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Matthews v. HSBC Bank USA, National Association

United States District Court, E.D. Virginia, Alexandria Division

August 29, 2014



LEONIE M. BRINKEMA, District Judge.

Before the Court is Plaintiff's Fed.R.Civ.P. Rule 59(e) Motion [Dkt. No. 18]("Rule 59(e) Motion"), in which he asks the Court to vacate the Order dismissing this lawsuit with prejudice. For the reasons that follow, the motion will be DENIED.


On May 14, 2014, plaintiff Alexander Otis Matthews ("Matthews" or "plaintiff"), suing in "his personal capacity as sole and managing member for Farmville Group LLC" brought this action in the Circuit Court for Fairfax County against defendants HSBC Bank USA, National Association ("HSBC"), America's Servicing Company ("ASC"), and Professional Foreclosure Corporation of Virginia ("PFC") (collectively "defendants"), asserting that they wrongfully foreclosed on a Dunn Loring, Virginia property owned by Farmville Group, LLC ("Farmville"). Plaintiff seeks over $2 million in damages. Defendants removed the action to this court on June 26, 2014. See Notice of Removal [Dkt. No. 1]. In his Complaint, plaintiff alleges violations of the Fair Debt Collection Practices Act ("FDCPA") 15 U.S.C. § 1962 et seq., the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362, common law negligence, and violations of his First and Fourteenth Amendment rights to "due process of law" and to seek "redress for his legal grievances."

Although he is before this court due to removal of the Complaint, Matthews is no stranger to the federal judicial system. On September 30, 2011, he pleaded guilty in this court to charges of bank fraud and wire fraud. Plea Agreement, No. 1:11-cr-00348 [Dkt. No. 3]. In his plea, Matthews admitted to using straw borrowers to apply for and obtain more than $10 million for the purchase of real estate, Statement of Facts, No. 1:11-cr-00348 [Dkt. No. 4] at 3, and admitted to using Farmville to help obtain those fraudulent loans. Transcript of Plea Hearing, No. 1:11-cr-00348 [Dkt. No. 22] at 11. Matthews' pretrial release was revoked before his conviction upon a finding that he had committed bankruptcy fraud while on release. Order of June 17, 2011, No. 1:11-cr-00087 [Dkt. No. 41]. In the fraudulent bankruptcy filing, Matthews listed his name as "Al Mather" with the Dunn Loring property at issue in this case being used for his mailing address. On September 30, 2011 Matthews was sentenced to 120 months in prison for his crimes. No. 1:11-cr-00348 [Dkt. No. 9].[1] Matthews is currently incarcerated in the Berlin Federal Prison Camp in Berlin, New Hampshire. See Plaintiff's Objection to Defendants' Motion to Dismiss [Dkt. No. 13], at 19.

On July 25, 2014, this Court granted defendant's Motion to Dismiss and dismissed Matthews' Complaint on the procedural ground of lack of standing because non-human entities, like Farmville, cannot appear in court without counsel. Although Matthews filed this Complaint in his personal capacity, he clearly did so attempting to assert Farmville's rights.


Matthews chiefly argues that the Court erred in finding that he lacked standing to personally assert the rights of Farmville LLC because he claims tobe the liquidating trustee of an LLC under Va. Code Ann. 13.1-1048 (C), although he did not describe himself as a liquidating trustee in his complaint.[2] Defendants oppose the motion arguing that plaintiff failed to identify his status as a liquidating trustee in either his Complaint or opposition to the Motion to Dismiss. They also repeat their substantive arguments supporting dismissal.

Rule 59(e) motions allow for the amendment or alteration of a final judgment, but are granted in only "three circumstances: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or to prevent manifest injustice." Ingle ex rel. Estate of Ingle v. Yelton , 439 F.3d 191, 197 (4th Cir. 2006) (internal quotation marks omitted). Such motions "may not be used... to raise arguments which could have been raised prior to issuance of the judgment, nor may they be used to argue a case under a novel legal theory that the party had the ability to address in the first instance." Pac. Ins. Co. v. Am. Nat. Fire Ins. Co. , 148 F.3d 396, 403 (4th Cir. 1998). Matthews' motion does not state under which circumstance he is seeking relief; however, based on his motion, it appears he is arguing that this Court made a clear error of law when it dismissed his action. As explained below, there is no merit to this argument.

At the outset, defendants properly argue that the motion should be denied because plaintiff failed to raise Farmville's cancellation as an LLC and his resulting status as a liquidating trustee in either his Complaint or his opposition to the Motion to Dismiss, although he clearly knew about the cancellation of Farmville's status as an LLC.[3] Matthews has provided no legitimate justification for that failure. Therefore, on this ground alone, his motion can be denied. See Willis N. Am. Inc. v. Walters, 2011 WL 3703301 (E.D. Va. Aug. 23, 2011) (denying a Rule 59(e) motion where arguments in the motion could have been made before judgment was entered).

In addition to this procedural basis to deny plaintiff's motion, the motion fails on its merits. A limited liability corporation exists as "an entity separate from its members." 1924 Leonard Road, LLC v. Van Roekel , 636 S.E.2d 378, 384 (Va. 2006). Under Virginia law, an LLC must pay yearly fees to remain in operation. Va. Code Ann. § 13.1-1061. If it fails to pay these fees, the LLC's certificate of operation is automatically cancelled. Id . § 13.1-1050.2(A). Once its certificate is cancelled, the properties and affairs of the LLC pass to its members, not as individuals but as "trustees in liquidation." Id . § 13.1-1050.2(C). Members of a former LLC who become trustees in liquidation have specific powers, allowing them to act "in the name and on behalf of the limited liability company." Id . § 13.1-1048(C). One such power is the power to "prosecute and defend suits, whether civil, criminal or administrative;" however, that power remains only "until the effective date of a certificate of cancellation" is issued by the State Corporation Commission. Id . In addition, members acting as trustees in liquidation may only act in the name and on behalf of the LLC. Id.

Matthews, therefore, is wrong when he argues that the language in 1048(C) gives him the power to prosecute this suit on behalf of Farmville in his personal capacity. As a trustee in liquidation, he would have to file any action explicitly on behalf of Farmville, which he has not done.

Moreover, the § 1048(C) power to "prosecute and defend suits" does not survive the effective date of Farmville's certificate of cancelation. Matthews admits in his Motion that "Farmville's certificate of operation was cancelled [sic] on June 30, 2012." Rule 59(e) Motion at 1. He has also submitted what purports to be a letter from the Virginia State Corporation Commission, confirming that Farmville ceased to exist on June 30, 2012. Id. at 3. As Matthews puts it: "Farmville's certificate of operation was automatically cancelled [sic] long before this suit was filed." Id. at 1.

Matthews attempts to rely on Gen. Tech. Apps, Inc. v. Exro Ltda , 388 F.3d 114 (4th Cir. 2004). In that case, the corporate manager-member of an LLC sought to bring an action in its own name for a violation of the LLC's property rights, after the LLC had been automatically canceled for nonpayment of fees. Id. at 119. Although recognizing that the LLC property passed in trust, the Fourth Circuit found that the manager-member was "still without standing to pursue its own action" because "the legal rights at issue... are not [the manager member]'s to pursue individually." Id . Similarly, any rights at issue ...

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