Koontz v. Bank of America Corporation et al
Filing
30
ORDER denying 9 Motion to Dismiss for Failure to State a Claim. Signed by Judge Dana L. Christensen on 2/12/2016. (ASG, )
FILED
FEB 1,2 2016
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
JOHNA KOONTZ,
Clef'!<, ~.s. District Court
D1stnct Of Montana
Missoula
CV 15-1 08-M-DLC
Plaintiff,
ORDER
vs.
BANK OF AMERICA, N.A., successor
by merger to BAC HOME LOANS
SERVICING, LP, f/k/a COUNTRYWIDE
HOME LOANS SERVICING, LP and
COUNTRYWIDE BANK, N.A.; and
RESIDENTIAL CREDIT SOLUTIONS,
INC.,,
Defendants.
Before the Court is a motion to dismiss filed by Defendant Bank of
America, N.A., successor by merger to BAC Home Loans Servicing, LP, f/k/a
Countrywide Home Loans Servicing, LP and Countrywide Bank, N.A. (hereinafter
"BANA"). For the reasons explained below, the Court denies the motion.
BACKGROUND
For purposes ofBANA's motion to dismiss, "[a]ll factual allegations set
forth in the [Amended Complaint] are taken as true and construed in the light most
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favorable to [Plaintiff]." Lee v. City ofLos Angeles, 250 F.3d 668, 679 (9th Cir.
2001 ). The Court recounts the factual allegations in the Amended Complaint only
as they pertain to BANA.
As has become a familiar set of facts in the wake of the financial crisis of
2008 and 2009, this case stems from allegations of mishandling and illegal
practices in the servicing of a home mortgage loan. On May 26, 2005, Plaintiff
Johna Koontz ("Koontz") obtained a mortgage loan from Mountain West Bank,
N.A., secured against her residence in Missoula, Montana. From the outset,
BANA's predecessor Countrywide Home Loans Servicing LP ("Countrywide")
serviced Koontz's loan on Mountain West Bank's behalf. After closing her small
business in late 2008, Koontz missed her first monthly payment on the loan in
February 2009. Thereafter, Koontz learned of the Home Affordable Modification
Program ("HAMP"), and applied for a loan modification through Countrywide.
Koontz alleges that Countrywide representatives indicated she would only qualify
for the modification if she was three months behind on her payments, and that she
purposefully missed a third payment accordingly. She then submitted her
application and the necessary supporting documents, but was continually placated
and made no progress in the application process.
By the end of April2009, Koontz began receiving her monthly mortgage
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statements from BANA, which had acquired Countrywide in 2008. BANA
informed her that she would need to start the HAMP application process anew,
and Koontz complied by sending in paperwork whenever requested. Koontz
claims to have spoken to over forty-five different BANA representatives between
April2009 and December 2012. Koontz received various conflicting and
confusing statements during many of these contacts, including that: (a) BANA had
begun reviewing her application, (b) BANA could not review her application due
to her failure to submit necessary documentation, (c) BANA could not modify her
loan, (d) BANA was unable to locate her file, (e) she should continue making
payments, (f) she should cease making payments, and (g) her income was
insufficient to qualify her for a modification. Moreover, BANA initiated
foreclosure of Koontz's loan by filing three separate notices of trustee sale in
September 2010, March 2012, and August 2012.
Prior to the scheduled March 20 12 trustee sale, Koontz, with the assistance
of a foreclosure intervention counselor, submitted a qualified written request
("QWR") to BANA seeking information regarding the status of her HAMP
application, then three years in the making. Koontz received a confrontational
response from an attorney purporting to represent BANA, in which the attorney
accused her of seeking proprietary information and failing to follow QWR
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protocol. The attorney did not provide Koontz with the information she requested.
Then, in September 2012, Koontz received a letter from Defendant Residential
Credit Solutions ("RCS") indicating that it had assumed servicing her loan.
BANA confirmed the transfer of servicing in a letter dated November 27, 2012,
and the transfer became effective December 16, 2012. As a result, Koontz was
again required to begin the HAMP application process from scratch.
Following similar confusing and contradictory actions on the part ofRCS
from December 2012 through June 2015- including RCS scheduling another
foreclosure sale for August 20 15 - Koontz filed this action in the Montana Fourth
Judicial District Court, Missoula County, on July 23, 2015. BANA removed the
case to this Court on the basis of diversity jurisdiction on August 21, 20 15.
Koontz then filed her Amended Complaint on September 18, 2015. In it, she
asserts the following claims against BANA specifically: ( 1) negligence,
(2) negligent misrepresentation, (3) violation of the Montana Consumer Protection
Act ("CPA") 1, ( 4) breach of contract, ( 5) breach of the covenant of good faith and
fair dealing, (6) fraud, and (7) punitive damages. BANA filed the instant motion
to dismiss in October 2015, and this case is scheduled for trial before a jury in
February 2017.
1. Mont. Code Ann. § 30-14-101 et seq.
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LEGAL STANDARD
Rule 12(b)(6) motions test the legal sufficiency of a pleading. Under Rule
8(a)(2) of the Federal Rules of Civil Procedure, a pleading must contain "a short
and plain statement of the claim showing that the pleader is entitled to relief."
Rule 8 "does not require detailed factual allegations, but it demands more than an
unadorned, the-defendant-unla'Yfully-harmed-me accusation." Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (internal citations and quotations omitted). "To survive
a 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."' Id. (quoting Bell
At/. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility
when the court can draw a "reasonable inference" from the facts alleged that the
defendant is liable for the misconduct alleged. I d. On a Rule 12(b)(6) motion to
dismiss, the court must accept all factual allegations in the complaint as true and
construe the pleadings in the light most favorable to the nonmoving party. Kneivel
v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).
DISCUSSION
BANA moves to dismiss all of Koontz's claims on the following grounds:
(I) Koontz's negligence, negligent misrepresentation, CPA, and fraud claims are
time-barred; (II) to the extent her breach of the covenant of good faith and fair
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dealing claim sounds in tort, it too is time-barred; (III) Koontz fails to state a
breach of contract claim; (IV) she fails to plead her fraud claim with the required
particularity; and (V) having failed to state a tort claim, Koontz's punitive
damages claim fails. At this stage in the litigation and mindful of the Court's
obligation with regard to finding facts, the Court denies BANA's motion as to
each of these grounds.
I.
Counts I, II, III, and VI
BANA contends that Koontz's negligence, negligent misrepresentation,
CPA, and fraud claims are time-barred because BANA's last alleged act which
could form the basis of any of the claims occurred in June 2012, a three year
limitations period governs the first two of these claims, and a two year period
governs the latter two. Koontz filed this action in state court in July 2015, outside
any of the applicable periods, according to BANA. Koontz counters that the
discovery rule tolled the statute of limitations on these claims, making them
timely.
"[T]he fact that a party does not know that he or she has a claim, whether
because he or she is unaware of the facts or unaware of his or her legal rights, is
usually not sufficient to delay the beginning of the limitations period." Christian
v. At/. Richfield Co., 358 P.3d 131, 152 (Mont. 2015) (citing Mont. Code Ann.
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§ 27-2-102(2)). However, Montana's discovery rule provides that "[t]he period of
limitation does not begin on any claim or cause of action for an injury to person or
property until the facts constituting the claim have been discovered or, in the
exercise of due diligence, should have been discovered by the injured party if: (a)
the facts constituting the claim are by their nature concealed or self-concealing; or
(b) before, during, or after the act causing the injury, the defendant has taken
action which prevents the injured party from discovering the injury or its cause."
§ 27-2-102(3). "[T]he nondisclosure of information," as well "[a]n injury that is
not apparent to the layperson because of its complexity, and which can ultimately
only be discovered by professional analysis," are circumstances which may
constitute self-concealing facts and injuries. Christian, 358 P.3d at 153.
"[W]hether the facts constituting the claim were concealed or self-concealing,
whether the defendant acted to prevent discovery of those facts, or whether the
plaintiff exercised due diligence" are questions of fact. !d. (citing Johnston v.
Centennial Log Homes & Furnishings, Inc., 305 P.3d 781, 790 (Mont. 2013)).
Koontz argues that the discovery rule applies to the facts underlying her
negligence, negligent misrepresentation, CPA, and fraud claims because, while
she was obviously aware ofBANA's actions during the period in which she
sought a loan modification from the bank, she did not become aware that those
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actions constituted unlawful conduct "until January of2015, when she sought
legal advice after seeing a newspaper article about another Montana couple suing
[BANA] for illegal loan servicing practices." (Doc. 17 at 18.) Instead, Koontz
states that she believed her protracted modification application process was either
par for the course or in some way her own fault. Her contentions present fact
questions regarding BANA's nondisclosure of information and the complexity of
the modification process, Christian, 358 P.3d at 153, and are therefore sufficient
under Montana law to move her negligence, negligent misrepresentation, CPA,
and fraud claims past BANA's motion to dismiss. BANA's motion is denied as to
these claims.
II.
Count V
BANA's motion to dismiss Count V applies to the extent Koontz alleges
tortious breach of the covenant of good faith and fair dealing, to which a threeyear statute of limitations applies. However, BANA acknowledges that an eightyear limitations period applies to claims for contractual breach of the covenant of
good faith and fair dealing, and Koontz confirms the contractual basis of her
claim. Indeed, the Amended Complaint states that BANA's breach "aris[es] from
its contract" with Koontz. (Doc. 7 at 32.) The Court therefore denies BANA's
motion to dismiss Count V on statute of limitations grounds.
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III.
Count IV
BANA next seeks dismissal of Koontz's breach of contract claim, arguing
that Koontz fails to state a claim because her Amended Complaint does not
contain specific facts regarding the home inspections which she claims violated
provisions in her Deed of Trust. Koontz counters that Section 7 of the Deed of
Trust provided for "reasonable entries upon and inspections of the property,"
(Doc. 7 at 3 (emphasis added)), and that BANA's repeated inspections of her
home - and concomitant charging fees for those inspections - were unreasonable.
Koontz states a plausible claim for breach of this particular contractual provision,
sufficient to put BANA on notice of the nature of the violations she alleges.
Furthermore, to decide the motion to dismiss this claim in BANA's favor would
require the Court's resolution of whether BANA's inspections were reasonable.
The Court may not make this factual determination at this time, and BANA's
motion to dismiss Koontz's breach of contract claim is denied.
IV.
Count VI
BANA moves to dismiss Koontz's fraud claim on the basis that she fails to
plead the claim with the requisite particularity. Koontz counters by referencing
the twenty-six page factual account of her multi-year attempt to obtain a loan
modification, and her application of those facts to the elements of a fraud claim,
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both in her Amended Complaint. Koontz's pleading clearly and specifically states
a fraud claim, and BANA's motion to dismiss Count VI will be denied
accordingly.
A valid fraud claim consists of the following elements, pled with
particularity: "(1) a representation; (2) the falsity of that representation; (3) the
materiality of the representation; (4) the speaker's knowledge of the
representation's falsity or ignorance of its truth; (5) the speaker's intent that the
representation should be acted upon by the person and in the manner reasonably
contemplated; (6) the hearer's ignorance of the representation's falsity; (7) the
hearer's reliance upon the truth of the representation; (8) the hearer's right to rely
upon the representation; and (9) the hearer's consequent and proximate injury or
damages caused by their reliance on the representation." Town of Geraldine v.
Mont. Mun. Ins. Auth., 198 P.3d 796, 801 (Mont. 2008) (citations omitted).
Rule 9(b) of the Federal Rules of Civil Procedure requires a party pleading
fraud-based claims to "state with particularity the circumstances constituting
fraud." Rule 9(b) requires that fraud-based allegations "be specific enough to give
defendants notice of the particular misconduct so that they can defend against the
charge and not just deny that they have done anything wrong." Kearns v. Ford
Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (citations, internal quotation
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marks, and alterations omitted). "Averments of fraud must be accompanied by the
who, what, when, where, and how of the misconduct charged." Id. (citations and
internal quotation marks omitted). However, Rule 9(b) does not supplant the
general pleading requirements expressed in Rule 8(a)- rather, "the two rules must
be read in conjunction with each other ... tak[ing] account of the general
simplicity and flexibility contemplated by the" rules as a whole. SA Charles Alan
Wright et al., Federal Practice and Procedure§ 1298 (3d ed. 2005).
Contrary to BANA's argument, Koontz provides the who, what, when,
where, and how regarding her fraud claim in her Amended Complaint. Koontz
lists the BANA employees with whom she spoke over the four years BANA
serviced her loan. She details the representations those employees made to her
regarding the HAMP process, her application in particular, and various actions she
either needed to take or refrain from taking. Specifically, she alleges that BANA
employees informed her that her application was being processed and/or that she
needed to submit more documentation, despite those employees knowing neither
was true and intending that the representations would placate her. Koontz alleges
that she relied on the BANA employees' representations by, among other things,
purposely skipping monthly mortgage payments. These allegations are sufficient
to put BANA on notice of their alleged misconduct, and sufficient to permit
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BANA to mount a defense. Accordingly, the motion to dismiss Koontz's fraud
claim is denied.
V.
Count VII failing to state a claim.
Finally, BANA moves for dismissal of Koontz's punitive damages claim on
the grounds that it cannot stand absent viable tort claims. Based on the foregoing,
Koontz's tort claims remain in play; so too, then, does her punitive damages claim.
Accordingly, IT IS ORDERED that Defendant Bank of America, N.A.'s
motion to dismiss (Doc. 9) is DENIED.
DATED this
ll ffaay ofFebruary, 2016.
Dana L. Christensen, Chief Judge
United States District Court
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