Barry et al v. EMC Mortgage et al

Filing 22

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/6/11. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
TIMOTHY BARRY, et al.
:
v.

:

Civil Action No. DKC 10-3120

:
EMC MORTGAGE, et al.
:
MEMORANDUM OPINION
Presently pending and ready for review is the motion for a
more

definite

Defendant
dismiss

statement

EMC

Mortgage

filed

(ECF No. 9).

by

of

claim

and

Corp.

(ECF

No.

Defendant

First

to
6)

Ohio

dismiss
and
Banc

the

filed

by

motion

to

and

Lending

The issues are fully briefed and the court now

rules pursuant to Local Rule 105.6, no hearing being deemed
necessary.

For the reasons that follow, Defendant EMC Mortgage

Corp.’s motion for a more definite statement will be denied,
Defendant EMC Mortgage Corp.’s motion to dismiss will be granted
in part and denied in part, and Defendant First Ohio Banc and
Lending’s motion to dismiss will be granted.
I.

Background
A.

Factual Background1

This case arises from the efforts of Plaintiffs Timothy and
Susan Barry to refinance the mortgage on their Maryland home.
1

These facts are alleged in Plaintiffs’ complaint.

Defendant First Ohio Banc and Lending (“First Ohio”) is an Ohio
corporation with its principal place of business in Ohio and the
original lender for Plaintiffs’ mortgage refinance.

(ECF No. 1

¶ 2).

a

Defendant

EMC

Mortgage

Corp.

(“EMC”)

is

Delaware

corporation with its principal place of business in Texas and
the

subsequent

assignee

of

Plaintiffs’

mortgage

loan.

(Id.

¶ 3).
In 2005, Plaintiffs contacted several potential lenders to
discuss the possibility of refinancing their home mortgage to
pay for home improvements.

(Id. ¶¶ 5, 7).

Several lenders

declined to assist Plaintiffs because of their lack of home
equity, lack of credit, and imbalanced debt to income ratio.
(Id. ¶ 9).

First Ohio was not deterred and agreed to assist

Plaintiffs.

After an initial screening interview, a First Ohio

representative

told

equity

their

from

Plaintiffs

they

refinance.

could
(Id.

obtain
¶¶

$75,000

13-14).

in
The

representative did not verify Plaintiffs’ ability to repay their
mortgage loan at its original rate or at the rate that would
take effect upon refinancing.
Plaintiffs

submitted

(Id. ¶¶ 16-17).
their

loan

application

packet,

received loan approval, and were contacted by a title company to
schedule a settlement date.
settlement,

Plaintiffs

(Id. ¶¶ 18-20).

“were

unnerved
2

by

On the date of
the

settlement

officer’s lack of knowledge about the transaction.”

(Id. ¶ 21).

In addition, “material details in the loan they received were
drastically different from those to be a part of the loan they
believed they had applied for” (id. ¶ 22), the total amount of
the refinance was lower than originally quoted, and the equity
cash

out

was

Plaintiffs

only

$60,000.

proceeded

discrepancies

because

project commitments.

(Id.

with
they

¶

the

had

23-24).

refinance

already

(Id. ¶ 25).

Nevertheless,

made

despite

home

the

improvement

Plaintiffs also allege that

important disclosures were missing from the settlement package
and they believe the disclosures were withheld “as a part of an
effort to induce the Barrys into agreeing to a loan different
than

the

¶¶ 27-28).

one

for

which

they

had

originally

applied.”

(Id.

Over time Plaintiffs realized that they were making

interest only payments on a negatively amortizing loan and the
principal on their mortgage was not decreasing.

(Id. ¶¶ 29-30).

At some point First Ohio sold Plaintiffs’ loan to EMC, and,
in October or November of 2009, Mr. Barry contacted EMC via
telephone
negatively

to

discuss

amortizing

his

concerns

loan.

The

about
EMC

his

interest-only

representative

then

suggested a new agreement to restructure the payment terms such
that Plaintiffs’ adjustable rate loan would convert to a fixed
interest rate of 5.5% for five years in connection with higher
3

monthly

payments.

(Id.

¶¶ 33-35).

An

agreement

reflecting

these changes was signed by Plaintiffs, increasing their monthly
payments from $2400.00 to $2850.00.

(Id. ¶ 37).

Despite the

higher payment, the loan principal continued to increase, and
after five months Plaintiffs were struggling to make the monthly
payments.

(Id. ¶¶ 38-39).

Plaintiffs again contacted EMC and

requested a reduction in their payments.
into

a

new

agreement

with

Plaintiffs

EMC agreed to enter
whereby

their

monthly

payments would decrease to $2400 for six months under a “loan
modification trial period.”
that

if

they

made

six

(Id. ¶ 40).

payments,

on

modification would become permanent.

EMC told Plaintiffs

time

and

in

(Id. ¶ 41).

full,

the

After six

months of making their payments at the reduced amount, however,
Plaintiffs received a bill from EMC demanding a much larger sum.
Plaintiffs state that it is unclear how the larger calculation
was made but it appeared to be the sum of their old monthly
payment of $2850, plus the difference between that amount and
the reduced amount that Plaintiffs had been making for the prior
six months.

(Id. ¶¶ 43-44).

Plaintiffs were unable to pay the

lump sum and went into loan default.
B.
On

(Id. ¶ 45).

Procedural Background
November

3,

2010,

complaint in federal court.

Plaintiffs

filed

a

thirty

count

Count I alleges that EMC breached
4

the loan modification agreement.

Count II alleges that both EMC

and

gross

First

alleges

Ohio

that

are

both

liable

for

Defendants

are

liable

violation of the duty of good faith.”
allege

that

First

concealment,

Ohio

fraudulent

misrepresentation.”

is

negligence.
for

an

Count

III

“intentional

Counts IV, V, VI, and VII

liable

for

“fraud,

misrepresentation,

fraudulent

and

negligent

Count VIII alleges that EMC is liable for

violations of the Maryland Consumer Protection Act.

Counts IX

through XXIX allege that EMC is liable for violations of the
Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”) the Real
Estate

Settlement

(“RESPA”),

and

Procedures

corresponding

Act,

12

U.S.C.

regulations.

§ 2601

Counts

et

seq.

XVI,

XXV,

XXVII, and XXVIII also implicate Defendant First Ohio.
count

XXX

foreclosing

seeks
on

injunctive
the

relief

property,

to

prohibit

submitting

Finally,
EMC

negative

from
credit

reporting, or engaging in any other complained of activity.
On Defendant 10, 2010, EMC filed a motion seeking a more
definite statement as to counts I and VIII and to dismiss counts
II, III, and IX through XXX.

(ECF No. 6).

On December 21,

2010, First Ohio filed a motion to dismiss all counts alleged
against it.

(ECF No. 9).

Plaintiffs oppose all the motions.

5

II.

Motion for a More Definite Statement
Under Fed.R.Civ.P. 8(a), a complaint must contain a short

and

plain

statement

of

the

grounds

for

relief.

Rule

8(e)

directs that each averment is to be simple, concise, and direct.
Fed.R.Civ.P. 12(e), in turn, provides:
If a pleading to which a responsive pleading
is permitted is so vague or ambiguous that a
party cannot reasonably be required to frame
a responsive pleading, the party may move
for
a
more
definite
statement
before
interposing a responsive pleading.
The
motion
shall
point
out
the
defects
complained of and the details desired.
As stated in Wright & Miller:
The class of pleadings that are appropriate
subjects for a motion under Rule 12(e) is
quite small. As the cases make clear, the
pleading must be sufficiently intelligible
for the district court to be able to make
out one or more potentially viable legal
theories
on
which
the
claimant
might
proceed; in other words the pleading must be
sufficient to survive a Rule 12(b)(6) motion
to dismiss.
5C Charles A. Wright & Arthur R. Miller, Federal Practice &
Procedure § 1376.

The decision of whether to grant a motion for

more definite statement is committed to the discretion of the
district court.

Id. at § 1377; Crawford-El v. Britton, 523 U.S.

574, 597-98 (1998).
Defendant EMC moves for a more definite statement of counts
I and VIII of Plaintiffs’ complaint.
6

EMC argues that the breach

of contract claim in count I is vague and ambiguous because it
fails “to state what the agreement was, whether the agreement
was oral or in writing, the terms of the agreement, the parties
to the agreement, the substantive provisions of the agreement
that

were

allegedly

breached,

or

the

who,

how

whatever breached is alleged to have occurred.”
at 2).

or

when

of

(ECF No. 6,

EMC further notes that because the complaint does not

contain the full names of the plaintiffs or provide the address
of the property that secures the loan, or even the county where
the property is located, it has been unable to identify the
property

and

loan

transactions

records or land records.

at

issue

from

its

business

(ECF No. 15, at 1-2).

Plaintiffs dispute EMC’s characterization of the complaint
and argue that the complaint identifies the agreement at issue,
its relevant terms, and the ways in which EMC breached that
agreement.

(ECF No. 11, at 2-3).

For example, Plaintiffs point

out that the complaint states explicitly “Defendant EMC Mortgage
created a binding agreement with the loan modification trial
period.”

(Id.

at 3) (citing ECF No. 1 ¶ 48).

Plaintiffs

maintain that they are not obligated to provide the complete
terms of the agreement in their complaint.

(Id.).

While motions for a more definite statement are disfavored,
EMC had made a strong case for requiring Plaintiffs to provide
7

certain additional details that are necessary to enable EMC to
respond to the complaint allegations.

See Frederick v. Koziol,

727 F.Supp. 1019, 1020-21 (E.D.Va. 1990) (“The motion for more
definite statement is ‘designed to strike at unintelligibility
rather

than

simple

want

of

detail,’

and

the

motion

will

be

granted only when the complaint is so vague and ambiguous that
the

defendant

cannot

frame

a

responsive

pleading.”)

(quoting

Scarbrough v. R-Way Furniture Co., 105 F.R.D. 90, 91 (E.D.Wis.
1985)).

EMC undercut its own argument, however, in its attempt

to bolster its simultaneous motion for dismissal.

In support of

dismissal of other claims, EMC attached copies of a deed of
trust and other documentation pertinent to the refinancing of a
property owned by the Barrys and located at 7318 Musical Way,
Severn, Maryland, in 2006.

(ECF No. 17-1).

EMC also attached a

copy of a loan modification agreement regarding this property
and signed by Plaintiffs and EMC in 2009.

(ECF No. 17-2).

In

response to a court order, Plaintiffs filed a surreply admitting
that

the

modification

agreement

is

the

written

document

referenced in paragraph 37 of the their complaint, although they
maintain that it does not state the “full scope of terms of the
2009 Loan Restructuring.”

(ECF No. 21, at 1).

By confirming

that this written document is an accurate copy, Plaintiffs have
provided EMC with the address of the property at issue and the
8

full names of the parties and EMC can now search its own records
and public land records for any additional information it needs
to

formulate

its

answer.

The

motion

for

a

more

definite

statement will be denied.
III. Motions to Dismiss
A.

Standard of Review

The purpose of a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6)

is

to

test

the

sufficiency

of

the

plaintiff’s

complaint.

See Edwards v. City of Goldsboro, 178 F.3d 231, 243

(4th

1999).

Cir.

Except

in

certain

specified

cases,

a

plaintiff’s complaint need only satisfy the “simplified pleading
standard” of Rule 8(a), Swierkiewicz v. Sorema N.A., 534 U.S.
506, 513 (2002), which requires a “short and plain statement of
the

claim

showing

Fed.R.Civ.P.
requires

a

that

the

8(a)(2).

is

Nevertheless,

‘showing,’

rather

entitlement to relief.”
544, 555 n.3 (2007).

pleader

than

a

entitled
“Rule
blanket

to

relief.”

8(a)(2)

still

assertion,

of

Bell Atl. Corp. v. Twombly, 550 U.S.

That showing must consist of more than “a

formulaic recitation of the elements of a cause of action” or
“naked
Ashcroft

assertion[s]
v.

Iqbal,

devoid
129

of

further

S.Ct.

citations omitted).

9

1937,

factual
1949

enhancement.”

(2009)

(internal

In its determination, the court must consider all well-pled
allegations in a complaint as true, Albright v. Oliver, 510 U.S.
266, 268 (1994), and must construe all factual allegations in
the light most favorable to the plaintiff.

See Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th

Cir.

1993)).

The

court

need

not,

however,

accept

unsupported legal allegations, Revene v. Charles County Comm’rs,
882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as
factual allegations, Iqbal, 129 S.Ct. at 1950, or conclusory
factual allegations devoid of any reference to actual events,
United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir.
1979).

See

also

(4th Cir. 2009).

Francis

v.

Giacomelli,

588

F.3d

186,

193

“[W]here the well-pleaded facts do not permit

the court to infer more than the mere possibility of misconduct,
the complaint has alleged, but it has not ‘show[n] . . . that
the pleader is entitled to relief.’”
(quoting Fed.R.Civ.P. 8(a)(2)).

Iqbal, 129 S.Ct. at 1950

Thus, “[d]etermining whether a

complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.”

10

Id.

B.

Claims Against First Ohio

As an overarching basis for dismissal, Defendant First Ohio
argues that all of the counts against it are barred by the
statute of limitations.2

(ECF No. 9, at 3).

First Ohio contends

that the statutes of limitations for Plaintiffs’ claims are a
maximum of three years and all the claims against them accrued
more than three years before Plaintiffs filed their complaint.
(Id.).

Plaintiffs argue in response that the claims did not

accrue when the loan transaction was completed in 2005 because
First Ohio’s failure to provide important disclosures prevented
Plaintiffs from learning the facts giving rise to their claims
until much later.

(ECF No. 14, at 6-7).

The statute of limitations for Plaintiffs’ Maryland state
law claims is three years.

See Md. Code Ann., Cts. & Jud. Proc.

§ 5-101 (“a civil action shall be filed within three years from
the

date

it

accrues

unless

another

2

provision

of

the

Code

The statute of limitations is an affirmative defense that
should only be employed to dismiss claims pursuant to Rule
12(b)(6) when it is clear from the face of the complaint that
the plaintiff’s claims are time barred.
Eniola v. Leasecomm
Corp., 214 F.Supp.2d 520, 525 (D.Md. 2002); see also 5A Charles
A. Wright & Arthur R. Miller, Federal Practice & Procedure
§ 1357, at 352 (1990) (“A complaint showing that the statute of
limitations has run on the claim is the most common situation in
which the affirmative defense appears on the face of the
pleading,” rendering dismissal appropriate).

11

provides a different period of time within which an action shall
be commenced”).
at

the

time

Under Maryland law, a cause of action accrues

the

plaintiff

had

actual

knowledge

or

knowledge of the existence of the cause of action.

implied

Wagner v.

Allied Chemical Corp., 623 F.Supp. 1407 (D.Md. 1985) (citing
Poffenberger v. Risser, 290 Md. 631 (1981)).

Implied knowledge

springs from “knowledge of circumstances which ought to have put
a person of ordinary prudence on inquiry [such that plaintiff is
charged] with notice of all facts which such an investigation
would in all probability have disclosed if it had been properly
pursued.”

Poffenberger, 290 Md. at 637.

The statute of limitations for Plaintiffs’ claims alleging
disclosure violations under TILA and RESPA is one year from the
date

of

the

occurrence

of

§ 1640(e); 12 U.S.C. § 2614.3
violation

is

the

date

on

the

violation.

See

15

U.S.C.

The date of the occurrence of the
which

creditor’s extension of credit.

the

borrower

accepts

the

See, e.g., Davis v. Wilmington

Finance, Inc., No. PJM-09-1505, 2010 WL 1375363 at *5 (D.Md.
Mar. 26, 2010) (slip copy).

3

TILA provides that borrowers have up to three years to
raise a right of rescission.
15 U.S.C. § 1635(f).
Plaintiffs
have not named First Ohio in any claims seeking rescission.
12

Plaintiffs allege that they refinanced their mortgage with
First Ohio in 2005.

Because more than three years passed before

Plaintiffs filed their complaint asserting claims against First
Ohio,

Plaintiffs’

claims

against

First

Ohio

are

time-barred.

Plaintiffs contend, however, that equitable tolling applies, at
least for the state law tort claims.

They rely on Md. Code

Ann., Cts. & Jud. Proc. § 5-203 which states:
If the knowledge of a cause of action is
kept from a party by the fraud of an adverse
party, the cause of action shall be deemed
to accrue at the time when the party
discovered, or by the exercise of ordinary
diligence should have discovered the fraud.
Plaintiffs

contend

that

First

Ohio’s

failure

to

provide

the

requisite disclosures and the fact that the settlement officer
sent by First Ohio was not knowledgeable about the details of
their

loan

are

examples

of

fraud

that

precluded

them

from

discovering the true nature of their loan within the statutory
period.
To invoke equitable tolling, plaintiffs must demonstrate
that they were not aware of facts that should have provoked
inquiry.

Minter v. Wells Fargo Bank, N.A., 675 F.Supp.2d 591,

596 (D.Md. 2009).

Plaintiffs’ reliance on the equitable tolling

doctrine here is misplaced because they have alleged that they
were troubled with the terms of the loan documents they signed
at

settlement,

(ECF

No.

1

¶¶
13

21-24),

and

that

within

approximately fourteen months from the date of the settlement
they

realized

¶ 28).

their

Because

loan

they

balance

were

aware

was
of

not

decreasing.

these

facts,

(Id.

Plaintiffs

should have made further inquiry at that time and they have not
alleged facts to justify waiting four or five years to raise
their claims.

As a result of their delay, the claims against

First Ohio are now time-barred and will be dismissed.
C.

Claims Against EMC

1.

Count II - Gross Negligence

Defendant EMC contends that Plaintiffs’ gross negligence
claim must be dismissed because any duties that EMC owed to
Plaintiffs arose from their contractual relationship and cannot
give rise to a negligence claim.
argue

that

EMC’s

contention

(ECF No. 6 ¶ 11).

“presupposes

the

Plaintiffs

existence

of

a

valid contract” and that the gross negligence count was pleaded
in the alternative so that Plaintiffs could still recover in the
event the contracts are deemed invalid.

(ECF No. 12, at 3-4).

Plaintiffs are correct that pleading in the alternative is
permitted

under

the

Federal

Fed.R.Civ.P. 8(d)(2)-(3).

Rules

of

Civil

Procedure.

See

Plaintiffs’ gross negligence claim

still fails, though, because Plaintiffs have not alleged that
EMC has any legal duties or obligations outside the scope of its
contractual relationship with Plaintiffs.
14

One seeking relief on

a negligence theory must identify a duty for which there has
been an alleged breach.

See, e.g., Pendleton v. State, 398 Md.

447, 460 (2007) (“a valid negligence action . . . must allege:
(1) that the defendant had a duty to protect the plaintiff from
injury, (2) that the defendant breached that duty, (3) that the
plaintiff

suffered

defendant’s
injury”).

breach

actual
of

injury

duty

or

loss,

proximately

and

(4)

that

caused

the

loss

the
or

“Whether a legal duty exists is a question of law, to

be decided by the court.”

Id. at 461; see also Bobo v. State,

346 Md. 706, 716 (1997) (“The existence of a duty is a matter of
law

to

be

determined

by

the

court

and,

therefore,

is

an

appropriate issue to be disposed of on motion for dismissal.”).
“The

mere

negligent

breach

of

a

contract,

absent

a

duty

or

obligation imposed by law independent of that arising out of the
contract itself, is not enough to sustain an action sounding in
tort”

Heckrotte v. Riddle, 224 Md. 591, 595-596 (1961).
In ordinary loan transactions, the relationship between a

debtor and a creditor is a contractual one, and is not fiduciary
in nature.

Pease v. Wachovia SBA Lending, Inc., 416 Md. 211,

247 (2010) (citing Parker v. Columbia Bank, 91 Md.App. 346, 368,
(1992)); see also Riggs Nat’l Bank of Washington, D.C. v. Wines,
59 Md.App. 219, 226 (“A deed of trust, among other things, is a
contract, and its language is to be construed in accordance with
15

the

law

of

contracts.”),

cert.

denied,

301

Md.

43

(1984).

Plaintiffs’ complaint does not identify any additional source
for the duties it references, accordingly Plaintiffs have failed
to plead facts to establish the first element of a claim of
negligence and this claim will be dismissed.4
D.
Count III - Breach of Duty of Good Faith and Fair
Dealing
EMC

argues

that

count

III

should

be

dismissed

because

Maryland does not recognize an independent tort for breach of
the duty of good faith and fair dealing.

(ECF No. 6, at 5).

Plaintiffs do not directly address this argument, but instead
construe EMC’s position to be that count III is duplicative of
count I and therefore invalid.
argument,

Plaintiffs

contend

In response to this constructed
that

count

III

refers

to

EMC’s

breach of its duties under the Deed of Trust, while count I
refers

to

EMC’s

breach

of

the

loan

modification

agreement.

(ECF No. 12, at 5).

4

Although not apparent from the face of Plaintiffs’
complaint, they may have intended to allege that Defendants
violated statutory duties imposed by TILA or RESPA. If they had
made such allegations, the claim would likely have been
preempted by TILA or RESPA.
See, e.g., Reyes v. Premier Home
Funding, Inc., 640 F.Supp.2d 1147, 1156 (N.D.Cal. 2009) (“to the
extent Plaintiffs’ negligence claim seeks to impose the
requirements of TILA or other disclosure laws on Wachovia, his
claim is preempted.”)
16

As

pleaded,

count

III

purports

to

state

a

claim

“intentional violation of the duty of good faith.”
does not recognize this cause of action.

for

Maryland

See Baker v. Sun Co.,

985 F.Supp. 609, 610 (D.Md. 1997) (“Maryland does not recognize
an

independent

contractual
Civil

cause

duty

Aviation

of

of

action

good

Admin.

for

faith

v.

and

Project

breach
fair

Mgmt.

of

the

implied

dealing.”);

Swedish

Enters.,

Inc.,

190

F.Supp.2d 785, 794 (D.Md. 2002) (finding that the duty of good
faith and fair dealing “is merely part of an action for breach
of

contract”);

Mount

Vernon

Props.

v.

Branch

Banking,

170

Md.App. 457, 472 (2006), cert. denied, 397 Md. 397 (2007).

To

the extent Plaintiffs intended for count III to state a claim
for

breach

expressed

of

the

that

Deed

intent

of

Trust

effectively.

agreement,
To

plead

they

have

not

a

breach

of

contract, a complaint must plead the existence of a contractual
obligation owed by the defendant to the plaintiff and a material
breach of that obligation.
Md.

638,

658

(2010).

RRC Ne., LLC v. BAA Md., Inc., 413
Count

III

does

not

identify

EMC’s

obligations under the Deed of Trust or state when or how these
obligations
conduct

“was

were
in

breached.
bad

faith”

The
is

vague

not

assertion

sufficient.

that
As

EMC’s

written,

Plaintiffs have failed to state a claim in count III, and it
will be dismissed.
17

E.

Truth in Lending Act Violations

Defendant EMC argues that the TILA violations pleaded in
counts IX through XXIX should be dismissed because the 2009 loan
modification did not give rise to any disclosure requirements
under TILA.

(ECF No. 6, at 5).

Plaintiffs argue in response

that the 2009 transaction was a refinancing and did trigger TILA
disclosure obligations.
12

C.F.R.

(ECF No. 12, at 6-7).

§ 226.20

discusses

requirements pursuant to TILA.

subsequent

disclosure

Subpart a covers refinancings

and states:
A
refinancing
occurs
when
an
existing
obligation that was subject to this subpart
is
satisfied
and
replaced
by
a
new
obligation undertaken by the same consumer.
A refinancing is a new transaction requiring
new disclosures to the consumer. The new
finance charge shall include any unearned
portion of the old finance charge that is
not credited to the existing obligation.
Thus,

a

typical

requirements.

refinancing

does

trigger

disclosure

But the regulation further states:

The following
refinancing:

shall

not

be

treated

as

a

(1) A renewal of a single payment obligation
with no change in the original terms.
(2) A reduction in the annual percentage
rate with a corresponding change in the
payment schedule.
(3)
An
agreement
proceeding.

involving
18

a

court

(4) A change in the payment schedule or a
change in collateral requirements as a
result
of
the
consumer’s
default
or
delinquency, unless the rate is increased,
or the new amount financed exceeds the
unpaid balance plus earned finance charge
and premiums for continuation of insurance
of the types described in § 226.4(d).
(5)
The
renewal
of
optional
insurance
purchased by the consumer and added to an
existing
transaction,
if
disclosures
relating
to
the
initial
purchase
were
provided as required by this subpart.
12 C.F.R. 226.20(a); see also Citizens State Bank of Marshfield,
Mo. v. Fed. Deposit Ins. Corp., 751 F.2d 209, 215 (8th Cir. 1994)
(“‘refinancing,’ such that new disclosures are required, occurs
only when the old obligation is actually extinguished and a new
one substituted and not when credit terms are merely altered.”);
Scott v. Wells Fargo Home Mortg. Inc., 326 F.Supp.2d 709, 715-16
(E.D.Va.)
from

(“restructuring/modification

TILA’s

disclosure

requirements,

agreements
otherwise

are

exempt

applicable

to

refinancing agreements, because those agreements resulted only
in a change in payment schedule as a result of the [plaintiff’s]
default or delinquency.”), aff’d by, in part, 67 F.App’x. 238
(2003).
EMC argues that the loan modification in 2009 was simply a
“change in the payment schedule” or “change in the collateral
requirements” that should not be treated as a refinancing and
19

that did not trigger any disclosure requirements.
at 6).

(ECF No. 6,

In response Plaintiffs argue that they have not alleged

that the 2009 refinance was a loan modification and that the
facts they have alleged show that it was a refinance under TILA
because

it

resulted

in

an

increase

in

monthly

payments,

it

converted the Plaintiffs’ interest rate from an adjustable rate
to a fixed rate of 5.5% followed by an increase after five
years, and because under the agreement the total amount of the
loan continued to increase.
EMC

submitted

labeled

“Loan

a

copy

of

(ECF No. 12, at 6-7).
the

Modification

In reply,

agreement

between

the

parties

Agreement.”

(ECF

No.

17-2).

Paragraph 7 of this modification agreement states:
Nothing
in
this
Modification
shall
be
understood or construed to be a satisfaction
or release in whole or in part of the Loan
Agreement.
Except as expressly provided in
this Modification, the Loan Agreement will
remain unchanged and Borrower and Lender
will be bound by, and comply with, all of
the terms and provisions of the Loan
Agreement, as amended by this Modification.
Plaintiffs have admitted that the written agreement provided by
EMC is an accurate copy of the written document described in
paragraph 37 of their complaint, but they maintain that this
written agreement does not cover the full scope of the parties’
agreement.

20

Although

the

court

must

accept

a

plaintiff’s

factual

allegations as true when evaluating a motion to dismiss, it need
not

assume

the

accuracy

of

legal

conclusions.

As

a

loan

refinancing is a defined term under TILA, the court does not
have to assume the truth of Plaintiffs’ allegation that the 2009
agreement between EMC and Plaintiffs constituted a refinancing.
Instead

the

court

must

determine

whether

the

alleged

facts

support that legal conclusion.5
The

complaint

alleges

that

per

the

terms

of

the

2009

restructure, “the Barry’s adjustable rate loan would convert to
a fixed interest rate of 5.5% for 5 years” and their new monthly
payments would be $450.00 more each month.
35).

(ECF No. 1 ¶¶ 34-

In their opposition, Plaintiffs contend that these changes

constituted a refinancing because the interest rate increased,
the payment schedule was altered, and the total amount of the
loan increased.
First, a change from an adjustable to a fixed rate, as
alleged in the complaint, does not necessarily equate to a rate
increase.

Plaintiffs’ complaint did not provide the applicable

5

It merits noting that while Plaintiffs label the agreement
a refinancing in their opposition to EMC’s motion to dismiss,
the complaint itself refers to the 2009 transaction only as a
“restructure” or a “modification.”
(See ECF No. 1 ¶¶ 33, 36,
37, 38, 39, 40, 41) (referring to the “2009 Restructuring” and
“loan modification trial period”).
21

interest before the 2009 restructure took place, but public land
records, which may be considered when reviewing a motion to
dismiss, provide that the adjustable interest rate in effect
before the 2009 restructure was 8.25%.

(See ECF No. 17-1, at 1,

Deed of Trust, Grantor Timothy Barry, 25 October 2006 (filed 13
November 2006), Anne Arundel County, Maryland, Book 18472, at
16).

In fact, the conversion to a fixed rate resulted in a rate

decrease

of

3.25%.

And

while

the

modification

agreement

provided that the rate would convert back to an adjustable rate
in 2013, even this cannot be considered a rate increase because
the terms of Plaintiffs’ loan before the modification specified
that it would become an adjustable interest rate tied to LIBOR
starting on November 1, 2011.

(Id. at 2, Book 18472, at 17).

Plaintiffs’ argument that the “new amount financed exceeded
the unpaid balance because the total loan amount continued to
increase despite Plaintiffs making higher payments” is also to
no avail.
time

of

The amount financed was the unpaid balance at the
the

modification.

Modification Agreement).

(See

ECF

No.

17-2,

2009

Loan

Plaintiffs cannot avoid this fact by

arguing that at a future time the balance due from Plaintiffs
could

increase

Plaintiffs
restructure.

had

through
a

negative

negatively

amortization.

before

the

(See ECF No. 17-1, at 1, Book 18472, at 16).

The

22

amortizing

loan

Moreover,

fact that the loan principal continued to increase after the
2009 modification represented a continuation of circumstances
that predated the restructure and does not mean that it was a
refinancing.
Because

Plaintiffs

have

not

pleaded

adequate

facts

to

establish that TILA’s disclosure requirements applied to EMC in
2009, Plaintiffs’ claims pursuant to TILA will be dismissed.
F.

Real Estate Settlement Procedures Act Claims

Although

neither

EMC

nor

Plaintiffs

mentions

it,

in

addition to asserting claims under TILA, Plaintiffs’ complaint
also alleges violations of the disclosure requirements imposed
by the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601
and 2610 (“RESPA”) in counts XVI, XX, XXI, XXII, XXV, and XXVI
against

EMC.

Count

XVI

alleges

that

Defendants

failed

to

provide a good faith estimate as required by 12 U.S.C. § 2601
and

12

C.F.R.

§ 226.18(c).6

Although

less

clearly

labeled,

counts XXV and XXVI also allege violations of RESPA’s good faith
estimate

requirement.

Count

XXV

alleges

that

Defendants’

initial estimates were inaccurate because the loan Plaintiffs
obtained had an interest rate higher than the rate reflected in

6

Although Plaintiffs cite 12 U.S.C. § 2601 as the source of
the obligation to provide a good faith estimate, the obligation
is actually imposed by a subsequent portion of RESPA codified at
12 U.S.C. § 2604.
23

the preliminary disclosures, and count XXVI alleges that EMC
failed to disclose to Plaintiffs that their loan required loan
origination fees.
EMC

failed

to

In effect, both claims are allegations that

provide

a

complete

and

accurate

good

faith

estimate pursuant to 12 U.S.C. § 2604 and 12 C.F.R. §§ 3500.5,
3500 App. C.

So construed, Plaintiffs’ allegations in counts

XVI, XXV, and XXVI must be dismissed because there is no private
right

of

action

under

RESPA

to

enforce

failure to provide a good faith estimate.

or

seek

damages

for

See, e.g., Collins v.

FMHA-USDA, 105 F.3d 1366, 1367-68 (11th Cir. 1997); Urbina v.
Homeview Lending Inc., 681 F.Supp.2d 1254, 1259 (D.Nev. 2009);
Louisiana v. Litton Mortg. Co., 50 F.3d 1298, 1301-02 (5th Cir.
1995); Allison v. Liberty Sav., 695 F.2d 1086, 1089-91 (7th Cir.
1982); Sarsfield v. Citimortgage, Inc., 667 F.Supp.2d 461, 467
(M.D.Pa. 2009).
Counts XX, XXI, XXII allege violations of 12 U.S.C. § 2610.
This

section

of

RESPA

prohibits

lenders

or

servicers

from

charging fees for the preparation or submission of disclosures
required by TILA or RESPA.
not

allege

that

EMC

Yet, in these counts Plaintiffs do

charged

preparation of disclosures.

unauthorized

fees

for

the

Instead Plaintiffs allege that EMC

failed to disclose, itemize, or identify certain finance charges
(count XX), inflated acceleration fees, “amount[ing] to usurious
24

interest” (count XXI), and failed to disclose the date by which
a

portion

of

additional

a

new

loan

finance

balance

charges

had

(count

to

be

paid

XXII).

to

These

avoid

factual

allegations do not state claims for violations of 12 U.S.C.
§ 2610.

To the extent these counts could be read to allege

violations

of

unidentified

TILA

disclosure

requirements,

the

2009 restructure did not trigger any new disclosure obligations,
as discussed above.

For all these reasons, the RESPA counts

will be dismissed.
G.

Injunctive Relief

Finally EMC moves to dismiss count XXX seeking injunctive
relief

and

relating

credit

reporting.

to
(ECF

an
No.

alleged
6,

at

foreclosure
6).

The

and
crux

negative
of

EMC’s

argument is that this count should be dismissed as moot because
the complaint does not allege that any negative credit reports
were made and there is no record of any foreclosures docketed
against
(Id.).

the

Plaintiffs’

property

in

the

State

of

Maryland.

Plaintiffs did not address count XXX in their opposition

to the motion to dismiss.
Count XXX states “Plaintiffs have been and will continue to
be

seriously

foreclosure,
complained

injured

negative
of

are

unless

credit

Defendant

reporting,

preliminarily
25

and

EMC

Mortgage’s

other

activities

permanently

enjoined.”

and

(ECF No. 1 ¶ 168).
negative

credit

Plaintiffs do not mention foreclosure or

reporting

anywhere

else

in

the

complaint.

Plaintiffs do allege that EMC has taken certain other actions,
such as assessing fees, charges, or penalties, in violation of
the parties’ agreement.
could,

in

theory,

be

(See ECF No. 1 ¶ 50).
enjoined.

An

injunction

These actions
is

a

remedy,

though, and not an independent cause of action, and should not
be stated as a separate count in the complaint.

Accordingly

count XXX will be dismissed, but Plaintiffs may maintain their
request for an injunction in their prayer for relief.
IV.

Conclusion
For the foregoing reasons, the motion for a more definite

statement filed by Defendant EMC will be denied, the motion to
dismiss filed by Defendant First Ohio will be granted, and the
motion to dismiss filed by EMC will be granted in part and
denied in part.

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

26