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Marion J. Tucker and Stephanie Tucker v. Charles Schwab Bank

March 29, 2013


The opinion of the court was delivered by: Judge John J. Tharp, Jr.


The plaintiffs, Marion and Stephanie Tucker, allege that Defendants Morgan Stanley Capital I, Inc. ("Morgan Stanley") and Charles Schwab Bank ("Charles Schwab") violated the Illinois Consumer Fraud and Deceptive Business Practices Act (the "ICFA") and the Illinois Uniform Deceptive Trade Practices Act (the "IDPA") and committed fraud, attempted conversion, and unjust enrichment. The Tuckers also allege that Morgan Stanley (but not Charles Schwab) violated the Fair Debt Collection Practices Act (the "FDCPA") and the Illinois Collection Agency Act (the "ICAA"). Both defendants move to dismiss all of the plaintiffs' claims pursuant to Rule 12(b)(6). For the reasons stated below, the Court grants the defendants' motions to dismiss without prejudice.

I. Background*fn1

On February 9, 2005, the Tuckers signed a mortgage note and mortgage in favor of Morgan Stanley. Cmplt. ¶ 13. The mortgage conveyed a security interest in the Tuckers' property located in Olympia Fields, Illinois (the "property") to Morgan Stanley. Id. ¶¶ 1, 14. On March 1, 2005, Morgan Stanley transferred ownership in the mortgage note and mortgage to a mortgage-backed-securities trust (the "Trust"), which listed Morgan Stanley as the servicer. Id. ¶ 15. After filing certain forms with the SEC, the complaint alleges that the Trust filed a "Certification and Notice of Termination," and the Trust was no longer registered. Id. ¶ 16. The Tuckers further allege, without providing any detail, that the Trust itself terminated and was dissolved on May 26, 2006, when its final form 10-K was filed with the SEC. Id. ¶¶ 16-17. According to the Tuckers, upon termination of the Trust, the Trust's certificate holders received the Trust's assets and became the holders of the note and mortgage.*fn2 Id. ¶ 19.

After the Trust allegedly dissolved, Morgan Stanley Home Loans (an entity that the Tuckers implicitly admit is distinct from Morgan Stanley) began communicating with the plaintiffs about the mortgage. Id. ¶¶ 20-21; Resp. Br. (Dkt. 37) at ¶ 13. The first communication consisted of a letter dated January 4, 2011 from Morgan Stanley Home Loans to the Tuckers confirming a payment the Tuckers had made in December 2010. Cmplt. ¶ 20, Ex. H. On May 16, 2011, Morgan Stanley Home Loans induced the Tuckers to enter into a formal mortgage repayment plan. Id. ¶ 21, Ex. I. Later, on January 30, 2012, Defendant Charles Schwab filed a complaint against the Tuckers to foreclose on the mortgage. Id. ¶ 22, Ex. J.

II. Analysis

A. The Tuckers Fail to Adequately Plead Termination of the Trust.

The Tuckers' claims against both Morgan Stanley and Schwab are predicated on their allegation that the Trust terminated and was dissolved while it held the mortgage and note to the Tuckers' property. Morgan Stanley notes that the Tuckers' allegations on this point are "vague and confusing," and the Court agrees. As the only factual basis for alleging that the Trust terminated while it was the holder of the mortgage and note, the Tuckers attach a document that they call the Trust's "Certification and Notice of Termination," but which in reality is a notice of termination of the Trust's registration with the SEC. Although "vague and confusing," the complaint appears to claim that de-registration terminated the trust itself. See, e.g., Cmplt. (Dkt. 1) ¶¶ 16-17 (mischaracterizing the trust's "Certification and Notice of Termination of Registration" as merely "Notice of Termination," and implying that the trust was terminated in conjunction with the filing of its final 10-K Annual Report).

To the extent that the Tuckers' claims depend on the thesis that the Trust's deregistration with the SEC terminated the trust itself, they are frivolous. Whether a mortgage-backed security trust is registered with the SEC has nothing at all to do with its legal existence, and de-registering the Trust does not terminate the Trust's existence. See, e.g., 15 U.S.C. § 78l(g)(4); 17 C.F.R. § 240.12g-4. Although at this stage the Court must take the Tuckers' factual allegations as true and draw all reasonable inferences in their favor, see Gessert, 703 F.3d at 1033, the Court need not accept specious claims uncritically. To the extent that the Tuckers allege that the Trust was dissolved due to its deregistration with the SEC, that allegation is simply an erroneous legal conclusion to which no deference is owed. And if the plaintiffs did not intend to allege that deregistration terminated the trust, and that the Trust was dissolved by some other act, they have provided no facts whatsoever that would (if true) establish, or even plausibly suggest, that the Trust was actually dissolved. Either way, at present the Tuckers' allegations regarding the termination of the Trust are insufficient to "state a claim to relief that is plausible on its face," and they do not "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007).

Because the Tuckers have failed to allege sufficient facts to plausibly show that the Trust was dissolved, and all of their claims turn on that claim, their complaint will be dismissed in its entirety without prejudice. The Tuckers have leave to file an amended complaint, if they are able to do so consistent with the requirements of Fed. R. Civ. P. 11, within 30 days. Though the Tuckers' entire complaint is being dismissed without prejudice, the Court will nonetheless review the Tuckers' claims against the Morgan Stanley and Charles Schwab to determine whether there are other independent grounds for dismissal.

B. The Tuckers Fail to State Any Claims Against Morgan Stanley.

Even if the Tuckers had alleged the facts necessary to show that the Trust was dissolved in 2006, they would still fail to state any valid claim against Morgan Stanley. The Tuckers argue that Morgan Stanley violated federal and state law*fn3 by: (1) sending the plaintiffs a confirmation letter regarding their payment on a loan, and (2) entering into a formal repayment plan with the plaintiffs for their mortgage. Id. ¶¶ 20-21, Ex. H-I.*fn4 These two facts underlie all of the plaintiffs' claims against Morgan Stanley.*fn5

Though the Tuckers' complaint alleges that Morgan Stanley sent the confirmation letter and entered into the formal repayment plan, the exhibits attached to the complaint do not mention the Morgan Stanley entity that the Tuckers sued, but rather only Morgan Stanley Home Loans. "It is a well-settled rule that when a written instrument contradicts allegations in the complaint to which it is attached, the exhibit trumps the allegations." N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 454 (7th Cir. 1998). Because the Tuckers' exhibit refutes their factual allegations, they have not alleged facts sufficient to state their claims against the Morgan Stanley entity that they named as a defendant. See id. at 455.

After Morgan Stanley's motion pointed out that their exhibits involved Morgan Stanley Home Loans rather than the defendant, Morgan Stanley Capital I, Inc., the Tuckers contended for the first time that "[o]n information and belief, Morgan Stanley Capital and Morgan Stanley Home Loans were working together to collect the debt." Resp. Br. (Dkt. 37) at ΒΆ 13. Even if the Court ignores the Tuckers' improper attempt to amend their complaint in a response brief, see Agnew v. Nat'l Collegiate Athletic Ass'n, 683 F.3d 328, 348 (7th Cir. 2012) (briefs in opposition to a motion to dismiss may not amend the complaint), they still fail to provide any factual basis for their conclusory allegation that Morgan Stanley was in any way involved in the events alleged.; Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002) (the Court is "not obliged to accept as true legal conclusions or unsupported conclusions of fact"). In fact, the Tuckers' ...

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