Opinion
2:23-cv-01443-RMG-MGB
04-10-2024
Angela Nolan, Plaintiff, v. U.S. Bank National Association, as Trustee for the C-Bass Mortgage Loan Asset-Backed Certificates, 2006-RP2; Brock &Scott, PLLC; PHH Corporation; Leonard Berry; and Aames Funding Corporation, d/b/a Aames Home Loan, Defendants.
REPORT AND RECOMMENDATION
MARY GORDON BAKER, UNITED STATES MAGISTRATE JUDGE
Angela Nolan (“Plaintiff”), proceeding pro se and in forma pauperis, brings this civil action challenging the foreclosure and sale of certain property located at 184 Harley Circle in Berkeley County, South Carolina (the “Property”). This matter is before the Court upon a Motion to Dismiss filed by Defendants PHH Corporation and U.S. Bank National Association (“Defendants”). (Dkt. No. 30.) Under 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B)(2) (D.S.C.), the undersigned is authorized to review this case and submit a recommendation to the assigned United States District Judge. For the reasons discussed below, the undersigned recommends the Court deny Defendants' Motion.
BACKGROUND
On November 8, 1999, Plaintiff's mother (“Ruth Spann”) executed a note in favor of Aames Funding Corporation (“Aames”) for $25,000 with an interest rate of 15.5% per annum (the “Note”), securing its repayment through a mortgage on the Property in Berkeley County, South Carolina (the “Mortgage”).(Case No. 2021-CP-08-2599; see also Dkt. No. 9 at 3.) The Mortgage was later assigned to the Chase Manhattan Bank as recorded on October 10, 2000, and then to U.S. Bank National Association (“U.S. Bank”) as recorded on February 27, 2007. (Case No. 2599; see also Dkt. No. 9 at 3-4.)
For purposes of background, the undersigned takes judicial notice of the underlying state foreclosure action involving the Property, U.S. Bank National Association v. Spann-Matthew, Case No. 2021-CP-08-02599 (Oct. 26, 2022). See Public Index, https://www.sccourts.org/casesearch/ (limiting search to Berkeley County) (last visited Jan. 22, 2024); see also Aloe Creme Labs., Inc. v. Francine Co., 425 F.2d 1295, 1296 (5th Cir. 1970) (noting that a federal court may take judicial notice of the contents of its own records, as well as those records and proceedings of other courts); Tisdale v. South Carolina Highway Patrol, No. 0:09-cv-1009-HFF-PJG, 2009 WL 1491409, at *1 n.1 (D.S.C. May 27, 2009), aff'd, 347 Fed.Appx. 965 (4th Cir. Aug. 27, 2009) (noting that the court may also take judicial notice of factual information located in postings on government web sites).
According to state court records, Ruth Spann conveyed the Property to Plaintiff by virtue of a deed recorded January 10, 2013, and passed away shortly thereafter. (Case No. 2599; see also Dkt. No. 9 at 4.) Payments on the loan apparently fell into default on or around May 1, 2015, and the U.S. Bank initiated a foreclosure action against Plaintiff in the Berkeley County Court of Common Pleas on December 15, 2021. (Case No. 2599; see also Dkt. No. 9 at 4.) On October 26, 2022, the Master-in-Equity entered an Order and Judgment of Foreclosure and Sale, and Plaintiff filed a notice of appeal with the South Carolina Court of Appeals on November 21, 2022. (Case No. 2599; see also App. Case No. 2022-1645.) The appeal was ultimately dismissed for failure to file a copy of the notice of appeal with the lower court and pay the appellate filing fee. (App. Case No. 1645.) The Property was eventually sold at public auction to buyer Leonard Berry (“Berry”) on February 1, 2023. (Case No. 2599; see also Dkt. No. 9 at 4.)
The undersigned also takes judicial notice of Plaintiff's appellate action, U.S. Bank National Association v. Spann-Matthews, App. Case No. 2022-001645 (May 9, 2023). See South Carolina Appellate Case Management System, https://www.sccourts.org/ACMS/ (last visited Jan. 22, 2024).
On February 9, 2023, Plaintiff obtained a “Forensic Loan Audit and Securitization Analysis” on the subject Property, which concluded that “U.S. Bank never proved its entitlement to enforce the terms of the Note and Mortgage.” (Dkt. No. 9 at 4-5; see also Dkt. Nos. 9-2, 9-3.) According to the purported audit, while the Mortgage had been reassigned several times, it was unclear as to whether the Note had been properly endorsed; in other words, there was “no evidence of a simultaneous transfer or assignment of the underlying Note and Mortgage/Deed of Trust.” (Dkt. No. 9 at 4.) Plaintiff therefore argues that the assignment of the Mortgage should “be rendered null and void without a corresponding endorsement of the [N]ote.” (Id. at 5.)
The Amended Complaint named as Defendants Aames; U.S. Bank; PHH Corporation; Brock & Scott, PLLC; and Berry, alleging six causes of action. (Dkt. No. 9.) On January 22, 2024, the undersigned issued a Report and Recommendation (“R&R”) recommending that Counts I, II, III, IV, and V were subject to summary dismissal and Count VI was subject to summary dismissal against all Defendants except U.S. Bank and PHH Corporation. (Dkt. No. 18.) The District Judge adopted the R&R on February 14, 2024, and Aames; Brock & Scott, PLLC; and Berry were dismissed. (Dkt. No. 26.) Relevant here, the only remaining claim, Count VI, alleges a violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 (“RESPA”). (Dkt. No. 9 at 13-14.)
On February 23, 2024, Defendant PHH Corporation and U.S. Bank filed a Motion to Dismiss. (Dkt. No. 30.) On February 26, 2024, this Court issued an Order pursuant to Roseboro v. Garrison, 528 F.2d 309 (4th Cir. 1975), advising Plaintiff of the dismissal procedure and the possible consequences if she failed to adequately respond to Defendants' Motion. (Dkt. No. 31.) Plaintiff filed his response in opposition on March 27, 2024, to which Defendants filed a reply on April 2, 2024. (Dkt. Nos. 33; 34.) Defendants' Motion is fully briefed and ripe for disposition.
STANDARD
On a motion to dismiss pursuant to Rule 12(b)(6), a “complaint must be dismissed if it does not allege ‘enough facts to state a claim to relief that is plausible on its face.'” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “In reviewing a motion to dismiss an action pursuant to Rule 12(b)(6) . . . [a court] must determine whether it is plausible that the factual allegations in the complaint are ‘enough to raise a right to relief above the speculative level.'” Andrew v. Clark, 561 F.3d 261, 266 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 555). “A plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).
For purposes of a motion to dismiss, the district court must “take all of the factual allegations in the complaint as true.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “In considering a motion to dismiss, [the court] accept[s] the complainant's well-pleaded allegations as true and view[s] the complaint in the light most favorable to the non-moving party.” Stansbury v. McDonald's Corp., 36 Fed.Appx. 98, 98-99 (4th Cir. 2002) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). However, while the court must draw all reasonable inferences in favor of the plaintiff, it need not accept the “legal conclusions drawn from the facts, . . . unwarranted inferences, unreasonable conclusions or arguments.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009) (citing Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); Giarratano, 521 F.3d at 298).
Because Plaintiff is representing herself, these standards must be applied while liberally construing her filings in this case. See Erickson v. Pardus, 551 U.S. 89, 94 (2007).
DISCUSSION
Count VI of the Amended Complaint is based on Defendants' alleged failure to adhere to the requirements of the error resolution procedures set forth in RESPA and its implementing regulation, 12 CFR § 1024 et seq. (“Regulation X”). (Dkt. No. 9 at 13-14.) RESPA “provides that loan servicers have a duty to respond to any [qualified written request] received from borrowers ‘for information relating to the servicing of the loan.'” See Morgan v. Caliber Home Loans, Inc., 26 F.4th 643, 648 (4th Cir. 2022) (citing § 2605(e)); see also 12 CFR § 1024.35(a) (explaining that a servicer must comply with the requirements of this section for any written notice from the borrower that asserts an error relating to the servicing of the borrower's mortgage loan). In the Amended Complaint, Plaintiff alleges she sent “Defendants” a second “Conditional Acceptance correspondence” on April 8, 2021, and a “Final Assessment and Tender of Instrument document” on September 15, 2022, but “[n]o defendant responded.” (Dkt. No. 9 at 13.) Plaintiff suggests that these communications-which expressed her “disagreement . . . with the alleged default on the subject [P]roperty”-constituted qualified written requests for purposes of RESPA, and that Defendants' failure to respond violated the same. (Id.)
In their Motion to Dismiss, Defendants argue Plaintiff's RESPA claim fails as a matter of law because Plaintiff “lacks standing to enforce the provisions of RESPA since she is not a ‘borrower.'” (Dkt. No. 30 at 1.) Alternatively, Defendants argue the RESPA claim against U.S. Bank fails as a matter of law because U.S. Bank “was not the loan's servicer.” (Id.) The undersigned considers these arguments, below.
1. Standing
As discussed above, Defendants first argue that Plaintiff lacks standing because she is not a borrower as contemplated under RESPA. (Dkt. No. 30 at 4-5.)
Under the RESPA, civil liability is limited to “borrowers”: “[w]hoever fails to comply with any provision of this section shall be liable to the borrower for each such failure . . .” 12 U.S.C. § 2605(f). In determining whether a person meets the definition of a “borrower” under the RESPA, “[c]ourts have held that a person who did not sign the promissory note is not a ‘borrower' for the purposes of RESPA because that individual has not assumed the loan.” Robinson v. Nationstar Mortg. LLC, No. TDC-14-cv-3667, 2019 WL 4261696, at *6 (D. Md. Sept. 9, 2019) (internal quotation and citation omitted); see also Kelly v. Nationstar Mortg., LLC, No. 2:20-cv-24, 2020 WL 6790989, at *4 (E.D. Va. July 14, 2020) (dismissing RESPA claim when complaint failed to allege the plaintiffs assumed the mortgage loan-even though the complaint showed the plaintiffs “purchased the property subject to a mortgage and paid on that mortgage obligation”).
Under amendments to Regulation X promulgated by the Consumer Financial Protection Bureau, which became effective on April 19, 2018, the term “borrower” includes a “confirmed successor in interest.” See Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 81 Fed.Reg. 72160 (Oct. 19, 2016). Thus, both borrowers and confirmed successors in interest may assert their rights against servicers for RESPA violations. The regulations define the term “successor in interest” as:
a person to whom an ownership interest in a property securing a mortgage loan . . . is transferred from a borrower, provided that the transfer is:
(1) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(2) A transfer to a relative resulting from the death of a borrower;
(3) A transfer where the spouse or children of the borrower become an owner of the property;
(4) A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property; or
(5) A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
12 C.F.R. § 1024.31. A successor in interest becomes “confirmed” when “a servicer has confirmed the successor in interest's identity and ownership interest in a property that secures a mortgage loan . . . .” Id.
Upon careful review, Plaintiff does not allege in the Amended Complaint that she signed the promissory note securing the Mortgage. She does claim, however, that she “has an interest in the subject property and thus an interest in the underlying loan/Note/Mortgage encumbering the subject property.” (Dkt. No. 33 at 5.) Indeed, it appears Plaintiff meets the definition of a “successor in interest” under § 1024.31 given that she obtained an ownership interest in the Property upon a transfer “where the . . . child[] of the borrower bec[a]me an owner of the property.” And her alleged qualified written requests were submitted after the amendment pertaining to confirmed successors in interest went into effect.
Notably, Defendants do not acknowledge Plaintiff's potential qualification as a confirmed successor in interest pursuant to the April 2018 amendment. Because Defendants do not specifically dispute Plaintiff's status as a confirmed successor in interest,and because it appears Plaintiff may meet this definition, the undersigned finds it would be premature to dismiss Plaintiff's claim for lack of standing at this stage in the proceedings. See Weber v. Wells Fargo Bank, N.A., No. 3:20-cv-48, 2021 WL 833949, at *7 (N.D. W.Va. Mar. 4, 2021) (Plaintiff's appointment as the administrator of her deceased spouse's estate and inheritor of the entire estate “confirms Plaintiff as a successor in interest under 12 C.F.R. § 1024(d). Therefore, Plaintiff has pled or sufficient information is properly in the record before the Court to state a plausible claim under RESPA.”). Accordingly, the undersigned recommends the Court deny Defendants' Motion to Dismiss on this basis.
In their Motion, Defendants cite a case from the Northern District of Texas to argue that “[m]erely having inherited an interest in the Subject Property does not transform Plaintiff into a ‘borrower' under RESPA.” (Dkt. No. 30 at 4 (citing Lackie v. PHH Mortg. Corp., No. 3:17-cv-377-BT, 2018 WL 4409799, at *2 (N.D. Tex. Sept. 17, 2018) (“Not even a successor in interest to a deceased borrower has standing to bring RESPA claims where the successor in interest did not sign a promissory note.”).) Here, Defendants rely on case law that does not appear to recognize the 2018 amendment, discussed above.
2. Loan Servicer
In their Motion to Dismiss, Defendants further argue that “U.S. Bank was not the loan's servicer,” and therefore, is not subject to RESPA. (Dkt. No. 30 at 5-6.) Defendants argue that U.S. Bank should therefore be dismissed from this action.
“RESPA's duties to respond to certain qualified written requests applies to servicers of federally regulated mortgage loans, but not merely holders of the promissory notes.” Luther v. Wells Fargo Bank, No. 4:11-cv-00057, 2012 WL 4405318, at *6 (W.D. Va. Aug. 6, 2012), adopted by, No. 4:11-cv-00057, 2012 WL 4405128 (W.D. Va. Sept. 25, 2012). “Servicer” is a defined term under RESPA. A “servicer” is “the person responsible for servicing of a loan,” and “servicing,” in turn, is defined as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan . . . and making payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.” 12 U.S.C. § 2605(i)(2)-(3).
Upon review, the Amended Complaint alleges that PHH Corporation is a “for-profit mortgage servicing company” and that U.S. Bank was assigned the Mortgage. (Dkt. No. 9 at 3.) Construed liberally, Count VI of the Amended Complaint alleges that both U.S. Bank and PHH Corporation were “loan servicer[s]” required to respond to Plaintiff's qualified written requests.
While Defendants assert that U.S. Bank was only a passive mortgage holder, this is not clear from the allegations in the Amended Complaint. At this stage in the proceedings, it is not clear as to whether PHH Corporation was solely responsible for receiving and applying the scheduled periodic mortgage payments. Based on the foregoing, the undersigned cannot find that U.S. Bank was a not a servicer of the loan at issue as a matter of law. Accordingly, the undersigned recommends the Court deny Defendants' Motion to Dismiss on this basis.
CONCLUSION
Based on the foregoing, the undersigned RECOMMENDS Defendants' Motion to Dismiss (Dkt. No. 30) be DENIED.
IT IS SO RECOMMENDED.
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk
United States District Court
Post Office Box 835
Charleston, South Carolina 29402
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).