Muncy v. Centex Home Equity Company, L.L.C., 1:14-cv-00016

Background

Ralph and Rita Muncy (pro se) obtained three mortgages on their Virginia home from Centex/Nationstar between 2002 and 2005; they allege they lacked sufficient income to qualify for the loans.
Plaintiffs allege loan officers made affirmative misrepresentations and omissions (including urging signature/backdating and advising refinancing) that induced them to take/refinance loans.
They fell behind on payments, accepted a 2010 modification with a temporary reduced rate, later defaulted, and the property was foreclosed in September 2013.
Plaintiffs initially pleaded ten counts; the court previously dismissed all but fraud and misrepresentation and allowed repleading.
Nationstar moved to dismiss the First Amended Complaint under Fed. R. Civ. P. 12(b)(6), arguing inadequate pleading under Rule 9(b) and that Virginia’s two-year fraud statute of limitations bars the claims.
The court concluded the amended fraud claims lacked the particularized content required by Rule 9(b) and, alternatively, were time-barred under Virginia’s discovery rule, and therefore granted the motion to dismiss.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether fraud/misrepresentation claims are pleaded with the particularity required by Fed. R. Civ. P. 9(b)	Muncy alleges loan officers told them they qualified/that refinancing was in their best interest and concealed terms, naming agents, dates, and places	Nationstar argues plaintiffs failed to plead the content of the alleged false statements, income figures, debt‑to‑income standards, or specific omissions	Court: Dismiss for failure to satisfy Rule 9(b); allegations are conclusory and lack specific content of statements and facts needed to show fraud
Whether lender owed fiduciary/special duty that would affect accrual or tolling	Plaintiffs contend a "continuing relationship" with lender tolled statute of limitations	Nationstar argues no fiduciary duty; lender‑borrower is arms‑length, so no continuing‑relationship tolling	Court: No continuing relationship; doctrine inapplicable to ordinary lender‑borrower transactions
Whether claims are time‑barred under Va. Code § 8.01‑243(A) (two‑year fraud limitation) and the discovery rule	Plaintiffs contend they were misled and discovered fraud only later (post‑refinancing/foreclosure)	Nationstar argues plaintiffs had information at signing and should have discovered inability to afford loans earlier; accrual occurred at or shortly after execution/refinancing	Court: Claims barred. Under Virginia discovery rule, plaintiffs reasonably should have discovered the alleged fraud much earlier (at signing or by 2010); thus statute of limitations ran
Whether failure to plead resulting harm defeats the fraud claim	Plaintiffs allege harm from unaffordable loans and foreclosure	Nationstar notes lack of specific allegations tying particular misrepresentations to specific damages (for some subclaims)	Court: Plaintiffs failed to allege resulting harm for at least one asserted misrepresentation; that subclaim fails

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
Erie R.R. v. Tompkins, 304 U.S. 64 (federal courts apply state substantive law in diversity cases)
Anthony v. Verizon Va., Inc., 758 S.E.2d 527 (Va. 2014) (elements of common‑law fraud include material false representation, reliance, and damage)
STB Marketing Corp. v. Zolfaghari, 393 S.E.2d 394 (Va. 1990) (Virginia discovery rule for accrual of fraud claims)
Schmidt v. Household Fin. Corp. II, 661 S.E.2d 834 (Va. 2008) (plaintiff must show due diligence to avoid statute‑of‑limitations bar)
Edwards v. City of Goldsboro, 178 F.3d 231 (4th Cir. 1999) (Rule 12(b)(6) standards)
Goodman v. Praxair, Inc., 494 F.3d 458 (4th Cir. 2007) (when statute‑of‑limitations defense is apparent on face of complaint)