Sovis v. Bank of New York Mellon Corporation, The et al
Filing
29
MEMORANDUM OPINION AND ORDER. Based upon the foregoing, IT IS HEREBY ORDERED that: 1. Saxon's Motion to Dismiss (Doc. No. 6 ) is GRANTED. 2. BONYM's Motion to Dismiss (Doc. No. 10 ) is GRANTED. 3. Plaintiff's Verified Complaint (Doc. No. [1, Attach. 1]) is DISMISSED WITH PREJUDICE. (Written Opinion). Signed by Judge Donovan W. Frank on 2/5/2013. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Terese M. Sovis,
Civil No. 12-2027 (DWF/LIB)
Plaintiff,
v.
MEMORANDUM
OPINION AND ORDER
The Bank of New York Mellon Corporation;
and Saxon Mortgage Services, Inc.,
Defendants.
________________________________________________________________________
Daniel M. Eaton, Esq., Christensen Law Office PLLC, counsel for Plaintiff.
David R. Mortensen, Esq., Wilford, Geske & Cook, PA, counsel for The Bank of New
York Mellon Corporation.
Michael J. Steinlage, Esq., Larson King, LLP, counsel for Saxon Mortgage Services, Inc.
________________________________________________________________________
INTRODUCTION
This matter is before the Court on a Motion to Dismiss brought by Saxon
Mortgage Services, Inc. (“Saxon”) (Doc. No. 6) and a Motion to Dismiss brought by The
Bank of New York Mellon Corporation (“BONYM”) (Doc. No. 10). For the reasons
stated below, the Court grants the motions.
BACKGROUND
Plaintiff Terese M. Sovis (“Plaintiff”) brought a previous action (Civil
No. 11-2253) to enforce a loan modification and to challenge the October 2009
foreclosure of her mortgage (“Sovis I”). All counts in Sovis I were dismissed with
prejudice, with the exception of Plaintiff’s cause of action for negligent
misrepresentation, which was dismissed without prejudice. (Sovis I, Doc. No. 20.) The
Court denied a request by Plaintiff to file a motion to reconsider. (Sovis I, Doc. No. 24.)
Plaintiff subsequently commenced the present action, alleging a single claim for
negligent misrepresentation. (Doc. No. 1, Ex. 1 (“Verified Compl.”).)
On May 17, 2006, Plaintiff executed a $227,000 mortgage in favor of
PrimeSource Funding (“PrimeSource”) that secured a lien for residential property on
Walnut Lane Northeast in Miltona, Minnesota (the “Property”). (Verified Compl. ¶¶ 7-9,
Ex. B.) The mortgage was later assigned to the Bank of New York, as Successor Trustee
for JPMORGAN CHASE BANK, N.A., as Trustee for NovaStar Mortgage Funding
Trust, Series 2006-3 NovaStar Home Equity Loan Asset-Backed Certificates, Series
2006-3, an assignment which was recorded on January 23, 2009. (Id. ¶ 10.) Saxon acted
as servicer of Plaintiff’s mortgage loan and as attorney in fact for BONYM. (Id.
¶¶ 13, 24.) Plaintiff alleges that Saxon is an agent of BONYM. (Id. ¶ 13.)
In the summer of 2008, Plaintiff contacted Saxon to inquire about a loan
modification. (Id. ¶¶ 14-15.) Plaintiff alleges that she submitted modification paperwork
to Saxon, but that several weeks later, Saxon indicated that the modification paperwork
had been lost. (Id. ¶¶ 17-18.) Plaintiff alleges that in December 2008, she spoke to a
manager at Saxon who told her that Saxon would send another modification package
within two weeks. (Id. ¶ 19.) Plaintiff alleges that she did not receive the modification
package and followed up with Saxon to no avail. (Id. ¶ 20.) In February 2009, Plaintiff
saw a notice of foreclosure sale of the Property listed in a local paper, indicating that a
2
Sheriff’s Sale would occur on March 26, 2009. (Id. ¶ 21.) Plaintiff asserts that she again
contacted Saxon, and that a representative of Saxon indicated that Saxon would send out
modification paperwork. (Id. ¶ 22.) Plaintiff also asserts that Saxon cancelled the
March 26, 2009 Sheriff’s Sale. (Id. ¶ 23.)
Plaintiff alleges that Saxon sent her a Loan Modification Agreement dated
February 24, 2009. (Id. ¶ 24, Ex. C.) The Loan Modification Agreement provided that
Plaintiff would make monthly payments of $857.66 plus escrow on the first day of each
month beginning on May 1, 2009. (Id. ¶¶ 24, 29 & Ex. C at 2.) Plaintiff asserts that the
terms of the loan modification: (1) included a 1.750% interest rate until April 1, 2014;
(2) waived interest on the “Stated Balloon Amount” of $12,476.45 due on the loan and
provided that this amount would not be due until June 1, 2036; (3) provided that the
principal and interest payment would be $857.66; and (4) provided that Saxon
represented that it would accept payments from Plaintiff under the Loan Modification
Agreement. (Id. ¶¶ 26-30.) Plaintiff alleges that she signed the Loan Modification
Agreement, returned it to Saxon, and made one payment. (Id. ¶ 34.) 1 Plaintiff also
alleges that Saxon returned the payment to Plaintiff. (Id. ¶ 36.) Plaintiff’s Property was
sold in a Sheriff’s foreclosure sale on October 9, 2009. (Id. ¶ 42.)
Plaintiff filed this second lawsuit, alleging a single claim of negligent
misrepresentation, asserting that Defendants made misrepresentations that it would
1
While Plaintiff alleges that she signed the Loan Modification Agreement, the copy
of the Loan Modification Agreement attached to the Verified Complaint contains no
signatures.
3
follow the terms set forth in the Loan Modification Agreement. (Verified Compl.
¶¶ 61-68.) Plaintiff seeks relief in the form of an order setting aside the Sheriff’s Sale
and requiring specific performance of the Loan Modification Agreement. Both Saxon
and BONYM move to dismiss the action.
DISCUSSION
I.
Legal Standard
In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court assumes all
facts in the complaint to be true and construes all reasonable inferences from those facts
in the light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th
Cir. 1986). In doing so, however, a court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999), or legal conclusions drawn by the pleader from the facts alleged. Westcott v. City
of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A court may consider the complaint,
matters of public record, orders, materials embraced by the complaint, and exhibits
attached to the complaint in deciding a motion to dismiss under Rule 12(b)(6). Porous
Media Corp., 186 F.3d at 1079.
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
545 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. As the United States Supreme Court recently reiterated, “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,”
4
will not pass muster under Twombly. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(citing Twombly, 550 U.S. at 555). In sum, this standard “calls for enough fact[s] to raise
a reasonable expectation that discovery will reveal evidence of [the claim].” Twombly,
550 U.S. at 556.
II.
Negligent Misrepresentation
Plaintiff brought a negligent misrepresentation claim in Sovis I, which this Court
dismissed without prejudice. In Sovis I, Plaintiff argued that Saxon told Plaintiff that she
was approved for a loan modification, and that Saxon would hold off on the foreclosure
sale while that modification was finalized. (Sovis I, Doc. No. 15 at 19-20.) The
modification upon which Plaintiff based her initial negligent misrepresentation claim in
Sovis I was allegedly sent to Plaintiff on or around July 13, 2009. (Sovis I, Doc. No. 4,
Ex. H ¶¶ 28-29.) In Sovis I, Plaintiff claimed that Saxon approved her for a temporary
loan modification wherein Plaintiff would make payments of $1,400 per month, and that
Saxon represented that the foreclosure sale would be put on hold because of the
modification. (Id. ¶¶ 28-30.) Plaintiff also asserted, in Sovis I, that she made the first
$1,400 payment, but that Saxon returned the payment. (Id. ¶¶ 31, 32.)
In Sovis I, the Court held, among other things, that Plaintiff’s negligent
misrepresentation allegations lacked the particularity required under Rule 9(b) and
dismissed Plaintiff’s negligent misrepresentation claim without prejudice. The Court
explained that:
Because it is conceivable that Plaintiff could allege a claim of negligent
misrepresentation against Saxon with the particularity required by
Rule 9(b) with respect to specific representations regarding postponement
5
of the sheriff’s sale, the Court dismisses the claim without prejudice. The
Court notes, however, that the Amended Complaint is substantially lacking
in its current form.
(Doc. No. 20 at 9 n.4.)
Defendants argue that Plaintiff’s present negligent misrepresentation claim
is barred by the doctrine of res judicata and otherwise fails to state a claim for
relief.
A.
Res Judicata
“The doctrine of res judicata applies to repetitive suits involving the same cause of
action.” Lundquist v. Rice Mem’l Hosp., 238 F.3d 975, 977 (8th Cir. 2001).
Res judicata, specifically, bars litigants from bringing claims on grounds that were raised
or could have been raised when: (1) a court of competent jurisdiction rendered the prior
judgment; (2) the prior judgment was a final judgment on the merits; and (3) both cases
involved the same cause of action and the same parties or their privies. Banks v. Int’l
Union Elec., Elec., Tech., Salaried and Machine Workers, 390 F.3d 1049, 1052 (8th Cir.
2004). A claim is barred by res judicata if it arises out of the same nucleus of operative
facts as the prior claim. Id.
Plaintiff claims to have filed the present lawsuit “in accordance with the order [in
Sovis I] . . . re-alleging her claim of negligent misrepresentation.” (Verified Compl.
¶ 59.) However, Count I of her Verified Complaint in the present action falls outside of
the narrow window left open by the Court with respect to Plaintiff’s negligent
misrepresentation claim. The Court left open the opportunity for Plaintiff to plead with
sufficient particularity her negligent misrepresentation claim “with respect to specific
6
representations regarding postponement of the sheriff’s sale.” Instead of doing so,
Plaintiff bases her negligent misrepresentation claim on the terms of a purported February
2009 modification and related payment that were not relied upon in Sovis I. Plaintiff is,
therefore, attempting to repackage her already rejected loan modification claims using a
different set of communications than those relied upon by Plaintiff in Sovis I. In doing
so, Plaintiff simply attempts to establish the existence of a loan modification claim
labeled as one for negligent misrepresentation, using factual allegations that could have
been made in Sovis I. Because the Court already rendered judgment on Plaintiff’s loan
modification claims against Defendants, and because the allegations in her current
complaint could have been raised previously, the Court concludes that Plaintiff’s
negligent misrepresentation claim is barred by res judicata. 2
B.
Failure to State a Claim
Even if Plaintiff’s new negligent misrepresentation claim 3 were properly before
the Court, it would be rightfully dismissed for failure to state a claim upon which relief
2
Plaintiff argues that res judicata does not apply because her negligent
misrepresentation claim was dismissed without prejudice. The Court disagrees.
Plaintiff’s present cause of action is simply a repackaged attempt to revive her previous
loan modification claims that were dismissed with prejudice in Sovis I.
3
Under Minnesota law, a person makes a negligent misrepresentation when:
(1) in the course of his or her business, profession, or employment, or in a
transaction in which he or she has a pecuniary interest, (2) the person
supplies false information for the guidance of others in their business
transactions, (3) another justifiably relies on the information, and (4) the
person making the representation has failed to exercise reasonable care in
(Footnote Continued on Next Page)
7
can be granted. First, Plaintiff’s reliance on the February Loan Modification Agreement
is precluded by Minnesota’s Credit Agreement statute, which bars the enforcement of
loan modifications 4 that are neither in writing nor signed by both the creditor and the
debtor. See Minn. Stat. § 513.33, subd. 2. (“A debtor may not maintain an action on a
credit agreement unless the agreement is in writing, expresses consideration, sets forth
the relevant terms and conditions, and is signed by the creditor and the debtor.”). See
also Greuling v. Wells Fargo Home Mortg., Inc., 690 N.W.2d 757, 761–62 (Minn. Ct.
App. 2005) (explaining that “claims on agreements falling under section 513.33 fail as a
matter of law if the agreement is not in writing”). The crux of Plaintiff’s argument is that
she was promised, via the Loan Modification Agreement, a modification that would have
resulted in payments of $857.66 per month and that Defendants failed to honor that
agreement. Thus, Plaintiff is seeking to enforce an alleged oral loan modification. To be
enforceable, the Loan Modification Agreement must be in writing and signed by the
creditor and the debtor. There is no dispute that it was not. Accordingly, it is not legally
enforceable under Minnesota law.
(Footnote Continued From Previous Page)
obtaining or communicating the information.
Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 369 (Minn. 2009).
4
A loan modification constitutes a credit agreement. See, e.g., Myrlie v.
Countrywide Bank, 775 F. Supp. 2d 1100, 1108–09 (D. Minn. 2011).
8
Second, Plaintiff’s Verified Complaint does not sufficiently allege the elements of
negligent misrepresentation, as left open by the Court in Sovis I. Allegations of negligent
misrepresentation must be pled with particularity. See Trooien v. Mansour, 608 F.3d
1020, 1028 (8th Cir. 2010). Plaintiff’s Verified Complaint simply does not allege
sufficient facts to support her claim that Saxon affirmatively represented that the
foreclosure sale would not occur on October 9, 2009.
For all of the above reasons, the Court grants Defendants’ motions and dismisses
Plaintiff’s claim for negligent misrepresentation with prejudice. 5
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that:
1.
Saxon’s Motion to Dismiss (Doc. No. [6]) is GRANTED.
2.
BONYM’s Motion to Dismiss (Doc. No. [10]) is GRANTED.
3.
Plaintiff’s Verified Complaint (Doc. No. [1, Attach. 1]) is DISMISSED
WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: February 5, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
5
Because Plaintiff’s claims against BONYM derive solely from the alleged actions
of Saxon, as the loan servicer for BOYNM, and because Plaintiff asserts that Saxon is an
agent of BONYM, the Court’s dismissal extends to both Saxon and BONYM.
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?