United States District Court, W.D. Kentucky, Paducah Division
DENNIS BELL; and McCRACKEN BUILDERS, PROPERTY & MANAGEMENT, LLC
PADUCAH BANK AND TRUST COMPANY; and JOHN ELLIS DEFENDANTS
MEMORANDUM OPINION AND ORDER
N. STIVERS, JUDGE.
matter is before the Court on Defendants' Motion to
Dismiss (DN 13). The motion has been fully briefed and is
ripe for decision. For the reasons stated below, the motion
SUMMARY OF FACTS AND CLAIMS
Factual Background of the Case
Paducah Bank and Trust Company (“Paducah Bank”)
provided Plaintiff McCracken Builders, Property &
Management, LLC (“McCracken Builders”), which is
wholly owned by Plaintiff Dennis Bell (“Bell”),
with a $66, 500.00 line of credit secured by a mortgage
against one of McCracken Builders' properties on Dixie
Street in Paducah (“Dixie Street Property”).
(Ellis Aff. ¶ 3(a), DN 14). McCracken Builders paid off
the balance of this loan in 2010, but because the terms of
the Dixie Street mortgage included an “additional
advance” clause allowing for additional loan advances,
the mortgage was not released at the time of repayment.
(Ellis Aff. ¶ 3(b)-(c)). Later Paducah Bank consolidated
two loans held by McCracken Builders with an $82, 500.00
promissory note on March 31, 2011, that was secured by a
mortgage against Bell's properties located along 28th
Street and Benton Road (“28th & Benton
Properties”). (Ellis Aff. ¶ 3(d)). Paducah Bank
also provided McCracken Builders with a $10, 868.78 loan on
October 6, 2011, that was secured by a second mortgage on
Bell's real estate located on 28th Street (“28th
Street Property”). (Defs.' Mot. Dismiss 4).
Procedural History of the Case
third party, Kentucky Lien Holdings, LLC, initiated a
foreclosure proceeding against a tax lien it held against the
Dixie Street Property, Paducah Bank was notified because of
its recorded mortgage on that property. (Defs.' Mot.
Dismiss 5). Defendant John Ellis (“Ellis”), the
loan collection officer for Paducah Bank, consulted Paducah
Bank's legal counsel to determine what rights Paducah
Bank had with respect to the Dixie Street Property. (Ellis
Aff. ¶ 4). Acting upon counsel's advice, Ellis
authorized a mortgage claim against the Dixie Street
Property. (Ellis Aff. ¶ 4).
claim was later withdrawn after McCracken Builders responded
asserting that the mortgage against the Dixie Road property
was reassigned. (Defs.' Mot. Dismiss 6). McCracken
Builders then filed counterclaims alleging that Paducah Bank
intentionally forged mortgage documents and used them to try
and foreclose on the Dixie Road property. (Defs.' Mot.
Dismiss Ex. G, DN 13-8). Paducah Bank moved for summary
judgment on those claims, and that motion was granted.
(Defs.' Mot. Dismiss 7). McCracken Builders did not
appeal this order. (Defs.' Mot. Dismiss 7).
Bank later initiated a separate foreclosure proceeding on the
28th Street Property and the 28th & Benton Properties
after Plaintiffs defaulted on both the March 2011 and October
2011 loans. (Ellis Aff. ¶ 7). Both of those foreclosure
actions were filed in McCracken Circuit Court. (Defs.'
Mot. Dismiss Ex. E, DN 13-6; Defs.' Mot. Dismiss Ex. J,
DN 13-11). Plaintiffs filed counterclaims in that action
alleging that Paducah Bank forged documents to fraudulently
foreclose on their property. (Defs.' Mot. Dismiss Ex. J,
¶¶ 9-11). Paducah Bank successfully moved for
summary judgment on all claims in December of 2015.
(Defs.' Mot. Dismiss 7). Neither McCracken Builders nor
Bell appealed that adverse state-court decision. (Defs.'
Mot. Dismiss 8).
August 5, 2016, Plaintiffs filed this suit to recover damages
from the fraud and other violations of state and federal law
they allege that Defendants committed in the pursuing the
aforementioned mortgage claims. (Compl. ¶¶ 40, 41,
43, 91, DN 1). Defendants have moved to dismiss the claims
asserted against them based on res judicata, judicial
privilege, and their reliance on advice of counsel.
(Defs.' Mem. Supp. Mot. Dismiss 10-15, DN 13-1). In
addition, Defendants argue that Plaintiffs' claims should
be dismissed because Defendants had a bona fide mortgage
claim on the Dixie Street mortgage, and Plaintiffs have
failed to state claims under Kentucky's Residential
Mortgage Fraud Act, the Fair Debt Collection Practices Act,
or the Racketeer Influenced & Corrupt Organizations Act.
(Defs.' Mem. Supp. Mot. Dismiss 15-23). Finally,
Defendants argue that McCracken Builders has suffered no
damages arising from the Bank's assertion of a mortgage
claim. (Defs.' Mem. Supp. Mot. Dismiss 23).
STANDARD OF REVIEW
motion to dismiss for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6), the Court “must construe the
complaint in the light most favorable to plaintiff, ”
accepting all of the plaintiff's allegations as true.
League of United Latin Am. Citizens v. Bredesen, 500
F.3d 523, 527 (6th Cir. 2007) (citation omitted);
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under
this standard, a plaintiff must provide the grounds for its
entitlement to relief, which “requires more than labels
and conclusions, and a formulaic recitation of the elements
of a cause of action.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies
this standard when it “pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. A complaint falls short if
it pleads facts that are merely “consistent with a
defendant's liability” or if the facts do not
“permit the court to infer more than the mere
possibility of misconduct.” Id. at 678-79. The
allegations must “‘show that the pleader is
entitled to relief.'” Id. at 679 (quoting