Pruitt v. Bank of America, N.A. et al

Filing 20

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 1/28/2016. (c/m 01/28/2016 bus, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

SANDRA PRUITT,
Plaintiff,
v.
Civil Action No. TDC-15-1310
BANK OF AMERICA, N.A., and
BANK OF NEW YORK MELLON,
Defendants.

MEMORANDUM OPINION
Plaintiff Sandra Pruitt, who is self-represented, has filed suit against Defendants Bank of
America, N.A. (“Bank of America”) and Bank of New York Mellon. Pending before the Court
is Defendants’ Motion to Dismiss. The Motion is fully briefed and ripe for disposition. No
hearing is necessary to resolve the issues. See D. Md. Local Rule 105.6. For the reasons set
forth below, the Motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
The following facts are presented in the light most favorable to Pruitt, the nonmoving
party:
I.

Pruitt’s Mortgage Loan
On March 22, 2006, Pruitt received a mortgage loan from American Home Mortgage for

a residential property at 7406 Shady Glen Terrace in Capitol Heights, Maryland.

Pruitt’s

promissory note (the “Note”) was secured by a deed of trust (the “Deed of Trust”), which names
American Home Mortgage as the lender and Mortgage Electronic Registration Systems, Inc.
(“MERS”) as the nominee for the lender and as the beneficiary. Both the Note and the Deed of

Trust state that the Note may be transferred, and the Deed of Trust provides that such a transfer
may occur without prior notice to the borrower and “might result in a change in the entity
(known as the ‘Loan Servicer’) that collects Periodic Payments due under the Note and this
Security Instrument.” Def.’s Mot. to Dismiss Ex. B, Deed of Trust at 11, ECF No. 16-3.
In August 2007, American Home Mortgage went out of business. Over four years later,
on February 13, 2012, an employee of Bank of America, Beverly Brook, executed an assignment
of the Deed of Trust (the “Assignment”) transferring the Deed of Trust “together with the note(s)
and obligations therein described” from MERS to the Bank of New York Mellon. 1 Deed of
Trust at 46; Compl. ¶¶ 7, 12, ECF No. 2.
At some point after receiving her mortgage loan, Pruitt began making payments to Bank
of America. In January 2013, Pruitt received a letter from Bank of America informing her that
she was eligible for a loan modification. The letter stated that, if Pruitt sent Bank of America
certain documents by a particular date, Bank of America would grant the modification, reduce
Pruitt’s loan principal from $165,000 to $98,000, and lower her monthly payments from $1,000
to $650. Pruitt sent Bank of America the required documents before the deadline, but Bank of
America claimed not to have received them. Although Bank of America later admitted that it
had received the documents, it did not modify Pruitt’s loan.
II.

Procedural History
On March 9, 2015, Pruitt filed a Complaint in the Circuit Court for Prince George’s

County, Maryland. The Complaint contains five counts: usury, unjust enrichment, declaratory
judgment, breach of contract, and promissory estoppel. On May 7, 2015, Defendants removed
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For purposes of the Motion to Dismiss, the Court considers the Note, the Deed of Trust, and
the Assignment, which were attached to the Motion, because they are integral to the Complaint
and are of undisputed authenticity. See Philips v. Pitt Cty. Mem’l Hosp., 572 F.3d 176, 180 (4th
Cir. 2009).
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the case to this Court on the basis of diversity jurisdiction. On June 15, 2015, Defendants filed
the pending Motion to Dismiss. Pruitt has not submitted a response.
DISCUSSION
I.

Legal Standard
To defeat a motion to dismiss under Rule 12(b)(6), the complaint must allege enough

facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is
plausible when the facts pleaded allow “the Court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. Although courts should construe pleadings
of self-represented litigants liberally, Erickson v. Pardus, 551 U.S. 89, 94 (2007), legal
conclusions or conclusory statements do not suffice, Iqbal, 556 U.S. at 678. The Court must
examine the complaint as a whole, consider the factual allegations in the complaint as true, and
construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver,
510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm’rs of Davidson Cty., 407 F.3d 266, 268 (4th
Cir. 2005).
II.

Defendants’ Authority to Enforce the Note and the Deed of Trust
Pruitt’s claims for usury, unjust enrichment, and declaratory relief hinge on her

contention that Defendants are not entitled to enforce the terms of the Note or the Deed of Trust.
Pruitt asserts that her lender, American Home Mortgage, lost its interest in the Note and Deed of
Trust once it became defunct. Although the February 13, 2012 Assignment purports to transfer
the Deed of Trust and the Note from MERS to Bank of New York Mellon, Pruitt contends that
MERS lacked the authority to transfer rights in these instruments. Pruitt also contends that the
“identity of the true holder of the promissory note in February 2012 is unknown,” but that it was
not MERS, Bank of America, or Bank of New York Mellon. Compl. ¶¶ 11-13.

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Pruitt’s argument suffers from two defects. First, MERS did have authority to assign the
Deed of Trust. The Deed of Trust names MERS and “the successors and assigns of MERS” as
the beneficiaries and nominees of the lender, American Home Mortgage. Deed of Trust at 3. It
thus expressly grants MERS the right to assign the Deed of Trust. See McNeil v. Bank of
America, N.A., No. DKC–13–2162, 2014 WL 1831115, at *5 (D. Md. May 7, 2014). MERS
operates a system of recordation, which tracks ownership interests in residential mortgages in an
electronic database.

See Anderson v. Burson, 35 A.3d 452, 455-56 (Md. 2011).

Courts

reviewing challenges to this electronic system of transferring rights “have found that the system
of recordation is proper and assignments made through that system are valid.” Suss v. JP
Morgan Chase Bank, N.A., No. WMN–09–1627, 2010 WL 2733097, at *5 (D. Md. July 9, 2010)
(collecting cases); see also McNeil, 2014 WL 1831115 at *5; Parker v. Deutsche Bank Nat’l
Trust Co., No. WMN–12–3358, 2013 WL 1390004, at *3 (D. Md. Apr. 3, 2013).
Second, Pruitt lacks standing to challenge the validity of the transactions that transferred
to Defendants the rights to enforce the Note and the Deed of Trust. See Wolf v. Fed. Nat’l
Mortg. Ass’n, 512 F. App’x 336, 342 (4th Cir. 2013) (finding that the borrower, a non-party to
the assignment, lacked standing to challenge the assignment of the note under Virginia law).
Under Maryland law, a person cannot sue under a contract when that person is neither a party to
nor a third-party beneficiary of the contract. 120 W. Fayette v. Baltimore, 43 A.3d 355, 368
(Md. 2012). The assignment of a promissory note or deed of trust is a contract to which a
mortgagor, such as Pruitt, is neither a party nor a third-party beneficiary. Wolf, 512 F. App’x at
342. As Pruitt acknowledged when she signed the Deed of Trust, the Note could be transferred.
Such an assignment affects the rights and obligations of the parties to the transfer, not Pruitt,

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whose obligation to make monthly payments remains. Id. Consequently, Pruitt lacks standing to
challenge the Assignment.
III.

Unjust Enrichment and Declaratory Judgment (Counts II and III)
Pruitt’s unjust enrichment and declaratory judgment claims depend entirely upon her

theory that Defendants do not have the authority to enforce the Note and Deed of Trust. Pruitt
asserts that Bank of America was unjustly enriched when it received Pruitt’s mortgage payments
because it was not entitled to those payments under the Note. She also seeks a declaratory
judgment that Defendants do not have any right to payment under the Note.
As noted above, however, MERS had the authority to effect the Assignment, and because
Pruitt lacks standing to challenge the validity of the Assignment, she cannot contest Defendants’
authority to enforce the Note or the Deed of Trust in this proceeding. These counts do not assert
any other claims based on Pruitt’s own rights or duties under the Note or the Deed of Trust.
Pruitt’s claims for unjust enrichment and declaratory judgment must therefore be dismissed.
IV.

Usury (Count I)
Pruitt argues that Bank of America engaged in usury by charging her more than six

percent interest on her mortgage loan. Although Maryland law generally caps annual interest
rates at six percent, Md. Code, Comm. Law § 12-102 (2015), it contains an exception for loans
“secured by a first mortgage or first deed of trust on any interest in residential real property,” id.
§ 12-103(b)(1)(ii). The lender may charge any rate of interest for these loans, provided that the
borrower has signed a written agreement which sets out the rate and does not include a penalty
for prepayment or require prepayment of interest. Id. § 12-103(b)(1).

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A review of the Note, which Pruitt signed, indicates that it satisfies these conditions, and
Pruitt does not contend otherwise. Bank of America therefore did not engage in usury by
charging her the interest rate she agreed to pay. Pruitt’s usury claim is dismissed.
V.

Breach of Contract and Promissory Estoppel (Counts IV and V)
Pruitt’s breach of contract and promissory estoppel claims stem from her assertion that

Bank of America reneged on its promise to modify her mortgage loan. Under Maryland law,
“[t]o prevail in an action for breach of contract, a plaintiff must prove that the defendant owed
the plaintiff a contractual obligation and that the defendant breached that obligation.” Taylor v.
NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001). “The formation of a contract requires mutual
assent (offer and acceptance), an agreement definite in its terms, and sufficient consideration.”
CTI/DC, Inc. v. Selective Ins. Co. of America, 392 F.3d 114, 123 (4th Cir. 2004) (citing Peer v.
First Fed. Sav. & Loan Ass’n of Cumberland, 331 A.2d 299, 301 (Md. 1975)).
Pruitt alleges that Bank of America offered to modify her mortgage in a January 2013
letter. That offer came with definite terms, including the manner of acceptance and the exact
amounts by which Pruitt’s mortgage principal and monthly payments would be reduced. Pruitt
accepted the offer by sending Bank of America the required information in a timely fashion.
Defendants counter that Pruitt has failed to plead facts to support the formation or breach of a
contractual obligation because she alleges only that Bank of America informed her that she was
eligible for a loan modification, not that Bank of America would actually grant the modification.
Defendants, however, fail to acknowledge the portions of Pruitt’s Complaint claiming that Bank
of America not only notified her of her eligibility, but also stated that she “would receive the
modification if she provided certain documentation by a certain date.”
Consequently, Pruitt has stated a claim for breach of contract.

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Compl. ¶ 40.

Promissory estoppel, or detrimental reliance, is an alternative means for proving the
existence of a contractual relationship. Pavel Enters. v. A.S. Johnson Co., Inc., 674 A.2d 521,
534 (Md. 1996). The elements of promissory estoppel are:
(1) a clear and definite promise;
(2) where the promisor has a reasonable expectation that the offer will induce action or
forbearance on the part of the promisee;
(3) which does induce actual and reasonable action or forbearance by the promisee; and
(4) causes a detriment which can only be avoided by the enforcement of the promise.
Id. at 532.
Pruitt contends that Bank of America made a clear and definite promise to reduce her
mortgage principal and monthly payments by specific amounts. It was reasonable to expect that
Pruitt would rely on that promise, and her reliance caused her to incur interest, fees, and costs
she would have otherwise avoided by selling the property, refinancing the property, obtaining
funds to bring the loan current, or seeking out another loan modification.

See Allen v.

CitiMortgage, Inc., No. CCB-10-2740, 2011 WL 3425665, at *8 (D. Md. Aug. 4, 2011) (holding
that plaintiffs stated a claim for promissory estoppel where they alleged that their mortgage
servicer had promised that, if they complied with the terms of a Trial Period Plan agreement, the
servicer would grant a permanent loan modification and not report them as delinquent to credit
reporting agencies, and that they detrimentally relied on the promise by forgoing other options
such as selling their home).
As with the breach of contract claim, Defendants’ sole point of opposition is that Bank of
America’s letter only informed Pruitt of her eligibility, rather than promising to modify her loan.
The record does not contain the letter, and at this stage, the accusations in the Complaint are
taken as true. Pruitt has therefore stated a claim for promissory estoppel.
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CONCLUSION
For the foregoing reasons, the Defendants’ Motion to Dismiss is GRANTED IN PART
and DENIED IN PART. The Motion is GRANTED as to Pruitt’s claims for usury, unjust
enrichment, and declaratory judgment, which are DISMISSED. The Motion is DENIED as to
Pruitt’s claims for breach of contract and promissory estoppel. A separate Order shall issue.

Date: January 28, 2016

/s/
THEODORE D. CHUANG
United States District Judge

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