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Traut v. Quantum Servicing Corp.

United States District Court, D. Massachusetts

August 4, 2016

CONRAD S. TRAUT and CELINA M. TRAUT, Plaintiffs
v.
QUANTUM SERVICING CORPORATION, RESIDENTIAL CREDIT SOLUTIONS, INC., RUSHMORE LOAN MANAGEMENT SERVICES LLC, ELIZON MASTER PARTICIPATION TRUST I and U.S. BANK TRUST N.A., Defendants.

          MEMORANDUM & ORDER

          Nathaniel M. Gorton United States District Judge

         Conrad and Celina Traut (collectively, “plaintiffs”) bring this action against Quantum Servicing Corporation (“Quantum”), Residential Credit Solutions, Inc. (“RCS”), Rushmore Loan Management Services LLC (“Rushmore”), Elizon Master Participation Trust I (“Elizon”) and U.S. Bank Trust N.A. (“US Bank”)(collectively, “defendants”) seeking injunctive relief and civil damages for defendants’ alleged conduct with respect to plaintiffs’ residential mortgage. Pending before the Court are RCS’s motion for judgment on the pleadings and Rushmore’s motion for partial dismissal. For the reasons that follow, Rushmore’s motion will be denied and RCS’s motion will be allowed, in part, and denied, in part.

         I. Background

         Plaintiffs own a residence in Sharon, Massachusetts. RCS is a Delaware corporation with a principal place of business in Texas. Rushmore is a limited liability company registered as a foreign entity in Massachusetts whose members apparently reside in California. Both defendants provide loan servicing services on behalf of mortgage creditors.

         In 2007, plaintiffs executed a note and 30-year mortgage with American Home Mortgage (“AHM”) to secure a loan in the amount of $415, 200. The terms of the mortgage included a low introductory interest rate, an initial monthly payment of less than full interest and a subsequent rate increase set only to repay accrued interest.

         In July, 2010, plaintiffs made a late payment due to financial hardship. Quantum, as the loan servicer, marked the loan delinquent and threatened foreclosure. Plaintiffs allege that they attempted to make subsequent payments but such efforts were rejected by Quantum. They also allege that they applied for multiple loan modifications throughout 2011. In December, 2011 those efforts resulted in receipt of a forbearance agreement and letter indicating that plaintiffs’ loan would be modified “upon completion of the 6 month trial plan agreement.” Despite confusion over the forbearance agreement and the modification approval, plaintiffs executed the document to prevent an imminent foreclosure sale. Quantum nevertheless auctioned plaintiffs’ residence but rescinded the sale after plaintiffs’ counsel threatened legal action.

         In August, 2012, RCS succeeded Quantum as the loan servicer. Plaintiffs allege that RCS did not credit some of their previous payments to Quantum on the loan. As a result, plaintiffs stopped making payments in September, 2012. They attempted to apply for a loan modification for nearly two years and resubmitted multiple applications and documents at RCS’s request. Plaintiffs did not, however, receive a modification.

         In December, 2014, Elizon became the loan creditor and Rushmore assumed loan servicing. Rushmore notified plaintiffs in February, 2015 that the loan was in foreclosure. Throughout the spring of 2015, Rushmore was in contact with plaintiffs. In May, 2015, plaintiffs’ counsel sent Rushmore a cease and desist letter advising Rushmore that all further communications should be made through plaintiffs’ counsel. They also sent a demand letter to Quantum, RCS and Rushmore in May, 2015 pursuant to Mass. Gen. Laws ch. 93A. Plaintiffs continued to receive communications from Rushmore through October, 2015.

         In September, 2015, plaintiffs initiated this action by filing a complaint against defendants alleging 1) breach of contract by Quantum, RCS, Rushmore and Elizon, 2) promissory estoppel against Quantum, RCS, Rushmore and Elizon, 3) negligent misrepresentation by Quantum, 4) violations of the Fair Debt Collection Practices Act (“FDCPA”) by Quantum, RCS and Rushmore and 5) violations of Mass. Gen. Laws ch. 93A (“Chapter 93A”) by Quantum, RCS, Rushmore and Elizon.

         II. Rushmore’s Motion to Dismiss and RCS’s Motion for Judgment on the Pleadings

         Rushmore filed a motion to dismiss, in part, pursuant to Fed.R.Civ.P. 12(b)(6) with respect to the breach of contract claim in Count I and the promissory estoppel claim in Count II. Rushmore filed that motion with its answer to the complaint so the Court will treat it as a motion for judgment on the pleadings. See Lu v. Menino, 98 F.Supp.3d 85, 93 (D. Mass. 2015)(reviewing a 12(b)(6) motion filed after the submission of an answer under the 12(c) standard).

         Similarly, RCS filed a motion for judgment on the pleadings pursuant to Rule 12(c) with respect to the breach of contract claim in Count I, the promissory estoppel claim in Count II, the Fair Debt Collection Practices Act (“FDCPA”) claim in Count IV and the Chapter 93A claim in Count V.

         A. Legal Standards

         A motion for judgment on the pleadings under Rule 12(c) “is treated much like a Rule 12(b)(6) motion to dismiss.” Perez- Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008). While it differs from a Rule 12(b)(6) motion insofar as it is filed after the close of the pleadings and considers the factual allegations in both the complaint and answer, a Rule 12(c) motion for judgment on the pleadings is governed by the same standard. See Perez-Acevedo, 520 F.3d at 19; Santiago v. Bloise, 741 F.Supp.2d 357, 360 (D. Mass. 2010).

         To survive a motion to dismiss, the subject pleadings must contain sufficient factual matter to state a claim for relief that is actionable as a matter of law and is “plausible on its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). For a claim to be facially plausible, the pleadings must show “more than a sheer possibility that a defendant has acted unlawfully.” Id. Plaintiffs cannot merely restate defendants’ potential liability. Id.

         In considering the merits of these motions, the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs’ favor. See Lu, 98 F.Supp.3d at 93. Moreover, the Court should “treat any allegations in the answer that contradict the complaint as false.” Id. at 94. The Court may also consider certain documents when 1) the documents’ authenticity is not disputed by the parties, 2) the documents are “central to the plaintiffs’ claim” or 3) the documents are “sufficiently referred to in the complaint.” Curran v. Cousins, 509 F.3d 36, 44 (1st Cir. 2007).

         B. Application

         1. Breach of Contract Claim (Count I) Against Rushmore & RCS

         In Count I, plaintiffs allege that RCS and Rushmore breached the terms of a 2011 trial plan or forbearance agreement entered between plaintiffs and Quantum (“the Agreement”). In accordance with Massachusetts law, plaintiffs must make the following four showings of fact to allege a breach of contract: 1) a valid contract existed between the parties, 2) plaintiffs were ready, willing, and able to perform under the contract, 3) defendants breached the contract and 4) ...


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