Fischer et al v. Ocwen Loan Servicing, LLC et al

Filing 59

ORDER and FINDINGS AND RECOMMENDATIONS re 47 MOTION for Judicial Notice; re 49 MOTION to Dismiss filed by Recontrust Company, NA, BAC Home Loans Servicing, LP, Bank of America, N.A. IT IS ORDERED that the Motion for Judicial Noti ce (ECF 47 ) is GRANTED. IT IS RECOMMENDED that the motion to dismiss (ECF 49 ) be GRANTED to the extent it seeks dismissal of Counts I through VII against BOA, BAC, and ReconTrust, but DENIED to the extent it seeks dismissal of Counts VIII, IX, an d X against BOA and BAC. IT IS FURTHER RECOMMENDED and that all claims asserted against Defendant ReconTrust be DISMISSED, without prejudice, and that ReconTrust be DISMISSED from this action, without prejudice. Signed by Magistrate Judge Carolyn S Ostby on 6/16/2015. (JDR, ) Modified on 6/16/2015 to modify text and regenerate NEF (JDR, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
JOHN DAVID FISCHER,
JERALD DUANE FISCHER, and
ANGIE LEE FISCHER,

CV-14-94-BLG-SPW-CSO
ORDER
and
FINDINGS AND
RECOMMENDATIONS OF
UNITED STATES
MAGISTRATE JUDGE

Plaintiffs,
vs.
OCWEN LOAN SERVICING,
LLC, FEDERAL HOME LOAN
MORTGAGE CORPORATION,
BANK OF AMERICA, N.A., BAC
HOME LOANS SERVICING, LP,
RECONTRUST COMPANY, NA,
JOHN DOES 1, 2, & 3, and all
persons unknown claiming any
right, title, estate, lien or interest
in or to the real property
described herein, or any part
thereof, adverse to the Plaintiffs’
title,
Defendants.
I.

INTRODUCTION
This action arises out of a trustee’s sale of real property and

involves, among other things, adjudication of title to the property in
Billings, Montana. In prior proceedings, the Court granted in part and

1

denied in part motions to dismiss brought by Defendants Ocwen Loan
Servicing, LLC (“Ocwen”) and Federal Home Loan Mortgage
Corporation (“FHLMC”). See Order (ECF 23) (adopting Findings and
Recommendations (ECF 22)). With the Court’s leave, Plaintiffs John
David Fischer, Jerald Duane Fischer, and Angie Lee Fischer (the
“Fischers”) then filed a Second Amended Complaint (ECF 31)1 adding
two defendants – Bank of America, N.A. (“BOA”) and BAC Home
Loans Servicing, LP (“BAC”). The Fischers now assert the following
claims, all of which derive from state law:
Count I:

Quiet Title against all Defendants

Count II:

Montana Consumer Protection Act violations by
BOA, BAC, Ocwen, and ReconTrust Company,
NA (“ReconTrust”)

Count III:

Fraud against BOA, BAC, and Ocwen

Count IV:

Alternative Fraud I against BOA, BAC, and
Ocwen

Count V:

Alternative Fraud II against BOA, BAC, and
Ocwen

Count VI:

Constructive Fraud against BOA, BAC, and

1

“ECF” refers to the document as numbered in the Court’s Electronic
Case Files. See The Bluebook, A Uniform System of Citation, § 10.8.3.
2

Ocwen
Count VII:

Deceit against BOA, BAC, and Ocwen

Count VIII:

Negligence/Negligent Misrepresentation against
BOA, BAC, and Ocwen

Count IX:

Implied Covenant of Good Faith and Fair Dealing
against BOA, BAC, and Ocwen

Count X:

Punitive damages against BOA, BAC, and Ocwen

ECF 31.
Now pending are BOA, BAC, and ReconTrust’s Motion for Judicial
Notice (ECF 47) and Motion to Dismiss (ECF 49).
II.

BACKGROUND
For purposes of considering the pending motion to dismiss, the

Court assumes that the following allegations in the Fischers’ Second
Amended Complaint are true.
On or about September 19, 2006, Jerald Fischer obtained a
mortgage to the property at issue in this action (hereafter “the subject
property”)2 secured by a Deed of Trust. ECF 31 at ¶ 10.

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The subject property is described as:

Lot 1 in Bock 14 of Lampman Subdivision, in the City of Billings,
Yellowstone County, Montana, according to the official plat on file in
3

On or about December 8, 2006, Jerald Fischer quitclaimed his
interest in the subject property to John David Fischer and himself. Id.
at ¶ 11.
On or about October 5, 2010, Jerald Fischer and John Fischer
executed a quit claim deed transferring the property to themselves and
to Angie L. Fischer. Id. at ¶ 12.
On April 7, 2011, the Deed of Trust at issue was assigned to BAC
and was recorded on or about April 13, 2011. Id. at ¶ 13. On April 13,
2011, ReconTrust was substituted as successor trustee for the Deed of
Trust. Id. at ¶ 14.
Sometime in 2011, the Fischers requested a mortgage
modification. BAC suggested modifying the mortgage through the
federal government’s Home Affordable Modification Program (“HAMP”)
through BAC. Representatives of BAC informed the Fischers that the
only way that a mortgage modification could be accomplished through
this program was if the Fischers did not make mortgage payments for

the office of the Clerk and Recorder of said County, under Document
#557995.
ECF 31 at ¶ 1.
4

two months. BAC encouraged the Fischers to default on the mortgage
obligation to qualify for the HAMP modification. Id. at ¶ 15.
In December 2011 and January 2012, the Fischers began the
application process for a mortgage payment modification through the
HAMP through BAC. Id. at ¶ 16.
As a part of the HAMP application process, BAC informed the
Fischers that foreclosure processes may be initiated, but that the
Fischers’ home would not be foreclosed upon or sold. Id. at ¶ 17.
The Fischers timely prepared and delivered a completed
application for loan modification through the HAMP to BAC and/or
BOA. Id. at ¶ 18.
On or about March 29, 2012, the Deed of Trust was assigned to
BOA, as successor by merger to BAC. Id. at ¶ 19.
In April 2012, the Fischers were notified, via mailing, of a
pending Trustee’s sale scheduled for August 22, 2012. Id. at ¶ 20.
BOA again assured the Fischers that this notification was part of
the HAMP modification process and assured the Fischers that their
home would not be foreclosed upon or sold. Id. at ¶ 21.

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On or about June 26, 2012, Ocwen notified the Fischers that it
had assumed the mortgage servicing from BAC. Id. at ¶ 22.
On or about August 9, 2012, BOA executed a Corporation
Assignment of Deed of Trust assigning to Ocwen all interest under the
Deed of Trust. Id. at ¶ 23. Because the Fischers’ mortgage was
transferred, Ocwen requested that the Fischers again complete the
HAMP modification application. The Fischers timely completed the
modification application as requested and delivered it to Ocwen. Id. at
¶¶ 24-25.
At no time before August 22, 2012, did BAC or Ocwen represent
to the Fischers that any trustee sale would proceed during the time
that the Fischers submitted the second HAMP application to Ocwen.
Id. at ¶ 26. Unbeknownst to the Fischers, on August 22, 2012, a
trustee’s sale allegedly occurred at which FHLMC was allegedly the
high bidder. Id. at ¶ 27.
On September 4, 2012, after receiving the HAMP application,
Ocwen represented to the Fischers that “[w]hile we consider your
request, we will not initiate a new foreclosure action and we will not

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move ahead with the foreclosure sale on an active foreclosure as long as
we have received all required documents and you have met the
eligibility requirements.” Id. at ¶ 28.
On September 19, 2012, the Fischers received a letter from Ocwen
stating that their modification had been denied because their house
had previously been foreclosed upon. Id. at ¶ 29.
On September 25, 2012, Ocwen wrote to the Fischers’ counsel
stating that the subject property had been foreclosed on August 23, not
August 22, and that the subject property was listed with Ocwen’s Real
Estate Owned department. Id. at ¶ 30.
On October 31, 2012, the Fischers filed a quiet title action in state
court in which they also alleged a violation of the Montana Consumer
Protection Act. Id. at ¶ 31.
On December 28, 2012, Ocwen executed an Assignment of Deed of
Trust, assigning all of its right, title, and interest in the subject
property to FHLMC. Id. at ¶ 32.
On January 2, 2013, ReconTrust executed the Trustee’s Deed
which states that on August 22, 2012, ReconTrust (as trustee) sold the

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subject property to FHLMC as the highest bidder. Id. at ¶ 33.
On January 8, 2013, Ocwen recorded both the Assignment of Deed
of Trust and the Trustee’s Deed with the Yellowstone County Clerk and
Recorder’s Office. Id. at ¶ 34. The Trustee’s Deed was recorded after
this action was filed. It purports to transfer title of the subject property
from ReconTrust to FHLMC. Id. at ¶ 35.
On January 22, 2013, the Fischers received a letter from Ocwen
thanking them for their submission of the modification packet and
assuring them that Ocwen will not foreclose upon the subject property.
Id. at ¶ 36.
III. DISCUSSION
A.

Motion for Judicial Notice

BOA, BAC, and ReconTrust, relying on Rule 201, Fed. R. Evid.,
move the Court to take judicial notice of two documents: (1) the Deed of
Trust recorded in the Yellowstone County Clerk & Recorder’s Office on
September 21, 2006, at Document No. 3393875; and (2) the Corporate
Assignment of Deed of Trust recorded in the Yellowstone County Clerk
& Recorder’s Office on August 20, 2012, at Document No. 3635151.

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Mtn. for Jud. Notice (ECF 47) at 2.
As a general rule, a district court may not consider any material
beyond the pleadings in ruling on a Rule 12(b)(6)3 motion without
converting the motion into one for summary judgment. Lee v. City of
Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). An
exception exists, however, where a court takes judicial notice of matters
of public record. Id. at 688-89. Taking judicial notice does not convert
a motion to dismiss into one for summary judgment. See United States
v. 14.02 Acres of Land More or Less in Fresno Cnty., 547 F.3d 943, 955
(9th Cir. 2008).
BOA, BAC, and ReconTrust present the Declaration of counsel
Mark D. Etchart, who declares under penalty of perjury that the two
documents, which are attached to his Declaration, have been filed in
the official records of the Yellowstone County Clerk and Recorder.
Decl. of Mark D. Etchart (ECF 48); Deed of Trust (ECF 48-1) and
Corporation Assignment of Deed of Trust (ECF 48-2).
The Fischers did not respond to the instant motion.

References to rules are to the Federal Rules of Civil Procedure unless
otherwise indicated.
3

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Consequently, they have not disputed the authenticity of the
documents nor have they disputed that the documents have been filed
in Yellowstone County’s official records. It appears that the documents
pertain to the course of transactions described in the Second Amended
Complaint. For all of these reasons, for the purpose of considering the
pending motion to dismiss, the Court will grant the motion for judicial
notice of the subject documents.
B.

Motion to Dismiss
1.

Legal Standard

“Dismissal under Rule 12(b)(6) is proper only when the complaint
either (1) lacks a cognizable legal theory or (2) fails to allege sufficient
facts to support a cognizable legal theory.” Zixiang Li v. Kerry, 710
F.3d 995, 999 (9th Cir. 2013) (quoting Mendiondo v. Centinela Hosp.
Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)). The Court’s standard of
review under Rule 12(b)(6) is informed by Rule 8(a)(2), which requires
that a pleading contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 677-678 (2009) (quoting Rule 8(a)).

10

To survive 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.’” Id. at 678. “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. A plausibility determination is context
specific, and courts must draw on judicial experience and common
sense in evaluating a complaint. Levitt v. Yelp! Inc., 765 F.3d 1123,
1135 (9th Cir. 2014) (citation omitted). When a Rule 12(b)(6) motion is
granted, leave to amend should be granted unless doing so would be
futile. See Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
2.

Analysis

BOA, BAC, and ReconTrust move to dismiss all claims against
them. Defts’ Br. (ECF 50) at 2. The Fischers agree that Counts I
through VII should be dismissed to the extent those Counts are
asserted against BOA and BAC. Fischers’ Resp. Br. (ECF 53) at 3, 6-7,
9-10. The Fischers further concede that all claims against ReconTrust
should be dismissed and that ReconTrust should be dismissed from this

11

action. Id. at 5-6.4 Thus, the Court will recommend that Counts I
through VII be dismissed to the extent that they are asserted against
BOA and BAC, and that all claims against ReconTrust be dismissed,
without prejudice.
Based on the foregoing, the motion to dismiss remains directed
only at Counts VIII, IX, and X to the extent that they are asserted
against BOA and BAC. The Court addresses the challenge to each
remaining count seriatim.
1.

Negligence/Negligent Misrepresentation
(Count VIII)

BOA and BAC argue that the Fischers’ negligence/negligent
misrepresentation claim is barred by the applicable three-year statute
of limitations provided in MCA § 27-2-204(1). ECF 50 at 8-9. They
maintain that the Fischers’ allegation that BOA and BAC instructed
them to stop making loan payments “[s]ometime in 2011[ ]” alleges
conduct that occurred more than three years before the Fischers’ filed

4

In conceding that ReconTrust should be dismissed, the Fischers note
that if they “discover any wrongdoing with regard to the trustee’s sale and
execution of documents, [they] will request leave to file an amended
complaint.” ECF 53 at 6. The Court, therefore, will recommend that all
claims against ReconTrust be dismissed, without prejudice.
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their Second Amended Complaint, which pleading named BOA and
BAC for the first time. Thus, they argue, the Fischers’
negligence/negligent misrepresentation claim against them is not
timely and must be dismissed. Id.
In response, the Fischers concede that their negligence/negligent
misrepresentation claim has a three-year statute of limitations.
Fischers’ Resp. Br. (ECF 53) at 3. Thus, they agree that the limitations
period extends only to any negligent misrepresentation that occurred
from January 14, 2012, to the present. Id. The Fischers, however, also
argue that several of their allegations related to this claim are alleged
in their Second Amended Complaint to have occurred after January 14,
2012. Id. at 4. Thus, they argue, the claim is timely and the Court
should deny the motion to dismiss. Id.
In reply, BOA and BAC note that the Fischers concede that any
alleged conduct occurring before January 12, 2012, is outside of the
applicable limitations period. Reply Br. (ECF 57-1) at 4. The claim at
issue fails, they argue, because the Fischers cannot establish that BOA
or BAC owed them a duty at any time within the applicable limitations

13

period. Id. Also, BOA and BAC argue that the Fischers’ Second
Amended Complaint contains no allegation that either John Fischer or
Angie Fischer were BOA customers, so there is no basis for concluding
that BOA and BAC owed them any duty. Id. at 5. And, BOA and BAC
did not foreclose on their property – Ocwen did. Thus, they argue, they
cannot be liable on this claim. Id. at 5-6.
As this Court has previously stated in this case, in Montana, a
claim of negligent misrepresentation against a financial institution is
governed by the Restatement (Second) of Torts § 552:
One who, in the course of his business, profession or
employment, or in any other transaction in which he has a
pecuniary interest, supplies false information for the
guidance of others in their business transactions, is subject
to liability for pecuniary loss caused to them by their
justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or
communicating the information.
Order and Findings and Recommendations (ECF 22) at 22 (quoting
Morrow v. Bank of America, N.A., 324 P.3d 1167, 1180 (¶ 46) (Mont.
2014)).
Here, the Fischers allege that they received inaccurate
information from BOA and BAC concerning the HAMP program and
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whether foreclosure of their property would be initiated or actually
occur. ECF 31 at ¶¶ 15-21, 26. Other than their allegations contained
in paragraphs 15 and 16 of their Second Amended Complaint, they do
not allege that any conduct by BOA and BAC related to this claim
occurred before January 12, 2012. Thus, the Court cannot conclude on
the current record that none of their allegations fall within the
applicable limitations period, and the Court cannot recommend
dismissal of this claim based on lack of timeliness.
Next, the Court declines to address BOA and BAC’s argument
that they could not have a duty to two of the plaintiffs because the two
were not their customers. BOA and BAC did not raise this argument in
their opening brief. Thus, the Fischers were precluded from responding
to the argument. In any event, it is unclear from the record at this
juncture in the proceedings whether BOA and BAC had a relationship
with John Fischer or Angie Fischer that could give rise to a duty under
Morrow. Thus, the Court cannot recommend dismissal of this claim on
the basis asserted.
Respecting the Fischers’ negligence claim, as noted previously

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Montana law provides that they must allege four elements: “(1) duty;
(2) breach of duty; (3) causation; and (4) damages.” ECF 22 at 22-23
(quoting Hatch v. State Dept. of Highways, 887 P.2d 729, 732 (Mont.
1994)). “The existence of a legal duty is a question of law to be
determined by the court.” Id. (quoting Fisher v. Swift Transp. Co., Inc.,
181 P.3d 601, 607 (Mont. 2008)). As this Court previously noted in this
case:
Generally, a bank has no duty to modify or renegotiate a
defaulted loan. If the borrower has not been advised by the
bank or has not relied on that advice, no fiduciary
relationship exists. But a mortgage servicer that actively
engag[es] with a borrower, particularly in the modification
context, stands in a different relation to the borrower than
does a traditional silent lender. Thus such special
circumstances, if proven, could support a fiduciary duty
where a defendant went beyond its conventional role as a
loan servicer by, for example, soliciting a plaintiff to apply
for a loan modification and by engaging with them for
several months or longer. If a mortgage servicer is actively
engaged with a borrower, particularly in the modification
context, it may give rise to a fiduciary duty.
[In determining whether a] special relationship exists,
a court may be required to make a fact-intensive inquiry.
The Court cannot make such an inquiry in connection with a
motion to dismiss.
Id. at 24 (citations and internal quotation marks omitted).
In light of this standard, the Court cannot determine on the
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present motion whether a special relationship exists. The Court
concludes, however, that the Fischers have supplied enough factual
allegations in their Complaint to state a claim for negligence. ECF 31
at ¶¶ 15-21, 102-03. Thus, while the Court cannot determine whether
BOA and BAC’s actions give rise to a fiduciary duty, it concludes that
the Fischers’ allegations satisfy Rule 8(a)(2)’s requirement of a short
and plain statement showing that the Fischers are entitled to relief.
See ECF 22 at 24-25. Thus, the Court will recommend that motion to
dismiss be denied to the extent it is directed at the Fischers’
negligence/negligent misrepresentation claim.
2.

Implied Covenant of Good Faith and Fair
Dealing (Count IX)

BOA and BAC argue that the Court already dismissed the
Fischers’ claim for breach of the implied covenant of good faith and fair
dealing and maintains that the Court should again dismiss it for the
reasons already stated in the earlier decision. ECF 50 at 15. Also, they
argue the Fischers have failed “to identify any discretionary provision
in the Deed of Trust upon which the implied covenant claim can be
based.” Id. Thus, they argue, the Court should dismiss the claim. Id.
17

at 15-16.
The Fischers respond that the Court granted them leave to amend
this claim, which they did. ECF 53 at 7. They argue that they have
properly stated a claim because they have alleged that BOA and BAC
breached a duty to them to deal honestly with them when BOA and
BAC encouraged them to default on their loan so as to be allowed to
refinance under the HAMP program. Id. The Fischers also argue that
BOA and BAC “repeatedly advised [them] that their property would not
be sold while the application process was proceeding . . . [and] [t]hese
representations turned out to be false and [their] property was
allegedly sold.” Id. at 7-8.
Because of the foregoing allegations, the Fischers argue, whether
there was a discretionary provision in the Deed of Trust is not relevant.
BOA and BAC “purported to have specialized knowledge,” the Fischers
argue, and had a contractual relationship with them. The Fischers
trusted the advice given and representations made, they argue, and “it
is not commercially reasonable for a mortgage servicer to provide false
information and to advise home owners to take a course of action that

18

would lead to the loss of their property.” Id. at 8. Thus, they argue, the
Court should deny the motion to dismiss respecting this claim. Id.
BOA and BAC reply that the Fischers have failed to “offer any
legally supported argument that would prevent the dismissal of” this
claim. ECF 57-1 at 6. Rather, they argue, the Fischers “conclude
(without any support) that they can state a claim for breach of the
implied covenant of good faith and fair dealing by simply making vague
references to alleged oral communications by [BOA and BAC] while
servicing the mortgage loan.” Id. But, they argue, the Court already
has determined that such allegations are insufficient to state a claim.
Id. at 6-7.
As the Court already has noted in this action, “[t]he implied
covenant of good faith and fair dealing requires ‘honesty in fact and the
observance of reasonable commercial standards of fair dealing in the
trade.’” ECF 22 at 25 (quoting MCA 28-1-211). “While every contract
involves an implied covenant of good faith and fair dealing, an existing
contract ‘is a prerequisite to a claim for tortious breach of the
covenant.’” Id. at 25-26 (quoting Morrow, 324 P.3d at 1176 (citing

19

Knucklehead Land Co. v. Accutitle, Inc., 172 P.3d 116, 121 (Mont.
2007))).
Here, the Fischers allege that BOA and BAC, as mortgage
servicers and assignees to the original mortgage documents (including
the Deed of Trust), had a contractual relationship with them. ECF 31
at ¶ 106. The Fischers further allege, as noted, that BOA and BAC
failed to deal honestly with them and failed to observe reasonable
commercial standards of fair dealing in the trade when they provided
false and inaccurate information concerning the HAMP program and
whether foreclosure of their property would be initiated or actually
occur. ECF 31 at ¶¶ 15-21, 26. Although the Fischers did not plead
their allegations with precision and specificity, the Court, construing
the Second Amended Complaint liberally, concludes that they have
alleged facts from which an inference may be reasonably drawn that
the claim is based, at least in part, on the underlying mortgage
agreement. See Roybal v. Bank of America, N.A., 2015 WL 1534118, *8
(D. Mont., April 6, 2015). Thus, the Court will recommend that the
motion to dismiss be denied to the extent that it is directed at this

20

claim.
3.

Punitive Damages (Count X)

As noted previously in this case, Montana law provides that “a
judge or jury may award, in addition to compensatory damages,
punitive damages for the sake of example and for the purpose of
punishing a defendant.” ECF 22 at 26-27 (quoting MCA § 27–1–220).
“Punitive damages are merely a component of recovery in some types of
civil actions.” Id. at 27 (citing Finstad v. W.R. Grace & Co., 8 P.3d 778,
782 (Mont. 2000)).
Here, the punitive damages claim is found both in a separate
cause of action under Count X and in the Fischers’ prayer for relief.
ECF 31 at ¶¶ 113-15; Prayer at ¶8. The claims that the Court herein
recommends not be dismissed could support an award of punitive
damages. Thus, the Court will recommend that the motion to dismiss
be denied to the extent that it is directed at this claim.
IV.

CONCLUSION
ORDER
IT IS ORDERED that the Motion for Judicial Notice (ECF 47) is

GRANTED.
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RECOMMENDATIONS
IT IS RECOMMENDED that the motion to dismiss (ECF 49) be
GRANTED to the extent it seeks dismissal of Counts I through VII
against BOA, BAC, and ReconTrust, but DENIED to the extent it seeks
dismissal of Counts VIII, IX, and X against BOA and BAC.
IT IS FURTHER RECOMMENDED and that all claims asserted
against Defendant ReconTrust be DISMISSED, without prejudice, and
that ReconTrust be DISMISSED from this action, without prejudice.
NOW, THEREFORE, IT IS ORDERED that the Clerk shall serve
a copy of the Findings and Recommendations of United States
Magistrate Judge upon the parties. The parties are advised that
pursuant to 28 U.S.C. § 636, any objections to the findings and
recommendations must be filed with the Clerk of Court and copies
served on opposing counsel within fourteen (14) days after entry hereof,
or objection is waived.
DATED this 16th day of June, 2015.

/s/ Carolyn S. Ostby
United States Magistrate Judge
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