Lacey v. Ocwen Loan Servicing, LLC et al
Filing
39
MEMORANDUM AND ORDER granting in part and denying in part 26 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Eric F. Melgren on 6/25/2014.Mailed to pro se party Rocky L. Lacey by regular mail (cm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
ROCKY L. LACEY,
Plaintiff,
vs.
Case No. 6:13-cv-1418-EFM-KMH
OCWEN LOAN SERVICING, LLC, et al.,
Defendants.
MEMORANDUM AND ORDER
Plaintiff Rocky L. Lacey brought this pro se lawsuit against Ocwen Loan Servicing, LLC
(Ocwen), GMAC Mortgage, LLC (GMAC), and The Bank of New York Mellon Trust Company,
National Association alleging several statutory and tort violations while Ocwen and GMAC were
servicing the note and mortgage held by The Bank of New York. The Defendants have moved
for dismissal for failure to state a claim. For the reasons stated below, the Court grants in part
and denies in part Defendants’ Motion to Dismiss (Doc. 26) for failure to state a claim pursuant
to Federal Rule of Civil Procedure 12(b)(6).
I.
Factual and Procedural Background
Plaintiff sets out the following facts and allegations in his complaint. In 2003, Plaintiff
Rocky L. Lacey executed a note that was secured by a mortgage on the property commonly
described as 116 Blankenship Road, Udall, Kansas 67146. Initially GMAC serviced the
mortgage. Plaintiff alleges in his complaint that Ocwen took over the servicing of the note and
mortgage in January 2011.1 In December 2012, the note and mortgage were assigned to The
Bank of New York.
Plaintiff alleges that after Ocwen took over the servicing of the note and mortgage,
Ocwen informed Plaintiff that Ocwen intended to have a third-party inspection done at his
property. Further, Ocwen informed Plaintiff that he would be responsible for payment of an
inspection fee. Plaintiff agreed to pay this fee. After the initial inspection, Plaintiff alleges he
began receiving notices from Ocwen that indicated that additional property inspections had been
performed and that additional inspection fees would be assessed. Plaintiff immediately began
protesting the fees. The inspection fees plus miscellaneous fees and interest totaled $3,300.
Plaintiff alleges that he continued to pay the principal and interest payments on his
mortgage but refused to pay the disputed fees throughout the disputed time. Plaintiff also alleges
Ocwen and GMAC misapplied his principal and interest payments to the disputed fees resulting
in his mortgage being in default.
Plaintiff alleges to have sent qualified written requests regarding the servicing of the
mortgage to both Ocwen and GMAC with no responses and no corrections to his account.
Throughout 2013, Ocwen and GMAC sent Plaintiff notices of his default and alerted him to the
possibility of foreclosure. Finally, Plaintiff alleges he has suffered emotional distress from the
fear of losing his property, his credit rating has been damaged, and he has had to miss work due
to dealing with this dispute.
Plaintiff’s amended complaint includes the following six claims against Ocwen and
GMAC: (1) violation of the Fair Debt Collection Practices Act (FDCPA), (2) violation of the
Real Estate Settlement Procedures Act (RESPA), (3) breach of contract, (4) negligence, (5)
1
The Court notes that letters attached to Lacey’s original complaint indicate that the transfer to Ocwen became
effective February 16, 2013. Doc. 1-2, at 36, 45.
2
intentional infliction of emotional distress, and (6) conspiracy to commit fraud.2 Plaintiff also
includes The Bank of New York in the breach of contract and negligence claims.
Defendants have filed a motion to dismiss.
II.
Legal Standards
A. Standard of Dismissal Under Rule 12(b)(6)
Under Rule 12(b)(6), the court must dismiss a complaint if the plaintiff has not pled
sufficient facts to state a claim upon which relief may be granted.3 In ruling on the motion, the
court must accept all factual allegations as true.4 However the court does not have to accept all
conclusory statements as true.5 The claim must state enough facts for the claim for relief to be
plausible on its face.6 A claim is facially plausible if the plaintiff pleads facts sufficient for the
court to reasonably infer that the defendant is liable for the alleged misconduct.7 Viewing the
complaint in this manner, the court must decide whether the plaintiff’s allegations give rise to
more than speculative possibilities.8 If the allegations in the complaint are “so general that they
encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged
2
Plaintiff also alleges a separate cause of action for exemplary damages. As Defendant points out, exemplary
damages are not a separate cause of action. See Smith v. Printup, 866 P.2d 985, 992 (Kan. 1993).
3
FED. R. CIV. P. 12(b)(6).
4
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).
5
Id.
6
Id. at 678.
7
Id.
8
Id.
3
their claims across the line from conceivable to plausible.’”9 Mere conclusions or a “formulaic
recitation of the elements of a cause of action will not do.”10
B. Pleading Standard for a Pro Se Litigant
A pro se plaintiff’s pleadings are to be construed liberally and held to a less stringent
standard than formal pleadings drafted by lawyers.11 This rule means that “if the court can
reasonably read the pleadings to state a valid claim on which the plaintiff could prevail, it should
do so despite the plaintiff's failure to cite proper legal authority, his confusion of various legal
theories, his poor syntax and sentence construction, or his unfamiliarity with pleading
requirements. However, it is not the proper function of the district court to assume the role of
advocate for the pro se litigant.”12
III. Analysis
Count 1: Fair Debt Collection Practices Act
The FDCPA was enacted to eliminate abusive debt collection practices.13 To eliminate
abusive debt collection practices the Act regulates interactions between consumer debtors and
“debt collectors.”14 The FDCPA does not “prohibit a debt collector from merely attempting to
collect on a debt. Nor are threats to take legal action or to report a debtor to credit agencies
9
Robbins v. Oklahoma, 519 F.3d 1242, 1248 (10th Cir. 2008).
10
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
11
Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).
12
Id.
13
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., 559 U.S. 573, 577 (2010).
14
Id.
4
actionable, unless the action threatened cannot legally be taken, is not intended to be taken, or
involves the communication of false information.”15
To present a claim under the FDCPA, the claimant must show the monetary obligation in
dispute is a “debt” and that the entity collecting the debt is a “debt collector.”16 The FDCPA
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.”17
The Act has multiple exceptions for the term “debt collector.”18 An entity that does not
own the loan but merely “services” the loan is treated as a “creditor” and generally not subject to
the FDCPA.19 Additionally, 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.20 A servicing company is subject to the FDCPA if the loan was in
default at the time the servicing company acquired the loan account.21
Plaintiff fails to allege that Ocwen or GMAC were debt collectors. Instead, Plaintiff
alleges that Ocwen and GMAC were servicers of the note. As servicers of the note, Ocwen and
GMAC are not “debt collectors” unless they acquired the note when it was in default. Here,
Plaintiff fails to allege that Ocwen or GMAC acquired the loan after it was in default. Thus,
15
Whayne v. United States Dep't of Educ., 915 F. Supp. 1143, 1145 (D. Kan. 1996).
16
Mondonedo v. Sallie Mae Inc., 2009 U.S. Dist. LEXIS 25497, at *8 (D. Kan. Mar. 25, 2009).
17
15 U.S.C.S. § 1692a(6).
18
Mondonedo, 2009 U.S. Dist. LEXIS 25497, at *10.
19
Id. at *11.
20
15 U.S.C.S. § 1692a(6)(F).; See Mondonedo, 2009 U.S. Dist. LEXIS 25497, at *11.
21
Id.
5
Plaintiff fails to allege that Ocwen of GMAC are “debt collectors” and that is an essential
element for a claim under the FDCPA. The FDCPA claim must be dismissed.
Count II: Real Estate Settlement Procedures Act
The RESPA provides a borrower a private action against a servicer of a loan for a failure
to respond, an incomplete response, or an untimely response to a qualified written request related
to the servicing of the loan made by the borrower.22 A qualified written request is a written
correspondence that includes the name of the account holder and a statement for the reasons for
the belief that the account is in error or provides sufficient detail to the servicer regarding other
information sought by the borrower.23 The servicers must “make appropriate corrections in the
account of the borrower” or conduct an “investigation” and provide either the requested
information or appropriate information to the borrower within 30 days of the receipt of the
qualified written request.24
To survive a Rule 12(b)(6) motion to dismiss a claim under § 2605(e) of the RESPA,
plaintiffs must plead the RESPA violation and actual damages stemming from the failure to
respond to requests or stemming from a pattern or practice of misconduct.25 Actual damages
include expended resources in preparing the requests and emotional distress from the failure to
respond.26
Here, Plaintiff alleges sufficient facts to withstand a motion to dismiss. Plaintiff alleges
that he sent qualified written requests to both Ocwen and GMAC. Furthermore, Plaintiff alleges
22
12 U.S.C.S. § 2605(e).
23
Id.
24
Id.
25
Toone v. Wells Fargo Bank, N.A., 716 F.3d 516, 523 (10th Cir. 2013).
26
Price v. America’s Sevicing Co., 403 B.R. 775, 793 (E.D. Ark. 2009).
6
that Ocwen and GMAC “did not make appropriate corrections to the account” and “did not
provide a written explanation or clarification” to his inquiry. Plaintiff alleges he had actual
damages of emotional distress. This is sufficient to satisfy the actual damage requirement.27
Therefore, Plaintiff includes enough facts to plead each element of a RESPA cause of action that
sufficiently put Ocwen and GMAC on notice. Thus, the motion to dismiss the RESPA cause of
action is denied.
Count III: Breach of Contract
Under Kansas law, the plaintiff must allege: (1) the existence of a contract between the
parties, (2) consideration, (3) plaintiff’s performance or willingness to perform in compliance
with the contract, (4) defendant’s breach of the contract, and (5) damage to plaintiff from the
breach.28 Federal law does not require the plaintiff to recite the contract terms specifically or
attach a copy of the contract.29
Here, Plaintiff alleges sufficient facts to withstand a motion to dismiss: (1) his note was a
contract; (2) as consideration for the note, Plaintiff agreed to furnish a mortgage and pay interest
on the principal; (3) plaintiff continued to pay the principal and interest payments in compliance
with the note; (4) Ocwen, GMAC, and the Bank of New York breached the note and mortgage
by applying erroneous fees and misapplying his principal and interest payments; and (5) as a
result Plaintiff suffered emotional distress from the fear of losing his property.
The specific language of the contract does not need to be stated. The plaintiff sufficiently
put the defendants on notice. Therefore, the motion to dismiss the breach of contract claim is
denied.
27
Id.
28
Britvic Soft Drinks Ltd. v. ACSIS Techs., Inc., 265 F. Supp. 2d 1179, 1187 (D. Kan. 2003).
29
CB Lodging, LLC v. i3tel, LLC, 2008 U.S. Dist. LEXIS 85518, at *12 (D. Kan. Oct. 20, 2008).
7
Count IV: Negligence
To state a claim for negligence, Plaintiff must plead the existence of a duty, a breach of
that duty, an injury, and a causal connection between the breach and the injury.30 A duty may be
established through contract or as a matter of law.31 The traditional rule in Kansas is that lenderborrower relationship creates a debtor-creditor relationship, not a fiduciary relationship.32 As a
matter of law in Kansas, under the “debtor-creditor relationship[,] the creditor has no duty to
police the loan outside of an explicit obligation created by contract.”33
Here, Plaintiff only alleges that the Defendants occupied a “position of trust” and owed
him a duty as a matter of law. Furthermore, Plaintiff alleges he entered into a lender-borrower
relationship by obtaining the loan. The law is clear in Kansas that a lender-borrower relationship
creates a debtor-creditor relationship. As a matter of law in Kansas, the debtor-creditor
relationship does not recognize any specific obligations or duties imposed on the Defendants
outside of those created by contract. Here, Plaintiff does not allege the duties owed to him were
created by contract. Therefore, Plaintiff fails to plead an essential element of a negligence claim
because there are no duties alleged by contract and no duties exist as a matter of law. Thus, the
motion to dismiss the negligence claim must be granted.
Count V: Intentional Infliction of Emotional Distress
To state a claim for intentional infliction of emotional distress (also known as outrage),
the plaintiff must plead four elements: (1) the conduct of the defendant must be intentional or in
30
Smith v. Kansas Gas Serv. Co., 169 P.3d 1052, 1057 (Kan. 2007).
31
Daniels v. Army Nat. Bank, 822 P.2d 39, 42 (Kan. 1991) (citing Denison State Bank v. Madeira, 640 P.2d 1235
(Kan. 1982)).
32
33
Daniels, 822 P.2d at 42.
Boyd v. U.S. Bank Nat. Ass’n, 2007 U.S. Dist. LEXIS 72455, at *47 (D. Kan. Sept. 26, 2007).
8
reckless disregard of the plaintiff; (2) the conduct must be extreme and outrageous; (3) there
must be a causal connection between the defendant’s conduct and the plaintiff’s mental distress;
and (4) the plaintiff’s mental distress must be extreme and severe.34
Here, Plaintiff alleges all the elements of emotional distress. First, Plaintiff alleges that
Ocwen and GMAC acted intentionally in respect to the property inspections. Second, Plaintiff
claims assessing the inspection fees was extreme and outrageous conduct. Third, Plaintiff alleges
that he suffered severe emotional distress due to the large amount of the property inspection fees
and the fear of foreclosure. Finally, Plaintiff alleges that his distress was severe by stating that he
sustained “heart attack like symptoms.”
In addition, a plaintiff claiming intentional infliction of emotional distress must meet two
threshold requirements to survive a motion to dismiss.35 The first question is whether the
defendant's conduct may be reasonably regarded as so extreme and outrageous as to permit
recovery.36 The second question is whether the plaintiff's emotional distress is so extreme and
severe that no reasonable person should be expected to endure it.37
Plaintiff also alleges enough facts to pass the threshold questions. First, plaintiff
quantifies the inspection fees as $3,300. This large sum could be seen as extreme and outrageous
conduct in the eyes of a reasonable fact finder. Second, plaintiff states that he suffered emotional
distress resulting in “heart attack like symptoms” which resulted in short-term hospital stays. A
reasonable fact finder could see this distress as extreme and severe especially considering
Plaintiff sought medical help.
34
Hoard v. Shawnee Mission Medical Ctr., 662 P.2d 1214, 1223 (Kan. 1983).
35
Rupp v. Purolator Courier Corp., 790 F. Supp. 1069, 1073 (D. Kan. 1992).
36
Id.
37
Id.
9
Thus, the motion to dismiss regarding the intentional infliction of emotional distress must
be denied because Plaintiff alleged all the required elements of an intentional infliction of
emotional distress claim. In addition, reasonable fact finders could differ as to whether the
conduct was extreme and outrageous and the distress was extreme and severe.
Count VI: Conspiracy to Commit Fraud
(A): Fraud
To state a claim for fraud, the plaintiff must allege: (1) false or untrue representations
were made as a statement of material fact; (2) the representations were known to be false or
untrue by the party making them, or were recklessly made without knowledge concerning them;
(3) the representations were intentionally made for the purpose of inducing another party to act
upon them; (4) the other party reasonably relied and acted upon the representations made; and
(5) the other party sustained damaged by relying upon the representations. 38
Additionally, Federal Rule of Civil Procedure 9(b) provides: “In all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall be stated with particularity.
Malice, intent, knowledge, and other conditions of mind of a person may be averred generally.”39
Following the “straightforward language” of Rule 9(b), the Tenth Circuit has held that “Rule
9(b) requires only the identification of the circumstances constituting fraud, and that it does not
require any particularity in connection with an averment of intent, knowledge or condition of
mind.”40
38
Balboa Threadworks, Inc. v. Stucky, 2006 U.S. Dist. LEXIS 24938, at *4 (D. Kan. April 27, 2006).
39
FED. R. CIV. P. 9(b).
40
Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10th Cir. 1997) (citing Seattle-First Nat'l Bank v.
Carlstedt, 800 F.2d 1008, 1011 (10th Cir. 1986)).
10
Simply stated, Rule 9(b) requires plaintiff to set forth “the time, place and contents of the
false representation, the identity of the party making the false statements and the consequences
thereof.”41 The Court must read the requirements of Rule 9(b) in conjunction with Rule 8, which
calls for pleadings to be “simple, concise, and direct, . . . and to be construed as to do substantial
justice.”42
Here, Plaintiff has insufficiently pled facts to meet the “particularity” pleading standard
of Rule 9(b). Plaintiff alleges that Ocwen and GMAC committed fraud by “artificially
inflat[ing] the balance due” on the loan by “fraudulently assessing in appropriate, illegal, and
otherwise wrongful charge to the loan.” However, Plaintiff offers no more detail as to the time,
place, and contents of the fraud. The Plaintiff’s complaint only makes conclusory statements
about the fraud rather than statements of fact. Plaintiff does not meet the particularity standard of
Rule 9(b). Furthermore, even if the Plaintiff sufficiently pled the time, place, and contents of the
fraud, Plaintiff did not rely upon or act on the statements containing the “wrongful charges.” In
fact, Plaintiff immediately protested the charges and refused to pay. Thus, Plaintiff admits that he
does not meet one of the elements of fraud. Therefore, the motion to dismiss regarding fraud is
granted.
(B): Conspiracy
To state a claim for civil conspiracy, the plaintiff must allege: 1) two or more persons; 2)
an object to be accomplished; 3) a meeting of the minds in the object or course of action; 4) one
or more unlawful acts; and 5) damages as the proximate result thereof.43 A “civil conspiracy is
41
Schwartz, 124 F.3d at 1252.
42
Id.
43
Balboa Threadworks, Inc., 2006 U.S. Dist. LEXIS 24938, at *8 (citing Carson v. Lynch Multimedia Corp., 123 F.
Supp .2d 1254, 1261 (D. Kan. 2000).
11
not actionable without the commission of a wrong giving rise to a cause of action independent of
the conspiracy claim.”44
There is no wrongful act independent of the conspiracy because Plaintiff failed to plead
fraud with particularity and did not rely upon or act on the statements containing the charges.
Therefore, the motion to dismiss the conspiracy claim must be granted.
In summary, Plaintiff’s FDCPA, negligence, and conspiracy to commit fraud claims are
dismissed. Plaintiff’s RESPA, breach of contract, and intentional infliction of emotional distress
claims survive this Rule 12(b)(6) motion for dismissal.
IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss (Doc.26) is
hereby GRANTED in part and DENIED in part.
IT IS SO ORDERED.
Dated this 25th day of June, 2014.
ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE
44
Carson, 123 F. Supp. 2d at 1262.
12
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