United States District Court, W.D. Virginia, Lynchburg Division
Joseph F. Vaughan II, and Katherine M. Vaughan Plaintiffs,
Wells Fargo Bank, N.A., et al. Defendants.
K. MOON, UNITED STATES DISTRICT JUDGE
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.
Facts as Alleged
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.
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.
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. ¶
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,
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.
Standard of Review
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).
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.
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).
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.
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).
the Plaintiffs’ claim for declaratory judgment must be
dismissed because they have failed to ...