United States District Court, W.D. Virginia, Roanoke Division
ELIZABETH K. DILLON UNITED STATES DISTRICT JUDGE
Spouses Calvin Edward Webb and Diane Grogan Webb, proceeding pro se, filed two substantially similar suits in state court, both seeking to stop foreclosure proceedings related to their residence. The Webbs, who had defaulted on their mortgage obligations, challenged their loan closing and the subsequent securitization of their loan. Both cases were removed to this court, and the Webbs have not contested the propriety of the removal in either case. Upon motion of some defendants, the court consolidated the two actions and the second, No. 7:15-cv-423, was struck from the active docket of the court. (Dkt. Nos. 9, 13.)
Pending before the court are two motions to dismiss. The first was filed jointly by two defendants: U.S. Bank National Association, as Trustee for Structured Asset Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-EQ1 (U.S. Bank), and Mortgage Electronic Registration Systems, Inc. (MERS). The second was filed by defendant Aurora Loan Services, LLC (Aurora). These three defendants seek dismissal of all of the Webbs’ claims against them. The motions have been fully briefed and are ripe for consideration. For the reasons set forth herein, the court will grant both motions to dismiss and dismiss all claims against these defendants.
As to the remaining defendants, the court will direct the Webbs to show cause as to why those defendants should not be dismissed because of the Webbs’ failure to serve them timely.
The facts are taken from the two complaints and documents attached to them, Zak v. Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606 (4th Cir. 2015). The court has also considered certain exhibits referenced in the complaint and attached to the motions to dismiss, since those documents are “integral to and explicitly relied on in the complaint, ” and there is no challenge to their authenticity. E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011) (quoting Phillips v. LCI Int’l, Inc., 190 F.3d 609, 618 (4th Cir. 1999)). For purposes of both motions to dismiss, the court accepts the complaint’s well-pleaded factual allegations as true and construes them in the light most favorable to the Webbs. Coleman v. Md. Court of Appeals, 626 F.3d 187, 189 (4th Cir. 2010). And because the Webbs are pro se litigants, this court also construes their pleadings liberally. See, e.g., Boag v. MacDougall, 454 U.S. 364, 365 (1982) (citation omitted). The court notes, though, that “[p]rinciples requiring generous construction of pro se complaints are not . . . without limits.” Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985) (affirming district court’s dismissal of pro se complaint).
A. Factual Allegations
On March 14, 2006, the Webbs executed an adjustable rate note (“the Note”), in favor of EquiFirst Corporation, in the amount of $340, 000. (Second Compl. ¶ 28, No. 7:15-cv-423, Dkt. No. 1-2; Note at 1, Ex. A to Defs.’ Mem. Supp. Mot. Dismiss (Defs.’ Mem.), Dkt. No. 12-1.) As part of their obligations under the Note, the Webbs agreed to repay the amount borrowed, plus interest at a adjustable rate starting at 7.7%. The Note also contains provisions stating that the Webbs understand that “the Lender may transfer the Note” and that “anyone who takes this Note by transfer and who is entitled to receive payments under the Note is called the Note Holder.” (Note at 1.)
The Note was secured by a deed of trust (“Deed of Trust”) for the property where the Webbs resided, 3617 Laurel Ridge Road, NW, in Roanoke, Virginia (“the Property”). (Deed of Trust, Ex. B to Defs.’ Mem., Dkt. No. 12-2.) As with any deed of trust under Virginia law, the Deed of Trust had a “grantor” (here, the Webbs), a “grantee” (here, MERS), and a trustee (here, Burton L. Albert). See Khair v. Countrywide Home Loans, Inc., No. 1:10-cv-410, 2010 WL 2486430, at *3 (E.D. Va. June 14, 2010) (discussing deeds of trust generally and citing Virginia Code §§ 55-58 and 55-59). The Deed of Trust explicitly designates MERS as beneficiary and nominee for EquiFirst, the original lender. (Deed of Trust 1–2, Dkt. No. 12-2.) The Deed of Trust also contained a “Sale of Note” clause, which states that “[t]he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower” and explains that a sale could result “in a change in the entity (known as the ‘Loan Servicer’) that” could collect payments due under the Note. (Deed of Trust ¶ 20, Dkt. No. 12-2 at 12.) The Deed of Trust and an adjustable rate rider signed by the Webbs were both recorded in the Roanoke City Circuit Court on March 20, 2006. (Dkt. No. 12-2 at 19–20.)
According to the complaint, at some point after their closing, the Webbs’ loan went through a securitization process, whereby it was grouped with other mortgage loans and sold to investors as a security. The Webbs’ Note was assigned by MERS to U.S. Bank, as trustee for a trust referred to as “Structured Assets Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-EQ1.” (Second Compl. ¶¶ 6–21; see also Defs.’ Mem. 7–8.) The process by which any particular loan ends up being transferred to such a trust is governed by a contract known as a Pooling and Servicing Agreement (PSA). (Second Compl. ¶ 19.) The PSA and another contract called the Mortgage Loan Purchase Agreement (MLPA) govern the securitization transactions. (Id.)
Although the complaint does not contain much detail on the foreclosure proceedings, the original state court records contain a recorded document titled a “Substitution of Trustee, ” dated January 6, 2015, in which U.S. Bank, as trustee for the trust, states that it is “either the original payee of the Promissory Note or the Promissory Note has been duly indorsed.” (No. 7:15-cv-423, Dkt. No. 1-2 at 47.) The same document removes Albert as trustee and appoints instead Professional Foreclosure Corporation of Virginia as substitute trustee. (Id.) The document was executed by Wells Fargo Bank, N.A., as servicing agent to U.S. Bank, as trustee for the trust. (Id.) Based on this document, it appears that, at the time of foreclosure, Wells Fargo Bank, N.A., was the servicing agent for U.S. Bank as Trustee, the owner of the Note. This is also consistent with correspondence sent from U.S. Bank to the Webbs in July 2014. (See No. 7:15-cv-413, Dkt. No. 16-1 at 41.)
Based on the foreclosure proceedings, and other allegations in the complaint concerning the Webbs’ inability to make their payments, it appears that the Webbs defaulted on their Note at some point. (E.g., Second Compl. ¶ 48 (noting the Webbs could not afford the loan); ¶ 129 (describing the Webbs as “permanently burdened” by the loan).) Certainly, they do not allege that they have repaid their debt in full. The reason for the default and the details of the foreclosure proceedings, however, are not explained in the complaint or elsewhere.
As described by the Webbs in their “introductory allegations, ” they “dispute the title and ownership of” the Property and allege that the originating mortgage lender and others alleging an ownership interest in the Note and Deed of Trust, “have unlawfully sold, assigned and/or transferred their ownership and security interest” and thus “do not have lawful ownership or a security interest” in the Property. (Id. ¶ 14.) They seek to quiet title on this basis. (Id.)
Their remaining claims are based “upon the facts and circumstances surrounding [the Webbs’] original loan transaction and subsequent securitization.” (Id. ¶ 15.) The Webbs describe, as the “very basis” of their complaint, “that Defendants breached their PSA contract, and through misrepresentation are about to foreclose on [the Property], and that because of the securitization process Defendants and their predecessors in interest failed to properly assign [the Webbs’] mortgage note and Deed of Trust according to state law and the PSA governing the original loan.” (First Compl. 10.) They point to a number of specific alleged “deficiencies” in the securitization process and posit that these “render invalid any security interest in [their] mortgage.” (Id. at 8.) Among other things, these supposed deficiencies include the “splitting or separation of title, ” a failure to properly assign the deed of trust, failures to record either the assignment or the default, and different failures to comply with the PSA and/or MLPA. (Id.) The court discusses each of these theories in more detail infra at Section II.B.
In addition to their challenges to the securitization process, the Webbs also allege, in general terms, that the defendants “intentionally concealed the negative implications of the loan they were offering” to the Webbs and now the Webbs have the “potential of losing their home to the very entities who placed them in this position.” (Id. at 5.) They claim that the “terms of the finance transaction with EquiFirst” were illegal and that the loan was illegal, because the terms were not clear, conspicuous, or consistent. They also contend that the loan was underwritten without proper due diligence. In particular, they contend that the underwriter, Lehman Brothers, failed to verify the Webbs’ income and that they should not have qualified for the loan in the first place. (Id. at 5–6.)
B. Parties, Causes of Action, and Defendants’ Motions to Dismiss
The complaint names as defendants EquiFirst Corporation (twice), U.S. Bank, Aurora, MERS, and “Does 1 through 100, Registration.” The Webbs allege that each of the named defendants was a “purported participant in the imperfect securitization of the Note and/or the Deed of Trust.” (Second Compl. ¶¶ 4-7). EquiFirst is also listed as the Lender on the note executed by the Webbs. (Note, Dkt. No. 12-1 at 1.) The Webbs further identify U.S. Bank as the “purported Trustee for the Securitized Trust, ” (Second Compl. ¶ 5). The Webbs describe Aurora as the “master servicer” for the securitized trust. (Id. ¶¶ 5–6). Defendant MERS is identified as the “beneficiary under the Deed of Trust.” (Id. ¶ 7; see also Deed of Trust, Dkt. No. 12-2.) The complaint also names as defendants “Does 1 through 100, ” describing these defendants as unknown entities who may claim “some right, title, or interest in the Property. (Id. ¶ 9.)
The complaint does not specify which claims are brought against which defendants; instead, it names all the defendants in all of the following ten claims:
1. Lack of standing to foreclose;
2. Fraud in the concealment;
3. Fraud in the indictment;
4. Intentional infliction of emotional distress;
5. Quiet title;
6. Slander of title;
7. Declaratory relief;
8. Violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (TILA);
9. Violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 ...