HAWKINS v. SETERUS, INC. et al

Filing 18

MEMORANDUM OPINION AND ORDER denying 7 Motion to Dismiss and 10 Motion to Dismiss. Signed by Judge Kevin McNulty on 9/27/2016. (seb)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 16-1407 (KM)

GREGORY HAWKINS,
Plaintiff,

MEMORANDUM OPINION and
ORDER
SETERUS, INC., ONEWEST BANK,
FSB, and OCWEN LOAN
SERVICING, LLC,
Defendants.

MCNULTY, U.S.D.J.:
The plaintiff, Gregory Hawkins, brings this action against his mortgage
lender and loan servicers, claiming breach of contract based on their failure to
enter into a modification of his mortgage loan under the Home Affordable
Modification Program (RAMP). Now before the Court are two motions to dismiss
the complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6).
The first is brought by defendant Seterus, Inc. (ECF no. 7). The second is
brought by defendants Octwen Loan Servicing, LLC (“Ocwen”) and OneWest
Bank, FSB (“OneWest”).’ For the reasons stated herein, the motions will be
denied.
I.

APPLICABLE STANDARD

FED. R. Civ. P. 12(b)(6) provides for the dismissal of a complaint, in whole
or in part, if it fails to state a claim upon which relief can be granted. The
moving party bears the burden of showing that no claim has been stated.
Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion
to dismiss, a court must take all allegations in the complaint as true and view
1

OneWest states that it would properly be named as CIT Bank, N.A.

them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.s.
490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140
F.3d 478, 483 (3d Cir. 1998); see also Phillips u. County of Allegheny, 515 F.3d
224, 231 (3d Cir. 2008) (“reasonable inferences” principle not undermined by
later Supreme Court Twombly case, infra).
R. CIV. P. 8(a) does not require that a complaint contain detailed
factual allegations. Nevertheless, “a plaintiff’s obligation to provide the
FED.

‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and formulaic recitation of the elements of a cause of action will
not do.” Bell Ati. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual
allegations must be sufficient to raise a plaintiff’s right to relief above a
speculative level, such that it is “plausible on its face.” See id. at 570; see also
Umland u. PLANCO Fin. Seru., Inc., 542 F.3d 59, 64 (3d Cir. 2008). 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a
‘probability requirement’
it asks for more than a sheer possibility.” Iqbal, 556
U.S. at 678 (2009).
...

II.

BACKGROUND

I focus on the allegations of the Complaint (ECF no. 1-1 at 6), which are
presumed to be true for purposes of this motion only.
On December 7, 2006, the plaintiff, Gregory Hawkins, took out a fixed
rate $334,500 loan, secured by a mortgage on his home in Union, New Jersey.
(Cplt. ¶j 1, 6) The monthly payments of principal and interest were $1968.09.
(Cplt. ¶ 8) On January 17, 2012, the mortgage was assigned to OneWest. (Cplt.
10) On May 9, 2012, OneWest filed a state court foreclosure complaint (No.
F-8528.-12), and a final judgment by default was entered on December 19,

¶

2012. (Cplt.

11, 12) In this period, and through July 2015, the loan was
serviced by Ocwen. (Cplt. ¶ 13)

¶

2

On September 18, 2014, Hawkins applied to Ocwen, a RAMP participant,
for a modification of the mortgage loan. (Cplt. ¶ 14) RAMP initially requires that
that the appliant participate in a Trial Period Plan (“TPP”). (Cplt.

¶J

16, 17)

On September 24, 2014, Hawkins received a letter from Ocwen placing
him on a TPP. It required three monthly payments of $2214.09, due on
November 1, 2014, December 1, 2014, and January 1, 2015. Hawkins made
the three payments. (Cplt. ¶ 18, 19)
On November 10, 2014, an Ocwen “relationship manager” named Gerald
Asplund told Hawkins that liens had appeared on a judgment search. On
November 19, 2014, Hawkins’ representative replied that the liens were “not
against Hawkins” and on December 11, 2014 Hawkins supplied an Affidavit of
Title to that effect. (Cplt.

¶J

20—24) Ocwen directed Hawkins that, until the

final modification was sent out, he should continue making payments at the
TPP amount. (Cplt. 24—28)
In February 2015, Ocwen raised the subject of a lien from Sears;
Hawkins’s representative replied that this lien, which had been addressed by
the Affidavit, “did not pertain to Hawkins.” (Cplt.
¶j 29—31) On March 3, 2015,
an Ocwen relationship manager named Charles told Hawkins’s representative
that he needed to satisfy the lien or otherwise have it removed from the County
records. (Cplt.

33) Checking, Hawkins found that the County had no such
lien on file. (Cplt. ¶ 34)

¶

Hawkins made monthly payments at the TPP amount through March
2015. (Cplt. ¶ 28) On March 18, 2015, an Ocwen employee said the file would
be “escalated” based on the lien issue. (Cplt.
payments to the pre-TPP amount. (Cplt.

¶

¶

35) Ocwen then restored the

32) On March 25, 2015, however,

OneWest moved in the foreclosure proceeding to set aside the final judgment of
foreclosure. (Cplt. ¶ 36)
On March 31, 2015, Asplund required that Hawkins supply a copy of the
title search conducted at the time of the origination of the mortgage. Hawkins
did so; it showed that title was clear of liens in 2006. (Cplt.

3

¶f

37—40)

On April 23, 2015, an Ocwen representative communicated to Hawkins
that the Affidavit and title search were rejected as insufficient. She directed
him to contact Asplund as to the next steps. Asplund replied that he was still
trying to get an answer from Ocwen’s “title experts” as to what would be
required to clear the Sears lien. (Cplt.

¶J

42—44)

By letter dated May 13, 2015, Ocwen denied the request for a permanent
loan modification. (Cplt. ¶ 45) On May 15, 2015, an Ocwen employee named
Ross said that Ocwen needed seven business days to work on the file and try
to
get a response regarding the Sears lien. (Cplt. 47) On June 19, 2015,

¶

Hawkins received a letter from Ocwen stating that the HAMP request was still
under review; on June 29, 2015, an Ocwen employee stated that the Affidavit
of Title was being resubmitted; on July 7, 2015, Asplund advised that the file
was still being reviewed. (Cplt. ¶J 48—50)
On July 15, 2015, an Ocwen employee advised Hawkins that the loan
was being transferred from Ocwen to defendant Seterus, Inc., for servicing as
of
August 1, 2015. (Cplt. ¶ 51)
In mid-September, Seterus proposed to Hawkins a new TPP on less
favorable terms than the prior one. (Cplt. ¶J 52—53) On September 29, 2015,
Seterus sent a Notice of intent to foreclose. (Cplt.

¶

54)

On January 20, 2016, Hawkins filed the Complaint in this action in New
Jersey Superior Court, Law Division, Union County. (ECF no. 1-1 at 6) On
March 11, 2016, defendants removed the action, invoking this Court’s diversi
ty
jurisdiction under 28 U.S.C.

§

1332(a). (ECF no. 1) The Complaint asserts three
causes of action: Count One (Breach of Contract); Count Two (Good Faith and

Fair Dealing); and Count Three (New Jersey Consumer Fraud Act).
III.

DISCUSSION
A.

Count 1

—

Breach of Contract

Count 1 of the complaint alleges breach of contract. The September 24,
2014 letter, it alleged, was an offer to modify the mortgage under RAMP.
Hawkins allegedly accepted the offer by complying with the TPP and supplying
4

all required documents. Ocwen and OneWest, however, declined to enter into
the modification, thereby breaching the parties’ agreement. Seterus, although it
took over servicing thereafter, is alleged to be obligated under the agreement as
successor to OneWest and Ocwen. (Cplt.

¶J

55—66) The defendants essentially

argue that there was no contractually binding agreement to modify the loan.
[A] contract is a voluntary obligation proceeding from a common
intention arising from an offer and acceptance. Johnson & Johnson
v. Charmley Drug Co., 11 N.J. 526, 95 A.2d 391 (1953). To be
enforceable, a contract must be sufficiently definite in its terms
that the performance to be rendered by each party can be
ascertained with reasonable certainty. Savarese v. Pyrene Mfg. Co.,
9 N.J. 595, 89 A.2d 237 (1952).
Friedman v. Tappan Dev. Corp., 22 N.J. 523, 531, 126 A.2d 646, 650 (1956).
New Jersey case law supports the proposition that such a TPP letter may
give rise to a binding contract:
Before reviewing the record and setting forth our own legal
analysis, we briefly discuss the most pertinent case law on which
the parties rely. In Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547
(7th Cir.2012), the court cogently explained the federal HAMP
program, which was designed to address the residential mortgage
foreclosure crisis by encouraging lenders to extend loan
modifications to qualified mortgagors. Id. at 556—57; see
Emergency Economic Stabilization Act of 2008, 12 U.S.C.A.
§
5219(a)(1). The court concluded that, even though there is no
private cause of action under RAMP, a mortgagor may nonetheless
assert a common-law contract claim based on a bank’s failure to
honor promises made in a RAMP Trial Period Plan Agreement. The
court reasoned that the terms of the TPP Agreement must be
construed as a promise by the bank that if the debtor complies
with its terms, she will be offered a loan modification. The court
thus described the TPP Agreement as including “a unilateral offer
to modify Wigod’s loan conditioned on her compliance with the
stated terms of the bargain.” Wigod, supra, 673 F.3d at 562. The
court reasoned that “a reasonable person in Wigod’s position would
read the TPP as a definite offer to provide a permanent
modification that she could accept so long as she satisfied the
conditions.” ibid.; see also Corvello v. Wells Fargo Bank, N.A., 728
F.3d 878, 883—85 (9th Cir. 2013); Young, supra, 717 F.3d at 234;
Bosque v. 277 Wells Fargo Bank, N.A., 762 F.Supp.2d 342 (D.
Mass. 2011); West v. JPMorgan Chase Bank, N.A., 214 CaLApp.4th
5

780, 154 CaL Rptr.3d 285, rev, denied, 2013 Cal. LEXIS 5801 (July
10, 2013).
Arias v. Elite Mortgage Grp., Inc., 439 N.J. Super. 273, 276—77, 108 A.3d 21,
22—23 (App. Div. 2015).
Whether the TPP letter, which is subject to interpretation, was intended
as such a binding offer, poses factual issues. Whether the borrower fully
complied with its express and implied terms, and so on, remain issues as well.
I cannot say, however, that the plaintiff’s theory is so clearly foreclosed as a
matter of New Jersey law that his claim must be dismissed at the pleading
stage. Further exploration of both the law and the facts must await summary
judgment.
Seterus urges further that it was not the loan servicer at the time the
alleged contract was formed in September 2014, but took over servicing only in
July 2015. Seterus, however, acted as the agent of the lender. Moreover, it is
alleged that Seterus participated in what was a continuing breach, by offering a
less favorable TPP and seeking foreclosure. Finally, the complaint seeks
injunctive relief in the form of reinstatement of the modification on the terms
allegedly offered originally. As loan servicer, Seterus is plausibly alleged to be a
proper subject of such injunctive relief. Once again, the Court is not prejudging
any of these issues, but believes they have been adequately alleged.
The motions to dismiss Count 1 are denied.
B.

Count 2- Good Faith and Fair Dealing

Count 2 of the Complaint asserts a breach of the covenant of good faith
and fair dealing that is implied in every contract. See generally Sons of
Thunder, Inc. v. Borden, Inc., 690 A.2d 575 (N.J. 1997).
The defendants essentially argue that, because there is no contract,
there can be no breach of this implied covenant. I have already denied the
motions to dismiss Count 1 on the basis of their having been no contract. I
therefore deny the motions as to Count 2 as well.

6

C.

Count 3

—

New Jersey Consumer Fraud Act

Count 3 of the Complaint asserts a claim under the New Jersey
Consumer Fraud Act (“NJCFA”).
Once again, there is authority for the proposition that drawing the
borrower into a TPP while wrongfully withholding the ultimate loan
modification may be an unconscionable practice under the NJCFA:
[Cjase law suggests that an agreement that purports to bind a
debtor to make payments while leaving the mortgage company free
to give her nothing in return might violate the New Jersey
Consumer Fraud Act (CFA), N.J.S.A. 56:8—1 to -195. See Gonzalez
v. Wilshire Credit Corp., 207 N.J. 557, 576—78, 25 A.3d 1103
(2011). Gonzalez involved a different factual scenario from the one
in this case. However, in Gonzalez the Court strongly signaled its
disapproval of post-foreclosure financing deals that essentially
turned debtors into “cash cows” without ever restoring their
mortgages to current status. Id. at 570, 582—83, 25 A.3d 1103.
Arias, 439 N.J. Super. at 277, 108 A.3d at 23. See also Miller v. Bank of
Am.
Home Loan Servicing, L.P., 439 N.J. Super. 540 (App. Div. 2015).
Deciding whether that is so in a particular case poses factual issues that
exceed the scope of review on a Rule 12(b)(6) motion. The motions to dismis
s
Count 3 are denied.
ORDER
The defendants having moved to dismiss the complaint (ECF nos. 7, 10);
and the plaintiff having files oppositions (ECF nos. 11, 12); and the defend
ant
having filed replies (ECF nos. 15, 16); and the court having considered
the
submissions, and good cause appearing therefor;
IT IS this 27th day of September, 2016
ORDERED that the motions to dismiss (ECF nos. 7, 10) are D MED.

HON. KEVIN MCNULTY, U.

7

.J.