ROST et al v. AVELO MORTGAGE, LLC et al
Filing
25
OPINION filed. Signed by Judge Joseph H. Rodriguez on 11/3/2015. (drw)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
STEPHEN ROST and SUSAN ROST,
:
:
Plaintiffs,
v.
Hon. Joseph H. Rodriguez
Civil Action No. 15-3254
:
OPINION
AVELO MORTGAGE, LLC; GOLDMAN :
SACHS BANK USA; LITTON LOAN
SERVICING, LP; OCWEN FINANCIAL :
COMPANY, LLC; WILMINGTON
SAVINGS FUND SOCIETY, FSB DBA :
CHRISTIANA TRUST AS TRUSTEE FOR
HLSS MORTGAGE MASTER TRUST, :
Defendants.
:
This matter is before the Court on motions to dismiss the Complaint
filed by Defendants (1) Litton Loan Servicing LP; Ocwen Financial
Corporation; and Wilmington Savings Fund Society, FSB d/b/a Christiana
Trust as Trustee for HLSS Mortgage Master Trust [Doc. 11] 1; and (2) Avelo
Mortgage, LLC; and Goldman Sachs Bank USA 2 [Doc. 15]. The Court heard
oral argument on the motions on November 3, 2015 and the record of that
proceeding is incorporated here. For the reasons expressed on the record
and those set forth below, Defendants’ motions will be granted.
Wilmington Trust is the trustee of a REMIC securitization trust which is
the beneficial owner of the loan at issue in this case. (Compl. p. 2, ¶ 5.)
2 Defendant Goldman Sachs Bank USA has been alleged to have been the
parent of wholly owned subsidiaries Defendants Avelo Mortgage, LLC and
Litton Loan Servicing LP.
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1
Background
Plaintiffs Stephen and Susan Rost own their residence at 133
Sunnyside Lane, Bellmawr, New Jersey. They allege that Defendants
wrongfully denied them a mortgage modification in violation of their
contractual obligations under the United States Treasury’s Home
Affordable Modification Program (HAMP). 3
Plaintiffs took out a loan on February 12, 2008 in the amount of
$201,985, and executed a promissory note to secure that debt in favor of
Mortgage Electronic Registration Systems, Inc., as nominee for Defendant
Avelo Mortgage, LLC d/b/a Senderra Funding, its successors and assigns.
(Slipakoff Decl., Ex. A.) The promissory note was secured by a mortgage
signed by Plaintiffs, which was secured by the Sunnyside Lane property.
(Slipakoff Decl., Ex. B.)
In January 2011, Plaintiffs became unable to make their monthly
mortgage payments. (Compl. p. 23, ¶ 45.) On July 22, 2011, Avelo assigned
the Plaintiffs’ note and mortgage to Defendant Litton Loan Servicing LP.
(Slipakoff Decl., Ex. C.)
Plaintiffs generally allege that Defendants Litton and Ocwen received
money from the Troubled Asset Relief Program (TARP) and agreed to
participate in HAMP by executing its Servicer Participation Agreement.
(Compl. p. 13, ¶¶ 8-10.) Further, as part of the sale of Litton to Ocwen, in
August 2011, Ocwen signed an Agreement on Mortgage Servicing Practices
with the New York State Banking Department. (Compl., Ex. A.)
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2
In August 2011, Plaintiffs contacted Litton because they were unable
to make their mortgage payment, but wanted to keep their home. (Compl.
p. 23, ¶ 46.) Litton offered Plaintiffs a “Repayment Plan Agreement,”
whereby Plaintiffs allegedly were immediately to wire $4,000.oo to
Defendant Litton and thereafter make monthly payments of $2,674.39 for a
year to bring their mortgage current. (Compl. p. 23, ¶ 48.) Plaintiffs allege
that the upfront payment required was prohibited by HAMP. (Id.) Also
allegedly prohibited was a $1,040 charge to Plaintiffs for servicer advances
including “attorney fees and costs, property preservation expenses,
inspections and other expenses.” (Compl. p. 24, ¶ 50.) Plaintiffs next allege
that Litton “lost” the $4,000 they wired via Western Union on August 2,
2011 in attempt to comply with the Repayment Plan Agreement. (Compl. p.
24, ¶ 51.) 4
On or about October 4, 2011, Plaintiffs received acknowledgement of
receipt and processing of their application for modification. (Compl. p. 24,
¶¶ 53-54.) They also received notice naming their “relationship manager”
as Jason Bravada, who allegedly instructed Plaintiffs via telephone
conference to refrain from making mortgage payments while their loan
In opposing the instant motions, Plaintiffs have produced a Western
Union form dated August 2, 2011, for $4,000 to be sent to Litton, Texas.
(Guice Decl., Ex. A.)
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modification was being processed. (Compl. pp. 24-25, ¶¶ 55-56.) Further
e-mail inquiries regarding the pending loan modification allegedly went
unanswered.
In response to their February 2012 follow-up letter, Plaintiffs
allegedly were instructed again to file for a loan modification, which they
did on March 13, 2012 with a new relationship manager, Grayson Johnson.
On July 16, 2012, Litton assigned the Plaintiffs’ note and mortgage to
Defendant Ocwen Loan Servicing, LLC. (Slipakoff Decl., Ex. D.) Plaintiffs
also contend that on March 11, 2013, a Kayla Frost was assigned as their
relationship manager, 5 but on March 31, 2014, they were informed that
Frost was no longer with Ocwen, so Christina Hernandez would be their
new relationship manager. On April 23, 2014, Plaintiffs’ counsel sent a
letter to Hernandez inquiring about the status of the loan modification,
(Compl., Ex. B), but allegedly received no response. Plaintiffs allege that
they “have continually been strung along by Defendants with no guidance
whatsoever.” (Compl. p. 27, ¶ 69.) Plaintiffs’ loan modification request
ultimately was denied. (Compl. p. 27, ¶66.)
In opposing the motions to dismiss, Plaintiffs state that they submitted a
third completed loan modification package on March 28, 2013. (Pl. Br., p.
11; Guice Decl., Ex. B.)
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4
On July 30, 2014, Ocwen assigned Plaintiffs’ note and mortgage to
Defendant Wilmington Savings Fund Society, FSB d/b/a Christiana Trust
as Trustee for HLSS Mortgage Master Trust. On April 2, 2015, Wilmington
served a foreclosure complaint on Plaintiffs. (Guice Decl., Ex. D.)
Plaintiffs filed the Complaint in this matter on April 13, 2015 in the
Superior Court of New Jersey, Law Division, Camden County. Defendants
removed the case here based on diversity of citizenship jurisdiction. Count
I of the Complaint asserts Breach of Contract/Breach of Duty of Good Faith
and Fair Dealing in that Plaintiffs were third party beneficiaries of the
Agreement between Defendants and the United States Treasury executed as
part of HAMP procedures in order that Defendants could continue to
receive federal funding. Plaintiffs allege that Defendants were obligated to
advise Plaintiffs of their right to seek loan modification once they were sixty
or more days in default of their mortgage loan, but failed to do so resulting
in an unjust enrichment. Plaintiffs assert that Litton’s, GSB’s, and Ocwen’s
breach of the Agreements with the federal government and New York State
caused them damages including payment of increased interest, longer loan
payoff times, higher principal balances, etc. 6
“Plaintiffs at all times material hereto were third party beneficiaries of the
SPA between Defendants and United States Treasury and/or Agreement
between Defendants and State of New York. . . . Defendants failed to
perform their duties owed to the third party beneficiaries, under the terms
6
5
Count II claims Promissory Estoppel, in the alternative, in that
Defendants should not prevail because their representative advised
Plaintiffs to stop making mortgage payments for their modification
application to be approved, and Defendants further ignored Plaintiffs’
telephone calls and follow-up emails. 7 Count III asserts violations of the
New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1.8 Count IV
alleges negligent hiring, improper training, and vicarious liability. 9
of the contract. . . . As a result of Defendants, Litton, GSB and Ocwen’s
breach of the SPA and Agreement, Plaintiffs have suffered and will continue
to suffer reasonable and foreseeable consequential damages resulting from
such breaches[.]” Compl. pp. 28-30, ¶¶ 2-3, 13.
7 “Defendants by way of their participation in the HAMP program made a
representation to plaintiffs that they could be saved from foreclosure or
other legal proceedings regarding their home. . . . Plaintiffs relied upon the
statements of Defendants, Litton, Ocwen and GSB, individually, jointly,
severally and in the alternative, that they would abide by the mandates set
forth by the United States Treasury and State of New York Department of
Banking.” Compl. p. 30-32, ¶ 2, 9.
8 Plaintiffs cite Defendants’ “practice of leading borrowers to believe that
defendants would offer loan modifications as required under HAMP” and
state “Plaintiffs have suffered an actual and ascertainable loss of money or
other property . . . including but not limited to: payment of increased
interest, longer loan payoff times, higher principle balances, deterrence
from seeking other remedies to address their default and/or unaffordable
mortgage payments, damage to their credit, additional income tax liability,
costs and expenses incurred to prevent or fight foreclosure and other
damages.” Compl. p. 34-35, ¶¶ 4, 6.
9 “At all times material hereto, Defendants were required under the SPA
and Agreement to: ‘ensure that employees and managers engaged in loan
servicing, collection, loss mitigation, foreclosure prevention and foreclosure
processing and/or proceedings participate in a compliance training
program.’ . . . At all times material hereto, Defendants failed to properly
train their employees as required.” Compl. pp. 35-36, ¶¶ 2-3.
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Applicable Standard
Federal Rule of Civil Procedure 12(b)(6) allows a party to move for
dismissal of a claim based on “failure to state a claim upon which relief can
be granted.” Fed. R. Civ. P. 12(b)(6). A complaint should be dismissed
pursuant to Rule 12(b)(6) if the alleged facts, taken as true, fail to state a
claim. Fed. R. Civ. P. 12(b)(6). When deciding a motion to dismiss
pursuant to Rule 12(b)(6), ordinarily only the allegations in the complaint,
matters of public record, orders, and exhibits attached to the complaint, are
taken into consideration. 1 See Chester County Intermediate Unit v. Pa.
Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990). It is not necessary for the
plaintiff to plead evidence. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446
(3d Cir. 1977). The question before the Court is not whether the plaintiff
will ultimately prevail. Watson v. Abington Twp., 478 F.3d 144, 150 (2007).
Instead, the Court simply asks whether the plaintiff has articulated “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).
1“Although
a district court may not consider matters extraneous to the
pleadings, a document integral to or explicitly relied upon in the complaint
may be considered without converting the motion to dismiss into one for
summary judgment.” U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383,
388 (3d Cir. 2002) (internal quotation marks and citations omitted)
(emphasis deleted). Accord Lum v. Bank of Am., 361 F.3d 217, 221 n.3 (3d
Cir. 2004) (citations omitted).
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“A claim has facial plausibility 2 when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Twombly, 550 U.S. at 556). “Where there are wellpleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief.”
Iqbal, 556 U.S. at 679.
The Court need not accept “‘unsupported conclusions and
unwarranted inferences,’” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir.
2007) (citation omitted), however, and “[l]egal conclusions made in the
guise of factual allegations . . . are given no presumption of truthfulness.”
Wyeth v. Ranbaxy Labs., Ltd., 448 F. Supp. 2d 607, 609 (D.N.J. 2006)
(citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also Kanter v.
Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423
F.3d 347, 351 (3d Cir. 2005) (“[A] court need not credit either ‘bald
assertions’ or ‘legal conclusions’ in a complaint when deciding a motion to
2This
plausibility standard requires more than a mere possibility that
unlawful conduct has occurred. “When a complaint pleads facts that are
‘merely consistent with’ a defendant’s liability, it ‘stops short of the line
between possibility and plausibility of ‘entitlement to relief.’’” Id.
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dismiss.”)). Accord Iqbal, 556 U.S. at 678-80 (finding that pleadings that
are no more than conclusions are not entitled to the assumption of truth).
Further, although “detailed factual allegations” are not necessary, “a
plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’
requires more than labels and conclusions, and a formulaic recitation of a
cause of action’s elements will not do.” Twombly, 550 U.S. at 555 (internal
citations omitted). See also Iqbal, 556 U.S. at 678 (“Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements,
do not suffice.”).
Thus, a motion to dismiss should be granted unless the plaintiff’s
factual allegations are “enough to raise a right to relief above the
speculative level on the assumption that all of the complaint’s allegations
are true (even if doubtful in fact).” Twombly, 550 U.S. at 556 (internal
citations omitted). “[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the complaint has
alleged-but it has not ‘shown’-‘that the pleader is entitled to relief.’” Iqbal,
556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
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Analysis
As an initial matter, the Court notes that no facts have been alleged
against Avelo to support any claim against it. In addition, GSB is
implicated only as parent of Litton, but no allegations form the basis for
piercing the corporate veil to hold GSB liable for actions of its former
subsidiary.10 Therefore, the motion of these two Defendants will be granted
for these independent grounds from those articulated next.
Plaintiffs’ first claim must fail because there is no private right of
action to enforce compliance with HAMP. Sinclair v. Citi Mortgage, Inc.,
519 Fed. App’x 737, 738 (3d Cir. 2013); In re O’Biso, 462 B.R. 147, 151
(D.N.J. 2011) (citing Stolba v. Wells Fargo & Co., No. 10-cv-6014, 2011 WL
3444078, D.N.J. Aug. 8, 2011)). With regard to the HAMP Servicer
Participation Agreement, this Court has held that an “SPA does not provide
a vehicle for creating a cause of action under the HAMP: ‘the HAMP
Guidelines, effectuated through the servicer’s execution of the SPA, may not
be enforced by a mortgagee under a third party beneficiary theory.’”
Shaffery v. Bank of Am., N.A., No. 14-cv-6123, 2015 WL 1189622, at *1
“It is a general principle of corporate law deeply ‘ingrained in our
economic and legal systems’ that a parent corporation . . . is not liable for
the acts of its subsidiaries.” U.S. v. Bestfoods, 524 U.S. 51, 61 (1998). It
follows that “[m]ere ownership of a subsidiary does not justify the
imposition of liability on a parent.” Pearson v. Component Technology
Corp., 247 F.3d 471, 484 (3d Cir. 2001).
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10
(D.N.J. Mar. 16, 2015) (quoting Thomas v. U.S. Bank Nat’l Ass’n, 474 B.R.
450, 459 (D.N.J. 2012)).
Plaintiffs also are not third-party beneficiaries of the Mortgage
Practices Agreement. Under New Jersey law, to be a third-party beneficiary
the contracting parties must have “intended others to benefit from the
existence of the contract,” it is insufficient that “the benefit so derived
arises merely as an unintended incident of the agreement.” See Broadway
Maintenance Corp. v. Rutgers, the State University, 447 A.2d 906, 909
(N.J. 1982). If a contract is silent, the court must look to the surrounding
circumstances and the relevant provisions in the agreement to determine
that intent. Id. If no such intent is found, the third person is merely an
incidental beneficiary without contractual standing to bring a claim. Id.
The Mortgage Practices Agreement here was entered into three years after
the origination of Plaintiffs’ mortgage. There is no mention in the
Mortgage Practices Agreement of third party beneficiaries or a private right
of action to mortgagors. Plaintiffs are at best incidental beneficiaries of the
Mortgage Practices Agreement, which does not give them enforceable rights
under that agreement.
Further, Even if Plaintiffs possessed third-party beneficiary status,
their claim would still fail because there is no guaranteed right to a loan
modification under HAMP. See Stolba, 2011 WL 3444078, at *3 (“the plain
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language of the relevant TPP documents makes clear that satisfying the TPP
conditions for permanent modification does not guarantee that Plaintiff
would receive such modification”). A borrower has no right to unilaterally
demand a loan modification from a lender. O’Biso, 462 B.R. at 151.
Plaintiffs argue in opposition to the motions to dismiss that their
breach of contract/implied covenant of good faith and fair dealing claim is
based upon breach of covenants contained in the original note, in that (1)
Defendant Litton lost and/or failed to apply a $4,000 payment to the
principal and interest of the original note and (2) Defendants intentionally
misled Plaintiffs for over three years regarding their application for a loan
modification [that the modification would be granted] to drive up costs
associated with the original note and build principal and interest. (Pl. Br.,
p. 14, 17.) “‘It is axiomatic that the complaint may not be amended by the
briefs in opposition to a motion to dismiss.’” Pennsylvania ex rel.
Zimmerman v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (citation
omitted); accord Frederico v. Home Depot, 507 F.3d 188, 201-02 (3d Cir.
2007) (“we do not consider after-the-fact allegations in determining the
sufficiency of [a] complaint under Rules 9(b) and 12(b)(6)”).
Next, to establish a claim for promissory estoppel, Plaintiffs must
show: (1) a clear and definite promise by the promisor; (2) the promise
must be made with the expectation that the promisee will rely thereon; (3)
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the promisee must in fact reasonably rely on the promise, and (4) detriment
of a definite and substantial nature must be incurred in reliance on the
promise. Malaker Corp. Stockholders Protective Committee v. First Jersey
Nat’l Bank, 395 A.2d 222, 230 (N.J. Super. Ct. App. Div. 1978). Plaintiffs
may have been told that they would be considered for a loan modification if
they adhered to the terms of the proposed Agreement and refrained from
making regular payments. Plaintiffs were not guaranteed a loan
modification, and Defendants were under no obligation to grant them one.
Therefore, it would have been unreasonable for Plaintiffs to rely on any
such statement as a promise, and this is not a sufficient basis for Plaintiffs’
promissory estoppel claim.
To state a valid claim for a violation of the NJCFA, a plaintiff must
allege each of the following elements: “‘(1) unlawful conduct by the
defendant; (2) an ascertainable loss on the part of the plaintiff; 11 and (3) a
causal relationship between the defendant’s unlawful conduct and the
plaintiff’s ascertainable loss.’” Weinberg v. Sprint Corp., 173 N.J. 233, 250
(2002). See also Maniscalco v. Brother Int’l Corp., 627 F. Supp. 2d 494,
499 (D.N.J. 2009).
An ascertainable loss is a loss that is “quantifiable or measurable”; it is not
“hypothetical or illusory.” Lee v. Carter-Reed Co., LLC, 203 N.J. 496, 522
(2010); see also Barows v. Chase Manhattan Mortgage Corp., 465 F. Supp.
2d 347, 353 (D.N.J. 2006).
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As stated above, Plaintiffs do not have standing to bring a claim under
HAMP. Further, neither HAMP nor the Mortgage Practices Agreement
guarantees any mortgagor the “right” to modification. Finally, Plaintiffs
have not alleged an ascertainable loss that they actually suffered which was
caused by any Defendant’s conduct, rather than by their own default.
Regarding the negligence claim, Plaintiffs must show: (1) a duty of
care; (2) breach of that duty; (3) proximate cause; and (4) actual damages.
Ramirez v. U.S., 81 F. Supp. 2d 532, 540 (D.N.J. 2000). Under New Jersey
law, “[t]he question of whether a duty exists is a matter of law properly
decided by the court, not the jury, and is largely a question of fairness or
policy.” Wang v. Allstate Ins. Co., 125 N.J. 2, 15 (1991).
The economic loss doctrine bars claims for negligence between
parties to a contract. SRC Const. Corp. of Monroe v. Atl. City Hous. Auth.,
935 F. Supp. 2d 796, 800 (D.N.J. 2013). “Under New Jersey law, a tort
remedy does not arise from a contractual relationship unless the breaching
party owes an independent duty imposed by law. . . . But mere failure to
fulfill obligations encompassed by the parties’ contract, including the
implied duty of good faith and fair dealing, is not actionable in tort.”
Skypala v. Mortgage Elec. Registration Sys., Inc., 655 F. Supp. 2d 451, 460
(D.N.J. 2009). Without an independent duty imposed by law, Plaintiffs’
negligence claim is barred.
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Plaintiffs will be granted leave to file a Motion to Amend the
Complaint within 20 days insofar as they wish to assert claims not
considered here or claims that would not be barred by the legal holdings the
Court has made herein. See Phillips v. County of Allegheny, 515 F.3d 224,
245 (3d Cir. 2008) (providing that plaintiffs whose claims are subject to a
Rule 12(b)(6) dismissal should be given an opportunity to amend their
complaints unless amendment would be inequitable or futile).
An appropriate Order will be entered.
Dated: November 3, 2015
/s/ Joseph H. Rodriguez
JOSEPH H. RODRIGUEZ
USDJ
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