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Noe v. Chastain

United States District Court, W.D. Missouri, Southern Division

April 10, 2019

REGINA NOE, Plaintiff,



         Before the Court is Defendant Neale and Newman, L.L.P.'s Motion to Dismiss Plaintiff's Amended Petition (Doc. #13). For reasons discussed below the motion is granted.[1]

         I. Legal Standard

         Defendant NN Law filed the present motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Under Rule 12(b)(6), a court may dismiss a claim for “failure to state a claim upon which relief can be granted.” “To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotation marks omitted) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); Zink v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ash v. Anderson Merchs., LLC, 799 F.3d 957, 960 (8th Cir. 2015) (internal citation quotation marks omitted) (quoting Iqbal, 556 U.S. at 678).

         The Court must accept all facts alleged in the complaint as true when deciding a motion to dismiss. See Data Mfg., Inc. v. United Parcel Serv., Inc., 557 F.3d 849, 851 (8th Cir. 2009) (noting “[t]he factual allegations of a complaint are assumed true and construed in favor of the plaintiff, even if it strikes a savvy judge that actual proof of those facts is improbable”). However, allegations that are “legal conclusions or formulaic recitation of the elements of a cause of action . . . may properly be set aside.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 677).

         II. Background

         Plaintiff's amended complaint alleges the following facts, which the Court accepts as true for purposes of Defendant NN Law's motion to dismiss. See Data Mfg., Inc., 557 F.3d at 851. In 2004, Plaintiff borrowed a total of $250, 000 (the “2004 loan”) from Defendant Wilma Chastain (“Chastain”) to pay off another loan Plaintiff had taken out from a bank to purchase real property in Springfield, Missouri (the “real property”). (Doc. #10, pp. 2-3). Plaintiff had purchased this real property on behalf of Iron Horse Properties, Inc. (“Iron Horse”), “a Missouri corporation solely owned by [Plaintiff] and to help run a home for homeless veterans in honor of [Plaintiff's] father A.C. Smith, which was a personal charity owned and operated by [Plaintiff], not as a commercial operation." (Doc. #10, p. 3). On August 20, 2004, Plaintiff signed a promissory note personally and on behalf of Iron Horse, promising to pay Defendant Chastain the $250, 000 plus interest within two years. (Doc. #10, p. 3; Doc. #10-1, p. 1). Plaintiff personally guaranteed the promissory note. (Doc. #10, p. 3). On April 15, 2009, Plaintiff personally signed and guaranteed another promissory note on the same loan. (Doc. #10, p. 3). Plaintiff alleges that the 2004 loan “arises out of a personal charitable purpose” and that the “loan was primarily for personal, family or household purposes.” (Doc. #10, pp. 11, 13).

         The loan went unpaid. On February 25, 2010, Defendant Chastain filed suit against Plaintiff and Iron Horse to recover the $250, 000 they owed her under the promissory notes. (Doc. #10, p. 3). On March 14, 2011, the Circuit Court of Greene County, Missouri, entered a $250, 000 judgment (the “judgment”) in favor of Defendant Chastain and against Plaintiff and Iron Horse. (Doc. #10, p. 3; Doc. #10-1, p. 2). On April 24, 2012, about a year after the judgment, Defendant Chastain formed an agreement (the “forbearance agreement”) with Iron Horse to “renew the notes previously signed between the parties.” (Doc. # 10, p. 4; Doc. #10-1, pp. 3-4). Under the forbearance agreement, Defendant Chastain promised to cancel the foreclosure sale of the real property in exchange for Iron Horse's promise to execute a new promissory note in the amount of $272, 500 and a deed of trust conveying a security interest in the real property for the benefit of Defendant Chastain. (Doc. #10-1, p. 3). The forbearance agreement further provided that payment in full according to the new promissory note would satisfy Defendant Chastain's judgment. (Doc. #10-1, p. 3).

         Iron Horse did not pay Defendant Chastain the full amount specified under the new promissory note that was part of the forbearance agreement. Beginning in July 2016, Defendant Neale and Newman, L.L.P, (“NN Law”), a law firm hired by Defendant Chastain, filed several garnishments in attempt to collect the amount Plaintiff allegedly still owed Defendant Chastain. (Doc. #10, pp. 5-9). Defendant NN Law directed the garnishments to Ken Davis, who is the trustee of the Revocable Trust of A.C. Smith and Olie Allene Smith (the “trust”). (Doc. #10, pp. 5-9; Doc. #10-1, pp. 15-20). Plaintiff has “rights in assets of the A.C. Smith Trust, ” to which Plaintiff refers as “her father's Trust.” (Doc. #10, p. 15). Plaintiff's rights in the trust assets “include cash and the rights to [Plaintiff's] portion of 5 acres of commercial property in Nixa, Missouri.” (Doc. #10, p. 10).

         Plaintiff brought this action, alleging that Defendants' collection activities are unlawful. In Count I of Plaintiff's amended complaint, Plaintiff alleges that Defendant NN Law violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., by filing the garnishments. (Doc. #10, pp. 11-12). In Count II, Plaintiff alleges that Defendants Chastain and NN Law violated the Missouri Merchandising Practices Act (“MMPA”), Mo. Rev. Stat. § 407.010 et seq., through their collection efforts, including the garnishments. (Doc. #10, pp. 12- 13). In Count III, Plaintiff alleges that Defendants Chastain and NN Law violated the garnishment procedures set forth in Missouri Supreme Court Rule 90 and Mo. Rev. Stat. § 525.010, et seq. (Doc. #10, pp. 14-15). Defendant NN Law now moves to dismiss Plaintiff's

         III. Discussion

         A. Count I: Violation of FDCPA

         The FDCPA allows “consumers who have been subjected to unfair practices by third-party debt collectors to recover damages, attorney fees, and costs.” Duffy v. Landberg, 133 F.3d 1120, 1122 (8th Cir. 1998) (citing 15 U.S.C. § 1692k(a)). The FDCPA applies only to collection activity arising from a “debt, ” which the statute defines as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” § 1692a(5) (emphasis added); Duffy, 133 F.3d at 1123 (citing § 1692a(5)) (holding that the FDCPA “broadly defines debt as ‘any obligation' to pay arising out of a consumer transaction”). “The FDCPA ‘characterizes debts in terms of end uses.'” Micks v. Gurstel Law Firm, P.C., No. 17-CV-4659 (ECT/ECW), 2019 WL 418850, at *7 (D. Minn. Feb. 1, 2019) (quoting Bloom v. I.C. Sys., Inc., 972 F.2d 1067, 1068 (9th Cir. 1992)). Under the FDCPA, “[t]he relevant time for determining the nature of the debt is when the debt first arises.” Zwicky v. Carlson & Assocs., Ltd., No. CIV. 11-1413 DSD/TNL, 2011 WL 6203058, at *1 (D. Minn. Dec. 13, 2011) (internal quotation marks omitted) (quoting Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 874 (7th Cir.2000)).

         The parties dispute whether the 2004 loan Plaintiff borrowed from Defendant Chastain was “primarily for personal, family, or household purposes” and is thus a “debt” within the FDCPA's scope. Defendant NN Law argues that Plaintiff has failed to sufficiently plead that the 2004 loan is a “debt” within the meaning of the FDCPA because “[t]he purpose of the loan from Ms. Chastain to Ms. Noe was to fund a charity and purchase real property owned by a business, not for personal purposes, and thus the debt is not consumer debt subject to the FDCPA.” (Doc. #14, p. 7). Plaintiff argues the loan in question is a debt she incurred “primarily for personal, family, or household purposes” under the FDCPA because “it is clear that Plaintiff Regina Noe personally guaranteed this debt and was personally liable for the judgment and that she used the debt for her personal purpose which included residing in the real property.” (Doc. #15, p. 5). Defendant NN Law replies that Plaintiff's use of the word “personal” in her amended complaint “does not change the fact that the loan was used” to purchase the real property for a Missouri corporation; that Plaintiff's allegation that she personally guaranteed the 2004 loan “does not make the ...

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