United States District Court, D. Connecticut
JAMES T. COSTELLO, Plaintiffs,
WELLS FARGO BANK NATIONAL ASSOCIATION, FEDERAL HOUSING FINANCE AGENCY, Defendants.
RULING AND ORDER ON MOTIONS TO DISMISS AND MOTIONS
A. BOLDEN UNITED STATES DISTRICT JUDGE.
T. Costello, (“Plaintiff”) brings this action,
pro se, against Wells Fargo Bank National
Association (“Wells Fargo”); the Federal Housing
Finance Agency (“FHFA”), the conservator for the
Federal National Mortgage Association (“Fannie
Mae”); the Mortgage Electronic Registration System
(“MERS”); Nationstar Mortgage, LLC
(“Nationstar”); and Fannie Mae (collectively, the
“Defendants”). ECF No. 1. Mr. Costello seeks
declaratory relief against all Defendants, alleges that Wells
Fargo has violated the Connecticut Unfair Trade Practices Act
(“CUTPA”); alleges that Wells Fargo has engaged
in negligent representation; alleges that Wells Fargo has
engaged in publicity that places him in a false light;
alleges that Wells Fargo has engaged in vexatious litigation
and abuse of process against him; alleges that MERS has
violated CUTPA; alleges that the FHFA, as the conservator of
Fannie Mae, is vicariously liable to him; and alleges that
Nationstar has violated CUTPA.
each move to dismiss Mr. Costello's Complaint. ECF No. 37
(FNMA, MERS, and Wells Fargo); ECF No. 40 (Nationstar); ECF
No. 45 (FHFA). Mr. Costello has moved, under Fed.R.Civ.P.
11(c), for sanctions against FHFA's counsel. ECF No. 43.
For the reasons that follow, the Court GRANTS each of the
pending motions to dismiss and DENIES the pending motion for
Costello alleges that, in 1991, he purchased a condominium
unit in Waterbury, Connecticut (the “Property”).
Compl. ¶ 19, ECF No. 1. On or around September 12, 2003,
Mr. Costello alleges that he refinanced the mortgage note on
the Property with Wells Fargo Home Mortgage. Id.
¶ 20. He alleges that the mortgage deed was duly
recorded in Waterbury land records. Id. On September
12, 2003, as part of the refinancing, Mr. Costello signed a
promissory note with Wells Fargo Home Mortgage (the
“Mortgage Note”) for the principal amount of $42,
213.00 payable to Wells Fargo Home Mortgage. Mortgage Note at
1, ECF No. 38-2 Ex. A. On the same date, Mr. Costello
executed and delivered to Wells Fargo Home Mortgage a
mortgage deed (the “Mortgage Deed”) as security
for the note. Mortgage Deed at 1, ECF No. 38-2 Ex. B. Wells
Fargo Home Mortgage later merged into Wells Fargo. Compl.
10, 2004, around eight months after the refinancing, Mr.
Costello alleges that MERS, as nominee for Wells Fargo, filed
a release of mortgage as to Mr. Costello's previous
mortgage, which was with American Home Funding Corporation.
Compl. ¶ 21.
24, 2014, Mr. Costello, through counsel, filed a voluntary
petition for bankruptcy under Chapter 7 (the
“Petition”) in the United States Bankruptcy Court
for the District of Connecticut (the “Bankruptcy
Court”), initiating a bankruptcy proceeding (the
“Bankruptcy Action”). Compl. ¶ 22. In the
Petition, Mr. Costello listed Wells Fargo as a creditor with
an undisputed, first priority security interest in the
Property. Petition at 13, ECF No. 38-3
(“Schedule D - Creditors Holding Secured
Claims”). Under the Chapter 7 Individual Debtor's
Statement of Intention portion of the Petition, Mr. Costello
declared, under penalty of perjury, that he intended to
surrender the Property to Wells Fargo Home Mortgage.
Id. at 34.
August 13, 2014, Wells Fargo moved the Bankruptcy Court for
relief from automatic stay to enforce its remedies to
foreclose upon and obtain possession of the Property. See
generally Mot. Rel. Stay, ECF No. 38-4. On August 28,
2014, the Bankruptcy Court granted Wells Fargo's motion,
allowing Wells Fargo “and/or its successors and assigns
to commence and/or continue and prosecute to resolution a
foreclosure action” as to the Property. Order Rel. Stay
at 1, ECF No. 38-5.
Costello alleges that, on August 28, 2014, the Bankruptcy
Court Trustee conducted a meeting with Mr. Costello, his
counsel, and Mr. Costello's creditors, which Wells Fargo
did not attend. Compl. ¶ 23. Mr. Costello alleges that,
at this meeting, he “orally affirmed to the Trustee,
his intent to surrender his equity interest” in the
Property to Wells Fargo. Id.
September 7, 2014, the Trustee submitted the Chapter 7
Trustee's Report, which certified that Mr. Costello's
bankruptcy estate “had been fully administered.”
Bk. Docket at 3, ECF No. 38-6. It certified, in relevant
part, “Assets Abandoned (without deducting any secured
claims): $25000.00.” Id. Mr. Costello alleges
that this abandoned asset was the Property. Compl. ¶ 25.
October 29, 2014, the Bankruptcy Court granted Mr. Costello
his bankruptcy Discharge. See Order of Discharge at
1, ECF No. 38-7. The Bankruptcy Court closed Mr.
Costello's case on November 13, 2014. See Bk.
Docket at 3.
Post-Bankruptcy Interaction with Wells Fargo
September 25, 2014, Mr. Costello alleges that Wells Fargo
sent him a letter regarding his post-bankruptcy options as to
the Property. Compl. ¶ 26. The letter explained the
“options available that may assist in addressing the
delinquent status of the mortgage loan” on the
Property. 9/25/14 Letter at 1, ECF No. 1-1 at 25. One of the
options in the letter was:
Deed in Lieu of Foreclosure: In situations where you are no
longer interested in retaining the property, this program
allows you to transfer or deed ownership of the property back
to the investor and forego the lengthy process involved in a
Id. The letter further explained that, while Mr.
Costello had “been discharged from personal
liability” for the mortgage on the Property, Wells
Fargo “retains a valid and enforceable lien against the
property and we will enforce those rights while the loan is
in default, ” and that while Mr. Costello would
“not be personally liable for the debt in any
foreclosure action, [he] w[ould] lose interest and rights to
the property.” Id.
October 21, 2014, Mr. Costello alleges that his bankruptcy
attorney telephoned Wells Fargo and, in Mr. Costello's
presence, confirmed to Wells Fargo that Mr. Costello intended
to take the option of surrendering the Property by executing
a quitclaim deed. Compl. ¶ 27. Mr. Costello alleges that
Wells Fargo confirmed receipt of this message over the phone.
October 25, 2014, Mr. Costello alleges that he duly executed
a quitclaim deed to convey the Property to Wells Fargo (the
“Quitclaim Deed”). Compl. ¶ 27. He alleges
that Wells Fargo acknowledged receipt on November 20, 2014.
Id.; see also 11/20/14 Letter at 1, ECF No.
1-1 at 30 (indicating receipt of Quitclaim Deed). The
November 20, 2014 letter from Wells Fargo noted that the
Quitclaim Deed “does not release a borrower from legal
responsibility for the Security Instrument” and that
while the bankruptcy discharge protected Mr. Costello
“personally from the collection of debt, ” that
if the mortgage became delinquent, Wells Fargo could
“exercise [its] rights against the property.”
11/20/14 Letter at 1.
Costello further alleges that Wells Fargo did not record the
Quitclaim Deed in the land records. Compl. ¶ 29. Mr.
Costello also alleges that he filed an affidavit attesting to
his conveyance of the Property in the Waterbury land records
on October 4, 2016. Id.; see generally
10/4/16 Aff., ECF No. 1-1 at 32.
October 29, 2015, Wells Fargo initiated a foreclosure action
in Connecticut Superior Court (the “Superior
Court”), seeking to foreclose on the Property (the
“Foreclosure Action”). Compl. ¶ 30; see
also Forecl. Docket at 1, ECF No. 38-8. Wells Fargo
filed an Affidavit of Foreclosure by Market Sale Notice (the
“Affidavit of Foreclosure”), in which a Wells
Fargo representative indicated that “Plaintiff or
plaintiff's servicer gave the mortgagor notice under P.A.
14-84 on April 13, 2015 . . . more than 60 days have passed
since the date that the notice was mailed, and” the
mortgagor, Mr. Costello “did not agree to go forward
with foreclosure by market sale by the date indicated in the
notice.” Aff. of Forecl. at 2, ECF No. 38-9. As Mr.
Costello alleges, the P.A. 14-84 referred to an
“acceleration notice” required under the mortgage
on the Property (the “April 2015 Acceleration
Notice”). Compl. ¶ 32.
Wells Fargo Communications
Costello further alleges that, between October 19, 2015 and
continuing through mid-December of 2015, Wells Fargo was
repeatedly telephoning Mr. Costello, both at his home and at
his mobile phone, demanding payment of the mortgage debt. On
December 10, 2015, Mr. Costello alleges that Wells Fargo sent
him a letter indicating that they “service [his]
mortgage on behalf of your investor, Fannie Mae.”
Compl. ¶ 34; 12/10/15 Letter at 1, ECF No. 1-1 at 43-44.
The letter discussed a “loan modification review”
and indicated that Mr. Costello had been “removed from
the loan modification review process” because he
“did not accept the offer for assistance. 12/10/15
Letter at 1. Mr. Costello further alleges that he never
requested nor participated in the process for a loan
modification review. Compl. ¶ 34. Mr. Costello further
alleges that the same Wells Fargo employee, Kelsey Adcock,
made the phone calls and signed the December 10, 2015 letter.
Superior Court Proceedings
November 9, 2015, Mr. Costello filed a motion to dismiss
Wells Fargo's complaint in the Foreclosure Action arguing
that Wells Fargo's claim “is moot because any debt
which could have existed between Wells Fargo and Costello was
discharged when Costello received a federal bankruptcy
discharge” and because Mr. Costello had executed the
Quitclaim Deed. 11/9/15 Motion at 1, ECF No. 38-11. Mr.
Costello further argued that the Superior Court therefore had
no subject matter jurisdiction to grant the foreclosure.
Id. Wells Fargo responded, in relevant part, that
Mr. Costello's Chapter 7 discharge prohibits only in
personam actions against the debt, and that “the
mere tendering of an unsolicited [quit claim] deed which was
not accepted” does not remove the obligation to pay the
mortgage debt. See 12/8/15 Br. at 1-4, ECF No. 38-12
at 4-7. On January 5, 2016, the Superior Court denied Mr.
Costello's motion to dismiss “as a matter of
law” “[f]or reasons set forth in [Wells
Fargo's] motion in opposition.” 1/5/16 Order at 1,
ECF No. 38-13. On January 25, 2016, the Superior Court issued
an additional order clarifying the earlier denial of the
motion to dismiss, at Wells Fargo's request, which
included a finding that the Quitclaim Deed “has not
been accepted by” Wells Fargo. 1/25/16 Order at 1, ECF
January 28, 2016, Mr. Costello filed a motion to strike or,
in the alternative, to dismiss Wells Fargo's complaint in
the Foreclosure Action, arguing that Wells Fargo failed to
join Fannie Mae as a necessary party, and again arguing that
the Quitclaim Deed already gave Wells Fargo the property and
further arguing that “Wells Fargo is neither owner nor
holder of [his] discharged note.” 1/16/2016 Motion at
1, ECF No. 38-16. On May 24, 2016, the Superior Court denied
this motion to strike without prejudice, finding that
“there appears to be no basis” to grant the
motion. See 5/24/16 Order at 1, ECF no. 38-17.
April 2015 Acceleration Notice Dispute
27, 2016, Mr. Costello filed another motion to dismiss Wells
Fargo's complaint in the Foreclosure Action, this time
raising the new argument that Wells Fargo “failed to
provide prior notice to Costello of its intent to accelerate
the mortgage note.” 1/27/16 Motion at 1, ECF No. 38-18.
August 5, 2016, the Superior Court held an evidentiary
hearing on the motion to dismiss. Compl. ¶ 38. Among the
issues raised with respect to this motion was the issue of
whether Mr. Costello ever received the April 2015
Acceleration Notice that Wells Fargo alleged had been
delivered to Mr. Costello's home address on April 18,
2015. See United States Postal Service
(“USPS”) Tracking at 1, ECF No. 1-1 at 59. Mr.
Costello was able to provide a USPS Delivery receipt that
showed that an individual named Kevin Lavery signed for the
delivery of the April 2015 Acceleration Notice. See
USPS Receipt at 1, ECF No. 1-1 at 61. Mr. Costello alleges
that he does not know who Mr. Lavery is. Compl. ¶ 38.
Mr. Costello further alleges that Wells Fargo presented
contradictory testimony from two witnesses regarding the date
the acceleration notice was issued, with one testifying that
it was April 9, 2015 and another testifying that it was April
13, 2015. Id. Mr. Costello further alleges that,
while Mr. Costello provided alleged originals of the
“mortgage deed and note, ” he alleges that those
documents may also be “fabrication[s]” like the
April 2015 Acceleration Notice allegedly was. Id.
August 16, 2016, the Superior Court granted Mr.
Costello's motion and dismissed the Foreclosure Action.
See Compl. ¶ 40; see also Dismissal
Order, ECF No. 38-19. The Superior Court found that the
underlying mortgage deed “clearly requires notice of
default prior to acceleration.” Dismissal Order at 4.
The Superior Court found that, while the USPS tracking
information showed that the April 2015 Acceleration Notice
was delivered to Mr. Costello's home address in
Stratford, Connecticut, the USPS receipt also showed that
another individual, Mr. Lavery, had actually signed for the
delivery, in addition to Mr. Costello's affidavits
stating that he had never received the April 2015
Acceleration Notice and that he did not know Mr. Lavery.
Id. at 5-6. The Superior Court further found that
Wells Fargo was unable to present any evidence that disputed
Mr. Costello's evidence disputing his receipt of the
April 2015 Acceleration Notice, thus Wells Fargo failed
“to show that [Mr. Costello] received proper notice of
the default and acceleration, a necessary condition precedent
to bringing” the Foreclosure Action. Id. at
Transfer of Mortgage Servicing Rights to Nationstar
August 15, 2016, Wells Fargo sent Mr. Costello a letter
notifying him that the servicing of his mortgage loan was
transferred to Nationstar. Compl. ¶ 41; see also 8/15/16
Letter, ECF No. 1-1 at 62. On September 13, 2016, Nationstar
sent Mr. Costello a letter, also notifying him of the
transfer. Compl. ¶ 42.
September 7, 2016, the Waterbury land records indicate that
Wells Fargo assigned the mortgage deed to Nationstar. Compl.
¶ 44; see also Record, ECF No. 1-1 at 73. Mr.
Costello alleges that “[n]either Wells Fargo nor
Nationstar notified [him] of the transfer of the mortgage
deed, ” and further alleges that the “transfer is
a nullity because only the owner of a note can transfer the
mortgage deed, ” and that “Wells Fargo[‘s]
own documents point to Fannie Mae as the lawful owner.”
Compl. ¶ 44.
September 19, 2016, Nationstar, as the “mortgage loan
servicer, ” sent Mr. Costello an acceleration notice
(“September 2016 Acceleration Notice”). Compl.
¶ 43. The letter indicated that Mr. Costello's
mortgage note was in default. 9/19/16 Letter at 1, ECF no.
1-1 at 66. It further stated that the total amount past due
“including principal, interest, and escrow, if
applicable” as well as “late fees, NSF fees, and
other fees and advances” was $20, 686.31. Id.
The letter also noted that “Nationstar is a debt
collector” and that “[t]his is an attempt to
collect a debt, ” but that if Mr. Costello was
“currently in bankruptcy or have received a discharge
in bankruptcy, ” the acceleration notice was “not
an attempt to collect a debt from you personally to the
extent that it is included in your bankruptcy or has been
Costello further alleges that the December 10, 2015 letter
indicating that Wells Fargo services his mortgage on behalf
of Fannie Mae establishes that “Fannie Mae is the owner
of the mortgage note, ” and that any “assignment
of the mortgage deed must come from Fannie Mae because the
mortgage deed follows the note ownership.” Compl.
¶ 48. Mr. Costello therefore alleges that “Wells
Fargo lacked authority to assign the mortgage deed” to
Nationstar, as Wells Fargo allegedly did on September 7,
2016. Id. Mr. Costello further alleges that
“[b]ecause FHFA succeeded to Fannie Mae's right,
titles and privileges, ” allegedly under 12 U.S.C.
§§ 4617(b)(2)(A) and (B)(iii), “FHFA stands
in Fannie Mae's shoes and is Fannie Mae for all relevant
legal purposes.” Id. ¶¶ 50-51.
Costello also alleges that “[a]s a consequence of Wells
Fargo's failure to properly and timely disclose transfer
of its beneficial interest to MERS as nominee for Wells Fargo
and MERS transfer of the beneficial interest to Fannie Mae,
Fannie Mae must seek equitable title from Wells Fargo.”
Id. ¶ 52. Mr. Costello himself alleges that he
“lacks any property right” over the Property
because of the Quitclaim Deed. Id. ¶ 49.
STANDARD OF REVIEW
motion to dismiss for failure to state a claim under Rule
12(b)(6) is designed “merely to assess the legal
feasibility of a complaint, not to assay the weight of
evidence which might be offered in support thereof.”
Official Comm. of Unsecured Creditors of Color Tile, Inc.
v. Coopers & Lybrand, LLP, 322 F.3d 147, 158 (2d
Cir. 2003) (internal citations omitted). When deciding a Rule
12(b)(6) motion to dismiss, a court must accept the material
facts alleged in the complaint as true, draw all reasonable
inferences in favor of the plaintiff, and decide whether it
is plausible that the plaintiff has a valid claim for relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009);
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56
(2007); In re NYSE Specialists Sec. Litig., 503 F.3d
89, 95 (2d Cir. 2007). When evaluating a complaint under Rule
12(b)(6), the Court “giv[es] no effect to legal
conclusions couched as factual allegations.” Starr
v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir.
plaintiff's “[f]actual allegations must be enough
to raise a right to relief above the speculative level,
” and assert a cause of action with enough heft to show
entitlement to relief and “enough facts to state a
claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 555, 570. A claim is facially
plausible if “the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. Although “detailed
factual allegations” are not required, a complaint must
offer more than “labels and conclusions, ”
“a formulaic recitation of the elements of a cause of
action, ” or “naked assertion [s]” devoid
of “further factual enhancement.”
Twombly, 550 U.S. at 555-57. Plausibility at the
pleading stage is nonetheless distinct from ...