McCleary v. DLJ Mortgage Capital, Inc. et al

Filing 73

Order granting in part denying in part 57 MOTION to Dismiss filed by Green Tree Servicing, LLC. Plaintiff's request for leave to file a second amended complaint is granted. Second Amended Complaint is due by 8/14/2015. Signed by Chief Judge William H. Steele on 7/27/2015. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
KELIA WEAVER MCCLEARY,
Plaintiff,
v.
DLJ MORTGAGE CAPITAL, INC.,
et al.,
Defendants.

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) CIVIL ACTION 15-0098-WS-C
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ORDER
This matter is before the Court on the motion to dismiss filed by defendant
Green Tree Servicing LLC (“Green Tree”). (Doc. 57). The parties have filed
briefs in support of their respective positions, (Docs. 58, 65, 68), and the motion is
ripe for resolution. After careful consideration, the Court concludes the motion is
due to be granted in part and denied in part.
BACKGROUND
According to the amended complaint, (Doc. 55), the plaintiff financed the
purchase of her home. Wilmington Finance was the lender; defendant Mortgage
Electronic Registration Systems, Inc. executed the mortgage as Wilmington
Finance’s nominee. The loan was purportedly sold and transferred to defendant
U.S. Bank, N.A., Inc., with the mortgage and note purportedly assigned to U.S.
Bank as trustee. A procession of defendants acted as loan servicer. Green Tree
serviced the loan from May 3, 2010 to June 2, 2013, followed (in chronological
order) by Select Portfolio Servicing, Inc., Selene Finance, LP, and DLJ Mortgage
Capital, Inc.
The amended complaint lists fourteen counts. Green Tree is named as a
defendant in five of them:

• Count One – negligence
• Count Two – wantonness
• Count Three – unjust enrichment
• Count Six – breach of contract
• Count Seven - fraud
Green Tree seeks the dismissal of all claims against it other than Count Six.
DISCUSSION
I. Negligence and Wantonness.
Count One alleges that the servicer defendants, including Green Tree,
negligently: (1) serviced the loan; (2) attempted to collect sums not owed by the
plaintiff; (3) caused her property insurance to be canceled; (4) defaulted the
plaintiff; (5) attempted a foreclosure sale; (6) failed to ensure that information
disseminated to third parties was maximally accurate; (7) failed to train their
employees properly on the thorough investigation of disputed accounts; (8) failed
to train and/or supervise their employees and agents properly on handling her loan
account; and (9) failed to remove adverse reporting once she disputed it. (Doc. 55
at 9-10). Count Two alleges that the same defendants were wanton in these
respects. (Id. at 10-11).
Green Tree presents two arguments: (1) Alabama recognizes no cause of
action for negligent or wanton loan servicing; and (2) the claims are time-barred.
(Doc. 58 at 3-5).
As the Court has noted, “[r]ecent federal precedent interpreting Alabama
law has uniformly found that no cause of action for negligent or wanton servicing
of a mortgage account exists under Alabama law, at least in the absence of
personal injury or property damage ….” Selman v. CitiMortgage, Inc., 2013 WL
838193 at *5 (S.D. Ala. 2013). Moreover, “[t]he Court agrees with these
decisions’ construction of Alabama law, and particularly their emphasis that the
mortgage servicing obligations at issue here are a creature of contract, not of tort,
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and stem from the underlying mortgage and promissory note executed by the
parties, rather than a duty of reasonable care generally owed to the public.” Id. at
*6. Therefore, “[t]hese claims fail as a matter of law.” Id. at *5; accord Quinn v.
Deutsche Bank National Trust Co., 2014 WL 977632 at *6-7 (S.D. Ala. 2014).
To the extent Counts One and Two attempt to assert claims for negligent or
wanton loan servicing, then, Green Tree’s motion to dismiss is due to be granted.
Unfortunately, Green Tree has not acknowledged the various sub-parts of these
counts or undertaken to demonstrate that each of them is captured by the foregoing
rule. For example, Green Tree has neither argued nor attempted to show that
negligent or wanton failure to train constitutes negligent or wanton loan servicing
for purposes of the rule. The parameters of Green Tree’s legal victory thus remain
indeterminate.
The parties agree that Counts One and Two are subject to a two-year
limitations period. The complaint was filed January 20, 2015. (Doc. 1-1 at 3).
Green Tree argues that Counts One and Two are barred in their entirety, on the
grounds that the plaintiff first experienced injury in 2012 when, the amended
complaint alleges, Green Tree misapplied several payments and wrongfully
returned several others. (Doc. 58 at 5). The plaintiff responds that Counts One
and Two are not barred to the extent based on conduct occurring between January
20, 2013 and June 2, 2013 (when Green Tree ceased to be loan servicer). (Doc. 65
at 14).
The Court agrees with the plaintiff. The amended complaint expressly
alleges that Green Tree wrongfully returned and/or refused to accept her payments
from October 2012 through March 2013, (Doc. 55 at 7), which on its face reflects
alleged misconduct within the limitations period. The Court cannot credit Green
Tree’s assumption that, because it returned some payments in 2012, the limitations
period as to payments it returned in 2013 began to run in 2012. Green Tree says
the limitations period begins to run “as soon as the alleged injury occurs,” (Doc.
58 at 4), but it has not explained how the plaintiff was injured in 2012 from the
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2013 return of her 2013 payments; it seems clear that such injury occurred in
2013, when or after the misconduct occurred.
In its reply brief, Green Tree changes tack, now insisting that the
allegations regarding returned payments are directed exclusively to the plaintiff’s
contract claim. (Doc. 68 at 4 n.1). This pivot comes too late to be considered,1
but it is in any event unavailing. The amended complaint asserts that Green Tree’s
return of these payments violated the mortgage contract, (Doc. 55 at 7), but this
does not rule out the plaintiff’s reliance on the same conduct in support of her tort
claims as well.2
Green Tree also complains that the plaintiff “points to no actual facts,
occurrences, or events during that period [on or after January 20, 2013] that give
rise to her tort causes of action.” (Doc. 68 at 4). This argument fails both because
it was raised too late and because it depends on the unsupported premise that a
defendant is entitled to dismissal on limitation grounds any time the complaint
does not state when the objectionable conduct occurred. That is not the law. “A
Rule 12(b)(6) dismissal on statute of limitations grounds is appropriate only if it is
apparent from the face of the complaint that the claim is time-barred.” Arthur v.
Thomas, 674 F.3d 1257, 1269 n.9 (11th Cir. 2012) (internal quotes omitted).
II. Unjust Enrichment.
Count Three expressly limits its scope to “[t]he actions of the Defendants in
attempting foreclosure.” (Doc. 55 at 12). As Green Tree points out, (Doc. 58 at 89), the amended complaint alleges that foreclosure proceedings began in
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“District courts, including this one, ordinarily do not consider arguments raised
for the first time on reply.” Gross-Jones v. Mercy Medical, 874 F. Supp. 2d 1319, 1330
n.8 (S.D. Ala. 2012) (citing cases and explaining the underlying rationale). Green Tree
identifies no reason to depart from this well-established rule, and the Court declines to do
so.
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Of course, returning a mortgagor’s payments likely constitutes loan servicing
within the prohibition on claims for negligent or wanton loan servicing.

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November 2014 and that Green Tree was no longer servicing the loan after June
2013. (Id. at 4). The amended complaint thus on its face negates Green Tree’s
liability.
In her response, the plaintiff asserts that Count Three is based on
allegations that the defendants “unlawfully and improperly charged fees and
expenses to her and her account which she paid resulting in the unjust enrichment
to the Defendants.” (Doc. 65 at 14-15). According to Count Three, however, she
paid “unauthorized and unearned fees and expenses” in response to the “threat of
foreclosure,” (Doc. 55 at 12), long after Green Tree had disappeared.
III. Fraud.
Green Tree argues that Count Seven fails to plead fraud with particularity
and that the claim is time-barred. (Doc. 58 at 5-8).
“[A] party must state with particularity the circumstances constituting fraud
….” Fed. R. Civ. P. 9(b). As the plaintiff acknowledges, (Doc. 65 at 17-18), in
order to satisfy Rule 9(b) she must allege: “(1) the precise statements, documents,
or misrepresentations made; (2) the time, place, and person responsible for the
statement; (3) the content and manner in which these statements misled the
Plaintiffs; and (4) what the defendants gained by the alleged fraud.” American
Dental Association v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010) (internal
quotes omitted). The particularity requirement must be met as to each defendant.
Id. (“The plaintiff must allege facts with respect to each defendant’s participation
in the fraud.”).
Count Seven alleges that certain defendants “misrepresented that the loan
was in default. Further, the Defendants made false and misleading
representations, to wit: dissemination of inaccurate information regarding the loan
account as being in default and dissemination of inaccurate information regarding
the credit history and credit of the Plaintiff that was known to be false.” (Doc. 55
at 18).
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Count Seven identifies the general subject matter (default, credit, credit
history), but it does not identify the “precise statements” made regarding these
subjects. Nor does Count Seven even generally allege who (or even which
defendant) made each representation, when they did so, where they did so, or by
what medium. Indeed, it is not clear from Count Seven to whom each
representation was made, whether to the plaintiff or to others. Count Seven
patently falls far short of the particularity required by Rule 9(b). The plaintiff’s
ipse dixit to the contrary, (Doc. 65 at 19), changes nothing.
Green Tree argues that Count Seven is time-barred because it alleges the
plaintiff relied on the fraudulent representations by “proceed[ing] with the
execution of the loan,” (Doc. 55 at 18), which the amended complaint indicates
occurred in 2006. (Id. at 3). It seems doubtful the plaintiff alleges the defendants
fraudulently represented that her loan was in default before the loan existed; more
likely is that Count Seven refers to the loan modification mentioned in the
plaintiff’s brief (although not in her pleading). (Doc. 65 at 13). In any event, the
amended complaint does not disclose on its face that the fraud claim is barred by
the statute of limitations.
IV. Amendment.
The plaintiff requests leave of Court to file a second amended complaint
should the Court grant any portion of Green Tree’s motion to dismiss. (Doc. 65 at
14, 16, 20). Green Tree opposes such relief. (Doc. 68 at 4-5).
The plaintiff’s request is subject to Rule 15(a), which provides that a court
“should freely give leave [to amend] when justice so requires.” Without
acknowledging this authority, Green Tree argues the Court should deny leave due
to the plaintiff’s “repeated failure to state a claim.” (Doc. 68 at 4). The amended
complaint, however, is the first pleading reviewed by the Court; the plaintiff
sought and received leave to file an amended complaint after the defendants filed
motions to dismiss the original complaint (which had been filed in state court and
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was not subject to federal pleading standards), and the Court’s grant of the
plaintiff’s motion mooted the defendants’ motions. (Doc. 54). Green Tree thus
has failed to show any “repeated” failure to state a claim.
CONCLUSION
For the reasons set forth above, Green Tree’s motion to dismiss is granted
with respect to the plaintiff’s claims against Green Tree for negligent or wanton
loan servicing, unjust enrichment and fraud. To the extent Green Tree seeks other
or additional relief, its motion is denied. The plaintiff’s request for leave to file a
second amended complaint, construed as a motion for such relief, is granted. The
plaintiff is ordered to file and serve any second amended complaint on or before
August 14, 2015.
DONE and ORDERED this 27th day of July, 2015.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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