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Vaughan v. Wells Fargo Bank N.A.

United States District Court, W.D. Virginia, Lynchburg Division

May 18, 2016

Joseph F. Vaughan II, and Katherine M. Vaughan Plaintiffs,
Wells Fargo Bank, N.A., et al. Defendants.



         This matter is before the Court upon Defendant Wells Fargo Bank N.A.’s motion to dismiss. Dkt. 23. In Plaintiffs’ amended complaint, they allege that the “Defendants are third-party strangers to his mortgage and have no ownership interest entitling them to collect payment or declare a default.” Am. Compl. p. 3. Because the Plaintiffs rely on unrecognized legal theories and fail to state any claim upon which relief can be granted, the Wells Fargo’s motion will be granted.

         I. Facts as Alleged[1]

         Plaintiffs Joseph Vaughan and Katherine Vaughan purchased real property at Route 1 Box 3118, Spout Spring, Virginia, also known as 838 Snapps Mill Road, Spout Spring. On February 21, 2005, the Plaintiffs executed a note in favor of Premium Capital Funding L.L.C. in the amount of $206, 250.00. This note was secured by a deed of trust for the real property. Dkts. 24-2 & 24-3; Am. Compl. ¶ 24. Premium Capital subsequently endorsed the Note to the order of Wells Fargo. Dkt. 24-2 at ECF 8.

         After this endorsement, Plaintiffs defaulted on their note. Am. Compl. ¶¶ 20, 27. On May 22, 2006, Wells Fargo executed a Lost Note Affidavit and Indemnification Agreement evidencing that the Note was lost and/or destroyed. Dkt. 24-4; see also Dkt. 2 at ¶ 18.

         Since May 2006, the Plaintiffs have used various tactics to avoid foreclosure. First, Plaintiffs have attempted to modify their loan eighteen times from 2008 to 2015. Am. Compl. ¶ 66.[2] Second, Plaintiffs have filed for numerous bankruptcies. Plaintiff Joseph Vaughan has filed for bankruptcy at least five times since he defaulted on the note. See Case No. 07-60584 (dismissed June 7, 2011); Case No. 13-62014 (dismissed November 27, 2013); Case No. 14-61220 (dismissed October 6, 2014); and Case No. 15-61907 (dismissed October 27, 2015). Plaintiff Katherine Vaughan has filed for bankruptcy twice. See Case No. 15-60527 (dismissed May 1, 2015) and Case No. 15-61081 (dismissed August 31, 2015).

         After dismissing Plaintiff Katherine Vaughan’s most recent bankruptcy, the Bankruptcy Court issued an Order prohibiting her from filing a new petition in that Court for 180 days. Case No. 15-61081 at Dkt. 28. Plaintiff Joseph Vaughan initiated this action on October 26, 2015. Dkt. 2.

         II. Standard of Review[3]

         When evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Court must accept as true all well-pleaded allegations. See Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 539 (4th Cir. 2013); see also Erickson v. Pardus, 551 U.S. 89, 94 (2007). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotation marks omitted). Stated differently, in order to survive a motion to dismiss, “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, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

         III. Discussion

         a. Declaratory Judgment

         Plaintiffs seek declaratory judgment and ask the Court “to make a finding and issue appropriate orders stating that none of the named Defendant and/or Doe Defendants, have any right or interest in Plaintiffs Note, Deed of Trust, or the Property. . . .” Am. Compl. ¶ 84.

         A declaratory judgment is “appropriate when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue.” Hipage Co., Inc., v. Access2go, Inc., 589 F.Supp.2d 602, 614 (E.D. Va. 2008). In a declaratory judgment determination, the court’s primary inquiry should be “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of declaratory judgment.” Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941).

         In this case, Plaintiffs have failed to show that an actual controversy exists because they rely on legal theories not recognized in Virginia law. Plaintiffs, throughout the amended Complaint, allege that their loan was improperly secured and that Wells Fargo is unable to “provide the original signed Note and Deed of Trust.” Am. Compl. ¶ 21; see also Am. Compl.

         ¶¶ 13-41. In Jesse v. Wells Fargo Home Mortg., 882 F.Supp.2d 877, 880 (E.D. Va. 2012), Judge Gibney held that such accusations are not enough to state a cognizable claim under Virginia law:

[P]laintiffs argue that the defendants lacked “standing” to foreclose upon the Property because the securitization of the mortgage made it such that the defendants cannot show they were the holder of the applicable note at the time of the sale. In support of their claim, the plaintiffs cite U.S. Bank v. Ibanez, 458 Mass. 637, 648-51, 941 N.E.2d 40 (2011). Under Virginia law, however, “the fact that the instrument is lost or cannot be produced shall not affect the authority of the trustee to sell or the validity of the sale.” Va.Code § 55-59.1. Virginia has a “well established status as a non-judicial foreclosure state, ” and “there is no legal authority that the sale or pooling of investment interest in an underlying note can relieve borrowers of their mortgage obligations or extinguish a secured party's rights to foreclose on secured property.” Upperman v. Deutsche Bank Nat'l Trust Co., No. 1:10cv149, 2010 WL 1610414, at *2-4 (E.D.Va. Apr. 16, 2010), aff'd 4th Cir. No. 10-2308 (Feb. 25, 2011). Further, as stated by the court in Gallant v. Deutsche Bank Nat. Trust Co., “[a] defendant's inability to produce the original note [does] not render the foreclosure sale invalid, and [a] plaintiff's claim to the contrary must be dismissed.” 766 F.Supp.2d 714, 721 (W.D.Va.2011). In sum, the plaintiffs' legal claim runs contrary to Virginia law, and cannot go forward.

         Furthermore, Plaintiffs also suggest that Mortgage Electronic Registration Systems (“MERS”) did not have authority to assign their loan nor was the substitution of trustee valid. Am. Compl. ¶ 42-65. Plaintiffs’ theories once again fail. Virginia law, along with the Plaintiffs’ loan documentation, provides MERS with authority to assign the loan. See e.g., Tapia v. U.S. Bank, 718 F.Supp. 2d. 689, 696-97 (E.D. Va. 2010). Similarly, Plaintiffs lack requisite standing to challenge the validity of substitution of trustee as they were not a party to the challenged documents. Pena v. HSBC Bank, No. 1:14-cv-1018, 2014 WL 5684798, at *5 (E.D. Va. Nov. 4, 2014) (“Virginia courts routinely dismiss such challenges on the basis of lack of standing because the complainant was not a party to or intended beneficiary of the challenged document.”); see also Wolf v. Fed. Nat’l Mortg. Ass’n, 830 F.Supp.2d 153, 1616 (W.D. Va. 2011) (concluding that plaintiff had no standing because “[a]bsent an enforceable contract right, a party lacks standing to challenge the validity of the contract”), aff’d 512 F. App’x 336 (4th Cir. 2013).

         Therefore, the Plaintiffs’ claim for declaratory judgment must be dismissed because they have failed to ...

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