. [Id.] Defendant Lerner is a law firm that prosecutes mortgage foreclosure actions. The Plaintiffs allege that Defendant Lerner engages in the widespread practice of filing and prosecuting mortgage foreclosure actions, notwithstanding the fact that many of Lerner’s clients lack proper standing to sue. [Id. at 2.] According to the Plaintiffs, the Defendant also employs individuals who regularly execute assignments of mortgages on behalf of the Mortgage Electronic Registration System (“MERS”) to their clients without proper legal authority to do so. [Id at 2.] The Plaintiffs further allege that Defendant Lerner has the practice of filing false and misleading affidavits in an effort to mislead courts into ruling that Lerner’s clients possess proper standing to prosecute foreclosure actions. [Id. at 2.] The Plaintiffs say that this practice has caused hundreds — and possibly thousands — of individuals in Ohio to defend frivolous foreclosure actions in which the Defendant’s clients lacked basic standing to sue. [Id.]

The Plaintiffs also set forth a number of allegations specific to the named Plaintiffs. First, the Plaintiffs say that Tamara and Phillip Turner resided in a home at 20526 Byron Road, Shaker Heights, Ohio, until Defendant Lerner filed a foreclosure action on behalf of Provident Funding Associates L.P. on October 16, 2009. [Id. at 5.] Tamara and Phillip Turner allege that they mistakenly believed that they only had twenty-eight days to vacate their home, and as a result, moved in with Phillip Turner’s mother. [Id. at 5.] On July 26, 2010, Defendant Lerner filed an affidavit with the Cuyahoga County Court of Common Pleas that falsely set forth the Provident Funding was the real party in interest in the foreclosure action. [Id. at 5.] However, on November 9, 2010, the Ohio state court action against the Turners was dismissed for lacking of standing, because Defendant Lerner was unable to prove that Provident had standing as holder of the relevant mortgage note to file the foreclosure action. [Id. at 5.] Apparently, Provident Funding took no appeal from that dismissal.

Second, the Plaintiffs say that Mary Sweeney owns a home located at 315 Overlook Park, Cleveland. [Id. at 6.] On January 5, 2010, Defendant Lerner filed a foreclosure action on behalf of Bank of America, claiming that Bank of America owned a promissory note which gave it standing to institute a foreclosure proceeding against her. [Id. at 6.] The Plaintiffs say that Defendant Lerner caused one of their employees — Shellie Hill — to fraudulently execute an assignment of the relevant mortgage note from MERS to Bank of America. [Id. at 6.] The Plaintiffs allege this assignment was not valid because Shellie Hill did not have any authority from MERS to execute the assignment to Bank of America. [Id. at 6.] However, on August 24, 2010, the Ohio state court action against Sweeney was dismissed for lacking of standing, because Defendant Lerner was unable to prove that Bank of America had standing as holder of the relevant mortgage note to file the foreclosure action. [Id. at 6-7.] Apparently, Bank of America took no appeal from that dismissal.

Third, and finally, Plaintiffs say that James and Kelly Unger own a home at 3158 Morley Road, Shaker Heights, Ohio. [Id. at 7.] On May 29, 2007, Defendant Lerner served the Ungers with a foreclosure complaint by on behalf of Bank of New York. [Id. at 7.] The Plaintiffs claim that Lerner’s employee, Shellie Hill, fraudulently assigned the mortgage note on behalf of MERS to Bank of New York. [Id. at 7-8.] The Plaintiffs say this assignment was not valid because Shellie Hill did not have any authority from MERS to execute the assignment to Bank of New York. [Id. at 7-8.] On July 14, 2009, the Cuyahoga County Court of Common Pleas dismissed the foreclosure action because the Defendant failed to prove that the Bank of New York had standing to sue. [Id. at 8.] The Ungers were again served with a foreclosure complaint in an action filed by the Bank of New York Mellon Trust Company on November 30, 2009. [Id. at 8.] This second action was dismissed on July 13, 2010; there is no allegation that Defendant Lerner directly participated in this second lawsuit. [Id. at 8.]

On January 4, 2011, Plaintiffs filed a complaint in the Cuyahoga County Court of Common Pleas. [Id.] The Plaintiffs bring six causes of action of behalf of a putative class of all Ohio homeowners who were defendants in foreclosure actions brought by Defendant Lerner since January 5, 2006. [Id.] Specifically, the Plaintiffs bring causes of action: (1) under the FDCPA, 15 U.S.C. §1692, saying the Defendant used false, deceptive, and misleading practices to prosecute foreclosure actions (Count 1); (2) under the FDCPA, saying that the Defendant’s behavior constitutes slander of credit (Count 2); (3) for abuse of process under Ohio state law (Count 3); (4) for malicious prosecution under Ohio state law (Count 4); (5) under the Ohio Consumer Sales Protection Act, O.R.C. Chapter 1345, saying the Defendant’s filing of frivolous lawsuits constitutes an “unfair, deceptive and unconscionable sales practice” (Count 5); and (6) for filing of frivolous lawsuits under Ohio Revised Code § 2323.51 (Count 6). [Doc. 1-1.]

On January 7, 2011, the Defendant removed the action to federal court. [Doc. 1.] The Court has proper subject matter jurisdiction over the claims brought under the FDCPA and supplemental jurisdiction over the claims brought under Ohio state law. 28 U.S.C. § 1331; 15 U.S.C. § 1692k(d); 28 U.S.C. § 1367(a). The Defendant now moves to dismiss this action for failing to state a claim. [Doc. 8.]

II. Legal Standard

A court may grant a motion to dismiss only when “it appears beyond doubt” that the plaintiff fails to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 45 (1957). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). The plausibility requirement is not a “probability requirement,” but requires “more than a sheer possibility that the defendant has acted unlawfully.” Id.

Federal Rule of Civil Procedure 8 provides the general standard of pleading and only requires that a complaint “contain . . . a short plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 129 S. Ct. at 1949Iqbal, 129 S. Ct. at 1949-51. (citations removed). In deciding a motion to dismiss under Rule 12(b)(6), “a court should assume the[] veracity” of “well-pleaded factual allegations,” but need not accept a plaintiff’s conclusory allegations as true.

III. Analysis

III.A Fair Debt Collection Practices Act (Count 1)

Congress enacted the FDCPA in order to eliminate “the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a). The statute is very broad, and was intended to remedy “what it considered to be a widespread problem.” Frey v. Gangwish, 970 F.2d 1516, 1521 (6th Cir.1992). “When interpreting the FDCPA, [courts should] begin with the language of the statute itself . . .” Schroyer v. Frankel, 197 F.3d 1170, 1174 (6th Cir.1999). With the purpose of the FDCPA in mind, the Court will proceed to the substance of the Plaintiffs’ claims.

i. Equitable Tolling

Claims brought under the FDCPA are subject to a one-year statute of limitations. 15 U.S.C. § 1692k(d). The claims brought by Plaintiffs James and Kelly Unger are not timely, since the last action alleged to be taken by the Defendant occurred in July, 2009. Therefore, unless equitable tolling applies to their claim, it must be dismissed as untimely.

The Sixth Circuit has not ruled on whether equitable tolling applies to claims under the FDCPA. Whittiker v. Deutsche Bank Nat. Trust Co., 605 F.Supp.2d 914, 917 (N.D. Ohio 2009). Nonetheless, since the Sixth Circuit has held that equitable tolling applies to claims brought under the Truth in Lending Act, district courts in this Circuit generally also apply equitable tolling principles to claims brought under the FDCPA. See, e.g., Zigdon v. LVNV Funding, LLC, 2010 WL 1838637 at *6-12 (N.D. Ohio, Apr. 23, 2010); Whittiker, 605 F. Supp.2d at 917; Foster, et al. v. D.B.S. Collection Agency, 463 F.Supp.2d 783, 799 (S.D. Ohio 2006).

To benefit from equitable tolling, a plaintiff must show that she has been pursuing her rights diligently and that some extraordinary circumstance stood in her way. Lawrence v. Florida, 549 U.S. 327, 335 (2007). Equitable tolling is “available only in compelling circumstances which justify a departure from established procedures.” Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1488 (6th Cir. 1989). Sixth Circuit case law has consistently held that the circumstances which will lead to equitable tolling are rare. Souter v. Jones, 95 F.3d 577, 590 (6th Cir. 2005). Moreover, the plaintiff has the burden of persuading the court that she is entitled to equitable tolling. Allen v Yukins, 366 F.3d 396, 401 (6th Cir. 2004). The following factors are generally considered when the issue of equitable tolling arises: (1) lack of notice of the filing requirement, (2) lack of constructive knowledge of the filing requirement, (3) diligence in pursuing one’s rights, (4) absence of prejudice to the defendant, and (5) the plaintiff’s reasonableness in remaining ignorant of the particular legal requirement. Chavez v. Carranza, 559 F.3d 486, 492 (6th Cir. 2009).

The Plaintiffs say that the claims of James and Kelly Unger should be subject to equitable tolling since another law firm attempted to foreclose on the Ungers’ home in 2010 on behalf of the Bank of New York Mellon Trust Company. The Plaintiffs allege that the firm which brought the second suit attempted to use the assignment of mortgage previously executed by one of Defendant Lerner’s employee as evidence of standing. [Doc. 14 at 9.] This second foreclosure action was ultimately dismissed on July 13, 2010, also for want of standing to sue. [Id.] There is no allegation that Defendant Lerner participated in this second action or otherwise was connected to it.

The Court does not find this sufficient reason to justify equitable tolling of the statute of limitations. The Ungers do not allege any circumstances that would have prevented them from filing this action within the one-year statute of limitations. The Ungers do not allege or proffer any evidence showing that they have been diligently pursuing their legal rights or that Defendant Lerner concealed their alleged wrongdoing or tricked them into not exercising rights. SeeMezo v. Holder, 615 F.3d 616, 620 (6th Cir. 2010); Barry v. Mukasey, 524 F.3d 721, 724 (6th Cir. 2008). Indeed, the Ungers were free to bring all claims related to the first lawsuit prior to or during the pendency of the second lawsuit. If anything, the Ungers are alleging an ongoing violation that did not end until July, 2010. However, this argument also fails, because there is no allegation that Defendant Lerner filed or otherwise participated in the second foreclosure action that was filed against the Ungers.

Accordingly, the Court GRANTS the Defendant’s motion to dismiss all claims brought by Plaintiffs James and Kelly Unger under the FDCPA.

ii. Violation of FDCPA

The Court will now proceed to the claims brought by Plaintiffs Tamara Turner, Phillip Turner, and Mary Sweeney, all of which are brought within the one-year statute of limitations.[1]

Section 1692e of the FDCPA generally prohibits a debt collector from using false, deceptive or misleading representation or means in connection with the collection of a debt. 15 U.S.C. § 1692e.[2] Section 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f.[3] In the Sixth Circuit, a false statement that is not deceptive under the objective “least sophisticated consumer” test is not a violation of the FDCPA. See Lewis v. ACB Business Services, Inc., 135 F.3d 389, 401-02 (6th Cir. 1998). In Count 1, the Plaintiffs allege Defendant Lerner violated the FDCPA in the underlying foreclosure actions by misrepresenting who owned Plaintiffs’ mortgage notes at the time the underlying foreclosure actions were filed, thus concealing the fact that its clients lacked capacity to bring the suits. [Doc. 14 at 5.]

Simple inability to prove present debt ownership at the time a collection action is filed does not constitute a FDCPA violation. Harvey v. Great Seneca Financial Corporation, 453 F.3d 324, 331-33 (6th Cir.2006). Courts in the Sixth Circuit applying the FDCPA to lawsuits brought to collect a debt have generally found, however, that where a plaintiff alleges that the plaintiff in an underlying debt collection action says that it was the owner of a debt, “all the while knowing that they did not have means of proving the debt,” that a FDCPA complaint will survive a motion to dismiss for failure to state a claim. See, e.g., Delawder v. Platinum Financial Services, 443 F. Supp.2d 942, 945 (S.D. Ohio 2005)[4] (false affidavit attached to complaint “all the while knowing that they did not have means of proving the debt”).

Here, not only do the Plaintiffs allege that the Defendant filed the foreclosure actions knowing that it did not have the means of proving the ownership of the debt; they also allege that the Defendant knowingly executed misleading affidavits and unauthorized assignments of the notes to their clients. [Doc. 1-1.] The Court finds that this conduct, if proven true, would be actionable under the FDCPA under both Sections 1692e and 1692f. See Hartman v. Asset Acceptance Corp., 467 F. Supp.2d 769, 779 (S.D. Ohio 2004) (holding that a representation that defendant was a “holder in due course” of a debt is actionable as a representation concerning the “legal status” of the debt, if the representation is false and if the defendant does not satisfy the bona fide error defense); Kline, 2010 WL 1133452, at *8; Lee v. Javitch, Block & Rathbone, LLP, 484 F. Supp.2d 816, 820 (S.D. Ohio 2007) (“Section 1692f of the FDCPA . . . has been described as a `backstop’ in the statute, intended to cover actionable debt collection practices that may not be expressly addressed in Sections 1692d and 1692e”).[5]

Accordingly, the Court DENIES the Defendant’s motion to dismiss Count 1 of the complaint as to Plaintiffs Tamara Turner, Phillip Turner, and Mary Sweeney.

III.B Slander of Credit (Count 2)

The Plaintiffs next bring a cause of action for “slander of credit” under the FDCPA, saying that instituting a legal action based upon manufactured or false evidence constitutes slander of credit. [Doc. 1-1.] The Plaintiffs fail to explain the basis for this claim, other than saying they are bringing the claim under the FDCPA. The Court finds, given this paucity of explanation, that the Plaintiffs fail to allege a valid cause of action for slander of credit. A claim will not survive a motion to dismiss where a plaintiff simply lists causes of action, but neglects to make any plausible factual allegations related to them.

There are several theories under which “slander of credit” could be actionable. However, the Plaintiffs do not allege factual circumstances that would constitute possible violations. For example, the Plaintiffs fail to allege that the Defendant made a negative report to a credit reporting agency or that the Defendant threatened to report the Plaintiffs to a credit agency related to the mortgages in question. See 15 U.S.C. § 1681h; 15 U.S.C. § 1692e(8). The Court does not have the duty to imagine or devise theories of recovery, and accordingly, the Court GRANTS the Defendant’s motion to dismiss Count 2 of the complaint.[6]

III.C Abuse of Process (Count 3)

The Plaintiffs also bring a claim for abuse of process under Ohio state law. Under Ohio law, the elements of a claim for abuse of process are that: “(1) that a legal proceeding has been set in motion in proper form and with probable cause; (2) the proceeding has been perverted to attempt to accomplish an ulterior purpose for which it was not designed; and (3) direct damage has resulted from the wrongful use of process.” Voyticky v. Village of Timberlake, Ohio, 412 F.3d 669, 676 (6th Cir. 2005) (quoting Yaklevich v. Kemp, Schaeffer, & Rowe Co. et. al., 626 N.E.2d 115, 116 (Ohio 1994)). “The tort action termed `abuse of process’ has developed for `cases in which legal procedure has been set in motion in proper form, with probable cause, and even with ultimate success, but nevertheless has been perverted to accomplish an ulterior purpose for which it was not designed.'” Yaklevich, 626 N.E.2d at 118 (quoting Prosser & Keeton, The Law of Torts (5th ed.1984) 897, Section 121). Thus, “there is no liability [for abuse of process] where the defendant has done nothing more than carry out the process to its authorized conclusion, even though with bad intentions.” Id. at 118 n. 2 (citing Prosser & Keeton, supra, at 898). Rather, in an abuse of process case, “[t]he improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of the process as a threat or a club.” Robb v. Chagrin Lagoons Yacht Club, Inc., 662 N.E.2d 9, 14 (Ohio 1996).

Here, even accepting the Plaintiff’s allegations as true, their claim for abuse of process fails. In support of their claim, Plaintiffs say that “the very act of attempting to force people out of their homes when their client does not have the proper paperwork to prove ownership constitutes malice.” [Doc. 14 at 16.] However, the Plaintiffs own allegations negate several of the elements of this cause of action.

On the first element — a legal proceeding initiated in proper form and with probable cause — the Plaintiffs allege that the Defendants did not have the proper standing or evidence needed to initiate their foreclosure actions. In claiming that the Defendant’s clients did not have probable cause to sue, the Plaintiffs seek to prove the exact opposite of this element of the abuse of process claim. Similarly, on the second element of the abuse of process claim — the proceeding has been perverted to attempt to accomplish an ulterior purpose for which it was not designed — the Plaintiffs own allegations again negate this element. The Plaintiffs claim that the Defendants initiated foreclosure actions without standing in the hope that it could nonetheless force the residents out of their homes. [Doc. 1-1 at 2-3; Doc. 14 at 16.] However, the proper purpose of a foreclosure action is to force people out of their homes; the Plaintiffs are alleging not that the Defendant used a foreclosure action for an improper purpose, but that the Defendants instituted foreclosure actions without reasonable hope of success.

Indeed, “`abuse of process differs from malicious prosecution in that the former connotes the use of process properly initiated for improper purposes, while the latter relates to the malicious initiation of a lawsuit which one has no reasonable chance of winning.'” Clermont Environmental Reclamation Co. v. Hancock, 474 N.E.2d 357, 362 (Ohio Ct. App. 1984); see also Avco Delta Corp. v. Walker, 258 N.E.2d 254, 257 (Ohio Ct. App. 1969) (“the malicious abuse of process is the employment of a process in a manner not contemplated by law, or to obtain an object which such a process is not intended by law to effect”). Here, rather than using the lawsuit to obtain a collateral advantage, the Plaintiffs allege that the Defendant filed the appropriate type of action for their ultimate goal — foreclosure of a home — but filed that action without proper probable cause. See Havens-Tobias v. Eagle, 2003 WL 1601461, at *5 (Ohio Ct. App., Mar. 28, 2003).

Accordingly, since the Plaintiffs’ allegations do not make out a claim for abuse of process, the Court GRANTS the Defendant’s motion to dismiss on this claim.

III.D Malicious Prosecution (Count 4)

The Plaintiffs also assert a claim of malicious civil prosecution. [Doc. 1-1 at 10.] To assert a claim for malicious prosecution under Ohio law, a plaintiff must prove: “(1) malicious institution of prior proceedings against the plaintiff by defendant . . . (2) lack of probable cause for the filing of the prior lawsuit, . . . (3) termination of the prior proceedings in plaintiff’s favor, . . . and (4) seizure of plaintiff’s person or property during the course of the prior proceedings.” Robb, 662 N.E.2d at 13 (citing Crawford v. Euclid Nat’l Bank, 483 N.E.2d 1168, 1171 (Ohio 1985)).

Under the first element, malicious institution of prior proceeding, the Court finds that the Plaintiffs’ allegation satisfy this element. The Plaintiff alleges that the Defendant filed the foreclosure actions with malice since the Defendant knew that its clients did not have proper standing to sue. [Doc. 1-1 at 2.] This allegation, if proven true, would sufficiently satisfy the malice element of a claim of malicious prosecution. See Eberhart v. Paintiff, 2005 WL 1962993 at *6 (Ohio Ct. App., Aug. 17, 2005) (“malice may be inferred from the absence of probable cause”);

On the second element, the Plaintiffs also adequately allege that the Defendant lacked probable cause for the filing of this lawsuit. In the complaint, the Plaintiffs say that the Defendant’s clients lacked basic standing to bring the lawsuit since their clients were not the proper holders of the mortgage notes and that Defendant knew of this lack of standing. [Doc. 1-1 at 2.] Therefore, this element is satisfied for purposes of a motion to dismiss.

As to the third element — termination of the prior proceeding in favor of the plaintiff — the Plaintiffs allege that all of the underlying foreclosures were terminated in their favor due to a lack of standing. This allegation, if proven true, would satisfy the third element. See Vitrano v. CWP Lmtd. Partnership, 1999 WL 1261151, at *4 (Ohio Ct. App., Dec. 22, 1999).

The Plaintiffs here, though, fail to adequately allege the fourth element — seizure of plaintiff’s person or property during the course of the prior proceedings. None of the Plaintiffs allege that their property was seized due to the actions of the Defendant, which is fatal to their claim of malicious prosecution. Ohio courts have emphasized that the seizure element is a necessary component of a claim for malicious civil prosecution and that the claim cannot survive without a seizure of property. See Robb, 662 N.E.2d at 14.

Indeed, a claim for malicious civil prosecution does not lie simply because a previously filed claim is meritless, but rather, only in cases “where there is a prejudgment seizure of property, i.e., where there essentially has been a judgment against, and a concomitant injury suffered by, a defendant before he has had a chance to defend himself.” Id.See, e.g., Aames Capital Corp. v. Wells, 2002 WL 500320 at *6 (Ohio Ct. App. Apr. 3, 2002) (“damage to a person’s credit, however, does not constitute seizure of property with regard to a malicious prosecution claim”); Clauder v. Holbrook, 2000 WL 98218 at *2 (Ohio Ct. App., Jan. 28, 2000) (holding that rendering a title to land unmarketable during pendency of a lawsuit is not a seizure for purposes of malicious prosecution); Ahlbeck v. Joelson, 1997 WL 458460, at *3 (Ohio Ct. App., Aug. 8, 1997) (freezing of assets during bankruptcy proceedings caused by suit does not satisfy seizure element). Thus, because none of the Plaintiffs allege that their property was seized during the course of the foreclosure proceedings instituted against them, the Court finds that they do not adequately plead this cause of action. at 14. This element of the cause of action has been strictly interpreted to apply only to seizures of actual real or personal property.

Accordingly, the Court GRANTS the Defendant’s motion to dismiss this claim.

III.E Ohio Consumer Sales Protection Act, Chapter 1345 (Count 5)

Next, the Plaintiffs allege a violation of the Ohio Consumer Sales Protection Act, Chapter 1345. Specifically, the Plaintiffs say that the conduct of the Defendant “commenc[ed] foreclosure proceedings when their clients lack standing [which] are unfair, deceptive and unconscionable sales practices under O.R.C. §§ 1345.02 and 1345.03.

Ohio Revised Code section 1345 makes it unlawful for a supplier to engage in an unfair, deceptive, or unconscionable act or practice in regard to a consumer transaction. O.R.C. § 1345.02. The OCSPA defines a “supplier” as a “person engaged in the business of effecting or soliciting consumer transactions, whether or not he deals directly with the consumer.” O.R.C. § 1345.01(B). The statute has been generally interpreted as applying to the collection of debts associated with consumer transactions by attorneys. See Celebrezze v. United Research, Inc., 482 N.E.2d 1260, 1262 (Ohio 1984); see also Schroyer v. Frankel, 197 F.3d 1170, 1177 (6th Cir. 1999). Thus, the Court concludes that the debt collection activities of Defendant Lerner fall within the purview of the statute. The Ohio Consumer Protection Statute provides generally that “[n]o supplier shall commit an unfair or deceptive act or practice in connection with a consumer transaction.” O.R.C. § 1345.02(A). Although a somewhat unresolved issue, other courts have held that a law firm collecting a debt on behalf of a mortgagee may be amenable to suit under this Act. See Delawder, 443 F. Supp.2d at 953; Havens-Tobias v. Eagle, 2003 WL 1601461, at *4-5 (Ohio Ct. App. March 28, 2003). Indeed, “[g]iven the [Ohio Consumer Protection Act’s] purpose to protect consumers from deceptive acts and practices, and Ohio courts’ recognition that debt collection falls within [its] ambit, the Court believes Ohio courts would recognize a cause of action under Section 1345.02(B)(10) for all deceptive debt collection practices, including a supplier’s deceptive lawsuit to collect a debt.” Delawder, 443 F.2d at 953. This Court now finds the rationale of the court in DelawderSee, e.g., Becker v. Montgomery, Lynch, 2003 WL 23335929, at *2 (N.D. Ohio, Feb. 26, 2003) (holding that conduct which violates the FDCPA also violates the Ohio Consumer Protection Staute); Lee, 484 F. Supp.2d at 821 (holding that Ohio Consumer Protection Act applies to debt collection practices of law firms). persuasive, and also finds that the filing of deceptive lawsuits violates the Ohio Consumer Protection Act.

Accordingly, the Court finds that the Plaintiffs’ allegations, if proven true, would be actionable under the Ohio Consumer Protection Act. The Plaintiffs here allege that the Defendant knowingly brought deceptive lawsuits and also made fraudulent assignments of mortgage notes to support standing to sue. The Court, therefore, DENIES the Defendant’s motion to dismiss this Count.[7]

III.F Frivolous Lawsuits — Ohio Revised Code Section 2323.51

Finally, the Plaintiffs bring a claim under Ohio Revised Code Section 2323.51, saying that they are entitled to “sanctions, including attorney fees,” since they argue that the Defendant filed frivolous lawsuits against them. [Doc. 1-1 at 11; Doc. 14 at 18.] The Defendant says this claim must be dismissed as untimely. [Doc. 9 at 18-19.]

Under Section 2323.51, a litigant may receive an award of attorney’s fees where their opponent has been found to have engaged in “frivolous conduct,” which is defined, inter alia, as conduct that is meant “merely to harass or maliciously injure” or “is not warranted under existing law [or] cannot be supported by a good faith argument,” as making “allegations or other factual contentions that have no evidentiary support,” or as denials “or factual contentions that are not warranted by the evidence.” O.R.C. § 2323.51(A)(2)(a)(i)-(iv).

Although the alleged conduct of the Defendant would seem fall within the purview of the statute, the Plaintiffs claim under the this statute fails for several reasons. First, the proper forum for a motion brought under O.R.C. Section 2323.51 would be the original state court foreclosure actions that the Defendant filed against the Plaintiffs. Indeed, the “[r]elief under R.C. 2323.51 is obtained by filing a motion in a pending case,” and not in a later separate civil action. Gevedon v. Gevedon,855 N.E.2d 548, 553 (Ohio Ct. App. 2006); see also Roo v. Sain, 2005 WL 1177940, at *5 (Ohio Ct. App. 2005). In that regard, Section 2323.51 is quite similar to Federal Rule of Civil Procedure 11, which itself does not create a separate cause of action, but rather, creates a means of punishing misconduct in a pending action. SeeSawyer v. Sinkey, 610 N.E.2d 1219, 1223 (Ohio Ct. App. 1992). Thus, the Plaintiffs attempt to improperly use that statute in this suit and any claims brought under that Section in this Court must be dismissed.

Second, even if that claim could be brought in this Court, the statute of limitations on the claim has run. Under the plain language of O.R.C. § 2323.51, any claim for attorney’s fees brought under that statute must be filed “not more than thirty days after the entry of final judgment in a civil action or appeal.” O.R.C. § 2323.51. Since more than thirty days have passed since the final judgment in each of the underlying state court foreclosure actions, the claims brought under that Section are not timely and must be dismissed. The Court, therefore, GRANTS the Defendant’s motion to dismiss this claim.

IV. Conclusion

For the foregoing reasons, the Court GRANTS the Defendant’s motion to dismiss Counts 2, 3, 4, and 6 of the complaint against all Plaintiffs and Count 1 of the complaint as to Plaintiffs James and Kelly Unger; the Court DENIES the Defendant’s motion to dismiss Count 1 of the complaint as to Plaintiffs Tamara Turner, Phillip Turner, and Mary Sweeney and Count 5 of the complaint as to all Plaintiffs.

IT IS SO ORDERED.

[1] As a preliminary matter, the Court finds that the Defendant is a “debt collector” under FDCPA. The Supreme Court has held that the FDCPA “applies to attorneys who `regularly’ engage in consumer-debt-collection activity, even when that activity consists of litigation.” Heintz v. Jenkins, 514 U.S. 291, 299 (1995). Under the FDCPA, a “debt collector” is “any person who uses any instrum entality of interstate commerce or the mails in any business the principle purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or assessed to be owed or due to another.” 15 U.S.C. § 1692a(6) (emphasis added).

[2] The sections of 15 U.S.C. § 1692e at issue provide in relevant part:

§ 1692e. False or misleading representations

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(2) The false representation of — (A) the character, am ount, or legal status of any debt; or . . .

(5) The threat to take any action that cannot legally be taken or that is not intended to be taken . . .

(10) The use of any false representations or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.

[3] The relevant sections of 15 U.S.C. § 1692f provide:

§ 1692f. Unfair practices

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

[4] See also Whittiker, 650 F. Supp.2d at 931 (holding that filing of foreclosure action while knowing that one lacks ability to prove ownership of debt is actionable under the FDCPA); Kline v. Mortgage Electronic Sec. Systems, 2010 WL 1133452, at *8 (S.D. Ohio, Mar. 22, 2010) (holding that an inability to prove a debt at the time of filing a collection lawsuit does not violate the FDCPA, but stating suing in court with false attachments in an attempt to prove debt would violate the FDCPA.); Williams v. Javitch, Block & Rathbone, LLP, 480 F. Supp.2d 1016 (S.D. Ohio 2007) (knowledge that information in affidavit is false as to specifics of debt violates FDCPA).

[5] The Court also notes that it concurs with the thoughtful analysis set forth in Hartman v. Asset Acceptance Corp., in which that court found that the common law immunity for statements and pleadings made in court is abrogated by the FDCPA. 467 F. Supp.2d 769 (S.D. Ohio 2004).

[6] As this case will proceed, this Court has authority to consider a motion to amend the complaint to reassert this claim if plaintiffs can more specifically allege a cause of action. Rule 54(b) provides:

“When an action presents more than one claim for relief []the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay. Otherwise, any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities.

[7] The Court need not yet consider whether a class action under Chapter 1345 may be validly brought. This issue may more appropriately be resolved in a motion for class certification.

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WSJ | Ocwen Financial Discloses FTC Probe

WSJ | Ocwen Financial Discloses FTC Probe


MARCH 3, 2011, 5:09 P.M. ET

By RUTH SIMON

Ocwen Financial Corp. said it is under investigation by the Federal Trade Commission, which has asked the mortgage-servicing company for information about its employee training, debt-collection practices, loan modifications and foreclosure procedures.

The Atlanta company, one of the largest home-loan servicers in the U.S., received a formal legal request from the FTC for documents in late November, Paul Koches, executive vice president and general counsel at Ocwen, said in an interview. Ocwen is “fully cooperating” and is “not accused anywhere of any wrongdoing,” he added.

“We are taking it as informational and are providing the [requested] information,” Mr. Koches said. In a securities filing Monday, Ocwen said it had received a “civil investigative demand” from the federal agency.

Continue reading … Wall Street Jounal

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BLOOMBERG | BofA Unit’s Utah Foreclosures Violate Law, State Says

BLOOMBERG | BofA Unit’s Utah Foreclosures Violate Law, State Says


A Bank of America Corp. unit is breaking the law by foreclosing on homeowners in Utah because it doesn’t meet state requirements, the state attorney general’s office said in a federal appeals court case.

ReconTrust Co., a subsidiary of Bank of America, the biggest U.S. lender by assets, isn’t a member of the state bar or a title insurance company and is unqualified to carry out trustee foreclosures, Utah Attorney General Mark Shurtleff wrote in court papers filed yesterday with the U.S. Court of Appeals in Denver.

“ReconTrust Co. N.A. is a non-depository national bank initiating approximately 4,000 home foreclosures in Utah each year in violation of Utah law,” the attorney general’s office said.

The court filing was made in a homeowner’s lawsuit against ReconTrust and Bank of America.

“National banks must abide by state law,” said John Christian Barlow, an attorney for the homeowner, Peni Cox. “ReconTrust just wants to foreclose, period,” he said.

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GUEST POST | “Affidavits Do Tell Dead Tales” Portfolio’s Martha Kunkle

GUEST POST | “Affidavits Do Tell Dead Tales” Portfolio’s Martha Kunkle


Dear folks:

I would review a case that has surfaced in Montana Federal District Court (Great Falls Div),  Cole v. Portfolio Recovery Associates”, docket no CV-08-036-GF.   This is a case here the debt collector/debt buyer “Portfolio” filed suit against Cole on a credit card debt, and inserted an “Affidavit” of one Martha Kunkle in a Motion for Summary Judgment in an effort to steamroll the Case to Judgment.  The Affidavit was dated May 24, 2007.

Unfortunately for both the debt collector [Portfolio] AND their collection attorneys, Cole did some checking, found other examples of the signature, and Motioned the State Court that the affidavit was dubious.  The State Court Judge ORDERED that Portfolio produce Kunkle, whose signature was notarized in Texas [see attached pdf], to appear in Montana for deposition.  Kunkle never showed up.  Turns out Martha Kunkle was dead, having died 12 years earlier, in 1995.  (Sanctions are pending in the State Court case).

Cole by counsel filed a FDCPA suit in USDC [above cite], in which Portfolio in essence denied they were bad boys, and as an affirmative defense claimed that Cole had not done act to “mitigate her damages.”  How a consumer mitigates damages when confronted with the Affidavit of a dead person is not explained.

In the USDC Final Order and Judgment, a class-action settlement was approved by the Court roughly $178,000 was paid to identified members of the Classes [3 classes of claimants] and $212,500 in attorneys’ fees, costs and expenses.

An expensive affidavit of a dead person.

While these are not directly “mortgage debt” controversies, the affidavit was furnished by agents of our friends at WASHINGTON MUTUAL BANK, from which the moral:  do not assume any signature of any “affidavit” [or anything else].  the affiant may well have been dead for over a decade!

Jan van Eck

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U.S. 3rd Circuit Court Of Appeals “FDCPA, CLASS ACTION” ALLEN v. LASALLE, FEIN, SUCH, KAHN AND SHEPARD, PC

U.S. 3rd Circuit Court Of Appeals “FDCPA, CLASS ACTION” ALLEN v. LASALLE, FEIN, SUCH, KAHN AND SHEPARD, PC


DOROTHY RHUE ALLEN,
v.
LASALLE BANK, N.A; CENLAR FEDERAL SAVINGS BANK FSB; FEIN, SUCH, KAHN AND SHEPARD, PC;

No. 09-1466.

United States Court of Appeals, Third Circuit.

Argued September 14, 2010.

Filed: January 12, 2011.

Lewis G. Adler (Argued), Woodbury, N.J. 08096, Roger C. Mattson, Woodbury, N.J. 08096, Attorneys for Appellant.

Andrew C. Sayles (Argued) Gregory E. Peterson, Connell Foley, Roseland, N.J. 08068, Attorneys for Appellee Fein, Such, Kahn and Shepard, P.C.

Daniel C. Green, Vedder Price, New York, N.Y. 10019, Chad A. Schiefelbein (Argued), Vedder Price, Chicago, IL 60601, Attorneys for Appellee LaSalle Bank.

Gregory A. Lomax, Christopher L. Soriano, Morgan J. Zucker, Duane Morris, Cherry Hill, N.J. 08003, Attorneys for Appellee Cenlar Federal Savings Bank.

Before: SLOVITER, BARRY, and SMITH Circuit Judges.

OPINION OF THE COURT
SLOVITER, Circuit Judge.
This appeal presents the question whether a communication from a debt collector to a consumer’s attorney is actionable under the Federal Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692f(1).
Continue below…

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OHIO CLASS ACTION: FMR AG Files Class Action Against Law Firm TURNER v. Lerner, Sampson & Rothfuss (“LS&R”)

OHIO CLASS ACTION: FMR AG Files Class Action Against Law Firm TURNER v. Lerner, Sampson & Rothfuss (“LS&R”)


CLASS ACTION COMPLAINT
PURSUANT TO RULE 23 OF THE
OHIO RULES OF CIVIL
PROCEDURE, FAIR DEBT
COLLECTION PRACTICES ACT,
SLANDER OF CREDIT, ABUSE OF
PROCESS AND MALICIOUS
PROSECUTION

continue to complaint…

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NY Judge Gives Green Light On RICO Class Action Against Law Firm in ‘Sewer Service’ Case SIKES v. MEL HARRIS & ASSOCIATES

NY Judge Gives Green Light On RICO Class Action Against Law Firm in ‘Sewer Service’ Case SIKES v. MEL HARRIS & ASSOCIATES


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

MONIQUE SYKES et al.,
Plaintiffs,

- against -

MEL HARRIS AND ASSOCIATES, LLC,
-et al.,
Defendants

APPEARANCES: (See last page)

CHIN, Circuit Judge:

In this case, eight plaintiffs allege that a debt buying
company, a law firm, a process service company, and others
engaged in a “massive scheme to fraudulently obtain default
judgments against them and more than 100,000 other consumers in
state court. Plaintiffs allege that defendants did so by
engaging in “sewer servicer” — the practice of failing to serve a
summons and complaint and then filing a fraudulent affidavit
attesting to service. When the debtors failed to appear in court
because they did not have notice of the lawsuits, defendants
obtained default judgments against them.

Plaintiffs sue on behalf of themselves and all others
similarly situated. Their second amended complaint (the
“Complaint”) asserts claims under the Fair Debt Collection
Practices Act (the “FDCPA”)1,5 U.S.C. 5 1692 et sea., the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. 5 1961 et sea., New York General Business Law (“GBL”) §
349, and New York Judiciary Law 5 487. Plaintiffs seek
injunctive relief, declaratory relief, and damages.
Defendants move to dismiss the Complaint pursuant to
Rules 9 (b) , 12 (b) (1) , and 12 (b) (6) of the Federal Rules of Civil
Procedure, challenging the sufficiency of every claim and the
subject matter jurisdiction of this Court. For the reasons that
follow, the motions to dismiss are denied in part and granted in
part.

Continue below to the decision…

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UTAH: Two Judges Recuse Themselves From The Class Action Against ReconTrust, MERS, BofA et al

UTAH: Two Judges Recuse Themselves From The Class Action Against ReconTrust, MERS, BofA et al


Class Action ReconTrust/Bank of America Case Lands in Federal Judge Dale Kimball’s Court

by Morgan Skinner, KCSG News

(Salt Lake City, UT) – US District Chief Judge Tena Campbell recused [Recusal order] herself in the class action lawsuit against ReconTrust and Bank of America (NYSE: “BAC”), Mortgage Electronic Registration Systems (“MERS”), Countrywide Home Loans, HSBC Bank (NYSE: “HSBC”), Wells Fargo Bank (NYSE: “WFC”), U.S. Bank (NYSE: “USB”), Bank of New York/Mellon (NYSE: “BK”), KeyBank (NYSE: “KEY”) filed in Utah federal court Friday, November 5, 2010, alleging violations of the, Fair Debt Collections Practices Act, Utah Pattern of Unlawful Activity Act (FDCPA), Unlawful Foreclosures, and Intentional Infliction of Emotional Distress.

Upon Judge Campbell recusal from the case [Class Action Complaint] it was sent to Judge Clark Waddoups who has the Peni Cox case pending in his court against ReconTrust and Bank of America. The case is also on appeal to the 10th Circuit Court in Denver, Colorado.

KCSG News has learned from court records filed Thursday that Judge Waddoups has recused himself. [Recusal order] Why did Judge Waddoups recuse himself in the class action matter? He didn’t recuse himself in the Peni Cox case pending in his court on the same issues against the same defendants, ReconTrust and Bank of America.

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INDIANA APPEALS COURT “Abusive Debt Collection Practices”; LUCAS v. US BANK N.A, LITTON

INDIANA APPEALS COURT “Abusive Debt Collection Practices”; LUCAS v. US BANK N.A, LITTON


IN THE COURT OF APPEALS OF INDIANA

MARY BETH LUCAS and PERRY LUCAS,
Appellants-Defendants,

vs.

U.S. BANK, N.A., As Trustee For THE
C-BASS MORTGAGE LOAN ASSET-BACKED
CERTIFICATES, SERIES, 2006-MH-1,
Appellee-Plaintiff,

and

LITTON LOAN SERVICING, LP,
Appellee-Third-Party Defendant

INTERLOCUTORY APPEAL FROM THE GREENE SUPERIOR COURT
Honorable Dena Benham Martin, Judge

Excerpt:

Likewise, the Lucases assert third-party claims against Litton for breach of contract and breach of duty of good faith and fair dealing. In addition, the Lucases maintain that Litton violated FDCPA, RESPA, and that they are entitled to relief under the Civil Damages Statute because Litton committed conversion.

Congress enacted FDCPA because “[t]here is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” 15 U.S.C. § 1692(a). Accordingly, these consumer protection statutes exist not only to make the consumer whole, but also to deter practices and behavior that negatively impacts society. In light of the nature of the claims, the rights and interests involved, and the majority of the relief requested, we cannot say that the essential features of this cause are equitable.

The judgment of the trial court is reversed and remanded with instructions to grant the Lucases’ motion for a jury trial on their legal claims.

Continue below…

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NY CLASS ACTION | MENASHE v. STEVEN J. BAUM, P.C.

NY CLASS ACTION | MENASHE v. STEVEN J. BAUM, P.C.


JACOB MENASHE

against

STEVEN J. BAUM, P.C.

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ARIZONA BK COURT ORDERS BONY MELLON TO PRODUCE ORIGINAL CUSTODIAN DOCUMENTS

ARIZONA BK COURT ORDERS BONY MELLON TO PRODUCE ORIGINAL CUSTODIAN DOCUMENTS


UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA

Minute Entry

Hearing Information:

Debtor: ANDREW C BAILEY
Case Number: 2:09-bk-06979-RTBP Chapter: 11
Date / Time / Room: TUESDAY, NOVEMBER 09, 2010 10:00 AM 7TH FLOOR #701
Bankruptcy Judge: SARAH SHARER CURLEY
Courtroom Clerk: WANDA GARBERICK
Reporter / ECR: ANDAMO PURVIS

Matter:

ADV: 2-09-01728
ANDREW C. BAILEY vs THE BANK OF NEW YORK MELLON, FKA THE BAN

HEARING RE Motion to Dismiss Complaint Defendants’ Motion To Dismiss, With Prejudice, Plaintiff’s Fourth Amended Complaint To Determine The Validity, Priority or Extent Of a Lien or Other Interest in Real Property and Petition For Injunctive Relief filed by KYLE S. HIRSCH of BRYAN CAVE LLP on behalf of BAC HOME LOANS SERVICING
R / M #: 50 / 0

Appearances:

ANDREW C BAILEY

KYLE S. HIRSCH, ATTORNEY FOR THE BANK OF NEW YORK MELLON, FKA THE BANK

Proceedings:

Mr. Hirsch goes over the background of the complaints that have been filed, and notes that this is the fourth amended complaint with no basis. Mr. Bailey gives his statements to the court on the note.

COURT: THE COURT FINDS THAT AT THIS TIME MR. BAILEY HAS NO SUPPORT FOR HIS CLAIMS. MR. HIRSCH IS DIRECTED TO GET THE ORIGINAL CUSTODIAL FILE FROM NEW YORK FOR THE COURT TO REVIEW. HE SHOULD ALSO GET AN AFFIDAVIT FROM THE INDIVIDUAL GETTING THE FILE, THAT THERE HAS NOT BEEN ANY CHANGES SINCE 2006. IT IS ORDERED CONTINUING THIS HEARING TO JANUARY 13, 2011 AT 10:00 A.M.

Case 2:09-ap-01728-SSC Doc 61 Filed 11/09/10 Entered 11/09/10 15:07:05

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MARYLAND CLASS ACTION: STEWART v. Biermen, Geesing, Ward & Wood Law Firm “BGWW”, Unamed Fidelity National Information Services “FNIS”

MARYLAND CLASS ACTION: STEWART v. Biermen, Geesing, Ward & Wood Law Firm “BGWW”, Unamed Fidelity National Information Services “FNIS”


FIRST CAUSE OF ACTION

Violation of the Fair Debt Collection Practices Act (FDCPA) (15 U.SC. 1692, et seq.)

SECOND CAUSE OF ACTION

Wrongful Foreclosure: Failure to Comply with Maryland Real Property Article, 7-105.1 0r 7.105.2

THIRD CAUSE OF ACTION

Negligence

FOURTH CAUSE OF ACTION

Violation of the Maryland Consumer Protection Act (MCPA) (MD. CODE ANN., COM. LAW., 13-101, ET SED.)

FIFTH CAUSE OF ACTION

Declaratory Judgment (MD. CODE ANN., CTS. & Jud. Proc., 3-406)

SIXTH CAUSE OF ACTION

Respondeat Superior

EXHIBITS

MARYLAND FABRICATED HERRERA SIGNATURES

Exhibit re Notaries Johnson and Mendoza_ DECOMMISSION


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UTAH CLASS ACTION: COLEMAN v. BofA, ReconTrust, MERS, Wells Fargo, HSBC, US Bank, Keybank, BNY Mellon

UTAH CLASS ACTION: COLEMAN v. BofA, ReconTrust, MERS, Wells Fargo, HSBC, US Bank, Keybank, BNY Mellon


E. Craig Smay #2985
174 E. South Temple
Salt Lake City, Utah 84111
ecslawyer@aol.com, cari@smaylaw.com
Telephone Number (801) 539-8515
Fax Number (801) 539-8544

John Christian Barlow
40 N 300 E #101
St. George UT 84771
jcb@JohnChristianBarlow.com
435-634-1200
Attorneys for Plaintiffs


IN THE UNITED STATES DISTRICT COURT, DISTRICT OF UTAH, CENTRAL DIVISION

JEREMY COLEMAN, DWAYNE WATSON, SAMUEL ADAMSON, ETHNA LYNCH,

Plaintiffs,

vs.

RECONTRUST COMPANY, N.A., MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., BANK OF AMERICA,
N.A. AS SUCCESSOR TO COUNTRYWIDE
HOME LOANS, INC., BAC HOME
LOAN SERVICING LP, HSBC BANK
USA, N.A., WELLS FARGO BANK, N.A.,
U.S. BANK N.A., BANK OF NEW YORK
MELLON, KEYBANK, N.A. and Does 1-
10, Defendants.

CLASS ACTION
COMPLAINT FOR VIOLATION OF
FAIR DEBT COLLECTION
PRACTICES ACT, UTAH
PATTERN OF UNLAWFUL
AUTHORITY ACT
JURY DEMANDED

Case No. 2:10-cv-02099-TC

Judge Tena Campbell

Plaintiffs Jeremy Coleman, Dwayne Watson, Samuel Adamson, and Ethna Lynch, individually and on behalf of others Similarly Situated (“Plaintiffs”) bring this action under the Fair Debt Collection Practices Act (“FDCPA”), 15 USC §§ 1692-1692p, and Utah state law, including, without limitation, §§ 76-10-1602, 76-10-1603, and 76-10-1605(1), (2), UCA (1953), and allege as follows:

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HSBC’s Irregularities: Mortgage Documentation and Corporate Relationships with Ocwen, MERS, and Delta

HSBC’s Irregularities: Mortgage Documentation and Corporate Relationships with Ocwen, MERS, and Delta


HSBC BANK USA v. THOMPSON

2010 Ohio 4158

HSBC Bank USA, N.A., as Indenture Trustee for the Registered Noteholders of Renaissance Home Equity Loan Trust 2007-1, Plaintiff-Appellant,
v.
Jamie W. Thompson, et al., Defendants-Appellees.

Appellate No. 23761.

Court of Appeals of Ohio, Second District, Montgomery County.

Rendered on September 3, 2010.

Benjamin D. Carnahan, Atty. Reg. #0079737, Shapiro, Van Ess, Phillips & Barragate, LLP, 4805 Montgomery Road, Norwood, OH 45212 and Brian P. Brooks, (pro hac vice), O’Melveny & Myers LLP, 1625 Eye Street, N.W., Washington, DC 20006-4001, Attorneys for Plaintiff-Appellant, HSBC Bank.

Amy Kaufman, Atty. Reg. #0073837, 150 East Gay Street, 21st Floor, Columbus, Ohio 43215, Attorney for Appellee, Department of Taxation.

Andrew D. Neuhauser, Atty. Reg. #0082799, and Stanley A. Hirtle, Atty. Reg. #0025205, 525 Jefferson Avenue, Suite 300, Toledo, OH 43604, Attorneys for Amici Curiae, Advocates for Basic Legal Equality, et al.

Richard Cordray, Atty. Reg. #0038034, by Susan A. Choe, Atty. Reg. #0067032, Mark N. Wiseman, Atty. Reg. #0059637, and Jeffrey R. Loeser, Atty. Reg. #0082144, Attorney General’s Office, 30 E. Broad Street, 14th Floor, Columbus, OH 43215, Attorneys for Amicus Curiae, Ohio Attorney General Richard Cordray.

Andrew M. Engel, Atty. Reg. #0047371, 3077 Kettering Boulevard, Suite 108, Moraine, Ohio 45439, Attorney for Defendant-Appellee Jamie W. Thompson.

Colette Carr, Atty. Reg. #00705097, 301 W. Third Street, Fifth Floor, Dayton, OH 45422, Attorney for Appellee, Montgomery County Treasurer.

OPINION

FAIN, J.

{¶ 1} Plaintiff-appellant HSBC Bank USA, N.A., as Indenture Trustee for the Registered Noteholders of Renaissance Home Equity Loan Trust 2007-1 (HSBC), appeals from a judgment of the trial court, which rendered summary judgment and dismissed HSBC’s complaint for foreclosure, without prejudice. HSBC contends that the trial court improperly treated the date the assignment of mortgage was executed as dispositive of the claims before it. HSBC further contends that the trial court’s decision is erroneous, because it is premised on the court’s having improperly struck the affidavit of Chomie Neil, and having failed to consider Neil’s restated affidavit.

{¶ 2} Two briefs of amicus curiae have been filed in support of the position of defendants-appellees Jamie W. Thompson, Administratrix of the Estate of the Estate of Howard W. Turner, and Jamie W. Thompson (collectively Thompson). One brief was filed by the Ohio Attorney General Richard Cordray (Cordray). The other brief was filed by the following groups: Advocates for Basic Legal Equality; Equal Justice Foundation; Legal Aid Society of Southwest Ohio; Northeast Ohio Legal Aid Services; Ohio Poverty Law Center; and Pro Seniors, Inc. (collectively Legal Advocates). We have considered those briefs, all of which have been helpful, in deciding this appeal.

{¶ 3} We conclude that the trial court did not abuse its discretion in striking Neil’s affidavit, because of defects in the affidavit. We further conclude that the trial court did not abuse its discretion in failing to consider Neil’s restated affidavit, in the course of deciding objections to the magistrate’s decision, because HSBC failed to indicate why it could not have properly submitted the evidence, with reasonable diligence, before the magistrate had rendered a decision in the matter. Finally, we conclude that the trial court did not err in rendering summary judgment against HSBC, and dismissing the foreclosure action for lack of standing. HSBC failed to establish that it was the holder of a promissory note secured by a mortgage. Accordingly, the judgment of the trial court is Affirmed.

I

{¶ 4} On January 27, 2007, Howard Turner borrowed $85,000 from Fidelity Mortgage, a division of Delta Funding Corporation (respectively, Fidelity and Delta). Turner signed a note promising to repay Fidelity in monthly payments of $786.44 for a period of thirty years. The loan number on the note is 0103303640, and the property listed on the note is 417 Cushing Avenue, Dayton, Ohio, 45429.

{¶ 5} In order to secure the loan, Turner signed a mortgage agreement, which names Fidelity as the “Lender,” and Mortgage Electronic Registration Systems, Inc. (MERS) as a nominee for Fidelity and Fidelity’s successors and assigns. The mortgage states that Turner, as borrower, “does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender’s successors and assigns) and to the successors and assigns of MERS, the following described property in the County of Montgomery, * * * which currently has the address of 417 Cushing Avenue, Dayton, Ohio 45429.” The mortgage was recorded with the Montgomery County Recorder on February 20, 2007, as MORT-07-014366.

{¶ 6} The entire amount of the loan proceeds was not disbursed. Fidelity placed $5,000 in escrow after closing, until certain repairs (roofing and heating) were made to the house. The required deposit agreement indicated that Turner had three months to make the repairs, and that if the items were not satisfactorily cleared, Fidelity had the option of satisfying the items from the funds held, of extending the time to cure, or of taking any other steps Fidelity felt necessary to protect the mortgage property, including but not limited to, paying down the principal of the loan with the deposit.

{¶ 7} Turner made timely payments through June 2007. However, he died in late July 2007, and no further payments were made. HSBC filed a foreclosure action on November 8, 2007, alleging that it was the owner and holder of Turner’s promissory note and mortgage deed and that default had occurred. HBSC sued Thompson, as administratrix of her father’s estate, and individually, based on her interest in the estate.

{¶ 8} HSBC attached purported copies of the note and mortgage agreement to the complaint. The note attached to the complaint is also accompanied by two documents that are each entitled “Allonge.” The first allonge states “Pay to the Order of _________ without recourse,” and is signed on behalf of Delta Funding Corporation by Carol Hollman, Vice-President. The second allonge states “Pay to the Order of Delta Funding Corporation” and is signed by Darryl King, as “authorized signatory” for Fidelity Mortgage.

{¶ 9} In January 2008, Thompson filed an answer, raising, among other defenses, the fact that the action was not being prosecuted in the name of the real party in interest. HSBC subsequently filed a motion for summary judgment in February 2007, supported by the affidavit of an officer of Ocwen Loan Servicing, LLC (Ocwen), which was a servicing agent for HSBC.

{¶ 10} Thompson filed a response to the summary judgment motion, pointing out various deficiencies in the affidavit and documents. Thompson further contended that HSBC was not the holder of the mortgage and note, and was not the real party in interest. In addition, Thompson filed an amended answer and counterclaim, contending that HSBC was not the real party in interest, and that HSBC had made false, deceptive, and misleading representations in connection with collecting a debt, in violation of Section 1692, Title 15, U.S. Code (the Fair Debt Collection Practices Act, or FDCPA).

{¶ 11} HSBC withdrew its motion for summary judgment in March 2008. In November 2008, the trial court vacated the trial date and referred the matter to a magistrate. HSBC then filed another motion for summary judgment in January 2009. This motion was supported by the affidavit of Chomie Neil, who was employed by Ocwen as a manager of trial preparation and discovery. Neil averred in the affidavit that he had executed it in Palm Beach, Florida. However, the notation at the top of the first page of the affidavit and the jurat both state that the affidavit was sworn to and subscribed to in New Jersey, before a notary public.

{¶ 12} Thompson moved to strike the affidavit, contending that it was filled with inadmissible hearsay, contained legal conclusions, and purported to authenticate documents, when no proper documentation had been offered. Thompson also questioned when the affidavit was executed, and whether it had been properly acknowledged, due to the irregularities in execution and acknowledgment. In addition, Thompson responded to the summary judgment motion, contending that HSBC was not the real party in interest and was not the holder of the note, because HSBC’s name was not on the note, and HSBC had failed to provide evidence that it was in possession of the note. In responding to the motion to strike, HSBC contended that the defects in the affidavit were the result of a scrivener’s error. HSBC did not attempt to correct the affidavit.

{¶ 13} In late March 2009, Thompson filed a motion for partial summary judgment against HSBC. The motion was based on the fact that under the allonges, Delta Funding Corporation was the payee of the note. Thompson also noted that MERS failed to assign the mortgage note to HSBC before the action was commenced. Thompson contended that HSBC was not the real party in interest when it filed the lawsuit, and lacked standing to invoke the court’s jurisdiction.

{¶ 14} In May 2009, the magistrate granted Thompson’s motion to strike the affidavit, because the affidavit stated that it had been sworn to in New Jersey, and the affiant declared that the affidavit was executed in Florida. The magistrate also overruled HSBC’s motion for summary judgment, and granted Thompson’s partial motion for summary judgment. The magistrate concluded that HSBC lacked standing because it was not a mortgagee when the suit was filed and could not cure its lack of standing by subsequently obtaining an interest in the mortgage. The magistrate further concluded that there was no evidence properly before the court that would indicate that HSBC was the holder of the promissory note originally executed by Turner. Accordingly, the magistrate held that HSBC’s foreclosure claim should be dismissed without prejudice. Due to factual issues regarding Thompson’s FDCPA counterclaim, HSBC’s motion for summary judgment on the counterclaim was denied.

{¶ 15} HSBC filed objections to the magistrate’s decision, and attached the “restated” affidavit of Neil. The affidavit was identical to what was previously submitted, except that the first page indicated that the affidavit was being signed in Palm Beach County, Florida. The jurat is signed by a notary who appears to be from Florida, although the notary seals on the original and copy that were submitted are not very clear. HSBC did not offer any explanation for the mistake in the original affidavit.

{¶ 16} In November 2009, the trial court overruled HSBC’s objections to the magistrate’s report. The court concluded that the errors in the affidavit were more than format errors. The court further noted that the document became an unsworn statement and could not be used for summary judgment purposes, because the statements were sworn to a notary in a state outside the notary’s jurisdiction. The court also held that, absent Neil’s affidavit, HSBC had failed to provide support for its summary judgment motion. Finally, the court concluded that HSBC failed to provide evidence that it was in possession of the note prior to the filing of the lawsuit, because the Neil affidavit had been struck, and a prior affidavit only verified the mortgage and note as true copies; it did not verify the undated allonges. Accordingly, the trial court dismissed HSBC’s action with prejudice, and entered a Civ. R. 54(B) determination of no just cause for delay.

{¶ 17} HSBC appeals from the judgment dismissing its action without prejudice.

II

{¶ 18} We will address HSBC’s assignments of error in reverse order. HSBC’s Second Assignment of Error is as follows:

{¶ 19} “THE LOWER COURT’S DECISION IS PREMISED ON IMPROPERLY STRIKING MR. NEIL’S AFFIDAVIT AND FAILING TO CONSIDER THE RESTATED AFFIDAVIT.”

{¶ 20} Under this assignment of error, HSBC contends that the errors in Neil’s affidavit were scrivener’s errors that have no bearing on the content of the affidavit. HSBC contends, therefore, that the trial court erred in refusing to consider the affidavit.

{¶ 21} The error, as noted, is that Neil averred that he signed the affidavit in Florida, while the first page and the jurat indicate that the affidavit was executed before a notary public in New Jersey.

{¶ 22} Thompson, Cordray, and Legal Advocates argue that the defect is not merely one of form, because the errors transform the affidavit into an unsworn statement that cannot be used to support summary judgment. The trial court agreed with this argument.

{¶ 23} Legal Advocates also stresses that HSBC was notified of problems with Neil’s affidavit, but made no attempt to cure the defect until after the magistrate had issued an unfavorable ruling. In addition, Cordray notes that the integrity of evidence in foreclosure cases is critical, due to the imbalance between access to legal representation of banks and homeowners. Thompson, Cordray, and Legal Advocates further contend that even if Neil’s affidavit could be considered, it is replete with inadmissible hearsay and legal conclusions, and is devoid of evidentiary value.

{¶ 24} Concerning the form of affidavits, Civ. R. 56(E) provides that:

{¶ 25} “Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit. Sworn or certified copies of all papers or parts of papers referred to in an affidavit shall be attached to or served with the affidavit. The court may permit affidavits to be supplemented or opposed by depositions or by further affidavits. * * *”

{¶ 26} The Supreme Court of Ohio has held that “An affidavit must appear, on its face, to have been taken before the proper officer and in compliance with all legal requisites. A paper purporting to be an affidavit, but not to have been sworn to before an officer, is not an affidavit.” In re Disqualification of Pokorny (1992), 74 Ohio St.3d 1238 (citation omitted). Accord, Pollock v. Brigano (1998), 130 Ohio App.3d 505, 509.

{¶ 27} The affidavit submitted to the magistrate contains irreconcilable conflicts, because the affiant, Neil, states that he executed the affidavit in Florida. In contrast, the jurat, as well as the first page of the affidavit, indicate that the affidavit was signed in New Jersey.

{¶ 28} In Stern v. Board of Elections of Cuyahoga Cty. (1968), 14 Ohio St.2d 175, the Supreme Court of Ohio noted that in common use, a jurat “is employed to designate the certificate of a competent administering officer that a writing was sworn to by the person who signed it. It is no part of the oath, but is merely evidence of the fact that the oath was properly taken before the duly authorized officer.” Id. at 181 (citations omitted).

{¶ 29} In light of the inconsistencies, Neil’s oath could not have been properly taken before a duly authorized officer. Under New Jersey law, a notary public commissioned in New Jersey may perform duties only throughout the state of New Jersey. See N.J. Stat. Ann. 52:7-15. Therefore, a New Jersey notary public could not properly have administered the oath in Florida. A New Jersey notary public also could not properly have certified that the writing was sworn to, when the person signed it in another jurisdiction.

{¶ 30} As support for admission of Neil’s affidavit, HSBC cites various cases that have overlooked technical defects in affidavits. See, e.g., State v. Johnson (Oct. 24, 1997), Darke App. No. 96CA1427 (holding that a “scrivener’s error” was inconsequential and did not invalidate an affidavit), and Chase Manhattan Mtg. Corp. v. Locker, Montgomery App. No. 19904, 2003-Ohio-6665, ¶ 26 (holding that omission of specific date of month on which affidavit was signed was “scrivener’s error” and did not invalidate affidavit, because notary public did include the month and year).

{¶ 31} In Johnson, the error involved a discrepancy between the preamble and the jurat.

{¶ 32} The preamble said the site of the oath was in a particular county, but the notary swore in the jurat that the affidavit had been signed in a different county. The trial court concluded that this was a typographical error, and we agreed. This is consistent with the fact that in Ohio, a notary public may administer oaths throughout the state. See R.C. 147.07. Therefore, even if a discrepancy exists between the location listed in the preamble and the notary’s location, the official status of the affidavit is not affected. In contrast, the affiant in the case before us stated that he signed the affidavit in a different state, where the notary did not have the power to administer oaths. The difference is not simply one of form.

{¶ 33} HSBC contends that the trial court should have accepted the “restated” affidavit that it attached to HSBC’s objections to the magistrate’s decision. The trial court did not specifically discuss the restated affidavit when it overruled HSBC’s objections. We assume, therefore, that the court rejected the affidavit. See, e.g., Maguire v. Natl. City Bank, Montgomery App. No. 23140, 2009-Ohio-4405, ¶ 16, and Takacs v. Baldwin (1995), 106 Ohio App.3d 196, 209 (holding that where a trial court fails to rule on a motion, an appellate court assumes that the matter was overruled or rejected).

{¶ 34} The trial court was not required to consider the restated affidavit, because HSBC failed to explain why the affidavit could not have been properly produced for the magistrate. In this regard, Civ. R. Rule 53(D)(4)(d) provides that:

{¶ 35} “If one or more objections to a magistrate’s decision are timely filed, the court shall rule on those objections. In ruling on objections, the court shall undertake an independent review as to the objected matters to ascertain that the magistrate has properly determined the factual issues and appropriately applied the law. Before so ruling, the court may hear additional evidence but may refuse to do so unless the objecting party demonstrates that the party could not, with reasonable diligence, have produced that evidence for consideration by the magistrate.”

{¶ 36} Well before the magistrate ruled, HSBC was aware that objections had been raised to the affidavit. HSBC made no attempt to submit a corrected document to the magistrate, nor did it provide the trial court with an explanation for the cause of the problem. Accordingly, the trial court did not abuse its discretion in refusing to consider the original or restated affidavit. See Hillstreet Fund III, L.P. v. Bloom, Montgomery App. No. 23394, 2010-Ohio-2267, ¶ 49 [noting that trial courts have discretion to accept or refuse additional evidence under Civ. R. 53(D)(4)(d).]

{¶ 37} Because the trial court did not abuse its discretion in rejecting the Neil affidavits, we need not consider whether the contents of the affidavits are inadmissible.

{¶ 38} HSBC’s Second Assignment of Error is overruled.

III

{¶ 39} HSBC’s First Assignment of Error is as follows:

{¶ 40}THE COURT OF COMMON PLEAS IMPROPERLY TREATED THE DATE THE ASSIGNMENT OF MORTGAGE WAS EXECUTED AS DISPOSITIVE OF THE CLAIMS BEFORE IT.”

{¶ 41} Under this assignment of error, HSBC contends that the trial court committed reversible error by disregarding the ruling in State ex rel. Jones v. Suster, 84 Ohio St.3d 70, 1998-Ohio-275, that defects in standing may be cured at any time before judgment is entered. According to HSBC, an assignment of mortgage recorded with the Montgomery County Recorder establishes that HSBC is the current holder of the mortgage interest, because the interest was transferred about one week after the action against Thomson was filed. HSBC further contends that the trial court improperly disregarded evidence that HSBC legally owned the note before its complaint was filed. Before addressing the standing issue, we note that the case before us was resolved by way of summary judgment. “A trial court may grant a moving party summary judgment pursuant to Civ. R. 56 if there are no genuine issues of material fact remaining to be litigated, the moving party is entitled to judgment as a matter of law, and reasonable minds can come to only one conclusion, and that conclusion is adverse to the nonmoving party, who is entitled to have the evidence construed most strongly in his favor.” Smith v. Five Rivers MetroParks (1999), 134 Ohio App.3d 754, 760. “We review summary judgment decisions de novo, which means that we apply the same standards as the trial court.” GNFH, Inc. v. W. Am. Ins. Co., 172 Ohio App.3d 127, 2007-Ohio-2722, ¶ 16.

{¶ 42} To decide the real-party-in-interest issue, we first turn to Civ. R. Rule 17(A), which states that:

{¶ 43} “Every action shall be prosecuted in the name of the real party in interest. * * * * No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest. Such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.”

{¶ 44} “Standing is a threshold question for the court to decide in order for it to proceed to adjudicate the action.” Suster, 84 Ohio St.3d at 77. The issue of lack of standing “challenges the capacity of a party to bring an action, not the subject matter jurisdiction of the court.” Id. To decide whether the requirement has been satisfied that an action be brought by the real party in interest, “courts must look to the substantive law creating the right being sued upon to see if the action has been instituted by the party possessing the substantive right to relief.” Shealy v. Campbell (1985), 20 Ohio St.3d 23, 25.

{¶ 45}In foreclosure actions, the real party in interest is the current holder of the note and mortgage.” Wells Fargo Bank, N.A. v. Sessley, Franklin App. No. 09AP-178, 2010-Ohio-2902, ¶ 11 (citation omitted). Promissory notes are negotiable, and may be transferred to someone other than the issuer. That person then becomes the holder of the instrument. R.C. 1303.21(A). R.C. 1303.21(B) provides, however, that:

{¶ 46} “Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.”

{¶ 47} R.C, 1301.01(T)(1) also states that a holder with regard to a negotiable instrument means either of the following:

{¶ 48} “(a) If the instrument is payable to bearer, a person who is in possession of the instrument;

{¶ 49} “(b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.”

{¶ 50} In the case before us, the promissory note identifies Fidelity as the holder. The note, therefore, could have been negotiated only by Fidelity, through transfer of possession, and by either endorsing the note to a specific person, or endorsing the note to “bearer.”

{¶ 51} HSBC contends that it is the legal holder of the promissory note, and is entitled to enforce it, because it obtained the note as a bearer. A “bearer” is “the person in possession of an instrument, document of title, or certificated security payable to bearer or endorsed in blank.” R.C. 1301.01(E). HSBC’s claim that it is the bearer of the note is based on the “allonges” that were included as part of the exhibits to the complaint.

{¶ 52} The rejected affidavits of Neil do not refer to the allonges, nor were any allonges included with the promissory note that was attached to Neil’s affidavit. During oral argument, HSBC referred frequently to the Jiminez-Reyes affidavit, which was attached to a February 2008 summary judgment motion filed by HSBC. Jiminez-Reyes identified the exhibits attached to the complaint, but did not refer to the allonges. HSBC withdrew the summary judgment motion in March 2008, after Thompson had identified various deficiencies in the affidavit, including the fact that Jiminez-Reyes had incorrectly identified Thompson as the account holder. Since the motion was withdrawn, it is questionable whether the attached affidavit of Jiminez-Reyes was properly before the trial court. Byers v. Robinson, Franklin App. No. 08AP-204, 2008-Ohio-4833, ¶ 16 (effect of withdrawing motion is to leave the record as it stood before the motion was filed).

{¶ 53} Nonetheless, shortly after the complaint was filed, and prior to its first summary judgment motion, HSBC filed an affidavit of Jessica Dybas, who is identified in the affidavit as an “agent” of HSBC. The exact status of Dybas’s agency or connection to HSBC is not explained in the affidavit.

{¶ 54} Dybas states in the affidavit that she has personal knowledge of the history of the loan, that she is the custodian of records pertaining to the loan and mortgage, and that the records have been maintained in the ordinary course of business. See “Exhibit A attached to Plaintiff’s Notice of Filing of Loan Status, Military, Minor and Incompetent Affidavit and Loan History,” which was filed with the trial court in February 2008. Dybas’s affidavit also identifies Exhibits A and B of the complaint as true and accurate copies of the originals. Exhibit A to the complaint includes a copy of the promissory note of the decedent, Howard Turner, made payable to Fidelity, and a copy of two documents entitled “Allonge,” that are placed at the end of the promissory note. Exhibit B is a copy of the mortgage agreement, which names Fidelity as the “Lender” and MERS as “nominee” for Fidelity and its assigns. Dybas’s affidavit does not specifically mention the allonges. Like the affidavit of Jiminez-Reyes, Dybas’s affidavit incorrectly identifies Thompson as the borrower on the note. Thompson was not the borrower; she is the administratrix of the estate of the borrower, Howard Turner.

{¶ 55} Assuming for the sake of argument that Dybas’s affidavit is sufficient, or that the affidavit of Jiminez-Reyes was properly before the court, we note that Ohio requires endorsements to be “on” an instrument, or in papers affixed to the instrument. See R.C. 1303.24(A)(1) and (2), which state that “For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.”

{¶ 56} “The use of an allonge to add indorsements to an instrument when there is no room for them on the instrument itself dates from early common law.” Southwestern Resolution Corp. v. Watson (Tex. 1997), 964 S.W.2d 262, 263. “An allonge is defined as `[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.'” Chase Home Finance, LLC v. Fequiere (2010), 119 Conn.App. 570, 577, 989 A.2d 606, quoting from Black’s Law Dictionary (9th Ed. 2009).

{¶ 57} In Watson, a note and allonge produced at trial were taped together and had several staple holes. The president of the noteholder testified that when his company received the note, “the allonge was stapled to it and may also have been clipped and taped, but that the note and allonge had been separated and reattached five or six times for photocopying.” 964 S.W.2d at 263. The lower courts agreed with a jury that the allonge was not so firmly affixed as to be part of the note. But the Supreme Court of Texas disagreed.

{¶ 58} The Supreme Court of Texas recounted the history of allonges throughout various versions of the Uniform Commercial Code (UCC). The court noted that an early provision had provided that an endorsement must be written on the note or on a paper attached thereto. Id., citing Section 31 of the Uniform Negotiable Instruments Law. Under this law, an allonge could be attached by a staple. Id (citation omitted). The Supreme Court of Texas also noted that:

{¶ 59} “When the UCC changed the requirement from `attached thereto’ to `so firmly affixed thereto as to become a part thereof’, * * * the drafters of the new provision specifically contemplated that an allonge could be attached to a note by staples. American Law Institute, Comments & Notes to Tentative Draft No. 1-Article III 114 (1946), reprinted in 2 Elizabeth Slusser Kelly, Uniform Commercial Code Drafts 311, 424 (1984) (`The indorsement must be written on the instrument itself or on an allonge, which, as defined in Section ___, is a strip of paper so firmly pasted, stapled or otherwise affixed to the instrument as to become part of it.’).” Id. at 263-64 (citation omitted).

{¶ 60} The Supreme Court of Texas further observed that:

{¶ 61} “The attachment requirement has been said to serve two purposes: preventing fraud and preserving the chain of title to an instrument. * * * * Still, the requirement has been relaxed in the current code from `firmly affixed’ to simply `affixed’. Tex. Bus. & Com.Code § 3.204(a). As the Commercial Code Committee of the Section of Business Law of the State Bar of Texas concluded in recommending adoption of the provision, `the efficiencies and benefits achieved by permitting indorsements by allonge outweigh[] the possible problems raised by easily detachable allonges.'” Id. at 264 (citations omitted).

{¶ 62} The Supreme Court of Texas, therefore, concluded that a stapled allonge is “firmly affixed” to an instrument, and that the allonge in the case before it was properly affixed. In this regard, the court relied on the following evidence:

{¶ 63} “In the present case, Southwestern’s president testified that the allonge was stapled, taped, and clipped to the note when Southwestern received it. There was no evidence to the contrary. The fact that the documents had been detached for photocopying does not raise a fact issue for the jury about whether the documents were firmly affixed. If it did, the validity of an allonge would always be a question of the finder of fact, since no allonge can be affixed so firmly that it cannot be detached. One simply cannot infer that two documents were never attached from the fact that they can be, and have been, detached. Nor could the jury infer from the staple holes in the two papers, as the court of appeals suggested, that the two documents had not been attached. This would be pure conjecture.” Id. at 264.

{¶ 64} Like Texas, Ohio has adopted the pertinent revisions to the UCC. In All American Finance Co. v. Pugh Shows, Inc. (1987), 30 Ohio St.3d 130, the Supreme Court of Ohio noted that under UCC 3-302, “a purported indorsement on a mortgage or other separate paper pinned or clipped to an instrument is not sufficient for negotiation.” Id. at 132, n. 3. At that time, R.C. 1303.23 was the analogous Ohio statute to UCC 3-202, which required endorsements to be firmly affixed.

{¶ 65} Ohio subsequently adopted the revisions to the UCC. R.C. 1303.24(A)(2) now requires that a paper be affixed to an instrument in order for a signature to be considered part of the instrument. R.C. 1303.24 is the analogous Ohio statute to UCC. 3-204. The 1990 official comments for UCC 3-204 state that this requirement is “based on subsection (2) of former Section 3-202. An indorsement on an allonge is valid even though there is sufficient space on the instrument for an indorsement.” This latter comment addresses the fact that prior to the 1990 changes to the UCC, the majority view was that allonges could be used only if the note itself contained insufficient space for further endorsements. See, e.g., Pribus v. Bush (1981), 118 Cal.App.3d 1003, 1008, 173 Cal.Rptr. 747. See, also, All American Finance, 30 Ohio St.3d at 132, n.3 (indicating that while the court did not need to reach the issue for purposes of deciding the case, several jurisdictions “hold that indorsement by allonge is permitted only where there is no longer room on the instrument itself due to previous indorsements.”)

{¶ 66} The current version of the UCC, codified as R.C. 1303.24(A)(2), allows allonges even where room exists on the note for further endorsements. However, the paper must be affixed to the instrument in order for the signature to be considered part of the instrument. As the Supreme Court of Texas noted in Watson, the requirement has changed from being “firmly affixed” to “affixed.” However, even the earlier version, which specified that the allonge be “attached thereto,” was interpreted as requiring that the allonge be stapled. Watson, 964 S.W.2d at 263.

{¶ 67} In contrast to Watson, no evidence was presented in the case before us to indicate that the allonges were ever attached or affixed to the promissory note. Instead, the allonges have been presented as separate, loose sheets of paper, with no explanation as to how they may have been attached. Compare In re Weisband, (Bkrtcy. D. Ariz., 2010), 427 B.R. 13, 19 (concluding that GMAC was not a “holder” and did not have ability to enforce a note, where GMAC failed to demonstrate that an allonge endorsement to GMAC was affixed to a note. The bankruptcy court noted that the endorsement in question “is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note.”)

{¶ 68} It is possible that the allonges in the case before us were stapled to the note at one time and were separated for photocopying. But unlike the alleged creditor in Watson, HSBC offered no evidence to that effect. Furthermore, assuming for the sake of argument that the allonges were properly “affixed,” the order of the allonges does not permit HSBC to claim that it is the possessor of a note made payable to bearer or endorsed in blank.

{¶ 69} The first allonge is endorsed from Delta to “blank,” and the second allonge is endorsed from Fidelity to Delta. If the endorsement in blank were intended to be effective, the endorsement from Fidelity to Delta should have preceded the endorsement from Delta to “blank,” because the original promissory note is made payable to Fidelity, not to Delta. Delta would have had no power to endorse the note before receiving the note and an endorsement from Fidelity.

{¶ 70} HSBC contends that the order of the allonges is immaterial, while Thompson claims that the order is critical. At the oral argument of this appeal, HSBC appeared to be arguing that the order of allonges would never be material. This is easily refuted by the example of two allonges, one containing an assignment from the original holder of the note to A, and the other containing an assignment from the original holder of the note to B. Whichever allonge was first would determine whether the note had been effectively assigned to A, or to B.

{¶ 71} Thompson contends that because the last-named endorsement is made to Delta, Delta was the proper holder of the note when this action was filed, since the prior, first-named endorsement was from an entity other than the current holder of the note. In Adams v. Madison Realty & Development, Inc. (C.A.3, 1988), 853 F.2d 163, the Third Circuit Court of Appeals stressed that from the maker’s standpoint:

{¶ 72} “it becomes essential to establish that the person who demands payment of a negotiable note, or to whom payment is made, is the duly qualified holder. Otherwise, the obligor is exposed to the risk of double payment, or at least to the expense of litigation incurred to prevent duplicative satisfaction of the instrument. These risks provide makers with a recognizable interest in demanding proof of the chain of title.” Id. At 168.

{¶ 73} The Third Circuit Court of Appeals further observed that:

{¶ 74} “Financial institutions, noted for insisting on their customers’ compliance with numerous ritualistic formalities, are not sympathetic petitioners in urging relaxation of an elementary business practice. It is a tenet of commercial law that `[h]oldership and the potential for becoming holders in due course should only be accorded to transferees that observe the historic protocol.'” 853 F.2d at 169 (citation omitted).

{¶ 75} Consistent with this observation, recent decisions in the State of New York have noted numerous irregularities in HSBC’s mortgage documentation and corporate relationships with Ocwen, MERS, and Delta. See, e.g., HSBC Bank USA, N.A. v. Cherry (2007), 18 Misc.3d 1102(A), 856 N.Y.S.2d 24 (Table), 2007 WL 4374284, and HSBC Bank USA, N.A. v. Yeasmin (2010), 27 Misc.3d 1227(A), 2010 N.Y. Slip Op. 50927(U)(Table), 2010 WL 2080273 (dismissing HSBC’s requests for orders of reference in mortgage foreclosure actions, due to HSBC’s failure to provide proper affidavits). See, also, e.g., HSBC Bank USA, N.A. v. Charlevagne (2008), 20 Misc.3d 1128(A), 872 N.Y.S.2d 691 (Table), 2008 WL 2954767, and HSBC Bank USA, Nat. Assn. v. Antrobus (2008), 20 Misc.3d 1127(A), 872 N.Y.S.2d 691,(Table), 2008 WL 2928553 (describing “possible incestuous relationship” between HSBC Bank, Ocwen Loan Servicing, Delta Funding Corporation, and Mortgage Electronic Registration Systems, Inc., due to the fact that the entities all share the same office space at 1661 Worthington Road, Suite 100, West Palm Beach, Florida. HSBC also supplied affidavits in support of foreclosure from individuals who claimed simultaneously to be officers of more than one of these corporations.).

{¶ 76} Because the last allonge endorses the note to Delta, and no further endorsement to HSBC was provided, the trial court did not err in concluding that HSBC was not the holder of the note when the litigation was commenced against Thompson.

{¶ 77} As an alternative position, HSBC contended at oral argument that it had standing to prosecute the action, because assignment of the mortgage alone is sufficient. In this regard, HSBC notes that the mortgage was transferred to HSBC by MERS on November 14, 2007. This was about one week after HSBC commenced the mortgage foreclosure action.

{¶ 78} HSBC did not argue this position in its briefs, and did not provide supporting authority for its position at oral argument. In fact, HSBC relied in its brief on the contrary position that HSBC “was the legal holder of the note and, accordingly, entitled to enforce the mortgage loan regardless of the date the Mortgage was assigned, and under Marcino, even if the Mortgage had never been separately assigned to HSBC.” Brief of Appellant HSBC Bank USA, N.A., pp. 15-16 (bolding in original).

{¶ 79} The Marcino case referred to by HSBC states as follows:

{¶ 80} “For nearly a century, Ohio courts have held that whenever a promissory note is secured by a mortgage, the note constitutes the evidence of the debt and the mortgage is a mere incident to the obligation. Edgar v. Haines (1923), 109 Ohio St. 159, 164, 141 N.E. 837. Therefore, the negotiation of a note operates as an equitable assignment of the mortgage, even though the mortgage is not assigned or delivered.” U.S. Bank Natl. Assn. v. Marcino, 181 Ohio App.3d 328, 2009-Ohio-1178, ¶ 52.

{¶ 81} Even if HSBC had provided support for the proposition that ownership of the note is not required, the evidence about the assignment is not properly before us. The alleged mortgage assignment is attached to the rejected affidavits of Neil. Furthermore, even if we were to consider this “evidence,” the mortgage assignment from MERS to HSBC indicates that the assignment was prepared by Ocwen for MERS, and that Ocwen is located at the same Palm Beach, Florida address mentioned in Charlevagne and Antrobus. See Exhibit 3 attached to the affidavit of Chomie Neil. In addition, Scott Anderson, who signed the assignment, as Vice-President of MERS, appears to be the same individual who claimed to be both Vice-President of MERS and Vice-President of Ocwen. See Antrobus, 2008 WL 2928553, * 4, and Charlevagne, 2008 WL 2954767, * 1.

{¶ 82} In support of its argument that a subsequent mortgage assignment can confer standing on a noteholder, HSBC cites some Ohio cases in which “courts have rejected claims that the execution of an assignment subsequent to the filing of a complaint necessarily precludes a party from prosecuting a foreclosure action as the real party in interest.” Deutsche Bank Natl. Trust Co. v. Cassens, Franklin App. No. 09-AP-865, 2010-Ohio-2851, ¶ 17. Accordingly, at least in the view of some districts in Ohio, if the note had been properly negotiated to HSBC, HSBC may have been able to claim standing, based on equitable assignment of the mortgage, supplemented by the actual transfer of the mortgage after the complaint was filed.

{¶ 83} In contrast to the Seventh District, other districts take a more rigid view. See Wells Fargo Bank v. Jordan, Cuyahoga App. No. 91675, 2009-Ohio-1092 (holding that Civ. R. 17(A) does not apply unless a plaintiff has standing in the first place to invoke the jurisdiction of the court. Accordingly, a bank that is not a mortgagee when suit is filed is not the real party in interest on the date the complaint is filed, and cannot cure its lack of standing by subsequently obtaining an interest in the mortgage). Accord Bank of New York v. Gindele, Hamilton App. No. C-090251, 2010-Ohio-542.

{¶ 84} In Gindele, the First District Court of Appeals commented as follows:

{¶ 85} “We likewise reject Bank of New York’s argument that the real party in interest when the lawsuit was filed was later joined by the Gindeles. We are convinced that the later joinder of the real party in interest could not have cured the Bank of New York’s lack of standing when it filed its foreclosure complaint. This narrow reading of Civ.R. 17 comports with the intent of the rule. As other state and federal courts have noted, Civ.R. 17 generally allows ratification, joinder, and substitution of parties `to avoid forfeiture and injustice when an understandable mistake has been made in selecting the parties in whose name the action should be brought.’ * * * * `While a literal interpretation of * * * Rule 17(a) would make it applicable to every case in which an inappropriate plaintiff was named, the Advisory Committee’s Notes make it clear that this provision is intended to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made. When determination of the correct party to bring the action was not difficult and when no excusable mistake was made, the last sentence of Rule 17(a) is inapplicable and the action should be dismissed.'” Id. at ¶ 4 (footnotes omitted).

{¶ 86} We need not decide which approach is correct, because the alleged assignment of mortgage is attached to Neil’s rejected affidavits. Since the trial court’s disregard of the affidavits was not an abuse of discretion, there is currently no evidence of a mortgage “assignment” to consider. Moreover, we would reject HSBC’s position even if we considered the alleged assignment, because HSBC failed to establish that it was the holder of the note. Therefore, no “equitable assignment” of the mortgage would have arisen. All that HSBC might have established is that the mortgage was assigned to it after the action was filed. However, as we noted, the matters pertaining to that fact were submitted with an affidavit that the trial court rejected, within its discretion.

{¶ 87} Accordingly, the trial court did not err in dismissing the action without prejudice, based on HSBC’s failure to prove that it had standing to sue.

{¶ 88} HSBC’s First Assignment of Error is overruled.

IV

{¶ 89} The final matter to be addressed is Thompson’s motion to dismiss the part of HSBC’s appeal which assigns error in the trial court’s denial of HSBC’s motion for summary judgment. HSBC filed a motion for summary judgment on Thompson’s counterclaim, which alleged violations of the Fair Debt Practices Collection Act. The trial court denied the motion for summary judgment, and filed a Civ. R. 54(B) certification regarding the summary judgment that had been rendered in Thompson’s favor.

{¶ 90} Thompson contends that denial of summary judgment is not a final appealable order, and that HSBC’s argument regarding the FDCPA should not be considered on appeal. In response, HSBC maintains that it is not appealing the denial of its motion for summary judgment. HSBC argues instead, that if we reverse the trial court order granting Thompson’s motion to strike the affidavit of Neil, or if we reverse the order dismissing HSBC’s foreclosure complaint, we would then be entitled under App. R. 12(B) to enter a judgment dismissing the FDCPA claims.

{¶ 91} App. R. 12(B) provides that:

{¶ 92} “When the court of appeals determines that the trial court committed no error prejudicial to the appellant in any of the particulars assigned and argued in appellant’s brief and that the appellee is entitled to have the judgment or final order of the trial court affirmed as a matter of law, the court of appeals shall enter judgment accordingly. When the court of appeals determines that the trial court committed error prejudicial to the appellant and that the appellant is entitled to have judgment or final order rendered in his favor as a matter of law, the court of appeals shall reverse the judgment or final order of the trial court and render the judgment or final order that the trial court should have rendered, or remand the cause to the court with instructions to render such judgment or final order. In all other cases where the court of appeals determines that the judgment or final order of the trial court should be modified as a matter of law it shall enter its judgment accordingly.”

{¶ 93} App. R. 12(B) does not apply, because the trial court did not commit error prejudicial to HSBC. Furthermore, HSBC admits that it is not appealing the denial of its summary judgment motion. Accordingly, Thompson’s motion to dismiss is without merit and is overruled.

V

{¶ 94} All of HSBC’s assignments of error having been overruled, the judgment of the trial court is Affirmed. Thompson’s motion to dismiss part of HSBC’s appeal is overruled.

Brogan and Froelich, JJ., concur.

This copy provided by Leagle, Inc.

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