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Pena v. HSBC Bank USA

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

November 4, 2014



JAMES C. CACHERIS, District Judge.

This matter is before the Court on Defendant HSBC Bank USA's ("HSBC") Motion to Dismiss the Amended Complaint.[1] [Dkt. 15] For the reasons set forth below, the Court will grant the motion.

I. Background

In considering a motion to dismiss for failure to state a claim, as is the case here, "a court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff[.]" Nemet Chevrolet, Ltd. v., Inc. , 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted). Accordingly, the following facts, taken from the Amended Complaint, [Dkt. 13], are accepted as true for purposes of this motion. See Erickson v. Pardus , 551 U.S. 89, 94 (2007).

This action arises from a residential mortgage foreclosure. On February 5, 2007, Plaintiffs Sostenes Pena and Yolanda Pena ("Plaintiffs") obtained a mortgage loan for property located in Loudoun County, Virginia. (Am. Compl. ¶¶ 1, 6-7.) The loan was evidenced by a note ("Note") and secured by a deed of trust ("Deed of Trust"). (Id. at ¶ 7, Ex. A [Dkt. 13-1].) The Note identifies Indymac Federal Bank ("Indymac") as the lender and defines the "Note Holder" as "anyone who takes this Note by transfer and who is entitled to receive payments under the Note." (Id. at ¶ 7; Def.'s Mem. in Supp. [Dkt. 19] Ex. A at 1.) The Deed of Trust also names Indymac as the lender and Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary. (Am. Compl. Ex. A at 1-2.) The Deed of Trust provides that MERS "is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns." (Id.) The Deed of Trust also states that

MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.


On July 27, 2010, MERS, acting as nominee for the lender, assigned the Deed of Trust to a mortgage trust controlled by HSBC. (Am. Compl. ¶ 36.) On July 29, 2010 and June 11, 2013, MERS executed two additional assignments that also purported to assign the Deed of Trust and Note to HSBC. (Id. at ¶¶ 37-38.)

At some point following the assignments described above, Plaintiffs defaulted on the Note. Plaintiffs were unable to "work something out with [their] servicer" and HSBC, after appointing Surety as a substitute trustee under the Deed of Trust, initiated foreclosure proceedings. (Am. Compl. ¶¶ 11, 12, 24.) Surety, through the law firm of McCabe, Weisberg & Conway, conducted a foreclosure sale on November 29, 2013, and HSBC obtained title to the property. (Id. at ¶ 13.) HSBC has since filed an unlawful detainer action Loudon County General District Court seeking to evict Plaintiffs. (Id. at ¶ 19.)

Plaintiffs initially filed this action in Loudoun County Circuit Court. Defendant removed the case to this Court shortly after service on August 8, 2014. (Notice of Removal [Dkt. 1].) Shortly thereafter, HSBC filed a motion to dismiss the complaint, [Dkt. 3], which was rendered moot when Plaintiffs filed an Amended Complaint as a matter of right under Rule 15 of the Federal Rules of Civil Procedure. [Dkt. 14] Plaintiffs' Amended Complaint contains four counts.

Count I, labeled Rescission of Foreclosure Sale, asks the Court to "enter an Order rescinding the foreclosure sale as having been conducted in violation of the terms of the trust document and without having satisfied all conditions precedent therein." (Am. Compl. ¶ 51.) As grounds for this relief, Plaintiffs allege that HSBC "violated the terms of the Deed of Trust, as it failed to strictly comply with the terms of the trust document, made material misrepresentations in the documents appointing SURETY and the Assignments, and proceeded to foreclose on the Property when it was fully aware of the fact it had no authority to so act." (Id. at ¶ 49.)

In Count II, Plaintiffs request "an order from this Court directing the land records clerk of the county in which the property lies to strike/remove the appointment of substitute trustee documents, the Assignments, and Trustees' Deed from the land records." (Am. Compl. ¶ 62.) According to Plaintiffs, "[HSBC] had no authority to appoint Defendant SURETY as substitute trustee, and [HSBC] had no authority to direct Surety to advertise the property for foreclosure or to effectuate the foreclosure on Plaintiffs home, and therefore had no authority to record [such documents] among the land [records]." (Id. at ¶ 56.)

In Count III, Plaintiffs seek "compensatory and punitive damages" for the "preparation, execution, and recording of the false documents among the land records" discussed above. (Am. Compl. ¶ 69.) Plaintiffs aver that HSBC "caused the[se] documents to be recorded in the public record... with knowledge that the filing was untimely, and unjustified because [HSBC] knew that it did not have a lawful authority to call a default, accelerate the debt, appoint a substitute trustee, invoke the power of sale, and to direct Surety to sell the Property and record the Trustees' Deed." (Id. at ¶ 68.)

Lastly, in Count IV, Plaintiffs allege HSBC breached the Deed of Trust by not satisfying conditions precedent prior to initiating foreclose proceedings. (Am. Compl. ¶¶ 71-72.) Plaintiffs ask the Court to find this material breach "meant the remedy of foreclosure did not accrue, [and] thus the substitute trustee had no authority to auction/foreclose the Property, and no title passed to [HSBC]...." (Id. at ¶ 72.) ...

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