Mayo v. Wells Fargo Bank, N.A.Mayo v. Wells Fargo Bank, N.A.
MEMORANDUM OPINION & ORDER
Before the Court is Defendants Wells Fargo Bank, Federal Home Loan Mortgage Corporation, and Samuel White P.C.’s Motion to Dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 16. Plaintiff Bonnie Mayo raises five state law claims against Defendants pertaining to the refinancing of her since-foreclosed home. For the reasons stated below, Defendants’ Motion to Dismiss is GRANTED IN PART AND DENIED IN PART.
I. FACTUAL AND PROCEDURAL HISTORY
Plaintiff Bonnie Mayo alleges the following relevant facts in the Amended Complaint. ECF No. 12. In December 2009, Plaintiff executed a refinancing of the mortgage on her home in Williamsburg, Virginia, which reduced the loan’s interest rate by 0.5%. Am. Compl. ¶¶ 2-6; id., Ex. B. The Refinance Note required monthly payments of $1,251.96 for interest and principal, to begin in February 2010. Am.
Plaintiff twice declared bankruptcy: once before the foreclosure, and once after. Both proceedings were ultimately dismissed. Defts’ Mem. in Opp. to Pltf s Req. for TRO, ECF No. 22, at 1-2. After the United States Court of Appeals for the Fourth Circuit denied Plaintiffs appeals from the second bankruptcy proceeding on October 4, 2012, Defendant FHLMC filed an unlawful detainer action in state court on November 20, 2012. Id. at 2. The York County General District Court granted possession to FHLMC on December 18, 2012, and Plaintiff appealed to the York County Circuit Court. Id. Nearly a year later, on December 11, 2013, that court also granted possession to FHLMC, and its judgment became final on January 12, 2014. Id. at 2-3.
In the meantime, Plaintiff had filed the first iteration of the instant complaint in state court. Defendants ultimately removed the case to this Court in December 6, 2013, pursuant to 12 U.S.C. § 1452(f), which allows removal to federal court “at any time before trial” in cases in which FHLMC is a party. Plaintiff filed an Amended Complaint on December 30, 2013. ECF No. 12. On January 9, 2014, Defendants filed the instant Motion to Dismiss, ECF No. 16, and accompanying Memorandum, ECF No. 17 (hereinafter “Mot. to Dismiss”). Plaintiff filed her Opposition on January 23, 2014, ECF No. 18 (hereinafter “Opp.”), and Defendants filed their Reply on January 28, 2014, ECF No. 19. The matter is accordingly ripe for disposition.
This is not the first order that the Court has entered in this case. On February 3, 2014, Plaintiff \yas served with a notice of eviction in execution of the state court’s judgment of possession. ECF No. 21, at 1-2. Arguing that the eviction should be stayed pending the outcome of her pending suit, Plaintiff requested that this Court grant a Temporary Restraining Order or a Preliminary Injunction. The Court held a hearing on February 6, 2014 and denied Plaintiffs requested TRO the following day. ECF No. 24.
II. STANDARD OF REVIEW
Rule 12(b)(6) provides for dismissal of actions that fail to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). The United States Supreme Court has stated that in order “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal,
In considering a Rule 12(b)(6) Motion to Dismiss, the Court cannot consider “matters outside the pleadings” without converting the motion to a summary judgment proceeding. Fed.R.Civ.P. 12(d). Nonetheless, the Court may still “consider documents attached to the complaint, see Fed. R.Civ.P. 10(c), as well as those attached .to the motion to dismiss, so long as they are integral to . the complaint and authentic.” Sec’y of State for Defence v. Trimble Navigation Ltd.,
The parties agree that Virginia substantive law applies to Plaintiffs claims, all of which are state common law claims. See, e.g., Opp. at 3 (relying on Virginia case law); Mot. to Dismiss at 14 (same). Nonetheless, the Court will apply federal rules that are procedural, such as the standards for a Rule 12(b)(6) motion discussed above. Rowland v. Patterson,
III. DISCUSSION
A. Count I: Breach of Contract
Plaintiff raises her breach of contract claim against Defendants Wells Fargo and FHLMC, whom she alleges were the lenders during the relevant time period. Specifically, Plaintiff says that the ownership of her loan changed from Wells Fargo to FHLMC at some point, but that Wells Fargo remained the agent of the subsequent lender. Am. Compl. ¶ 52. She claims that the Deed of Trust dated December 14, 2009 is the relevant contract and that it was improperly breached in six different ways:
1) Wells Fargo required Plaintiff to submit monthly payments in an amount that exceeded the agreed-upon amount.
2) Wells Fargo required Plaintiff to make payments into an escrow account although the loan was to be without escrow.
3) Wells Fargo invoked the power of sale even though the contract gives that sole power to the actual lender and it only may be exercised in the event of a default.
4) Neither the lender nor the agent of the lender sent Plaintiff the notice of default, right to cure, acceleration, or foreclosure.
5) Wells Fargo failed to provide Plaintiff with notice that she had a right to bring a cause of action to dispute the default.
6) Wells Fargo and FHLMC improperly sold Plaintiffs home in foreclosure where the only default was itself created by Wells Fargo.
Am. Compl. ¶¶ 50, 53-58. Defendants contend that all of these allegations fail to
Under Virginia law, a viable breach ■ of contract claim has three elements: “(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant’s violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Filak v. George,
The Court will first address Plaintiffs second contention regarding the payment of escrow, as it will be relevant to considering Plaintiffs first contention. Section 1 of the Deed of Trust states:
1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charges. Borrower shall pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. Borrower shall also pay funds for Escroiv Items pursuant to Section 3....
Am. Compl., Ex. C, at 4 (emphasis added). Section 3, in turn, provides:
3. Funds for Escrow Items. Borrow shall pay to Lender on the day Periodic Payments are due under the Note, until the Note is paid in fill, as sum (the “Funds”) to provide for payments of amounts due for: (a) taxes and assessments and other items which can attain priority over this Security Instrument as a lien or encumbrance on the Property; (b) leasehold payments or ground rents on the Property, if any; (c) premiums for any and all insurance required by Lender under Section 5; and (d) Mortgage Insurance premiums, if any.... These items are called “Escrow Items.” At origination or at any time during the term of the Loan, Lender may require that Community Association Dues, Fees, and Assessments, if any, be escrowed by Borrower, and such dues, fees and assessments shall be an Escrow Item. Borrower shall promptly furnish to Lender all notices of amounts to be paid under this Section. Borrower shall pay Lender the Funds for Escrow -Items unless Lender waives Borrower’s obligation to pay the Funds for any or all Escroiv Items. Lender may waive Borrower’s obligation to pay to Lender Funds for any or all Escrow Items at any time. Any such waiver may only be in writing....
If there is a surplus of Funds held in escrow, as defined under RE SPA, Lender shall account to Borrower for the excess funds in accordance with RESPA. If there is a shortage of Funds held in escrow, as defined under RESPA, Lender shall notify Borrower as required by RESPA, and Borrower shall pay to Lender the amount necessary to make up the shortage in accordance with RE SPA, but in no more than 12 monthly payments. If there is a deficiency of Funds held in escrow, as defined under RESPA, Lender shall notify Borrower as required by RESPA, and Borrower shall pay to Lender the amount necessary to make up the deficiency in accordance with RE SPA, but in no more than 12 monthly payments.
Upon payment in full of all sums secured by this Security Instrument, Lender shall promptly refund to Borrower any Funds held by Lender.
Id. at 5-6 (emphasis added).
This language disposes of Plaintiffs argument that the contract was breached because she was required to pay escrow. The Deed of Trust clearly states that Plaintiff was to pay escrow to the lender. Section 1 states that Plaintiff “shall also
Plaintiff also claims she “waived” the requirement to pay escrow fees to the lender by not signing an escrow disclosure. Id. at 6. But pursuant to the Deed of Trust, only the lender may waive the requirement to pay escrow and must do so in writing. Finally, Plaintiff points to the provision in the Deed of Trust stating that in the event of a shortage in the escrow fund, the Borrower shall make up the shortage in no more than twelve monthly payments. Accordingly, Plaintiff contends, she was not properly placed in default for failure to pay escrow and should have been allowed to make up payments. But Defendants sent Plaintiff a notice of default when it claimed she was $2,072.06 behind in payments — which was not solely escrow but substantially composed of payment on the interest and principal of the loan. Am. Compl., Ex. K.,
Plaintiffs first ground for breach of contract is that Wells Fargo “breached the contract by requiring Plaintiff to submit monthly payments in an amount that exceeded that which the parties agreed upon.” Am. Compl. ¶ 53. It is not entirely clear what the specific basis of this claim is. To the extent that Plaintiff reiterates that she expected that she would not pay escrow, the Court has already rejected this argument for the reasons explained above. Assuming arguendo that Plaintiff means that the required initial escrow amount of $230.31 per month, Am. Compl. Ex. F, was higher than she had expected, she does not explain how this is a breach of the relevant contract. The Deed of Trust, as quoted above, does not say escrow will be a specific amount, but explains how escrow will be determined and clearly contemplates that it may fluctuate over time. The Amended Complaint does not allege that escrow was improperly calculated using expenses not listed as “Escrow Items” in the Deed of Trust. Re-latedly, Plaintiff also alleges that what the exact escrow payments would be was not disclosed to her at all at the time of refinancing, Opp. at 4, but she does not point to a specific provision of the Deed of Trust that was violated by the lack of initial disclosure.
Plaintiff may mean that whatever the cause, her monthly payment went up when she expected it to go down because the refinancing lowered her interest rate by 0.5%, and that this amounts to a breach of contract. Am. Compl. ¶¶ 13-14. But any such assertion is so vague and unclear as to fail federal pleading standards. Exhibits attached to the Amended Complaint indicate that Plaintiffs monthly payment under her prior mortgage might have been $1,588.22, of which $230.31 was escrow,* id. Ex. E, or $1,485.87, including an unspecified amount of escrow, id. Ex. A. (The Amended Complaint asserts it is the latter amount. Id. ¶ 2.) The Initial Escrow Account Disclosure for the new loan indicated that Plaintiffs new monthly payment after the refinancing would be $1,482.27, including a principal of $1,251.96 and escrow of $230.31. Because of an escrow shortage, that amount increased in March 2010 to $1,501.41. Id. Ex. F. In sum, it is unclear whether the total monthly payments reflecting principal, interest, and escrow .in
Third, Plaintiff argues that Sections 16(c) and 22 of the Deed of Trust allow only fhe lender to invoke the power of sale,
But Plaintiff elsewhere alleges multiple times in the Amended Complaint that Wells Fargo was acting’ “as agent for the true lender” and “at all times represented itself as the owner of the indebtedness.” Am. Compl. ¶¶ 40, 52-54. And under Virginia law, “[t]he doctrine of principal and agent — whether disclosed or undisclosed — recognizes that privity of contract exists. The act of the agent is the act of the principal.” Harris v. McKay,
A final component of Plaintiffs fourth breach of contract claim is that she received a notice of default (on June 13, 2010) when she was not yet in default. Am Compl. ¶ 23, 56. She avers this is so because Wells Fargo was demanding unwarranted sums from her. But as the Court has already held, requiring escrow was not in violation of the Deed of Trust, and Plaintiff herself acknowledges that she never paid escrow. Am. Compl. ¶¶ 5, 15
Fifth, Plaintiff alleges that one of the notices she received was substantively inadequate. Specifically, she contends that she “was not informed that she had a right to bring a cause of action to dispute the default or assert defenses to acceleration.” Am. Compl. ¶ 57. She states that such notices were required by Section 22 of the Deed of Trust. Portions of that Section are illegible, but as best the Court can discern, the relevant part of that Section provides:
Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to any acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date [stated in] the notice, Lender at its option may require immediate payment in full of all sums secured by the Security Instrument without further demand and may invoke the power of sale and any other [remedy] permitted by Applicable Law....
Am. Compl., Ex. C (emphasis added). But ■ as the Amended Complaint itself acknowledges, Wells Fargo sent Plaintiff a letter dated June 13, 2010, informing her that she was in default and giving her 30 days to cure it. Am. Compl. ¶ 23 (citing Ex. K). It further informed her that if she did not pay the $2,072.06 that was owed, Wells Fargo would proceed with acceleration and could proceed to foreclosure. It also noted, “[i]f foreclosure is initiated, you have the right to argue that you did keep your promises and agreements under the Mortgage Note and Mortgage, and to present any other defenses that you may have.” Further, it told her of the right to reinstatement: “You have the right to reinstate your Mortgage Note and Mortgage or Deed of Trust after acceleration, and to have enforcement of the Mortgage discontinued and to have the Mortgage Note and Mortgage remain fully effective as if acceleration had never been required.” Am. Compl., Ex. K.
While the letter informed Plaintiff that she could make certain arguments and raise defenses if the Lender initiated a foreclosure, that is different from informing her that she herself could initiate a court action to prevent acceleration or foreclosure before those processes even occurred. This is particularly so when the lender chooses to utilize nonjudicial foreclosure proceedings, as Wells Fargo did here. Am. Compl. ¶ 96. The Court recognizes that another case in this District has reached the opposite conclusion based on identical language in both the Deed of Trust and the notice letter, reasoning that the letter was the “functional equivalent” of what the Deed of Trust required See Matanic v. Wells Fargo Bank, N.A., No. 3:12cv472,
The Amended Complaint’s sixth and final breach of contract claim is that it was a breach of contract to sell Plaintiffs home at foreclosure, as there was no legitimate default existing at the time. The last payment that Plaintiff claims she made was in May, 2010. Am. Compl. ¶ 22. Even prior to then, she states that she was not paying escrow. Id. ¶ 15. The foreclosure sale did not occur until over a year later. It is abundantly clear that Plaintiff was in default because she did not make the required payments. Therefore, the Court concludes that Plaintiff has failed to plead a standalone claim that foreclosure was inappropriate because there was no default. This conclusion does not, however, necessarily impact her potential remedies for other viable claims.
For the reasons stated above, Defendants’ Motion to Dismiss Count I, the breach of contract claim, is DENIED as to the specific claim identified in Paragraph 57 of the Amended Complaint, and GRANTED as to the remaining breach of contract claims.
B. Count II: Breach of Fiduciary Duty
Plaintiffs second claim is for breach of fiduciary duty against Defendant Samuel I. White, P.C. (“the White firm”). The Deed of Trust lists the White firm as the trustee, Plaintiff as the trustor, and Wells Fargo as the beneficiary. Am. Compl., Ex. C. Plaintiff contends that the White firm breached its fiduciary duty because it: 1) failed to perform its duties with reasonable care because it sent foreclosure notices when Plaintiff was not in default, Am. Compl. ¶ 62; 2) proceeded to the foreclosure sale even though the Note was lost, in violation of Va.Code § 55-59.1, Am. Compl. ¶¶ 63-64; 3) failed to disclose to Plaintiff the true identity of the Lender, Am. Compl. ¶¶ 65-71; 4) failed to investigate Plaintiffs claims of error, Am. Compl. ¶¶ 72-73; and 5) failed to act impartially, placing its own interests before Plaintiffs, Am. Compl. ¶ 74.
Defendants contend that under Virginia law, the duties of a trustee are limited to those in the Deed of Trust, and that none of the above violations are grounded in that document. Plaintiffs respond that a trustee has common law duties outside of the deed of trust. This dispute reflects somewhat conflicting statements in Virginia case law. Virginia courts have frequently noted that the duties of a trustee are limited and defined by the deed of trust. E.g., Warner v. Clementson,
However, Virginia courts have also repeatedly noted that a trustee named in a deed of trust is a fiduciary for both the debtor and the creditor. Whitlow v. Mountain Trust Bank,
The Court finds that the only common law duty consistently recognized by the Virginia Supreme Court with respect to the trustee for a Deed of Trust security real property is a duty of impartiality. Specifically, in Whitlow, the court concluded that when the named trustee in the deed of trust owned a substantial amount of stock in the corporation which purchased the home at the foreclosure, the foreclosure sale must be set aside bepause the trustee did not “refrain from placing himself in a position where his personal interest conflicts with the interests of those for whom he acts as a fiduciary.”
Plaintiffs remaining fiduciary claim against the White firm is that it proceeded to foreclose without providing an affidavit of a lost note pursuant to Va.Code § 55-59.1. That provision says that if a note secured by a deed of trust is lost and the trustee is made aware of that loss by an affidavit sent by the beneficiary, the trustee may nonetheless proceed to sale as long as they have given proper notice to the debtor. Plaintiff alleges in the Amended Complaint that she did indeed receive notice of the lost note, Am. Compl. ¶ 26. Her claim is only that the trustee did not receive an affidavit to that effect, even though the letter the White firm sent her stated that Wells Fargo had requested it to send her the notice. Id. Ex. M. Even assuming that the statute gives rise to a fiduciary duty, Plaintiff has failed to plead how she was injured by that breach given that she received notice. See Sun Hotel, Inc. v. SummitBridge Credit Investments III, LLC, 86 Va.Cir. 189,
For the reasons just discussed, Defendants’ Motion to Dismiss Count II is GRANTED.
C. Count III: Tortious Interference with Contract
In her Opposition, Plaintiff'Stated that she was withdrawing this claim. Accordingly, Defendants’ Motion to Dismiss Count III is GRANTED.
D. Count IV: Equitable Action to Rescind Foreclosure
Plaintiffs fourth claim is entitled, “Equitable Action to Rescind Foreclosure.” As a basis for “rescission,” Plaintiff recites the wrongs alleged in the breach of contract and breach of fiduciary claim: requiring more than was due per the parties’ contract, an inadequate notification of Plaintiffs right to cure, an undisclosed change in lenders, notices sent from the incorrect party, and the lost note issue. The Court has already dismissed all of these underlying claims except for the breach of contract claim stemming from inadequate notification of Plaintiffs right to cure. For this reason, the question is whether the foreclosure may be set aside as an equitable remedy for that condition precedent to the sale not being satisfied.
Defendants contend that Virginia courts do not recognize the remedy of equitable rescission of foreclosure. But Virginia courts have, in equity, recognized claims to aside foreclosure sales after they occur because of some problem with the sale.
It may very well be that equity would not support setting aside the foreclosure sale for the allegedly faulty notice in these circumstances. E.g., In re Tr.’s Sale of Prop. of Brown, 67 Va.Cir. 204,
E. Count V: Abuse of Process
Plaintiffs final claim is for abuse of process against Wells Fargo for utilizing nonjudicial foreclosure for an improper purpose. Under Virginia law, “abuse of process lies for the improper use of process after it has been issued.” Donohoe Constr. Co., Inc. v. Mount Vernon Assocs.,
F. Compensatory Damages
Defendants also allege that the Court should strike Plaintiffs request for compensatory damages because she fails to offer any factual or legal support for her demands for damages and fails to demand a specific amount of damages. In light of the remaining breach of contract claim which may entitle Plaintiff to damages if successful, and because there is no requirement that Plaintiff specifically allege an amount of compensatory damages at this stage, the Court declines to grant Defendants’ request.
IV. CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss is GRANTED IN PART AND DENIED IN PART. Counts II, III and V of the Amended Complaint are DISMISSED. Count I is DISMISSED IN PART.
The Court DIRECTS the Clerk to send a copy of this Order to the parties.
IT IS SO ORDERED.
Notes
. Section 22 of the copy of the Deed of Trust attached to the Amended Complaint is illegible in parts, so the Court will assume for the purposes of this Order that it says what Plaintiffs claims it says.