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Sahlein v. Red Oak Capital, Inc.

United States District Court, N.D. Mississippi, Oxford Division

July 3, 2014

HUGO SAHLEIN; RITA SAHLEIN, STEVEN SAHLEIN; and EMELINE SAHLEIN, Plaintiffs,
v.
RED OAK CAPITAL, INC., its successors and assigns; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., its successors and assigns; MERSCORP HOLDINGS, INC., its successors and assigns; FLAGSTAR BANK, FSB, its successors and assigns; LSF7 MORTGAGE ACQUISITIONS II, LLC, its successors and assigns; LSF7 BERMUDA NPL V TRUST, its successors and assigns; U.S. BANK TRUST, NA, its successors and assigns; VERICREST FINANCIAL, INC., its successors and assigns; VOLT 2011-NPL1 HOLDINGS, LLC, its successors and assigns; VERICREST OPPORTUNITY LOAN TRUST 2011-NPL1, its successors and assigns; VOLT NPL IX, LLC, its successors and assigns; VOLT NPL IX ASSET HOLDINGS TRUST, its successors and assigns; WELLS FARGO DELAWARE TRUST COMPANY, NA, its successors and assigns; MARINOSCI LAW GROUP, PC, its successors and assigns; JANE DOE TRUSTS; and JOHN DOES, Defendants.

ORDER GRANTING MOTION TO DISMISS

DEBRA M. BROWN, District Judge.

This multi-count action arises from a dispute concerning the validity of a promissory note and deed of trust. Plaintiffs contend that the note and deed are fraudulent and unenforceable. Doc. #1 at ¶¶ 30-31. This matter is before the Court on the motion to dismiss of numerous defendants alleged to have participated in the purported fraud. Doc. #21. In their motion, the moving defendants argue that Plaintiffs' complaint fails to state a claim upon which relief may be granted. Doc. #22 at 2.

I.

Applicable Standards

As a general matter, "[a] pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). When a complaint falls short of this directive, a defendant may move to dismiss the claim for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering the interplay between Rule 8 and Rule 12, the United States Supreme Court has explained that:

To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and punctuation omitted) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-58 (2007)). Under this standard, a "court must accept all well-pleaded facts as true and view those facts in the light most favorable to the plaintiff." Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 803 n.44 (5th Cir. 2011) (internal quotation marks and punctuation omitted).

In addition to the standard articulated by Iqbal and Twombly, Rule 9(b) of the Federal Rules of Civil Procedure requires that, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." This heightened pleading standard is "supplemental to the Supreme Court's recent interpretation of Rule 8(a)...." U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 2009). As a supplement, Rule 9 requires "simple, concise, and direct allegations of the circumstances constituting fraud, which... must make relief plausible, not merely conceivable, when taken as true. Id. at 185-86 (internal quotation marks omitted).

II.

Factual Allegations

Taking the allegations of the complaint and the documents attached to the complaint as true, the Court derives the following facts:

On November 12, 2004, Arthur Michael Slaughter and Kimberly C. Slaughter executed a warranty deed in favor of Plaintiffs Hugo Sahlein, Rita Sahlein, Steven Tyler Sahlein, and Emeline Sahlein. Doc. #1-1 at 3. The deed conveyed to Hugo[1] and Rita a joint interest in onehalf of certain property located in Oxford, Mississippi (the Property"). Id. The deed conveyed to Steven and Emeline the remaining one-half interest in the described property. Id.

Also on November 12, 2004, certain unspecified defendants "fabricated a Note... and Deed of Trust... that labeled [Defendant] Red Oak as the Lender.'" Doc. #1 at ¶ 31. The Note, which reflected an indebtedness of $495, 000, bore signatures purporting to be those of Hugo and Rita. Doc. #1-2. The Deed of Trust, which listed the Property as security for the Note, bore signatures purporting to be those of all the plaintiffs. Doc. #1-3. Defendant Mortgage Electronic Registration Systems, Inc. ("MERS"), was listed as the beneficiary of the Deed of Trust. Id.

Following the alleged fabrication, Plaintiffs allege that Defendants engaged in a series of assignments of the security interest "solely to disguise and further an otherwise unlawful foreclosure." Doc. #1 at ¶ 36. The various assignments and the Deed of Trust were publicly recorded with the Chancery Clerk for Lafayette County. Id. at ¶ 37. Plaintiffs allege that, through the foregoing documents and actions, "Defendants fraudulently ...


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