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Midfirst Bank v. Craige

United States District Court, E.D. Louisiana

May 26, 2016


         SECTION “L” (5)

          ORDER & REASONS

         Before the Court is pro se Third-Party Plaintiff Kristian Craige's (“Craige”) Motion to Re-Urge a Non-Prescribed Claim, R. 26. In response, Third Party Defendants Citimortgage, Inc., Citibank, N.A., and Citigroup Inc. (the “Citi Entities”) have filed a Motion to Dismiss. R. 29. Craige opposes the Motion to Dismiss. R. 34. Having reviewed the parties' briefs and the applicable law, the Court now issues this Order & Reasons.

         I. BACKGROUND

         This tort case involves a dispute arising out of a promissory note executed by Kristian Craige, dated June 16, 2003, regarding an Act of Mortgage executed on the same date. R. 1-1 at 1. The note was executed in favor of New Freedom Mortgage Corporation in the principal amount $73, 369.00 and stipulating 6% interest per annum on the unpaid balance. R. 1-1 at 1. While the viability of the transfers is disputed, the record indicates that New Freedom Mortgage endorsed the mortgage note to Citimortgage, Inc., and Citimortgage, Inc. in turn endorsed the note to Midfirst Bank. R. 1-1 at 2. On December 17, 2014, Midfirst Bank instituted foreclosure proceedings in state court to collect on the unpaid principal on the note, $65, 795.39. R. 1-1 at 3. According to the Petition filed in state Court, Craige had not made his scheduled mortgage payments since May 1, 2014. R. 1-1 at 4.[1]

         On March 15, 2016, Craige filed a pro se counterclaim in state court against Midfirst Bank (“Midfirst”), Citimortgage, Inc., Citibank N.A., and Citigroup Inc (“the Citi Entities”). Craige argues the Defendants conspired to commit fraud against his, and deprive him of his property. The counterclaim alleges numerous procedural errors committed by Midfirst during the foreclosure process, and also claims that the assignment of the note “has yet to be verified.” R. 1-2 at 3.

         On July 26, 2016, the Court held that Plaintiff's tort claims were prescribed, but granted leave for Plaintiff to amend his complaint and re-assert any non-prescribed claims. R. 19. On August 24, 2016, Plaintiff filed a motion to “re-urge any non-prescribed claims, ” but did not specify any of the new claims he wished to assert against Defendants. R. 21. The Court denied the Motion and explained that Plaintiff was barred from re-urging the claims in the initial Complaint, as the Court already determined those claims had prescribed. R. 23. The Court granted Plaintiff a third opportunity to file another Complaint alleging a non-prescribed claim, if such a claim exists. R. 23.

         In response, Plaintiff filed a motion to re-urge a Complaint with non-prescribed claims against any of the parties. R. 26. Plaintiff appears to assert four additional claims, which he contends are not prescribed. First, Plaintiff brings a breach of contract claim against the Citi Entities. R. 26 at 3. He makes two arguments in relation to the breach of contract claim. First, he explains that the note and mortgage were bifurcated because the “promise to pay” was placed in a trust with the SEC and later sold for profit. R. 26 at 3. Plaintiff contends that he did not consent to this process, and argues that once the note, mortgage and deed are bifurcated, the property can only be foreclosed if the holder of the deed trust is the agent of the note holder. R. 26 at 3. His second argument in support of the breach of contract claim is that he entered into a consumer credit loan, which was subsequently endorsed to the New Freedom Mortgage Corporation, which endorsed to note to MidFirst Bank. R. 26 at 3. Plaintiff avers that he did not consent to this transfer, the transfer was a breach of the mortgage contract, and therefore he is entitled to the proceeds of the trust that was created to effectuate the transfer. R. 26 at 3.

         Second, Plaintiff asserts claims for violations of the Uniform Commercial Code §3-305 and Recoupment. R. 26 at 3-4. Plaintiff avers that under §3-305 there can be no holder in due course, because such a transfer would be impossible under the law. R. 26 at 4. Further, he alleges that a disclaimer required under 16 CFR 433.2 was “intentionally omitted” from the initial credit application. R. 26 at 4-5.

         Third, Plaintiff argues that the Citi Entities violated Generally Accepted Accounting Principles. R. 26 at 4-5. Plaintiff contends that the banks converted the original executed note to cash, deposited it in their bank, then loaned the value to Plaintiff as if the loan came from the bank. R. 26 at 4-5. According to Plaintiff, if defendants had followed GAAP at the time of the transaction, the accounting records would show the “promise to pay” was used to generate credit to Plaintiff. R. 26 at 4-5.

         Finally, Plaintiff alleges that he is entitled to quiet title to the property, because of the Citi Entities fraudulent conduct, and that he has adverse possession rights. R. 26 at 5-6. Further, he requests that the Citi Entities counsel and/or the mortgage servicer be named as a defendant. R. 26 at 6. In connection to these claims, Plaintiff seeks $4, 000, 000.00 in damages. R. 26 at 6.


         A. MidFirst's Motion to Dismiss (R. 29-1)

         The Citi Entities have filed a motion to dismiss Craige's claims under Federal Rule of Civil Procedure 12(b)(6). R. 29-1 at 1-2. First, the Citi Entities argue that Craige has not alleged any facts to support his breach of contract claim, but instead relies on wholly conclusory statements. R. 29-1 at 5. In particular, they contend he has not stated facts which demonstrate the Citi Entities breach an obligation, or that he suffered damages as a result of any alleged breach. R. 29-1 at 5. Second, The Citi Entities also aver that Plaintiff's claim based on UCC 3-305 is not based in law; Plaintiff alleges that the Citi Entities cannot be a holder in due course under this provision of the UCC. R. 29-1 at 6. According to the Citi Entities this is in direct contradiction to Louisiana law, which “specifically sets forth the means by which the holder of an instrument may become a holder in due course.” R. 29-1 at 6. Similarly, the Citi Entities argue that Plaintiff claims under the Federal Trade Commission Act (FTCA) fail, as the FTCA does not provide a private right of action to individual plaintiffs. R. 29-1 at 6 (citing Fulton v. Hecht, 580 F.2d 1243, 1248 (5th Cir. 1978)).

         Third, in response to Plaintiff's claim that the Citi Entities violated Generally Accepted Accounting Principles (GAAP), the Citi Entities respond that GAAP are a set of principles, which do not provide a cause of action; and even if they did, Plaintiff only makes conclusory allegation to support this supposed claim. R. 29-1 at 6-7. Finally, the Citi Entities argue that Plaintiff's claim for quiet title must be dismissed. R. 29-1 at 8. Plaintiff avers that he is entitled to quiet title to the property because of the fraud committed by the Citi Entities; however, the Citi Entities argue that Plaintiff's claims based on fraud have already been dismissed with prejudice. R. 29-1 at 8. Thus, the Citi Entities contend that Plaintiff's new claims should also be dismissed with prejudice. Further, they ...

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