United States District Court, S.D. Indiana, Indianapolis Division
ENTRY ON DEFENDANTS HSBC MORTGAGE SERVICES INC. AND
HSBC BANK USA, NATIONAL ASSOCIATION'S MOTION TO
WALTON PRATT, UNITED STATES DISTRICT COURT, JUDGE.
matter is before the Court on a Motion to Dismiss filed
pursuant to Federal Rule of Civil Procedure 12(b)(6) by
Defendants HSBC Mortgage Services, Inc. (“HSBC”)
and HSBC Bank USA, National Association (collectively,
“the Defendants”). (Filing No. 5.) After
paying HSBC a total of $31, 611.63 through a bankruptcy
proceeding, Plaintiff Georgia Carol Carter
(“Ms.Carter”), filed a Complaint alleging
violation of the automatic stay, Racketeer Influenced and
Corrupt Organizations Act (“RICO”), RICO
conspiracy, actual fraud, constructive fraud, restitution,
and unjust enrichment. (Filing No. 2.) The
Defendants seek to dismiss Ms. Carter's Complaint for
failure to state a claim. For the following reasons, the
Court GRANTS the Motion to Dismiss.
2003, Ms. Carter obtained a mortgage with Accredited Home
Lenders, Inc. for $71, 000.00. The mortgage was secured by
Ms. Carter's residence, located at 1233 South Whittier
Place, Indianapolis, Indiana. (Filing No. 2 at 8,
¶ 12.) The mortgage was later transferred to Mortgage
Electronic Registration Systems, Inc. (“MERS”).
MERS serves as a nominee on mortgages and its parent company
owns and operates an electronic registry which is designed to
track and service rights and ownership of mortgages and
mortgage backed securities. Id. Unbeknownst to Ms.
Carter, on July 27, 2009, MERS recorded a Satisfaction of
Mortgage, releasing the secured mortgage on Ms. Carter's
residence. Id. at 9, ¶ 22. At some point, HSBC
began servicing Ms. Carter's mortgage. Id. at 2
¶6. After the Satisfaction of Mortgage was recorded, Ms.
Carter received telephone calls from HSBC stating that her
residence would be foreclosed upon if she did not pay $6,
000.00. Id. at 10, ¶ 25. In fear of losing her
residence, on May 4, 2010, Ms. Carter filed a voluntary
petition under Chapter 13 of the Bankruptcy Code.
Id. at 10, ¶ 26.
13, 2010, HSBC filed a proof of claim in Ms. Carter's
bankruptcy case, alleging a secured claim in the amount of
$60, 820.16. Id. at 10, ¶ 30. In October 2010,
Ms. Carter's bankruptcy plan was confirmed. (Filing
No. 6 at 3.) From September 2010 to August 2014, Ms.
Carter made monthly payments to the Trustee, who in turn paid
HSBC a total of $31, 611.63. (Filing No. 2 at 12,
¶ 47.) This consisted of $24, 088.32 for post-filing
mortgage payments and payments of $7, 523.31 in pre-petition
arrears. Id. On July 9, 2013, HSBC filed a
withdrawal of its proof of claim. Id. at 10,
¶34. Nearly four months later, on November 7, 2013, HSBC
amended its withdrawal by reducing only the amount of
arrears. Id. at 11, ¶ 35. HSBC filed another
amended proof of claim on December 22, 2014 withdrawing its
rights to receive any additional payments. Id. at
11, ¶ 40.
March 2015, Ms. Carter visited the Marion County
Recorder's office to determine who the lienholder of her
mortgage was, so that she could begin making mortgage
payments directly to the mortgage company. (Filing No. 2
at 39). On this occasion, she learned of the
Satisfaction of Mortgage record and notified her attorney.
(Filing No. 2.at 12, ¶ 43). In July 2015, the Chapter 13
Trustee filed an objection to HSBC's secured claim. The
Bankruptcy Court sustained the objection in August 2015 and
ordered HSBC to repay the $31, 611.63 it received from the
Trustee under the bankruptcy plan. HSBC repaid the amount in
its entirety. On August 6, 2015, Ms. Carter sought relief by
filing a Complaint in the bankruptcy court, alleging that the
Defendants willfully filed a false proof of claim in
violation of the automatic stay, RICO, RICO conspiracy,
actual fraud, constructive fraud, restitution, and unjust
enrichment. (Filing No. 2.) On December 9, 2015, the
bankruptcy court judge recommended withdrawal of the
reference of this adversary proceeding. On December 17, 2016,
this Court instructed the parties to refile their pleadings
in the district court. (Filing No. 4.) On December
28, 2015, the Defendants filed the instant Motion to Dismiss.
STANDARD OF REVIEW
Rule of Civil Procedure 12(b)(6) authorizes a defendant to
move to dismiss a complaint that fails to “state a
claim upon which relief can be granted.” Fed.R.Civ.P.
12(b)(6). When deciding a motion to dismiss under Rule
12(b)(6), the court construes the complaint in the light most
favorable to the plaintiff, accepts all factual allegations
as true, and draws all reasonable inferences in favor of the
plaintiff. Tamayo v. Blagojevich, 526 F.3d 1074,
1081 (7th Cir. 2008). However, courts “are not obliged
to accept as true legal conclusions or unsupported
conclusions of fact.” Hickey v. O'Bannon,
287 F.3d 656, 658 (7th Cir. 2002).
complaint need not include detailed factual allegations, a
plaintiff has the obligation to provide the factual grounds
supporting his entitlement to relief; and neither bare legal
conclusions nor a formulaic recitation of the elements of a
cause of action will suffice in meeting this obligation.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). Stated differently, the complaint must include
“enough facts to state a claim to relief that is
plausible on its face.” Hecker v. Deere &
Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and
quotation marks omitted). To be facially plausible, the
complaint must allow “the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556).
Defendants argue that the Complaint should be dismissed
because Ms. Carter failed to state sufficient facts to
support claims of automatic stay violation, RICO, RICO
conspiracy, actual fraud, constructive fraud, restitution,
and unjust enrichment. They also argue in the alternative,
that Ms. Carter's actual fraud, constructive fraud,
unjust enrichment, and restitution claims are preempted by
the federal Bankruptcy Code. (Filing No. 5.) Each
claim is addressed below.
Automatic Stay Violation
Carter asserts in Count I of her Complaint that the
Defendants violated the automatic stay provision under the
Bankruptcy Code by collecting on a debt falsely labeled
“secured by real-estate, ” when in fact the debt
owed to HSBC was unsecured. The “automatic stay”
bars, among other things, any “act to collect, assess,
or recover a claim against the debtor that arose before the
commencement of the case.” 11 U.S.C. § 362(a)(6).
The purpose of the automatic stay is to “preserve what
remains of the debtor's insolvent estate and to provide a
systematic equitable liquidation procedure for all creditors,
secured as well as unsecured, ” in order to prevent a
“chaotic and uncontrolled scramble for the debtor's
assets in a variety of uncoordinated proceedings in different
courts.” In re Holtkamp, 669 F.2d 505, 508
(7th Cir. 1982) (citing In re Frigitemp Corp., 8
B.R. 284, 289 (D.C.S.D.N.Y.1981)).
Defendants contend that they never attempted to recover a
debt in violation of the automatic stay provision because
payments from the Trustee to HSBC were made pursuant to a
confirmed bankruptcy plan. Confirmation of a bankruptcy plan
triggers a Chapter 13 trustee's duty to distribute funds
received from the debtor to creditors. Bullard v. Blue
Hills Bank, 135 S.Ct. 1686, 1692 (2015); 11 U.S.C.
§ 1326(a)(2). Ms. Carter argues that the Defendants
received payments prior to confirmation of a bankruptcy plan
in violation of the automatic stay. However, it is undisputed
that at the time of Ms. Carter's bankruptcy filing, the
Defendants were thought to have a secured interest in Ms.
Carter's residence. This mistaken belief was shared by
Ms. Carter as well as the creditor, HSBC. It is also clear
from Ms. Carter's Exhibit 4, that the pre-confirmation
payments, made September 2 and October 1, 2010, amounted to
“adequate protection” payments. (Filing No. 2
at 60-61.) “The Bankruptcy Code provides secured
creditors various rights, including the right to adequate
protection, and these rights replace the protection
afforded by possession.” United States v. Whiting
Pools, Inc.,462 U.S. 198, 207 (1983) (emphasis added).
Under the Bankruptcy Code, a debtor is required to
“commence making payments not later than 30 days after
the date of filing of the plan or the order for relief,
whichever is earlier, in the amount that …. provides
adequate protection directly to a creditor holding
an allowed claim secured by personal property . . . .”
11 U.S.C. § 1326 (a)(1)(C) (emphasis added). Thus, the
payments that the Defendants received did not violate the
bankruptcy stay because the Trustee made the bankruptcy plan
payments as required under the bankruptcy plan. In other