Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Costello v. Wells Fargo Bank National Association

United States District Court, D. Connecticut

July 31, 2017

JAMES T. COSTELLO, Plaintiffs,



         James 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.

         Defendants 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 sanctions.


         Mr. 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. ¶ 1.

         On May 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.

         A. Bankruptcy Action

         On July 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.[1] 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.

         On 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.

         Mr. 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.

         On 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.

         On 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.

         B. Post-Bankruptcy Interaction with Wells Fargo

         On 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 foreclosure.

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.

         On 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. Id.

         On 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.

         Mr. 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.

         C. Foreclosure Action

         On 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.

         1. Wells Fargo Communications

         Mr. 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. Id.

         2. Superior Court Proceedings

         On 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 No. 38-15.

         On 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.

         3. April 2015 Acceleration Notice Dispute

         On May 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.

         On 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. ¶ 29.

         On 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 7-8.

         D. Transfer of Mortgage Servicing Rights to Nationstar

         On 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.

         On 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.

         On 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 discharged.” Id.

         Mr. 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.

         Mr. 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.


         A. Rule 12(b)(6)

         A 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. 2010).

         A 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 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.