Pliam et al v. Cendant Mortgage Corporation et al
ORDER granting 11 Motion to Dismiss; dismissing with prejudice 10 Amended Complaint. (Written Opinion). Signed by Judge Richard H. Kyle on 04/26/12. (kll)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Steven Pliam and Anjali Ganapathy,
Civ. No. 11-3720 (RHK/JSM)
Cendant Mortgage Corporation, et al.,
Michael J. Keogh, Keogh Law Office, Saint Paul, Minnesota, for Plaintiffs.
Aaron A. Dean, Jesse R. Orman, Lucas T. Clayton, Fabyanske, Westra, Hart & Thomson,
P.A., Minneapolis, Minnesota, for Defendants.
This action arises out of a mortgage and promissory note signed by Plaintiffs
Steven Pliam and Anjali Ganpathy. Defendant Cendant Mortgage Corporation—
previously known as Burnett Home Loans and now known as PHH Mortgage
Corporation (“PHH”)—was the mortgagee. After working with PHH to modify the
mortgage, Plaintiffs stopped making monthly payments. PHH then foreclosed by
advertisement, and Plaintiffs brought the instant action alleging defective foreclosure,
breach of contract, violation of the Real Estate Settlement Procedures Act (RESPA), and
violations of various Minnesota statutes. Defendants now move to dismiss Plaintiffs’
Amended Complaint. For the reasons that follow, the Court will grant the Motion.
Plaintiffs purchased property located at 5053 Newton Avenue South in
Minneapolis (“the Property”) in November 2002. (Am. Compl. ¶¶ 12-13.) For the last
five years, they have been living in Boston and India. (Id. ¶¶ 16-17.)
After Plaintiffs defaulted on their mortgage payments, PHH commenced
foreclosure proceedings in May 2009. (Id. ¶¶ 19-21.) However, in March 2010, PHH
offered, and Plaintiffs agreed to enter into, a loan modification agreement (“the
Agreement”). (Id. ¶ 26 & Ex. B.) PHH drafted the Agreement, and Plaintiffs signed it on
March 29, 2010. (Id. ¶¶ 23, 26-27.) As part of the Agreement, they paid a $4,000 loanmodification fee, and began making modified payments under the Agreement in May
2010. (Id. ¶ 27, 31 & Ex. B.) The Agreement was recorded in the Hennepin County
Recorder’s Office on August 24, 2010. (Id., Ex. C.)
In September 2010, Plaintiffs contacted PHH to inquire why no PHH
representative had signed their copy of the Agreement. (Id. ¶ 32 & Ex. D.) PHH
responded that, even though the Agreement was valid unsigned, it would execute the
document and have it re-recorded. (Id. ¶ 33.) Plaintiffs then stopped making payments
under the Agreement. (Id. ¶ 34.) Nevertheless, PHH did execute the Agreement and
record it with Hennepin County on December 21, 2010. (Id., Ex. E.)
Because Plaintiiffs failed to make the agreed-upon payments, PHH commenced
foreclosure proceedings on May 5, 2011. (Id. ¶ 38.) Plaintiffs did not cure their default,
and PHH eventually purchased their note at a sheriff’s sale. 1 (Id. ¶ 39; Compl. Ex. G.) 2
On July 20, 2011, PHH assigned the Sheriff’s Certificate, and with it the ownership rights
in the Property, to Fannie Mae. (Am. Compl., Ex. H.)
Plaintiffs later sent PHH a Qualified Written Request (“QWR”) in accordance
with the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e), asking for
information concerning the mortgage owner’s identity, an accounting of payments,
credits and debits to the mortgage, and when PHH obtained servicing rights to the
mortgage. (Id. ¶¶ 41, 66, Ex. I.) They received no response. Plaintiffs never sent a
QWR to Fannie Mae.
Plaintiffs commenced this action on December 29, 2011. After Defendants moved
to dismiss (Doc. No. 7), Plaintiffs filed an Amended Complaint (Doc. No. 10) and
Defendants filed the instant Motion to Dismiss (Doc. No. 11). The Court held a hearing
on April 2, 2012, 3 the issues have been fully briefed, and the Motion is now ripe for
A sheriff’s sale, also called a judicial sale, is “a sale, commonly by auction, conducted by a
sheriff or other court officer to carry out a decree of execution or foreclosure issued by a court.”
Black’s Law Dictionary 1376 (6th ed. 1990).
Although the Amended Complaint references an “Exhibit G,” Plaintiffs actually attached two
documents labeled “Exhibit F.” From context, however, it is clear to the Court that they
intended to attach the same Exhibit G to the Amended Complaint as they did to the Complaint.
Because Plaintiffs’ counsel did not appear at the duly noticed hearing, the Court did not hear
oral arguments and took the Motion under advisement based upon the written submissions of the
STANDARD OF DECISION
The Supreme Court set forth the standard for evaluating a Rule 12(b)(6) motion in
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). To avoid dismissal, a complaint
must include “enough facts to state a claim to relief that is plausible on its face.” Id. at
547. A “formulaic recitation of the elements of a cause of action” will not suffice. Id. at
555; accord Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009). Rather, the complaint must set
forth sufficient facts to “nudge the claim across the line from conceivable to
plausible.” Twombly, 550 U.S. at 570. Stated differently, the plaintiff must “assert facts
that affirmatively and plausibly suggest that [he] has the right he claims . . . , rather than
facts that are merely consistent with such a right.” Stalley v. Catholic Health Initiatives,
509 F.3d 517, 521 (8th Cir. 2007) (citing Twombly, 550 U.S. at 554–57).
When reviewing a motion to dismiss, the Court “must accept [the] plaintiff’s
specific factual allegations as true but [need] not . . . accept a plaintiff’s legal
conclusions.” Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010) (citing
Twombly, 550 U.S. at 556). The complaint must be construed liberally, and any
allegations or reasonable inferences arising from the complaint must be interpreted in the
light most favorable to the plaintiff. Tombly, 550 U.S. at 554-56. A complaint should
not be dismissed simply because the Court is doubtful that the plaintiff will be able to
prove all of the necessary factual allegations. Id. at 556. “Ultimately, evaluation of a
complaint upon a motion to dismiss is ‘a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.’” Braden v. Wal-Mart
Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Iqbal, 556 U.S. at 679). 4
Plaintiffs’ case cobbles together both state and federal claims in an attempt to
invalidate the foreclosure. After carefully reviewing the record and the asserted causes of
action, however, the Court concludes that none of Plaintiffs’ claims passes muster.
In Count One, Plaintiffs assert that PHH foreclosed after it had failed to record the
mortgage’s assignment to Fannie Mae. Minnesota law requires a party instituting
foreclosure proceedings to (1) record all assignments of the mortgage and (2) list each
assignee in the foreclosure notice. Minn. Stat. §§ 580.02(3), 580.04(a)(1). Plaintiffs
allege that the mortgage had been assigned to Fannie Mae when PHH instituted
foreclosure proceedings and that Fannie Mae was not listed on the Notice of Foreclosure,
rendering the foreclosure invalid. See Jackson v. Mortg. Elec. Registration Sys., Inc.,
770 N.W.2d 487, 494 (Minn. 2009) (a party foreclosing by advertisement must show
exact compliance with statutory requirements, or the foreclosure proceeding is void).
Defendants respond that Plaintiffs have not overcome the presumption of accuracy given
to the sheriff’s certificate of sale. See Minn. Stat. § 580.19 (“Every sheriff’s certificate of
sale . . . shall be prima facie evidence that all requirements of law in that behalf have
been complied with . . . .”). The Court agrees. Bald allegations that a mortgage was
assigned before foreclosure are insufficient to rebut the presumption of accuracy given to
a sheriff’s certificate. See Bazil v. Wells Fargo Bank, N.A., Civ. No. 11-1206, 2011 WL
Where, as here, public records have been submitted with a motion to dismiss, the Court may
consider them without converting the motion into one for summary judgment. E.g., Porous
Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
4442835, at *5 (D. Minn. Sept. 22, 2011) (Nelson, J.). Even at the pleading stage, a
plaintiff must proffer more than speculation to overcome this presumption. Id. Because
Plaintiffs have not done so here, their defective foreclosure claim must be dismissed.
Count Two alleges that PHH breached the Agreement by accepting Plaintiffs’
payments but failing to execute and record the Agreement. The Court fails to understand
exactly how such conduct constitutes breach of contract or has caused Plaintiffs any
damage. Plaintiffs’ brief only adds to the confusion, arguing that but for controlling
Minnesota law, they would be able to bring a claim for breach of the implied covenant of
good faith and fair dealing. Yet, Plaintiffs nowhere explain how the failure to record the
signed Agreement constitutes a breach of the Agreement or the implied covenant of good
faith and fair dealing, and in any event, it is clear that PHH did, in fact, record a signed
copy of the Agreement in December 2010. For these reasons, Plaintiffs’ breach-ofcontract claim must be dismissed.
Count Three alleges that PHH violated RESPA by failing to “acknowledge receipt
of [the QWR] within [twenty] days” and by failing to provide “a written explanation or
clarification that include[d the] information requested . . . or an explanation of why the
information requested is unavailable” within sixty days. See 12 U.SC. § 2605(e)(1), (2).
The Amended Complaint, however, does not allege that this failure resulted in any
damages. While RESPA itself does not set a pleading standard, courts have interpreted
the statute to require a showing of pecuniary damages in order to state a claim. See, e.g.,
Allen v. United Fin. Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009);
Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383 (D.N.J. 2006) (“[A]lleging
breach of RESPA duties alone does not state a claim under RESPA. Plaintiff must, at a
minimum, also allege that the breach resulted in actual damages.”). Even under a liberal
reading, no fact alleged in the Amended Complaint shows that Plaintiffs suffered any
harm as a result of PHH’s failure to respond to the QWR. This defect is fatal to their
Count Three also alleges that PHH engaged in a pattern or practice of
noncompliance with RESPA, entitling Plaintiffs to additional damages under 12 U.S.C.
§ 2605(f)(1)(B). However, Plaintiffs have failed to allege any facts to support such a
claim. Even if the Court were to conclude that Plaintiffs had sufficiently pleaded a
RESPA violation vis-à-vis them, this would be insufficient to show that PHH engaged in
a “pattern or practice of noncompliance.” Compare Garcia v. Wachovia Mortg. Corp.,
676 F. Supp. 2d 895, 909 (C.D. Cal. 2009) (alleging one instance of failing to respond to
a QWR is insufficient to state a claim for damages based on a pattern or practice), with
Ploog v. HomeSide Lending, Inc., 209 F. Supp. 2d 863, 868 (N.D. Ill. 2002) (alleging
five instances of failing to respond to QWR was sufficient to plead a pattern or practice).
Accordingly, Plaintiffs’ pattern or practice claim must be dismissed.
Count Four-(a) 5 alleges that Defendants violated Minn. Stat. § 58.13, subd. 1(8),
which provides that no mortgage originator or servicer shall “violate any provision of any
other applicable state or federal law regulating residential mortgage loans[.]” But to
The Amended Complaint contains two counts entitled “Count Four.” For clarity’s sake, the
Court will refer to the first “Count Four” as “Count Four-(a),” and the second “Count Four” as
establish violations of state or federal law, Plaintiffs largely re-assert their earlier claims,
which as noted above, fail to adequately plead any violations of law.
The only “new” allegation in Count Four-(a) is that PHH charged Plaintiffs an
excessive lender fee. Minnesota law prohibits a mortgage originator modifying a
residential mortgage from “includ[ing] in the principal amount . . . all or any portion of
any lender fee in an aggregate amount exceeding five percent of the loan amount.” Minn.
Stat. § 58.137. Plaintiffs allege that PHH charged a lender fee of $12,322.36, which is
greater than five percent of their loan amount, $236,750.00. Yet, the record shows that
the Agreement increased Plaintiffs’ loan by $8,322.36, which is less than five percent.
Plaintiffs have come up with a higher figure by adding a $4,000 payment referenced in
the letter offering them a loan modification. Upon examining the loan documents and the
Agreement, however, it is clear to the Court that the $4,000 was merely an upfront,
partial payment of the modification fee ($8,322.36). (See Am. Compl. Ex. B.) In total,
the cost of Plaintiffs’ loan modification was $8,332.36, which is less than five percent of
the loan amount. Accordingly, the Court concludes that Plaintiffs have not sufficiently
pleaded a claim under § 58.137.
Count Four-(b) asserts a violation of Minn. Stat. § 8.31, which creates a private
cause of action under various mortgage regulations. This claim relies on a violation of
§ 58.137 to create liability, effectively reasserting Count Four-(a). Because the Court
concludes that Plaintiffs’ Count Four-(a) fails, Count Four-(b) likewise fails.
Finally, Plaintiffs ask the Court to allow them to further amend their Amended
Complaint should it be determined that any of their claims is legally insufficient. (Mem.
in Opp’n at 12.) Although courts “should freely give leave to amend when justice so
requires,” Fed. R. Civ. P. 15(a)(2), plaintiffs do not enjoy an absolute right to amend their
complaint. See Drobnak v. Andersen Corp., 561 F.3d 778, 787-88 (8th Cir. 2009). Here,
Plaintiffs have already taken two bites from the pleading apple. Defendants laid bare the
defects in Plaintiffs’ claims by moving to dismiss the initial Complaint, and Plaintiffs
filed their Amended Complaint three weeks later. Despite being on notice of potential
deficiencies in their claims, however, Plaintiffs’ Amended Complaint simply tacked on a
RESPA claim; it did nothing to rectify the pleading failures. Moreover, established
procedures exist for seeking to amend a Complaint: file a Motion under Federal Rule of
Civil Procedure 15 and follow the strictures of Local Rule 15.1, including proffering a
proposed amended complaint to the Court. See Dudek v. Prudential Sec., Inc., 295 F.3d
875, 880 (8th Cir. 2002) (denying a plaintiff’s request to amend where the plaintiff did
not submit a motion for leave to amend or provide a proposed amended pleading).
Plaintiffs have not followed these procedures. Accordingly, the Court will deny
Plaintiffs’ request for leave to amend their Amended Complaint, and dismiss their claims
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that Defendants’ Motion to Dismiss (Doc. No. 11) is GRANTED, and the
Amended Complaint (Doc. No. 10) is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Date: April 26, 2012
s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
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