Moore v. Seterus, Inc.
4:16-cv-00293
E.D.N.C.Aug 15, 2017Background
- Gwenda and R. Wilton Moore borrowed money in 2002; Gwenda executed a promissory note secured by 129 Goose Creek Drive, NC, later modified in 2013 and subsequently defaulted.
- Seterus, servicing the loan for Fannie Mae (note holder), sent a Fannie Mae Trial Period Plan (TPP) in June 2014; Gwenda made the required trial payments of $1,529.55 and several additional payments which Seterus accepted.
- After completion of the trial payments, Seterus sent a proposed permanent modification with higher monthly payments (~$2,000); plaintiffs rejected that offer and contended the TPP required a permanent modification at $1,529.55.
- Seterus later purchased hazard (and other) insurance and ordered multiple property inspections, adding charges to the loan escrow balance; Trustee Services initiated foreclosure proceedings in January 2015.
- Plaintiffs sued in North Carolina state court in November 2016 asserting breach of contract (based on the TPP) and tort claims (negligence, fraud, negligent misrepresentation, breach of fiduciary duty, and UDTPA), seeking declaratory relief and damages; defendants removed to federal court and moved to dismiss under Rules 8 and 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TPP created an enforceable permanent modification at $1,529.55/month | The TPP either was an offer of permanent modification at $1,529.55 or represented that the permanent modification would have that payment | The TPP only bound defendants to a trial period and to send a later Modification Agreement; it did not fix permanent payment terms | Court: TPP did not obligate defendants to a particular permanent payment amount; defendants performed TPP obligations (refrained from foreclosure during trial and sent a modification offer) |
| Whether defendants breached the TPP by later offering higher permanent payments | Moores say defendants breached by offering a permanent modification > $1,529.55 | Defendants say TPP imposed no term fixing permanent payment and they made the required post-trial offer | Court: No breach of TPP as a matter of contract law; dismissal granted |
| Whether plaintiffs may pursue tort claims (negligence, fraud, negligent misrepresentation, UDTPA) arising from the TPP dispute | Tort claims are pleaded as independent causes based on defendants’ conduct around the TPP and modification process | Defendants contend these claims are contract-based and cannot be recast as torts where they depend on interpretation of the TPP | Court: Tort claims are derivative of the contract dispute and must be relegated to contract law; tort claims dismissed |
| Whether breach of fiduciary duty/constructive fraud claim based on insurance/inspection charges survives | Plaintiffs assert Seterus purchased excessive insurance/inspections and thus breached fiduciary duty | Defendants point to the deed of trust which authorizes lender-purchased insurance and related fees; reasonableness of charges depends on deed interpretation | Court: Claim depends on deed interpretation and is contractually governed; fiduciary duty claim dismissed (plaintiffs did not plead it alternatively as a contract claim) |
Key Cases Cited
- Republican Party v. Martin, 980 F.2d 943 (4th Cir. 1992) (standards for Rule 12(b)(6) motions and that such motions do not decide factual disputes)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (establishes the pleading standard requiring factual plausibility)
- Nemet Chevrolet Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009) (courts accept well-pleaded facts but disregard legal conclusions at the pleading stage)
- Crosby v. City of Gastonia, 635 F.3d 634 (4th Cir. 2011) (elements of breach of contract claim)
- Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998) (tort claims arising from contractual relationships must be distinct from contract claims)
- Carolina Power & Light Co. v. Bowman, 229 N.C. 682 (1949) (contract interpretation from the four corners of the instrument)
- Crockett v. First Fed. Sav. & Loan Ass’n, 289 N.C. 620 (1976) (where contract terms are unambiguous, the written language controls)