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Brandenstein v. Pennymac Loan Services, LLC

United States District Court, N.D. Georgia, Atlanta Division

November 6, 2017

LORI G. BRANDENSTEIN, Plaintiff,
v.
PENNYMAC LOAN SERVICES, LLC, Defendant.

          FINAL REPORT AND RECOMMENDATION

          JANET F. KING UNITED STATES MAGISTRATE JUDGE

         Plaintiff Lori G. Brandenstein (“Brandenstein”), proceeding Pro Se (and asserting that she is “Suis Juris in Propria Persona”), commenced this civil action in the Superior Court of Cobb County, Georgia, with the filing of her Verified Complaint. [Doc. 1-1, Exhibit A - Verified Complaint (“Compl.”), State Court Civil Action No. 17-1-4682-53]. Defendant PennyMac Loan Services, LLC (“PennyMac”), removed the complaint to federal court. [Doc. 1]. Pending before the court is PennyMac's motion to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for which relief can be granted as well as pursuant to Rules 4(m) and 9, and PennyMac's October 26, 2017, Supplement expressly waiving its service-related defense under Rule 12(b)(5). [Docs. 3, 6]. Plaintiff Brandenstein has not filed a response.[1] The matter has been submitted to the undersigned for a report and recommendation to the District Judge.

         I. Factual Background

         As an initial matter, the Complaint includes a number of conclusory allegations and citations to legal authorities that are not appropriate for inclusion in a complaint and will not be set forth in the following statement of facts. See Moore v. McCalla Raymer, LLC, 916 F.Supp.2d 1332, 1342 (N.D.Ga. 2013) (“The complaint contains whole paragraphs of legal argument, quotations, and citations which have no place in a complaint.”) (citing Chevy Chase Bank, F.S.B. v. Carrington, 2010 WL 745771, at *4 (M.D. Fla. March 1, 2010) (“Huge swaths of the . . . Complaint are improper irrespective of their relevance, consisting of lengthy legal arguments, case citations, and quotations from treatises-material proper in legal memoranda, but almost never proper in a complaint.”)).

         The undersigned also notes that the complaint in this case is remarkably similar to the complaints filed in several other cases within this district and, in each instance, dismissal was found to be warranted. See, e.g., Winston v. 360 Mortg. Group, LLC, 2017 WL 4356918 (N.D.Ga. October 2, 2017) (dismissing complaint alleging fraudulent conversion, mortgage servicing fraud, “declaratory judgment (credit default swap)[, ]” “unfair and / or deceptive business practices[, ]” “fraud and/or attempted fraud[, ]” and intentional infliction of emotional distress); Pessini v. Nationstar Mortg., LLC, 2017 WL 2197136 (N.D.Ga. April 25, 2017) (dismissing complaint as shotgun pleading and listing cases with “virtually identical” form complaints); Samuel v. Nationstar Mortg., LLC, 2015 WL 12227731 (N.D.Ga. July 27, 2015), report and recommendation adopted by 2015 WL 12434315 (N.D.Ga. August 13, 2015). “[P]laintiff's use of a form complaint evidences that her claims are not brought in good faith.” Pessini, 2017 WL 2197136, at *4 (citing Martin v. Citimortgage, 2010 WL 3418320, at *6 n.8 (N.D.Ga. August 3, 2010), report and recommendation adopted by 2010 WL 3418322 (N.D.Ga. August 25, 2010)).

         On a motion to dismiss under Rule 12(b)(6), the complaint's factual allegations are assumed true and construed in the light most favorable to the plaintiff. Hardy v. Regions Mortg., Inc., 449 F.3d 1357, 1359 (11th Cir. 2006); M.T.V. v. DeKalb County School Dist., 446 F.3d 1153, 1156 (11th Cir. 2006). “However, conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal.” Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11thCir. 2002) (citations omitted). The following factual allegations are drawn from the Complaint, certain attachments to the Complaint, and relevant public records.[2]

         On June 19, 2017, Plaintiff Brandenstein initiated this litigation against Defendant PennyMac challenging PennyMac's conduct as it relates to the July 5, 2017, foreclosure of Plaintiff's former residence, real property located at 2244 Josephine Court, Marietta, Georgia, 30062 (“Property”). [Compl.]. PennyMac was the servicer of Plaintiff Brandenstein's mortgage loan on the Property. [Compl. ¶ 8].

         On January 30, 2010, Plaintiff Brandenstein, along with Richard W. Brandenstein (“R. Brandenstein”), who is not a complainant or party to the instant suit, obtained a mortgage loan from First Option Mortgage, LLC (“First Option” or “Lender”), in the principal amount of $213, 776.00 (“Loan”). [Compl. ¶ 6]. In connection with and to secure payment on the Loan, Plaintiff and R. Brandenstein executed a Security Deed in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for First Option, the lender, and its successors and assigns. [Compl. ¶ 7; Doc. 1-3, Exhibit C - Security Deed]. The Security Deed was recorded on February 15, 2010, in Deed Book 14754, Pages 4296-4307 of the Cobb County, Georgia, records. [Security Deed].

         On October 29, 2014, the Security Deed was assigned to Bank of America, N.A. (“BANA”) by MERS. [Doc. 3-2, Exhibit A - Assignment; Compl. ¶ 7].[3] The assignment was recorded on November 19, 2014, in Deed Book 15199, Pages 4869-70 of the Cobb County, Georgia, records. [Assignment].

         On or about May 2, 2017, due to Plaintiff's alleged default on the Loan, Defendant PennyMac, through the law firm of Rubin Lublin, LLC, advertised its first Notice of Sale Under Power (“Notice”) of Plaintiff's Property scheduled to occur on July 5, 2017. [Compl. ¶ 8]. According to Plaintiff, the Notice did not identify the holder of the Security Deed and identified PennyMac as the loan servicer. [Compl. ¶ 8].

         On May 12, 2017, Plaintiff sent PennyMac a request for disclosure, rescission, and validation of debt under TILA and a “qualified written request” (“QWR”) under RESPA. [Compl. ¶ 10]. According to Plaintiff, Defendant PennyMac did not respond to her QWR. [Compl. ¶¶ 11-12].

         At some point following Plaintiff's default on the Loan, BANA exercised the power of sale in the Security Deed and foreclosed on the Property July 5, 2017. The Property was transferred to Arch Property Holdings, LLC, via a Deed Under Power. [Doc. 4, Exhibit 1 - Deed Under Power]. On August 20, 2017, the Deed Under Power was recorded in Deed Book 15472 at Pages 3016-19 in the Cobb County, Georgia, records. [Deed Under Power].

         In her Complaint, Plaintiff identifies six causes of action, described as Counts I-VI.[4] [Compl.]. Plaintiff Brandenstein identifies her claims as follows: Count I - Fraudulent Conversion, Count II - Mortgage Servicing Fraud, Count III - Declaratory Judgment (Credit Default Swap), Count IV - Unfair and Deceptive Trade Practices / Fair Debt Collection Practices Act, Count V - Fraud / Attempted Fraud, and Count VI - Intentional Infliction of Emotional Distress (“IIED”). [Compl.]. Within the Fact Section, Plaintiff alleges violation of the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). [Compl. ¶¶ 10-12]. In her prayer for relief, Brandenstein also requests prelitigation discovery and injunctive relief. [Compl., Prayer for Relief ¶¶ a, b, d].

         On July 19, 2017, Defendant PennyMac properly and timely removed the case to this federal district court pursuant to 28 U.S.C. §§ 1331, 1332, 1441, and 1446.[5][Doc. 1 - Notice of Removal (“Notice”)]. Defendant asserts that Plaintiff's Complaint is subject to dismissal on multiple grounds, including Rules 4(m), 9, and 12(b)(6) of the Federal Rules of Civil Procedure, but has since expressly waived its service-related defense pursuant to Rule 12(b)(5) in favor of a ruling on the merits pursuant to Rule 12(b)(6).[6] [Docs. 3-1, 6 at 1]. Defendant further contends that the relief Plaintiff seeks is moot given that foreclosure has already occurred. [Doc. 3-1].

         II. Rule 12(b)(6) Standard of Law

         The Federal Rules of Civil Procedure include no requirement that a plaintiff detail the facts upon which the plaintiff bases a claim. Rule 8(a)(2) requires a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2) (as amended 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 ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]” Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (citations omitted); accord Financial Sec. Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282-83 (11th Cir. 2007) (recognizing that “while notice pleading may not require that the pleader allege a specific fact to cover every element or allege with precision each element of a claim, it is still necessary that a complaint contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory”) (citations and internal quotation marks omitted).

         “Factual allegations must be enough to raise a right to relief above the speculative level, ” i.e., they must do more than merely create a “‘suspicion [of] a legally cognizable right of action, ' on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 127 S.Ct. at 1965 (citations omitted; emphasis omitted). “Stated differently, the factual allegations in a complaint must ‘possess enough heft' to set forth ‘a plausible entitlement to relief[.]'” Stephens, 500 F.3d at 1282 (quoting Twombly, 127 S.Ct. at 1966-67). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citation omitted). A plaintiff's complaint will be dismissed if it does not contain “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         The court's inquiry at this stage of the proceedings focuses on whether the challenged pleadings “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (citations and internal quotation marks omitted). A court reviewing a motion to dismiss must keep in mind that a “motion to dismiss for failure to state a claim upon which relief can be granted merely tests the sufficiency of the complaint; it does not decide the merits of the case.” Wein v. American Huts, Inc., 313 F.Supp.2d 1356, 1359 (S.D. Fla. 2004) (citing Milburn v. United States, 734 F.2d 762, 765 (11th Cir. 1984)). “Regardless of the alleged facts, however, a court may dismiss a complaint on a dispositive issue of law.” Bernard v. Calejo, 17 F.Supp.2d 1311, 1314 (S.D. Fla. 1998) (citing Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993) (“[T]he court may dismiss a complaint . . . when, on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action.”)); see also Glover v. Liggett Group, Inc., 459 F.3d 1304, 1308 (11th Cir. 2006); Aque v. Home Depot U.S.A., Inc., 629 F.Supp.2d 1336, 1350 (N.D.Ga. 2009).

         The law establishes that “[a] document filed pro se is ‘to be liberally construed' . . . and ‘a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers[.]'” Erickson, 127 S.Ct. at 2200 (citations omitted). Nevertheless, nothing in that leniency excuses a plaintiff from compliance with threshold requirements of the Federal Rules of Civil Procedure. “Even though a pro se complaint should be construed liberally, a pro se complaint still must state a claim upon which the Court can grant relief.” Grigsby v. Thomas, 506 F.Supp.2d 26, 28 (D. D.C. 2007).

         The court will apply these standards in ruling on the motion [Doc. 3] to dismiss the complaint.

         III. Discussion

         A. Plaintiff Cannot Directly Challenge Foreclosure

         As an initial matter, to the extent that Plaintiff Brandenstein is challenging the foreclosure itself (and no independent wrongful foreclosure claim is alleged), the underlying Loan documents reveal that BANA - not PennyMac - was the foreclosing entity. [Doc. 3-1 at 8, n.5; Assignment]. And see O.C.G.A. § 23-2-114 (“[p]owers of sale in deeds of trust, mortgages, and other instruments . . . shall be fairly exercised”); see also Mbigi v. Wells Fargo Home Mortg., 336 Ga.App. 316, 318, 785 S.E.2d 8, 13 (2016). And to the extent Plaintiff contends that there was no authority to foreclose, the terms of the Security Deed, “grant[ed] and convey[ed] to MERS . . . and the successors and assigns of MERS with power of sale, [the Property].” [Security Deed]. The Assignment states that MERS “hereby assign[s] and transfer[s] . . . all its right, title, and interest in” the Security Deed to BANA and its successors.[7][Assignment]. BANA was entitled to exercise the power of sale in the Security Deed, see § 23-2-114, and Plaintiff's underlying challenge of the foreclosure is flawed. See Winston, 2017 WL 4356918, at **3-4 (citations omitted).

         In addition, Brandenstein does not (and cannot) allege that she timely made all of her mortgage payments and does not allege that she ever tendered payment of the amount due on the Loan which is a prerequisite under Georgia law for stating a claim for wrongful foreclosure. See Heritage Creek Development Corp. v. Colonial Bank, 268 Ga.App. 369, 601 S.E.2d 842, 844-45 (2004) (stating the elements of wrongful foreclosure claim under Georgia law and holding that plaintiff's own acts and omissions such as defaulting on the loan, failing to cure default, and failing to bid on the property at foreclosure despite receiving a foreclosure notice caused plaintiff's alleged damages)[8]; accord Harvey v. Deutsche Bank Nat'l Trust Co., 2012 WL 3516477, at *2 (N.D.Ga. August 14, 2012) (“Failure to make the proper loan payments defeats any wrongful foreclosure claim.”).

         Moreover, because Plaintiff does not allege that she made the tender required to have the foreclosure sale set aside, Plaintiff is precluded from seeking equitable relief. See Calhoun First Nat'l Bank v. Dickens, 264 Ga. 285, 285-86, 443 S.E.2d 837, 838 (1994); see also Sajous v. Specialized Loan Servicing, 2015 WL 11347597, at *5 (N.D.Ga. July 22, 2015) (plaintiff not entitled to equitable or injunctive relief where plaintiff did not plead that she is in compliance with her loan obligations and / or has tendered payment for the amount due on the loan) (citations omitted), report and recommendation adopted in part (all but “Alternative Recommendations”) by 2015 WL 11492542 (N.D.Ga. August 10, 2015); and see Stewart v. Suntrust Mortg., Inc., 331 Ga.App. 635, 640-41, 770 S.E.2d 892, 898 (2015) (affirming trial court's dismissal of request for injunctive relief where plaintiff's complaint revealed that the debt was in default at the time of foreclosure).

         B. Claims Based Upon Fraud / Fed.R.Civ.P. 9(b)

         Plaintiff Brandenstein asserts fraud-based claims in Counts I, II, and V alleging fraudulent conversion, mortgage servicing fraud, and fraud or attempted fraud. Defendant moves to dismiss for failure to plead fraud with specificity as required by Rule 9(b) of the Federal Rules of Civil Procedure. [Doc. 3-1 at 5-10].

         Rule 9(b) provides in pertinent part that, “In alleging fraud . . ., a party must state with particularity the circumstances constituting fraud . . . .” Fed.R.Civ.P. 9(b) (as amended 2007). The circumstances constituting fraud typically include “the time, place, and content of the false misrepresentations, the facts misrepresented, and the nature of the detrimental reliance[.]” Elster v. Alexander, 75 F.R.D. 458, 461 (N.D.Ga. 1977); and see Burgess v. Religious Technology Center, Inc., 600 Fed.Appx. 657, 663 (11th Cir. 2015) (holding that plaintiff's allegations that did not indicate the date, time or place of the misrepresentation did not meet heightened fraud pleading requirement). “Notably, the ‘[f]ailure to satisfy Rule 9(b) is a ground for dismissal of a complaint.'” FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1296 (11thCir. 2011) (quoting Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005)).

         And in order to state a claim for common law fraud under Georgia law, Plaintiff must allege facts in support of the following elements: “(1) false representation by defendant; (2) with scienter, or knowledge of falsity; (3) with intent to deceive plaintiff or to induce plaintiff into acting or refraining from acting; (4) on which plaintiff justifiably relied; (5) with proximate cause of damages to plaintiff.” WESI, LLC v. Compass Environmental, Inc., 509 F.Supp.2d 1353, 1358 (N.D.Ga. 2007) (citations and internal quotation marks omitted).

         The Court agrees with Defendant that Plaintiff's conclusory allegations of fraud do not state a claim and do not comport with the strict pleading requirements of Rule 9(b). See Elster, 75 F.R. D. at 461; and see Burgess, 600 Fed.Appx. at 663; see also Cooke v. BAC Home Loans Servicing, LP, 2011 WL 4975386, at *3 (N.D.Ga. October 18, 2011) (dismissing unfair and deceptive act practices claim based upon alleged fraud where complaint contained legal conclusions that defendant engaged in “fraudulent, deceptive, unfair, and other wrongful conduct[, ]” did not specify “facts and circumstances” that defendants allegedly failed to disclose, generally alleged defendants used “various rates and charges to disguise the actual payment schedule and loaned amount” but no specific rates or charges and, therefore, did not satisfy Rule 9(b)) (citations and internal quotation marks omitted).

         In Count I, Plaintiff alleges fraudulent conversion. Plaintiff's fraudulent conversion claim is a nonsensical challenge to the banking system, the validity of the Loan itself, and foreclosure of the Property. [Compl. ¶¶ 17-61]. For instance, in an effort to support her claim that there was no default at the time of foreclosure and that foreclosure amounted to conversion, Plaintiff alleges that the promissory note executed in connection with the Loan was “altered and converted into a negotiable instrument” that the banks do not account for and that created no actual money, that no loan was actually made and no debt existed, that the mortgage should be set aside as null and void because the bank or lender provided no consideration to support the contract, and that the Security Deed should be set aside for lack of consideration and disclosure violations of the truth in lending law. [Compl. ¶¶ 17, 19, 26, 31, 37, 40, 46]. Relying on the same premise, Brandenstein alleges that she was deceived “to believe that the lender really made a loan.” [Compl. ¶ 31]. These are mere conclusory allegations not supported by any facts, and courts have routinely rejected such “‘vapor money'” claims. Winston, 2017 WL 4356918, at *4 (quoting McCrary v. Nationstar Mortg., LLC, 2015 WL 11422301, at *4 (N.D.Ga. November 25, 2015) (“So-called ‘vapor money' claims are based on the notion that a borrower's repayment obligation is negated, because of the allegation that the lending bank did not fund the loan through actual deposits of legal tender but rather ‘created' the appearance of a loan through bookkeeping entries.”), report and recommendation adopted as modified by 2015 WL 11492547 (N.D.Ga. December 16, 2015)).

         Under Georgia law, in order to establish a claim for conversion, “a plaintiff must show ‘title to the property [in the plaintiff], possession by the defendant, demand for possession, and refusal to surrender the property, or an actual conversion prior to the filing of the suit.'” Powell v. Bank of America, N.A., 2014 WL 2118821, at *3 (N.D.Ga. May 21, 2014) (quoting Habel v. Tavormina, 266 Ga.App. 613, 615, 597 S.E.2d 645, 648 (Ga.Ct.App. 2004)). Notably, under Georgia law, Plaintiff is precluded from asserting a claim for conversion of real property. Old Atlanta Road, LLC v. Specialized Loan Serv., LLC, 2015 WL 570753, at *9 (N.D.Ga. January 26, 2015) (citations omitted). Therefore, to the extent Plaintiff's fraudulent conversion claim is based upon foreclosure of real property, it must be dismissed as a matter of law.

         In support of Count II alleging mortgage servicing fraud, Plaintiff challenges the use and roles of third-party servicers by mortgage lenders generally as well as the post- closing practices employed by servicers.[9] [Compl. ¶¶ 63-81]. More specifically, Plaintiff complains that, as a practice, servicers manipulate the accounting of loans to make it appear as if the loan is in default, refuse to accept properly tendered payments, charge fees for collection letters, inspections and BPOs, charge excessive interest, and place payments into suspense accounts without cause. [Compl. ¶ 64]. Plaintiff complains about the lack of incentive for servicers to assist borrowers with staying current on monthly payments and the absence of risk undertaken by the servicer contrasted with the vulnerable position of the borrower / homeowner. [Compl. ¶¶ 66, 72]. However, the Plaintiff does not identify any specific action taken by PennyMac in connection with her Loan that she contends amounts to fraud. The Complaint purports “to explain to the Court how the Defendant is committing servicing fraud” but then reads like an editorial on the adverse impact of servicers in the mortgage industry, minus any related facts. [Compl. ¶ 63]. Similarly, beyond the foreclosure sale itself, Plaintiff does not allege any specific harm allegedly caused by PennyMac during the time it serviced her Loan.

         With respect to Count V, alleging fraud and / or attempted fraud, Plaintiff asserts that PennyMac “misrepresented the true balance of the Loan and their true status as servicer not the true creditor of the Loan, with knowledge or reckless disregard of the statements' falsity, in each of the Monthly Statements, Notices of Default, Payoff Letter and Notice(s) of Foreclosure.” [Compl. ¶ 93]. Plaintiff next alleges that she relied upon the representations by continuing to deal with Defendant as [her] lender, including directing [her] modification application(s).”[10] [Compl. ¶ 94]. However, Plaintiff does not identify in Count V (or in any of her fraud-based claims) specifically who made the purported representations, what the content of the alleged representations were, or when and where any alleged representations were made. Given these deficiencies, Plaintiff's Complaint does not satisfy Rule 9(b)'s pleading requirement. See Sampson v. Washington Mutual Bank, 453 Fed.Appx. 863, 866-67 (11th Cir. 2011) (dismissal of fraud claim affirmed where complaint did not allege who made the misrepresentations or the content of the same or when and where the misrepresentations occurred); see also Matthews v. JPMorgan Chase Bank, N.A., 2013 WL 12106937, at *6 (N.D.Ga. January 14, 2013), report and recommendation adopted by 2013 WL 12110528 (N.D.Ga. February 20, 2013) (dismissing fraud claim due to failure of plaintiff to allege the “who, what, when, where & how” in complaint).

         In addition, to the extent Plaintiff Brandenstein's Complaint could be construed to allege a negligence claim, Georgia does not recognize an independent cause of action for negligent mortgage servicing. See Anderson v. Deutsche Bank Nat'l Trust Co., 2012 WL 3756512, at *9 (N.D.Ga. August 6, 2012) (rejecting plaintiff-borrower's claim that defendant had a duty to service the mortgage loan in good faith pursuant to provision within the Georgia Residential Mortgage Act governing the conduct of mortgage brokers or lenders in connection with the loan application, renewal, and refinancing, see O.C.G.A. § 7-1-1013), report and recommendation adopted by 2012 WL 3756435 (N.D.Ga. August 27, 2012). In fact, Georgia does not recognize any fiduciary duty in the mortgagor-mortgagee context. Id. (citations omitted). And Plaintiff fails to allege any duty owed to her by PennyMac or any special circumstances that could arguably support an exception to the general rule that no such duty exists. [Doc. 3-1 at 9-10]. In sum, Plaintiff's Complaint lists her fraud-based causes of action but does not explain how any of her sparse ...


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