Polanco v. HSBC Bank USA National Association et al

Filing 81

ORDER granting in part and denying in part 58 Motion for Summary Judgment ; granting in part and denying in part 60 Motion for Summary Judgment ; denying as moot 76 Motion to Strike Signed by Senior Judge Graham Mullen on 2/05/2020. (brj)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:17-CV-00466-GCM
CLAUDIA E. POLANCO,
Plaintiffs,
v.
HSBC BANK USA NATIONAL
ASSOCIATION, PHH MORTGAGE
CORPORATION,
Defendants.

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ORDER

THIS MATTER COMES before the Court on the Parties’ cross motions for summary
judgment (Doc. Nos. 58, 60) and Defendants’ Motion to Strike (Doc. No. 76). The Court, having
carefully considered the briefs and materials submitted in support of the respective motions and
the oppositions thereto, and being otherwise fully advised, finds and orders as follows:
I.

FACTUAL BACKGROUND
The alleged facts relevant to these motions are as follows. In 2007, Plaintiff’s husband,

Oscar Polanco, obtained a $214,000.00 loan from Defendant HSBC Bank USA National
Association (“HSBC”) secured by Plaintiff’s real property located in Mecklenburg County, North
Carolina. (Doc. No. 1-2, at 24). In 2012, HSBC and Defendant PHH Mortgage Company (“PHH”)
(together “Defendants”) entered into a “Subservicing Agreement” (“Agreement”) whereby PHH
became the servicing agent for Mr. Polanco’s loan. (Doc. No. 67, at 11, 12; Doc. No. 39-15, at 3).
In 2013, Mr. Polanco executed a quitclaim deed in favor of Plaintiff. (Doc. No. 1-2, at 47). In that
same year, the loan went into default. (Doc. No. 60-1, at 2). After defaulting, Plaintiff entered into

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a Loan Modification Agreement (“LMA”) with Defendants which modified the loan’s terms and
allowed Plaintiff to keep her home. (Doc. No. 60-1, at 2; Doc. No. 59, at 1; Doc. No. 1-2, at 52).
However, the LMA did not address $17,709.95 in escrow arrearages, which had accrued
as a result of PHH’s payments for taxes and insurance while the account was in default. (Doc. No.
60-1, at 2). Nor did PHH immediately implement the LMA, and, when it did, Plaintiff’s payments
were not applied to the loan correctly. (Doc. No. 60-1, at 2). As a result of the misapplied payments,
the loan was temporarily referred, once again, for foreclosure proceedings, though no foreclosure
was completed, and Plaintiff did not lose possession of her home. (Doc. No. 60-1, at 2).
In response to the misapplication of her funds, Plaintiff filed a complaint with the North
Carolina Attorney General’s Office (“AG’s Office”) in January 2017. (Doc. No. 59, at 1). The
AG’s Office then sent a letter requesting that Defendants investigate Plaintiff’s account. (Doc. No.
59, at 1). Defendants acknowledged that they misapplied Plaintiff’s payments and now allege that
they have corrected those errors by contributing their own funds and making other adjustments to
bring Plaintiff’s loan current. (Doc. No. 60-1, at 2). However, Defendants did not fully waive
Plaintiff’s escrow arrearages. (Doc. No. 60-1, at 1; Doc. No. 59, at 3, 4). Plaintiff alleges that
Defendants’ failure to fully waive the escrow arrearages has caused (and continues to cause) her
harm. (Doc. No. 59, at 2, 3, 4).
II.

STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(c), “summary judgment is proper ‘if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.’” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The “party seeking
summary judgment always bears the initial responsibility of informing the district court of the

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basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes
demonstrates the absence of a genuine issue of material fact.” Id. at 323. Once the movant has met
the initial burden, the burden then shifts to the non-moving party to identify specific facts showing
there is a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986). In considering a motion for summary judgment, a Court views all evidence in the light
most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-24
(4th Cir. 1990). However, “[t]he mere existence of a scintilla of evidence in support of the [nonmoving party’s] position will be insufficient; there must be evidence on which the jury could
reasonably find for the [non-moving party].” Id. at 252.
“If a party fails to properly support an assertion of fact or fails to properly address another
party’s assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed.”
Fed. R. Civ. P. 56(e)(2). Further, where a party “fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party will bear the proof
at trial . . .[,] there can be no genuine issue as to [a] material fact, since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily renders all other facts
immaterial.” Celotex, 477 U.S. at 322, 323 (citation and quotations omitted). Where parties file
cross motions for summary judgment, a “court must rule on each party's motion on an individual
and separate basis, determining, for each side, whether a judgment may be entered in accordance
with the Rule 56 standard.” Towne Mgmt. Corp. v. Hartford Acci. & Indem. Co., 627 F. Supp. 170,
172 (D. Md. 1985) (citing Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d §
2720.) It is with these standards in mind that the Court considers the present matter.

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III.

DISCUSSION
Plaintiff moves for summary judgment: (1) that PHH acted as Defendant HSBC Bank USA

National Association’s (“HSBC”) agent when servicing Plaintiff’s loan, (2) that the North Carolina
Secure and Fair Enforcement Mortgage Licensing Act (“SAFE Act”) imposes a legal duty upon
Defendants beyond the contractual relationship of the parties, (3) that violation of the SAFE Act
is a violation of the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”), (4) in
favor of Plaintiff’s UDTPA claim, (5) in favor of Plaintiff’s breach of contract claim, and (6)
against Defendants’ failure to state a claim, laches, statute of limitations, economic loss rule, bona
fide error, and learned profession exception defenses. Defendants move for summary judgment
against Plaintiff’s: (1) negligent infliction of emotional distress (“NIED”) claim, (2) fraud claim,
(3) negligent misrepresentation claim, (3) negligent accounting and servicing (“NAS”) claim, (4)
Mortgage Debt Collection and Servicing Act (“MDCSA”) claim, (5) Real Estate Settlement
Procedures Act (“RESPA”) claim, and (6) UDTPA claim. In addition, Defendants argue, in their
Motion to Strike, that “Mr. Polanco’s testimony at his deposition . . . should not be considered . .
. to determine . . . Plaintiff’s alleged damages for emotional distress.” (Doc. No. 76). The Court
now addresses each issue in turn.
A. Agency
Plaintiff requests summary judgment as to HSBC’s vicarious liability for PHH’s actions
while servicing Plaintiff’s loan. (Doc. No. 59, at 6; Doc. No. 67, at 11). “There are two essential
ingredients in the principal-agent relationship: (1) Authority, either express or implied, of the agent
to act for the principal, and (2) the principal's control over the agent.” Vaughn v. N.C. Dep't of
Human Res., 37 N.C. App. 86, 91, 245 S.E.2d 892, 895 (1978) (citing Sharpe v. Bradley Lumber
Company, 446 F. 2d 152 (4th Cir. 1971), cert. denied 405 U.S. 919, 92 S.Ct. 946 (1972); Julian v.

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Lawton, 240 N.C. 436, 82 S.E. 2d 210 (1954)). “Whenever the principal retains the right ‘to control
and direct the manner in which the details of the work are to be executed’ by his agent, the doctrine
of respondeat superior operates to make the principal vicariously liable for the tortious acts
committed by the agent within the scope of his employment.” Vaughn, 296 N.C. at 686 (citations
omitted and emphasis added).
Here, HSBC (1) expressly authorized PHH to act on its behalf and (2) clearly controlled
and directed the manner in which PHH worked. PHH’s authority to act on behalf of HSBC is
illustrated by HSBC’s execution of Limited Powers of Attorney appointing PHH as its true and
lawful attorney-in-fact. (Doc. No. 59-2, at 1, 2). Further, PHH acted on HSBC’s behalf with regard
to Plaintiff’s loan when it sent a letter to the North Carolina Attorney General, signing it as the
“servicing agent for HSBC.” (Doc. No. 39-15, at 2, 3). Similarly, a Corrective Appointment of
Substitute Trustee regarding Plaintiff’s property was filed on October 24, 2014 and signed by an
“Assistant Vice President” of PHH as an “Authorized Agent of HSBC.” (Doc. No. 59-3, at 1, 2).
Defendants’ Rule 30(b)(6) witness (testifying on behalf of both PHH and HSBC) agreed that PHH
had signed that document “as an authorized agent of HSBC.” (Doc. No. 59-1, At 7). Defendants
made no attempt to rebut any of these facts, and the Court considers them undisputed. See Fed. R.
Civ. P. 56(e)(2). Thus, HSBC clearly authorized PHH to act on its behalf when servicing Plaintiff’s
loan.
While Defendants do not appear to contest the fact that HSBC authorized PHH to act on
its behalf, Defendants argue that Plaintiff has not established that HSBC controlled the manner in
which PHH executed its duties with regard to Plaintiff’s loan. (Doc. No. 65, at 12, 13). In response,
Plaintiff argues HSBC exercised control over PHH through a Subservicing Agreement
(“Agreement”) that both parties entered on May 3, 2012. (Doc. No. 67, at 11, 12). In that

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Agreement, “PHH agree[d] to provide, and HSBC agree[d] to utilize, the Subservicing Services in
connection with the subservicing of Mortgage Loans, subject to and in accordance with the terms
of the Agreement.” (Doc. No. 67-3. At 3). The Agreement also “contemplate[d] that . . . manuals”
would be used that contain “HSBC-specific requirements [and] policies and procedures that PHH
must follow and with which PHH must comply.” (Doc. No. 67-3, at 4). Further, the Agreement
gave HSBC the “right in its sole discretion to approve . . . or withhold its approval of, any action
or inaction of PHH in providing the Subservicing Services that would have a material adverse
effect on the Subservicing Services or on HSBC or the Customers, cause a security risk, result in
noncompliance with Law or result in additional costs to HSBC.” (Doc. No. 67-3, at 5). The
Agreement even specified what third-party law firms PHH could use. (Doc. No. 67-3, at 6, 7).
Thus, the Agreement clearly provides for HSBC’s control over the manner in which PHH executed
its duties regarding Plaintiff’s loan. Because Plaintiff has demonstrated the absence of a genuine
issue of material fact with regard to both elements of respondeat superior and Defendants, both in
their briefing and at oral argument, have failed to identify facts to the contrary, Plaintiff’s motion
for summary judgement as to HSBC’s vicarious liability for PHH’s actions while servicing
Plaintiff’s loan and within the scope of its employment is GRANTED.
B. Breach of Contract
Plaintiff requests summary judgment on her breach of contract claim. (Doc. No. 59, at 1518). In North Carolina, the “elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of that contract.” Crosby v. City of Gastonia, 635 F.3d 634,
645 (4th Cir. 2011) (quotations omitted). While Plaintiff and Defendants agree that the LMA was
a contract (Doc. No. 59, at 16; Doc. No. 65, at 10-11), the parties diverge regarding the second
element of Plaintiff’s breach claim. According to Plaintiff, Defendants violated their contractual

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duty to properly apply her loan. (Doc. No. 59, at 17). Defendants acknowledge that they did not
properly apply Plaintiff’s loan payments (Doc. No. 65, at 4, 6), but they assert that by applying
$17,709.85 of PHH’s own funds to Plaintiff’s account, they took corrective action within a
reasonable period after receiving notice of the breach, consistent with the LMA (Doc. No. 65, at
10, 10, n. 1). In response, Plaintiff concedes that Defendants took corrective action but argues that,
because it took fifteen months, the corrective action did not occur within a “reasonable period” as
required by the LMA. (Doc. No. 67, at 11). However, Plaintiff failed to support that assertion with
any citations to the record (Doc. No. 67, at 11), and, consequently, the Court considers Defendants’
assertion that it took corrective action, thereby correcting any breach, unrebutted, see Fed. R. Civ.
P. 56(e)(2). Because Defendants identified specific facts showing that there is a genuine issue of
material fact, Plaintiff’s motion for summary judgment regarding its breach of contract claim is
DENIED.
C. Fraud
Defendants move for summary judgment on Plaintiff’s fraud claim. (Doc. No. 60-1, at 10).
In North Carolina, the elements of fraud are:
(1) [a f]alse representation or concealment of a material fact, (2) reasonably calculated
to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting
in damage to the injured party. An essential element of actionable fraud is that the false
representation or concealment be made to the party acting thereon.

Sain v. Adams Auto Grp., Inc., 244 N.C. App. 657, 662 (2016) (citations omitted). Defendants
argue that Plaintiff has produced no evidence supporting the fourth element of her fraud claim—
that she was deceived regarding the handling of the escrow arrearages. (Doc. No. 60-1, at 10).
Defendants also cite evidence showing that she was not deceived, relying on the following
exchange from Plaintiff’s deposition:
Q. Okay. And do you know—prior to the modification, do you know if the lender
continued paying for taxes and insurance after you stopped making payments?
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A. I don’t.
Q. Okay. And the reason I’m asking the questions is to try and figure out if you had
any particular understanding or intent as to how past escrow payments by the lender
would be incorporated in the modification terms. And what I understand you to tell
me right now is that at the time you entered the modification, you were not aware
whether the lender was making escrow payments or was making payments out of
the escrow account?
A. No, I wasn’t aware.
(Doc. No. 60-3, at 5) (emphasis added). According to Defendants, Plaintiff could not have been
deceived as to how the escrow arrearages would be treated under the LMA if she did not even
know that there “were escrow arrearages.” (Doc. No. 60-1, at 11).
Plaintiff responds that she “viewed the LMA as a way to wipe the slate clean of all missed
payments, late fees, and any escrow arrearages and start fresh with the Defendants.” (Doc. No.
66, at 9) (emphasis added). In other words, Plaintiff argues that Defendants led her to believe that
the LMA would include all outstanding issues because Defendants mentioned no exceptions.
However, because Plaintiff did not support that argument with citation to her testimony or to any
other evidence indicating her understanding of the agreement (Doc. No. 66, at 9), the Court treats
Defendants’ factual assertions as undisputed, see Fed. R. Civ. P. 56(e)(2). Thus, there is no genuine
dispute that Plaintiff could not have been deceived about how the escrow arrearages would be
treated under the LMA because she did not know that there were any escrow arrearages, and
Defendant’s motion for summary judgment against that claim is GRANTED.
D. Negligent Misrepresentation
Defendants

also

move

for

summary

judgment

against

Plaintiff’s

negligent

misrepresentation claim. (Doc. No. 60-1, at 13). The elements of a negligent misrepresentation
claim are that a plaintiff (1) justifiably relied, (2) to his or her detriment, (3) on information
prepared without reasonable care, (4) by one who owed the relying party a duty of care. Walker v.
Town of Stoneville, 211 N.C. App. 24, 30 (2011). Similar to Defendants’ argument above regarding
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Plaintiff’s fraud claim, Defendants argue that Plaintiff could not have relied on information from
Defendants about the escrow arrearages and the manner in which they would be treated under the
LMA because she did not even know that there “were escrow arrearages.” (Doc. No. 60-1, at 11).
In making that argument, Defendants cite to statements made by Plaintiff at her deposition. (Doc.
No. 60-3, at 5). Portions of those statements are provided above. See supra at 7. Plaintiff’s
rebuttal—that by not mentioning any exceptions, Defendant HSBC was leading her to believe that
the LMA would include all outstanding issues—fails for the same reason it failed above: It is not
supported by citation to her testimony or to any other evidence indicating her understanding of the
agreement. (Doc. No. 66, at 9). Thus, the Court treats Defendants’ factual assertion—that Plaintiff
did not rely on information from Defendant about the escrow arrearages—as undisputed. See Fed.
R. Civ. P. 56(e)(2). Because Plaintiff has failed to establish the first element of her negligent
misrepresentation claim, Defendants’ motion for summary judgment against that claim is
GRANTED.
E. Negligent Infliction of Emotional Distress
Defendants move for summary judgment against Plaintiff’s NIED claim. (Doc. No. 60-1,
at 4, 7-10). In North Carolina, the elements of a NIED claim are that “(1) the defendant negligently
engaged in conduct, (2) it was reasonably foreseeable that such conduct would cause the plaintiff
severe emotional distress (often referred to as ‘mental anguish’), and (3) the conduct did in fact
cause the plaintiff severe emotional distress.” Johnson v. Ruark Obstetrics & Gynecology Assocs.,
P.A., 327 N.C. 283, 304 (1990) (citations omitted). Defendants argue that Plaintiff presents only
uncorroborated lay testimony insufficient to establish that “Defendants’ actions were the cause of
her alleged [emotional distress]” and that, consequently, “Defendants are entitled to summary
judgment as to” Plaintiff’s NIED claim. (Doc. No. 60-1, at 4, 5).

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Plaintiff responds that the evidence she has presented, including testimony from friends
and family, is sufficient to show that Defendants caused Plaintiff’s emotional distress. (Doc. No.
66, at 3, 4). For example, Plaintiff sent a letter to the AG’s Office on January 1, 2017 stating that
she has “been getting physically sick trying to resolve the matter of payments” to Defendants and
that the experience has caused her “disappointment, emotional[] distress, and . . . severe health
issues,” including impediments to her eating and appetite. (Doc. No. 66-8, at 18, 19, 25). However,
in that letter, Plaintiff also stated that the stress of the “foreclosure also tie[d] in with [her] pre
existing condition of throat cancer” and that as she was going through “treatments for throat cancer
that [were] very painful” before Defendants “added” the “stress . . . of foreclosure.” (Doc. No. 668, at 25). Plaintiff reinforced her suggestion that cancer was the root cause of her distress when
she stated, later, that the foreclosure made the distress she felt from fighting cancer “worse.” (Doc.
No. 66-1, at 3). While Plaintiff presents multiple possible causes of her current distress, she
provides no basis for a jury to parse the alleged harm caused by Defendants from the harm caused
by her throat cancer.
The other evidence cited by Plaintiff suffers from a similar flaw. For example, Plaintiff’s
friend Robyn Moore testified that HSBC “cost [Plaintiff’s] marriage,” “caused her
embarrassment,” caused her “suffering and pain,” and caused her to have suicidal ideations and to
“try to commit suicide.” (Doc. No. 66-2, at 2). However, Plaintiff testified that she separated from
her husband before the LMA was executed. (Doc. No. 68-3, at 3, 5). Thus, the misconduct of which
Plaintiff complains in this case (involving the mishandling of the LMA agreement) could not have
caused that separation. In addition, Ms. Moore testified—consistent with Plaintiff’s testimony—
that the stress caused by Defendants was merely “on top of” the stress Plaintiff already suffered as
a result of cancer. (Doc. No. 66-2, at 2). In other words, Ms. Moore testified that Plaintiff was

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already suffering as a result of her cancer before Defendants are alleged to have caused Plaintiff
emotional distress. Lastly, Ms. Moore’s testimony (taken July 30, 2018) that Plaintiff had current
suicidal ideations and that she had tried to commit suicide is contradicted by Plaintiff’s May 31,
2018 interview with a mental health provider when Plaintiff reported that she did not have any
current suicidal ideations and that she did not have a history of suicide attempts. (Doc. No. 66-2,
at 4; Doc. No. 60-4, at 2). While Ms. Moore also asserted that Plaintiff had suicidal ideations in
2015 and Plaintiff stated that she had a prior history of suicidal ideations, neither statement shows
that Plaintiff’s suicidal ideations began after the LMA was executed on November 5, 2015. (Doc.
No. 59, at 1).
Plaintiff also relied on testimony from her husband, Oscar Polanco, and her daughter,
Claudia Angel, asserting that Plaintiff and Mr. Polanco separated as a result of Defendants’ actions
and that Plaintiff has become more emotional since Defendants’ alleged mishandling of the LMA.
(Doc. No. 66, at 6). However, as discussed above, Plaintiff separated from her husband before the
LMA was executed. See supra at 10. Further, Plaintiff stated that her cancer diagnosis “was
difficult, both emotionally and physically” and that it occurred “[a]round the same time . . . that
she began receiving notices from the Defendants that her home was headed to foreclosure.” (Doc.
No. 66, at 7). Those statements, once again, present multiple possible causes—throat cancer and
Defendants’ actions—of Plaintiff’s increased emotionality.
Defendants cite additional evidence that, when coupled with the evidence cited by Plaintiff,
makes clear that a reasonable jury could not conclude that Defendants were the proximate cause
of Plaintiff’s emotional distress. Specifically, in 2018 Plaintiff’s mental health provider noted that
she had a history of depression, starting “when she was [diagnosed with] cancer.” (Doc. No. 60-4,
at 2). In addition, Defendants prompted Plaintiff—via interrogatories—to provide statements

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supporting her contention that her damages were caused by Defendants, and she declined to do so.
(Doc. No. 60-5, at 5). Put simply: the evidence clearly establishes that Plaintiff’s cancer is at least
the initial cause of her emotional distress, and Plaintiff fails to provide any basis for a jury to
determine that Defendants’ actions, not Plaintiff’s cancer, caused the emotional distress
complained of in this case. Consequently, summary judgment against Plaintiff’s NIED claim is
GRANTED. See Harrison v. Edison Bros. Apparel Stores, 814 F. Supp. 457, 462 (M.D.N.C.
1993) (Dismissing a plaintiff’s negligent retention claim, brought under North Carolina law, where
there was “no doubt” that the plaintiff had suffered emotional distress but where “other stressors
[were] possible alternative causes of [the plaintiff’s] emotional injuries” and there was no evidence
presented as to which possible cause was the correct one.). In addition, Defendants’ Motion to
Strike, which argues that “Mr. Polanco’s testimony at his deposition . . . should not be considered
. . . to determine . . . Plaintiff’s alleged damages for emotional distress,” is DENIED as MOOT
because summary judgment has been granted against Plaintiff’s NIED claim.
F. Negligent Accounting and Servicing
Plaintiff seeks partial summary judgment as to the legal duty elements of her NAS, NIED,
and negligent misrepresentation claims. (Doc. No. 59. At 9). Because the Court has granted
summary judgment against Plaintiff’s NIED and negligent misrepresentation claims, the Court
need only consider Plaintiff’s argument with respect to her NAS claim. Plaintiff argues that
because the Court, in its order on Defendants’ Motion to Dismiss, has previously determined that
“the SAFE Act provides a sufficient legal duty upon which Plaintiff can maintain her tort causes
of action,” there is no genuine issue of material fact as to whether Defendants owed Plaintiff a
duty. (Doc. No. 59, at 9) (citation omitted). Of course, a determination that Plaintiff’s tort claims
should not be dismissed because the SAFE Act may create a duty for Plaintiff to maintain tort

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claims simply is not a determination that there is no genuine dispute that Defendants owe Plaintiff
a duty, and the Court finds that argument misguided.
Plaintiff, however, provides other arguments in favor of summary judgment. For example,
Plaintiff cites testimony from Defendants’ corporate representative agreeing that Defendants “have
a duty to act with reasonable skill, care, and diligence in servicing [Plaintiff’s] loan.” (Doc. No.
59, at 8) (citing Doc. No. 59-1, at 25). Defendants respond by arguing exclusively that the SAFE
Act cannot create a duty of care for Plaintiff’s tort claims. (Doc. No. 65, at 13-15). However, that
question has already been resolved by the Court, which determined, as explained above, that the
SAFE Act can create such a duty. (Doc. No. 51, at 7). Further, because Defendants do not address
Plaintiff’s assertion that Defendants’ corporate representative conceded that they owed Plaintiff a
duty when servicing her loan, the Court considers that fact undisputed. See Fed. R. Civ. P. 56(e)(2).
Thus, there is no genuine dispute whether Defendants owed Plaintiff a duty regarding Plaintiff’s
NAS claim and Plaintiff’s motion for summary judgment as to that element is GRANTED.
G. Unfair and Deceptive Trade Practices
Both Plaintiff and Defendants move for summary judgment of Plaintiff’s UDTPA claim.
(Doc. No. 59, at 14; Doc. No. 60-1, at 17). To prevail on a UDTPA claim, a plaintiff must show
an (1) unfair or deceptive act or practice, or an unfair method of competition, (2) in or affecting
commerce, (3) which proximately caused actual injury to the plaintiff or to his business. Brinkman
v. Barrett Kays & Assocs., P.A., 155 N.C. App. 738, 743, 575 S.E.2d 40, 44 (2003). However, the
UDTPA does not govern the “area of commerce regulated by [the North Carolina Debt Collection
Act (“DCA”)].” Musenge v. SmartWay of the Carolinas, LLC, No. 3:15-cv-153-RJC-DCK, 2018
U.S. Dist. LEXIS 158044, at *12 (W.D.N.C. Sep. 17, 2018) (citing N.C. Gen. Stat. § 75-56).
Instead, “[t]he []DCA constitutes the sole remedy for unfair and deceptive trade practices in the

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context of debt collection.” Id. (citing DIRECTV, Inc. v. Cephas, 294 F. Supp. 2d 760, 765
(M.D.N.C. 2003) (“If the abusive conduct alleged pertains only to debt collection, the NCDCA
provides a claimant's exclusive remedy.”)).
Defendants allege that Plaintiff’s UDTPA claim is improperly duplicative of her DCA
claim because the DCA, not the UDTPA, is the proper remedy for unfair and deceptive trade
practices in the context of debt collection. (Doc. No. 60-1, at 17). In Plaintiff’s response, each of
the facts she alleges in support of her UDTPA claim involve the collection of debt. For example,
Plaintiff alleges that the Defendants concealed how the escrow arrearages would be handled by
the LMA, that Defendants did not properly apply loan payments, and that Defendants did not take
the “corrective action” that they had promised with regard to the loan. (Doc. No. 66, at 21-24).
Thus, there is no genuine dispute that Plaintiff’s allegations involve the collection of debt. Because
those allegations may not support Plaintiff’s UDPTA claim, Plaintiff has failed to establish the
second element of her UDTPA claim and summary judgment is appropriate. See Celotex, 477 U.S.
at 322, 323. Thus, Plaintiff’s motion for summary judgment in favor of her UDTPA claim is
DENIED, and Defendants’ motion for summary judgment against Plaintiff’s UDTPA is
GRANTED.
H. Mortgage Debt Collection and Servicing Act
Defendants move for summary judgment on Plaintiff’s MDCSA claim, arguing that
Plaintiff failed to comply with pre-suit notice requirements set forth in the MDCSA. The MDCSA
requires mortgage servicers to “[p]romptly correct errors relating to the allocation of payments,
the statement of account, or the payoff balance identified in any notice from the borrower . . . or
discovered through the due diligence of the servicer or other means.” N.C. Gen. Stat. § 45-93(3).
However, a borrower must wait “at least 30 days” after providing notice to the “servicer in writing

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of any claimed errors or disputes regarding the borrower’s home loan” before filing a “civil action
for damages against a servicer for violation of this Article.” N.C. Gen. Stat. §45-94.
Defendants argue that Plaintiff never provided notice pursuant to N.C. Gen. Stat. §45-94.
(Doc. No. 60-1, at 17). In support, Defendants assert that Plaintiff “admitted that she never sent
any letters to [Defendants] between the date of the 2015 modification and her complaint to the
N.C. Department of Justice in January 2017, and her communications with Defendants were ‘just
phone calls,’” not written notice. (Doc. No. 60-1, at 17). Plaintiff responds that she wrote an
extensive letter that she sent to the AG’s Office and that the AG’s Office then sent to HSBC on
January 18, 2017. (Doc. No. 66, at 19) (citing Doc. No. 66-8, at 15). Defendants assert that the
AG’s Office’s letter to Defendants did not satisfy N.C. Gen. Stat. §45-94 because Plaintiff’s initial
letter to the AG’s Office was a “complaint.” (Doc. No. 68, at 9, 10). In other words, Defendants
assert that Plaintiff was required to notify Defendants in writing before sending the letter to the
AG’s Office. The Court disagrees. While N.C. Gen. Stat. §45-94 explains that a complaint or
summons does not satisfy the notice requirement, Plaintiff’s letter to the AG’s Office—while
termed a complaint—was not “a civil action for damages” and is not the kind of complaint §45-94
prohibits prior to the completion of the 30-day remedial window. Further, the letter sent on behalf
of Plaintiff from the AG’s Office to HSBC was a notice, in writing, to the servicer of Plaintiff’s
loan that Plaintiff claimed errors regarding her home loan, satisfying N.C. Gen. Stat. §45-94. Thus,
Defendants’ motion for summary judgment on Plaintiff’s MDCSA claim is DENIED.
I. Real Estate Settlement Procedures Act
Defendants allege that Plaintiff’s RESPA claim fails because Plaintiff has provided no
evidence that she sent “Qualified Written Requests” (“QWR”) to Defendants requesting an
accounting of her mortgage loan. (Doc. No. 60-1, at 17). A QWR is a:

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written correspondence, other than notice on a payment coupon or
other payment medium supplied by the servicer, that—
(i) includes, or otherwise enables the servicer to identify, the
name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in error
or provides sufficient detail to the servicer regarding other
information sought by the borrower.
12 U.S.C. § 2605(e)(1)(B). Plaintiff responds that the AG’s Office sent a letter to HSBC on January
18, 2017, meeting all the requirements of the QWR. (Doc. No. 66, at 19). As discussed above, the
letter was submitted on Plaintiff’s behalf. See supra at 12. Further, the letter from the AG’s Office
included an additional letter from Plaintiff “outlining the errors and disputes she had concerning
her loan” and containing Plaintiff’s name, account number, address, and phone number. (Doc. No.
66, at 19) (citing Doc. No. 66-8, at 16, 19). In fact, Plaintiff specifically stated in her letter to the
AG’s Office that it was a “Written Qualified Request.” (Doc. No. 66-8, at 19). Thus, Plaintiff has
shown that there is a genuine issue of material fact that Plaintiff sent a Written Qualified Request,
and Defendants’ motion for summary judgment against Plaintiff’s RESPA claim is DENIED.
J. Defenses
Plaintiff also moves for summary judgment against Defendants’ (1) failure to state a claim,
(2) laches, (3) statute of limitations, (4) bona fide error, (5) economic loss rule, and (6) learned
profession exception defenses. The Court now considers each defense.
1. Failure to State a Claim
The Court has determined, in its Order on Defendant’s Motion to Dismiss (Doc. No. 51)
that each of Plaintiff’s remaining claims state a claim. Thus, summary judgment against
Defendants’ failure to state a claim defense is GRANTED.

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2. Laches and Statute of Limitations
Plaintiff asserts that Defendants’ statute of limitations and laches defenses should be
dismissed. (Doc. No. 59, at 18, 19). Defendants agree, with qualifications. (Doc. No. 65, at 15).
Thus, summary judgement against both defenses is GRANTED. To the extent that Plaintiff seeks,
at trial, to make claims barred by the statute of limitations or laches defenses, Defendants may
raise those defenses at trial.
3. Bona Fide Error
Plaintiff argues that Defendants’ bona fide error defense applies only to Plaintiff’s
previously dismissed Fair Debt Collection Practices Act claim and should be dismissed. (Doc. No.
59, at 19). Defendants agree. (Doc. No. 65, at 16-17). Thus, summary judgment against
Defendants’ bona fide error defense is GRANTED.
4. Economic Loss Rule
Plaintiff makes a perfunctory argument—unsupported by citation—that because the Court
has determined that the SAFE Act creates a legal duty sufficient to support her tort causes of action,
“the economic loss rule does not prevent her from recovering tort damages for claims resulting
from Defendants’ breach of contract and the claimed torts.” (Doc. No. 59, at 19). The Court
declines construct Plaintiff’s legal argument in her stead. See Davis v. District of Columbia, 503
F. Supp. 2d 104 (D.D.C. 2007) (For purposes of summary judgment, perfunctory and undeveloped
arguments, and arguments that are unsupported by pertinent authority, are waived.). Thus,
Plaintiff’s motion for summary judgment against Defendants’ economic loss rule is DENIED.
5. Learned Profession Exception
Plaintiff seeks summary judgment against Defendants’ learned profession exception
defense to Plaintiff’s UDTPA claim. (Doc. No. 59, at 19). Because the Court has granted summary

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judgment against Plaintiff’s UDTPA claim, Defendants’ learned profession exception defense is
moot. Therefore, Plaintiff’s motion for summary judgment against Defendants’ learned profession
exception defense is GRANTED.
IV.

CONCLUSION

For the reasons stated above, Plaintiff’s Motion for Summary Judgment is GRANTED IN
PART and DENIED IN PART and Defendants’ Motion for Summary Judgement is GRANTED
IN PART and DENIED IN PART. Plaintiff’s motion for summary judgment as to HSBC’s
vicarious liability for PHH’s actions committed within the scope of its employment is GRANTED;
Plaintiff’s motion for summary judgment for her breach of contract claim is DENIED;
Defendants’ motion for summary judgment against Plaintiff’s fraud claim is GRANTED;
Defendants’ motion for summary judgment against Plaintiff’s negligent misrepresentation claim
is GRANTED; Defendants’ motion for summary judgment against Plaintiff’s NIED claim is
GRANTED; Plaintiff’s motion for summary judgment in favor of her UDTPA claim is DENIED,
and Defendants’ motion for summary judgment against Plaintiff’s UDTPA claim is GRANTED;
Plaintiff’s motion for summary judgment in favor of the legal duty element of her NAS claim is
GRANTED; Defendants’ motion for summary judgment against Plaintiff’s MDCSA claim is
DENIED; Defendants’ motion for summary judgment against Plaintiff’s RESPA claim is
DENIED; Plaintiff’s motion for summary judgment against Defendants’ failure to state a claim,
laches, statute of limitations, bona fide error, and learned profession exception defenses are
GRANTED; and Plaintiff’s motion for summary judgment against Plaintiff’s economic loss rule
defense is DENIED. In addition, Defendants’ Motion to Strike is DENIED as MOOT. Plaintiff’s
breach of contract, NAS, MDCSA, RESPA, and DCA claims remain.

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SO ORDERED.

Signed: February 5, 2020

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