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Laues-Gholston v. Hsbc Mortgage Services

United States District Court, E.D. Michigan, Southern Division

February 9, 2015

ROY LAUES-GHOLSTON and KRISTEN G. LAUES-GHOLSTON, Plaintiffs,
v.
HSBC MORTGAGE SERVICES, MORTGAGE ELECTRONIC REGISTRATION SYSTEM, and ENCORE CREDIT CORP., Defendants.

REPORT AND RECOMMENDATION

R. STEVEN WHALEN, Magistrate Judge.

Before the Court is a Motion to Dismiss filed by Defendants HSBC Mortgage Services ("HSBC") and Mortgage Electronic Registration System ("MERS") [Doc. #22], which has been referred for a Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons discussed below, I recommend as follows:

(1) That HSBC's and MERS' motion to dismiss [Doc. #22] be GRANTED.

(2) That the Court sua sponte dismiss Plaintiffs' claim under the Truth in Lending Act.

(3) That the Court sua sponte dismiss all claims against unserved Defendant Encore Credit Corp.

(4) That Plaintiffs' complaint be DISMISSED WITH PREJUDICE.

I. FACTS

This is a mortgage case. On May 17, 2013, Plaintiffs filed a pro se complaint in the Wayne County Circuit Court, seeking quiet title to their property and an order invalidating the first mortgage of $432, 000.00 and the second mortgage of $108, 000.00. Their complaint is centered on a claim that an assignment of the original mortgage severed the promissory note and the mortgage, thereby precluding HSBC's ability to foreclose and nullifying the mortgage. At ¶ 1 of the complaint, Plaintiffs state that they "seek[] to quiet title by extinguishing Defendants['s] interest in the property as a remedy for fraud and the bifurcation of note and obligation."

The Plaintiffs acknowledge that they defaulted on the loans secured by both the first and second mortgages. Id. ¶ 21. Their claim of fraud appears to center on the assignment from MERS to HSBC and the "bifurcation" of the mortgage from the promissory note. Id. ¶ 25. They also bring a claim under the Truth in Lending Act ("TILA"), alleging that they did not receive notice of the assignment of the original promissory note within 30 days. Id. ¶ 11.

II. STANDARD OF REVIEW

Fed.R.Civ.P. 12(b)(6) provides for dismissal of a complaint "for failure of the pleading to state a claim upon which relief can be granted." Rule 12(b) also provides that if, on consideration of a motion under paragraph (6), "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56 (summary judgment)." In assessing a Rule 12(b)(6) motion, the court accepts the plaintiff's factual allegations as true, and asks whether, as a matter of law, the plaintiff is entitled to legal relief. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001).

The United States Supreme Court has modified the standard for determining whether a complaint is subject to dismissal under Fed.R.Civ.P. 12(b)(6). In Bell Atlantic Corp. v. Twombley, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Court, construing the requirements of Fed.R.Civ.P. 8(a)(2), held that although a complaint need not contain detailed factual allegations, its "[f]actual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true." Id., 127 S.Ct. at 1964-65 (internal citations and quotation marks omitted). Further, "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." Id. (Internal citations and quotation marks omitted). See also Association of Cleveland Fire Fighters v. City of Cleveland, Ohio 502 F.3d 545, 548 (6th Cir. 2007). Stated differently, a complaint must "state a claim to relief that is plausible on its face." Twombley, at 1974.

In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Court explained and expanded on what it termed the "two-pronged approach" of Twombley. First, it must be determined whether a complaint contains factual allegations, as opposed to legal conclusions. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id., 129 S.Ct. at 1949, citing Twombley, 550 U.S. at 555. Second, the facts that are pled must show a "plausible" claim for relief, which the Court described as follows:

"Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ...

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