30 F. Supp. 3d 485
E.D. Va.2014Background
- Mayo refinanced her Williamsburg, VA home in December 2009; the Deed of Trust named Wells Fargo as lender/servicer and Samuel I. White, P.C. as trustee; loan later transferred to FHLMC (Freddie Mac).
- The refinance reduced interest but required escrow; Mayo alleges she was not properly informed escrow would be required and stopped paying escrow, continuing only interest/principal through May 2010.
- Wells Fargo declared Mayo in default in June 2010 for arrears (including principal/interest and escrow), and the property was nonjudicially foreclosed June 15, 2011; Wells Fargo purchased the property.
- Mayo filed state-court claims, removed to federal court after FHLMC joined; she amended her complaint asserting five state-law claims: breach of contract, breach of fiduciary duty (against trustee), tortious interference (withdrawn), equitable rescission of foreclosure, and abuse of process.
- Defendants moved to dismiss under Rule 12(b)(6); the court accepted Deed of Trust text and related exhibits as integral to the complaint and evaluated plausibility of pleaded claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — escrow/payment obligations | Mayo: lender required escrow/payments contrary to agreement and increased monthly payments after refinancing | Defs: Deed of Trust expressly requires borrower to pay escrow unless lender waives in writing; notices and agent actions were authorized | Court: Dismissed most contract theories; allowed a limited contract claim that the default/foreclosure notice failed to advise Mayo of her right to bring a pre-acceleration court action (Paragraph 57) to proceed |
| Breach of contract — who may invoke power of sale / notices | Mayo: Wells Fargo improperly invoked power of sale and sent required notices while not the lender | Defs: Wells Fargo acted as agent for FHLMC; agent’s acts bind principal; notices were given and Mayo not prejudiced | Court: Rejected theory that agent’s acts breached contract; plaintiff failed to allege injury from wrong-party notices; claim dismissed |
| Breach of fiduciary duty (trustee) | Mayo: Trustee breached duties (impartiality, failed to investigate, lost-note affidavit under Va. Code §55‑59.1, etc.) | Defs: Trustee’s duties are limited to those in the Deed of Trust; many asserted duties are contractual, not fiduciary | Court: Dismissed all fiduciary claims; plaintiff failed to plausibly allege the narrow common-law trustee duty of impartiality or injury from a missing affidavit |
| Equitable rescission of foreclosure | Mayo: Foreclosure should be rescinded based on the above defects (especially defective notice) | Defs: Virginia does not recognize rescission in these circumstances and foreclosure sale should stand | Held: Denied dismissal — court allowed the equitable rescission claim to proceed (declining to foreclose the issue at Rule 12 stage) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6) motions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state a plausible claim)
- Filak v. George, 267 Va. 612 (Va. 2004) (elements of breach of contract under Virginia law)
- Harris v. McKay, 138 Va. 448 (Va. 1924) (agent’s acts bind principal/privity in agency)
- Whitlow v. Mountain Trust Bank, 215 Va. 149 (Va. 1974) (trustee under deed of trust owes duty of impartiality)
- Warner v. Clementson, 254 Va. 356 (Va. 1997) (trustee powers and duties are defined by instrument)
- Augusta Mut. Ins. Co. v. Mason, 274 Va. 199 (Va. 2007) (contractual duties are not transformed into fiduciary duties)
- Mathews v. PHH Mortg. Corp., 283 Va. 723 (Va. 2012) (borrower’s standing and equitable challenges to foreclosure conditions)