Laues-Gholston v. HSBC Mortgage Services
2:13-cv-12463
E.D. Mich.Mar 4, 2015Background
- Plaintiffs Roy and Kristen Laues-Gholston (pro se) challenged validity of two mortgages securing promissory notes on their home (loans of $432,000 and $108,000), seeking to quiet title.
- Mortgages were executed by MERS as nominee for Encore Credit Corp.; mortgages were later assigned to HSBC, which plaintiffs allege does not hold both the note and mortgage.
- Plaintiffs also asserted a Truth in Lending Act (TILA) claim, alleging they did not receive a required notice of assignment within 30 days.
- Defendants moved to dismiss, arguing note-mortgage bifurcation does not prevent foreclosure, plaintiffs failed to plead fraud with particularity, and TILA claim is time-barred.
- Magistrate Judge Whalen recommended granting dismissal (including sua sponte dismissal of claims against unserved Encore) because separation of note and mortgage is permissible and the TILA claim was untimely.
- District Judge Lawson conducted de novo review, overruled plaintiffs’ unintelligible objections, adopted the R&R, granted defendants’ motion, and dismissed the complaint with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of mortgages when note and mortgage holder differ | HSBC cannot foreclose because it does not hold both note and mortgage | Bifurcation of note and mortgage is permissible; holder of the note may enforce security | Dismissal: separation does not invalidate foreclosure rights (Residential Funding governs) |
| TILA notice claim | Plaintiffs did not receive required assignment notice within 30 days | TILA damages/claims are time-barred under the statute of limitations | Dismissal: TILA claim is time-barred (15 U.S.C. § 1640(e)) |
| Fraud/defective assignment pleading sufficiency | Assignments are defective; alleged misconduct supports fraud claim | Plaintiffs failed to plead fraud with required particularity; allegations are conclusory | Dismissal: fraud not adequately pled; defects in assignments insufficient to state fraud claim |
| Procedural/recusal and jurisdictional complaints | Court lacks subject-matter jurisdiction; judges/attorneys engaged in conspiracy | Court previously adjudicated jurisdiction (diversity under §1332); allegations speculative and conclusory | Objections overruled; jurisdiction proper; conspiracy/recusal claims meritless (Liteky) |
Key Cases Cited
- Residential Funding Co., L.L.C. v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (Michigan 2011) (Michigan recognized that separation of a note and mortgage does not automatically invalidate foreclosure rights)
- Spencer v. Bouchard, 449 F.3d 721 (6th Cir. 2006) (overly general objections to magistrate judge reports are insufficient)
- Miller v. Currie, 50 F.3d 373 (6th Cir. 1995) (objections must identify specific findings believed erroneous)
- Cowherd v. Million, 380 F.3d 909 (6th Cir. 2004) (failure to file specific objections constitutes waiver)
- Liteky v. United States, 510 U.S. 540 (1994) (disagreement with judicial rulings is not a basis for recusal)