TOM S. LEE, District Judge.
Plaintiffs Pieter and Lisa Teeuwissen originally filed this action in the Chancery Court of Hinds County, Mississippi on December 7, 2010 seeking, first, to enjoin the imminent foreclosure of their home by defendants JP Morgan Chase Bank, N.A. a/k/a Chase Home Finance, LLC (Chase) and Nationwide Trustee Services, Inc. (Nationwide), and also asserting a variety of claims for affirmative relief relating to Chase's alleged improper handling of their mortgage loan. Plaintiffs were unable to get a hearing scheduled on their request for an injunction prior to the date and time of the scheduled foreclosure,
The Teeuwissens' claims in this case all ultimately stem from Chase's decision in April 2009 to establish an escrow account for the payment of plaintiffs' property taxes on their Jackson, Mississippi home and its eventual foreclosure of their home. While plaintiffs' deed of trust required that their monthly mortgage payment include "a sum ... to provide for payment of amounts due for: (a) taxes and assessments and other items which can attain priority over" the deed of trust as a lien or encumbrance on the property, it provided for a waiver of this requirement, as follows: "Borrower shall pay Lender the Funds for Escrow Items unless Lender waives Borrower's obligation to pay the Funds for any or all Escrow Items." The Teeuwissens had been granted such a waiver. The deed of trust recited:
In March 2009, Chase, which held the note and deed of trust on plaintiffs' Jackson, Mississippi residence, received notice that the 2008 real property taxes on the property were delinquent.
Subsequently, by letter dated April 15, 2009, Mr. Teeuwissen forwarded to Chase a copy of a receipt from the Hinds County Tax Collector reflecting the Teeuwissens' payment at 3:27 p.m. on that date of the outstanding taxes on the subject property,
Thereafter, in July, Chase notified plaintiffs of the amount they were required to pay for escrow. However, taking the position that Chase had no legitimate basis for requiring payment into escrow for taxes since the property tax had already been paid, the Teeuwissens refused to pay the additional amount assessed by Chase for the escrow of property taxes and instead, continued to remit their regular monthly mortgage payment of $739.19. As a result, on September 4, 2009, Chase sent notice to plaintiffs that they were in default on their mortgage. In response, plaintiffs, through their attorney, notified Chase that they disputed Chase's purported attempt to collect and disputed that they were in default. Over the next few months, plaintiffs continued to make the monthly payment of $739.19. And during this time, plaintiffs' attorney repeatedly wrote to Chase, advising that plaintiffs disputed the validity of the debt, as well as Chase's imposition of and/or calculations of escrow. Eventually, according to plaintiffs, Chase informed Mr. Teeuwissen in a December 2009 phone call that it would no longer accept a monthly payment of $739.19, and that, the Teeuwissens would be required to pay the additional amount to cover the escrow for taxes. From that point forward, the Teeuwissens, maintaining their position that Chase had no authority to impose an escrow requirement, stopped making mortgage payments, which ultimately culminated in Chase's proceeding to foreclose on the property.
According to plaintiffs, they learned in late November of 2010 that their property was scheduled to be sold through foreclosure. They allege in this regard that while Chase did not provide them with notice of foreclosure as required by law, they received a solicitation from a third-party law firm in late November 2010 offering to assist them in avoiding foreclosure. This letter prompted them to investigate, and on December 4, 2010, their attorney located a November 30, 2010 publication of a Substitute Trustee's Notice of Foreclosure Sale showing that a foreclosure sale was scheduled for December 21, 2010. The Teeuwissens responded by initiating the present action in Hinds County Chancery Court with the filing of their Complaint for Wrongful Foreclosure, to Set Aside Foreclosure Sale, for Preliminary Injunction (Temporary) Injunction, Permanent Injunction, Accounting and Other Relief.
As previously indicated, the court entered an order on December 23, one day after the foreclosure sale, purporting to
Based on these allegations, plaintiffs have asserted putative claims in this cause for wrongful foreclosure, breach of contract, breach of the covenant of good faith and fair dealing, negligence, failure to provide accounting, misrepresentation, violations of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq., violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., violations of injunction/contempt, declaratory judgment and gross negligence. By its motion, Chase seeks dismissal and/or summary judgment as to each of these claims.
Chase moves for dismissal under Federal of Civil Procedure 12(b)(6) or summary judgment under Rule 56. Under Rule 12(b)(6), a claim should not be dismissed unless the court determines that it is beyond doubt that the plaintiff cannot prove a plausible set of facts that support the claim and would justify relief. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965-66, 167 L.Ed.2d 929 (2007). This does "not require heightened fact pleading of specifics." Id. at 570, 127 S.Ct. 1955. "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955. The court must view the facts in favor of the plaintiff. Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir.2002). The court's analysis on a Rule 12(b)(6) motion is generally confined to a review of the complaint and its proper attachments. Fin. Acquisition Partners v. Blackwell, 440 F.3d 278, 286 (5th Cir.2006). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 546, 127 S.Ct. 1955.
Although Chase primarily argues for dismissal under Rule 12(b)(6), it has moved alternatively for summary judgment. Rule 56 states that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" only if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. When a motion for summary judgment is under consideration, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255, 106 S.Ct. 2505.
The court considers plaintiffs' claims seriatim, with these standards in mind.
Plaintiffs' complaint alleges a wrongful foreclosure resulted from
Under Mississippi law, a wrongful foreclosure occurs when a foreclosure is attempted solely for a malicious desire to injure the mortgagor or the foreclosure is conducted negligently or in bad faith to the mortgagor's detriment. West v. Nationwide Trustee Servs., Inc., No. 1:09CV295LG-RHW, 2009 WL 4738171, *3 (S.D.Miss. Dec. 4, 2009) (citing National Morig. Co. v. Williams, 357 So.2d 934, 935-36 (Miss.1978)).
In the case at bar, plaintiffs' position, as the court understands it based on their complaint, the evidence submitted (including Mr. Teeuwissen's testimony in the Chancery Court hearing), and their response to Chase's motion, is that Chase had no authority to unilaterally increase their monthly note to include an escrow account for taxes and/or property insurance since plaintiffs had always timely paid their property taxes, and that Chase's subsequent foreclosure was malicious and wrongful since the sole basis for plaintiffs' putative default and the resulting foreclosure was plaintiffs' refusal to pay the increased amount for escrow items which they did not owe and could not have been required to pay.
Plaintiffs' position in this regard is contradicted by the terms of the deed of trust, which expressly authorized Chase to revoke plaintiffs' escrow waiver and to require escrow for payment of property taxes. Chase's right in this regard was unambiguous and unconditional: "Lender may revoke the waiver as to any or all Escrow Items at any time by a notice given in accordance with Section 15 and, upon such revocation, Borrower shall pay to Lender all Funds, and in such amounts, that are then required under this Section 3." Yet even if, as plaintiffs seem to suggest, Chase's right to require escrow of property taxes was conditioned on plaintiffs' failure to timely pay their property taxes, it is manifest from the allegations of their complaint that the Teeuwissens did not timely pay their 2008 real property taxes, which were due February 1, 2009, see Miss.Code Ann. § 27-41-1. Furthermore, even after Chase explicitly informed plaintiffs by its March 26 letter that it might invoke its right to require escrow for property taxes if the delinquent taxes were not paid within fifteen days, the Teeuwissens, according to their own allegations and proof, did not pay their delinquent taxes within that fifteen-day time period.
However, in addition to these allegations, plaintiffs have alleged in their complaint that they "were not provided any notice from Chase, Nationwide and/or JF, of the foreclosure sale as required by law and no notice of a foreclosure sale was found at the Hinds County Courthouse." They note that under the terms of the deed of trust, "if Lender invokes the power of sale, Lender shall give Borrower, in the manner provided in Section 15, notice of Lender's election to sell the Property. Trustee shall give notice of sale by public advertisement for the time and in the manner' prescribed by applicable law." Mississippi Code Annotated § 89-1-55 provides that the sale of lands sold under mortgages and deeds of trust
Plaintiffs have clearly alleged that Chase failed to provide notice as required by statute, and in response to Chase's motion seem to take the position that they have stated a claim for wrongful foreclosure based on Chase's failure to provide the required notice of foreclosure. Moreover, plaintiffs have alleged that at all times, including prior to foreclosure, Chase failed to provide them with an accurate accounting (which would have included the sums that would bring them current on their mortgage), despite their repeated requests for such information, which they contend states a claim for wrongful foreclosure. For its part, Chase's briefing on its motion, including its rebuttal submission, focuses entirely on Chase's right to foreclose based on plaintiffs' default and does not address plaintiffs' allegations regarding procedural shortcomings in the foreclosure process.
Numerous courts have recognized a debtor's right to bring an action for wrongful foreclosure based on a lack of statutorily-required notice. See, e.g., Bittinger v. Wells Fargo Bank NA, Civil Action No. H-10-1745, 2011 WL 3568206, *4 (S.D.Tex. Aug. 15, 2011) (denying Rule 12(b)(6) motion to dismiss wrongful foreclosure claim based on allegation that lender foreclosed without notice of default and notice of sale in accordance with state law); Roylston v. Bank of Am., N.A., 290 Ga.App. 556, 660 S.E.2d 412, 417 (Ga.Ct.App.2008) (holding that "[w]here a foreclosing creditor fails to comply with the statutory duty to provide notice of sale to the debtor in accordance
Again, Chase's arguments on the present motion address only plaintiffs' claim of wrongful foreclosure based on their allegation that Chase had no right to foreclose because it was not entitled to impose an escrow requirement, which is what plaintiffs contend ultimately caused the alleged default. At this time, considering plaintiffs' further allegations of shortcomings in the foreclosure process, the court is unable to conclude that plaintiffs have not sufficiently alleged a claim for wrongful foreclosure to survive the present motion to dismiss. Accordingly, the court will deny Chase's motion as it relates to these specific aspects of plaintiffs' wrongful foreclosure claim.
Chase argues that the FDCPA does not apply to it because it is not a "debt collector," as that term is defined in the Act. Chase insists that it is instead a creditor itself and a mortgage servicer that has an interest in the note and mortgage, to which the Act is not applicable. As Chase notes, the FDCPA applies to "debt collectors." The Act defines a debt collector as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6) (emphasis added). The definition expressly excludes "any person collecting or attempting to collect any debt owed or due or asserted to be owed or due to the extent that such activity ... (ii) concerns a debt that was originated by such person [or] (iii) concerns a debt which was not in default at the time it was obtained by such person..." 15 U.S.C. § 1692a(6)(F). The Act defines a creditor as "any person who offers or extends credit creating a debt or to whom a debt is owed." Id. § 1692a(4). "The legislative history of section 1692a(6) indicates conclusively that a debt collector does not include the consumer's creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned." Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir.1985). In the case at bar, plaintiffs do not allege, nor does the evidence of record suggest that plaintiffs
Plaintiffs allege that defendants violated RESPA
In its motion, Chase argues that plaintiffs have not stated a claim under RESPA because they have not alleged that their loan was a "federally related mortgage loan." In Middleton v. Ameriquest Mortgage Co., Civil Action No. 1:10CV146-LG-RHW, 2010 WL 2653293 (S.D.Miss.2010), the court held that a plaintiff who does not specifically allege that his mortgage loan was a "federally related mortgage loan" in his complaint does not have standing to assert a RESPA claim and on this basis dismissed the plaintiff's putative RESPA claim. Id. at *4 (citing Gardner v. First Amer. Title Ins. Co., 294 F.3d 991, 993 (8th Cir.2002), and Sinclair v. United States, No. 5:06cv179, 2007 WL 1106125, at *8 (W.D.Mich. Apr. 5, 2007)). Plaintiffs do not allege in their complaint that the loan at issue was a "federally related mortgage loan." Furthermore, in their response to Chase's motion, plaintiffs have not acknowledged, much less responded to Chase's argument on this claim. The court, therefore, will grant Chase's motion to dismiss the putative RESPA claim.
Plaintiffs allege that Chase is liable for its alleged "refusal to timely provide a full and complete accounting as [they] requested." In its motion, Chase notes that under Mississippi law, the factors considered in determining whether an accounting is warranted include "(1) the need of discovery, (2) the complicated character of the accounts, and (3) the existence of a fiduciary or trust relationship." See Re/Max Real Estate Partners, Inc. v. Lindsley, 840 So.2d 709, 712 (Miss.2003). Chase submits that none of these factors was present in this case, that plaintiffs thus were not entitled to an accounting, and that they consequently have no plausible claim for Chase's alleged failure to provide an accounting. Plaintiffs do not respond to Chase's argument that they were not entitled to an accounting, other than by their citation to West, supra, which did not find any general right to an accounting by a mortgagee but rather only recognized a mortgagee's right to an accounting prior to foreclosure. The court has already concluded that plaintiffs' allegation that Chase failed to provide an accounting prior to foreclosure suffices to state a claim for wrongful foreclosure. Plaintiffs otherwise have not identified a basis for a cognizable cause of action against Chase for failure to provide an accounting.
Plaintiffs allege that Chase breached its contractual obligations by imposing an escrow obligation, taking actions which violated RESPA and the FDCPA and failing to provide notice required under RESPA and the deed of trust. Plaintiffs have no cognizable claim for breach of contract
Johnston v. Palmer, 963 So.2d 586, 594 (Miss.Ct.App.2007). Plaintiffs broadly allege that "[d]efendants' failure to perform their duties under the mortgage contract, thereby violating the Plaintiffs' rights under said mortgage, as well as state and federal law, resulted in the Defendants' breach of the duties of good faith and fair dealing." However, the only potential breach which plaintiffs have identified is the requirement that Chase provide notice of foreclosure in the manner specified in the deed of trust and required by law; and plaintiffs do not allege that Chase's alleged failure to provide such notice was other than merely negligent. Accordingly, Chase's motion to dismiss will be granted as to this claim.
Though not entirely clear, it appears plaintiffs' claim for negligence and/or gross negligence is based on their allegation that Chase wrongfully imposed an escrow requirement and thereafter misapplied plaintiffs' mortgage payments, which ultimately resulted in Chase's foreclosure of their home.
Plaintiffs' claim for misrepresentation is based solely on an allegation that "Defendants ... misrepresented the status of Plaintiffs' mortgage." A claim for misrepresentation requires proof of the following elements:
Horace Mann Life Ins. Co. v. Nunaley, 960 So.2d 455, 461 (Miss.2007). Presumably, plaintiffs' allegation that Chase misrepresented "the status of [their] mortgage" refers to Chase's having declared plaintiffs to be in default on their mortgage. However, while plaintiffs have contended they actually were not in default since what Chase characterized as their default was solely the result of Chase's unauthorized imposition of an escrow requirement, the fact is, Chase had the right to do this, and plaintiffs were in fact in default. Further, as Chase points out, plaintiffs certainly have not alleged that they reasonably relied on any representation by Chase as to the status of their loan. To the contrary, it is clear from plaintiffs' complaint that they thoroughly resisted Chase's declaration of default. Plaintiffs' misrepresentation claim will be dismissed.
In its motion, Chase argues that since the foreclosure had already taken place prior to entry of the Hinds County chancellor's December 23, 2010 order, then there was nothing to be enjoined. Citing Save the Bay, Inc. v. U.S. Army, 639 F.2d 1100, 1102 (5th Cir.1981), and Gregory v. Mitchell, 634 F.2d 205 (5th Cir.1981), Chase contends that "[b]ecause the activity Plaintiffs sought to prohibit had already been `completed,' the claim for injunctive relief is moot." On the other hand, in their complaint, plaintiffs characterize the chancery court's order as "setting aside and voiding [the] foreclosure sale of December 21, 2010." In fact, however, the chancery court did not purport to void or set aside the foreclosure sale; but the relief ordered by the court was not directed to the actual foreclosure sale. Rather, the court granted "a limited preliminary (temporary) injunction" enjoining Chase "from any action against the Plaintiffs related to or in any way connected with foreclosure of the Plaintiffs' real property." The chancellor's clear intention, as evidenced both by his order and ruling from the bench, was to prevent Chase or its agents from attempting to effectuate the purported foreclosure sale, by which he meant to enjoin Chase from attempting to take possession of the property or interfere with the Teeuwissens' right to quiet and peaceful possession of their home pending a hearing on the merits of the case.
Plaintiffs allege that Chase violated the court's injunction by taking certain actions intended to dispossess them of their home. Particularly, they allege that
They further allege that they were damaged as a result of such actions by Chase. As Chase has not addressed plaintiffs' allegations in this regard and has instead only purported to seek dismissal of plaintiffs' claim for injunctive relief relating to the chancellor's order as it related to the foreclosure sale itself, the court will deny the motion as it pertains to this claim.
Plaintiffs seek declaratory relief because Chase allegedly "engaged in serious systematic abuses of the Plaintiffs' rights under the mortgage documents, and state and federal law." Chase seeks dismissal of this claim, arguing that because plaintiffs have no viable substantive claims, it follows that their request for declaratory relief is due to be dismissed. However, since the court has concluded that plaintiffs have stated a claim for wrongful foreclosure and breach of contract, the premise of Chase's motion for dismissal of their further claim for declaratory judgment fails.
Plaintiffs urge the court to deny Chase's motion to dismiss, or, in the alternative, for summary judgment, as premature since "there has been no discovery conducted by any party" and since in their view, "discovery is necessary to fully develop the record in order for the Teeuwissens to further develop their claims and for this Court to render an informed decision on the merits of the claims and defenses." As plaintiffs put it, "[d]iscovery is necessary because it will either produce evidence showing that the Plaintiffs can recover against the Defendants, or that the Plaintiffs cannot recover against the Defendants."
The Fifth Circuit has explained that the Rule 12(b)(6) standard "`simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of' the necessary claims or elements." In re Southern Scrap Material Co., 541 F.3d 584, 587 (5th Cir.2008) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). In the case at bar, regarding those putative causes of action as to which the court has found that plaintiffs have failed to state a cognizable claim for relief, the court has implicitly found that plaintiffs have failed to plead "enough fact to raise a reasonable expectation that discovery will reveal evidence of" the necessary claims or evidence. Id. Accordingly, there is no merit to plaintiffs' contention that discovery must, or even should be permitted before dismissal is proper. See Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009) (Rule 8 "does not
Furthermore, Rule 56 allows a party to move for summary judgment "at any time until thirty days after the close of all discovery." See Fed.R.Civ.P. 56(c)(1)(A). If the party opposing summary judgment "cannot present facts essential to justify its opposition," it must set forth the "specified reasons" through affidavit. See Fed.R.Civ.P. 56(f). The resisting "party may not simply rely on vague assertions that additional discovery will produce needed, but unspecified facts in opposition to summary judgment." Tate v. Sanderson Farms, Inc., Civil Action No. 3:09CV350TSL-JCS, 2010 WL 2292139, at *2 (S.D.Miss. Jun. 3, 2010) (citing Baker v. American Airlines, Inc., 430 F.3d 750, 756 (5th Cir.2005)). Plaintiffs, having done nothing more than recite that they need unspecified discovery to develop enough evidence to determine whether or not plaintiffs have a basis for recovery against defendants, obviously have not demonstrated that discovery is warranted.
In summary, the court concludes that Chase had the right under the terms of the deed of trust to revoke plaintiffs' escrow waiver and to require plaintiffs to include with their monthly mortgage payment an amount for escrow of property taxes and/or insurance. Plaintiffs admit that because they disputed Chase's right to impose an escrow requirement, they refused to pay the increased amount for escrow items, as a result of which they were declared to be in default. They further admit that they eventually stopped making mortgage payments altogether. Based on these facts, which plaintiffs have pled and which are undisputed, Chase had the right to foreclose on plaintiffs' residence. Thus, regarding the foreclosure, the only issues that remain for resolution between plaintiffs and Chase are whether Chase provided plaintiffs with proper notice of foreclosure and a proper accounting prior to proceeding with the foreclosure. The court concludes that plaintiffs' claim for wrongful foreclosure and declaratory judgment premised on their allegations that Chase failed in these respects, and their claim for breach of contract for failure to provide notice required by the deed of trust, survive Chase's motion to dismiss. Plaintiffs' further claims relating to the alleged violation of the chancery court injunction also remain pending. However, it is ordered that Chase's motion to dismiss is granted as to all other claims.
