861 F. Supp. 2d 646
E.D.N.C.2012Background
- Bryants filed suit on June 14, 2010 challenging a mortgage on their Raleigh property and amended the complaint on January 18, 2011.
- Defendants Brock & Scott and Shapiro & Ingle (and others) moved to dismiss for failure to state a claim; M&R recommended dismissal of all claims against them.
- Magistrate Judge Daniel recommended dismissing breach of contract, RESPA, TILA, FDCPA, FCRA, NCUDTPA and related claims against substitute trustees and related entities.
- Plaintiffs objected to the M&R; the district court conducted a de novo review on objections and reviewed the remainder for clear error.
- The court overruled objections, adopted the M&R, and granted the motions to dismiss the Brock and Shapiro Defendants.
- The court held substitute trustees not parties to the deed of trust for breach-of-contract purposes, and found RESPA, FDCPA, TILA, NCUDTPA, and FCRA claims insufficient or exempt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract by substitute trustees | Bryants allege substitute trustees breached the deed of trust. | Substitute trustees were not original parties to the deed and cannot be liable for breach. | Breach claim against substitute trustees dismissed |
| RESPA liability for substitute trustees | Brock & Scott and Shapiro & Ingle acted as servicers and violated RESPA. | Defendants were not servicers under RESPA. | RESPA claims dismissed; not servicers under 12 U.S.C. § 2605 |
| TILA liability | Brock and Shapiro defendants are creditors under TILA. | Defendants are not creditors under TILA. | TILA claims dismissed |
| FDCPA claims against Brock defendants | Defendants engaged in improper debt collection practices and failed validation. | Allegations fail to state a valid FDCPA claim for the Brock defendants. | FDCPA claim against Brock dismissed |
| NCUDTPA and related debt-collection statutes | Defendants engaged in unfair or deceptive acts in debt collection. | Professional services exemption and lack of statutory basis shield defendants. | NCUDTPA and related claims dismissed for both Brock and Shapiro Defendants |
Key Cases Cited
- Diamond v. Colonial Life & Accident Ins. Co., 416 F.3d 310 (4th Cir.2005) (de novo review standard for magistrate recommendations when objections are raised)
- Horvath v. Bank of N.Y., N.A., 641 F.3d 617 (4th Cir.2011) (purchase rights under deed of trust; cautions on public policy in state-law interpretations)
- Canady v. Mann, 419 S.E.2d 597 (N.C.App.1992) (nonparties to contract cannot be liable for breach)
- Sloop v. London, 219 S.E.2d 502 (N.C.App.1975) (fiduciary duties in deed of trust context; limits on breach-of-contract theory for trustees)
- Sprouse v. N. River Ins. Co., 344 S.E.2d 555 (N.C.App.1986) (distinguishing contractual powers of trustees from due-process requirements)
- Garcia-Contreras v. Bank of Am., N.A., 775 F. Supp. 2d 808 (M.D.N.C.2011) (overshadowing claim analysis under FDCPA prereq; early discussion of pre-notice communications)
- Graham v. Lewis, 2011 WL 6748805 (E.D.N.C.2011) (judicial notice of public records in ruling on removal and jurisdiction)
- Thomas v. Green Point Mortg. Funding, No. 5:10-cv-365-D, 2011 WL 2457835 (E.D.N.C.2011) (TILA creditor analysis in similar context)