Lyons v. Federal National Mortgage Asscociation

          MEMORANDUM AND ORDER ON MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         Plaintiff Leonard Lyons brings this action against Ditech Financial LLC (“Ditech”), the servicer of his mortgage, and Federal National Mortgage Association (“Fannie Mae”), the holder of his mortgage (collectively, “Defendants”), for a declaratory judgment and monetary damages arising out of Ditech's servicing of Plaintiff's mortgage loan. [ECF No. 26]. The Amended Complaint alleges five counts: a claim under “Consumer Protection Law” against Defendants (Count I); a claim under the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 (“RESPA”) against Ditech (Count II); a declaratory judgment that Defendants have not strictly complied with Plaintiff's mortgage terms (Count III); a claim for breach of contract against Defendants (Count IV); and, a claim for breach of the covenant of good faith and fair dealing against Defendants (Count V). [ECF No. 26 ¶¶ 21-51 (“Amended Complaint” or “Am. Compl.”)]. Pending before the Court is Defendants' motion to dismiss Counts I and II pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 29]. For the following reasons, the Defendants' partial motion to dismiss, [ECF No. 29], is GRANTED in part, and Counts I and II are dismissed as against Fannie Mae.^[1]

         I. BACKGROUND

         The following facts are drawn from the Amended Complaint, the well-pleaded allegations of which are taken as true for purposes of evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). Certain details are also culled from documents sufficiently referred to in the Amended Complaint or attached thereto. Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 542 F.3d 315, 321 (1st Cir. 2008); Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).

         Plaintiff purchased his current house at 61 Court Road, Braintree, MA in 2004. [Am. Compl. ¶ 7]. On October 22, 2007, he executed a promissory note for $344, 000, secured by a mortgage on his residence.^[2] [ECF No. 26-1]. Plaintiff alleges that Fannie Mae is the current holder of his mortgage loan and that Ditech is its current servicer. [Am. Compl. ¶¶ 8-9].

         In 2012, Plaintiff filed for bankruptcy. [Id. ¶ 10]. After the bankruptcy case concluded, Plaintiff attempted to make mortgage payments. [Id.]. He received loan documents from Ditech that informed him that no amount was due on the mortgage loan, but his credit report indicated that Ditech had reported the mortgage loan as 90-days delinquent. [Id. ¶¶ 11-12].

         On October 12, 2016, Plaintiff sent a letter to Ditech with a payment for four months of the outstanding balance of his mortgage loan. [Id. ¶ 13; ECF No. 26-2]. The letter was addressed to Ditech, P.O. Box 94710, Palatine, IL 60094-4710, with copies to Ditech, P.O. Box 6172, Rapid City, S.D. 57709-6172, and Ditech Financial LLC, 1100 Virginia Drive, Suite 100A, Fort Washington, PA, 19034. [ECF No. 26-2]. The letter contained Plaintiff's name and loan number and indicated the discrepancy between Plaintiff's credit report, which reported a 90-day delinquency on the mortgage loan, and the documents Ditech sent Plaintiff, which stated that there was no balance due on the same mortgage loan. [ECF No. 26-2]. Plaintiff's letter enclosed an “Information Billing Statement” that provided a “Designated Address for Qualified Written Requests, Notices of Error and Requests for Information” under the heading “Other Important Information Regarding Your Account.” [ECF No. 29 at 84-85].^[3] The “Designated Address” was Ditech Financial LLC, P.O. Box 6176, Rapid City, S.D. 57709-6176. [Id. at 85]. Plaintiff requested that Ditech “clarify for [him] the status of [his] account, and what steps must be taken to see this resolved.” [Id. at 82]. Ditech responded to Plaintiff's October 12, 2016 letter on October 20, 2016, stating that it was looking into the matter and indicating that Plaintiff could expect to receive a written response within 30 days. [Am. Compl. ¶ 14; ECF No. 26-3]. Ditech did not provide any further response. [Am. Compl. ¶ 14].

         Plaintiff sent four follow up letters to Ditech between November 2016 and July 2017, each addressed to the same three Ditech locations as the October 12, 2016 letter. [Id. ¶ 16; ECF No. 26-4]. Ditech did not respond. [Am. Compl. ¶ 16]. Instead, on or around August 10, 2017, Plaintiff received a notice informing him of his right to cure his mortgage default within 90 days. [Id. ¶ 17; ECF No. 26-5]. According to the notice, the past due amount on the mortgage loan was $37, 617.05, [ECF No. 26-5], but this letter did not account for Plaintiff's October 12, 2016 payment on the mortgage, [Am. Compl. ¶ 17].

         Defendants' failure to address Plaintiff's concern about his mortgage or to verify Plaintiff's mortgage debt allegedly caused increased service charges and accrued interest on Plaintiff's mortgage loan, damaged his credit score, and required him to spend time and expense addressing the issue. [Id. ¶ 25]. In October 2017, Plaintiff sent Ditech a demand letter under “Consumer Protection Law.” [Id. ¶ 19]. Ditech responded in November 2017. [Id. ¶ 20].

         On February 2, 2018, Plaintiff filed this action in the Superior Court of Norfolk County. [ECF No. 1-1]. Defendants removed the action to this Court on February 26, 2018. [ECF No. 1]. Defendants later moved to dismiss the complaint, [ECF No. 14], and Plaintiff responded by filing an Amended Complaint on June 22, 2018, [ECF No. 26].

         On July 12, 2018, Defendants moved to partially dismiss the Amended Complaint. [ECF No. 29]. Plaintiff opposed the motion on July 26, 2018. [ECF No. 33]. On February 11, 2019, Ditech filed for Chapter 11 bankruptcy, which triggered an automatic stay that prohibits further litigation of Counts I and II as against Ditech at this time. See supra n.1; [ECF No. 38 at 1-2].

         II. LEGAL STANDARD

         On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff's theory, and draw all reasonable inferences from those facts in favor of the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, the complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory, ” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (internal quotations and citations omitted). The facts alleged must be sufficient to “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly, 550 U.S. at 570).

         When assessing the sufficiency of a complaint, the Court first “separate[s] the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the Court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224). “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 ...