Otwell v. Home Point Financial Corp
4:19-cv-01120
N.D. Ala.Oct 2, 2019Background
- Plaintiffs Joshua and Danna Lee Otwell borrowed against their home; Stonegate Mortgage foreclosed in 2017 but later rescinded the sale after state-court proceedings.
- Home Point acquired Stonegate and the mortgage; Plaintiffs applied for loss mitigation, entered a September 2018 trial payment plan, and made the required trial payments.
- After completing the trial plan and attempting further payments, Home Point rejected additional payments, later declared Plaintiffs in default, and advertised a foreclosure sale that named the Plaintiffs and stated they had defaulted.
- Plaintiffs allege reputational and credit harm, economic loss, and emotional distress; foreclosure sale was cancelled because of this suit.
- Home Point moved to dismiss multiple state-law tort claims and to limit FDCPA recovery; the court denied dismissal of Counts One (RESPA), Two (FDCPA), Three (negligent/wanton/intentional hiring & supervision), Five (invasion of privacy), and Six (misrepresentation/suppression), and granted dismissal of Count Four (negligence/wantonness) with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RESPA (Count One): servicer failed to offer modification or notify rejection while in loss-mitigation review | Plaintiffs allege they submitted necessary paperwork, entered and complied with a trial plan, so Home Point should have treated an application as complete and not foreclosed | Home Point argues Plaintiffs did not allege a complete application and alleged damages are conclusory | DENIED dismissal — facts permit inference of a completed application and plausible damages at pleading stage |
| FDCPA damages (Count Two): scope of recoverable damages | Plaintiffs allege actual damages (credit, reputation, emotional distress) from debt-collection practices | Home Point concedes liability but asks to limit recovery to $1,000 statutory damages, arguing alleged damages are conclusory | DENIED request to limit damages — pleadings sufficiently allege actual damages |
| Invasion of privacy (Count Five): wrongful intrusion by foreclosure advertising and collection conduct | Plaintiffs point to foreclosure ads naming them and claiming default, threats to take property, false credit reporting and other collection tactics that outraged ordinary sensibilities | Home Point says conduct is at most minor irritation and reasonable creditor action | DENIED dismissal — publishing names/default and foreclosure notices plausibly state wrongful intrusion |
| Fraudulent misrepresentation / suppression (Count Six): servicer misrepresented intent to notify decision on loss mitigation | Plaintiffs say Home Point promised to notify decision (or concealed it would not consider application), inducing trial-plan payments they otherwise would not have made | Home Point contends a trial plan does not guarantee modification and thus reliance is unreasonable | DENIED dismissal — plaintiffs disclaimed reliance on a guaranteed modification and plausibly alleged inducement and duty to disclose under particular circumstances |
| Negligent/wanton/intentional hiring & supervision (Count Three): employer liability for employee misconduct | Plaintiffs allege underlying torts (privacy, fraud) and that Home Point knew or should have known of agent misconduct | Home Point argues Alabama law bars negligence/wantonness claims arising from contractual mortgage servicing or that underlying torts fail | DENIED dismissal — invasion of privacy and fraud survive and can support negligent hiring/supervision claim |
| Negligence/Wantonness (Count Four) | — | Plaintiffs concede current Alabama law precludes this claim | GRANTED dismissal with prejudice (plaintiffs conceded it cannot stand) |
Key Cases Cited
- Butler v. Sheriff of Palm Beach Cty., 685 F.3d 1261 (11th Cir. 2012) (motion-to-dismiss standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading requirement for plausible claims)
- Hogin v. Cottingham, 533 So. 2d 525 (Ala. 1988) (element and standard for wrongful-intrusion privacy claim)
- Jacksonville State Bank v. Barnwell, 481 So. 2d 863 (Ala. 1985) (creditor actions exceeding reasonableness can support privacy claim)
- Padgett v. Hughes, 535 So. 2d 140 (Ala. 1988) (elements of fraudulent misrepresentation under Alabama law)
- DGB, LLC v. Hinds, 55 So. 3d 218 (Ala. 2010) (elements of fraudulent suppression under Alabama law)
- Wolff v. Allstate Life Ins. Co., 985 F.2d 1524 (11th Cir. 1993) (duty-to-disclose principles; "particular circumstances")
- Voyager Ins. Co. v. Whitson, 867 So. 2d 1065 (Ala. 2003) (elements for negligent/wanton hiring and supervision)
- James v. Nationstar Mortg., LLC, 92 F. Supp. 3d 1190 (S.D. Ala. 2015) (Alabama authority finding no tort for negligent mortgage servicing)
- Costine v. BAC Home Loans, 946 F. Supp. 2d 1224 (N.D. Ala. 2013) (same)