Marquard et al v. New Penn Financial, LLC et al

Filing 62

Opinion and Order - Defendants' Request for Judicial Notice (ECF 41 ) is GRANTED. Defendants' Motion to Dismiss (ECF 40 ) is GRANTED IN PART and DENIED IN PART. Defendants' motion is granted with respect to Plaintiffs' claim fo r reformation of the mortgage modification agreement. Plaintiffs may amend their complaint within 14 days to cure the deficiencies identified in this Opinion and Order. Defendants motion is denied in all other respects. Signed on 9/22/2017 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

LINDA MARQUARD and DAVID
MARQUARD,

Case No. 3:17-cv-549-SI
OPINION AND ORDER

Plaintiffs,
v.
NEW PENN FINANCIAL, LLC, dba
SHELLPOINT MORTGAGE SERVICING,
and THE BANK OF NEW YORK
MELLON fka THE BANK OF NEW
YORK, as TRUSTEE FOR THE
CERTIFICATEHOLDERS of CWABS
INC., ASSET-BACKED CERTIFICATES,
SERIES 2007-3,
Defendants.
David L. Koen, LEGAL AID SERVICES OF OREGON, 520 SW Sixth Avenue, Suite 700, Portland,
OR 97204; Emily Teplin Fox and Ed Johnson, OREGON LAW CENTER, 522 SW Fifth Avenue,
Suite 812, Portland, OR 97204. Of Attorneys for Plaintiffs.
Donald G. Grant, DONALD G. GRANT, P.S., Washougal Town Square, Suite 245, 1700 Main
Street, Washougal, WA 98671; Neeru Jindal, YU MOHANDESI LLP, 633 West Fifth Street,
Suite 2800, Los Angeles, CA 90017. Of Attorneys for Defendants.

PAGE 1 – OPINION AND ORDER

Michael H. Simon, District Judge.
Plaintiffs Linda Marquard (“Ms. Marquard”) and David Marquard (“Mr. Marquard”)
(collectively, “the Marquards” or “Plaintiffs”) bring this lawsuit against Defendants New Penn
Financial, LLC, dba Shellpoint Mortgage Servicing (“Shellpoint”) and the Bank of New York
Mellon, fka the Bank of New York (the “Bank”) (collectively, “Defendants”). The Marquards
allege that Defendants collected escrow payments for property taxes that the Marquards did not
owe because of a state deferral program. The Marquards assert claims alleging violations of the
Real Estate Settlement Procedures Act (“RESPA”), breach of contract, breach of the covenant of
good faith and fair dealing, violation of the Unlawful Trade Practices Act, conversion, violation
of Oregon Revised Statutes (“ORS”) § 659A.142, violation of the Fair Housing Amendments
Act (“FHA”),1 violation of ORS § 659A.145, declaratory judgment, and contract reformation.
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants move to dismiss the
Marquard’s claims of conversion, violation of ORS § 659A.142, violation of the FHA, violation
of ORS § 659A.145, declaratory judgment, and contract reformation. For the reasons stated
below, Defendants’ motion is granted in part and denied in part.
STANDARDS
A motion to dismiss for failure to state a claim may be granted only when there is no
cognizable legal theory to support the claim or when the complaint lacks sufficient factual
allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs.,
Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint’s factual
allegations, the court must accept as true all well-pleaded material facts alleged in the complaint

1

Plaintiffs allege violations of the Fair Housing Amendments Act, which amended the
Fair Housing Act. Most case law references the Fair Housing Act. Thus, for convenience, the
Court references Plaintiff’s claims as “FHA” claims.
PAGE 2 – OPINION AND ORDER

and construe them in the light most favorable to the non-moving party. Wilson v. HewlettPackard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629
F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint
“may not simply recite the elements of a cause of action, but must contain sufficient allegations
of underlying facts to give fair notice and to enable the opposing party to defend itself
effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from
the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office
Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the
plaintiff’s legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556
U.S. 662, 678-79 (2009).
A complaint must contain sufficient factual allegations to “plausibly suggest an
entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the
expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
BACKGROUND
In 2005, Ms. Marquard purchased a home in Portland, Oregon. First Amended Complaint
(“FAC”) ¶ 15 (ECF 39). In 2007, the Marquards refinanced their home with the loan that is at
issue in this lawsuit, and Mr. Marquard was added to the title. FAC ¶ 16. In February 2011,
Ms. Marquard was laid off from her job as an associate director of strategic planning for an
energy conservation non-profit organization. FAC ¶ 21. Later in 2011, the Marquards became
unable to make payments on their home loan. FAC ¶ 22.

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Mr. Marquard has two ruptured discs in his lower back, stemming from prior work, most
recently from lifting a concrete fountain at a nursery. FAC ¶ 23. His injury causes him back pain
and numbness in his legs. FAC ¶ 24. In 2015, the Social Security Administration found him to be
disabled. FAC ¶ 23.
In August 2015, Ms. Marquard began working part-time as a cashier at a Fred Meyer
supermarket, earning $10.50 per hour. FAC ¶ 26. In March 2016, Ms. Marquard was diagnosed
with non-small cell lung cancer. FAC ¶ 27. She then underwent surgery to remove the upper lobe
of her right lung. FAC ¶ 27. In September 2016, Ms. Marquard learned that her cancer had
spread, and she was diagnosed with Stage IV non-small cell lung cancer. FAC ¶ 37. On
September 29, 2016, Ms. Marquard applied for Social Security Disability Insurance (“SSDI”)
under the Social Security Administration’s expedited Compassionate Allowances Initiative. Her
application was approved. FAC ¶ 39. She receives $2,485 per month in SSDI benefits. FAC ¶ 2.
Defendant Shellpoint has been the mortgage servicer for Plaintiffs’ home loan since
December 1, 2016, when it succeeded Plaintiffs’ former servicer, Specialized Loan Servicing
LLC (“SLS”). FAC ¶ 49.
For the loan that is at issue in this lawsuit, Plaintiffs entered into their mortgage
arrangement on January 26, 2007. The Bank is the Note Holder and Lender. FAC ¶ 19.
Paragraph 3 of its Deed of Trust provides:
Borrower shall pay to Lender . . . a sum (the “Funds”) to provide
for payment of amounts due for: (a) taxes and assessments and
other items which can attain priority over this Security Instrument
as a lien or encumbrance on the Property . . . . These items are
called “Escrow Items.” . . . Borrower shall pay Lender the Funds
for Escrow Items unless Lender waives Borrower’s obligation to
pay the Funds for any or all Escrow Items.
Lender may, at any time, collect and hold Funds in an amount (a)
sufficient to permit Lender to apply the Funds at the time specified
under RESPA, and (b) not to exceed the maximum amount a
PAGE 4 – OPINION AND ORDER

lender can require under RESPA. Lender shall estimate the
amount of Funds due on the basis of current data and reasonable
estimates of expenditures of future Escrow Items or otherwise in
accordance with Applicable Law.
ECF 41-1 at 4 (Deed of Trust ¶ 3) (emphasis added). The Deed of Trust also provides: “If there
is a surplus of Funds held in escrow, as defined under RESPA, Lender shall account to Borrower
for the excess funds in accordance with RESPA.” Id. at 4 (Deed of Trust ¶ 3).
In June 2016, the Oregon Department of Revenue (“DOR”) approved Plaintiffs’
application for the Oregon Property Tax Deferral for Disabled and Senior Citizens program (“the
“Oregon Tax Deferral Program” or “the Program”). FAC ¶ 31. The purpose of the Program is to
keep low-income senior citizens and people with disabilities in their homes by relieving them of
having to pay property taxes while they are incapable of making such payments. FAC ¶ 161.
Under the Program, the State of Oregon agreed to pay Plaintiffs’ property taxes to Multnomah
County on an annual basis, beginning November 2016. FAC ¶ 31. Also under the Program, on
July 14, 2016, the State recorded a lien on Plaintiffs’ property to secure eventual repayment of
the property taxes paid by the State for Plaintiffs. FAC ¶ 34. Under the Program, the deferred
property taxes need not be repaid until “[t]he ownership of the property changes,” “[t]he deferral
applicant[s] die[],” or “[t]he deferral applicant[s] move[] from the property for any reason other
than health reasons.” FAC ¶ 30. To remain in the Program, Plaintiffs need only certify every two
year that they continue to meet all eligibility requirements. FAC ¶ 59.
On November 1, 2016, Plaintiffs applied for a loan modification under the Home
Affordable Modification Program (“HAMP”). FAC ¶ 41. Plaintiffs’ loan modification
application included a copy of their property tax deferral approval letter. FAC ¶ 41.
On November 7, 2016, Plaintiffs and their attorney met with a representative of SLS,
who informed Plaintiffs that they could make trial-period modification payments in the monthly
PAGE 5 – OPINION AND ORDER

amount of $2,105.83. FAC ¶ 44. This payment would include an escrow for one-twelfth of
Plaintiffs’ anticipated annual property taxes. FAC ¶ 44. The inclusion of the escrow for property
taxes would make their monthly payments higher by $376.68 than it would otherwise have been.
FAC ¶ 44. At that meeting, Plaintiffs’ attorney requested that SLS not require as part of
Plaintiffs’ trial-period payments any amount for an escrow of property taxes. FAC ¶ 45 At the
meeting, SLS refused to grant the request. FAC ¶ 46. Instead, SLS stated at the meeting that if
Plaintiffs made all three payments under the trial-period modification, SLS would reanalyze the
escrow account for Plaintiffs’ loan. FAC ¶ 47. SLS’s representation that it would reanalyze the
escrow account led Plaintiffs to believe that after the trial period, an escrow for property taxes
would no longer be included in Plaintiffs’ loan. FAC ¶ 47. Plaintiffs made their first trial period
payment on November 30, 2016. FAC ¶ 48.
On January 20, 2017, Mr. Marquard sent Shellpoint, SLS’s successor loan servicer,
another copy of the State of Oregon Property Tax Deferral Application Approval along with a
statement. FAC ¶ 51. On February 1, 2017, Plaintiffs paid their final trial period payment. FAC
¶ 43. On that date, they also sent Shellpoint a notice of error under RESPA, which prohibits
servicers from escrowing amounts for property taxes unless they are “reasonably anticipated to
be paid on dates during the ensuing twelve months[.]” FAC ¶¶ 54-53.
Shellpoint responded on February 20, 2017, stating that “[w]e do not have information
from the state of Oregon advising that your property taxes will be temporarily paid for by
another entity or that your taxes are not due for 2017.” FAC ¶ 56. On February 27, Plaintiffs’
attorney provided to Shellpoint copies of the letter from the Oregon Department of Revenue
confirming Plaintiffs’ participation in the Oregon Tax Deferral Program. FAC ¶ 62. On March 1,
2017, Plaintiffs sent a complaint to the Consumer Financial Protection Bureau. Shellpoint

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responded “[b]ecause the tax deferral program does not eliminate the borrower’s liability for the
payment of the property tax, we must continue to escrow for the property taxes and disburse
payments to your taxing authority accordingly.” FAC ¶ 64. Shellpoint sent a similar letter to
Plaintiffs’ counsel. FAC ¶ 65.
On or about March 14, 2017, Plaintiffs signed a permanent HAMP Agreement. FAC
¶ 72. The HAMP Agreement includes monthly escrow payments of 1/12 of Plaintiffs’ annual
property tax bill plus a 10 percent cushion. FAC ¶ 72. Plaintiffs’ monthly mortgage payment
constitutes more than 80 percent of the income they receive from the Social Security
Administration. FAC ¶ 82. Plaintiffs have continued to pay the monthly escrow payments, under
protest, out of fear of foreclosure. FAC ¶ 73.
Plaintiffs fear that, due to their financial situation, they will fall behind again, default on
their loan, risk losing their home, and end up homeless. FAC ¶ 82. As a result of this fear,
Ms. Marquard has suffered severe emotional distress, including but not limited to anxiety,
depression, nausea, headaches, anger, irritability, and sleeplessness. FAC ¶ 75. Mr. Marquard has
suffered and will likely continue to suffer severe emotional distress, depression, headaches,
anger, irritability, and sleeplessness. FAC ¶ 76. As a further result, Mr. Marquard grinds his teeth
during his sleep, leading to headaches, hearing loss, and trouble eating. FAC ¶ 76. His teethgrinding also has forced him to seek treatment from a physical therapist and will require that he
obtain special dental care. FAC ¶ 76. On May 31, 2017, the Court granted Plaintiffs’ motion for
a preliminary injunction, enjoining Shellpoint from collecting the escrow payments for
anticipated property taxes. FAC ¶ 81.
After issuance of the preliminary injunction, Plaintiffs noticed that the terms of their loan
modification agreement were not what they thought they had agreed to. FAC ¶ 83. The loan

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modification agreement that they signed accounts for an interest bearing principal of
$435,850.00, on which Plaintiffs were required to make monthly payments, and a deferred
principal balance of $64,226.82, on which Plaintiffs were not required to make monthly
payments. FAC ¶ 86. Under the signed agreement, Plaintiffs are to make monthly principal and
interest payments of $1,560.28 at three percent interest over a repayment term of 362 months.
FAC ¶ 91. Under these terms, Plaintiffs will owe two balloon payments on May 1, 2047: one of
$159,664.60 on the balance of the interest bearing principal, and one of $64,226.82 on the
deferred interest principal. FAC ¶ 91. The signed agreement contains no explicit reference to a
balloon payment of $159.664.60, but does state that for mortgages that do not fully amortize over
the term of the note, “there is a final remaining balance that is due upon maturity.” ECF 41-2 at 2
(HAMP mortgage modification summary).
Plaintiffs agree with all terms of the signed agreement, except the repayment period and
the resulting balloon payment on the interest bearing principal. FAC ¶¶ 84-87. Plaintiffs allege
that “[t]he parties intended and agreed” to a repayment term of 480 months, with a maturity date
of March 1, 2057. FAC ¶¶ 84-85. Under such an agreement, Plaintiffs would owe only one
balloon payment on March 1, 2057: the deferred interest principal of $64,226.82. FAC ¶ 92. By
March 1, 2057 (the completion of the 480 month term), the interest bearing principal would have
completely amortized and only the deferred interest principal would remain. FAC ¶ 90.
Plaintiffs allege that all parties understood that they had agreed to the longer repayment
term, FAC ¶ 95, and the shorter term in the signed agreement was a result drafting error, FAC
¶ 107. Plaintiffs allege that the terms of the modification were subject to HAMP Tier 2, which
requires that loan servicers extend the note term to 480 months. FAC ¶ 103; ECF 41-3 at 2
(“HAMP Handbook” ¶ 6.3.2.3). The HAMP Handbook states that servicers may not adjust the

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HAMP Tier 2 mortgage adjustment requirements, unless “an investor restriction or applicable
law requires them to do so.” ECF 41-3 at 2 (HAMP Handbook ¶ 6.3.2). Alternatively, Plaintiffs
allege that Defendants unilaterally and intentionally shortened the repayment term in the signed
agreement and added the balloon payment, despite neither party agreeing to the shorter term or
balloon payment. FAC ¶ 109.
DISCUSSION
A. Request for Judicial Notice
On June 30, 2017, Defendants filed a request for judicial notice of three documents:
Exhibit A: Deed of Trust recorded on February 7, 2017 in the
Multnomah County Clerk’s office (ECF 41-1);
Exhibit B: Pages 21-28 of Exhibit 18-8 filed in support of the
Declaration of David L. Koen on April 28, 2017 in the pending
lawsuit (ECF 41-2);
Exhibit C: Making Home Affordable Handbook for Servicers of
Non-GSE Mortgages, version 5.1, at 6.3.2, p. 111, (ECF 41-3).
ECF 41 at 2.
Although district courts generally may not consider any material beyond the pleadings in
ruling on a Rule 12(b)(6) motion, they may take judicial notice of documents referenced in the
complaint, pleadings from other relevant proceedings, as well as matters in the public record,
without converting a motion to dismiss into one for summary judgment a motion. Intri-Plex
Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). Importantly, the Ninth
Circuit has “extended the doctrine of incorporation by reference to consider documents in
situations where the complaint necessarily relies upon a document or the contents of the
document are alleged in a complaint, the document’s authenticity is not in question and there are
no disputed issues as to the document’s relevance.” Coto Settlement v. Eisenberg, 593 F.3d 1031,
1038 (9th Cir. 2010).
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Plaintiffs do not object to judicial notice of Exhibits A and C, and both documents are
referenced in Plaintiffs’ first amended complaint. Plaintiffs do object to judicial notice of Exhibit
B, which includes the cover letter attached to Plaintiffs’ loan modification agreement and an
unsigned copy of the modification agreement. Defendants argue that the Court may take judicial
notice of Exhibit B because it was filed in this lawsuit in support of Plaintiffs’ Motion for
Preliminary Injunction, and a court may take judicial notice of public records under Rule 201.
Plaintiffs correctly respond that, generally, a court may take judicial notice of the fact that a
given document was filed, but not “of facts presented in those documents . . . for the purpose of
establishing those facts in the case currently before it.” Reynoso v. Fid. Nat’l Title Ins. Co., 2013
WL 6919666, at *5 (D. Or. Dec. 31, 2013) (refusing to take judicial notice of the factual
assertions made in a complaint as a way of establishing essential facts in the case (citing Wyatt v.
Terhune, 315 F.3d 1108, 1114 (9th Cir. 2003))).
In this case, however, Defendants request judicial notice of a document that Plaintiffs
themselves filed in support of their motion for preliminary injunction. See ECF 18-8 at 21-25.
Plaintiffs have therefore already vouched for the authenticity of both the modification agreement
and the accompanying cover letter. Moreover, Plaintiffs reference the modification agreement in
their first amended complaint. See FAC ¶ 87. Because Plaintiffs referenced the modification
agreement in their first amended complaint and have already vouched for the authenticity of both
documents by filing them as evidence in support of Plaintiffs’ motion for preliminary injunction,
the Court will take judicial notice of Exhibit B. Defendants’ request for judicial notice of
Exhibits A, B, and C is granted.

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B. Motion to Dismiss
1. Conversion
Plaintiffs claim that by collecting and retaining escrow amounts for Plaintiffs’ property
taxes which at the time were not owed, Defendants have committed the tort of conversion.
Defendants move to dismiss on the grounds that Plaintiffs made the escrow payments voluntarily
and any excess funds would be returned at the end of the year.
Oregon follows the definition of conversion set forth in the Restatement (Second) of Torts
§ 222A (1965). Scott v. Jackson Cty., 244 Or. App. 484, 499 (2011) (citing Mustola v. Toddy,
253 Or. 658, 664 (1969)). Thus, to state a claim for conversion, a plaintiff must allege facts
establishing “the intentional exercise of dominion or control over a chattel that so seriously
interferes with the right of another to control it that the actor may justly be required to pay the
full value of the chattel.” Emmert v. No Problem Harry, Inc., 222 Or. App. 151, 159-60 (2008).
The principle concern in a conversion claim is whether the defendant exercised intentional
control over the chattel in a manner “inconsistent[] with the plaintiff’s rights” Naas v. Lucas, 86
Or. App. 406, 409 (1987) (citing Lee v. Wood Prods. Credit Union, 275 Or. 445 (1976)). “For
the purposes of a conversion claim, money can be chattel.” Cron v. Zimmer, 255 Or. App. 114,
129 (2013) (citing In re Martin, 328 Or. 177, 184 n. 1 (1998)). Thus, Plaintiffs must allege facts
sufficient to establish that: (1) Plaintiffs are entitled to control the funds at issue; (2) Defendants
have intentionally exercised dominion or control over those funds; and (3) Defendants’ control
over those funds is sufficiently serious to require full repayment.
Plaintiffs allege that after qualifying for the Oregon Tax Deferral Program, they did not
owe property taxes that would otherwise have been paid to Multnomah County between
November 2016 and November 2017. Plaintiffs further allege that Defendants continued to bill
them for those property tax escrow payments and that Plaintiffs made those payments under
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protest and out of fear of having their home foreclosed upon. Plaintiffs claim that Defendants
kept those payments in an escrow account where Plaintiffs could not access them to apply to
immediate needs. Plaintiffs have further alleged that Defendants have refused to return the funds
currently held in escrow. These facts are sufficient to establish that Plaintiffs had a right to
control the property tax escrow funds, and Defendant intentionally exercised control over those
funds.
Defendants argue that because Plaintiffs made the escrow payments voluntarily, there
was no “unlawful assumption of dominion” over Plaintiffs’ money. A claim for conversion of
money may be barred where the money was voluntarily paid to the alleged converter, or it was
otherwise not “wrongfully received.” Talk Radio Network Enters. v. Cumulus Media, 2016 WL
6693183, at *8 (D. Or. Sept. 13, 2016), report and recommendation adopted sub nom. 2016 WL
6699137 (D. Or. Nov. 14, 2016) (quoting Wood Indus. Corp. v. Rose, 271 Or. 103, 108 (1975)).
A claim may be stated, however, where the converter “was under obligation to return the specific
money to the party claiming it.” Id. Here, Plaintiffs have alleged sufficient facts to establish that
they were owed the return of the property tax payments, for reasons explained above. Thus,
Plaintiffs’ claim is not barred, even assuming that the payments were voluntary.2

2

Plaintiffs and Defendants both cite to Lee Tung v. Burkhart, 59 Or. 194 (1911), in
discussing the relevance of the principle that a withholding may constitute a conversion. That
case states that a claim for conversion may lie when there was a “withholding of the possession
from the plaintiffs, under a claim of right or title inconsistent with that of the plaintiffs.” Id. at
202. That case, however, predates by nearly 60 years the contemporary formulation of the
definition of conversion, as announced in Mustola v. Toddy, 253 Or. 658 (1969). The
contemporary definition speaks to a defendant’s “dominion or control” over chattel and not
“claim of right or title.” Id. at 663-64. Mustola in fact cites Lee Tung as an example of the
antiquated definition. Id. at 643, n. 1. Lee Tung is thus of little precedential value to the issue of
conversion.

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Defendants further argue that because RESPA requires that they account to Plaintiffs any
excess funds at the end of 2017, no conversion has occurred. That the allegedly improperly
collected funds would have been returned at the end of 2017 speaks to the severity of
Defendants’ interference with Plaintiffs’ right to control those funds, but does not bar Plaintiffs’
claim. Paragraph 2 of the Restatement (Second) of Torts § 222A identifies the following factors
for courts to consider when determining whether the severity of the interference rises to the level
of conversion:
(a) the extent and duration of the actor’s exercise of dominion or
control;
(b) the actor’s intent to assert a right in fact inconsistent with the
other's right of control;
(c) the actor’s good faith;
(d) the extent and duration of the resulting interference with the
other's right of control;
(e) the harm done to the chattel;
(f) the inconvenience and expense caused to the other.
Mustola, 253 Or. at 663 (quoting Restatement (Second) of Torts § 222A (1965)). None of these
factors presume permanent deprivation. Rather, they speak to the relative extent and duration of
the interference, the defendant’s good faith, and the “inconvenience and expense” to the plaintiff.
Restatement (Second) of Torts § 222A. Plaintiffs have alleged that Defendants wrongfully
collected escrow payments between November 2016 and May 31 2017, when the Court issued a
preliminary injunction. Defendants continue to retain those funds in escrow. Given Plaintiffs’
difficult financial position, these facts are sufficient to establish that Defendants’ alleged
interference with Plaintiffs’ right to control their would-be property tax payment was sufficiently
severe to state a claim of conversion.

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2. Disability Discrimination under ORS § 659A.142(4)
Plaintiffs claim that Defendants violated Oregon law prohibiting discrimination against
people with disabilities by failing to make a reasonable modification to their escrow policy.
Defendants challenge this claim as to Ms. Marquand, arguing that the statute does not grant her
associational standing. Defendants also challenge the claim as to both plaintiffs on two grounds:
(1) Defendants are not places of public accommodations and (2) Plaintiffs have not stated facts
to establish discrimination on the basis of disability.
a. Ms. Marquand’s standing
Plaintiffs allege that Defendants are discriminating against Mr. Marquard because of his
disability, and against Ms. Marquard because of her association with Mr. Marquard. Defendants
argue that of ORS § 659A.885, the provision that establishes standing for violations of ORS
§ 659A.142, does not provide for associational standing.
Oregon law provides that “[a]ny person claiming to be aggrieved by an unlawful practice
specified in subsection (2) of this section may file a civil action in circuit court.” ORS
§ 659A.885. Subsection (2) includes ORS § 659A.142, the anti-discrimination statute that
Plaintiffs allege Defendants violated. Plaintiffs point to ORS § 659A.139, which requires that
Oregon’s disability discrimination laws (ORS § 659.103 to ORS § 659.144) “be construed to the
extent possible” consistently with similar provisions in the Americans with Disabilities Act
(“ADA”). The ADA contains an explicit associational standing provision. See 42 U.S.C.
§ 12182(b)(1)(E). Defendants respond that the Oregon standing provision (§ 659A.885) is not
included in the sequence of sections directed to be interpreted in lockstep with the ADA
(§ 659.103 to § 659.144). Further, the Oregon statute does not have a similar associational
standing provision.

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The Oregon Supreme Court requires that courts ruling on standing “focus on the wording
of the particular statute at issue, because standing is not a matter of common law but is, instead,
conferred by the legislature.” Vannatta v. Oregon Gov’t Ethics Comm’n, 347 Or. 449, 470
(2009) (quoting Local No. 290 v. Dept. of Environ. Quality, 323 Or. 559, 566 (1996)) (quotation
marks omitted). When an Oregon statute grants standing to “any person,” “the legislature’s
policy choice regarding standing . . . is unambiguous.” Kellas v. Dep’t of Corr., 341 Or. 471, 477
(2006). Such a statute “imposes no additional qualifications for standing.” Id. In other standing
contexts, the Oregon Supreme Court has defined “aggrieved” as meaning “something more than
just dissatisfied with a result. It is to have an interest in the outcome—an interest beyond that
shared with the general public—such as pecuniary or other interest peculiar to the person who
claims to be aggrieved. One indication that a person has a sufficient interest in the outcome so as
to be “aggrieved” is the recognition of that interest by the legislature by a statute granting
standing.” Nw. Med. Labs., Inc. v. Good Samaritan Hosp. & Med. Ctr., 309 Or. 262, 268 (1990).
Here, Ms. Marquard plainly meets the “any person” requirement. She therefore has
standing so long as she claims to be aggrieved. In other words, she must claim “to have an
interest in the outcome . . . beyond that shared with the general public,” Good Samaritan 309 Or.
at 268. Plaintiffs allege that Mr. and Ms. Marquard are co-owners of their home and that they are
at risk of losing that home if Defendants continue their allegedly discriminatory conduct.
Ms. Marquard would become homeless along with her husband were Plaintiffs to lose their
home. Defendants’ allegedly discriminatory conduct therefore has a direct and peculiar effect on
Ms. Marquard. Plaintiffs further allege that as a result of Defendants’ discriminatory conduct,
Ms. Marquard is suffering severe emotional distress, including anxiety, depression, nausea,
headaches, anger, irritability, and sleeplessness. Accordingly, Ms. Marquard has alleged that she

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has an interest in the Defendants’ allegedly discriminatory conduct that is “beyond that shared
with the general public” and peculiar to her.
Defendants correctly note that ORS § 659A.142 does not explicitly bar discrimination
against people based on their association with people with disabilities, whereas the ADA does
contain such a provision. The inference, Defendants suggest, is that associational standing was
intentionally excluded from the Oregon laws. But the Oregon Supreme Court in Good Samaritan
indicated that the legislature’s statutory recognition of a person’s interest is only “one indication”
that a person has sufficient interest in the outcome of a case to be “aggrieved,” 309 Or. At 268.
Moreover, the Oregon anti-discrimination statutes and the ADA differ meaningfully in how their
standing and substantive provisions interact. A close comparison of the two suggests that they
should be interpreted to grant similarly broad standing. Like Oregon law, the ADA has an
independent standing provision, 42 U.S.C. § 12188 (“Enforcement”). Unlike Oregon law, the
ADA extends standing not to “any person claiming to be aggrieved,” but to “any person who is
being subjected to discrimination on the basis of disability.” 42 U.S.C. § 12188 (1). The
substantive anti-discrimination provision of the ADA then defines discrimination to include
discrimination on the basis of association, 42 U.S.C. § 12182(b)(E), which the Oregon
substantive provision does not. See ORS § 659A.142. Thus, although the ADA has a more
detailed description of actions constituting banned discrimination, which includes discrimination
on the basis of association, it has a narrower standing provision, which grants standing only to
those “subjected to discrimination,” 42 U.S.C. § 12188(1). Oregon law, in comparison, does not
explicitly bar discrimination on the basis of association, but has a comparatively broad standing
provision that includes “any person claiming to be aggrieved” by discrimination. This broad
standing provision is consistent with the policy of Oregon’s disability discrimination laws, which

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is “to guarantee individuals the fullest possible participation in the social and economic life of
the state.” Based on the Oregon Supreme Court’s precedent interpreting standing provisions, the
policy of Oregon’s disability discrimination laws and a structural analysis of those laws, Ms.
Marquard has standing under ORS § 659A.885 to bring a claim as an aggrieved person for
Defendants’ alleged violation of ORS § 659A.142.
b. Public Accommodation
Defendants also challenge Plaintiffs’ claim for disability discrimination under ORS
§ 659A.142 on the grounds that Defendants are not places of public accommodation, as defined
by ORS § 659A.400. ORS § 659A.142 provides that “[i]t is an unlawful practice for any place of
public accommodation, resort or amusement as defined in ORS § 659A.400 . . . to make any
distinction, discrimination or restriction because a customer or patron is an individual with a
disability.” Oregon defines a place of public accommodation as “[a]ny place or service offering
to the public accommodations, advantages, facilities or privileges whether in the nature of goods,
services, lodgings, amusements, transportation or otherwise.” ORS § 659A.400. The statutory
definition excludes certain state institutions and “[a]n institution, bona fide club or place of
accommodation that is in its nature distinctly private.” Id. § 659A.400(2)(e).
Defendants’ argument relies primarily on ORS § 659A.139, the ADA lockstepping
provision described above. As defined in 42 U.S.C. § 12181(7), a “place of public
accommodation” under the ADA “must be a physical place that is connected to the goods or
services being provided.” Blair v. Bank of Am., N.A., WL 860411, at *5 (D. Or. Mar. 13, 2012),
aff’d sub nom. Blair v. Bank of Am., NA, 573 F. App’x 665 (9th Cir. 2014) (citing Weyer v.
Twentieth Century Fox Film Corp., 198 F.3d 1104, 1114 (9th Cir. 2000)). Because “Plaintiffs
have not alleged that Defendants’ collection of escrow payments . . . is connected to an actual

PAGE 17 – OPINION AND ORDER

physical place,” Defendants argue, Plaintiffs have failed to allege that Defendants are places of
public accommodation.
The parties disagree as to whether ORS § 659A.139, the ADA lockstepping provision,
applies to ORS § 659A.400, the “public accommodation” definition. The requirement of ORS
§ 659.139 explicitly references only §§ 659A.103 through 659A.144. The public
accommodations definition, § 659A.400, falls outside of that sequence, but is referenced in
§ 659A.142, the non-discrimination provision. The text of § 659A.139, however, requires that
the identified provisions of the Oregon statute be construed in lockstep with the ADA only “to
the extent possible.” ORS § 659A.139. Given this limitation, the Court need not resolve the
question of whether ORS § 659A.139 applies to ORS § 659A.400. Oregon’s statute defining
public accommodation is substantially different in both text and structure from that of 42 U.S.C.
§ 12181(7). Assuming, without finding, that ORS § 659A.139 applies to § 659A.400, it is not
possible to construe § 659A.400 “in a manner that is consistent” with 42 U.S.C. § 12181(7).
In Weyer, the Ninth Circuit interpreted “places of public accommodation” under Art. III
of the ADA to require “some connection between the good or service complained of and the
actual physical place.” 198 F.3d at 1114. Unlike the Oregon statute, the federal statute does not
explicitly define the term “public accommodation.” Rather, 42 U.S.C. § 12181(7) puts forth an
extensive list of private entities that are considered public accommodations for the purposes of
the ADA. That list includes such entities “as an inn, a restaurant, a theater, an auditorium, a
bakery, a laundromat, [and] a depot.” Id. In Weyer, the Ninth Circuit observed that all items on
the list were “actual, physical places where goods or services are open to the public.” Id.
Therefore, “[t]he principle of noscitur a sociis require[d] that the term, ‘place of public

PAGE 18 – OPINION AND ORDER

accommodation,’” be interpreted to include only those places with a nexus between the service
provided and a physical location. Id.
Oregon’s definition of “public accommodation” in ORS § 659A.400 does not support the
same strict reading required by the ADA in 42 U.S.C. § 12181(7). The Oregon statute provides a
general definition that on its face is not limited to “actual, physical places.” The statute explicitly
distinguishes between “places” and “services” and includes both in its definition. ORS
§ 659A.400(a) (“[a]ny place or service”). Paragraphs (b) and (c) of ORS § 659A.400 reinforce
this distinction and inclusion. Paragraph (b) includes in the definition of public accommodation
“[a]ny place that is open to the public and owned or maintained by a public body,” while
paragraph (c) includes “[a]ny service to the public that is provided by a public body.”
§ 659A.400(b)-(c). This structure suggests that both publically and privately owned public
accommodations are not limited to those services associated with a physical space.
The legislative history of the Oregon Public Accommodations Act, which this Court may
consider, ORS 174.020(1)(b), further supports the broader interpretation of Oregon’s law. In
Schwenk v. Boy Scouts of Am., 275 Or. 327 (1976) the Oregon Supreme Court observed that the
Oregon legislature amended the definition of “public accommodation” to include “services” in
1973. Before 1973, Oregon defined “public accommodations” through a list of places,
resembling that of 42 U.S.C. § 12181(7). See Schwenk, 275 Or. at 332-33 (citing Oregon Laws
1961, 301, ch. 247, § 1). The Oregon Supreme Court concluded that the Oregon Legislature’s
purpose behind the 1973 amendment, which resulted in the current definition, was “to prohibit
discrimination by business or commercial enterprises which offer goods or services to the
public.” Id. at 334. The Oregon Supreme Court approvingly cited a summary of the effect of the
1973 amendment provided by then Administrator of the Civil Rights Division of the Oregon

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Bureau of Labor, who claimed that the broadened definition included “the services of credit,
financing mortgages, loans, and insurance as well as hotels, motels, retail sales, etc.” Id. at 335
(quotation marks omitted).
Plaintiffs allege that both Defendants are companies in the business of making and
servicing home loans in Oregon. These facts sufficiently allege that Defendants are commercial
enterprises that “offer goods or services to the public.”
In their reply brief, Defendants raise for the first time the argument that they are not
places of public accommodation because of the “selective and discretionary application
processes” for mortgage modifications. Generally, any argument first raised in a reply brief is
waived. See Graves v. Arpaio, 623 F.3d 1043, 1048 (9th Cir. 2010) (citing U.S. ex rel. Meyer v.
Horizon Health Corp., 565 F.3d 1195, 1199 n. 1 (9th Cir. 2009)); see also United States v.
Puerta, 982 F.2d 1297, 1300 n. 1 (9th Cir. 1992) (“New arguments may not be introduced in a
reply brief.”). Defendants cite new case law from this district, Breyer v. Pac. Univ., 2017 WL
3429395 (D. Or. Aug. 9, 2017), in support of their new argument. Breyer, however, does not
reflect a change in Oregon state law, as it relies upon closely analogous case law that pre-exists
Defendants’ opening motion to dismiss. Breyer, 2017 WL 3429395 at *3-4 (citing Vejo v.
Portland Public Sch., 204 F. Supp. 3d 1149, 1167 (D. Or. 2016) and Abukhalaf v. Morrison
Child & Family Services, 2009 WL 4067274, at *6-7 (D. Or. Nov. 20, 2009)). Because this
argument was first raised in a reply brief and is not based on new or changed law, it is waived.
c. Discrimination
Defendants argue that Plaintiffs’ disability discrimination claim fails because Plaintiffs
have not identified any good or service offered by Defendants that Defendants have not made
accessible. Plaintiffs respond that Defendants must make a reasonable modification to their

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policy requiring escrow payments in order for Plaintiffs to avail themselves of Defendants’ loan
services.
Both the ADA and Oregon’s anti-discrimination laws require that places of public
accommodations make reasonable modifications to ensure access to their goods and services by
those with disabilities. See 42 U.S.C.A. § 12182(2)(A) (“discrimination includes . . . a failure to
make reasonable modifications in policies, practices, or procedures, when such modifications are
necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to
individuals with disabilities”); Or. Admin. R. 839-006-0330 (“Places of public accommodation
must remove physical and administrative barriers, if readily achievable . . . in order to make
offered goods and services accessible”). Oregon’s anti-discrimination provision, ORS
§ 659A.142, “shall be construed to the extent possible in a manner that is consistent with any
similar provisions of the federal Americans with Disabilities Act.” ORS § 659A.139(1).
The ADA requirement that places of public accommodation make reasonable
modifications to their policies also requires reasonable concessions to ensure that disabled people
can fully realize other benefits designed to promote accessibility. The Ninth Circuit held in
Fortyune v. Am. Multi-Cinema, Inc. that the ADA required a movie theater to remove a noncompanion from a companion’s seat so that a quadriplegic patron’s companion could sit next to
him at the theater. 364 F.3d 1075, 1086 (9th Cir. 2004). The Ninth Circuit held that “[s]uch
concessions, while certainly ‘preferential’ in the sense that they confer upon disabled patrons a
benefit denied to others, are not only contemplated by the ADA, they are required.” Id. In order
for disabled patrons to fully realize their entitlement to a specially designated area for their
wheelchair, they must be extended the additional concession of a companion seat. Similarly,
when a person with a disability is entitled to a state benefit intended to promote accessibility or

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otherwise ameliorate hurdles faced by people with disabilities, businesses must make reasonable
concessions to ensure the realization of that benefit.
Here, Plaintiffs state that they are entitled to property tax deferment due to
Mr. Marquard’s disability. They allege that the tax relief program is intended to keep the elderly
and disabled in their homes, and that it improves Plaintiffs ability to pay, and therefore access,
the mortgage serviced by Defendants. Plaintiffs allege that Defendants refuse to give effect to
that benefit by continuing to collect escrow amounts that include payments designated for
property taxes. Plaintiffs further allege that Defendants’ refusal to relax their policy of collecting
property tax escrow payments poses an administrative barrier to Plaintiffs’ access to Defendants’
mortgage services because of the unnecessary financial burden. Plaintiffs have therefore stated a
claim that Defendants’ policy interferes with a benefit to which Plaintiffs are entitled due to
Mr. Marquard’s disability and that the interference with that benefit poses a barrier to Plaintiffs’
access to Defendants’ services.
3. The FHA Claim
Plaintiffs allege that Defendants’ refusal to stop collecting the escrow payments
discriminated against Mr. Marquard as a person with disabilities, in violation of the FHA.
Plaintiffs allege that both Mr. and Ms. Marquard have been harmed under the FHA as a result of
Defendants’ discriminatory conduct. Defendants first argue that Plaintiffs’ FHA claim fails as to
Ms. Marquard because Plaintiffs do not allege that she has a disability as defined by FHA, and
she therefore lacks standing.
Standing to bring a FHA claim is very broad, constrained only by Article III of the U.S.
Constitution. Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982). A plaintiff need not be the
victim of the discrimination complained of, but must have suffered some “distinct and palpable
injury” from the discriminatory conduct. Id.; San Pedro Hotel Co. v. City of L.A., 159 F.3d 470,
PAGE 22 – OPINION AND ORDER

475 (9th Cir. 1998). For example, plaintiffs who witnessed instances of assault and suffered
emotional disturbances have standing. Fair Housing Council v. Penasquitos Casablanca
Owner’s Ass’n, 381 F. App’x 674, 676 (9th Cir. 2010).
Plaintiffs allege that they are co-owners of their home and that they are at risk of losing
that home if Defendants continue their allegedly discriminatory conduct. Ms. Marquard would
become homeless along with her husband were Plaintiffs to lose their home. Plaintiffs further
allege that as a result of Defendants’ discriminatory conduct, Ms. Marquard is suffering severe
emotional distress, including anxiety, depression, nausea, headaches, anger, irritability, and
sleeplessness. Accordingly, Ms. Marquard has alleged that she is suffering a distinct and
plapable injury from Defendants’ alleged discriminatory behavior.
Defendants also challenge Plaintiffs’ FHA claim on three additional grounds: (1)
Plaintiffs do not allege that 42 U.S.C. § 3605 applies to loan servicing; (2) Plaintiffs fail to allege
a disparate impact on a protected group; and (3) Plaintiffs do not allege facts identifying a
specific and clearly delineated policy adopted by Defendants. With respect to Defendants’ first
argument, Plaintiffs sufficiently allege that the FHA applies to loan servicing. In paragraph 181
of the FAC, Plaintiffs quote 24 C.F.R. § 100.130(b)(3) (the implementing regulation of 42
U.S.C. § 3605), which provides that unlawful conduct includes “[s]ervicing of loans or other
financial assistance with respect to dwellings in a manner that discriminates . . . because of . . .
handicap.” See also Paschal v. Flagstar Bank, 295 F.3d 565, 569 (6th Cir. 2002) (applying 42
U.S.C. § 3605 and 24 C.F.R. § 100.130 to mortgage servicers).
With respect to Defendants’ second and third arguments, the Court notes that the Ninth
Circuit has instructed that the “threshold for pleading discrimination claims under the [FHA] is
low.” McGary v. City of Portland, 386 F.3d 1259, 1262 (9th Cir. 2009). In McGary, the Ninth

PAGE 23 – OPINION AND ORDER

Circuit reiterated that it has explicitly applied the pleading requirements stated in the Supreme
Court’s decision in Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002), to FHA
claims. McGary, 386 F.3d at 1262 (citing Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248-49
(9th Cir. 1997)). In Gilligan, the Ninth Circuit held that for claims alleging violations of the FHA
there is a “powerful presumption against rejecting pleadings for failure to state a claim.” 108
F.3d at 249 (quotation marks and citation omitted). Finally, the Supreme Court has recognized
the FHA’s “broad and inclusive compass” and has instructed courts to accord a “generous
construction to the Act’s complaint-filing provision.” City of Edmonds v. Oxford House, Inc.,
514 U.S. 725, 731 (1995). Additionally, the Ninth Circuit recognizes disparate impact claims
under the FHA. Keith v. Volpe, 858 F.2d 467, 482 (9th Cir. 1988). To prevail on a disparate
impact claim, a plaintiff must show “a significant disparate impact on a protected class caused by
a specific, identified . . . practice or selection criterion.” Stout v. Potter, 276 F.3d 1118, 1121 (9th
Cir. 2002); Ramirez v. GreenPoint Mortg. Funding, Inc., 633 F. Supp. 2.d 922, 927 (N.D. Cal.
2008).
In response to Plaintiffs’ request for a modification to Defendants’ escrowing policy,
Shellpoint responded: “Because the tax deferral program does not eliminate the borrower’s
liability for the payment of the property tax, we must continue to escrow for the property taxes
and disburse payments to your taxing authority accordingly.” FAC ¶ 64. Because the Oregon
Property Tax Deferral for Disabled and Senior Citizens Program is a tax deferral program, no
participants have their tax liability eliminated, only deferred. Thus, it is reasonable to infer that
Shellpoint’s stated policy is to continue to escrow property taxes from all participants in the
Program.

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Plaintiffs allege that participants in the Program are all low income and either disabled or
elderly. Plaintiffs add that many of the elderly may also have disabilities. Thus, Plaintiffs
plausibly have alleged that many, and perhaps most, participants in the tax deferral program are
in a protected class as people with disabilities. Plaintiffs also allege that Defendants’ policy of
escrowing property tax amounts that Plaintiffs do not owe due to disability puts Plaintiffs at risk
of losing their home. It is plausible that this risk applies equally to the other participants with
disabilities in the tax deferral program, all of whom are low income and all of whom owe
property taxes. Given the Ninth Circuit’s low threshold for pleading discrimination claims, these
facts are sufficient to state a claim that Defendants’ escrowing policy has a disproportionate
impact on people with disabilities.
4. Housing Discrimination under ORS § 659A.145
Plaintiffs allege that Defendants violated Oregon’s fair housing law, ORS § 659A.145, by
failing to make a reasonable accommodation in their escrowing policy, which deprived Plaintiffs
of an equal opportunity to use and enjoy their home. Defendants challenge this claim on the
grounds that Plaintiffs have not established that Defendants’ collection of property taxes has
interfered with Plaintiffs use and enjoyment of their property because “foreclosure proceedings
have not been instituted.”
Oregon fair housing law requires reasonable accommodations in “rules, policies,
practices or services” to be made where such accommodations may be necessary to ensure a
disabled person’s “equal opportunity to use and enjoy a dwelling.” ORS § 659A.145. Oregon’s
fair housing law mirrors the federal law. Fishing Rock Owner’s Ass’n, Inc. v. Roberts, 6 F. Supp.
3d 1132, 1138 (D. Or. 2014) (interpreting 42 U.S.C. § 3604 and ORS § 659A.145 identically).
The Ninth Circuit requires plaintiffs making reasonable accommodations claims under 42 U.S.C.
§ 3604 to show that (1) they suffer from a disability as defined by the FHA (here, the Court looks
PAGE 25 – OPINION AND ORDER

to the definition in ORS § 659A.145); (2) defendants knew or reasonably should have known of
plaintiffs’ disability; (3) accommodation of the disability may be necessary to afford plaintiffs an
equal opportunity to use and enjoy the dwelling; and (4) defendants refused to make such an
accommodation. See Giebeler v. M & B Assocs., 343 F.3d 1143, 1147 (9th Cir. 2003).
Defendants argue that Plaintiffs do not and cannot meet element three. Defendants
contend that Plaintiffs have not claimed any interference with Plaintiffs’ opportunity to use and
enjoy the dwelling because Defendants have not initiated foreclosure proceedings. Plaintiffs
allege that their current mortgage payments constitute more than 80 percent of their income and
they are at risk of defaulting. They claim that a default may lead to foreclosure and
homelessness. They further allege that the stress of their financial position has caused both
Plaintiffs to experience severe emotional distress. The symptoms of this stress include
depression, anger, headaches, irritability and sleeplessness. These facts are sufficient to establish
Defendants’ escrowing of property taxes, and the resulting financial stress, has limited Plaintiffs’
opportunity to “use and enjoy” their home.
Defendants further argue that any accommodation would not ameliorate the effects of
Mr. Marquard’s disability, but only “the effects of Plaintiffs’ financial condition.” The Ninth
Circuit does not draw such a distinction. The court has held that a reasonable accommodation
may be made not only for immediate manifestations of a person’s physical or mental
impairment, but also for the “practical impact” of that disability, to include financial barriers.
Giebeler, 343 F.3d at 1144 (citing U.S. Airways v. Barnett, 535 U.S. 391 (2002)). In Giebeler, a
plaintiff whose disability prevented him from working was deemed financially unqualified to
live in the defendant’s apartment complex. Id. The plaintiff’s mother, who was financially
qualified, offered to rent the apartment on behalf of her son. Id. The defendant refused her offer,

PAGE 26 – OPINION AND ORDER

citing a management policy against cosigners. The Ninth Circuit held that such a refusal was a
failure to accommodate under 42 U.S.C. § 3604. Id. at 1150-51. In the Ninth Circuit, “even when
a neutral policy’s adverse effect on disabled persons is attributable to financial limitations faced
by disabled persons in securing housing, the FHAA may require an exception to the policy as a
reasonable accommodation.” Id. at 1152.
Plaintiffs allege facts analogous to those in Giebler. The State of Oregon offered financial
assistance on the basis of Mr. Marquard’s disability, and Defendants refused to accommodate
that assistance. Under Giebler, these facts are sufficient to state a claim for failure to
accommodate under ORS § 659A.145.
5. Reformation and Declaratory Judgment
Plaintiffs allege that the mortgage modification agreement that they signed with
Shellpoint is mistaken as to the repayment term and resulting balloon payment. The modification
agreement that they signed establishes a repayment term of 362 months and a maturity date of
May 1, 2047. Plaintiffs allege that before signing those documents they had intended and agreed
to a repayment term of 480 months and a maturity date of March 1, 2057. The shorter repayment
term, Plaintiffs allege, will result in an unintended balloon payment of the remaining interestbearing principle, $159,664.60, coming due on May 1, 2047. Plaintiffs seek a declaration that the
parties’ loan modification agreement be interpreted as agreeing to a repayment term of 480
months. Alternatively, they seek reformation of the agreement.
a. Declaratory Judgment
Defendants challenge Plaintiffs’ request for declaratory judgment on the grounds that it is
duplicative of their request for reformation. Oregon’s Uniform Declaratory Judgment Act, ORS
Chapter 28, authorizes courts “within their respective jurisdictions . . . to declare rights, status,
and other legal relations, whether or not further relief is or could be claimed.” ORS § 28.010.
PAGE 27 – OPINION AND ORDER

The statute specifically allows determination of “any question of construction or validity” arising
under written contracts, either before or after there has been a breach of the contract. ORS
§§ 28.020-030; see also Walker v. Metro. Life Ins. Co., 2008 WL 747105, at *2 (D. Or. Mar. 17,
2008). Defendants cite no Oregon case for the proposition that a plaintiff cannot seek a
declaratory judgment in the alternative to reformation of a contract. Further, such an argument
runs counter to Oregon’s statutory text: “No action or proceeding shall be open to objection on
the ground that a declaratory judgment is prayed for.” ORS § 28-010. Moreover, “a plaintiff is
generally entitled to plead alternative or multiple theories of recovery on the basis of the same
conduct on the part of the defendant.” MB Fin. Grp., Inc. v. U.S. Postal Serv., 545 F.3d 814, 819
(9th Cir. 2008).
b. Reformation
To state a claim for contract reformation under Oregon law, Plaintiffs must plead that: (1)
there was an antecedent agreement to which the contract can be reformed; (2) there was a mutual
mistake or a unilateral mistake on the part of the party seeking reformation and inequitable
conduct on the part of the other party; and (3) the party seeking reformation was not guilty of
gross negligence. 5 Star, Inc. v. Atl. Cas. Ins. Co., 269 Or. App. 51, 60 (2015). Any prior
agreement need not be legally binding. Pioneer Res., LLC v. D.R. Johnson Lumber Co., 187 Or.
App. 341, 367-78 (2003). The parties must, however, “have previously reached a complete
mutual understanding with respect to all of the essential terms of their agreement.” Manning
Lumber Co. v. Voget, 188 Or. 486, 500 (1950).
Plaintiff’s primary theory is based on allegations of mutual mistake and that the shorter
repayment term was the result of scrivener’s error. To establish the existence of an antecedent
agreement, Plaintiffs allege that “the parties intended and agreed” that Plaintiffs would make 480
monthly payments and that the maturity date would be March 1, 2057. They also allege other
PAGE 28 – OPINION AND ORDER

purported essential terms of that agreement: the date of the first payment (April 1, 2017); the
interest-bearing principal ($435,850.00); and the non-interest bearing, deferred principal
($64,226.82) and the annual interest rate (three percent). Plaintiffs point out that their monthly
payments at the stated interest rate would amortize to their interest-bearing principal in 480
months, not 362. They also allege that their mortgage modification was performed pursuant to
the provisions of Home Affordable Modification Program Tier 2, which require modified loans
to be re-amortized to 480 months.
Plaintiffs do not allege, however, when or how the alleged antecedent agreement was
established. They make no claims about how they came to their understanding of the terms of
their mortgage modification before receiving the purportedly mistaken modification
documentation that they signed. They also allege no facts about the existence of a specific
communication (oral or written) in which SLS indicated that the amortization term would be 480
months. In the absence of facts indicating some communication between the parties relating to
the prior agreement, Plaintiffs have failed to plausibly claim the “complete mutual
understanding” necessary to establish an antecedent agreement.
Given that Plaintiffs have not alleged facts sufficient to establish the existence of an
antecedent modification agreement, they have also not alleged facts sufficient to establish mutual
mistake regarding the terms of the purported agreement. Plaintiffs allege that the 362-month term
in the signed agreement was scrivener’s error. But there must have been some antecedent
agreement in order for it to have been improperly transcribed on the modification documents.
Plaintiffs’ alternative theory is that they were unilaterally mistaken and Defendants
engaged in inequitable conduct. Both theories require the existence of an antecedent agreement,
though there need not have been a “complete and mutual understanding” as to the antecedent

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agreement under a theory of unilateral mistake if the defendants engaged in inequitable conduct.
“[T]he range of misconduct termed ‘inequitable’ is quite broad, varying from the most egregious
and concrete, such as fraud, to more amorphous and somewhat less egregious misconduct,
sometimes described as ‘overreaching’ or ‘sharp practice.’” Murray v. Laugsand, 179 Or.App.
291, 302 (2002). Inequitable conduct includes a party's silence where that “party knows that the
other party is materially mistaken as to a writing's scope and effect, but remains silent, hoping to
take advantage of the other's mistake.” Pioneer Resources, 187 Or.App. at 376, 68 P.3d 233.
As noted above, Plaintiffs have failed to allege even their own unilateral mistake in more
than conclusory terms. They do not allege facts that explain how they came to the understanding
that their repayment term would be 480 months. They have thus not alleged that an antecedent
agreement existed; further they have not alleged sufficient facts to establish their unilateral
mistake as to that agreement. Moreover, they do not allege any specific inequitable conduct on
Defendants’ part that would have misled Plaintiffs about the terms of the signed agreement. Nor
do they allege facts indicating that Defendants knew about Plaintiffs’ mistaken understanding,
but remained silent. Plaintiffs do allege that Defendants will receive a windfall by reporting their
compliance with Hamp Tier 2 to the United States Treasury when they are not actually compliant
with that program. Such inequitable conduct, however, is not “overreaching” or “sharp practice”
as it relates to the Plaintiffs’ mistake as to the terms of their contract. Because the existence of an
antecedent agreement to which the contract could be reformed has not been established, the
claim for reformation fails under both of Plaintiffs’ theories. Plaintiffs have leave to replead.
CONCLUSION
Defendants’ Request for Judicial Notice (ECF 41) is GRANTED. Defendants’ Motion to
Dismiss (ECF 40) is GRANTED IN PART and DENIED IN PART. Defendants’ motion is
granted with respect to Plaintiffs’ claim for reformation of the mortgage modification agreement.
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Plaintiffs may amend their complaint within 14 days to cure the deficiencies identified in this
Opinion and Order. Defendants’ motion is denied in all other respects.
IT IS SO ORDERED.
DATED this 22nd day of September, 2017.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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