Carter v. Mortgage Electronic Registration Systems, Inc.
680 F. App'x 178
| 4th Cir. | 2017Background
- Brandon and Erica Carter sued several defendants challenging a deed of trust and asserting fraud, quiet title, declaratory relief, and recoupment claims; on appeal they proceeded only against CWABS, Inc. Asset Certificates Trust, Series 2005-14 (the Trust).
- The district court granted the Trust’s motion to dismiss; the Carters appealed that dismissal to the Fourth Circuit.
- The Trust raised ratification as an affirmative defense in its motion to dismiss; the district court considered it.
- The district court dismissed the Carters’ fraud claim (the district court alternatively found it time-barred, but the Fourth Circuit affirmed on the merits).
- The Carters sought to assert an affirmative claim for recoupment and raised a quiet-title argument on appeal that they had not presented below.
- The Carters acknowledged they did not sign the mortgage documents, paid the mortgage, lived in the home, and had received a note that disclosed an adjustable rate and a statutory rescission right.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trust adequately raised ratification so the district court could consider it | Carters: Trust did not sufficiently plead ratification in its dismissal motion | Trust: Affirmative defense of ratification was raised with sufficient specificity | Court: Trust adequately raised ratification; district court properly considered it |
| Whether fraud claim was viable | Carters: Deed/note were forged or fraudulent; they suffered harm from receiving an adjustable-rate note instead of a fixed-rate note | Trust: Plaintiffs were not deceived and suffered no plausible harm; note disclosed adjustable rate; rescission and duty to read existed | Court: Fraud claim inadequately pleaded (no actual deception or plausible harm); dismissal affirmed |
| Whether a party may bring an affirmative action for recoupment | Carters: Asserted recoupment as an affirmative cause of action (and alternatively with declaratory relief) | Trust: Recoupment is a defensive device, not an affirmative claim | Court: Recoupment is defensive; plaintiffs cannot bring it affirmatively; claim not properly before the court when raised for the first time on appeal |
| Whether quiet title/declaratory relief arguments raised for the first time on appeal are reviewable | Carters: Raised new quiet-title argument on appeal | Trust: Issues not preserved below; cannot be considered on appeal | Court: New arguments not presented in district court are not properly before the appellate court; not considered |
Key Cases Cited
- Harbourt v. PPE Casino Resorts Md., LLC, 820 F.3d 655 (4th Cir. 2016) (motion-to-dismiss factual-pleading plausibility standard)
- LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394 (5th Cir. 2014) (level of specificity required to plead affirmative defenses)
- Goodman v. Praxair, Inc., 494 F.3d 458 (4th Cir. 2007) (when a defense may be raised in a motion to dismiss)
- Bull v. United States, 295 U.S. 247 (U.S. 1935) (recoupment is defensive in nature)
- RL REGI N.C., LLC v. Lighthouse Cove, LLC, 748 S.E.2d 723 (N.C. Ct. App. 2013) (noting recoupment’s defensive character)
- Forbis v. Neal, 649 S.E.2d 382 (N.C. 2007) (elements of actionable fraud under North Carolina law)
- Raper v. Oliver House, LLC, 637 S.E.2d 551 (N.C. Ct. App. 2006) (duty to read contract terms)
- Weidman v. Exxon Mobil Corp., 776 F.3d 214 (4th Cir. 2015) (appellate courts may affirm on any correct ground appearing in the record)