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Hendiazad v. Ocwen Loan Servicing, LLC

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

April 4, 2019

AMRIK HENDIAZAD, et al., Plaintiffs,
OCWEN LOAN SERVICING, LLC, et al., Defendants.


          Leonie M. Brinkema United States District Judge.

         Before the Court is defendants' Ocwen Loan Servicing, LLC ("Ocwen") and Mortgage Electronic Registration Systems, Inc. ("MERS") Motion to Dismiss [Dkt. No. 5], in which they argue that plaintiffs' Amrik and Seemin Hendiazad ("plaintiffs") Complaint should be dismissed as an impermissible "show-me-the-note" claim. Plaintiffs, proceeding pro se, have responded to defendants' Motion. Finding that oral argument would not further the decisional process, the defendants' Motion to Dismiss will be granted without oral argument for the reasons discussed below.

         I. BACKGROUND

         In this Complaint, plaintiffs allege that defendants MERS and Ocwen have attempted to unlawfully foreclose on their property by fraudulently transferring the Note and Deed of Trust, failing to provide them with a notice of acceleration, and lacking the authority to foreclose at all.

         The Complaint alleges that on April 19, 2010, plaintiffs obtained a home mortgage loan from U.S. Mortgage Finance Corp. for $682, 411 through a promissory Note ("Note") secured by real property located at 35376 Glencoe Court, Round Hill, Loudoun County, Virginia ("Property"). Compl. [Dkt. No. 1-1] ¶¶ 4-5, Exs. A, B. This agreement was evidenced by a Deed of Trust ("Deed"), which named MERS as the Beneficiary and Palma Collins as the Trustee. Id. ¶ 6, Ex. A.

         On June 18, 2014, MERS assigned its interest in the Deed to Ocwen. Id. Ex. D. On October 14, 2016, Ocwen appointed Surety Trustees, LLC as substitute trustee. Id. Ex. C. On November 30, 2017, Ocwen removed Surety Trustees, LLC and appointed Equity Trustees, LLC as substitute trustee. Defs.' Mem. in Supp. of Mot. to Dismiss Third Am. Compl.[1] [Dkt. No. 6] ("Mem.") 2-3, Ex. 1.

         Defendants allege that plaintiffs have defaulted on the loan. Id. at 3. On October 25, 2018, plaintiffs received a Notice of Foreclosure from BWW Law Group, allegedly acting on behalf of Equity Trustees, informing them that the Property would be sold on November 13, 2018. Compl. ¶ 30 (citing Ex. D). Although plaintiffs are unsure whether the sale occurred, defendants allege that Equity Trustees voluntarily cancelled the sale. Mem. 3.

         Plaintiffs filed this action in the Circuit Court of Loudoun County on December 20, 2018. Dkt. No. 1-1. Defendants removed the action to this court on January 24, 2019. Dkt. No. 1. In essence, plaintiffs argue that Ocwen cannot foreclose because it has not presented plaintiffs with the original Note and because the assignment by MERS of its interest in the Deed to Ocwen was fraudulent. Specifically, plaintiffs assert five causes of action: (1) trespass quare clausum fregit (2) trover, (3) covenant, (4) declaratory judgment, and (5) breach of contract. Plaintiffs also seek injunctive relief, to include a temporary restraining order ("TRO"). Specifically, Count I alleges that defendants have trespassed on plaintiffs' Property because defendants do not have any evidence of ownership of the loan. Compl. ¶¶ 46-50. Count II alleges that defendants are not entitled to seek title to the Property because they have received full payment of the mortgage from the mortgage insurance carrier. Id. ¶¶ 51-54. Count III asks the Court to grant declaratory relief to enforce the covenant that only the original lender or a valid assignee be allowed to enforce the Note and Deed. Id. ¶¶ 55-57. Count IV seeks a declaration that Ocwen does not have standing to conduct a foreclosure sale on the Property and that the mortgage debt has been paid. Id. ¶¶ 58-63. Count V alleges that Ocwen breached the Note and Deed when it failed to give plaintiffs notice of acceleration, a change in loan servicer, and foreclosure. Id. ¶ 64. Count VI requests injunctive relief, including a TRO forbidding Ocwen from foreclosing on the Property. Id. ¶¶ 65-68. In addition to the requested declarations, plaintiffs seek damages in the amount of $888, 0000, plus $2, 664, 000 treble damages if defendants are found to have made false claims against the Property. Id. ¶¶ 69-75.

         Defendants have moved to dismiss [Dkt. No. 5], arguing that under Virginia's nonjudicial foreclosure laws, they cannot be compelled to produce documentation authorizing foreclosure on the Property. Mem. 2. Additionally, because the foreclosure was voluntarily cancelled, plaintiffs have yet to suffer harm. Id. Plaintiffs have responded, although not in a timely fashion, [2] and have also represented that they will move for leave to file a first amended complaint "as soon as [they] are done with this Response." Pis.' Resp. in Opp'n to Defs.' Mot. to Dismiss Original Compl. [Dkt. No. 9] ("Opp'n") 11. In a separate letter to the Court, plaintiffs allege that the Note has been securitized and offered on the market and they demand "full disclosure." Notice and Demand [Dkt. No. 10].


         A. Standard of Review

         Federal Rule of Civil Procedure 12(b)(6) provides that a complaint should be dismissed if it fails to state a claim upon which relief can be granted. "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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Pleadings filed by a prose party must be "liberally construed" and will not be held to the same standards as those filed by lawyers. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal quotation marks and citations omitted). Nevertheless, whether a complaint states a claim on which relief may be granted is determined by "the familiar standard for a motion to dismiss under Fed.R.Civ.P. 12(b)(6)." Sumner v. Tucker, 9 F.Supp.2d 641, 642 (E.D. Va. 1998). The Court must "assume that the facts alleged in the complaint are true and draw all reasonable inferences in the plaintiffs favor," Burbach Broad. Co. of Del, v. Elkins Radio Corp., 278 F.3d 401, 406 (4th Cir. 2002), but only to the extent that those allegations pertain to facts rather than to legal conclusions, IqbaL 556 U.S. at 678. Plausibility requires "more than a sheer possibility that a defendant has acted unlawfully"; instead, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         B. Analysis

         To the extent that plaintiffs are claiming defendants must "bring forward the original note for [] inspection" and that the law "makes the production of the note mandatory," Compl. ¶ 27, they are making a "show-me-the-note" claim, which Virginia "courts have roundly rejected" as "plainly contrary to Virginia's non-judicial foreclosure laws." Davis v. White, No. 3:13cv780, 2014 WL 1604270, at *10 (E.D. Va. Apr. 21, 2014) (internal quotation marks omitted) (citing Hien Pham v. Bank of N.Y.,856 F.Supp.2d 804, 810 (E.D. Va. 2012)). In Virginia, a trustee may "foreclose on a loan in default, even if the original note cannot be found, without first seeking a court order." Hien Pham, 856 F.Supp.2d at 810 (citing Horvath v. Bank of N.Y., N.A.,641 F.3d 617, 623 n.3 (4th Cir. 2011)). A noteholder is not required to come to court to prove its authority to foreclose because if this were permissible, borrowers would "compel judicial ...

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