Nunez v. J.P. Morgan Chase Bank, N.A.

Filing 44

ORDER granting 31 and 34 Motions to Dismiss for Failure to State a Claim. Signed by Judge Gregory A. Presnell on 4/13/2015. (JU)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
ARELIS NUNEZ,
Plaintiff,
v.

Case No: 6:14-cv-1485-Orl-31GJK

J.P. MORGAN CHASE BANK, N.A.,
MANUFACTURERS and TRADERS
TRUST COMPANY and BAYVIEW
LOAN SERVICING LLC,
Defendants.

ORDER
This matter is before the Court on Defendant J.P. Morgan Chase Bank, N.A.’s (“Chase”)
Motion to Dismiss the Amended Complaint (Doc. 31), Defendants Manufacturers and Traders Trust
Company’s (“M and T”) and Bayview Loan Servicing, LLC’s (“Bayview”) Motion to Dismiss (Doc.
34), Plaintiff Arelis Nunez’s Response to Chase (Doc. 40) and her Response to M and T and
Bayview’s Motion (Doc. 41). 1
I.

Background

This case arises out of the Plaintiff’s default on her home loan and Chase’s responses to
asserted errors related to the foreclosure on the home and subsequent loan modification. In 2010
Plaintiff began having difficulty repaying her loan, which was serviced by Chase, causing a default
and a foreclosure action in state court. In October 2012, the state court issued a foreclosure

1

Chase also filed a Reply in Support of their Motion (Doc. 42) without leave of the Court,
which contravenes Local Rule 3.01(c). Chase subsequently filed a Notice Striking its Reply. (Doc.
43).

judgment. But prior to the foreclosure sale, in January of 2013, Plaintiff and Chase entered into a
loan modification agreement with the goal of keeping Plaintiff in her home. The problems that led
to this lawsuit appear to stem from the failure of Chase’s attorney to timely notify the state court
that there was a loan modification in place and that the foreclosure sale should be cancelled or
continued—this failure ultimately caused a foreclosure sale in spite of the loan modification.
Following the sale, on March 3, 2014, Plaintiff’s counsel sent Chase the first of two letters
informing it of errors with the account. The letter stated in pertinent part:
[T]here are two separate but related errors affecting Ms. Nunez’s loan. First, Chase
and the law firm representing it failed to timely and properly advise the Court of the
substance of the agreement between Chase and Ms. Nunez[.] As a result, Chase
completed the foreclosure, despite having entered into a binding agreement not to do
that. Even now Chase and its foreclosure counsel are preparing to evict Ms. Nunez—
even though she fully complied with her obligations under the loan modification
agreement.
Second, Chase failed to accept Ms. Nunez’s December [2013] payment, erroneously
insisting that the amount agreed upon in the loan modification was insufficient.
(Doc. 24-1). Chase’s provided a detailed response on March 13, 2014 that disclosed the following
timeline:
Modification Review:
•

Modification review began when Nunez applied for loan modification on November 20,
2012.

•

Chase requested the pending foreclosure sale be postponed and on December 18, 2012, the
state court postponed the sale until March 20, 2013.

•

On January 20, 2013, Chase requested its foreclosure counsel move for a postponement of
the March 20, 2013 foreclosure sale. The foreclosure attorney, evidently, did not do this.

•

On February 21, 2013 Chase received confirmation that the sale was still on hold.

•

Chase initiated a “Modification review process” early in 2013, which is essentially a trial
payment plan—if Plaintiff successfully completed the payments, the modification was to
become permanent. The due dates for the three trial payments were in February, March, and
April of 2013.

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•

Chase acknowledged that the Plaintiff timely made all of the trail payments from February
through April 2013.

•

On March 15, 2013, despite Chase’s January request to cancel the sale and Plaintiff’s
February trial payment being timely made, Chase was informed by its foreclosure attorney
that the foreclosure court required a hearing to cancel a sale, and that such a hearing must be
scheduled ten (10) days prior to the scheduled sale. Since the sale was scheduled for March
20, 2013, the attorney missed the chance to schedule a sale cancellation hearing, and the
court required the sale move forward.

•

On March 19, 2013, Chase asked the foreclosure attorneys to request a postponement
because Nunez’s “loan modification review[2] was still in process and they had received the
first trail plan payment.”

•

Despite Chase’s request to postpone the sale, it went forward on March 20, 2013.

•

Following the sale of the property, Chase approved the final loan modification on May 8,
2013.
Rescission

•

Two months after the sale, on May 17, 2013 Chase began its first efforts to rescind the
foreclosure sale.

•

The state court denied the first rescission request on December 19, 2013. 3

•

Chase initiated a second rescission process on February 24, 2014.

(Doc. 24-2). In response to the alleged errors, the letter explained that the modification had been
cancelled because of the denial of the rescission. While the letter was plainly well researched it
reached the odd conclusion that there had been no error with the account.

2

Chase’s use of the phrase “loan modification review” appears to be somewhat of a
misnomer. Nunez was given a trial modification period, which appears to have entitled her to a loan
modification upon successful completion of the trial payments. It was not the case that Chase was
reviewing a modification application which may or may not have resulted in a modification at
Chase’s discretion.
3

Ultimately, Chase’s second attempt to rescind the sale was successful and complete by
May 15, 2014. (Doc. 24-6).

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Plaintiff’s second letter to Chase, on September 8, 2014, asserted that it improperly placed
her payments in a suspense account rather than applying it to the loan and again asserted that Chase
failed to honor the modification agreement. (Doc. 24-5). Chase’s second response, on October 27,
2014, again chronicled the history of the foreclosure sale and then explained that the modified
repayment plan was cancelled because the first attempt to rescind the foreclosure sale failed. (Doc.
24-6). Chase then stated that the cancellation was later un-cancelled after the second rescission
process was successful. Chase recounted its discussion with Plaintiff’s agent leading to its
agreement to honor the modified loan agreement upon receipt of $3,450.09 to bring the loan current.
Chase received the funds it required on July 3, 2014. After some processing by Chase, which
involved briefly holding the Plaintiff’s funds a suspense account, the modified plan was
implemented on August 22, 2014. Subsequently, on September 16, 2014 servicing of the loan was
transferred to M and T under the modified loan terms. Plaintiff, wrote one additional letter to
Bayview 4 on October 8, 2014, asserting an error with the account. Bayview deemed the letter
duplicative and did not provide a substantive response to Plaintiff’s notice of error.
Plaintiff asserts that the Defendants have failed to live up to their obligations to respond to
her notices of error under the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et. seq.
(“RESPA”) and implementing Regulation X, (12 C.F.R part 1024) (“Regulation X”). 5 Further,
Plaintiff asserts that Chase is liable for negligence per se in its response to her requests to correct

4

The notice of error (Doc. 24-7) was sent to Bayview only. However, according to the
Amended Complaint, Bayview and M and T had contractually agreed to both work to service
multiple loans, including the Plaintiff’s loan. (Doc. 24 ¶ 4).
5

The Amended Complaint states that it is also brought under the Truth In Lending Act and
implementing Regulation Z, (12 C.F.R part 1026). (Doc. 24 ¶ 2). However, none of the claims
expressly invoke Regulation Z, nor even mention it, and the analysis herein is accordingly limited
to RESPA and Regulation X.

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the account errors and to comply with the loan modification. Chase has moved to dismiss, arguing
that Plaintiff’s exhibits establish, as a matter of law, that it fulfilled its requirements, that Plaintiff
failed to allege causation as to damages, 6 and that the laws cited created no duty for Chase thus it
cannot be liable for negligence. Bayview and M and T assert that they had no obligation to respond
to the Plaintiff’s letters and that Plaintiff has not sufficiently alleged damages as against them.
II.

Standard

In ruling on a motion to dismiss, the Court must view the complaint in the light most
favorable to the Plaintiff, see, e.g., Jackson v. Okaloosa County, Fla., 21 F.3d 1531, 1534 (11th Cir.
1994), and must limit its consideration to the pleadings and any exhibits attached thereto. Fed. R.
Civ. P. 10(c); see also GSW, Inc. v. Long County, Ga., 999 F.2d 1508, 1510 (11th Cir. 1993). The
Court will liberally construe the complaint’s allegations in the Plaintiff’s favor.

Jenkins v.

McKeithen, 395 U.S. 411, 421 (1969). However, “conclusory allegations, unwarranted factual
deductions or legal conclusions masquerading as facts will not prevent dismissal.” Davila v. Delta
Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).
In reviewing a complaint on a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), “courts must be mindful that the Federal Rules require only that the complaint contain ‘a
short and plain statement of the claim showing that the pleader is entitled to relief.’ ” U.S. v. Baxter
Intern., Inc., 345 F.3d 866, 880 (11th Cir. 2003) (citing Fed. R. Civ. P. 8(a)). This is a liberal
pleading requirement, one that does not require a plaintiff to plead with particularity every element
of a cause of action. Roe v. Aware Woman Ctr.for Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001).
However, a plaintiff’s obligation to provide the grounds for his or her entitlement to relief requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
6

For purposes of this Order, the Court assumes that causation damages have been alleged.

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will not do. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-555 (2007). The complaint’s
factual allegations “must be enough to raise a right to relief above the speculative level,” Id. at 555,
and cross “the line from conceivable to plausible.” Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009).
III.

Analysis
A. RESPA Claims
i. Count I—RESPA Claim Against Chase

Count I asserts that Chase failed to fulfill its duties to investigate and correct or explain errors
after receiving Plaintiff’s two letters. Specifically, Plaintiff asserts that Chase failed to comply with
Regulation X, 12 C.F.R. § 1024.35(e), which requires that upon receipt of a notice of error, a servicer
must respond as follows:
(i) In general. Except as provided in paragraphs (f) and (g)[7] of this section, a servicer
must respond to a notice of error by either:
(A) Correcting the error or errors identified by the borrower and providing the
borrower with a written notification of the correction, the effective date of the
correction, and contact information, including a telephone number, for further
assistance; or
(B) Conducting a reasonable investigation and providing the borrower with a
written notification that includes a statement that the servicer has determined that
no error occurred, a statement of the reason or reasons for this determination, a
statement of the borrower’s right to request documents relied upon by the servicer
in reaching its determination, information regarding how the borrower can
request such documents, and contact information, including a telephone number,
for further assistance.
“Errors” are broadly defined in 12 C.F.R. § 1024.35 and includes various categories which were
implicated by both of the Plaintiff’s letters. See, e.g., 12 C.F.R. § 1024.35(b) (1, 7, 10).

7

Chase does not assert either of these exceptions are applicable for purposes of the Motion
to Dismiss. M and T and Bayview, however, do assert an exception based on duplicative requests.

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Chase chose to respond within the requirements of 12 C.F.R. § 1024.35(e)(i)(B), 8 which
applies when a servicer determines that there has been no error with the account. The letters
demonstrate that Chase’s investigation was thorough and chronicled the history of the loan quite
extensively. Chase stated that it did not believe an error had occurred, provided its reasons for the
determination, included a statement of Plaintiff’s rights to request additional information, enclosing
some of the documents relied upon by Chase, and identified a dedicated customer service specialist
to assist the Plaintiff. Plainly, Chase complied with the letter of the law as prescribed by 12 C.F.R.
§ 1024.35(e)(i)(B).
Quizzically, the conclusion that no error had occurred stands in contrast to the history traced
out in the loan. A fairer assessment of the situation was that Chase reviewed the account, concluded
that there was a problem (namely that the foreclosure proceeded when it should not have) and it was
working on fixing the problem. Yet, 12 C.F.R. § 1024.35(e)(i) does not contemplate errors of the
type that cannot be fixed within the thirty day response deadline. See 12 C.F.R. § 1024.35(e)(3).
Regulation X gives a servicer only two options to reply to a notice of error: 1) state that it had erred
and that the error was fixed; 2) state that there had been no error and explain why. In the event that
an error has occurred, but will take some time to fix, a servicer is without recourse to accurately
state the situation and comply with Regulation X’s binary response options.
Chase appears to have done the best it could, given the circumstance, and complied with the
letter and spirit of the law. Ultimately, Chase did fix the problem and the Plaintiff, after some time
wrangling with Chase and the foreclosure process, was put in her desired modified repayment

8

Chase’s response letters do not affirm that there was an account error, that it was corrected,
and give a date of correction—accordingly, they do not techincally comply with 12 C.F.R. §
1024.35(e)(i)(A).

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program and still has possession of her house. While this was, no doubt, an unpleasant experience,
it is not one that is actionable as a failure to comply with 12 C.F.R. § 1024.35(e)(i).
ii. Count III—RESPA Claim Against Bayview and M and T
On September 16, 2014 Bayview and M and T took over servicing of the loan. Plaintiff sent
another letter informing Bayview and M and T of the errors with the account, to which neither
servicer responded. Instead, Bayview and M and T assert that Plaintiff’s request was duplicative,
and that Chase’s earlier responses excused them from responding. (Doc. 34 at 2). The exception
upon which they rely states:
1. In general. A servicer is not required to comply with the requirements of
paragraphs (d), (e), and (i) of this section if the servicer reasonably determines
that any of the following apply:
i.

Duplicative notice of error. The asserted error is substantially the same as an
error previously asserted by the borrower for which the servicer has
previously complied with its obligation to respond pursuant to paragraphs (d)
and (e) of this section, unless the borrower provides new and material
information to support the asserted error. New and material information
means information that was not reviewed by the servicer in connection with
investigating a prior notice of the same error and is reasonably likely to
change the servicer’s prior determination about the error.

12 C.F.R. § 1024.35(g)(1)(i). Whether a sufficient response by an earlier servicer can excuse a new
servicer from providing a substantive response to a notice of error is a question of first impression
for this Court. The text excuses servicers from being subject to Regulation X’s response obligations
where the same errors are raised without the introduction of new information on the part of a
borrower. Here, the regulatory text permits the interpretation that a sufficient response and
explanation by an earlier servicer serves to excuse later servicers from responding to a duplicative
notice of error. Further, the purpose of the enabling statute was to prevent abusive practices by
servicers. See 12 U.S.C. § 2601. For the duplicative notices exception to apply the transferor must
have already sufficiently responded to a notice of error—accordingly the congressional goal of

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avoiding abusive practices would have already been advanced and would not furthered by a second
servicer repeating the same explanation of an earlier servicer. 9
In this case the Plaintiff’s notice of error, 10 which was attached to the Amended Complaint
as Exhibit “G” makes clear that it was notifying the new servicer of the same errors that Plaintiff
had previously raised with Chase. Since Chase’s response was adequate, Bayview and M and T
were excused from an obligation to respond under Regulation X. Further, Chase’s letter of October
27, 2014 makes clear that when Bayview and M and T began servicing the loan, the errors the
Plaintiff complained of had been fixed because the loan transferred to Bayview and M and T under
the terms of the new loan and Plaintiff had already been informed of the changes. (See Doc. 24-6 at
3 (“The servicing of this loan transferred to M&T Bank on September 16, 2014. The loan transferred
with the modified loan terms and monthly payment in place. A copy of the letter informing our
customer of the transfer dated August 29, 2014, is enclosed for your reference.”). Plaintiff’s letter
to Bayview dated October 8, 2014, hardly required a response when the asserted errors had been
resolved prior to the transfer and the Plaintiff had been notified. Plaintiff’s notice of error was
duplicative under Regulation X and Chase’s actions obviated any need for Bayview and M and T to
respond and inform her of what she already knew.

9

Practically, this entails that the transferee would have to undergo independent investigation
of the alleged error and evaluate whether the earlier response was sufficient. If the transferee does
not satisfy itself that the earlier response was sufficient, then plainly it would have a strong
motivation to respond to the notice and address the asserted errors. The concern would be,
obviously, that a court may share the opinion that the transferor’s response was insufficient, and
accordingly, the duplicative notice of error exception would not apply and both the transferor and
transferee may be liable for failing to adequately respond under Regulation X.
10

Bayview and M and T correctly point out that the letter sent to Bayview can only be
characterized as a notice of error and not a request for information, the letter specifically states:
“The purpose of this letter is to alert you to the ongoing servicing errors and request that, as required
by RESPA/Regulation X, you investigate them, make appropriate corrections, and confirm these
corrections in writing.” (Doc. 24-7).

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B. Count II - Negligence Per Se Claim Against Chase
Finally, Plaintiff’s negligence theory is predicated on her argument that Chase violated
RESPA and Regulation X. “A negligence per se claim [is] appropriate under Florida law when there
is a violation of a ‘statute which establishes a duty to take precautions to protect a particular class
of persons from a particular injury or type of injury.’ ” Liese v. Indian River Cnty. Hosp. Dist., 701
F.3d 334, 353 (11th Cir. 2012). Yet, because negligence per se is predicated on the violation of a
statute or regulation, where there is no violation a negligence per se claim cannot stand.
Therefore, it is
ORDERED, the Defendants’ Motions to Dismiss (Docs. 31 and 34) are GRANTED, the
Amended Complaint (Doc. 24) is DISMISSED WITH PREJUDICE.
DONE and ORDERED in Chambers, Orlando, Florida on April 13, 2015.

Copies furnished to:
Counsel of Record
Unrepresented Party

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