Nelson v. Nationstar Mortgage LLC et al

Filing 23

ORDER granting 18 Motion to Dismiss as to plaintiff's claims under RESPA and the Garn-St. Germain Act. The court declines to exercise supplemental jurisdiction over plaintiffs remaining state law claims, and this matter is REMANDED to the Superior Court of North Carolina, Onslow County for further proceedings. Signed by Senior Judge W. Earl Britt on 3/28/2017. Order to Superior Court of North Carolina, Onslow County via US Mail at 625 Court St., Jacksonville, NC 28540. (Marsh, K)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No. 7:16-CV-00307-BR
SANDRA KAY NELSON,

)
)
Plaintiff,
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v.
)
)
NATIONSTAR MORTGAGE LLC,
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U.S. BANK NATIONAL ASSOCIATION )
AS INDENTURE TRUSTEE FOR
)
SPRINGLEAF MORTGAGE LOAN
)
TRUST 2013-2, and GRADY I. INGLE
)
and ELIZABETH B. ELLS, in their
)
capacity as Substitute Trustee,
)
)
Defendants.
)

ORDER

This matter is before the court on the 3 October 2016 motion to dismiss filed by
defendants Nationstar Mortgage LLC (“Nationstar”) and U.S. Bank National Association, as
Indenture Trustee for Springleaf Mortgage Loan Trust 2013-2 (“U.S. Bank”) (collectively
“defendants”). (DE # 18.) Plaintiff filed a memorandum in opposition on 27 October 2016.
(DE # 21). Defendants did not file a reply brief, and the time within which to do so has expired.
This matter is therefore ripe for disposition.
I. FACTS
This case concerns foreclosure proceedings involving a house (“the Property”) that was
purchased by plaintiff’s deceased father, Danny Chambers, in Jacksonville, North Carolina.
Plaintiff lived at the Property with Chambers, along with her husband, daughter, and brother.
(Am. Compl., DE # 16, ¶ 11.) In August 2007, Chambers refinanced the mortgage on the
Property and executed a promissory note to Equity One, Incorporated d/b/a Equity One

Mortgage Services, Inc. in the amount of $24,581.41. (Id. ¶¶ 8-10; see also Ex. 1, DE # 16-1, at
3.) The mortgage loan was initially serviced by Springleaf Financial Services (“Springleaf”).
(Am. Compl., DE # 16, ¶ 13.) Chambers designated plaintiff as an authorized third party on the
account, and she would occasionally make mortgage payments for her father. (Id. ¶¶ 12-13.)
On 8 March 2010, Chambers passed away. (Id. ¶ 14.) Plaintiff and her three siblings
thereafter became co-owners of the Property through intestate succession. (Id. ¶ 1.) Following
Chambers’s death, plaintiff continued to make mortgage payments on the account and continued
communicating with Springleaf about the account. (Id. ¶ 15.) At some point, plaintiff fell
behind on the mortgage payments. (Id. ¶ 16.) Plaintiff eventually sent in $2,000 to Springleaf
on 5 August 2014. (Id.) Based on the records from Springleaf, this payment brought the account
current through the August 2014 payment. (Id.)
On 16 September 2014, Springleaf sent a letter addressed to Chambers to the Property
advising him that Nationstar would become the servicer of the loan effective 1 October 2014.
(Id. ¶ 17; see also Ex. 2, DE # 16-2.) Plaintiff alleges that Nationstar refused to communicate
with her or accept payments from her upon learning of Chambers’s death. (Am. Compl, DE #
16, ¶¶ 21-26.) She further alleges that Nationstar has prevented her from assuming the loan
through loss mitigation procedures. (Id. ¶¶ 47-50.)
In 2015, defendants initiated foreclosure proceedings in the North Carolina Superior
Court, Onslow County, seeking to enforce the power of sale in the deed of trust for the mortgage
loan. (Id. ¶¶ 1, 33-34.) On 9 June 2016, the Assistant Clerk of Court for Onslow County entered
an order authorizing foreclosure. (Id. ¶ 56.) Plaintiff filed a notice of appeal on 15 June 2016,
and subsequently paid a bond to stay the foreclosure pending appeal. (Id. ¶¶ 57-58.)

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On 27 July 2016, plaintiff commenced this action in the North Carolina Superior Court,
Onslow County. (See Ex. 1, DE # 1-1.) On 25 August 2016, defendants removed the action to
this court based on federal question jurisdiction and supplemental jurisdiction. (DE # 1.) On
that same day, defendants filed a motion to dismiss plaintiff’s complaint. (DE # 3.) On 19
September 2016, plaintiff filed an amended complaint, alleging six counts. (DE # 16.) Counts
two and three allege violations of the Garn-St. Germain Depository Institutions Act of 1982
(“Garn-St. Germain Act”), 12 U.S.C. § 1701j-3, and the Real Estate Settlement Procedure Act
(“RESPA”), 12 U.S.C. § 2601 et seq. (Id.) The remaining counts allege the following state law
claims: violation of the North Carolina Mortgage Debt Collection and Servicing Act, N.C. Gen.
Stat. § 45-90 et seq. (count one); violation of the North Carolina Unfair and Deceptive Trade
Practices Act, N.C. Gen. Stat. § 75-1.1 et seq. (count four); declaratory relief (count five); and
injunctive relief (count six). (Id.) On 3 October 2016, defendants filed the instant motion to
dismiss plaintiff’s complaint. (DE #18).
II. ANALYSIS
Defendants move to dismiss plaintiff’s complaint pursuant to Rules 8(a) and 12(b)(6) of
the Federal Rules of Civil Procedure. Defendants argue that plaintiff lacks standing to assert her
various mortgage-related claims, and that she has otherwise failed to set forth any claim upon
which relief can be granted. (Defs.’ Mem. in Support, DE # 19, at 2.)
A. Standard of Review
Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim
upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A Rule 12(b)(6) motion challenges
the legal sufficiency of a complaint, and the relevant inquiry is whether the plaintiff’s factual
allegations are “enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 555 (2007). A complaint attacked by a Rule 12(b)(6) motion to
dismiss will survive if it contains “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) (quoting
Twombly, 550 U.S. at 570); see also Robinson v. Am. Honda Motor Co., 551 F.3d 218, 222 (4th
Cir. 2009). In reviewing a motion to dismiss, “[the] court accepts all well-pled facts as true and
construes these facts in the light most favorable to the plaintiff.” Nemet Chevrolet, Ltd. v.
Consumeraffairs.com. Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations omitted).
The pleading standard set forth in Rule 8(a)(2) requires “‘a short and plain statement of
the claim showing that the pleader is entitled to relief.’” Iqbal, 556 U.S at 677-78 (quoting Fed.
R. Civ. P. 8(a)(2)). However, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id. at 678. Therefore, while “the
pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ . . . it
demands more than unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (citing
Twombly, 550 U.S. at 555). “[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
‘show[n]’—‘that the pleader is entitled to relief,’ as required by Rule 8 . . .” Francis v.
Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 678).
B. Federal Claims
In count two of her amended complaint, plaintiff asserts that defendants violated the
Garn-St. Germain Act by accelerating the debt after learning of Chambers’s death and the
transfer of the Property to his children. (Am. Compl., DE # 16, ¶¶ 68-72.) Defendants argue
that this claim should be dismissed because the Garn-St. Germain Act does not provide a private
right of action. (Defs.’ Mem. in Support, DE # 19, at 6.)

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The Garn-St. Germain Act supplants state laws concerning due-on-sale clauses with a
federal law that permits enforcement of the clauses. Dupuis v. Yorkville Fed. Sav. & Loan
Ass’n, 589 F. Supp. 820, 823 (S.D.N.Y. 1984). Plaintiff seeks relief under an exception to this
statute, 12 U.S.C. § 1701j-3(d)(3), which provides that a creditor may not enforce a due-on-sale
clause upon “a transfer by devise, descent, or operation of law on the death of a joint tenant or
tenant by the entirety.” (Am. Compl., DE # 16, ¶ 69.) However, as defendants note, the GarnSt. Germain Act does not create a cause of action for damages. See Touche Ross & Co. v.
Redington, 442 U.S. 560, 568 (1979) (“‘[T]he fact that a federal statute has been violated and
some person harmed does not automatically give rise to a private cause of action in favor of that
person.’”) (quoting Cannon v. Univ. of Chicago, 441 U.S. 677, 688 (1979)); Dupuis, 589 F.
Supp. at 823 (holding that the Garn-St. Germain Act does not create a private right of action for
damages); Turman v. Wells Fargo Bank, N.A., No. 3:15-CV-1119, 2016 WL 5467947 at *3
(M.D. Tenn. Sept. 29, 2016) (dismissing plaintiff’s complaint alleging violations of 12 U.S.C. §
1701 because “[s]ection 1701j-3, upon which [p]laintiff relies, does not provide her with a
private right of action”). Accordingly, plaintiff’s claim under this statute must be dismissed for
failure to state a claim upon which relief can be granted.
Count three of plaintiff’s amended complaint is based on defendants’ alleged failure to
adhere to the loss mitigation procedures set forth in RESPA and its implementing regulation, 12
CFR § 1024 et seq. (“Regulation X”). (Am. Compl., DE # 16, ¶¶ 73-80.) In moving to dismiss
this claim, defendants argue that plaintiff lacks standing because she is not a borrower in this
action. (Defs.’ Mem. in Support, DE # 19, at 7-8.)
“RESPA is a consumer protection statute that regulates the real estate settlement process
[by placing various obligations on mortgage servicers].” Hardy v. Regions Mortg., Inc., 449

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F.3d 1357, 1359 (11th Cir. 2006) (citing 12 U.S.C. § 2601(a)). Regulation X provides that “[a]
borrower may enforce the provisions of this section pursuant to section 6(f) of RESPA (12
U.S.C. 2605(f)).” 12 C.F.R. § 1024.41(a). Pursuant to 12 U.S.C. § 2605(f) of RESPA,
“[w]hoever fails to comply with any provision of this section shall be liable to the borrower.”
“Thus, a defendant’s liability in a civil action under RESPA is limited to borrowers.” Correa v.
BAC Home Loans Servicing LP, 853 F. Supp. 2d 1203, 1207 (M.D. Fla. 2012); see also Leblow
v. BAC Home Loans Servicing, LP, No. 1:12-cv-00246-MR-DLH, 2013 WL 2317726, at *7
(W.D.N.C. May 28, 2013) (“Pursuant to the express language of the statute, civil liability under
RESPA is limited to borrowers.”) (citations omitted).
A number of federal courts have held that only individuals who execute the promissory
note are “borrowers” with standing to bring a RESPA claim. See Correa, 853 F. Supp. 2d at
1207 (rejecting plaintiff’s argument that his payment of the down payment for the mortgage and
note transaction made him a borrower with legal rights under RESPA where he did not sign
either the note or the mortgage); Green v. Cent. Mort. Co., No. 14-cv-04281-LB, 2015 WL
5157479, at *5 (N.D. Cal. Sept. 2, 2015) (finding that plaintiff, who obtained property subject to
mortgage as a result of her parents’ death, did not become a borrower under RESPA simply upon
obtaining title to the property); Leblow, 2013 WL 2317726, at *7 (concluding that plaintiff was
not a borrower because he did not sign the promissory note and was not a party to the loan, and
that plaintiff’s wife was the only borrower on the loan at issue); Mitchell v. Mort. Elec.
Registration Sys., Inc., No. 1:11-CV-425, 2012 WL 1094671, at *2 (W.D. Mich. Mar. 30, 2012)
(holding that plaintiff, who was not a signatory to the mortgage and note at issue, was not a
borrower with standing to bring claims under RESPA); see also Johnson v. Ocwen Loan

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Servicing, 374 F. App’x 868, 873-74 (11th Cir. 2010) (affirming the district court’s dismissal of
plaintiff’s RESPA claim because she was not a borrower or otherwise obligated on the loan).
Because plaintiff did not sign the promissory note and has not assumed the loan, she is not a
borrower under RESPA. Accordingly, plaintiff lacks standing to assert a RESPA claim, and this
claim must be dismissed.
Plaintiff’s remaining claims all arise under North Carolina law. Having dismissed
plaintiff’s federal claims over which it has original jurisdiction, the court declines to exercise
supplemental jurisdiction over plaintiff’s state law claims. See Hinson v. Norwest Fin. S.C.,
Inc., 239 F.3d 611, 617 (4th Cir. 2001) (holding a district court’s power to remand pendent state
law claims to state court is inherent in statutory authorization to decline supplemental
jurisdiction under 28 U.S.C. § 1367(c)); see also 28 U.S.C. § 1367(c)(3) (stating a district court
may decline to exercise supplemental jurisdiction over a state law claim if it has dismissed all
claims over which it has original jurisdiction). Accordingly, plaintiff’s remaining state law
claims will be remanded.
III. CONCLUSION
For the reasons stated above, defendants’ motion to dismiss is GRANTED as to
plaintiff’s claims under RESPA and the Garn-St. Germain Act. The court declines to exercise
supplemental jurisdiction over plaintiff’s remaining state law claims, and this matter is
REMANDED to the Superior Court of North Carolina, Onslow County for further proceedings.
This 28 March 2017.

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W. Earl Britt
Senior U.S. District Judge
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