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Schueller v. Wells Fargo & Co.

United States District Court, D. New Mexico

March 28, 2018

NORBERT A. SCHUELLER, Plaintiff,
v.
WELLS FARGO & COMPANY, d/b/a WELLS FARGO BANK, N.A., d/b/a WELLS FARGO HOME MORTGAGE, Defendant.

          MEMORANDUM OPINION AND ORDER

          MARTHA VAZQUEZ, UNITED STATES DISTRICT JUDGE.

         THIS MATTER comes before the Court on Wells Fargo & Company's Motion to Dismiss (“Motion to Dismiss”) [Doc. 10] and Wells Fargo and Company's Rule 11 Motion for Sanctions (“Motion for Sanctions”) [Doc. 11]. The Court, having considered the motions, briefs, and relevant law, and being otherwise fully informed, finds that the Motion to Dismiss and the Motion for Sanctions are well-taken and will be granted.

         BACKGROUND

         In 2005, Plaintiff Norbert Schueller obtained a mortgage loan from Wells Fargo & Company (“Wells Fargo”) secured by real property in Valencia County. Doc. 1-2 at ¶ 3. Plaintiff's monthly mortgage payments are made to Wells Fargo via an automatic withdrawal from his checking account at Bank of the West. Id. at ¶¶ 4(a)-(b).

         On July 22, 2010, Plaintiff filed for Chapter 7 bankruptcy. See In re Schueller, No. 10-13665-j7. The bankruptcy petition included the Wells Fargo mortgage loan. Doc. 1-2 at ¶ 5. Plaintiff received a discharge on November 1, 2010. Id. As a result of the bankruptcy discharge, Plaintiff's personal liability for the Wells Fargo mortgage was discharged but the in rem liability on the property remains. Id. Since the date of discharge, Plaintiff has continued to make the monthly payments on his mortgage. Id.

         On October 25, 2011, Plaintiff, proceeding pro se, filed an action against Wells Fargo and three credit reporting agencies (“CRAs”), for violations of the Fair Credit Reporting Act (“FCRA”), defamation, and conversion. See Schueller v. Experian Info. Solutions, Inc., et al., U.S.D.C., No. 11-cv-00955 (MCA/LFG) (“2011 Action”), Doc. 1. In his complaint in the 2011 Action, Plaintiff alleged that, after he filed for bankruptcy and received a discharge of his mortgage loan with Wells Fargo in November 2010, Wells Fargo continued to automatically withdraw mortgage payments from his bank account. 2011 Action, Doc. 1 at ¶¶ 9(a), 12(b), (c). Plaintiff alleged that, because he continued to make his mortgage payments, it was false or inaccurate for Wells Fargo to report his mortgage loan as “closed” and/or with a $0 balance on his credit reports. Id. at ¶¶ 15-16. Plaintiff alleged: “If this is really true, then defendant Wells Fargo has been unlawfully and fraudulently extracting monies from plaintiff's checking account since October, 2010.” Id. at ¶ 15(c).

         Specifically, Plaintiff challenged Wells Fargo's reporting to the CRAs that: (1) his account was closed; (2) the account had a $0 balance; and (3) there was no payment history after November, 2010. Id. at ¶¶ 118, 119, 123. Plaintiff further alleged that, if these statements were in fact true, then “Wells Fargo has no legal right to extract from plaintiff's checking account monies as payment on that loan.” Id. These allegations formed the basis for his FCRA, defamation, and conversion claims. Id. at ¶¶ 115-125, 127-132, 133-135.

         On December 5, 2011, Wells Fargo filed a motion to dismiss Plaintiff's complaint. 2011 Action, Doc. 25. On July 30, 2012, this Court entered a Memorandum Opinion and Order granting Wells Fargo's motion to dismiss (“Dismissal Order”). 2011 Action, Doc. 68. In the Dismissal Order, the Court explained that Plaintiff's bankruptcy discharge only discharged his personal liability for the debt, not the mortgage lien: “a bankruptcy discharge extinguishes only one mode of enforcing a claim - namely an action against the debtor in personam - while leaving intact another - namely, an action against the debtor in rem.” Id. at 14 (quoting Johnson v. Home State Bank, 501 U.S. 78, 84 (1991)). The Court also noted that the bankruptcy discharge included an explanation that “a debtor may voluntarily pay any debt that has been discharged.” Id. at 15.

         The Court concluded that “Wells Fargo accurately and truthfully reported that Plaintiff's personal liability on his home mortgage loan had been discharged in the Chapter 7 bankruptcy proceeding” and “[b]ecause Wells Fargo did not furnish inaccurate or untruthful information to [the CRAs], Plaintiff's FCRA and defamation claims fail as a matter of law.” Id. at 18-19.

         With regard to Plaintiff's conversion claim, the Court concluded that Wells Fargo retained a security interest in the mortgaged property, and thus it was “not prohibited from accepting Plaintiff's voluntary payments” even though it could not collect or recover any of the discharged debt from Plaintiff personally. Id. at 19-20 (citing Sections 524(a)(2) 524(f) of the Bankruptcy Code). Based on the pleadings and exhibits, the Court concluded that Plaintiff's monthly payments on his home mortgage loan were voluntary. Id. at 20. First, the Court explained that the complaint did not allege that Wells Fargo withdrew the monthly mortgage payments without Plaintiff's authorization or contrary to his instructions. Id. at 20-21. Second, the Court noted that Plaintiff's quarterly mortgage statements, which were attached to his complaint, indicated that the mortgage payments were automatically withdrawn from Plaintiff's bank account at his direction. Id. at 20. Finally, the Court found that the mortgage statements indicated that Plaintiff's payments were neither influenced nor induced by Wells Fargo, as they stated in relevant part:

This statement is for informational purposes only and is being provided as a courtesy should you voluntarily decide to make your loan payments. This statement should not be construed as an attempt to collect a debt or a demand for payment contrary to any protections you may have received pursuant to your bankruptcy case. If you have received a discharge, and the loan was not reaffirmed in the bankruptcy case, we will only exercise our rights as against the property and we are not attempting to act to collect the discharged debt personally. . . . This statement is for informational purposes only. Our records indicate that your loan is subject to bankruptcy. The attached coupon reflects the calendar due date, not the contractual due date of the bankruptcy case. If you have any questions regarding your loan, please contact your bankruptcy attorney or our office.

Id. at 21 (quoting 2011 Action, Doc. 1-1 at 28, 38; Doc. 1-2 at 10, 18, 30, 36-38). The Court thus concluded that Plaintiff's complaint failed to state a claim for conversion. Id.

         The Court determined that it would be futile to grant Plaintiff leave to amend his FCRA and defamation claims, as the record demonstrated that Wells Fargo reported truthful and accurate information to the CRAs, and thus dismissed those claims with prejudice. Id. at 22. The Court, however, indicated that Plaintiff might “be able to allege additional facts indicating that his monthly mortgage payments were not voluntary, ” and accordingly, dismissed Plaintiff's conversion claim without prejudice. Id.

         On August 29, 2012, Wells Fargo filed a motion for attorney fees and costs. 2011 Action, Doc. 71. On March 27, 2013, the Court entered a Memorandum Opinion and Order granting in part Wells Fargo's motion (“Fee Order”). 2011 Action, Doc. 82. The Court described Plaintiff as a “law-trained pro se litigant and frequent filer of various and sundry lawsuits.” Id. at 1. The Court stated:

As noted above, Schueller is very experienced in bringing and litigating claims under the FCRA. But the documents on which Schueller based his FCRA, defamation, and conversion claims against Wells Fargo were entirely groundless because they clearly controverted his contention that Wells Fargo misrepresented information on his credit report about Schueller's discharge in bankruptcy or his payment history from 2005 until November 2010. As the Court has previously explained to Schueller, the fact that Wells Fargo has a security interest in the real property and, therefore, still has the right to bring an in rem procedure and foreclose on the property secured by the mortgage if Schueller elects to stop making the mortgage payments on the debt does not mean that Wells Fargo “lied” in reporting that the loan balance for which Schueller is personally responsible is zero. As Schueller has readily concede[d], a chapter 7 discharge only eliminates personal liability for a debt; a discharge in bankruptcy is not an extinguishment or cancellation or elimination of a debt.

         Fee Order at 9. While the Court concluded that Plaintiff's complaint was “frivolous, ” it could not equally conclude that Plaintiff had commenced his action in “bad faith, ” because it was not clear that he necessarily understood the import of the bankruptcy proceedings on Wells Fargo's reporting requirements or its continuing right to foreclose if payments stopped. Id. at 9-10. Accordingly, the Court declined to award Wells Fargo any fees through the filing of its motion to dismiss. The Court, however, concluded that after Wells Fargo filed its motion to dismiss “fully appris[ing] Schueller of the law, as well as the magistrate judge explaining to Schueller his complaint was without merit, “Schueller stubbornly, and without any legal basis for doing so, persisted in pursuing his claims in bad faith.” Id. at 10. Thus, the Court awarded Wells Fargo the amount the Court determined to be its reasonable fees “from that point forward in replying to Schueller's bad-faith response to the motion to dismiss under [15 U.S.C.] § 1681n(c) and/or its inherent power to sanction bad-faith or vexatious, harassing filings.” Id.

         Consistent with the Dismissal Order and the Fee Order, the Court entered Final Judgment on March 7, 2013. 2011 Action, Doc. 81. Plaintiff, proceeding pro se, appealed both Orders to the United States Court of Appeals for the Tenth Circuit. The Tenth Circuit concluded that “Wells Fargo did not furnish inaccurate or incomplete information to the CRAs, ” and that this conclusion was “fatal to Mr. Schueller's state-law defamation claim.” Schueller v. Wells Fargo & Co., 559 F. App'x 733, 737 (10th Cir. 2014). Further, the Court concluded that “[a]lthough Wells Fargo was prohibited by the bankruptcy discharge from attempting to collect the home loan debt from Mr. Schueller personally, it was not prohibited from accepting voluntary payments to avoid foreclosure.” Id. at 738. Accordingly, the Tenth Circuit affirmed the district court's dismissal of Plaintiff's defamation and conversion claims. Id. With regard to the fee award, the Court noted that Plaintiff did “not challenge the district court's assessment of hourly rates or time expended, nor [did] he challenge the district court's finding that he engaged in bad-faith litigation conduct.” Id. Thus, the Court found “no abuse of discretion and affirm[ed] the award of attorney fees and costs to Wells Fargo.” Id. Plaintiff filed a petition for writ of certiorari to the United States Supreme Court, which was denied on October 6, 2014. Schueller v. Wells Fargo & Co., 135 S.Ct. 275 (2014).

         On January 15, 2016, Plaintiff, proceeding pro se, commenced the instant action against Wells Fargo in the Thirteenth Judicial District Court of the State of New Mexico, Valencia County. Wells Fargo removed the action to this Court on February 12, 2016. Doc. 1. In the Complaint, Plaintiff alleges - as he did in the 2011 Action - a claim of conversion (Count I) and a claim of defamation (Count II). Plaintiff's claims in the instant action are based on the same conduct that was at issue in the 2011 Action, namely the withdrawal by Wells Fargo of monthly mortgage payments from Plaintiff's bank account for a “non-existent debt and a no-longer extant home mortgage loan account.” Doc. 1-2, at ¶ 4(b). In support of his defamation claim, Plaintiff alleges that Wells Fargo is inaccurately and falsely reporting to the CRAs that his mortgage account is closed and has a $0 balance and that no payment history has been reported since November 2010. Id. at ¶¶ 6, 11. In support of his conversion claim, Plaintiff alleges that if what Wells Fargo is reporting to the CRAs is true - that the account is closed and there is no balance - then there is “no legally valid and enforceable lien on the property” and Wells Fargo has “no legal basis for demanding and extracting a monthly mortgage payment.” Id. at ¶ 7.

         On March 18, 2016, Wells Fargo filed the instant Motion to Dismiss and Motion for Sanctions. ...


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