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

Filing 24

MEMORANDUM AND ORDER - Accordingly, IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Plaintiffs' first amended complaint [ECF No. 16] is GRANTED, in part, and DENIED, in part. IT IS FURTHER ORDERED that Plaintiffs' Counts II, and IV are DISMISSED, without prejudice. IT IS FURTHER ORDERED that Defendant's motion is DENIED in all other respects. Signed by District Judge E. Richard Webber on November 1, 2016. (MCB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
LAURA HILL and JOHNNY HILL,
Plaintiffs,
vs.
BANK OF AMERICA, N.A.
Defendant.

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No. 4:16CV00444-ERW

MEMORANDUM AND ORDER
This matter comes before the Court on Defendant Bank of America, N.A.’s Motion to
Dismiss Plaintiffs’ First Amended Complaint [ECF No. 16].
I.

BACKGROUND
Plaintiffs Laura Hill and Johnny Hill (“Plaintiffs”) initiated this lawsuit by filing a

petition against Defendant Bank of America, N.A. on December 28, 2015 in the Twenty–First
Judicial Circuit Court, in St. Louis County, Missouri [ECF Nos. 1, 1-1]. On April 1, 2016,
Defendant removed the action to this Court [ECF No. 1]. On May 12, 2016, Defendant filed a
motion to dismiss, alleging Plaintiffs failed to state a claim upon which relief can be granted
[ECF No. 10]. On Jun 18, 2016, Plaintiffs filed a first amended complaint [ECF No. 14]. On July
8, 2016, Defendant filed this Motion to Dismiss for failure to state a claim upon which relief can
be granted pursuant to FRCP 12(b)(6), seeking to dismiss all counts of Plaintiffs’ first amended
complaint [ECF No. 16]. For purposes of this Motion to Dismiss, the Court accepts the
following facts alleged in Plaintiffs’ complaint as true. Great Rivers Habitat Alliance v. Fed.
Emergency Mgmt. Agency, 615 F.3d 958, 988 (8th Cir. 2010).
Plaintiffs obtained a loan secured by a mortgage on their real property commonly known

as 2326 Wallis Avenue, St. Louis, Missouri, in St. Louis County, Missouri, (“Real Property”)
from Defendant. In connection with the loan, Plaintiffs executed a Note on October 12, 2001. On
March 18, 2008, Plaintiffs and Defendant entered into a loan modification agreement where
Plaintiffs were obliged to pay $830.18 plus interest per month, with the first payment due on
May 1, 2008. Plaintiffs continued to make their scheduled monthly payment, after agreeing to
the Loan Modification Agreement. When Plaintiffs attempted to make their October 28, 2008
payment, Defendant refused to accept the payment and informed Plaintiffs their loan was in
default. Plaintiffs claim they made all the required payments and were not otherwise in default.
Further, Plaintiffs claim Defendant failed to apply several payments made by Plaintiffs,
including insurance proceeds, to Plaintiffs’ loan account. Plaintiffs contacted Defendant several
times to urge Defendant to apply the payments to Plaintiffs’ loan balance,e but Defendant
allegedly never applied these payments. On or about February 23, 2011, Defendant foreclosed on
Plaintiff’s home. On June 12, 2011, Plaintiffs repurchased the real property for $62,406.00.
In Plaintiffs’ Complaint, Plaintiffs allege nine counts against Defendant. In Count I,
Plaintiffs allege Defendant wrongfully foreclosed on the real property by refusing Plaintiffs’
payments and by failing to properly apply those payments towards the loan balance, despite
Plaintiffs making all the required payments and not otherwise being in default at the time of the
foreclosure. In Count II, Plaintiffs allege Defendant fraudulently misrepresented Plaintiffs by
instructing them to stop making loan payments and assuring Plaintiffs they were eligible for a
loan modification. In Count III, Plaintiffs allege Defendant breached the deed of trust in not
properly applying payments received from Plaintiffs. In Count IV, Plaintiffs allege Defendant
negligently misrepresented Plaintiffs by providing them with false information and instructions.
In Count V, Plaintiffs allege a claim of money had and received, where they argue Defendant’s

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acceptance and retention of Plaintiffs’ loan payment was unjust, because Defendant did not
properly apply these payments to Plaintiffs’ loan balance. In Count VI, Plaintiffs allege
Defendant was unjustly enriched since Defendant retained Plaintiffs’ loan payments without
applying the payments to Plaintiffs’ loan balance. In Count VII, Plaintiffs allege Defendant
engaged in conversion of funds by diverting money, paid by Plaintiffs for the specific purpose of
satisfying monthly mortgage payments, to a different purpose. In Count VIII, Plaintiffs allege
Defendant violated the Missouri Merchandising Practice Act (“MMPA”) by engaging in unfair
practices in not applying Plaintiffs’ loan payments to their loan balance and making false
promises and misrepresentations to Plaintiffs. In Count IX, Plaintiffs allege Defendant’s conduct
was grossly negligent, and warrants punitive damages to deter Defendant from like conduct in
the future. Plaintiffs request the Court award Plaintiffs compensatory damages in a fair and
reasonable amount in the excess of Twenty-Five Thousand Dollars ($25,000) for each count
except for Count IX. Defendant now seeks to dismiss all of Plaintiffs’ claims pursuant to FRCP
12(b)(6) for failure to state a claim upon which relief can be granted.
II.

STANDARD

Under FRCP 12(b)(6), a party may move to dismiss a claim for “failure to state a claim
upon which relief can be granted.” The notice pleading standard of FRCP 8(a)(2) requires
plaintiffs to give “a short and plain statement showing that the pleader is entitled to relief.” To
meet this standard and to survive a FRCP 12(b)(6) motion to dismiss, “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 (2009) (internal quotations and citation omitted). This
requirement of facial plausibility means the factual content of Plaintiffs’ allegations must “allow
the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Cole v. Homier Distrib. Co., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Iqbal, 556
U.S. at 678). Courts must assess the plausibility of a given claim with reference to plaintiffs’
allegations as a whole, not in terms of the plausibility of each individual allegation. Zoltek Corp.
v. Structural Polymer Group, 592 F.3d 893, 896 n.4 (8th Cir. 2010) (internal citation omitted).
This inquiry is “a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679. Court must grant all reasonable
inferences in favor of the nonmoving party. Lustgraaf v. Behrens, 619 F.3d 867, 872-73 (8th Cir.
2010).
III.

DISCUSSION

Defendant makes multiple arguments in its Motion to Dismiss, where it generally argues
each of Plaintiffs’ counts in their first amended complaint fails to state a claim for relief. The
Court will address each claim individually.
A.

Plaintiffs’ Wrongful Foreclosure Claim – Count I

In Count I, Plaintiffs allege Defendant is liable for wrongful foreclosure because
Defendant did not apply Plaintiffs’ payment towards their loan balance and Plaintiffs were not
otherwise in default. Defendant asserts Plaintiffs’ wrongful foreclosure claim fails because
multiple and conflicting allegations in the complaint are inconsistent with and contradictory to
Plaintiffs’ wrongful foreclosure claim, because the other allegations state Plaintiffs were in
default at various times and Defendant had a lawful right to foreclose [ECF No. 17 at 3].
Plaintiffs respond Defendant never had a right to foreclose, because Plaintiffs were up to date on
their loan payments and even if they were not, Defendant waived its right to insist on the original
payments in the first loan modification and its instructions to Plaintiffs to stop making further
payments [ECF No. 20 at 4-5]. Defendant replies Plaintiffs’ allegations are too implausible and

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the timeline of the complaint does not support a theory of waiver.
Under Missouri law, Plaintiffs can pursue a claim in equity as a basis for setting aside a
foreclosure sale, or they can let the sale stand and file a tort action to recover damages for
wrongful foreclosure. Dobson v. Mortg. Electronic Registration Sys., Inc./GMAC Mortg. Corp.,
259 S.W.3d 19, 22 (Mo. Ct. App. 2008). What constitutes a “wrongful foreclosure” sufficient to
set aside a sale differs from what constitutes a “wrongful foreclosure” sufficient to recover
damages in tort. Id. at 22. Because Plaintiffs only request the Court enter a judgment against
Defendant for damages, and not set aside the foreclosure sale, the Court will only examine
Plaintiffs' pleading to determine if it states a tort claim for wrongful foreclosure claim.
“[A] plaintiff seeking damages in a wrongful foreclosure action must plead and prove
that when the foreclosure proceeding was begun, there was no default on its part that would give
rise to a right to foreclose.” Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887 (8th Cir. 2014)
(quoting Fields v. Millsap & Singer, P.C., 295 S.W.3d 567, 571 (Mo. Ct. App.2009)).
Plaintiffs, in their complaint, allege their mortgage was not in default when the
foreclosure proceeding began [ECF No. 14 at 40]. Plaintiffs also allege they complied with the
original and modified deed of trust agreement by making payments in the amount of $830.18
plus interest every month and complied with all obligations pursuant to the deed of the trust.
Plaintiffs allege sufficient factual matter, if true, could show there was no default on Plaintiffs'
part and Defendant had no right to foreclose at the time foreclosure proceedings were
commenced.
Defendant argues Plaintiffs’ claims are internally inconsistent and the Court does not
need to accept such claims. Parties are allowed to plead alternative and inconsistent theories in
their complaints under FRCP 8, and Defendant acknowledges this, but avers Plaintiffs’ claims

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are internally inconsistent with each other and the Court need not accept them. “The liberal
policy reflected in Rule 8(d) mandates that courts not construe a pleading ‘as an admission
against another alternative or inconsistent pleading in the same case.’” Franke v. Greene, No.
4:11CV1860 JCH, 2012 WL 3156577, at *5 (E.D. Mo. Aug. 2, 2012) (quoting Molsbergen v.
United States, 757 F.2d 1016, 1019 (9th Cir. 1985)). Plaintiffs are allowed to plead in the
alternative, and the Court does not find these pleadings to be internally inconsistent, other than to
the extent they may be alternative pleadings. Adopting Defendant’s position would stifle the
liberal alternative pleading policy of Rule 8(d). Plaintiffs have stated a claim for wrongful
foreclosure, and therefore, the Court denies Defendant’s motion with respect to count I.
B.

Plaintiffs’ Fraudulent Misrepresentation Claims – Count II

Plaintiffs allege Defendant engaged in fraudulent misrepresentation when Defendant’s
agent instructed Plaintiffs to not make any payments on their loan while it was being reviewed.
[ECF No. 14 ¶¶ 43-48]. Defendant asserts Plaintiffs’ claims for fraudulent misrepresentation fail
because: (1) Plaintiffs have not pled sufficient facts; (2) the claims are barred by the economic
loss doctrine; (3) a misrepresentation cannot relate to expectations and predictions concerning a
future event; and (4) Plaintiffs’ claims are barred by the statute of limitations. Plaintiffs respond
the fraudulent misrepresentation claims should not be dismissed, because, inter alia, Plaintiffs
have properly pled all elements of fraudulent misrepresentation and have been as specific as
possible in their complaint by providing dates and specific names of individuals who made the
misrepresentations.
To state a claim for fraudulent misrepresentation, a plaintiff must allege facts to support
the following elements:
(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge
of its falsity or ignorance of its truth; (5) the speaker's intent that it should be
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acted on by the person in the manner reasonably contemplated; (6) the hearer's
ignorance of the falsity of the representation; (7) the hearer's reliance on the
representation being true; (8) the hearer's right to rely thereon; and (9) the hearer's
consequent and proximately caused injury.
Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 131–32 (Mo. 2010). “A failure
to establish any one of the essential elements of fraud is fatal to recovery.” Verni v. Cleveland
Chiropractic Coll., 212 S.W.3d 150, 154 (Mo. 2007) (quoting Jungerman v. City of Raytown,
925 S.W.2d 202, 204 (Mo. 1996).
Defendant contends Plaintiffs fails to state a claim upon which relief can be granted,
because FRCP 9(b) demands a heightened pleading standard for claims of fraud and Plaintiffs
fail to meet the standard. Plaintiffs respond they are as specific as possible in their complaint by
providing dates and specific names of individuals who made the misrepresentations and
Defendant holds Plaintiffs to a heightened expectation of alleging all facts.
Fraudulent misrepresentation claim is subject to the heightened pleading requirements of
FRCP 9(b). Freitas v. Wells Fargo Home Mortg., Inc., 703 F.3d 436, 439 (8th Cir. 2013); see
also Arthur v. Medtronic, Inc., 123 F. Supp. 3d 1145, 1149 (E.D. Mo. 2015). FRCP 9(b)
provides “a party must state with particularity the circumstances constituting fraud or mistake.”
“To satisfy the particularity requirement of FRCP 9(b), the complaint must plead such facts as
the time, place, and content of the defendant's false representations, as well as the details of the
defendant's fraudulent acts, including when the acts occurred, who engaged in them, and what
was obtained as a result.” United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 556
(8th Cir. 2006). “Put another way, the complaint must identify the ‘who, what, where, when, and
how’ of the alleged fraud.” Id. (quoting United States ex rel. Costner v. URS Consultants, Inc.,
317 F.3d 883, 888 (8th Cir. 2003)).
Plaintiffs, in their complaint, have failed to state a claim for fraudulent misrepresentation,
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because they have not plead they relied on Defendant’s misrepresentation of an instruction to
stop making payments. Plaintiffs allege they were instructed to stop making payments, while
their loan was under review. They also allege they had a right to rely on Defendant’s
representation any funds paid would be applied to their loan balance. Plaintiffs’ right to rely is
not premised on Defendant’s original misrepresentation, but a separate misrepresentation.
Further, Plaintiffs allege they continued to make payments “despite this instruction.” [ECF No.
14 ¶ 17]. Plaintiffs failed to allege any reliance on Defendant’s “stop making payment”
instruction, and therefore have failed to state a claim on this misrepresentation.
If Plaintiffs are attempting to plead a claim of fraudulent misrepresentation on the
allegations Defendant, in accordance with the loan modification agreement, would remedy the
misapplied payments and not proceed with a foreclosure, this claim also fails. Plaintiffs’
complaint fails to clearly identify when this misrepresentation happened. Even if the Court
construes this misrepresentation as happening “in December and January 2010,” pleading a
single instance of misrepresentation occurred during a two month time period does not satisfy the
particularity requirement of FRCP 9(b)’s “when” element. See Arthur, 123 F. Supp. 3d 1145,
1150 (finding plaintiff's allegations do not satisfy Rule 9(b)'s particularity requirement when
plaintiff alleges fraudulent misrepresentation happened “in November 2008”). Plaintiffs
fraudulent misrepresentation claim on this misrepresentation is not sufficiently plead.
In sum, Plaintiffs fail to plead when Defendant’s loan modification eligibility assurance
occurred with particularity and therefore, do not meet the heightened pleading standard of FRCP
9(b). Plaintiffs also fail to allege the reliance element for the stop making payment instruction.
Because failure of any one element is “fatal” to Plaintiff's claim, the Court need not address the
economic loss doctrine and the statute of limitations issue. Accordingly, Plaintiffs' fraudulent

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misrepresentation claims will be dismissed without prejudice.
C.

Plaintiffs’ Breach of Contract Claim – Count III
Plaintiffs, in their complaint, allege Defendant breached the deed of trust agreement by

failing to apply Plaintiffs’ payment to their loan balance. Defendant contends any purported
breach of contract alleged by Plaintiffs should be dismissed, because Plaintiffs have failed to
plead facts sufficient to a breach of contract claim, because Plaintiffs do not identify any section
or paragraph Defendant breached of any contract. Plaintiffs respond the agreement has mutual
obligations for both parties, and it was Defendant’s duty to apply Plaintiffs’ payment to their
loan balance. Plaintiffs further respond, even if Defendant contends Plaintiffs were behind in
their loan payments, Defendant breaches the deed of trust by not returning Plaintiffs’ late
payments. Defendant replies, it did not breach the deed of trust by failing to return the Plaintiff’s
payments because Defendant has the discretion to apply the payments to the most delinquent
periodic payment until the payments are current [ECF No. 23 at 9-10].
Under Missouri law, “[a] breach of contract action includes the following essential
elements: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered
performance pursuant to the contract; (3) breach of the contract by the defendant; and (4)
damages suffered by the plaintiff.” Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo.
2010).
Plaintiffs allege they entered into the loan modification agreement (“LMA”) with
Defendant which amended the deed of trust agreement, [ECF No. 14, ¶ 51], Plaintiffs performed
or at least tendered to perform pursuant to the LMA by paying the requirement monthly
payments, [ECF No. 14 ¶¶ 39-40], Defendant breached the deed of trust agreement by not
applying Plaintiffs’ payments, [ECF No. 14, ¶ 55], and Plaintiffs suffered damages as the direct

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and proximate result of the actions of Defendant [ECF No. 14 ¶ 57]. Plaintiffs have pled each of
necessary elements for a claim of breach of contract.
Defendant makes the argument because Plaintiffs have failed to identify a specific
provision of the contract Defendant breached, Plaintiffs have failed to support a claim. A breach
of contract claim does not require the type of specificity at this early stage of the case. See, e.g.,
BJC Health Sys. v. Columbia Cas. Co., 348 F.3d 685, 689 (8th Cir. 2003) (“The allegations that
BJC had a binding agreement with Columbia, that Columbia breached the agreement, and that
BJC suffered injury as a result of the breach, are sufficient to satisfy the requirements of Rule
8(a).”). Plaintiffs have sufficiently pleaded a claim for breach of contract on this basis, and
Defendants’ motion is denied.
D.

Negligent Misrepresentation Claim – Count IV
Plaintiffs, in their Complaint, allege Defendant negligently misrepresented to Plaintiffs

by stating: Plaintiffs’ loan was under review, Defendant was investigating Plaintiffs’ payment,
and Plaintiffs should not make any further mortgage payments. [ECF No. 14 ¶ 59]. Defendant
asserts Plaintiffs’ claim for negligent misrepresentation fails because: (1) Plaintiffs have not pled
sufficient facts; (2) the claims are barred by the economic loss doctrine; (3) a
“misrepresentation” cannot relate to expectations and predictions concerning a future event; and
(4) Plaintiffs’ claims are barred by the statute of limitations. [ECF No. 17 ¶ 5]. Plaintiffs respond
the negligent misrepresentation claims should not be dismissed, because, inter alia, Plaintiffs
have properly pled all elements of negligent misrepresentation specifically as possible in their
complaint by providing dates and specific names of individuals who made the
misrepresentations.
To state a claim for negligent misrepresentation, a plaintiff must allege facts supporting

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the following elements:
(1) the speaker supplied information in the course of his business; (2) because of
the speaker's failure to exercise reasonable care, the information was false; (3) the
information was intentionally provided by the speaker for the guidance of limited
persons in a particular business transaction; (4) the hearer justifiably relied on the
information; and (5) due to the hearer's reliance on the information, the hearer
suffered a pecuniary loss.
Renaissance Leasing, 322 S.W.3d at 134.
The particularity requirements of Rule 9(b) do not apply to a claim of negligent
misrepresentation. First Franklin Financial Corp. v. Advantage Mortg. Consulting, Inc., No.
4:07CV1478 JCH, 2007 WL 4454292 (E.D. Mo. Dec. 14, 2007), citing In re Marion Merrell
Dow, Inc., No. 92-0609-CV-W-6, 1993 WL 393810 at *13 (W.D. Mo. Oct. 4, 1993); see also
Burt on Behalf of McDonnell Douglas Corp. v. Danforth, 742 F. Supp. 1043, 1051 (E.D. Mo.
1990) (“Plaintiff's theory of reckless or culpable neglect does not involve fraud, and the Court
will, therefore, not apply the requirements of Rule 9(b) to plaintiff's pleadings alleging this
theory”); Mounger Const., LLC v. Fibervision Cable Services, LLC., No. 211CV00081 ERW,
2012 WL 1745543 (E.D. Mo. Dec. 14, 2007). Thus, Plaintiffs’ cause of action for negligent
misrepresentation is governed by FRCP 8, which requires only “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). Accordingly, the
Court holds Plaintiffs’ negligent misrepresentation claim must comply only with Rule 8(a)'s
general pleading requirement.
Plaintiffs’ negligent representation claim fails because Plaintiffs never claimed they
relied on Defendant’s misrepresentations, a required element of such a claim. In fact, Plaintiffs
allege they continued to make payments in spite of Defendants misrepresentations. Plaintiff did
not allege they relied on any of Defendant’s alleged negligent misrepresentations, a required
element for negligent misrepresentation claims. See, Stein v. Novus Equities Co., 284 S.W.3d
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597, 603 (Mo. Ct. App. 2009) (finding Plaintiff did not allege facts which, if proven, would
establish plaintiffs took or refrained from taking any action in reliance upon the
misrepresentations allegedly made by Defendants preventing a claim of fraudulent
misrepresentation). Thus, the Court need not address the economic loss doctrine and the statute
of limitations issue. Accordingly, Plaintiffs' negligent misrepresentation claims will be
dismissed.
E. Plaintiffs’ Money Had and Received Claim in Count V and their Unjust Enrichment
Claim in Count VI
Plaintiffs allege in Count V, a claim for money had and received and in Count VI, a claim
for unjust enrichment [ECF No. 14 ¶¶ 66–82], and therefore, Defendant’s retention of Plaintiffs
loan payments is unjust and they are entitled to damages. Defendant moves to dismiss the two
counts for failure to state a claim, because Plaintiffs were obliged to make payments to
Defendant under the terms of the loan modification agreement, and thus, retention of payments
made by Plaintiffs toward their debt was not unjust. Plaintiffs respond Defendant’s retention was
unjust because it was not using the payments for its intended purpose, to wit, applying to the loan
balance.
“To state a claim for money had and received, a plaintiff must allege that ‘(1) the
defendant received or obtained possession of the plaintiff's money; (2) the defendant thereby
appreciated a benefit; and (3) the defendant's acceptance and retention of the money was
unjust.’” Superior Edge, Inc. v. Monsanto Co., 44 F. Supp. 3d 890, 899 (D. Minn. 2014) (quoting
Pitman v. City of Columbia, 309 S.W.3d 395, 402 (Mo. Ct. App. 2010)). Similarly, to state a
claim for unjust enrichment, the petition must set forth facts demonstrating: “‘(1) that the
defendant was enriched by the receipt of a benefit; (2) that the enrichment was at the expense of
the plaintiff; (3) that it would be unjust to allow the defendant to retain the benefit.’” Damon v.
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City of Kansas City, 419 S.W.3d 162, 192 (Mo. Ct. App. 2013).
Plaintiffs plead Defendant received the benefit of numerous loan payments, such
payments were not applied to the loan balance, the intended account for the money, and
Defendant’s receipt of these payments was thus unjust. [ECF No. 14 ¶ 66–70]. Although,
Defendant claims Plaintiffs were in default on their loan, the retention of payments may still be
unjust. Plaintiffs’ allegations are a short plain statement indicating they are entitled to relief.
Accordingly, the Court will deny Defendant’s motion to dismiss Count V and VI of Plaintiffs'
Complaint.
F. Conversion of Funds – Count VII
Plaintiffs allege in their complaint Defendant engaged in conversion of funds by diverting
Plaintiffs’ payments “to another, different purpose.” Defendant asserts Plaintiffs’ claim for
conversion of funds fails because conversion is not a proper theory where the claim involves
money rather than a chattel, besides, a narrow exception exists where a plaintiff pays a specific
amount for a specific purpose, but a defendant diverts the funds. Plaintiffs’ case does not fall
under this narrow exception. Defendant further asserts Plaintiffs’ claim violates the economic
loss doctrine, because the underlying relationship between Plaintiffs and Defendant is based on
contracts. Plaintiffs respond their case falls under the narrow exception because they claim the
payments are of a specific amount and for a specific purpose, to wit, paying the loan, and
defendant diverting the funds by using the funds for a purpose different from applying the funds
to the loan balance. Plaintiffs further respond the conversion of funds claim is not barred on the
economic loss doctrine, because Plaintiffs are damaged by suffering “mental anguish and
hardship” in addition to their economic loss. Defendant replies Plaintiffs cannot establish
Defendant tortuously took Plaintiffs’ payment, because Plaintiffs made payments to Defendant

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voluntarily to pay their debt.
As noted, “[c]onversion generally is not a proper theory where the claim involves money,
as opposed to specific chattel.” Johnson v. GMAC Mortgage Corp., 162 S.W.3d 110, 125 (Mo.
Ct. App. 2005) (quoting Express Scripts, Inc. v. Walgreen Co., No. 4:08–CV–1915–TCM, 2009
WL 4574198, *4 (E.D. Mo. Dec. 3, 2009)). Missouri law recognizes a “narrow exception,”
where the plaintiff must have delivered funds to the defendant for a specific purpose and the
defendant must have diverted the funds to another and different purpose of the
defendant. Johnson, 162 S.W.3d at 125 (quoting Knight v. M.H. Siegfried Real Estate, Inc., 647
S.W.2d 811, 817 (Mo. Ct. App. 1982). In Johnson, the Court found plaintiff pleading a claim he
alleged he made two payments to the mortgagor for the specific purpose of crediting the money
to an escrow account, and the Defendant never credited the money to this account was sufficient
to plead a claim for conversion. Johnson, 162 S.W.3d at 125-126. Similarly, Plaintiffs alleged
they delivered loan payments to Defendant in the specific amount of $830.18 plus interest per
month for the sole purpose of to be applied to Plaintiffs’ loan balance. By allegedly not applying
the payments to Plaintiffs’ loan balance, Defendant “must have diverted the funds to another and
different purpose.” Plaintiffs’ case fits the narrow exception and conversion is a proper theory
for Plaintiffs conversion of funds claim.
Defendants further argue Plaintiff’s claim should be dismissed as a result of the economic
loss doctrine. The economic loss doctrine bars tort claims where the “substance of [the] claims is
for the recovery of losses arising out of the parties' contractual relationships.” CitiMortgage, Inc.
v. K. Hovnanian American Mortg., L.L.C., No. 4:12CV01852–SNLJ, 2013 WL 5355471 (E.D.
Mo. Sept. 20, 2013) (quoting Dubinsky v. Mermart, LLC, No. 4:08–CV–1806–CEJ, 2009 WL
1011503, *6 (E.D. Mo. Apr. 15, 2009)). Here, the parties’ underlying relationship is based on

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loan agreements and is contractual in nature. Defendant’s failure to apply Plaintiffs’ payments to
their loan balance allegedly breached its contractual duty in the Agreement.
“The economic loss doctrine prohibits tort recovery for economic loss, which is defined
as loss resulting from a product failure when there is no personal injury or damage to other
property.” W. Dudley McCarter, Economic Loss Doctrine: Is Privity Required?, 53 J. Mo. B. 23
(1997). “It is the law in Missouri ... that recovery in tort for purely economic damage is limited
to those cases where there is personal injury, damage to property, other than that sold, or
destruction of the property sold due to some violent occurrence.” Wilbur Waggoner Equip. and
Excavating Co. v. Clark Equip. Co., 668 S.W.2d 601, 603 (Mo. Ct. App. 1984). Plaintiffs have
pleaded mental anguish damages, in addition to pecuniary damages. Plaintiffs may recover
damages for mental anguish under a theory of conversion. Young v. Mercantile Trust Co. Nat'l
Ass'n, 552 S.W.2d 247, 250 (Mo. Ct. App. 1977) (a conversion claim for damages for the alleged
detriment to plaintiff's reputation in the economic community) (internal quotation marks omitted)
(quoting Condos v. Associated Transports, Inc., 453 S.W.2d 682, 688 (Mo. Ct. App. 1970),
abrogated on other grounds Fleischmann v. Mercantile Trust Co. Nat'l Ass'n, 617 S.W.2d 73, 74
(Mo. 1981)). Plaintiffs have pleaded a claim for damages beyond that of just pecuniary damages,
and therefore the economic loss doctrine does not apply. Plaintiffs have sufficiently stated a
claim, which if true, would entitle them to relief.
G. Action under the Missouri Merchandising Practices Act
In Plaintiffs’ complaint, they allege Defendant violated the MMPA by not applying
certain insurance proceeds and mortgage payments to Plaintiffs’ loan balance, and making false
promises and misrepresentations to Plaintiffs, when Defendant, in its correspondence to
Plaintiffs, indicated their mortgage was under review, they were eligible for another loan

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modification, and the funds were being applied to their mortgage. [ECF No. 14 ¶¶ 95-96].
Defendant argues Rule 9(b) applies to Plaintiffs’ MMPA claim, and Plaintiffs fail to meet the
heightened pleading standard. Plaintiffs respond they plead all elements of a MMPA violation,
the type of specificity argued by Defendant is not what is required in an initial pleading, and
Defendant is in the superior position to provide specified information. Defendant replies
Plaintiffs failed to allege any specific facts supporting causation and the existence of any
ascertainable loss resulting from the alleged MMPA violation.
The MMPA prohibits the “act, use or employment by any person of any deception, fraud,
false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression,
or omission of any material fact in connection with the sale or advertisement of any merchandise
. . .” Mo. Rev. Stat. § 407.020. Rule 9(b) states the applicable standard of pleading for claims
made under the MPPA. See Robbe v. Webster University, 98 F. Supp. 3d 1030, 1034 (E.D. Mo.
2015); see also Khaliki v. Helzberg Diamond Shops, Inc., No. 4:11-cv-00010, 2011 WL 1326660
at *3 (W.D. Mo. Apr. 6, 2011).
As discussed earlier on Plaintiffs’ fraudulent misrepresentation claim, under Rule 9(b),
“the complaint must identify the ‘who, what, where, when, and how’ of the alleged fraud.”
United States ex rel. Joshi, 441 F.3d 552, 556 (8th Cir. 2006). Here, Plaintiffs’ complaint alleges
sufficient facts regarding the “who, what, where, when, and how” of Defendant alleged violation
of the MMPA by not applying certain insurance proceeds and mortgage payments to Plaintiffs’
loan balance. Plaintiffs state the dates for the violation on failure to apply their payments are
March 19, 2008, July 29, 2010, and for a period of time from December 2009 to January 2010
[ECF No. 14 ¶¶ 7-32]. It is not necessary for Plaintiffs to state the name of the specific individual
who allegedly failed to apply Plaintiffs’ payments to Plaintiffs’ loan account or the location of

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such failure, because the name of the individual and the location are not relevant to the claim and
it will subject Plaintiffs to an unreasonable burden of having knowledge of the Defendant’s
internal operation.
To state a claim under the MMPA, Plaintiff must show that (1) she purchased the
merchandise in question; (2) she purchased the merchandise for personal, family, or household
use; (3) she suffered an ascertainable loss; and (4) the ascertainable loss was the result of an
unfair practice. Thompson v. Allergan USA, Inc., 993 F. Supp. 2d 1007, 1011-12 (E.D. Mo.
2014). Defendant’s alleged false promises and misrepresentations did not cause the Plaintiffs’
loss, to wit, the consequences of the foreclosure, including the repurchase of the Real Property
[ECF No. 14 ¶ 98]. Plaintiffs have alleged there was an ascertainable loss based on the payments
they made, which were improperly applied. Plaintiffs, at this stage, are not required to know the
ins and outs of Defendant’s inner workings and have alleged sufficient information regarding the
payments they have made in accordance with their agreements. The loss was the result of
Defendant’s alleged failure to apply Plaintiffs’ payments to their loan balance. The Court will
not grant Defendant’s motion to dismiss Plaintiffs’ MMPA claim on Defendant’s failure to apply
payments to Plaintiffs’ loan balance.
H.

Punitive Damages
Plaintiffs, in Count IX, assert a claim for punitive damages. Defendant argues Plaintiffs’

count for punitive damages should be dismissed because Missouri does not recognize a
standalone cause of action for punitive damages, as any request for punitive damages must be
brought in conjunction with a claim for actual damages. Plaintiffs respond the punitive damages
claim is brought in conjunction with eight separate claims for actual damages in their Complaint.

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“A punitive damage claim is not a separate cause of action, it must be brought in
conjunction with a claim for actual damages.” Misischia v. St. John's Mercy Med. Ctr., 30
S.W.3d 848, 866 (Mo. Ct. App. 2000); Kelly v. State Farm Mut. Auto. Ins. Co., 218 S.W.3d 517,
526 (Mo. Ct. App. 2007) (finding where plaintiffs failed to prove an underlying cause of action
supporting a punitive damages award, the award in the judgment was reversed). “There is no
independent cause of action for punitive damages under either federal or Missouri law.” Jackson
v. Wiersema Charter Serv., Inc., No. 4:08CV00027 JCH, 2009 WL 1310064, at *3 (E.D. Mo.
May 11, 2009) (quoting Reed v. Bd. of Trs. of Columbia College, No. 07–04155–CV–C–NKL,
2008 U.S. Dist. LEXIS 105167, at *41 (W.D. Mo. Dec. 31, 2008)). “In Missouri, punitive
damages do not and cannot exist as an independent cause of action; they are mere incidents to
the cause of action and can never constitute the basis thereof.” Hurley v. Smithway Motor
Express, No. 4:05CV901, 2006 U.S. Dist. LEXIS 76095, at *5 (E.D. Mo. Oct. 19, 2006);
Jackson, 2009 WL 1310064, at *3 (finding where a count failed to allege any claim for actual
damages, any independent cause of action included within the allegations of that count, was
redundant and properly dismissed).
“The request for punitive damages need not be plead in a separate count, but it
must nevertheless appear from the complaint, either by direct averment or from
necessary inference, that the act occasioning the damages was done maliciously
or was the result of the willful misconduct of the defendant or of that reckless
indifference to the rights of others which is equivalent to an intentional violation
of them, at least where the wrongful act does not in itself imply malice.”
City of Greenwood v. Martin Marietta Materials, Inc., 299 S.W.3d 606, 627 (Mo. Ct. App. 2009)
(internal citations omitted); Bower v. Hog Builders, Inc., 461 S.W.2d 784, 798 (Mo. 1970);
Brown v. Payne, 264 S.W.2d 341, 345 (Mo. 1954).
While punitive damages must not be brought in separate or independent causes of action,
they may be pleaded as separate counts. Therefore, the proper inquiry is not whether Plaintiffs
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pleaded their punitive damages as separate counts, because they clearly did, but if they pleaded
the punitive damages as separate or independent causes of action.
In each count, from Counts I through VIII, Plaintiffs have plead a claim for actual
damages and incorporated all counts into Count IX through incorporation by reference. [ECF
No. 14 ¶ 99]. Therefore, in connection with Defendant’s other counts, the independent punitive
damage count is not a standalone cause of action and will not be dismissed.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss Plaintiffs’ first
amended complaint [ECF No. 16] is GRANTED, in part, and DENIED, in part.
IT IS FURTHER ORDERED that Plaintiffs’ Counts II, and IV are DISMISSED,
without prejudice.
IT IS FURTHER ORDERED that Defendant’s motion is DENIED in all other respects.

Dated this 1st Day of November, 2016.

E. RICHARD WEBBER
SENIOR UNITED STATES DISTRICT JUDGE

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