NOT FOR PUBLICATION (Doc. Nos. 5, 10)

 

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY 

CAMDEN VICINAGE

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RUSSELL GRADDY AND LORETTA

GRADDY, 

Plaintiffs, 

v. 

DEUTSCHE BANK TRUST COMPANY

AMERICAS AS TRUSTEE, et al. 

Defendants. 

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Civil No. 11- 3038 (RBK/KMW)

OPINION

KUGLER, United States District Judge:

This matter arises out of a foreclosure dispute between Russell and Loretta Graddy

(“Plaintiffs”) and Defendant Deutsche Bank Trust Company Americas as Trustees (“Deutsche

Bank”). Presently before the Court is Deutsche Bank’s motion to dismiss the Amended

Complaint based on Plaintiffs’ alleged failure to state a claim upon which relief may be granted.

Because the Court finds Plaintiffs failed to identify a duty Deutsche Bank owed Plaintiffs, and

Plaintiffs failed to demonstrate Deutsche Bank accepted responsibility for Wachovia’s liability,

Plaintiffs’ claims against Deutsche Bank are dismissed without leave to amend.

I. BACKGROUND1

A. The Mortgage, its Assignment, and Foreclosure

On March 15, 2006, Plaintiff executed a mortgage with Wachovia Mortgage Company

(“Wachovia”). Under the terms of the mortgage, Plaintiffs owed Wachovia $272,000 in addition

As this matter comes before the Court on a motion to dismiss, all disputed facts have been construed in favor of

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Plaintiffs, the non-moving party. See discussion infra Part II.

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to interest, which was scheduled to be assessed annually at a rate of 7.25 percent. The mortgage

required Plaintiffs to submit monthly payments of $1,855.52 on the first day of each month until

April 1, 2036, the maturity date. 

The mortgage also contained an acceleration clause which could be triggered by

Plaintiffs’ defaulting on their required payments. Defining “default” as failure to pay “the full

amount of each monthly payment on the date it is due,” the mortgage stated that Plaintiffs’

default enabled the Note Holder to send a written notice demanding full payment of the principal

and interest. Before demanding the accelerated payment, however, the Note Holder was required

to wait at least thirty calendar days from the day the notice was mailed or otherwise delivered.

On January 1, 2009, Plaintiffs failed to submit their monthly payment, and have not

submitted any payments since. Am. Compl. Ex. C. On August 24, 2009, Wachovia assigned the

mortgage to Deutsche Bank. Three days later, on August 27, 2009, Deutsche Bank filed for

foreclosure in the Atlantic County Superior Court. 

B. Procedural History

With Deutsche Bank’s foreclosure action pending, Plaintiffs initiated this suit on April 8,

2011, by filing their Complaint in the New Jersey Superior Court. Deutsche Bank was served on

May 4, 2011. Twenty-two days later, Deutsche Bank removed this case to federal court. 

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss an action for failure

to state a claim upon which relief can be granted. When addressing a motion to dismiss, "courts

accept all factual allegations as true, construe the complaint in the light most favorable to the

plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff

may be entitled to relief." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009)

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(quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). Accordingly, a

complaint survives a motion to dismiss if it contains sufficient factual matter, accepted as true, to

"state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).

In making this determination, a court must engage in a two-part analysis. Ashcroft v.

Iqbal, 129 S. Ct. 1937, 1949-50, 173 L. Ed. 2d 868 (2009); Fowler, 578 F.3d at 210-11. First, the

court must separate factual allegations from legal conclusions. Iqbal, 129 S. Ct. at 1949.

"Threadbare recitals of the elements of a cause of action, supported by mere conclusory

statements, do not suffice." Id. Second, the court must determine whether the factual allegations,

standing alone, are sufficient to show that the plaintiff has a "plausible claim for relief." Id. at

1950. Determining plausibility is a "context-specific task" that requires the court to "draw on its

judicial experience and common sense." Id. A complaint cannot survive where a court can only

infer that a claim is merely possible rather than plausible. See id.

III. DISCUSSION

Plaintiffs are pursuing three counts against Deutsche Bank. First, Plaintiffs contend that

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Deutsche Bank negligently breached its duty to investigate Plaintiffs’ mortgage before accepting

its assignment from Wachovia. Second, Plaintiffs allege that Deutsche Bank should be liable for

Wachovia’s breach of the covenant of good faith and fair dealing contained within the mortgage.

Finally, Plaintiffs argue that Deutsche Bank’s actions, allegedly resulting in Deutsche Bank

breaching the covenant of good faith and fair dealing, constituted gross negligence.

While Plaintiffs Amended Complaint contains seven counts, only three—Counts I, IV, and V—name Deutsche

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Bank. Plaintiffs acknowledge, moreover, that only these three counts pertain to Deutsche Bank. See Pls.’ Br. 9.

Therefore, notwithstanding Plaintiffs naming Deutsche Bank in each ad damnum clause, this Opinion will address

only the three counts in which Deutsche Bank is explicitly named.

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As Plaintiffs have failed to plead facts to support their assertion that Deutsche Bank

owed a duty to Plaintiffs, and as amending the Complaint would be futile since, as a matter of

law, Deutsche Bank owed no duty to Plaintiffs, this Court finds that Plaintiffs’ claims for

negligence and gross negligence should be dismissed without leave to amend. Further, because

Plaintiffs have failed to plead facts to support their assertion that Deutsche Bank assumed

Wachovia’s liabilities, Plaintiffs claim against Deutsche Bank for Wachovia’s breach of the

mortgage’s covenant of good faith and fair dealing is likewise dismissed without leave to amend.

A. Count I: Negligence

Plaintiffs contend Deutsche Bank breached its duty to Plaintiffs when it failed to

investigate Plaintiffs’ mortgage before accepting its’ assignment from co-defendant Wachovia.

Am. Compl. Count I ¶¶ 1-16. Specifically, Plaintiffs point to Deutsche Bank filing a foreclosure

action within three days of receiving the mortgage. Pls.’ Br. 7-8, 11. Construing all facts in favor

of Plaintiffs, this Court disagrees.

In the context of a motion to dismiss, a plaintiff must allege sufficient facts to state a

claim for relief that is plausible on its face. Twombly, 550 U.S. at 570. While a complaint need

not contain detailed factual allegations, a pleading relying on “labels and conclusions” or “a

formulaic recitation of the elements of a cause of action” is inadequate. Id. at 555 (citations

omitted). Legal conclusions may provide the framework of a complaint, but they must be

supported by factual allegations. Iqbal, 129 S. Ct. at 1950. 

In the present case, Plaintiffs failed to properly plead their negligence claim. Plaintiffs

aver that: (1) at the time of the assignment, Deutsche Bank had an obligation to research and/or

investigate Plaintiffs’ full financial situation, Am. Compl. Count I ¶ 12; (2) Deutsche Bank failed

to investigate Plaintiffs’ finances before accepting the mortgage, Am. Compl. Count I ¶ 13; and

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(3) three days after accepting Plaintiffs’ mortgage, Deutsche Bank initiated a foreclosure action,

Am. Compl. Count I ¶ 10. Notwithstanding their averments, Plaintiffs failed to identify any duty

Deutsche Bank owed to Plaintiffs. 

Further, “[i]n every instance, before negligence can be predicated of a given act, back of

the act must be sought and found a duty to the individual complaining, the observance of which

would have averted or avoided the injury.” Palsgraf v. Long Island R. Co., 162 N.E. 99, 99-100

(N.Y. 1928) (Cardozo, J.) (emphasis added) (citations omitted). No party can owe a duty to the

world—any duty a party may owe must be tethered to an entity or individual and is restrained by

the boundaries of foreseeability. See id.

Merely declaring Deutsche Bank had an obligation to investigate Plaintiffs’ financial

situation is insufficient to survive a motion to dismiss where Plaintiffs have also failed to supply

any facts or law supporting their claim. See Twombly, 550 U.S. at 555. In addition, this Court

finds that as a matter of law, Deutsche Bank cannot have owed a duty to Plaintiffs sufficient to

substantiate a negligence claim. Accordingly, Plaintiffs negligence claim is dismissed without

leave to amend.

B. Count IV: Breach of Covenant of Good Faith and Fair Dealing 

Plaintiffs next allege Deutsche Bank violated the implied covenant of good faith and fair

dealing contained within the mortgage. Am. Compl. Count IV ¶ 1-6. In reply, Deutsche Bank 3

argues that even if Wachovia were liable, Deutsche Bank cannot be liable for Wachovia’s

conduct since it is merely an assignee. Def.’s Br. 12. This Court agrees.

While the Complaint fails to specify whether Deutsche Bank’s alleged liability is predicated on Deutsche Bank’s

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actions or Wachovia’s actions, Plaintiffs’ brief focuses on Deutsche Bank’s liability “to the extent that Wachovia is

liable for breach....” Pls.’ Br. 12. Consequently, this Court will address Deutsche Bank’s liability only as it relates to

Wachovia’s alleged misconduct.

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Unless an assignee assumes responsibility for the assignor’s conduct, affirmative claims

against assignees based on the assignor’s conduct are prohibited. See Falkenstern v. Herman

Kussy Co., 55 A.2d 11, 12 (N.J. Super. Ct. App. Div. 1947), aff’d, 59 A.2d 372 (N.J. 1948); see

also Pargman v. Maguth, 64 A.2d 456, 459 (N.J. Super. Ct. App. Div. 1949) (“No citations are

necessary in support of the well settled doctrine, that recovery and justment on a counterclaim or

setoff against an assignee, where based on a demand against the assignor, cannot be affirmative;

it can be defensive only.”). 

For example, an assignee cannot generally be liable for an assignor’s debts. In

Falkenstern, plaintiff was assigned a matured debt of $1,412.50 that defendant owed to the

assignor. 55 A.2d at 12. Defendant counterclaimed, arguing that the assignment was invalid and

that assignor owed defendant $2,883.06. Id. As the assignor owed them a greater sum of money

than they had owed the assignor, argued defendant, and the sum they owed assignee was the

same debt they had owed to the assignor, the court should set-off the debt defendant owed

assignee with the debt the assignor owed defendant. Id. The appellate division struck defendant’s

counterclaim, holding that the assignor’s debt was irrelevant to the case since defendant failed to

demonstrate the assignee assumed the assignor’s liabilities. Id. Noting that an “assignee does not

thereby, without more, assume the liabilities of the assignor[,]” the court specifically found that

plaintiff was not a party to the transaction complained of, and that nothing suggested plaintiff

had assumed the assignor’s liabilities. Id. 

In the present case, Plaintiffs have failed to demonstrate Deutsche Bank assumed

Wachovia’s liabilities. Like the assignee in Falkenstern, Deutsche Bank was not a party to the

construction of the contract. The mortgage identifies only Wachovia as the lender, Am. Compl.

Ex. A, and Plaintiffs concede that “Plaintiffs executed a mortgage with Wachovia Mortgage

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Corporation.” Am. Compl. Count I ¶ 2. And also like the assignee in Falkenstern, nothing in the

assignment document evidences that Deutsche Bank assumed Wachovia’s liabilities. See Am.

Compl. Ex. B. The assignment document merely states that Deutsche Bank was assigned the

mortgage “together with the bond, note or other obligation therein described.” Id. Thus, since

Deutsche Bank was not a party to the initial contract, and since it never expressly or impliedly

assumed Wachovia’s liability, Deutsche Bank, like the plaintiff in Falkenstern, cannot be held

liable for liability arising from Wachovia’s misconduct. 

Count four against Deutsche Bank, therefore, is dismissed without leave to amend

because Plaintiffs failed to identify why Deutsche Bank should be held liable for Wachovia’s

alleged breach of the covenant of good faith and fair dealing.

C. Count V: Gross Negligence

Finally, Plaintiffs claim Deutsche Bank’s breach of the covenant of good faith and fair

dealing was so egregious it constituted gross negligence. See Pls.’ Br. 9; Am. Compl. Count V.

Deutsche Bank counters that Plaintiffs failed to allege facts to support a prima facie case against

Deutsche Bank, and that even if Plaintiffs can demonstrate Wachovia was grossly negligent,

Deutsche Bank, as an assignee, cannot be held liable for Wachovia’s misconduct. Def.’s Br. 12-

13. In reply, Plaintiffs argue that at this stage of the litigation they are not required to make a

prima facie case. Pls.’ Br. 9. To the contrary, however, this Court finds that Plaintiffs have failed

to state a claim for gross negligence since Plaintiffs never identified a duty Deutsche Bank owed

Plaintiffs.

Gross negligence differs from negligence only in degree and not in kind. Monaghan v.

Holy Trinity Church, 646 A.2d 1130, 1133 (N.J. Super. Ct. App. Div. 1994). Thus, like a claim

for negligence, a plaintiff claiming gross negligence must show defendant owed plaintiff a duty

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and that defendant breached that duty. See, e.g., Kelly v. Gwinnell, 476 A.2d 1219, 1222 (N.J.

1984). 

But general allegations of a duty are insufficient to support a negligence claim. See, e.g.,

Globe Motor Car Co. v. First Fidelity Bank, 641 A.2d 1136, 1139 (N.J. Super. Ct. Law Div.

1993), aff’d, 677 A.2d 794 (N.J. Super. Ct. App. Div.), certif. denied, 686 A.2d 764 (N.J. 1996).

In Globe, plaintiff’s employee embezzled over one-million dollars from plaintiff. Id. at 1138. In

granting defendant bank’s summary judgment motion, the trial court found that there was no

issue of material fact regarding plaintiff’s negligence claim since, as a matter of law, defendant

owed no duty to plaintiff. Id. at 1139. In so holding, the Globe court explicitly rejected plaintiff’s

argument that plaintiff’s fiduciary relationship with defendant generated a duty to monitor

plaintiff’s accounts. Id. The court compared plaintiff’s attempt to assign liability to defendant for

its failure to police plaintiff’s employee to “the farmer, who upon appointing the fox to guard the

henhouse, finds fault with the rooster for the subsequent slaughter.” Id. “In both instances,”

concluded the court, “blame is misplaced.” Id.; see also Paradise Hotel Corp. v. Bank of Nova

Scotia, 842 F.2d 47, 53 (3d Cir. 1988) (holding creditor-debtor relationship insufficient to

substantiate finding a duty since creditors and debtors are adversarial by nature).

Here, too, Deutsche Bank owed no duty to Plaintiffs to investigate Plaintiffs’ finances.

Like the plaintiff’s allegations in Globe, Plaintiffs merely assert, without more, that Deutsche

Bank had an obligation to investigate their finances. Am. Compl. count I ¶ 12. Like the Globe

plaintiff’s allegation, it is improper for Plaintiffs to attempt to hold Deutsche Bank responsible

for any harm it had no duty to guard against. As the court in Globe noted, to be liable for

negligence a defendant must owe a duty to plaintiff beyond anything which may arise from a

presumed fiduciary relationship. Id. at 1138-39. As a matter of law, therefore, Plaintiffs cannot

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state a claim against Deutsche Bank for negligently failing to investigate if Plaintiffs’ sole basis

for Deutsche Bank’s duty is an alleged fiduciary relationship.

Further, Plaintiffs’ assertion they need not plead facts demonstrating defendant’s duty is

misguided. Plaintiffs contend that they need not “match facts” to each element of their legal

theory. Pls.’ Br. 10. In support of this argument, Plaintiffs cite Trs. of I.A.M. Dist. No. 15 Health

Fund v. Operant Material, Civil Action No. 07-4262, 2008 WL 4601792 (D.N.J. October 15,

2008). There, plaintiffs alleged defendant violated ERISA when it failed to contribute to

employee-benefits funds in violation of the collective bargaining agreement. Trustees, 2008 WL

4601792, at *1. Defendant moved to dismiss the complaint, claiming (1) plaintiffs had failed to

include a statement of jurisdiction, and (2) plaintiffs had failed to state the substantive legal basis

for its claim. Id. at *2. The district court disagreed, holding that the complaint met the liberal

standard required by Fed. R. Civ. P. 8. Id. at *3. After noting that the complaint’s general

assertion of jurisdiction specifically included the four preceding claims, the court characterized

the omission as a mere “scrivener’s error.” Id. Further, the court found that the complaint gave

defendant fair notice of the nature and basis of the claim since while it may not have set out

which sections of the ERISA statute the claim was being brought under, it clearly demonstrated

the drafters intent by incorporating the earlier ERISA claims and invoking the ERISA provision

defining “fiduciary.” Id.

This Court finds that Trustees is distinguishable from the facts of our case. Plaintiffs in

the present case failed to provide Deutsche Bank with fair notice of the nature and basis of their

claim. Plaintiffs aver that Deutsche Bank was grossly negligent when it intentionally failed to

perform its duty to act in good faith and fair dealing. Am. Compl. Count V ¶ 2. But Plaintiffs’

failure to identify any duty Deutsche Bank may have owed them is distinct from the “scrivener’s

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error” at issue in Trustees. The alleged pleading deficiency in Trustees was premised upon

plaintiffs’ failure to identify the governing statute by name and plaintiffs’ failure to aver the

court had jurisdiction over the contested count under ERISA. Any potential vagueness, however,

was found to have been vitiated by plaintiffs’ invoking other ERISA provisions in the averments

in the count, and by plaintiffs’ otherwise consistent jurisdictional averments throughout the

complaint. Unlike the alleged pleading deficiency in Trustees, Plaintiffs consistently failed to

identify a legally recognized duty Deutsche Bank owed to Plaintiffs. Thus, Plaintiffs’ oversight

greatly exceeds the minor omission found in Trustees. 

Because the Amended Complaint fails to properly plead and support a claim for gross

negligence against Deutsche Bank, and because as a matter of law, Deutsche Bank owed no duty

to Plaintiffs, Count V against Deutsche Bank is dismissed without leave to amend. 

IV. CONCLUSION

It is not for Deutsche Bank to guess which of its actions is being challenged and under

what theory it may be liable. In order to state a claim for relief a pleading must contain a short

and plain statement of the claim showing that the pleader is entitled to relief. And a pleading that

fails to place a party on notice of the grounds on which it is being sued is inadequate. Moreover,

the Court finds that any amendment would be futile since Plaintiffs’ claims fail as a matter of

law. Consequently, as Plaintiffs did not and cannot identify a legally cognizable duty Deutsche

Bank owed to them, and Plaintiffs did not and cannot demonstrate Deutsche Bank assumed

liability for Wachovia’s conduct, Counts I, IV, and V of the Amended Complaint against

Deutsche Bank are dismissed without leave to amend.

For the reasons discussed above, Deutsche Bank’s Motion to Dismiss is GRANTED. An

appropriate Order shall enter.

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Dated: 3/6/12 /s/ Robert B. Kugler

 ROBERT B. KUGLER

United States District Judge

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