Cole v. Wells Fargo Bank, N.A.

Filing 18

MEMORANDUM of Decision and Order granting in part and denying in part 11 Motion to Dismiss for Failure to State a Claim; denying 13 Motion to Remand to State Court. Defendants Motion 11 is DENIED with respect to Plaint iffs claims for breach of the duty of good faith and fair dealing, for violation of the NCDCA, and for violation of Chapter 45. In all other respects, Defendants Motion to Dismiss is GRANTED, and all of the Plaintiffs claims, with the exception of the aforementioned claims, are DISMISSED WITH PREJUDICE. Signed by District Judge Martin Reidinger on 2/23/2016. (kby)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:15-cv-00039-MR

SCOTT COLE,

)
)
Plaintiff,
)
)
vs.
)
)
WELLS FARGO BANK, N.A.,
)
)
Defendant.
)
__________________________ )

MEMORANDUM OF
DECISION AND ORDER

THIS MATTER is before the Court on the Plaintiff’s Motion to Remand
[Doc 13] and the Defendant’s Motion to Dismiss [Doc. 11].
I.

FACTUAL AND PROCEDURAL BACKGROUND
Viewing the allegations of the Amended Complaint as true, the

following is a summary of the relevant facts. On or about October 31, 2006,
the Plaintiff Scott Cole obtained a mortgage from AME Financial, and the
mortgage was subsequently acquired by the Defendant Wells Fargo Bank,
N.A. (“Wells Fargo”). [Doc. 7 at ¶ 6]. The mortgage consisted of a Note in
the principal amount of $275,000, and a Deed of Trust that encumbered the
Plaintiff’s second home (the “property”). [Id.]. In 2009, the Plaintiff began
experiencing financial difficulties. [Id. at ¶ 10]. Upon seeking assistance
from Wells Fargo, the Plaintiff was advised that he needed to be three

months behind in his mortgage payments to be eligible for a loan
modification. [Id. at ¶¶ 11-13]. Thus, after skipping three payments, the
Plaintiff applied for relief under the federal Home Affordable Modification
Program (“HAMP”). [Id. at ¶¶ 18, 19]. In January of 2011, while the Plaintiff
was still negotiating his HAMP loan modification, the property was partially
destroyed by fire. [Id. at ¶ 29]. The Plaintiff paid for the repairs out of pocket
and was later reimbursed by his insurance company in the amount of
$149,345.71. [Id. at ¶ 31]. On or about August 30, 2011, the Plaintiff
tendered a check to Wells Fargo in the amount of $149,345.71 (the “lump
sum payment”), along with a letter stating the check was tendered in full
satisfaction of any debt owed to Wells Fargo. [Id. at ¶¶ 32, 33]. The letter
further stated that if Wells Fargo did not agree to the accord, then the lump
sum payment should be returned to the Plaintiff. [Id. at ¶ 33].
On or about November 4, 2011, Wells Fargo cashed the lump sum
payment, and applied the entire amount to the principal balance owed on the
loan, reducing the principal from $262,035.69 to $112,689.98. [Id. at ¶ 34,
36]. On November 30, 2011, the Plaintiff received a letter from Wells Fargo
stating that his mortgage was in default and would be referred for foreclosure
proceedings. [Id. at ¶ 37]. On or about December 19, 2011, the Plaintiff
received a letter from Trustee Services of Carolina advising him that it
2

intended to initiate foreclosure on behalf of Wells Fargo, and further stating
that the principal amount then owed was $112,689.98. [Id. at ¶ 38].
The Plaintiff opposed the foreclosure in the Superior Court of Macon
County, arguing that the lump sum payment was in full satisfaction of the
debt, or in the alternative, that the lump sum payment caught up any past
due periodic payments eliminating his default. [Id.at ¶¶ 40, 41]. Wells Fargo
responded that it had applied the entire lump sum payment towards the
principal, reducing the principal balance to $112,689.98, and it submitted
evidence of an account history showing that it had not applied any of the
lump sum payment towards the Plaintiff’s past due payments. [Id. at ¶¶ 42,
43]. The parties litigated the matter in the Superior Court of Macon County
for two years, during which time Wells Fargo failed to comply with multiple
requests by the Plaintiff for a payoff balance.1 [Id. at ¶ 44]. Ultimately, the
Superior Court of Macon County rejected the Plaintiff’s argument that the
lump sum payment constituted full satisfaction of the mortgage.2 [Id. at ¶ 49].

1

The Plaintiff alleges that he requested a payoff balance in writing and that Wells Fargo
“failed to provide [the Plaintiff] with a payoff balance within ten business days.” [Doc. 7
at ¶ 46]. It is unclear whether Wells Fargo was merely untimely in complying with the
Plaintiff’s request, or whether it never provided the Plaintiff a payoff amount. The Plaintiff
separately alleges “Wells Fargo then persisted to refuse [the Plaintiff’s] subsequent
requests for a payoff amount.” [Id. at ¶ 47].
2

The Amended Complaint does not address how the Superior Court ruled with respect
to the Plaintiff’s argument that the lump sum payment should have been applied to past
due periodic payments.
3

On or about August 6, 2014, the Plaintiff sold the property for less than
its market value to avoid imminent foreclosure proceedings. [Id. at ¶ 52].
When the Plaintiff attempted to pay off the loan, however, Wells Fargo
informed the Plaintiff for the first time that it had identified an error in its 2011
application of the Plaintiff’s lump sum payment. [Id. at ¶¶ 54-56]. Wells
Fargo issued the Plaintiff a corrected accounting history, showing that
approximately $30,000 of the lump sum payment, which it had previously
applied to the principal, was now applied to the Plaintiff’s past due periodic
payments. [Id. at ¶ 55]. As a result, the Plaintiff’s principal balance rose from
$112,689.98 to $142,937.42. [Id. at ¶ 56]. In total, Wells Fargo required
$173,380.36 before it would release the Deed of Trust, which the Plaintiff
paid in protest.3 [Id. at ¶¶ 57, 58].
On January 26, 2015, the Plaintiff filed a Complaint against Wells
Fargo in the Superior Court of Buncombe County, North Carolina asserting
claims for negligence, fraud, fraud in the inducement, unfair and deceptive
trade practices (“Chapter 75”), breach of the implied duty of good faith and
fair dealing, and violations of the duty to disclose borrower’s principal
balance pursuant to the North Carolina Mortgage Debt Collection and

3

The Amended Complaint does not allege why Wells Fargo required a payoff amount
that was $30,000 in excess of the principal balance, but it appears that this additional
amount was likely the result of late charges, interest, and other fees.
4

Servicing Act (“Chapter 45”). [Doc. 1-1]. The Plaintiff’s Complaint sought
$60,690.38 in actual damages, the difference between the original principal
amount and the amended loan payoff amount, as well as treble damages
under Chapter 75. [Id.]. Wells Fargo removed the Plaintiff’s action to this
Court, by Notice filed February 25, 2015, based upon diversity of the
citizenship of the parties and an amount in controversy exceeding $75,000.4
[Doc. 1].
On April 3, 2015, Wells Fargo filed a Motion to Dismiss.5 [Doc. 5]. The
Plaintiff did not respond to Wells Fargo’s Motion to Dismiss. Instead, on April
17, 2015, pursuant to Rule 15 of the Federal Rules of Civil Procedure, the
Plaintiff filed an Amended Complaint wherein the Plaintiff reordered the
claims and eliminated his claims under Chapter 75 and for fraud in the
inducement, as well as his prayer for treble damages.

[Doc. 7].

The

Amended Complaint alleges claims for unjust enrichment, negligence,
breach of the duty of good faith and fair dealing, fraud, violations of the North
Carolina Debt Collection Act (“NCDCA”), and violations of Chapter 45. The

4

Wells Fargo alleged in its Notice of Removal that the parties were diverse because the
Plaintiff was a citizen of the State of Florida and Wells Fargo was a citizen of the State of
South Dakota. [Doc. 1 at 2]. The diversity of the parties is not in dispute.
On February 27, 2015, this Court granted Wells Fargo’s February 26, 2015 Motion for
Extension of Time to Answer Complaint [Doc. 3], extending Wells Fargo’s deadline to
Answer or otherwise respond until April 3, 2015. [Doc. 4].
5

5

Plaintiff still seeks $60,690.38 in actual damages,6 plus civil penalties
pursuant to the NCDCA, and attorney’s fees pursuant to Chapter 45. [Id.].
On May 4, 2015, the Plaintiff filed a Motion to Remand to State Court
[Doc. 13], and Wells Fargo filed a Motion to Dismiss for Failure to State a
Claim [Doc. 11]. Both parties filed their Responses on May 21, 2015, [Docs.
14, 15], and Replies were filed by both parties on June 1, 2015. [Docs. 16,
17]. Having been fully briefed, this matter is now ripe for disposition.
II.

STANDARDS OF REVIEW
A.

Motion to Remand

“Federal courts are courts of limited jurisdiction, and [must] presume
that a cause lies outside this limited jurisdiction.” Wheeling Hosp., Inc. v.
Health Plan of the Upper Ohio Valley, Inc., 683 F.3d 577, 583–84 (4th Cir.
2012). “Because removal jurisdiction raises significant federalism concerns,
[courts] must strictly construe removal jurisdiction. If federal jurisdiction is
doubtful, a remand is necessary.” Mulcahey v. Columbia Organic Chems.
Co., 29 F.3d 148, 151 (4th Cir. 1994).

6

The Amended Complaint also claims damages in excess of $10,000 for his negligence
claim, and other amounts and remedies to be proven at trial or as allowed by law or equity.
It is unclear whether the damages for these claims are subsumed by the $60,690.38 that
the Plaintiff pleads as actual damages.
6

B.

Rule 12(b)(6) Motion to Dismiss

In order to survive a motion to dismiss pursuant to 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.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)). To be “plausible on its face,” a plaintiff must demonstrate more than
“a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S.
at 678.
Determining whether a complaint states a plausible claim for relief is
“a context-specific task,” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.
2009), which requires the Court to assess whether the factual allegations of
the complaint are sufficient “to raise a right to relief above the speculative
level,” Twombly, 550 U.S. at 555.

As the Fourth Circuit has recently

explained:
To satisfy this standard, a plaintiff need not forecast
evidence sufficient to prove the elements of the
claim. However, the complaint must allege sufficient
facts to establish those elements. Thus, while a
plaintiff does not need to demonstrate in a complaint
that the right to relief is probable, the complaint must
advance the plaintiff's claim across the line from
conceivable to plausible.
Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citations and internal
quotation marks omitted).
7

In reviewing the complaint, the Court must accept the truthfulness of
all factual allegations but is not required to assume the truth of “bare legal
conclusions.” Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir. 2011). “The
mere recital of elements of a cause of action, supported only by conclusory
statements, is not sufficient to survive a motion made pursuant to Rule
12(b)(6).” Walters, 684 F.3d at 439. Notably, a Rule 12(b)(6) motion “does
not resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses.” Edwards v. City of Goldsboro, 178 F.3d 231, 24344 (4th Cir. 1999) (quoting Republican Party v. Martin, 980 F.2d 943, 952
(4th Cir. 1992)).
III.

DISCUSSION
A.

Motion to Remand

A defendant may remove a civil action from state court where the
action is one “of which the district courts of the United States have original
jurisdiction.” 28 U.S.C. § 1441(a). Federal courts have original jurisdiction
where it is established that “the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is between citizens of
different states.” 28 U.S.C. § 1332(a).
The existence of diversity jurisdiction is determined at the time the
action is filed. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S.
8

283, 288-93 (1938). As such, courts generally do not consider post-removal
pleadings in determining the existence of diversity jurisdiction. See Porsche
Cars N. Am., Inc. v. Porsche.net, 302 F.3d 248, 255-56 (4th Cir. 2002). The
Fourth Circuit has held, however, that “if some event subsequent to the
complaint reduces the amount in controversy, such as the dismissal of one
count based on the defendant's answer, the court must then decide in its
discretion whether to retain jurisdiction over the remainder of the case.”
Shanaghan v. Cahill, 58 F.3d 106, 112 (4th Cir. 1995).
Here, there is no dispute that this Court properly had original diversity
jurisdiction over the case at the time of removal. 7 The Plaintiff argues,
however, that when he dropped his Chapter 75 claim in the amended
Complaint this reduced the amount in controversy below the jurisdictional
threshold, thereby permitting this Court to exercise its discretion and remand
the case pursuant to Shanaghan. [Doc. 17]. Wells Fargo opposes the
Plaintiff’s Motion, arguing in part that this Court need not apply Shanaghan
because the amount in controversy is still met. Wells Fargo, as the removing
party, bears the burden of showing the amount in controversy by a

The Plaintiff concedes that “[t]here is no dispute that this case was properly removed to
this Court under 28 U.S.C. § 1332, since the parties are citizens of different states and
Plaintiff’s original Complaint alleged actual damages of $60,690.38, an amount which was
to be trebled if Plaintiff succeeded on his claim for violations of [Chapter 75].” [Doc. 13-1
at 1].
7

9

preponderance of the evidence. See Bartnikowski v. NVR, Inc., 307 F. App’x
730, 734 (4th Cir. 2009).
“The sum claimed by the plaintiff controls the amount in controversy
determination.” JTX Tax, Inc. v. Frashier, 624 F.3d 635, 639 (4th Cir. 2010)
(citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288
(1938)). When a claim is based upon a statute for which “there is a maximum
penalty . . . it is appropriate to measure the amount in controversy by the
maximum penalty and not by how much the plaintiff is likely to be awarded.”
Bologna v. Enhanced Recovery Co., LLC, No. 5:15-CV-18, 2015 WL
1780881, at *3 (N.D.W. Va. Apr. 20, 2015).

Further, courts may also

consider a reasonable estimate for attorneys’ fees when such fees are
provided for by statute. See Francis v. Allstate Ins. Co., 709 F.3d 362, 368
(4th Cir. 2013) cert. denied, 134 S. Ct. 986 (2014) (affirming a district court’s
use of “experience and common sense” to estimate the potential attorneys’
fee award).
Aggregating Plaintiff’s claims for compensatory damages, civil
penalties, and attorneys’ fees, the Court is satisfied that Wells Fargo has met
its burden of showing the amount in controversy still exceeds $75,000.
Therefore, Shanaghan is inapplicable.

Here, the Plaintiff’s Amended

Complaint seeks compensatory damages in the amount of $60,690.38. the
10

Plaintiff also claims that the Wells Fargo violated the N.C. Debt Collection
Act, a statute that imposes a maximum penalty of $4,000. See N.C. Gen.
Stat. Ann. § 75-56. Finally, the Plaintiff also seeks to recover attorneys’ fees
pursuant to N.C. Gen. Stat. § 45-94. Combining the civil penalty with the
compensatory damages, the amount in controversy is $64,690.38, just
$10,309.62 below the jurisdictional threshold. Further, applying experience
and common sense, this Court estimates that if the Plaintiff prevails in this
matter, that his attorneys’ fees will very likely exceed the $10,309.62 left to
reach the jurisdictional threshold.8 See Francis v. Allstate Ins. Co., 709 F.3d
at 368. Because the parties are diverse and the amount in controversy still
exceeds $75,000, this Court has subject matter jurisdiction over the case.
For these reasons, the Plaintiff’s Motion to Remand is hereby denied.
B.

Motion to Dismiss

The Plaintiff alleges that Wells Fargo exploited the 2011 misapplication
of his lump sum payment in state court to win the right to foreclose and to
place him in an inferior bargaining position. The Plaintiff further alleges that
only after he contracted to sell the property for less than fair market value, at
a calculated loss in reliance upon Wells Fargo’s representation of the payoff,

The Court also notes that the Plaintiff did not respond to Wells Fargo’s offer to consent
to remand in exchange for the Plaintiff stipulating to an award not to exceed $75,000.
8

11

did Wells Fargo “correct” its prior misapplication of the lump sum payment
resulting in a higher payoff amount.

Wells Fargo then employed this

improved bargaining position to refuse to release the Deed of Trust until the
Plaintiff paid the higher amount. On these allegations, the Plaintiff claims
unjust enrichment, negligence, breach of the duty of good faith and fair
dealing, fraud, violations of the NCDCA, and violations of Section 45.9
Wells Fargo moves to dismiss all of Plaintiff’s claims. The Court will
address these arguments in turn.
1.

Unjust Enrichment

Wells Fargo first moves to dismiss Plaintiff’s claim for unjust
enrichment, arguing that the Deed of Trust is an express contract that
precludes this claim.

9

Although the Plaintiff alleges the existence of a contract (the Note and Deed of Trust),
and that Wells Fargo, the other party to the contract, acted unfairly in relation to its
performance under that contract, the Plaintiff has not alleged that any express term of
their agreement was violated. The Plaintiff appears to attempt to argue an express breach
of contract claim in his Response to Wells Fargo’s Motion to Dismiss. There, the Plaintiff
belatedly alleges for the first time that the terms of the Note and Deed of Trust were
altered by modification or waiver, that a new agreement existed regarding how lump sum
payments were to be applied, and that Wells Fargo violated those express terms. There
are, however, no allegations of any such modification in the Amended Complaint, nor any
allegations setting forth the purported revised terms. This Court cannot consider new
claims raised in a Response Brief; seeking to add claims this way is inappropriate
because it is comparable to amending the Complaint a second time without first obtaining
leave of court. See Proctor v. Metro. Money Store Corp., 579 F. Supp. 2d 724, 744 (D.
Md. 2008).

12

To state a claim for unjust enrichment, a plaintiff must allege facts
demonstrating: (1) a measurable benefit conferred on defendant; (2) that the
defendant consciously accepted; and (3) the benefit was not conferred on
the defendant officiously or gratuitously. Lake Toxaway Cmty. Ass'n, Inc. v.
RYF Enterprises, LLC, 226 N.C. App. 483, 490, 742 S.E.2d 555, 561 (2013).
The existence of an express contract between the parties, however,
precludes a finding of unjust enrichment with regard to matters addressed in
that contract. Flexible Foam Products, Inc. v. Vitafoam Inc., 980 F. Supp. 2d
690, 699 (W.D.N.C. 2013) aff’d sub nom. FFP Holdings LLC v. Vitafoam Inc.,
576 F. App’x 234 (4th Cir. 2014); Madison River Mgmt. Co. v. Bus. Mgmt.
Software Corp., 351 F. Supp. 2d 436, 446 (M.D.N.C. 2005); Southeastern
Shelter Corp. v. BTU, Inc., 154 N.C. App. 321, 331, 575 S.E.2d 200, 206
(2002).
Here, the Plaintiff alleges that Wells Fargo was unjustly enriched in the
amount of $60,690.38 by requiring Plaintiff to pay $173,380.36, instead of
the $112,6893.98 it previously quoted him, before it would release the Deed
of Trust. [Doc. 7 at ¶¶ 62-68]. The Plaintiff does not dispute that the Deed
of Trust entitled Wells Fargo to demand payment before releasing the Deed
of Trust. The Plaintiff’s claim is simply that Wells Fargo demanded more
than it was entitled to, and thus “squeeze[d] an extra $60,690.38 out of him.”
13

[Doc. 15 at 6]. The Note and Deed of Trust, however, are fatal to the
Plaintiff’s claim because the express contract comprised of these documents
specifically addresses how payments are to be applied. The Note provides,
in pertinent part, as follows:
[Plaintiff] ha[s] the right to make payments of
Principal at any time before they are due. A payment
of Principal only is known as a “Prepayment.” When
[Plaintiff] make[s] a Prepayment, [Plaintiff] will tell the
Note Holder in writing that [Plaintiff] [is] doing so.
[Plaintiff] may not designate a payment as a
Prepayment if [Plaintiff] ha[s] not made all the
monthly payments due under the Note.
The Deed of Trust provides, in pertinent part, as follows:
Except as otherwise described in this Section 2, all
payments accepted and applied by Lender shall be
applied in the following order of priority: (a) Interest
due under the Note; (b) principal due under the Note;
(c) amounts due under Section 3. Such payments
shall be applied to each Periodic Payment in the
order in which it became due. Any remaining
amounts shall be applied first to late charges, second
to any other amounts due under this Security
Instrument, and then to reduce the principal balance
of the Note.
[“Note” Doc. 11-1 at 1; “Deed of Trust” Doc. 11-2 at 5].10 Because the
Plaintiff’s unjust enrichment claim relies upon a matter specifically dealt with

The Court may consider the Note and Deed of Trust without converting Wells Fargo’s
Rule 12(b)(6) motion into a motion for summary judgment, because the pleadings rely
upon these documents and their authenticity is not disputed. See Stewart v. Pension
Trust of Bethlehem Steel Corp., 12 Fed. Appx. 174, 176 (4th Cir. 2001).
10

14

in his contract with Wells Fargo, the Plaintiff’s unjust enrichment claim must
fail as a matter of law. See Lawhead v. PNC Bank, No. 1:13-cv-00198-MRDLH, 2014 WL 1266995, at *8 (W.D.N.C. Mar. 26, 2014). Therefore, Wells
Fargo’s Motion to Dismiss the Plaintiff’s unjust enrichment claim is granted.
2.

Negligence

The Plaintiff asserts that Wells Fargo was negligent in misinforming the
Plaintiff as to the correct balance owed in 2011 and in failing to account
properly for the lump sum payment in 2014. [Doc. 7 at ¶¶ 70-71].

Wells

Fargo moves to dismiss the Plaintiff’s negligence claim arguing that (i) the
claim is time-barred, and (ii) the allegations fail to state a claim for
negligence.
“To state a claim for common law negligence, a plaintiff must allege:
(1) a legal duty; (2) a breach thereof; and (3) injury proximately caused by
the breach.” Stein v. Asheville City Bd. of Educ., 360 N.C. 321, 328, 626
S.E.2d 263, 267 (2006). A claim for negligence in North Carolina must be
brought within three years of the date on which the claim accrues. N.C. Gen.
Stat. § 1-52; Birtha v. Stonemor, N. Carolina, LLC., 220 N.C. App. 286 at
292, 727 S.E.2d 1, 7 (2012). A negligence claim accrues when the wrong
giving rise to the claim is complete, despite the fact that the plaintiff may not
discover the actual injury until later. Id.
15

Wells Fargo first argues that, to the extent the Plaintiff bases his
negligence claim upon any alleged misconduct by Wells Fargo occurring in
2011, it is barred by the statute of limitations. The Plaintiff’s Response does
not challenge this conclusion, and states that the 2011 facts were alleged as
“background information included to provide a degree of relevant context.”
[Doc. 15 at 7]. The Plaintiff, however, argues that his negligence claim arises
from Wells Fargo’s handling of his lump sum payment in 2014, when Wells
Fargo modified its prior misapplication of the lump sum payment after had
relied upon the misapplication to his detriment. Specifically, the Plaintiff
claims that Wells Fargo’s 2014 modification proximately caused: (i) the
Plaintiff’s overpayment for the release of the Deed of Trust; (ii) Wells Fargo’s
pursuit of foreclosure; and (iii) the Plaintiff’s acceptance of less than fair
market value for the sale of the property at a distressed sale. To the extent
that this states a negligence claim, it has been filed within the statutory
limitations period. Accordingly, Wells Fargo’s argument that this negligence
claim is time-barred is without merit.
The Plaintiff alleges that Wells Fargo breached its duty to account for
the Plaintiff’s loan payments according to the mortgage when it belatedly
applied a portion of the lump sum payment to periodic installments in lieu of
applying the entire payment to principal. In other words, the Plaintiff alleges
16

that Wells Fargo breached its duty to perform according to the terms of their
contract.
“North Carolina has recognized an ‘independent tort’ arising out of
breach of contract only in ‘carefully circumscribed’ circumstances.”
Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 346 (4th Cir.
1998) (quoting Strum v. Exxon Co., U.S.A., a Div. of Exxon Corp., 15 F.3d
327, 331 (4th Cir. 1994)). The “failure to perform a contractual obligation is
never a tort unless such nonperformance is also the omission of a legal duty.”
Toone v. Adams, 262 N.C. 403, 407, 137 S.E.2d 132, 135 (1964); see also
N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 81, 240
S.E.2d 345, 350 (1978) (“Ordinarily, a breach of contract does not give rise
to a tort action by the promisee against the promisor.”). Generally, absent a
special relationship, the only duties imposed upon a lender are those duties
set forth in the loan agreement to which it is a party. See Camp v. Leonard,
133 N.C. App. 554, 560, 515 S.E.2d 909, 913, (1999). Otherwise, “the law
does not typically impose upon lenders a duty to put borrowers’ interests
ahead of their own.” Dallaire v. Bank of Am., N.A., 367 N.C. 363, 368, 760
S.E.2d 263, 267 (2014).
Here, the Plaintiff’s allegations establish nothing more than a typical
debtor-creditor relationship.

There are no allegations of any special
17

circumstances under which Wells Fargo owed a duty beyond that which was
imposed upon it by the contract. The Plaintiff’s alleged injury arises from
Wells Fargo’s application of his lump sum payment to past due periodic
installments in accordance with the terms of the Note and Deed of Trust.
This does not state a claim in negligence.11 For these reasons, the Court
grants Wells Fargo’s Motion to Dismiss Plaintiff’s negligence claims.
3.

Breach of the Duty of Good Faith and Fair Dealing

Wells Fargo next moves to dismiss the claims for breach of the duty of
good faith and fair dealing, arguing that (i) the Plaintiff’s claims are barred,
at least in part, by the statute of limitations; (ii) the claims fail to the extent
they contradict the express terms of the contract; and (iii) the Amended
Complaint pleads insufficient facts to satisfy Twombly/Iqbal.
“In every contract there is an implied covenant of good faith and fair
dealing that neither party will do anything which injures the right of the other
to receive the benefits of the agreement.” Sunset Beach Dev., LLC v. AMEC,
Inc., 196 N.C.App. 202, 217, 675 S.E.2d 46, 57 (2009) (quoting Bicycle
Transit Auth., Inc. v. Bell, 314 N.C. 219, 333 S.E.2d 299, 305 (1985)). This
implied duty modifies the meaning of the contract’s express terms to prevent

The Plaintiff’s Response to Wells Fargo’s Motion to Dismiss highlights the incongruity
of bringing a tort claim based upon these facts by perplexingly buttressing his negligence
claims with traditional contractual defenses, such as modification, waiver, and estoppel.
11

18

a de facto breach when performance is maintained de jure. See Girgis v.
Countrywide Home Loans, Inc., 733 F. Supp. 2d 835, 854 (N.D. Ohio 2010)
(citing Burger King Corp. v. Weaver, 169 F.3d 1310, 1315 (11th Cir. 1999)).
“It is perhaps a principle of last resort to adjust economic harm wrongly or
unconscionably inflicted,” when losses are not otherwise compensable under
ordinary contract principles. United Roasters, Inc. v. Colgate-Palmolive Co.,
649 F.2d 985, 990 (4th Cir. 1981).
“Courts have equated the covenant of good faith and fair dealing with
an obligation to exercise . . . discretion reasonably and with proper motive,
. . . not . . . arbitrarily, capriciously, or in a manner inconsistent with the
reasonable expectations of the parties.” Mendenhall v. Hanesbrands, Inc.,
856 F. Supp. 2d 717, 726 (M.D.N.C. 2012) (citing Fishoff v. Coty Inc., 634
F.3d 647, 653 (2d Cir. 2011)). This duty is not without limits, however, and
no obligation may be implied that would be inconsistent with the other terms
of the contractual relationship. Id.
“Where the claim for breach of good faith is ‘part and parcel’ of a similar
claim for breach of an express term of the contract claim, that claim will rise
and fall with the other breach of contract claim . . . and only a single recovery
of damages will be allowed.” Rezapour v. Earthlog Equity Grp., Inc., No.
5:12CV105-RLV, 2013 WL 3326026, at *4 (W.D.N.C. July 1, 2013) (citations
19

omitted) (quoting Lord of Shalford v. Shelley’s Jewelry, Inc., 127 F. Supp. 2d
778, 787 (W.D.N.C. 2000) (citations omitted)). Where there has been no
allegation of a breach of an express term, a plaintiff may proceed on an
independent claim for breach of the duty of good faith and fair dealing. See
Robinson v. Deutsche Bank Nat. Trust Co., No. 5:12-CV-590-F, 2013 WL
1452933, at *12 (E.D.N.C. Apr. 9, 2013). The statute of limitations for claims
for breach of the duty of good faith and fair dealing is three years. Mountain
Land Properties, Inc. v. Lovell, 46 F. Supp. 3d 609, 625-26 (W.D.N.C. 2014).
Here, the Plaintiff alleges that Wells Fargo breached the duty of good
faith and fair dealing by: (i) misapplying the lump sum payment, (ii) falsely
reporting the payoff, (iii) refusing to disclose the payoff at times, and (iv)
forcing the Plaintiff to pay an “inflated amount” for the release of the Deed of
Trust. [Doc. 7 at ¶¶ 77-84].
According to the Plaintiff’s allegations in the Amended Complaint,
Wells Fargo originally misapplied the lump sum payment and first reported
the payoff amount upon which the Plaintiff allegedly relied no later than
December of 2011. Any claim based on those activities accrued at that time.
See Lovell, 46 F. Supp. 3d at 625-26. This action was not filed until January
26, 2015.

Therefore, the Plaintiff’s claims based upon Wells Fargo’s

20

application of the payment and its representations in 2011 are barred by the
three-year statute of limitations. See id. at 626.
The Plaintiff also bases this claim on Wells Fargo’s action in 2014 of
(i) misapplying the lump sum payment and (ii) consequently reporting an
incorrect payoff. The Note and Deed of Trust, however, contain express
terms agreed upon by the parties regarding how payments were to be
applied, and the law will not imply an obligation that contradicts the parties’
agreed upon terms. See Mendenhall, 856 F. Supp. 2d at 726. Therefore, to
the extent the Plaintiff argues that the duty of good faith obligated Wells
Fargo to apply the payment in a way different from that dictated by the
contract (and thus producing a different payoff amount), the Plaintiff has
failed to state a claim upon which relief may be granted.12
The Plaintiff next asserts that Wells Fargo breached its implied
obligation to provide him with a correct payoff upon request. In support, the
Plaintiff alleges that he made multiple requests for a payoff amount, that
Wells Fargo failed to fulfill his requests, and that only after the Plaintiff sold

As noted supra, the Plaintiff’s Brief in response to Wells Fargo’s Motion to Dismiss first
alleges that the terms of the Note and Deed of Trust were altered by modification or
waiver, and that a new agreement existed. Although such new allegations may aid the
Court in navigating the logical gaps of the Amended Complaint, they cannot serve to
amend the Complaint. Plaintiff has not obtained leave of Court to amend, and a pleading
cannot be amended by arguments. See Proctor, 579 F. Supp. 2d at 744.
12

21

the property for less than fair market value to avoid foreclosure did Wells
Fargo finally contend that the Plaintiff owed a much higher payoff amount.
Wells Fargo argues that this claim should be dismissed because the
contract did not obligate it to provide the Plaintiff with a payoff when
requested. Wells Fargo’s argument, however, must fail.
The Plaintiff asserts that the tardiness of Wells Fargo’s disclosure of a
much higher payoff was unreasonable and it injured his ability to receive the
benefits of their contract – namely to evaluate the advantages of selling a
property for a calculated loss to avoid greater financial distress. The fact that
the contract does not expressly deal with the issue begs the question of
whether this may have constituted bad faith or be contrary to the principle of
fair dealing. Taking the factual allegations of the Amended Complaint as true
and viewing all reasonable inferences in the Plaintiff’s favor, the Plaintiff has
stated a claim for breach of the duty of good faith and fair dealing. See Susilo
v. Wells Fargo Bank, N.A., 796 F. Supp. 2d 1177, 1189 (D. Utah 2011)
(denying Rule 12(b)(6) dismissal of breach of the duty of good faith claim
where plaintiff alleged that the mortgage company refused to disclose the
reinstatement amount).
The Plaintiff also alleges that Wells Fargo dealt with him in an unfair
manner by shifting its position as to the proper allocation of the lump sum
22

payment. Wells Fargo took one position in the state foreclosure proceeding
as to the proper allocation, and based thereon (at least in part) Wells Fargo
was granted the right to foreclose. After obtaining the order of foreclosure,
however, when the Plaintiff sold the house and saved Wells Fargo the trouble
and expense of proceeding with the foreclosure sale, Wells Fargo took a
different position as to the proper allocation of those funds. Taking these
allegations as true,13 such allegations also state a claim for the breach of the
covenant of good faith and fair dealing. A lender cannot take one position
as to the meaning of the contract in order to foreclose, but then take a
different position when it seeks payment. See Girgis v. Countrywide Home
Loans, Inc., 733 F. Supp. 2d 835 (N.D. Ohio 2010) (borrowers stated claim
for breach of implied covenant because borrower alleged, among other
things, that the mortgage company refused to timely credit their payments).
Therefore, as to these allegations, Wells Fargo’s Motion to Dismiss is denied.
4.

Fraud

Wells Fargo next moves to dismiss the Plaintiff’s fraud claims, arguing
that the Amended Complaint (i) lacks the specificity required by Rule 9, (ii)

The Plaintiff’s allegations as to Wells Fargo’s conduct in the state foreclosure action
are, at best, vague.
13

23

fails to allege any fraudulent act, and (iii) fails to allege any injury as a result
of reasonably relying on any such fraudulent act.
In order to state a valid claim for fraud under North Carolina law, a
plaintiff must allege (1) a false representation or concealment of a material
fact; (2) that is reasonably calculated to deceive; (3) was made with the intent
to deceive; (4) did in fact deceive the plaintiff; and (5) resulted in injury to the
plaintiff. Anderson v. Sara Lee Corp., 508 F.3d 181, 189 (4th Cir. 2007).
The party must also demonstrate that any reliance on the false
representations was reasonable. See id.
Though the Plaintiff’s allegations of fraud are difficult to discern, giving
the Plaintiff the benefit of doubt, he alleges that Wells Fargo (i)
misrepresented how it had applied the lump sum payment [Doc. 7 at ¶ 86],
which induced the Plaintiff to “negotiate[ ] a quick sale” [id. at ¶ 89] and (ii)
issued a “fabricated 2014 Accounting Statement” [id.] to induce the Plaintiff
to pay more than he owed [id. at ¶¶ 90, 92]. The Plaintiff’s allegations,
however, fail to set forth a claim for fraud. Both parties agreed to the terms
of the Note and Deed of Trust, and the law charges each with knowledge of
their contents. See Cara's Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d
566, 571 (4th Cir. 1998). It is undisputed that the first payoff quoted by Wells
Fargo was false (or at least incorrect) in that it reflected a claimed principal
24

balance that was inconsistent with the terms of the Note and Deed of Trust.
The Plaintiff could have easily discovered this, however, by reviewing his
own agreement. Whether or not the first payoff was a false statement, the
Plaintiff’s reliance on the statement was unreasonable as a matter of law.
Therefore, the Plaintiff’s fraud claim based upon the first payoff fails as a
matter of law.
The Plaintiff’s second fraud claim also fails because the Plaintiff has
failed to allege that the payoff Wells Fargo quoted in 2014 was false.14 In
fact, the Plaintiff has not alleged that Wells Fargo’s 2014 payoff calculation
was inconsistent with (or a breach of) the contract.

The only contract

identified in the Amended Complaint consists of the terms of the Note and
Deed of Trust, and the Plaintiff has not alleged that Wells Fargo’s application
of the lump sum payment was inconsistent with those terms. Although the
Plaintiff asserts the bare legal conclusion that the 2014 payoff amount was
“fabricated,” the Plaintiff has failed to allege that the higher payoff was
actually false.

The Plaintiff’s allegations evoke an interesting issue as to whether Wells Fargo could
be judicially estopped from asserting a payoff different from that relied upon by Wells
Fargo in the state court proceeding. See generally Powell v. City of Newton, 364 N.C.
562, 569, 703 S.E.2d 723, 728 (2010). Whether judicial estoppel is applicable to this
case, however, is not before this Court, as it was neither pleaded by the Plaintiff in his
Amended Complaint nor briefed by the parties.
14

25

Even if Wells Fargo’s revised calculation were incorrect, this would be
a breach of the contract, not a fraud. See Int’l Designer Transitions, Inc. v.
Faus Grp., Inc., 663 F. Supp. 2d 432, 445 (M.D.N.C. 2009).15
For all of the foregoing reasons, the Court grants Wells Fargo’s Motion
to Dismiss all of Plaintiff’s claims for fraud.
5.

Violations of N.C. Debt Collection Act

The Plaintiff’s fifth claim for relief alleges that Wells Fargo violated the
NCDCA by “ma[king] false representations to [the Plaintiff] regarding the
nature of the debt and the amount owed under the Mortgage.” [Doc. 7 at
14]. Under the NCDCA, a plaintiff must first allege that (i) the alleged
obligation is a “debt”; (ii) the claimant owing the obligation is a “consumer”;
and (iii) the party attempting to collect the obligation is a “debt collector.”
Campbell v. Wells Fargo Bank, N.A., 73 F. Supp. 3d 644, 649 (E.D.N.C.
2014); Davis Lake Cmty. Ass'n v. Feldmann, 138 N.C. App. 292, 295, 530
S.E.2d 865, 868 (2000); Reid v. Ayers, 138 N.C. App. 261, 263, 531 S.E.2d

The Plaintiff’s fraud claims are also subject to dismissal because his allegations fail to
satisfy the heightened pleading standards of Rule 9(b) of the Federal Rules of Civil
Procedure. See Cozzarelli v. Inspire Pharmaceuticals Inc., 549 F.3d 618, 629 (4th Cir.
2008). Rule 9(b) provides that when “alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). These
circumstances include “the time, place, and contents of the false representations, as well
as the identity of the person making the representations and what he obtained thereby.”
See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999).
The Plaintiff’s extremely vague fraud allegations simply do not meet this standard.
15

26

231, 233 (2000); see N.C. Gen. Stat. § 75–50 (defining “consumer,” “debt,”
and “debt collector”). The Plaintiff has satisfied all three elements here.16
“After satisfying these threshold requirements, a plaintiff also must
allege the general elements of an unfair and deceptive trade practices claim
under North Carolina law: an unfair act, in or affecting commerce,
proximately causing injury.” Campbell v. Wells Fargo Bank, N.A., 73 F.
Supp. 3d 644, 649 (E.D.N.C. 2014); see Ross v. FDIC, 625 F.3d 808, 817
(4th Cir. 2010). In this case, the Plaintiff asserts that the unfair act was Wells
Fargo’s modification of its application of the lump sum payment after both
parties relied on the initial application to the Plaintiff’s detriment. Wells
Fargo’s business activities affect commerce. See N.C. Gen. Stat. § 75-1.1(b)
(“commerce includes all business activities, however denominated”). The
Plaintiff’s allegations of injury are more problematic. The Plaintiff merely
asserts that “actual damages [were] incurred as a result.” [Doc. 7 at ¶ 102].
Elsewhere in the Amended Complaint, however, the Plaintiff alleges that he
sold the house for “substantially less than the real market value at the time.”
[Id. at ¶ 52]. Giving the Plaintiff the benefit of the inference, this can be seen

16

The Plaintiff expressly alleges that he is a consumer, and that his obligation to Wells
Fargo is a debt, but the Plaintiff does not expressly allege that Wells Fargo is a debt
collector. The Court is satisfied that the third element is pleaded, however, by the Plaintiff
alleging that Wells Fargo “is in the business of . . . collecting . . . mortgage payments,”
which the Plaintiff previously identified as a debt. [Doc. 7 at 14].
27

as an allegation that Wells Fargo’s provision of the lower payoff figure
caused the Plaintiff to accept a substantially below-market sales price to his
detriment. The Plaintiff has stated a claim for relief under the NCDCA, and
therefore, Wells Fargo’s Motion is denied with respect to this claim.
6.

Violations of Chapter 45

Lastly, Wells Fargo moves to dismiss Plaintiff’s Chapter 45 claim.
Chapter 45 requires servicers of home loans to “make reasonable attempts
to comply with a borrower’s request for information about the home loan
account and to respond to any dispute initiated by the borrower about the
loan account . . . .” N.C. Gen. Stat. § 45-93.
Wells Fargo contends that the Plaintiff, who bought the property as a
second home rather than his principal residence,17 lacks standing to bring a
claim under Chapter 45 because his loan does not qualify as a “home loan.”
Chapter 45 defines a “home loan” as:
[a] loan secured by real property located in this State
used, or intended to be used, by an individual
borrower or individual borrowers in this State as a
dwelling, regardless of whether the loan is used to
purchase the property or refinance the prior purchase
of the property or whether the proceeds of the loan
are used for personal, family, or business purposes.

Plaintiff specifically alleges that “[t]he Highlands Property was purchased as a second
home,” and that “[a]t the time of this purchase, [Plaintiff] maintained his primary residence
in Florida . . ..” [Doc. 7 at ¶¶ 7-8].
17

28

N.C. Gen. Stat. Ann. § 45-90.

Citing Merriam-Webster’s definition of

“dwelling” as “a place where a person lives,” Wells Fargo argues that Chapter
45’s protections do not extend to loans obtained to purchase second homes.
[Doc. 12 at 19].

The Plaintiff summarily responds to this argument by

asserting that “[t]he Highlands Property constitutes a “dwelling” under N.C.
Gen. Stat. § 45-93.” [Doc. 15 at 12].
The term “dwelling” is not specifically defined within the statute. It is
axiomatic that unless otherwise defined, words in a statute should be
interpreted as taking their ordinary, contemporary, common meaning. Perrin
v. United States, 444 U.S. 37, 42 (1979); see, e.g., State v. Louali, 215 N.C.
App. 176, 181, 716 S.E.2d 385, 389 (2011) (referencing Black’s Law
Dictionary to ascertain the ordinary meaning of statutory language). Black’s
Law Dictionary does not define the term “dwelling” alone, but similar to
Merriam-Webster, Black’s defines “dwelling-house” as a “house or other
structure in which one or more people live; a residence or abode.” DwellingHouse, Black’s Law Dictionary (10th ed. 2014).

Wells Fargo points to

nothing limiting “residence” to principal residence or dwelling of domicile.
The General Assembly could have limited the application of this statute to
primary residences, but it chose not to do so. The Court will not import such
limitation into the statute where its language does not so indicate. Therefore,
29

the Court concludes as a matter of law that Chapter 45 applies whenever a
loan is secured by a residential property that is used for residential purposes
by the borrower, whether that property is a first or second home. The Plaintiff
alleges that the property in question was a home, albeit a second home.
These allegations are sufficient to bring this claim within the purview of the
Act.
Next, Wells Fargo argues that even if Chapter 45 applied to the
Plaintiff’s loan, the Plaintiff can only bring suit to recover for an alleged
violation of the Act if he provided written notice to Wells Fargo of any claimed
errors or disputes regarding the loan that forms the basis of the suit at least
thirty days prior to filing suit. See N.C. Gen. Stat. § 45-94. In the Amended
Complaint, however, the Plaintiff alleges that he provided the requisite notice
“at least thirty days prior to instituting this lawsuit….” [Doc. 7 at ¶ 59].
Accordingly, Wells Fargo’s argument on this point must be rejected.
Third, Wells Fargo contends that the Plaintiff’s claim under Chapter 45
fails because the Plaintiff has not alleged that he suffered any actual
damages as a result of Wells Fargo’s alleged failure to comply with the
provisions of the Act. Chapter 45 provides, in pertinent part, that a borrower
may seek actual damages “[i]n addition to any equitable remedies and any
other remedies at law ….” N.C. Gen. Stat. § 45-94 (emphasis added). As
30

such, alleging actual damages is not a necessary element in order to state a
claim upon which some form of relief may be granted. In any event, however,
the Plaintiff has alleged that he requested payoff information and that
because Wells Fargo did not timely provide accurate information because
the Plaintiff sold the residence, the Plaintiff sold for a reduced price (i.e.,
accepted a contract amount lower than he otherwise would have). Thus, the
Plaintiff has alleged some actual damage resulting from Wells Fargo’s failure
to comply with Chapter 45. For these reasons, Wells Fargo’s Motion to
Dismiss the Plaintiff’s Chapter 45 claim is denied.

ORDER
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion to Remand
[Doc. 13] is DENIED.
IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss [Doc.
11] is GRANTED IN PART and DENIED IN PART.

Specifically, the

Defendant’s Motion [Doc. 11] is DENIED with respect to Plaintiff’s claims for
breach of the duty of good faith and fair dealing, for violation of the NCDCA,
and for violation of Chapter 45. In all other respects, the Defendant’s Motion
to Dismiss is GRANTED, and all of the Plaintiff’s claims, with the exception
of the aforementioned claims, are DISMISSED WITH PREJUDICE.
31

IT IS SO ORDERED.
Signed: February 23, 2016

32