Howard v. ABN Amro Mortgage Group, Inc. et al
Filing
35
ORDER granting in part and denying in part Defendant CitiMortgage, Inc., individually and as successor by merger to ABN AMRO Mortgage Group, Inc.'s 28 Motion to Dismiss. Plaintiffs' claims for violations of the Fair Debt Collection Prac tices Act, the Fair Credit Report Act, and the Home Affordable Modification Program are dismissed with prejudice. Plaintiffs' state law claims, as discussed in this opinion, remain pending. Counsel for the parties are to contact the chambers of Magistrate Judge Michael T. Parker within ten (10) days of the entry of this Order to schedule a case management conference. Signed by District Judge Keith Starrett on December 2, 2014 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
JOHN W. HOWARD
AND TAMMY T. HOWARD
VS.
PLAINTIFFS
CIVIL ACTION NO. 1:13cv543-KS-MTP
CITIMORTGAGE, INC. and its predecessor in
interest, ABN AMRO MORTGAGE, INC.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court on the Motion to Dismiss Plaintiffs’ First Amended
Complaint [28] of the Defendant CitiMortgage, Inc. (“CitiMortgage” or “CMI”), individually
and as successor by merger to ABN AMRO Mortgage Group, Inc. (“ABN”). Having
considered the submissions of the parties, the record, and the applicable law, the Court
finds that the motion should be granted in part and denied in part.
I. BACKGROUND
The Plaintiffs John W. Howard and Tammy T. Howard are the owners of certain
real property located in Greene County, Mississippi (the “Subject Property”). On
November 24, 2003, Plaintiffs executed a Note [28-1] and Deed of Trust [28-2],
encumbering the Subject Property, in order to secure a loan in the amount of
$128,000.00. Plaintiffs also executed an Escrow Waiver Agreement [28-3] enabling
them to pay certain items, such as taxes and insurance premiums, directly to the
appropriate authorities without having to establish an escrow account with the Lender.
ABN is listed as the “Lender” under the Note, Deed of Trust, and Escrow Waiver
Agreement. In 2007, ABN and CitiMortgage merged with only CitiMortgage surviving
the merger. In August of that same year, Plaintiffs received a letter stating that the
servicing of their mortgage loan was being transferred from ABN to CitiMortgage, and
that future loan payments should be forwarded to CitiMortgage. (See August 10, 2007
Letter [28-4].)
On June 24, 2013, Tammy Howard filed suit against ABN, CitiMortgage, Federal
Home Loan Bank Chicago c/o Wells Fargo (“FHLB”), and Wells Fargo in the Circuit
Court of Greene County, Mississippi, alleging numerous federal and state law claims
relating to the mortgage loan. (See Compl. [1-1 at ECF p. 8].) On July 29, 2013,
CitiMortgage and ABN (sometimes collectively referred to as “CitiMortgage”) removed
the proceeding to this Court. (See Notice of Removal [1].) The Notice of Removal
asserts that the Court has subject matter jurisdiction over this action pursuant to 28
U.S.C. §§ 1331 (federal question), 1332 (diversity of citizenship), and 1367
(supplemental jurisdiction). All of the Defendants subsequently moved for the dismissal
of the Complaint. On March 26, 2014, the Court entered its Memorandum Opinion and
Order [21], dismissing Wells Fargo and FHLB from the action without prejudice;
requiring the joinder of John Howard pursuant to Federal Rule of Civil Procedure 19(a);
and, denying CitiMortgage’s request for dismissal without prejudice to its ability to again
move for dismissal after the issue of Mr. Howard’s joinder was resolved.
On April 16, 2014, John Howard joined the litigation via the filing of Plaintiffs’ First
Amended Complaint [25]. CitiMortgage has again moved for dismissal pursuant to
Federal Rule of Civil Procedure 12(b)(6). The Court has fully considered the parties’
competing positions and is ready to rule.
II. DISCUSSION
A.
Standard of Review
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To withstand a motion to dismiss under Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L.
Ed. 2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id.; see also In re Great Lakes Dredge & Dock Co.,
624 F.3d 201, 210 (5th Cir. 2010) (“To be plausible, the complaint’s ‘[f]actual allegations
must be enough to raise a right to relief above the speculative level.’”) (quoting
Twombly, 550 U.S. at 555). A complaint containing mere “labels and conclusions, or a
formulaic recitation of the elements” is insufficient. Bowlby v. City of Aberdeen, Miss.,
681 F.3d 215, 219 (5th Cir. 2012) (citation and internal quotation marks omitted).
Although courts are to accept all well-pleaded facts as true and view those facts in the
light most favorable to the nonmoving party, courts are not required “to accept as true a
legal conclusion couched as factual allegation.” Randall D. Wolcott, M.D., P.A. v.
Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (citations omitted). Ultimately, the court’s
task “is to determine whether the plaintiff has stated a legally cognizable claim that is
plausible, not to evaluate the plaintiff’s likelihood of success.” In re McCoy, 666 F.3d
924, 926 (5th Cir. 2012) (citing Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC,
594 F.3d 383, 387 (5th Cir. 2010)). A court may consider matters of public record and
documents that are referenced in the complaint and central to the plaintiff’s claim in
deciding a Rule 12(b)(6) motion. See Test Masters Educ. Servs., Inc. v. Singh, 428
F.3d 559, 570 n.2 (5th Cir. 2005) (citations omitted).
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B.
Analysis
1.
Federal Claims
a.
Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et
seq. (“FDCPA”) and Fair Credit Reporting Act, 15 U.S.C.
§ 1681 et seq. (“FCRA”)
Paragraph 9 of the First Amended Complaint references the FDCPA and FCRA
in support of liability:
This is a federally related mortgage loan. The Defendant is liable for
violations of the Fair Debt Collection Practices Act and Fair Credit Reporting
Act by reporting this loan as late due to the manufactured and incorrect
charges which Plaintiff did not owe which damaged Plaintiff’s credit standing
and access to financing and credit. The improper reporting to credit bureaus
such as Experian, Equifax and Transunion have [sic] harmed the Plaintiff [sic]
financial standing and caused an inability to access to [sic] credit and
financing, more favorable interest rates and other damages which naturally
flow from this type of misconduct.
(1st Am. Compl. [25] at ¶ 9.) CitiMortgage argues that the Plaintiffs’ FDCPA claim must
be dismissed because it is not a “debt collector” subject to the Act. This argument is
well taken.
The FDCPA allows for the imposition of civil liability against “a debt collector” that
fails to comply with any of its provisions. Wagstaff v. U.S. Dep’t of Educ., 509 F.3d 661,
663 (5th Cir. 2007) (citing 15 U.S.C. § 1692k(a)). Any person attempting to collect “a
debt which was originated by such person; [or,] a debt which was not in default at the
time it was obtained by such person” is specifically excluded from the definition of a
“debt collector” under the FDCPA. 15 U.S.C. § 1692a(6)(F). It is clear within the Fifth
Circuit that “mortgage lenders are not ‘debt collectors’ within the meaning of the
FDCPA.” Hopson v. Chase Home Fin. LLC, 14 F. Supp. 3d 774, 789 (S.D. Miss. 2014)
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(quoting Montgomery v. Wells Fargo Bank, N.A., 459 Fed. Appx. 424, 428 n.1 (5th Cir.
2012)); see also Brush v. Wells Fargo Bank, N.A., 911 F. Supp. 2d 445, 477-78 (S.D.
Tex. 2012) (holding that the FDCPA did not apply to a lender seeking to recover its own
debt). Also excluded from the scope of the FDCPA is “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.” Teeuwissen v. JP Morgan Chase Bank, N.A., 902 F. Supp. 2d 826, 835
(S.D. Miss. 2011) (quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir.
1985)).
For present purposes, the First Amended Complaint establishes that ABN was
the original mortgage lender in connection with the Plaintiffs’ loan. (See 1st Am. Compl.
[25] at ¶ 3.) The Court must also accept as true the assertion that CitiMortgage became
the servicer on the loan in 2007. (See 1st Am. Compl. [25] at ¶ 4.) Plaintiffs present no
allegations to the effect that the loan was in default at the time of the merger between
ABN and CitiMortgage leaving CitiMortgage as the surviving entity. Therefore, the First
Amended Complaint fails to offer any plausible basis for imposing FDCPA liability
against a debt collector and this claim will be dismissed. Cf. Montgomery, 459 Fed.
Appx. at 428 n.1 (finding that the plaintiff’s FDCPA claim failed because a mortgage
lender does not fall within the FDCPA’s definition of a debt collector); Brumberger v.
Sallie Mae Servicing Corp., 84 Fed. Appx. 458, 459 (5th Cir. 2004) (affirming the district
court’s dismissal of the plaintiff’s FDCPA claim since the plaintiff failed to allege that he
was in default when the defendant began servicing the loan); Hopson, 14 F. Supp. 3d at
788-89 (dismissing the plaintiffs’ FDCPA claims against a mortgage lender and
mortgage servicers); Teeuwissen, 902 F. Supp. 2d at 835-36 (ordering dismissal where
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the plaintiffs failed to allege that they were in default prior to the defendant’s acquisition
of the loan).
CitiMortgage also argues that the Plaintiffs have not adequately pled any
violation of the FCRA. The FCRA was enacted “to ensure fair and accurate credit
reporting, promote efficiency in the banking system, and protect consumer privacy.”
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52, 127 S. Ct. 2201, 167 L. Ed. 2d 1045
(2007) (citations omitted). “Under 15 U.S.C. § 1681s-2(a), ‘furnishers’ of information
that transmit information to a credit reporting agency concerning a debt owed by a
consumer have a duty to provide accurate information . . . .” Hopson, 14 F. Supp. 3d at
789 (citation omitted). However, there is no private right of action under § 1681s-2(a)
since the Federal Trade Commission (“FTC”) is charged with enforcement of this
provision. See id.; see also Young v. Equifax Credit Info. Servs., Inc., 294 F.3d 631,
639 (5th Cir. 2002) (“enforcement of Section 1681s-2(a) shall be by government
officials”). “Section 1681s-2(b) imposes duties on furnishers of information to, inter alia,
investigate disputed information and report the results of any such investigation to the
consumer reporting agency.” Young, 294 F.3d at 639. The Fifth Circuit has not decided
whether a private individual can maintain a claim against a furnisher of information
under § 1681s-2(b). See id.1 Nonetheless, the Fifth Circuit has held that a necessary
1
Several other courts have decided the issue in favor of the existence of a private
right of action. See, e.g., Boggio v. USAA Fed. Sav. Bank, 696 F.3d 611, 616 (6th Cir.
2012); Chiang v. Verizon New England, Inc., 595 F.3d 26, 36 (1st Cir. 2010); Nelson v.
Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir. 2002); but see Zamos
v. Asset Acceptance, LLC, 423 F. Supp. 2d 777, 788 (N.D. Ohio 2006) (agreeing with a
federal district court in Tennessee, Carney v. Experian Info. Solutions, Inc., 57 F. Supp.
2d 496, 502 (W.D. Tenn. 1999), “that an individual consumer has no private cause of
action under 15 U.S.C. § 1681s-2(b)”).
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element of any such claim is the existence of notice from a credit reporting agency to a
furnisher of information that a consumer is contesting certain credit information. See
Young, 294 F.3d at 639; Bank One, N.A. v. Colley, 294 F. Supp. 2d 864, 870 (M.D. La.
2003) (“[T]he duties created by § 1681s-2(b) do not arise until the furnisher of
information receives notice from a consumer reporting agency . . . that a consumer is
disputing credit information.”) (citation omitted).
In opposing dismissal, Plaintiffs contend they have pled sufficient facts to state a
claim against CitiMortgage for negligently reporting inaccurate credit information under
the FCRA. The Court disagrees. Plaintiffs’ allegations of inaccurate credit reporting fail
to allow for recovery under § 1681s-2(a) since “plaintiffs have no private right of action”
under this provision. Hopson, 14 F. Supp. 3d at 789; see also Smith v. CitiMortgage,
Inc., No. 3:08cv492, 2009 WL 1976513, at *3 (S.D. Miss. July 7, 2009) (holding that the
defendant was entitled to judgment as a matter of law on the plaintiff’s FCRA claims
since only the FTC can enforce § 1681s-2(a)). Without deciding whether Plaintiffs can
maintain a private action pursuant to § 1681s-2(b), the Court is able to conclude that the
First Amended Complaint lacks allegations satisfying “the notice element” of this Code
section. Young, 294 F.3d at 640. “Plaintiffs do not allege that . . . [CitiMortgage] was
ever provided with notice of a dispute they filed with a consumer reporting agency and
accordingly they have not stated a cognizable FCRA claim.” Hopson, 14 F. Supp. 3d at
790; see also Fagan v. Lawrence Nathan Assocs., Inc., 957 F. Supp. 2d 784, 798-99
(E.D. La. 2013) (rejecting the plaintiffs’ § 1681s-2(b) cause of action in the absence of
any evidence or allegations indicating that the defendant received notice of a reporting
dispute from a credit reporting agency). Therefore, the Plaintiffs’ claims under the
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FCRA will also be dismissed.
b.
Home Affordable Modification Program (“HAMP”)
HAMP is a federal program designed to assist homeowners who have defaulted
on their mortgages, or who are at risk of defaulting, by providing financial incentives to
mortgage servicers and lenders to lower mortgage payments through the modification of
eligible loans. See United States v. Morrison, 713 F.3d 271, 274 (5th Cir. 2013).
Although the First Amended Complaint does not specifically reference HAMP, Plaintiffs
do allege that they sought multiple modifications of their loan and that CitiMortgage
informally denied each request by asking for additional information and documentation
even though it never intended to help them. In light of this allegation, CitiMortgage
asserts that the Plaintiffs cannot force it to modify their loan or recover for its alleged
failure to comply with HAMP because the program does not provide for a private right of
action. Plaintiffs’ opposition to dismissal confirms or clarifies that their claim is for
CitiMortgage’s “failure to adequately evaluate and determine their eligibility for a HAMP
modification after they produced their documentation.” (Pls.’ Mem. Resp. in Opp. to
Mot. to Dismiss [33] at pp. 27-28.)
The clear weight of authority among district courts in the Fifth Circuit counsels
that HAMP fails to afford borrowers a private right of action. See, e.g., Neel v. Fannie
Mae, No. 1:12cv311, 2014 WL 1050125, at *10 (S.D. Miss. Mar. 17, 2014) (granting the
defendant’s request for summary judgment on the basis that HAMP does not provide for
a private action); Martinez-Bey v. Bank of Am., N.A., No. 3:12-CV-4986-G (BH), 2013
WL 3054000, at *5 (N.D. Tex. June 18, 2013) (recognizing opinions holding that
borrowers cannot maintain private actions against mortgage lenders and servicers
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under HAMP); Tran v. BAC Home Loans Servicing, LP, No. 4:10cv03514, 2011 WL
5057099, at *2 (S.D. Tex. Oct. 24, 2011) (“[T]he majority of courts have held that HAMP
does not create a private right of action in a borrower.”). Plaintiffs appear to seek to
avoid this precedent by arguing that they have “alleged, not that CMI failed to award
them a HAMP modification, but, rather, that CMI failed to properly and adequately
evaluate them under the HAMP guidelines as required by law.” (Pls.’ Mem. Resp. in
Opp. to Mot. to Dismiss [33] at p. 28.) The Court finds that this is a distinction without a
difference with respect to the Plaintiffs’ inability to maintain any HAMP-based claims
against CitiMortgage. “Congress has not created a cause of action for violations of the
HAMP . . . guidelines.” Goffney v. Bank of Am., N.A., 897 F. Supp. 2d 520, 526 (S.D.
Tex. 2012) (citations omitted). Accordingly, Plaintiffs are precluded from obtaining any
recovery from CitiMortgage based on its alleged failure to comply with HAMP in
evaluating their requests for loan modification.
c.
Dismissal with Prejudice
Ordinarily, a court should provide a claimant an opportunity to amend his
complaint prior to granting a motion to dismiss with prejudice. See Hart v. Bayer Corp.,
199 F.3d 239, 248 n.6 (5th Cir. 2000) (citations omitted). However, dismissal without
leave to amend is appropriate where any amendment would be futile or the plaintiff has
presented his best case. See Washington v. Weaver, No. 08-30392, 2008 WL
4948612, at *3 (5th Cir. Nov. 20, 2008) (citing Bazrowx v. Scott, 136 F.3d 1053, 1054
(5th Cir. 1988); Stripling v. Jordan Prod. Co., 234 F.3d 863, 872-73 (5th Cir. 2000)).
Amendment of the Plaintiffs’ HAMP-based claims or allegations implicating 15 U.S.C. §
1681s-2(a) “would be futile, as no private right of action exists” under HAMP or this
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statutory provision. MM&S Fin., Inc. v. Nat’l Ass’n of Sec. Dealers, Inc., 364 F.3d 908,
911 (8th Cir. 2004) (affirming the denial of leave to amend with respect to a claim falling
under the scope of the Securities Exchange Act). Furthermore, the Court presumes
that the Plaintiffs have stated their best case with respect to the remaining federal
claims since there is no pending request for leave to file a second amended complaint.
See, e.g., Joseph v. Bach & Wasserman, L.L.C., 487 Fed. Appx. 173, 178-79 (5th Cir.
2012); C & C Inv. Props., LLC v. FDIC, No. 3:12cv57, 2013 WL 1136337, at *3 (S.D.
Miss. Mar. 18, 2013). Therefore, Plaintiffs’ federal claims will be dismissed with
prejudice.
2.
State Law Claims
Plaintiffs’ First Amended Complaint asserts the following state law claims:
breach of contract; breach of the implied covenant of good faith and fair dealing;
negligent misrepresentation; negligence/gross negligence; negligent infliction of
emotional distress; and, intentional infliction of emotional distress. CitiMortgage seeks
the dismissal of each of these claims on the grounds that they are time-barred and/or
insufficiently pled. The Court will look to Mississippi law for the necessary elements of
these causes of action and the applicable statutes of limitations given the existence of
diversity jurisdiction in this action relating to real property located in Mississippi. Cf.
Tex. Soil Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 649-50 (5th Cir. 2001)
(applying the law of Texas).
a.
Statutes of Limitations
“A statute of limitations may support dismissal under Rule 12(b)(6) where it is
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evident from the plaintiff’s pleadings that the action is barred and the pleadings fail to
raise some basis for tolling or the like.” Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir.
2003) (citations omitted). The United States District Court for the Northern District of
Texas has aptly observed “that in order for a defendant to prevail on the basis of
limitations at the pleadings stage, the plaintiff must normally plead [it]self out of court.”
TIB–The Indep. BankersBank v. Canyon Cmty. Bank, 13 F. Supp. 3d 661, 666 (N.D.
Tex. 2014) (quoting W. Fork Partners, L.P. v. Chesapeake Exploration, L.L.C., 2009 WL
2252505, at *5 (N.D. Tex. July 29, 2009)). All of the Plaintiffs’ state law claims, except
their allegation of intentional infliction of emotional distress (“IIED”), are subject to the
three-year period of limitations prescribed by section 15-1-49 of the Mississippi Code.
See Hensarling v. Regions Bank, No. 3:11cv149, 2012 WL 2839687, at *4 n.6 (S.D.
Miss. July 10, 2012) (citations omitted). Actions alleging IIED are subject to the oneyear limitations period provided under section 15-1-35 of the Mississippi Code. See
Jones v. Fluor Daniel Servs. Corp., 32 So. 3d 417, 423 (¶ 26) (Miss. 2010).
CitiMortgage essentially presents two time-bar arguments. First, Plaintiffs’
breach of contract, breach of implied covenant, negligence/gross negligence, negligent
infliction of emotional distress (“NIED”), and IIED claims based on the alleged
revocation of the Escrow Waiver Agreement [28-3] and creation of an escrow account
are untimely because the Complaint establishes that these circumstances occurred no
later than January of 2008, and this suit was filed in June of 2013, more than five years
later. Second, Plaintiffs’ negligent misrepresentation, NIED, and IIED claims based on
CitiMortgage’s purported representations regarding the status of the Plaintiffs’ loan are
untimely because the last such representation identified in the Complaint was allegedly
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made in January of 2009. Neither argument warrants the dismissal of any of Plaintiffs’
claims at this stage of the litigation.
Certain of the Complaint’s allegations relating to the creation of an escrow
account arguably support CitiMortgage’s first time-bar argument. The Complaint
alleges that CitiMortgage breached its contractual obligations and duty of care by: (i)
creating an escrow account without proper notice resulting in the revocation of the
Escrow Waiver Agreement [28-3]; (ii) billing for escrow balances and failing to credit the
escrow account; and (iii) failing to correct the account and fix the charges. (See 1st Am.
Compl. [25] at ¶¶ 5, 22, 31-32, 38, 46.) The Complaint further alleges the existence of a
“conversation about fixing this account” occurring “in January of 2008, when a CMI
representative in the escrow department informed the” Plaintiffs that all past and future
escrow due would be removed if they made a payment in the amount of $488.66. (1st
Am. Compl. [25] ¶ 35) (emphasis added). These allegations show that CitiMortgage
established an escrow account, purportedly in violation of the Deed of Trust and Escrow
Wavier Agreement, at least by January of 2008, more than five years prior to the
initiation of this lawsuit.
Plaintiffs do not dispute the timing of the creation of the escrow account in
opposition to dismissal. Rather, Plaintiffs invoke the continuing tort doctrine in response
to CitiMortgage’s statutes of limitations defense. “Plaintiffs would argue that the
continuing tort doctrine should nevertheless apply to their escrow-related claims insofar
as a continuing and repeated tort occurred each time CMI altered, in any way, the
balance of the wrongfully-established escrow account because such action constitutes
repeated conduct on the part of CMI.” (Pls.’ Mem. Resp. in Opp. to Mot. to Dismiss [33]
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at pp. 6-7.)
The Mississippi Supreme Court has described the continuing tort doctrine as
follows:
[W]here a tort involves a continuing or repeated injury, the cause of action
accrues at, and limitations begin to run from, the date of the last injury, or
when the tortious acts cease. Where the tortious act has been completed,
or the tortious acts have ceased, the period of limitations will not be extended
on the ground of a continuing wrong.
A “continuing tort” is one inflicted over a period of time; it involves a wrongful
conduct that is repeated until desisted, and each day creates a separate
cause of action. A continuing tort sufficient to toll a statute of limitations is
occasioned by continual unlawful acts, not by continual ill effects from an
original violation.
Stevens v. Lake, 615 So. 2d 1177, 1183 (Miss. 1993) (citations omitted). The doctrine
is inapplicable “when harm reverberates from one wrongful act or omission”; tolling
depends on the existence of “repeated acts of wrongful conduct.” Pierce v. Cook, 992
So. 2d 612, 619 (¶ 25) (Miss. 2008) (quoting Smith v. Franklin Custodian Funds, Inc.,
726 So. 2d 144, 148-49 (Miss. 1998)). In a 2011 opinion, Chief Judge Guirola found
that Mississippi law supported the existence of a continuing breach of contract claim in
rejecting a statute of limitations defense. See Singing River Elec. Power Ass’n v.
Bellsouth Telecomms., No. 1:10cv486, 2011 WL 5082235, at *7 (S.D. Miss. Oct. 26,
2011) (citing Merchants & Marine Bank v. Douglas-Guardian Warehouse Corp., 801
F.2d 742, 745 (5th Cir. 1986); Provenza v. Stamps, No. 1:09cv191, 2010 WL 706480, at
*2 (S.D. Miss. Feb. 22, 2010)).2 Chief Judge Guirola also found the Mississippi
2
But see Baldwin v. Miss. State Univ., No. 1:08cv191, 2009 WL 3647356, at *2 (N.D.
Miss. Nov. 3, 2009) (“[T]he Court has been unable to find, and Plaintiff has not provided
any authority, of the continuing violation doctrine applying in contract actions.”).
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Supreme Court’s description of the continuing tort doctrine persuasive in holding that
the defendant’s “repeated and continuous acts of alleged wrongful conduct” served to
extend the statute of limitations on a breach of contract claim. Singing River Elec.
Power Ass’n, 2011 WL 5082235, at *7-8.
The Complaint contains several allegations of repeated wrongful conduct
plausibly implicating the existence of a continuing tort or breach of contract:
(i)
“There have been more than 48 property inspections by CMI, all for the
purpose of continuing to rack up unnecessary charges on the mortgage.”
(1st Am. Compl. [25] at ¶ 7.)
(ii)
“The Defendant was presented with sufficient information to fix the
Plaintiff’s account on numerous occasions but failed to take steps to do
so. . . . A reasonable Defendant would have taken steps to comply with
their contractual obligations to fix the account. . . . Instead of correcting
the account and fixing the charges, CMI added more charges and then
tried to foreclose.” (1st Am. Compl. [25] at ¶¶ 31-32.)
(iii)
“Plaintiff was already paying her own escrow when CMI took over the
servicing of her loan. On multiple occasions the Plaintiff produced proof to
CMI that she paid taxes and insurance on her home. Despite this, CMI
continued to bill for an escrow that the Plaintiff did not owe. Despite
multiple representations that CMI was remedying these errors, this was
never done.” (1st Am. Compl. [25] at ¶ 38.)
(iv)
“CMI falsely informed the Plaintiff in an effort to have her pay more money,
while at the same time representing to her that there were errors in her
account which they were fixing and that Plaintiff’s payment was current
and in the proper amount. These verbal representations conflicted with
the letters subsequently received by Plaintiff. When Plaintiff attempted to
get clarification, she was assured that CMI had made an error and that the
Plaintiff was at all times correct. Regardless of these representations,
CMI marked Plaintiff’s mortgage ready for foreclosure and CMI’s
foreclosure team began assembling the necessary documentation.” (1st
Am. Compl. [25] at ¶¶ 39-40.)
(v)
CMI failed “to properly apply the Plaintiff’s payments;” improperly
overcharged “the Plaintiffs for their mortgage payments;” and, improperly
refused “to accept the Plaintiff’s mortgage payments”. (1st Am. Compl.
[25] at ¶ 46.)
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(vi)
“Despite Plaintiff’s multiple attempts to demonstrate that she paid her own
taxes and homeowner’s insurance, CMI refused to alter the mortgage
status, and kept the Plaintiff in suspense status. While in suspense
status, CMI charged corporate advances and property preservation fees
upon Plaintiff’s mortgage. The Plaintiffs do not owe for these charges.”
(1st Am. Compl. [25] at ¶ 49.)
Accepting “all factual allegations in the complaint as true” and drawing “all reasonable
inferences in the plaintiff[s’] favor”,3 it is not evident “that the action is barred and the
pleadings fail to raise some basis for tolling or the like.” Jones, 339 F.3d at 366.
The central flaw in CitiMortgage’s time-bar argument relating to the Plaintiffs’
claims of negligent misrepresentation, NIED, and IIED is that it requires the Court to
draw inferences in the moving party’s favor. CitiMortgage asserts that to the extent
these claims are based on its alleged representations regarding the status of the
Plaintiffs’ account, they are untimely because the last representation “identified in the
Amended Complaint was made during a telephone call on January 29, 2009”, more
than four years prior to the filing of this action. (Def.’s Brief in Supp. of Mot. to Dismiss
[29] at pp. 11, 24.) This argument overlooks the Complaint’s references to
“misrepresentations”, “multiple representations”, and “verbal representations” that are
not specifically dated. (1st Am. Compl. [25] at ¶¶ 37-39.) Assuming that each of these
communications occurred outside of the applicable period of limitations would conflict
with the Court’s present duty to “draw all inferences in favor of the . . . [Plaintiffs], not
against them.” Morgan v. Swanson, 659 F.3d 359, 420 (5th Cir. 2011) (citations
omitted); cf. Simmons v. Local 565 Air Transp. Div. Transp. Workers Union of Am., No.
3:09-CV-1181-B, 2010 WL 2473840, at *4 (N.D. Tex. June 16, 2010) (denying the
3
Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009) (citations omitted).
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defendant’s Rule 12(b)(6) motion based on the statute of limitations where the
complaint failed to provide dates for certain occurrences, and thus, the affirmative
defense did not appear on the face of the pleading); Nat’l Util. Serv., Inc. v. Xanser
Corp., No. 3:03-CV-0878-P, 2003 WL 22939107, at *4 (N.D. Tex. Dec. 1, 2003) (same).
Based on the foregoing, the Court finds that the Plaintiffs have not pled
themselves “out of court” and CitiMortgage’s request for dismissal “on the basis of
limitations at the pleadings stage” is denied. TIB–The Indep. BankersBank, 13 F. Supp.
3d at 666. Whether the Plaintiffs’ claims are, in fact, timely via the continuing tort
doctrine or some other ground is not being decided today. These issues may be
revisited following the development of the facts through discovery and upon summary
judgment briefing.
b.
Sufficiency of the Pleadings
(1)
Breach of Contract
CitiMortgage argues that the Plaintiffs’ breach of contract claim based on any
alleged misapplication of payments must be dismissed as inadequately pled. A plaintiff
asserting a breach of contract claim has the burden of proving “by a preponderance of
the evidence: 1. the existence of a valid and binding contract; and 2. that the defendant
has broken, or breached it . . . .” Bus. Commc'ns, Inc. v. Banks, 90 So. 3d 1221,
1224–25 (¶ 10) (Miss. 2012) (citation omitted). Plaintiffs allege that CitiMortgage “is a
party to and is bound by the terms of” several contracts, including the Deed of Trust [282]. (1st Am. Compl. [25] at ¶¶ 11-12.) Plaintiffs further assert that CitiMortgage
breached “the Application of Payments provision” of the Deed of Trust by not applying
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their payments in accordance with the payment hierarchy (1-interest, 2-principal, 3escrow, 4-late charges) established by that provision. (1st Am. Compl. [25] at ¶ 15.)
The Court finds that the Plaintiffs have presented “sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678; see
also Morris v. PLIVA, Inc., 713 F.3d 774, 776 (5th Cir. 2013) (“a complaint does not
need detailed factual allegations, but must provide the plaintiff’s grounds for entitlement
to relief”) (citation and internal quotation marks omitted). Therefore, this request for
dismissal is denied.
(2)
Breach of the Implied Covenant of Good Faith and
Fair Dealing
“All contracts contain an implied covenant of good faith and fair dealing in
performance and enforcement.” Limbert v. Miss. Univ. for Women Alumnae Ass’n, Inc.,
998 So. 2d 993, 998 (¶ 11) (Miss. 2008) (citing Morris v. Macione, 546 So. 2d 969, 971
(Miss. 1989)). Good faith has been described as “faithfulness of an agreed purpose
between two parties, a purpose which is consistent with justified expectations of the
other party.” Harris v. Miss. Valley State Univ., 873 So. 2d 970, 987 (¶ 51) (Miss. 2004)
(quoting Cenac v. Murry, 609 So. 2d 1257, 1272 (Miss. 1992)). “The breach of good
faith is bad faith characterized by some conduct which violates standards of decency,
fairness or reasonableness.” Id. Bad judgment or negligence does not constitute bad
faith. Id. Instead, “bad faith implies some conscious wrongdoing because of dishonest
purpose or moral obliquity.” Lippincott v. Miss. Bureau of Narcotics, 856 So. 2d 465,
468 (¶ 8) (Miss. Ct. App. 2003) (citation and internal quotation marks omitted).
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CitiMortgage argues that the Complaint merely presents a threadbare recital of
the elements and fails to allege facts supporting the inference that it breached the
implied covenant. The Complaint clearly alleges the existence of a contractual
relationship between the Plaintiffs and CitiMortgage. Cf. Miss. Dep’t of Envtl. Quality v.
Pac. Chlorine, Inc., 100 So. 3d 432, 441-42 (¶ 33) (Miss. 2012) (holding that there can
be no breach of the implied covenant in the absence of an underlying contract). The
Complaint also, albeit scantily, alleges factual content concerning conduct attributable to
CitiMortgage rising above mere negligence and implying conscious wrongdoing with
respect to its dealings with the Plaintiffs arising out of this contractual relationship.
Plaintiffs contend that CitiMortgage conducted 48 property inspections for the purpose
of creating unnecessary mortgage charges. (See 1st Am. Compl. [25] at ¶ 7.) It is
further alleged that CitiMortgage provided the Plaintiffs with false information so that
their loan could be placed and kept in suspense status, resulting in the creation of
additional fees and charges, which the Plaintiffs did not owe, and the loan being marked
for foreclosure. (See 1st Am. Compl. [25] at ¶¶ 37, 39-40, 48-49.) Resolving all
reasonable inferences arising from these allegations in the Plaintiffs’ favor, the Court
finds that they have stated a legally cognizable claim for breach of the implied covenant
of good faith and fair dealing. Cf. Morgan Stanley Mortgage Capital Holdings, LLC v.
Realty Mortgage Corp., No. 3:07cv507, 2008 WL 4279585, at *5-6 (S.D. Miss. Sept. 11,
2008) (denying a motion to dismiss with respect to a breach of the implied covenant
claim where the claimant accused a mortgage lender of altering its underwriting
guidelines in order to increase the likelihood of borrowers defaulting on their loans);
Favre Prop. Mgmt., LLC v. Cinque Bambini, 863 So. 2d 1037, 1046 (¶ 27) (Miss. Ct.
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App. 2004) (finding allegations to the effect that the defendant intentionally thwarted the
plaintiff’s efforts to perform under the contract sufficient to state a claim). Therefore,
CitiMortgage’s request for the dismissal of this claim is also denied.
(3)
Negligent Misrepresentation
The Court determines that the averments of the Complaint state a claim for
negligent misrepresentation. See Mladineo v. Schmidt, 52 So. 3d 1154, 1164–65 (¶ 39)
(Miss. 2010) (listing elements). Thus, this cause of action will proceed past the pleading
stage.
(4)
Negligence/Gross Negligence
CitiMortgage argues that the Plaintiffs’ negligence allegations should be
dismissed as duplicative restatements of their breach of contract claim based on the
creation of an escrow account. The Court finds the two authorities CitiMortgage
principally relies on for this position to be distinguishable. See Mixon v. Golden Rule
Ins. Co., No. 2:12cv234, 2014 WL 232114 (S.D. Miss. Jan. 22, 2014); Furr Mktg., Inc. v.
Orval Kent Food Co., 682 F. Supp. 884 (S.D. Miss. 1988). In Mixon, the issue before
the undersigned was whether the defendant was entitled to summary judgment based
on the absence of a genuine dispute as to any material fact. 2014 WL 232114, at *2.
Here, the concern is whether the allegations of the Complaint state a claim for relief that
is sufficient to avoid dismissal under Rule 12(b)(6). In Furr, Judge Lee dismissed an
allegation of negligence because it added “nothing which would give rise to a cause of
action apart from the basic claim for breach of contract.” 682 F. Supp. at 886. The
breach of contract and negligence allegations before the Court are certainly intertwined
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and mirror each other in many respects. However, the Court does not find that the
allegations are so duplicative that they essentially state the same cause of action.
Furr and Mixon aside, the Court is required to follow the Mississippi Supreme
Court’s holding on issues of substantive state law. See Erie R.R. Co. v. Tompkins, 304
U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). Mississippi’s highest court has held
that a negligence claim may be founded on the breach of a legal duty arising from a
contract. See City of Jackson v. Estate of Stewart ex rel. Womack, 908 So. 2d 703, 711
(¶ 40) (Miss. 2005) (providing that it was permissible for the plaintiff to assert breach of
contract and negligence claims arising from the same operative facts); George B.
Gilmore Co. v. Garrett, 582 So. 2d 387, 391 (Miss. 1991) (“[W]hile th[e] duty of care, as
an essential element of actionable negligence, arises by operation of law, it may and
frequently does arise out of a contractual relationship . . . .”) (citation omitted); cf.
Williams v. Entergy Miss., Inc., 19 So. 3d 757, 762 (¶ 21) (Miss. Ct. App. 2008) (“Under
Mississippi law, a party may be negligent for failure to properly perform a duty assumed
under a contract.”) (citing Hartford Steam Boiler Inspection & Ins. Co. v. Cooper, 341
So. 2d 665, 667 (Miss. 1977)). Under “federal procedural law”, negligence and breach
of contract claims arising from the same set of facts may also coexist in one action
pursuant to the well-established practice of pleading in the alternative. Ajax Hardware
Mfg. Corp. v. Indus. Plants Corp., 569 F.2d 181, 185 (2d Cir. 1977) (citing Fed. R. Civ.
P. 8(e)(2), which is now codified at Fed. R. Civ. P. 8(d)(2)); cf. Nature’s Formula, Inc. v.
Norstar Consumer Prods. Co., No. 3:03cv1222, 2003 WL 23282765, at *3 (N.D. Tex.
Sept. 10, 2003) (refusing to dismiss an unjust enrichment claim as duplicative of a
quantum meruit cause of action because the Federal Rules of Civil Procedure allow for
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pleading alternative claims). Accordingly, CitiMortgage’s dismissal request based on
the duplicative nature of the Plaintiffs’ claims for breach of contract and negligence is
refused.
CitiMortgage further suggests that the Plaintiffs cannot recover on their
negligence claims relating to the imposition of an escrow account because the only
enforceable duties existing between the parties arose from the loan documents, and the
creation of the account and resulting collection of account charges were authorized by
the Deed of Trust. This suggestion fails to consider that “contracts are not the only way
in which . . . [Mississippi] law imposes a duty of care. Whenever a person does some
act, the law imposes a duty upon that person to take reasonable care in performing that
act.” River Prod. Co. v. Baker Hughes Prod. Tools, Inc., 98 F.3d 857, 859 (5th Cir.
1996) (citing Dr. Pepper Bottling Co. of Miss. v. Bruner, 245 Miss. 276, 148 So. 2d 199,
201 (Miss. 1962)); see also Garrett, 582 So. 2d at 391 (A duty of a care may arise by
operation “of the basic rule of the common law which imposes on every person engaged
in the prosecution of any undertaking an obligation to use due care, or to so govern his
actions as not to endanger the person or property of others”.). Furthermore, whether or
not CitiMortgage’s acts or omissions complied with the loan documents is a merits issue
that cannot be resolved at this stage of the litigation. CitiMortgage’s arguments fail to
warrant the dismissal of the Plaintiffs’ negligence claims at this time.
(5)
IIED
A plaintiff may recover on an IIED claim in Mississippi “[w]here there is
something about the defendant’s conduct which evokes outrage or revulsion, done
intentionally . . . even though there has been no physical injury. In such instances, it is
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the nature of the act itself—as opposed to the seriousness of the consequences—which
gives impetus to legal redress . . . .” Bowden v. Young, 120 So. 3d 971, 980 (¶ 25)
(Miss. 2013) (citation omitted). The defendant’s conduct “must be ‘so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of decency,
and to be regarded as atrocious, and utterly intolerable in a civilized community.’” Id.
(quoting Pegues v. Emerson Elec. Co., 913 F. Supp. 976, 982 (N.D. Miss. 1996)).
Liability will not attach for mere insults, threats, indignities, petty oppression,
annoyances, or other trivialities. Funderburk v. Johnson, 935 So. 2d 1084, 1100 (¶ 40)
(Miss. Ct. App. 2006) (quoting Raiola v. Chevron U.S.A., Inc., 872 So. 2d 79, 85 (¶ 23)
(Miss. Ct. App. 2004)).
The allegations at issue in Bowden v. Young provide a useful counterpoint to
those presently before the Court. In Bowden, the plaintiffs, former employees of the
defendant law firm, asserted multiple claims regarding the presence of toxic mold in the
workplace. 120 So. 3d at 973 at (¶ 2). As to their IIED claim, the plaintiffs alleged that
the law firm engaged in a pattern of dishonesty designed to cast doubt on their
suspicions concerning the existence of the mold and their related symptoms. Id. at 979
(¶ 24). The Mississippi Supreme Court held that the plaintiffs failed to state a claim
upon which relief could be granted. Id. at 980 (¶ 26). The court accepted as true the
claims that the defendant initially denied the presence of mold and suggested that the
plaintiffs’ symptoms were caused by other ailments. Id. However, the complaint also
indicated that the law firm subsequently attempted to remedy the situation by applying a
chemical spray, and ultimately decided to move its offices as a result of the mold. Id.
“While the defendants’ handling of the mold problem may have been negligent, the
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allegations do not rise to the level of outrageous and extreme conduct that is necessary
to support a claim for intentional infliction of emotional distress.” Id.
As noted in the preceding discussion of the Plaintiffs’ claim for breach of the
implied covenant of good faith and fair dealing, the Complaint presents some limited
facts giving rise to the inference that CitiMortgage engaged in intentional misconduct in
relation to the Plaintiffs’ loan. Furthermore, unlike the complaint at issue in Bowden, the
Plaintiffs’ pleadings do not indicate that CitiMortgage eventually attempted to cure the
alleged errors pertaining to their mortgage account. To the contrary, Plaintiffs
essentially claim that CitiMortgage doubled down on its misconduct. “Instead of
correcting the account and fixing the charges, CMI added more charges and then tried
to foreclose.” (1st Am. Compl. [25] at ¶ 32.) Plaintiffs further contend that CitiMortgage
lulled them into a false sense of security by misrepresenting that it was remedying the
account errors. (See 1st Am. Compl. [25] at ¶¶ 38-40, 48.) Analogous circumstances
have been cited in the rejection of a request for dismissal of an IIED claim at the
pleadings stage. See Paschall v. Enter. Rent-A-Car Co., No. 1:08cv151, 2008 WL
2704828, at *2 (S.D. Miss. July 7, 2008) (the defendant purportedly acknowledged that
the plaintiff did not return a rented vehicle in a damaged state, but nevertheless
continued to demand payment from the plaintiff for damage to the vehicle). Because
CitiMortgage’s alleged “[mis]handling of the mo[rtgage] problem may have been
[intentional and motivated by bad faith, and not just] negligent,” further factual
development is required for a determination as to whether CitiMortgage’s purported acts
or omissions “rise to the level of outrageous and extreme conduct that is necessary to
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support a claim for intentional infliction of emotional distress.” Bowden, 120 So. 3d at
980 (¶ 26).
The Court is far from convinced that the Plaintiffs will ultimately prevail at trial or
even survive summary judgment on their IIED allegations. However, the evaluation of
the Plaintiffs’ ultimate likelihood of success is not the Court’s present task. See In re
McCoy, 666 F.3d at 926. There are enough facts, accepted as true, before the Court to
deny this request for dismissal and allow the parties to move forward and conduct
discovery on the Plaintiffs’ IIED cause of action. Cf. Hanye v. Innocence Project, No.
3:09cv218, 2011 WL 198128, at *11 (S.D. Miss. Jan. 20, 2011) (denying the
defendants’ request for dismissal since the plaintiff had not yet been allowed to present
evidence in support of his claim, which would facilitate a decision as to whether the
defendants’ conduct was sufficiently outrageous).
(6)
NIED
CitiMortgage argues that this claim fails because the Plaintiffs have not alleged
any physical injuries resulting from its alleged acts or omissions. The Court has
recognized that where ordinary negligence is at issue, a plaintiff in Mississippi “must
prove some sort of injury or demonstrable harm, whether it be physical or mental, and
that harm must have been reasonably foreseeable to the defendant.” Montgomery v.
CitiMortgage, Inc., 955 F. Supp. 2d 640, 653 (S.D. Miss. 2013) (quoting Am. Bankers’
Ins. Co. of Fla. v. Wells, 819 So. 2d 1196, 1208 (¶ 40) (Miss. 2001)). The Plaintiffs’
claim of “demonstrable harm” resulting from CitiMortgage’s alleged negligence is
certainly ill-defined. (1st Am. Comp. [25] at ¶ 56.) Nonetheless, the parties can flesh
out the details of the Plaintiffs’ alleged injuries through the discovery process. The
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sufficiency of the Plaintiffs’ proof in support of this claim may then be tested at the
summary judgment stage. Cf. Elam v. Pharmedium Healthcare Corp., No. 2:07cv212,
2008 WL 1818436, at *2 (N.D. Miss. April 18, 2008) (“At this stage in the litigation-i.e.,
before discovery has been completed-the court concludes that it is inappropriate to
assume that ‘harm’ does not include physical harm.”). Accordingly, this request for
dismissal is denied.
III. CONCLUSION
IT IS THEREFORE ORDERED AND ADJUDGED that CitiMortgage’s Motion to
Dismiss Plaintiffs’ First Amended Complaint [28] is granted in part and denied in part.
Plaintiffs’ claims for violations of the Fair Debt Collection Practices Act, the Fair Credit
Report Act, and the Home Affordable Modification Program (including any underlying
guidelines) are dismissed with prejudice. Plaintiffs’ above-discussed state law claims
remain pending.
IT IS FURTHER ORDERED AND ADJUDGED that counsel for the parties are to
contact the chambers of the United States Magistrate Judge Michael T. Parker within
ten (10) days of the entry of this Order to schedule a case management conference.
SO ORDERED AND ADJUDGED this the 2nd day of December, 2014.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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