Allan Askar v. ETrade Bank
700 F. App'x 308
| 4th Cir. | 2017Background
- In 2006 Askar and Zagrebeinaya borrowed $552,000 secured by a deed of trust on their residence; the promissory note was later obtained by E*Trade.
- Borrowers defaulted and E*Trade, through substitute trustee M. Richard Epps, initiated nonjudicial foreclosure proceedings under Virginia law.
- Plaintiffs sued seeking a declaratory judgment requiring E*Trade to prove its authority to foreclose because it was not the original lender and had not originally produced the note.
- E*Trade produced a copy of the note endorsed in blank and Epps submitted an affidavit stating he had possession of the original note.
- The district court granted E*Trade’s motion to dismiss under Rule 12(b)(6); plaintiffs appealed and the Fourth Circuit reviewed the dismissal de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether E*Trade must establish entitlement to foreclose in a judicial proceeding | Askar argued E*Trade must prove authority to foreclose because it was not the original lender and had not produced the note | E*Trade argued Virginia permits nonjudicial foreclosure and possession of an endorsed-in-blank note establishes enforcement authority | Court held Virginia’s nonjudicial foreclosure regime allows foreclosure without a prior judicial decree and E*Trade’s possession of the endorsed-in-blank note sufficed |
| Whether the complaint plausibly alleged a claim to prevent foreclosure (12(b)(6) standard) | Plaintiffs asserted the evidence E*Trade produced was insufficient and pleaded facts entitling relief | E*Trade argued plaintiffs’ allegations were conclusory and failed to plausibly state a claim given the produced note and affidavit | Court held plaintiffs’ claims were conclusory and insufficient under Iqbal/Twombly; dismissal affirmed |
Key Cases Cited
- King v. Rubenstein, 825 F.3d 206 (4th Cir. 2016) (standard for evaluating documents integral to a complaint and 12(b)(6) review)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard requires plausible factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Horvath v. Bank of New York, N.A., 641 F.3d 617 (4th Cir. 2011) (possession of an endorsed-in-blank negotiable instrument permits enforcement; Virginia is a nonjudicial foreclosure state)