360 F. Supp. 3d 363
W.D. Va.2018Background
- Morris took a $65,195 mortgage on Page County property; the loan note is now held by WSFS. She fell behind (16 payments; ~$11,448) and foreclosure proceeded.
- WSFS (through servicers) mailed a pre-acceleration “Notice of Default and Intent to Accelerate” via certified mail; Morris says she never received it and only obtained a copy at a December 8, 2017 detainer hearing.
- A substitute trustee scheduled and sold the property at auction on May 8, 2017; Morris repeatedly requested a reinstatement quote to pull funds from her 401(k); she received the quote on May 4, 2017, too late to stop the May 8 sale.
- Morris sued in Virginia state court alleging breach of the Deed of Trust (Sections 15, 22, 19) and TILA/RESPA violations; WSFS removed to federal court and moved to dismiss.
- Central factual disputes: whether certified mail satisfied the DOT’s “first-class mail” requirement (and whether delivery occurred), whether WSFS timely provided a reinstatement quote, and whether the loan qualifies as a TILA/RESPA “high-cost” mortgage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does sending the pre-acceleration notice via certified mail satisfy DOT §15's requirement that notice be mailed by "first-class mail"? | Morris: certified mail is not equivalent to first-class mail; she never actually received the notice. | WSFS: certified mail is an optional feature of first-class mail and thus meets the DOT's mailing requirement. | Court: certified mail is not sufficient unless actually received; Morris plausibly alleged lack of receipt. Motion to dismiss Count I denied. |
| Did WSFS violate DOT §22 by failing to provide a proper pre-acceleration notice? | Morris: she never received a compliant pre-acceleration notice. | WSFS: the notice met §22's content requirements and was properly sent. | Court: content elements were present but delivery is disputed; motion to dismiss Count II denied. |
| Did WSFS breach the implied covenant of good faith and fair dealing under DOT §19 by delaying reinstatement quote so Morris could not reinstate before sale? | Morris: lender's delay in providing reinstatement quote prevented her from exercising the contractual reinstatement right five days before sale. | WSFS: foreclosure/acceleration was an exercise of contractual rights, not bad-faith conduct. | Court: Virginia recognizes an implied covenant; allegations that WSFS's delay frustrated Morris's contractual right are plausible. Motion to dismiss Count III denied. |
| Do TILA §1639(t)(2) and RESPA regulation claims apply (i.e., was this a high-cost mortgage)? | Morris: WSFS failed to provide payoff/reinstatement balances within statutory timeframes under TILA/RESPA. | WSFS: the cited provisions apply only to "high-cost" mortgages; this loan's APR is below the statutory high-cost threshold. | Court: loan did not meet the statutory definition of a high-cost mortgage; TILA/RESPA claims in Count IV dismissed. |
Key Cases Cited
- Jones v. Flowers, 547 U.S. 220 (distinguishing certified mail from ordinary mail; certified mail requires recipient action and may not equate to actual notice)
- In re Frazier, 394 B.R. 399 (Bankr. E.D. Va.) (certified mail requires recipient's affirmative act; cannot be left like regular mail)
- Rehbein v. CitiMortgage, Inc., 937 F. Supp. 2d 753 (E.D. Va.) (foreclosure as exercise of contractual rights; modification denial not necessarily bad faith)
- Stoney Glen, LLC v. Southern Bank & Trust Co., 944 F. Supp. 2d 460 (E.D. Va.) (Virginia recognizes implied covenant of good faith and fair dealing in contracts)