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Kellis v. U.S. Bank, N.A.

United States District Court, M.D. North Carolina

March 30, 2017

DAVID L. KELLIS, Plaintiff,
v.
U.S. BANK, N.A., FEDERAL DEPOSIT INSURANCE CORPORATION, OCWEN LOAN SERVICING, LLC., HSBC BANK USA, N.A., and TRUSTEE SERVICES OF CAROLINA, LLC., Defendants.

          MEMORANDUM OPINION AND ORDER

          N. CARLTON TILLEY, JR. SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiff David L. Kellis, proceeding pro se, has asserted various claims under both federal and North Carolina state law regarding the foreclosure of his property in Burlington, North Carolina. This matter is before the Court on four motions: (1) Defendant Trustee Services of Carolina's (“Trustee Services”) Motion to Dismiss [Doc. #13], (2) Defendant U.S. Bank, N.A.'s (“U.S. Bank”) Motion to Dismiss [Doc. #20], Defendant Federal Deposit Insurance Corporation's (“FDIC”) Motion to Dismiss [Doc. #26], and Defendants Ocwen Loan Servicing, LLC (“Ocwen”) and HSBC Bank USA, N.A.'s (“HSBC”) Motion to Dismiss [Doc. #31].

         The Court has considered all Defendants' Motions to Dismiss [Docs. #13, 20, 26, 31] and supporting documents [Docs. #14, 21, 27, 32]. Mr. Kellis has not filed responses to any of the Defendants' Motions despite being notified several times of his right to do so. (June 20, 2016 Letters [Docs. #22, 23]; July 1, 2016 Letter [Doc. #29]; July 12, 2016 Letter [Doc. #33].) Under Local Rule 7.3(k), a motion that is uncontested may be granted without further notice. Nevertheless, because one claim is barred by the Rooker-Feldman doctrine, because three defendants were not properly served, and because the remaining allegations fail to state a claim, this matter will be dismissed on the merits.

         I.

         The instant action arises out of the foreclosure of Mr. Kellis' residence at 1434 Greenwood Drive, Burlington, North Carolina. Mr. Kellis alleges that in December 2002, he executed a promissory note (“Note”) naming U.S. Bank as Lender, which was secured by a deed of trust (“Deed”) also naming U.S. Bank as the Lender. (Compl. [Doc. #1] at ¶ 10.) The same month, the Deed was recorded in Alamance County, North Carolina. (Id. ¶ 11.) From 2004 through 2015, several appointments of substitute trustee were recorded in Alamance County culminating in the appointment of Trustee Services as Trustee. (Id. ¶¶ 13-16.) In addition, in 2015, three Assignments of Deed of Trust were filed in Alamance County resulting in all rights being assigned to HSBC. (Id. ¶¶ 17-19.) On February 18, 2016, Mr. Kellis' property was sold at a foreclosure sale. (Ex. I, Report of Foreclosure Sale/Resale [Doc. #21-9].)[1]

         According to the Complaint, sometime around March 18, 2016, Mr. Kellis received a “Notice to Vacate” the subject property. (Id. ¶ 20.) Mr. Kellis claims that this was the first notice of any type that he received about any foreclosure proceeding. (Id.) Sometime around April 13, 2016, Mr. Kellis wrote to Trustee Services raising concerns about the lack of notice and the nature of the transfers and assignments of the deed of trust. (Id. ¶ 24.) As of the date of filing his Complaint, Mr. Kellis had not received any response from Trustee Services. (Id. ¶ 25.)

         On April 29, 2016, Mr. Kellis commenced the present action against Defendants U.S. Bank, FDIC, Trustee Services, HSBC, and Ocwen (collectively “Defendants”). The Complaint asserts claims for: (1) Violations of Real Estate Settlement Procedures Act (“RESPA”) against Ocwen (Id. ¶¶ 52-55); (2) Violations of Federal Truth-In-Lending Act (“TILA”) against U.S. Bank (Id. ¶¶ 56-60); (3) Misrepresentation against all Defendants (Id. ¶¶ 61-67); (4) Conversion against U.S. Bank, Ocwen, and HSBC (Id. ¶¶ 68-72); (5) To Set Aside Wrongful Foreclosure against all Defendants (Id. ¶¶ 73-80); (6) Civil Conspiracy against all Defendants (Id. ¶¶ 81-86); and (7) Slander of Title against all Defendants (Id. ¶¶ 87-100).

         Mr. Kellis' Complaint references attached exhibits, but no exhibits were ever filed. Trustee Services alerted Mr. Kellis to this in its Memorandum in Support of Motion to Dismiss. ([Doc. #14] at 3.) Twice, Mr. Kellis moved for an extension of time to address the motions to dismiss (July 19, 2016 Mot. for Extension of Time [Doc. #34]; August 25, 2016 Mot. for Extension of Time [Doc. #35]) and, both times, his motion was granted. (July 22, 2016 Text Order; August 29, 2016 Text Order.) Despite this extra time, Mr. Kellis has not responded to any of the motions to dismiss nor has he filed any exhibits. The time for Mr. Kellis to respond has passed making all motions to dismiss ripe for review. For the reasons discussed below, the Defendants' motions will be granted and this matter will be dismissed.

         II.

         Several Defendants argue that the claim to set aside the state foreclosure is barred in the present action pursuant to the Rooker-Feldman[2] doctrine. A motion to dismiss for lack of subject matter jurisdiction, filed pursuant to Federal Rule of Civil Procedure 12(b)(1), raises the fundamental question of whether a court has jurisdiction to adjudicate the matter before it. Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006). It is the plaintiff's burden to prove jurisdiction. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991).

         Three Defendants argue they were inadequately served with process, making the exercise of personal jurisdiction over them improper pursuant to Federal Rule of Civil Procedure 12(b)(2) and 12(b)(5).[3] A motion pursuant to Federal Rule of Civil Procedure 12(b)(5) is the appropriate means for challenging the sufficiency of service of process. Plant Genetic Sys., N.V. v. Ciba Seeds, 933 F.Supp. 519, 526 (M.D. N.C. 1996). The plaintiff bears the burden of establishing that the service of process has been performed in accordance with the requirements of Federal Rule of Civil Procedure 4. Id.

         All Defendants assert that Mr. Kellis has failed to state any claim upon which relief can be granted. “To survive a motion to dismiss [pursuant to Rule 12(b)(6)], 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 Atlantic Corp. V. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible provided the plaintiff provides enough factual content to enable the court to reasonably infer that the defendant is liable for the misconduct alleged. Id. The pleading setting forth the claim must be “liberally construed” in the light most favorable to the nonmoving party, and allegations made therein are taken as true. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). However, “the requirement of liberal construction does not mean that the court can ignore a clear failure in the pleadings to allege any facts [that] set forth a claim.” Lindsay v. Nichino America, Inc., 202 F.Supp.3d 524, 528 (M.D. N.C. 2016)(quoting Estate of Williams-Moore v. Alliance One Receivables Mgmt., Inc., 335 F.Supp.2d 636, 646 (M.D. N.C. 2004)).

         Rule 12(b)(6) protects against meritless litigation by requiring sufficient factual allegations “to raise a right to relief above the speculative level” so as to “nudge[ ] the[ ] claims across the line from conceivable to plausible.” Twombly, 500 U.S. at 555, 570; see Iqbal, 556 U.S. at 662. Under Iqbal, the court performs a two-step analysis. First, it separates factual allegations from allegations not entitled to the assumption of truth (i.e., conclusory allegations, bare assertions amounting to nothing more than a “formulaic recitation of the elements”). Second, it determines whether the factual allegations, which are accepted as true, “plausibly suggest an entitlement to relief.” 556 U.S. at 681.

         When a party is proceeding pro se, that party's filings are “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 v. Pardus, 551 U.S. 89, 94 (2007) (internal citations and quotation marks omitted). It is important to note that, in the case of a pro se plaintiff, the United States Court of Appeals for the Fourth Circuit has “not read Erickson to undermine Twombly's requirement that a pleading contain more than labels and conclusions.” Giarratano v. Johnson, 521 F.3d 298, 304 n.5 (4th Cir. 2008) (internal quotation marks omitted) (dismissing pro se complaint).

         III.

         A.

         Pursuant to Federal Rule of Civil Procedure 12(b)(1), U.S. Bank, HSBC, and Ocwen assert that this action is an appeal of the state court foreclosure which is not properly before the Court. The Rooker-Feldman doctrine is a jurisdictional rule that prohibits a federal district court from hearing “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). In other words, the doctrine precludes claims that seek redress for an injury caused by a state-court decision, because such a claim essentially asks “the federal district court to conduct an appellate review of the state-court decision.” Adkins v. Rumsfeld, 464 F.3d 456, 464 (4th Cir. 2006) (quoting Davani v. Va. Dep't of Transp., 434 F.3d 712, 719 (4th Cir. 2006)).

         In January, 2016, Mr. Kellis' property was foreclosed. (Ex. H, Order to Allow Foreclosure Sale [Doc. #21-8].) The property was ultimately sold at a foreclosure sale on February 18, 2016. (Ex. I, Report of Foreclosure Sale/Resale [Doc. #21-9].) In North Carolina, the Clerk of Superior Court presides over power-of-sale foreclosure actions. See N.C. Gen. Stat. § 45-21.16(d). To find that a foreclosure initiated under a power of sale is valid, the clerk of court must determine that a valid debt exists, the debtor is in default, the trustee has the right to foreclose, and sufficient notice was given. See N.C. Gen. Stat. § 45-21.16(d)-(d1); Phil Mech. Const. Co. v. Haywood, 325 S.E.2d 1, 3 ( N.C. Ct. App. 1985). Any issue that the clerk decides in a foreclosure proceeding under N.C. Gen. Stat. § 45-21.16(d) is conclusive unless appealed and reversed and cannot be relitigated in a subsequent lawsuit. See In re Atkinson-Clark Canal Co., 67 S.E.2d 276, 278 ( N.C. 1951); Douglas v. Pennamco, Inc., 331 S.E.2d 298, 300 ( N.C. Ct. App. 1985). A party may appeal a decision of the clerk of court to the superior court, which reviews de novo the same issues that the clerk resolved. See N.C. Gen. Stat. § 45-21.16(d1).

         Pursuant to these statutes, the Clerk of Superior Court in Alamance County made a determination that: (1) HSBC was the holder of the Kellis note; (2) the note was a valid debt; (3) the note was in default and HSBC had the right to foreclose under a power of sale; (4) notice of the hearing had been served on the record owners of the real estate to be foreclosed; (5) pre-foreclosure notice was provided pursuant to N.C. Gen. Stat. § 45-102; and that (6) Mr. Kellis had not shown any valid legal reason why the foreclosure should not proceed. (Ex. H, Order to Allow Foreclosure Sale [Doc. #21-8].) In his claim to set aside wrongful foreclosure, Mr. Kellis alleges that the Defendants never “were properly authorized to initiate such foreclosure and sale.” (Compl. ¶ 75.) However, ...


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