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Smith v. ABN AMRO Mortgage Group Inc.

March 27, 2007

DEMETRIOUS SMITH, ET AL., PLAINTIFFS,
v.
ABN AMRO MORTGAGE GROUP INC., ET AL. DEFENDANTS.



The opinion of the court was delivered by: Judge Michael R. Barrett

ORDER

This matter is before the Court upon the Magistrate Judge's Report and Recommendation ("R&R") dated January 9, 2007 (Doc. 62) and the Magistrate Judge's R&R dated January 22, 2007 (Doc. 69).

The parties were given proper notice, pursuant to 28 U.S.C. § 636(b)(1)(C), including notice that the parties would waive further appeal if they failed to file objections to the R&R in a timely manner. See United States v. Walters, 638 F.2d 947 (6th Cir. 1981).*fn1 In response to the January 9, 2007 R&R, Plaintiffs filed a two-part pleading, which includes both a Motion for Reconsideration and an Opposition to Defendants' Motions to Dismiss. (Docs. 66, 67) In response to the January 22, 2007 R&R, Plaintiffs filed a Motion of Opposition. (Doc. 70) Defendants National Mortgage Funding, Chase Home Finance, LLC, and ABN AMRO Mortgage Group, Inc. filed Responses in Opposition to Plaintiffs' Motion of Opposition (Docs. 71, 72, 73) Plaintiffs filed a response to these Responses, entitled "Response: to Defendants' Motion against 'Plaintiff's Objections to Magistrate Judge's Report and Recommendation' and 'Request for Classification as Complex Litigation.'" (Doc. 74) Defendants National Mortgage Funding and ABN AMRO Mortgage Group Inc. filed Motions to Strike Plaintiffs' Response. (Docs. 75, 76) Plaintiffs filed a Motion of Opposition to these Motions (Doc. 77); and Defendant National Mortgage filed a Reply. (Doc. 78) This matter is now ripe for review.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs claim that they are the victims of loan "flipping" schemes. Plaintiffs claim that Defendants took advantage of Plaintiff Demetrious Smith's lack of knowledge about home buying and exploited his desire to own rental property. Plaintiffs bring claims for undue influence; fraud and misrepresentation; negligence; violation of fiduciary duty; failure to disclose; violations of the Real Estates Settlement Procedures Act; violations of the Federal Trade Commissions Act; violations of the Racketeer Influenced and Corrupt Organizations Act; violations of the Home Equity Loan Consumers Protection Act; violations of Chapter 1322 of the Ohio Revised Code; violation of Ohio Revised Code § 1345.03; civil conspiracy; negligent hire, supervision and retention; injunctive relief; and negligence and lack of supervision by the Hamilton County Treasurer.

Originally, Plaintiffs filed a similar action in the Hamilton County Court of Common Pleas. Plaintiffs attempted to remove that action to this Court. On December 14, 2005, this Court remanded the action to state court because under 28 U.S.C § 1441, only a defendant can remove an action from state court to federal court. On December 23, 2005, Plaintiffs commenced the present action in this Court. Plaintiffs filed a notice of voluntary dismissal in the state court action on April 28, 2006.

The Court notes that Plaintiffs have also removed three actions ("the foreclosure actions") from the Hamilton County Court of Common Pleas to this Court. See ABN AMRO Mortgage Group, Inc. v. Smith, et al., No. 1:06cv36; ABN AMRO Mortgage Group, Inc. v. Smith, et al, No. 1:06cv37; and Chase Manhattan Mortgage Corp., et al. v. Smith, et al., No. 1:06cv38 (remanded).

II. MAGISTRATE JUDGE'S R&R'S

A. R&R of January 9, 2007

The Magistrate Judge recommends granting Defendant Hamilton County Treasurer's Motion to Dismiss. (Doc. 13) The Magistrate Judge determined that the Hamilton County Treasurer was not a proper party against whom Plaintiffs could bring their claim that they were erroneously taxed on their property prior to taking ownership. The Magistrate Judge explained that by Ohio statute, the County Auditor is responsible for correcting all clerical errors in the tax lists and duplicates in the name of the person charged with taxes or assessments, the valuation or assessment of property, or in the amount of such taxes. The Magistrate Judge also explained that Ohio statutory law provides that the tax commissioner may remit real property taxes, penalties, and interest found by the commissioner to have been illegally assessed. Based on the foregoing, the Magistrate Judge concluded that Plaintiffs claims against Defendant Hamilton County Treasurer should be dismissed for the failure to state a claim upon which relief could be granted.

B. R&R of January 22, 2007

The Magistrate Judge recommends granting Defendants National Mortgage Funding and ABN AMRO Mortgage Group, Inc.'s Motions to Dismiss (Docs. 28, 54); denying as moot Mid America Land Title Agency, Inc., Chelsea Title Agency of Cincinnati, Inc., Mortgage Electronic Registration System Inc., Chase Home Finance, LLC's Motions to Dismiss (Docs. 17, 19, 23, 25); and dismissing Plaintiffs' Complaint in its entirety as judicially estopped.

The Magistrate Judge explains that prior to this litigation, on January 7, 2004, Plaintiffs filed a voluntary Chapter 13 Petition in the United States District Court for the Southern District of Ohio; and on April 20, 2004, the bankruptcy court entered an Order Confirming Plan. The Magistrate Judge explained further that Plaintiffs' bankruptcy action is currently on appeal. The Magistrate Judge noted that pursuant to 11 U.S.C. § 521(1), a cause of action is an asset that must be scheduled, and a debtor's obligation to disclose all potential causes of action is a continuing obligation. The Magistrate Judge noted that Plaintiffs attempted to file a Motion to Modify Plan, disclosing that they were in litigation with Defendants ABN AMRO and Chase, but withdrew the motion. The Magistrate Judge found that since Plaintiffs had failed to disclose this current litigation to the bankruptcy court, Plaintiffs were judicially estopped from proceeding with their claims.

C. Plaintiffs' Objections

In response to the Magistrate Judge's January 9, 2007 R&R, Plaintiffs make several requests. First, Plaintiffs ask this Court to reconsider the Magistrate Judge's Order denying Plaintiffs' motion for appointment of counsel. Next, Plaintiffs ask this Court to review the practices of the United States Bankruptcy Court for the Southern District of Ohio, specifically, the denial of appointment of counsel in their Chapter 13 proceedings before that court. Third, Plaintiffs request an oral hearing regarding an explanation of how a bankruptcy trustee oversees their bankruptcy case in state court. Fourth, Plaintiffs request a oral hearing and argument regarding the real estate taxes assessed on their properties, which they dispute. Plaintiffs argue that they are entitled to an "adversary hearing" as part of their bankruptcy proceedings.

Regarding the recommendation of dismissal of the Hamilton County Treasurer as a party, Plaintiffs argue that the Treasurer is a proper party based upon a case filed in the Hamilton County Court of Common Pleas, wherein the Treasurer brought suit against Denise Hill.*fn2 Plaintiffs explain that as a result of the lawsuit brought against Ms. Hill by the Treasurer, Ms. Hill lost her house to the Treasurer because the Treasurer claimed that Ms. Hill owed back real estate taxes. Plaintiffs argue that the dismissal of the Treasurer is premature.

In response to the Magistrate Judge's January 22, 2007 R&R, Plaintiffs argue that the bankruptcy court was fully aware of this action. Plaintiffs maintain that both Judge Aug, the bankruptcy judge presiding over their bankruptcy proceedings, and Margaret Burks, their bankruptcy trustee, were aware of these proceedings. Plaintiffs state that this is established through written evidence, the bankruptcy transcript, this case, and global telephone settlement talks. Plaintiffs explain that their failure to notify the bankruptcy court of this action was probably due to oversight and that their attorney in the bankruptcy matter attempted to submit the modification, but was told by the bankruptcy trustee to retract her modification. Plaintiffs have attached a memorandum from the bankruptcy trustee to their former bankruptcy attorney in which the bankruptcy trustee is repeating a conversation she had with Plaintiff Amy Smith. The bankruptcy trustee states that Ms. Smith told her about a "flipping" case which she has filed with the assistance of counsel, Jim Slattery, in the Court of Common Pleas. In the memo, the bankruptcy trustee explains that if any funds come from the lawsuit, these funds should be turned over to the trustee.

In addition, Plaintiffs request that an oral argument or hearing be held regarding their request for a court-appointed attorney.

III. ANALYSIS

A. Motions to Strike

Defendants National Mortgage Funding and ABN AMRO Mortgage Group Inc. have filed Motions to Strike Plaintiffs' Response to their Memoranda in Opposition. Defendants argue that Plaintiffs' filing is untimely and inappropriate. Specifically, Defendants argue that the filing should be struck because it contains (1) highly inappropriate and scandalous statements about the Court; (2) arguments regarding the appointment of counsel which are repetitious; (3) a request for classification of this case as "complex;" and (4) additional objections not permitted by Federal Rule of Civil Procedure 72. Defendants also suggest that the Court issue an order enjoining Plaintiffs from filing any further actions or papers in this Court without first obtaining leave.

The Court finds that none of the above bases are sufficient to strike Plaintiffs' filing. The Court does find that several of the statements about the legal system made by Plaintiffs are completely unfounded, but presumes that Plaintiffs make these statements out of a sense of frustration.*fn3 The Court notes that if it struck all documents which contained repetitious material, including documents filed by well-qualified counsel, its docket would be significantly reduced. Finally, Plaintiffs are proceeding in this matter pro se. A pro se litigant's pleadings are to be construed liberally and held to a less stringent standard than formal pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520-21 (1972); Estelle v. Gamble, 429 U.S. 97, 106 (1976). While Plaintiffs should have filed for leave to file their response and filed a separate motion for their request to designate this case as "complex," the Court does not find either to sufficient bases to strike the filing. Therefore, the Motions to Strike are DENIED.

B. Plaintiffs' Motion for Extension of Time

On January 8, 2007, Plaintiffs filed a Motion for Extension of Time to File Response to Defendants' Motions to Dismiss (Doc. 60). The Court finds that this Motion was untimely, and therefore it is DENIED. On January 16, 2007, Plaintiffs filed a Motion to Reconsider the Magistrate Judges' January 9, 2007 R&R along with Responses to Defendants' Motions to Dismiss. The Court will construe this pleading as timely objections to the R&R.

C. Motion to Dismiss Standard of Review

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists. DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004).*fn4 Facial attacks, such as the one here, question the sufficiency of the pleadings. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). This court must take the allegations in the complaint as true and construe them in the light most favorable to the nonmoving party. Id.; Moir v. Cleveland Transit Auth., 895 F.2d 266, 269 (6th Cir.1990).

A motion to dismiss under Rule 12(b)(6) requires this Court to construe the complaint in the light most favorable to the plaintiff, accept all of the complaint's factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of the claims that would entitle relief. Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir. 1990), cert. denied, 498 U.S. 867 (1990). "However, while liberal, this standard of review does require more than the bare assertion of legal conclusions." Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995).

D. Motion to Dismiss by Hamilton County Treasurer

The allegations against Defendant Hamilton County Treasurer are as follows: Further, the real estate tax bill of the aforementioned real estate, issued the Hamilton County Treasurer defendant Robert Goering, was assigned to the plaintiffs before closing on the real estate was completed. This shows either knowledge of the falsity of the aforementioned real estate transactions and/or negligence and lack of supervision on the issuance of these taxes to the plaintiffs. This has caused additional damage to the plaintiffs. (Doc. 6) The Court finds no error in the Magistrate Judge's R&R, and therefore the Court GRANTS Hamilton County Treasurer's Motion to Dismiss, and dismisses Count Fifteen, the only claim brought against the Hamilton County Treasurer.

The Court denies the requests made by Plaintiffs in their objections to the Magistrate Judge's R&R: (1) request for review of the United States Bankruptcy Court for the Southern District of Ohio's denial of appointment of counsel; (2) request for a hearing regarding an explanation of how a bankruptcy trustee oversees their bankruptcy case in state court; and (3) request for a hearing regarding the real estate taxes assessed on their properties. The Court finds that this is not the proper forum to address these matters and these issues are not relevant to the claims Plaintiffs have brought before this Court in this matter.

E. Remaining Motions to Dismiss

The Court will address the arguments made by Defendants as if made by all Defendants, and differentiate only where arguments are applicable to specific Defendants.

1. Colorado River Doctrine

To the extent that Defendants' Motions are based upon the Colorado River doctrine, the Court denies the Motions as moot, given Plaintiffs' dismissal of their state court action.

2. Judicial Estoppel

Defendants argue that Plaintiffs failed to disclose the existence of this lawsuit to the bankruptcy court, and therefore Plaintiffs are ...


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