Crymes v. Ocwen Loan Servicing, LLC (In re Crymes)

IN RE: DAVID STUART CRYMES, Debtor.

DAVID STUART CRYMES, Plaintiff, v. OCWEN LOAN SERVICING, LLC as SERVICING AGENT for U.S. BANK,

N.A., as TRUSTEE for CITIGROUP MORTGAGE LOAN TRUST,

INC. SERIES 2005-9, ITS SUCCESSORS AND ASSIGNS, Defendants.

CASE NO. 16-10206-rlj13

ADVERSARY NO. 18-01000-rlj

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS ABILENE DIVISION

August 20, 2018

The following constitutes the ruling of the court and has the force and effect therein described.

MEMORANDUM OPINION

The Court addresses the motion to dismiss of the defendants, Ocwen Loan Servicing, LLC (Ocwen), U.S. Bank, N.A. (U.S. Bank), and Citigroup Mortgage Loan Trust, Inc. Series 2005-9 (Citigroup) (collectively, Defendants). The plaintiff (and debtor), David Crymes, filed his complaint on January 2, 2018, alleging multiple causes of action and requesting a determination of the validity, priority, or extent of U.S. Bank's lien and a declaratory judgment.¹ This suit is related to Crymes's chapter 13 bankruptcy case and, in particular, to U.S. Bank's motion for relief from stay² filed in Crymes's bankruptcy case after Crymes's chapter 13 plan was confirmed.³

The Court has jurisdiction over this proceeding under 28 U.S.C § 1334(b), and the matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(B), (G), and (K).

Crymes filed chapter 13 bankruptcy on September 2, 2016.⁴ He filed his Schedules A/B through J on September 16, 2016⁵ and later amended Schedule A/B, which relates to his assets and liabilities, on November 28, 2016.⁶ By his amended Schedule A/B, Crymes lists his homestead as 845 Sayles Blvd., Abilene, Texas and estimates its value at $426,754.81.⁷ On Schedule D, Crymes lists Ocwen as holding a secured claim in the same amount and secured by the homestead property.⁸ Crymes reflects $127,488.53 as a mortgage arrearage owed to Ocwen but states that such "amount is disputed in the state district court."⁹

Crymes filed his chapter 13 plan and motion for valuation on September 16, 2016.¹⁰ Ocwen objected to confirmation of Crymes's chapter 13 plan, contending it was not feasible given Crymes's inability to pay the arrears owed to Ocwen.¹¹ But Ocwen (or its counsel) did not appear at the confirmation hearing and the plan was confirmed over Ocwen's objection.¹² The plan called for direct payments by Crymes on the mortgage debt—and thus not made through the plan from the plan payments—but no payments on the mortgage arrears.¹³

Six months after confirmation of Crymes's chapter 13 plan, on June 23, 2017, U.S. Bank filed its motions for relief from stay.¹⁴ Crymes opposed the motions¹⁵; however, the co-debtor stay as to his wife, Sabina Crymes, was lifted by default by order of August 29, 2017.¹⁶ Following several joint requests for continuances on the stay motion, Crymes filed this suit on January 2, 2018.¹⁷ An order abating the hearing on the stay motion was entered on February 7, 2018.¹⁸

The Complaint

Crymes's original complaint generally describes the 2001 Amendments to Article 9 of the Uniform Commercial Code and the "robo-signing" scandal that impacted the Mortgage Electronic Registration System (MERS) that, in turn, resulted in an extensive investigation of such conduct in 2010.¹⁹ Crymes alleges that his mortgage was affected by this "scandal" andclaims the following against Defendants: (1) a violation of 18 U.S.C. § 1962(c), the RICO Statute; (2) an objection to the motion for relief from stay for lack of standing; (3) a right to declaratory judgment declaring the mortgage lien of Defendants void under 11 U.S.C. § 506(d); and (4) a right to judgment for sanctions and damages under 11 U.S.C. § 105(a) against Defendants.²⁰ In response, Defendants filed their motion to dismiss on February 23, 2018.²¹

Crymes then filed an amended complaint.²² The amended complaint is practically identical in substance to the original complaint; attached to it, however, are two exhibits. Exhibit 1 is a Consent Judgment, referenced by the amended complaint, signed by the District Judge of the United States District Court for the District of Columbia on February 26, 2014.²³ Exhibit 2 is entitled "Explanation of Securitization" that Crymes posits "explains the securitization process in greater detail."²⁴ Neither the original complaint nor its amended version explains how the mortgage scandal, the judgment, or the securitization process affects the Crymes loan and mortgage.

The Motion to Dismiss

Defendants' motion to dismiss alleges that Crymes fails to state a claim upon which relief may be granted, and thus dismissal is appropriate under Rule 12(b)(6) of the Federal Rules ofCivil Procedure.²⁵ Specifically, the motion states that the Court should dismiss Crymes's complaint for the following reasons: (1) Crymes has not alleged facts to support a violation of the RICO Act; (2) Crymes has failed to state a claim upon which relief may be granted for his "lack of standing"-to-foreclose claim ; (3) Section 506(d)(2) specifically excepts Defendants' asserted lien from Crymes's avoidance claim; and (4) Crymes has no claim for damages or sanctions.²⁶

Attached as exhibits to the motion to dismiss are Defendants' motion for relief from stay (and its related attachments—the note, deed of trust, and assignments) and the affidavit of Shilundra Lidell in support of the motion.²⁷

For a Rule 12(b)(6) motion to dismiss, the court typically considers the pleadings alone and thus not extrinsic material. See Fed. R. Civ. P. 12(d). But when items are attached to the motion to dismiss that are central to the plaintiff's claim, the court may properly consider such documents. See Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004) ("Documents that a defendant attaches to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim."); see also Vanderbrook v. Unitrin Preferred Ins. Co. (In re Katrina Canal Breaches Litig.), 495 F.3d 191, 205 (5th Cir. 2007) ("But because the defendants attached the contracts to their motions to dismiss, the contracts were referred to in the complaints, and the contracts are central to the plaintiffs' claims, we may consider the terms of the contracts in assessing the motions to dismiss."). Here, Defendants attached the relevant deed of trust and assignment documents to its motion to dismiss.²⁸ The Court may properly consider these documents in ruling on the motionto dismiss because they are referred to several times in Crymes's complaint and are central to his claim. See Alexander v. Verizon Wireless Servs., L.L.C., 875 F.3d 243, 247 n.4 (5th Cir. 2017).

Analysis

A motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted tests the formal sufficiency of the plaintiff's statement of its claim for relief. A Rule 12(b)(6) motion is appropriate if the plaintiff has not provided fair notice of his claim with factual allegations that, when accepted as true, are plausible and not merely speculative. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Motions to dismiss for failure to state a claim are generally viewed with disfavor. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).

Count I-RICO Violation

"RICO creates a civil cause of action for '[a]ny person injured in his business or property by reason of a violation of section 1962.'" St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 439 (5th Cir. 2000) (quoting Beck v. Prupis, 529 U.S. 494, 495 (2000)). To state a claim under 18 U.S.C. § 1962, there must be: "(1) a person who engages in (2) a pattern of racketeering activity (3) connected to the acquisition, establishment, conduct, or control of an enterprise." Id. (quoting Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 242 (5th Cir. 1988)) (emphasis in original). Crymes asserts that Defendants have violated 18 U.S.C. § 1962(c).²⁹

By the amended complaint, Crymes alleges that Defendants "comprise an 'enterprise' or 'enterprises' as defined in 18 U.S.C. §1961(4)."³⁰ An enterprise "includes any individual,partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4); see also Boyle v. United States, 556 U.S. 938, 944 (2009). The Supreme Court has stated that by its definition, an enterprise is intended to be broad and reaches "a group of persons associated together for a common purpose of engaging in a course of conduct." Boyle, 556 U.S. at 944 (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)) (internal quotation omitted). Crymes identifies Defendants as an enterprise.

Notably absent, however, is any allegation that a specific person engaged in conduct that constitutes racketeering activity or that such person has an existence apart from the enterprise. See Parker & Parsley Petroleum Co. v. Dresser Indus., 972 F.2d 580, 583-84 (5th Cir. 1992) (affirming dismissal of the plaintiff's RICO claim where, in part, no allegation was made that an identifiable person engaged in the alleged predicate acts).³¹ The complaint identifies "DocX CEO Lorraine Brown" as "presently serving a five (5) year prison sentence for mail and wire fraud" and suggests that Defendants subsequently carried on the same pattern of activity to establish standing to foreclose.³² Crymes does not, however, explain how Lorraine Brown was directly or indirectly involved, if at all, in the assignments, pooling, or securitization of his deed of trust. The Court thus cannot so decide that Lorraine Brown is the RICO person.

Nor will the Court decide that Defendants are the RICO person(s), despite Crymes's conclusory allegation that "the enterprise or enterprises have an existence apart from and beyond the racketeering activity complained of in this action."³³ "For purposes of § 1962(c) . . . , the plaintiff must demonstrate not...