Williams v. The Bank of Fayette County

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

)

TERRY WILLIAMS, )

)

Plaintiff, )

)

v. ) No. 2:24-cv-02216-SHM-cgc

)

THE BANK OF FAYETTE COUNTY, )

)

Defendant. )

)

)

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

Pro se Plaintiff Terry Williams sues Defendant Bank of

Fayette County (the “Bank”) based on a real property transaction

that originated on November 21, 2008. Before the Court is the

Bank’s Motion to Dismiss for Failure to State a Claim under Rule

12(b)(6), filed on May 10, 2024 (the “Motion”). See ECF No. 10.

This matter is fully briefed and ripe for adjudication. For the

reasons stated below, Defendant’s Motion to Dismiss is GRANTED.

I. Background

The following background information is taken from

Plaintiff’s pro se complaint, filed on April 4, 2024. See ECF

No. 1. For purposes of deciding the Motion, the Court construes

the allegations in the complaint as true. See Mertik v. Blalock,

983 F.2d 1353, 1356 (6th Cir. 1993); Miller v. Currie, 50 F.3d

373, 377 (6th Cir. 1995).

On November 21, 2008, the Bank made a loan to Plaintiff in

the principal amount of $191,250, with a fixed annual interest

rate of 7.25%. See Compl. at *6, ECF No.1; see also ECF No. 3,

Ex. 1. That loan was memorialized by a promissory note. See

Compl. at *7, ECF No.1. To secure the note, Plaintiff executed

a Deed of Trust encumbering his property at 4697 Winchester Road,

Memphis, Tennessee 38118, naming Defendant as the secured party.

See Compl. at *6, ECF No. 1; see also ECF No. 3, Ex. 2.

On January 23, 2024, Plaintiff discovered that his mortgage

loan had been transferred to a third-party trust known as

“Guaranteed REMIC Pass-Through Certificates Fannie Mae REMIC

Trust 2008-94” (the “Fannie Mae Trust”). See Compl. at *7, ECF

No. 1. According to Plaintiff, the Fannie Mae Trust is a “special

purpose vehicle […] created for the purpose of issuing mortgage-

backed securities.” Id. The Trust purchases mortgages from

banks, commingles them into trust assets, and sells the right to

collect loan proceeds to investors in the secondary markets—a

process known as securitization. See id. Based on this alleged

securitization transaction, Plaintiff asserts that the Fannie

Mae Trust had purchased the right from Defendant to collect

future mortgage payments from Plaintiff. See id. Plaintiff

ceased making mortgage payments to Defendant, which then

threatened to foreclose on Plaintiff’s property. See id. at *11.

II. Procedural History

On April 4, 2024, Plaintiff filed his pro se complaint

against Defendant, claiming the following:

1. Declaratory Judgment: Plaintiff seeks a declaratory

judgment that Defendant has no right to foreclose on

Plaintiff’s property, asserting that the securitization

of the mortgage renders the mortgage and promissory note

unenforceable. See id. at *19.

2. Fraudulent Concealment: Plaintiff claims that Defendant

committed fraudulent concealment by failing to disclose

its intent to transfer the mortgage to the Fannie Mae

Trust, which securitized the mortgage without Plaintiff’s

consent or knowledge. See id. at *16.

3. Truth in Lending Act Violation: Plaintiff argues that

Defendant violated the Truth in Lending Act (“TILA”), 15

U.S.C. § 1641(g), by failing to record the loan transfer

with the appropriate state recordation office and by

neglecting to notify Plaintiff within 30 days of the

transfer. See id. at *7-8.

4. Quiet Title: Plaintiff asks the Court to declare that the

securitization of the mortgage extinguished Defendant’s

right and security interest in the property, and that

title to the property is vested in Plaintiff alone. See

id. at *19.

Plaintiff seeks several forms of relief, including monetary

damages between $100,000 and $2,000,000, a refund of all loan

proceeds paid under the promissory note, and the return of all

loan documents evidencing rights to the property. See id. at

*23-24.

On May 10, 2024, Defendant moved to dismiss Plaintiff’s

complaint for failure to state a claim. See ECF No. 10. Plaintiff

opposed Defendant’s Motion on May 29, 2024. See ECF No. 11.

Defendant replied on June 7, 2024. See ECF No. 12. On July 11,

2024, Plaintiff filed a sur-reply addressing Defendant’s reply.

See ECF No. 13. Defendant moved to strike Plaintiff’s sur-reply

on July 12, 2024, see ECF No. 14, which the Court partially

granted on August 16, 2024. See ECF No. 18.

III. Jurisdiction

The Court has federal question jurisdiction under 28 U.S.C.

§ 1331, which grants district courts original jurisdiction over

all civil actions arising under the Constitution, laws, or

treaties of the United States, based on Plaintiff’s allegation

that Defendant violated the TILA. The Court has supplemental

jurisdiction over Plaintiff’s state law claims pursuant to 28

U.S.C. § 1367.

IV. Standard of Review

“In determining whether a complaint fails to state a claim,

the court must construe the complaint in the light most favorable

to the plaintiff[.]” Payne v. Secretary of Treasury, 73 Fed.Appx.

836, 837 (6th Cir. 2003). Under Federal Rule of Civil Procedure

8(a)(2), a complaint need only contain “a short and plain

statement of the claim showing that the pleader is entitled to

relief.” Fed. R. Civ. P. 8(a)(2). It need not contain “detailed

factual allegations,” Bell Atlantic Corp. v. Twombly, 550 U.S.

544, 555 (2007), but it must assert “more than an unadorned,

the-defendant-unlawfully-harmed-me accusation.” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009). “Following Twombly and Iqbal,

it is well settled that a complaint must contain sufficient

factual matter, accepted as true, to state a claim to relief

that is plausible on its face[.]” Center for Bio-Ethical Reform,

Inc. v. Napolitano, 648 F.3d 365, 369 (6th Cir. 2011) (emphasis

added). A claim is plausible when the alleged fact “allows the

court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

Pro se complaints must also meet this plausibility standard.

They are “not exempt from the Federal Rules of Civil Procedure.”

Selmon-Austin v. Wells Fargo Bank, No. 2:21-cv-02724, 2022 WL

18141470, at *1 (W.D. Tenn. Sep. 7, 2022) (citing Wells v. Brown,

891 F.2d 591, 594 (6th Cir. 1989)). Although “pro se complaints

are held to less stringent standards” and “should be liberally

construed,” Williams v. Curtin, 631 F.3d 380, 383 (6th Cir.

2011), courts do not “abrogate [the] basic pleading essentials

in pro se suits.” Wells, 891 F.2d at 594. If essential elements

are missing, dismissal is warranted as a matter of law. See Mayer

v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993) (explaining that the

“purpose of Rule 12(b)(6) is to allow a defendant to test

whether, as a matter of law, the plaintiff is entitled to legal

relief even if everything alleged in the complaint is true.”).

V. Analysis

Defendant moves to dismiss each of Plaintiff’s claims based

on a variety of legal arguments. See ECF No. 10.

A. Declaratory Judgment Claim

Plaintiff seeks a declaratory judgment that Defendant has

no right to foreclose on Plaintiff’s property, alleging that the

securitization of the mortgage “forever destroyed” the note and

mortgage. See Compl. at *19, ECF No.1. Plaintiff’s theory is

that the deed of trust, promissory note, and the underlying debt

obligation are inseparable components of the mortgage, and that

any separation would render the entire mortgage unenforceable.

See id. at *7. Based on this theory, Plaintiff contends that

the securitization effectively voided his debt obligation. See

id. Defendant denies that the mortgage was ever securitized,

assigned, or transferred. See ECF No. 10.

There is no legal authority supporting Plaintiff’s

proposition that a loan becomes unenforceable when securitized.

It is well-settled in the Sixth Circuit that the securitization

of a mortgage alone does not free a borrower from the borrower’s

obligation to repay. See Thompson v. Bank of America, N.A., 773

F.3d 741, 749 (6th Cir. 2014) (“securitization of a note does

not alter the borrower’s obligation to repay the loan.”); see

also Johnson v. Broker Solutions, Inc., No. 3:15-cv-00047, 2015

WL 4469276, at *3 (M.D. Tenn. Jul. 22, 2015).1

Securitization merely “creates a separate contract,

distinct from a plaintiff’s obligations under the [original

note].” Dauenhauer v. Bank of New York Mellon, 562 Fed.Appx.

473, 480 (6th Cir. 2014). Under Tennessee law, the mortgage

note is a negotiable instrument which “can be sold or assigned

to another party who then receives the right to enforce the

instrument.” Thompson, 773 F.3d at 749 (citing Tenn. Code Ann.

§§ 47-3-104, 201, 203, 301, 302). On assignment, the borrower’s

debt obligation remains intact. See id. (citing W.C. Early Co.

v. Williams, 186 S.W. 102, 103 (1916)). Therefore,

securitization will not “shield plaintiff’s property from

foreclosure.” Dauenhauer, 562 Fed.Appx. at 480.

1 In Thompson, the Sixth Circuit also noted the uptick in claims related to

securitization and addressed the extent to which securitization might affect

the borrower’s obligations to repay. See Thompson, 773 F.3d at 746. The

Sixth Circuit noted that, “the district courts in this circuit, particularly

in Tennessee, have entertained a spate of civil actions that advance legal

theories similar to [the plaintiff’s] ... [M]any of these civil actions are

scattershot affairs, tossing myriad (sometimes contradictory) legal theories

at the court to see what sticks.” Id. at 748.

Federal law allows the creation of mortgage-backed

securities through securitization. See Securities Act of 1933,

15 U.S.C. §§ 77a-77aa; Secondary Mortgage Market Enhancement Act

of 1984, Pub. L. 98-440, 98 Stat. 1689. Contrary to Plaintiff’s

assertions, “the pooling of mortgages into investment trusts is

not some sort of illicit scheme that taints the underlying debt.”

Thompson, 773 F.3d at 749.

Even if Plaintiff’s allegation that the mortgage was

securitized were accepted as true, Plaintiff cannot state a

plausible claim to relief. Plaintiff’s declaratory judgment

claim fails as a matter of law.

B. Fraudulent Concealment Claim

Plaintiff claims that Defendant committed fraudulent

concealment by failing to disclose (1) its intent to transfer

the mortgage when the parties signed the loan agreement, and (2)

the terms of the securitization agreement with the Fannie Mae

Trust. See Compl. at *17, ECF No. 1. Plaintiff asserts that,

had he “known […] the truth” that the mortgage would be

securitized, he “would not have pledged a security to

[Defendant].” Id. at *18. Plaintiff alleges that this

information was material, and that the concealment was

intentional. See id.

To establish a claim of fraudulent concealment under

Tennessee law, a plaintiff must show “(1) that the defendant

took affirmative action to conceal or remained silent and failed

to disclose material facts despite a duty to do so and, (2) the

plaintiff could not have discovered the cause of action despite

exercising reasonable care and diligence.” Shadrick v. Coker,

963 S.W.2d 726, 735 (Tenn. 1998) (citing Benton v. Snyder, 825

S.W.2d 409, 414 (Tenn. 1992)). A duty to disclose arises when

there is a “confidential or fiduciary relationship between the

parties.” Id. (citing Hall v. De Saussure, 297 S.W.2d 81, 85

(1956)).

When alleging fraud, a plaintiff must meet a heightened

pleading standard. Federal Rule of Civil Procedure 9(b) requires

fraud allegations to be stated with particularity as to the

circumstances, rather than mere plausibility. See Fed. R. Civ.

P. 9(b) (emphasis added). At a minimum, fraud allegations must

state “the time, space, and content of the alleged

misrepresentation […]; the fraudulent scheme; the fraudulent

intent of the defendants; and the injury resulting from the

fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir.

1993). The test is whether the complaint places the defendant

on “sufficient notice of the misrepresentation,” allowing the

defendant to respond “in an informed way [to] plaintiff’s claim

of fraud.” Id. at 162 (citing Brewer v. Monsanto Corp., 644

F.Supp. 1267, 1273 (M.D. Tenn. 1986)).

Plaintiff has failed to plead with particularity the

essential elements of the fraudulent concealment claim.

Plaintiff does not allege any facts to support an inference that

Defendant owed a duty to disclose the terms of securitization to

Plaintiff. Securitization merely creates a separate contract

that does not alter Plaintiff’s rights or obligations under the

original note, and Plaintiff, as third party, has no right or

interest in the securitization agreement between Defendant and

the Fannie Mae Trust. See Dauenhauer, 562 Fed.Appx. at 480.

Defendant has no contractual or fiduciary obligation to disclose

the terms of securitization. Plaintiff’s fraudulent concealment

claim must be dismissed.

C. Truth in Lending Act Violation Claim

1. TILA’s Notice Requirement

Plaintiff claims that Defendant violated the TILA by failing

to comply with its notice obligations. Plaintiff asserts that

Defendant did not “record the transfer [of mortgage] in the

Official Records of the Shelby County Recorder’s Office within

30 days along with [a] notification” to Plaintiff of that

transfer. Compl. at *7, ECF No. 1. Although Plaintiff cites the

wrong section of the United States Code, the Court construes

this claim as arising under 15 U.S.C. § 1641(g).2

2 Plaintiff alleges that, “[u]nder 41 U.S.C. § 1641[,] any transfers of the

[…] Mortgage Loan to the Federal National Mortgage Association Trust would

be in violation of [the] Federal Statute.” Compl. at *7, ECF No. 1. The

Section 1641(g) of TILA requires that, when a mortgage loan

is assigned or otherwise transferred, the assignee must notify

the borrower in writing within 30 days. See 15 U.S.C. § 1641(g).

The written notice must state:

(A) the identity, address, telephone number of the new

creditor;

(B) the date of transfer;

(C) how to reach an agent or party having authority to act

on behalf of the new creditor;

(D) the location of the place where transfer of ownership

of the debt is recorded; and

(E) any other relevant information regarding the new

creditor.

See 15 U.S.C. § 1641(g)(1)(A)-(E). The notice requirement

applies specifically to a mortgage assignee, not the original

mortgagee. See id. Only “entities that acquire legal title to

the debt obligation” are subject to § 1641(g). Robertson v. U.S.

Bank, N.A., 831 F.3d 757, 762 (6th Cir. 2016). In Robertson,

the Sixth Circuit clarified that holders of the mortgage

instrument (such as a deed of trust) without rights to the

underlying debt are not subject to the notice requirement. See

id.

statutory provision on which Plaintiff relies does not exist in the United

States Code. It appears that Plaintiff is referring to 15 U.S.C. § 1641(g).

Accepting all facts in Plaintiff’s complaint as true, his

TILA claim fails because Defendant has no duty notify Plaintiff

under 15 U.S.C. § 1641(g). First, Defendant is not a mortgage

assignee. Only the Fannie Mae Trust, as the alleged assignee,

would owe a duty of notification to Plaintiff. Second,

Plaintiff’s complaint alleges that Defendant “gave up all rights

to the debt after the [securitization].” Compl. at *9, ECF No.

1. If that statement is accurate, Defendant would be relieved

of any notice obligations because § 1641(g) applies only to

entities that acquire legal title to the debt obligation.

Robertson, 831 F.3d at 762.

2. TILA’s One-Year Statute of Limitations

Even if Plaintiff could establish that Defendant had a duty

to notify him under § 1641(g), his TILA claim must be dismissed

as time-barred. Under 15 U.S.C. § 1640(e), “[a]ny action under

this section may be brought […] within one year from the date of

the occurrence of the violation.” 15 U.S.C. § 1640(e) (emphasis

added). “[T]he statute of limitations begins to run when the

plaintiff has a complete and present cause of action and thus

can file and obtain relief.” Wike v. Vertrue, Inc., 566 F.3d

590, 593 (6th Cir. 2009) (internal quotations omitted).

Plaintiff has not specified the exact date of the alleged

securitization, but the complaint suggests it occurred on or

shortly after November 11, 2008. Plaintiff alleges that the

“Original Lender, [t]he Bank, gave up all the rights to [the

debt] to Fannie Mae [Trust] shortly after the November 11, 2008

signing.” See Compl. at *9, ECF No. 1. That date cannot be

correct because the original mortgage transaction was executed

on November 21, 2008. A mortgage cannot be securitized before

it is created.

Even if the alleged securitization occurred on November 11,

2008, the TILA’s one-year statute of limitations would bar the

claim. Plaintiff did not file this lawsuit until April 4, 2024,

long after the one-year limitations period had run. Plaintiff’s

claim is time-barred. He has failed to state a plausible claim

of TILA violation.

D. Quiet Title Claim

Plaintiff brings a claim to quiet title. He argues that

the securitization of his mortgage clouded the title. He asks

the Court to declare that “the title to the subject property is

vested in plaintiff alone,” and that any of Defendant’s rights,

security interest, or title in the property be extinguished. See

Compl. at *21, ECF No. 1.

To succeed on a quiet title claim, a plaintiff must “show

that he himself has the title, or else he has no right to have

a cloud removed from that to which he has no title in himself.”

Dauenhauer, 562 Fed.Appx. at 481 (citing Hoyal v. Bryson, 53

Tenn. 139, 141 (Tenn. 1871)). “[A] party wishing to quiet title

must show that he has superior title against any other

claimants.” Starkey v. Bank of America, N.A., No. 3:17-0511,

2018 WL 3872193, at *6 (M.D. Tenn. Aug. 15, 2018) (citing Hoyal,

53 Tenn. at 141). Under Tennessee law, “the lender, the holder

of the note, has title to the property [and] … [u]ntil the note

is satisfied, the holder of the note has superior title to

property.” Thompson, 773 F.3d at 750-51 (citing Hoyal, 53 Tenn.

at 141).

Plaintiff has not established any plausible legal basis on

which he has title to the property, let alone superior title.

Nowhere in his 24-page complaint or subsequent filings does he

demonstrate that he had satisfied the obligations in his note to

acquire title. Plaintiff’s only relevant assertion is that the

securitization clouds the title. See Compl. at *21, ECF No. 1.

However, securitization does not alter Plaintiff’s debt

obligations under the note, does not affect the property’s title,

and does not affect the priority of title. See Thompson, 773

F.3d at 749. Plaintiff’s quiet title claim fails as a matter of

law.

VI. Conclusion

For the foregoing reasons, each of Plaintiff’s claims fails

as a matter of law. Defendant’s Motion to Dismiss under Rule

12(b)(6) is GRANTED. Plaintiff’s declaratory judgment claim,

fraudulent concealment claim, TILA violation claim, and quiet

title claim are DISMISSED WITH PREJUDICE.

SO ORDERED this 18th day of October, 2024.

/s/ Samuel H. Mays, Jr.

SAMUEL H. MAYS, JR.

UNITED STATES DISTRICT JUDGE