Montanez v. HSBC Mortgage Corp.
2012 U.S. Dist. LEXIS 99692
E.D. Pa.2012Background
- Plaintiffs are LaQuenta and Sergio Montanez, homeowners in Philadelphia, who had a mortgage from HSBC Mortgage that required insurance on the property.
- HSBC Mortgage allegedly force-placed insurance after plaintiffs failed to maintain coverage and charged premiums significantly higher than prior coverage.
- The force-placed policy was first issued around 2006 with a premium of $1,302, later renewed multiple times with premiums around $1,271–$1,302.
- Plaintiffs allege HSBC Mortgage and HSBC Services (the servicing affiliate) benefited financially from kickbacks or captive reinsurance arrangements related to the force-placed policies.
- Plaintiffs sue HSBC Mortgage for breach of contract (implied covenant of good faith and fair dealing), unjust enrichment, and UTPCPL violations; HSBC Services is sued for unjust enrichment and UTPCPL; RESPA claims were dismissed by stipulation.
- The court grants HSBC Services’ motion to dismiss in full and grants HSBC Mortgage’s motion to dismiss in part and in part to proceed with Count II, denying only part of its motion as to breach of the implied covenant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of HSBC Services under Article III | Plaintiffs claim HSBC Services improperly benefited from the scheme and caused injury to plaintiffs. | HSBC Services was not involved in force-placing and lack of direct conduct/benefit. | Plaintiffs have Article III standing to pursue claims against HSBC Services. |
| Breach of the implied covenant of good faith and fair dealing (Count II) | HSBC Mortgage exercised force-placing discretion unreasonably to profit through kickbacks and unnecessary policies. | Express contract gives discretion; no implied duty to act unreasonably. | Plaintiffs stated a claim for breach of the implied covenant; dismissal denied. |
| Unjust enrichment (Count III) | Alternative theories permitted; breach of contract not exclusive. | No unjust enrichment where express contract exists; HSBC Services lacks contract with plaintiffs. | Unjust enrichment claims dismissed as to HSBC Mortgage and HSBC Services; no viable alternative theory alleged against HSBC Services. |
| UTPCPL claims (Count IV) | Defendants engaged in deceptive practices by profiting from force-placed insurance. | Economic loss doctrine bars the UTPCPL claim against HSBC Mortgage; no deception by HSBC Services. | UTPCPL claim dismissed for HSBC Mortgage under economic loss doctrine; UTPCPL claim against HSBC Services dismissed for failure to plead deceptive acts. |
Key Cases Cited
- Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002) (economic loss doctrine applies to UTPCPL claims to the extent they arise from contract)
- Wulf v. Bank of Am., 798 F. Supp. 2d 586 (E.D. Pa. 2011) (fraudulent representations concerning performance of a contract are interwoven with contract terms)
- McNeary-Calloway v. JP Morgan Chase Bank, N.A., 863 F. Supp. 2d 928 (N.D. Cal. 2012) (breach of implied covenant in force-placed insurance context recognized)
- Abels v. JPMorgan Chase Bank, N.A., 678 F. Supp. 2d 1273 (S.D. Fla. 2009) (implied covenant and force-placed insurance discussions persuasive)
- Creeger Brick & Building Supply Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151 (Pa. Super. 1989) (Pennsylvania adoption of good faith and fair dealing in contract)
- Cable & Assocs. Ins. Agency, Inc. v. Commercial Nat. Bank of Pa., 875 A.2d 361 (Pa. Super. Ct. 2005) (lender generally not liable for harm from refusing to advance funds or similar)
- Klein v. Gen. Nutrition Cos., 186 F.3d 338 (3d Cir. 1999) (standing requirement to show personal injury in class actions)
- D.C. cases cited: Brisbin v. Superior Valve Co., 398 F.3d 279 (3d Cir. 2005) (contract interpretation considerations in implied covenant context)
- Jones v. ABN Amro Mortgage Group, Inc., 606 F.3d 119 (3d Cir. 2010) (context for Lorah/related force-placed insurance discussion)