CONQUEST v. WMC MORTGAGE CORP. et al

Filing 42

MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE JOEL H. SLOMSKY ON 3/29/17. 3/30/17 ENTERED AND COPIES E-MAILED.(ti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JERRY A. CONQUEST,
Plaintiff,

CIVIL ACTION
NO. 16-03604

v.
WCM MORTGAGE CORP., et at.
Defendants.
OPINION
Slomsky, J.

March 30, 2017
Table of Contents
INTRODUCTION ................................................................................................................. 1

I.

II. BACKGROUND .................................................................................................................... 2
A. Conveyance of the Property and the Terms of the First Mortgage ...................................... 2
B. The Fire Insurance Policy .................................................................................................... 5
C. The Second Mortgage Assignment ...................................................................................... 6
D. Fire Loss and Insurance Proceeds ........................................................................................ 7
E. Alleged Misrepresentations About the Insurance ................................................................ 8
F.

The Instant Action ................................................................................................................ 9

III. STANDARD OF REVIEW ................................................................................................. 10
IV. ANALYSIS ........................................................................................................................... 12
A. All Claims Made Against MERSCORP Holding, Inc. Will be Dismissed ........................ 12
B. Count I – Breach of Fiduciary Duty .................................................................................. 13
1.

All Mortgage Defendants – WMC Mortgage LLC (“WMC”), Mortgage
Electronic Registration Systems, Inc. (“MERS”), and Vanderbilt Mortgage
and Finance (“Vanderbilt”) – did not owe Plaintiff a Fiduciary Duty ........................ 14
a. A Fiduciary Relationship Did Not Exist ..................................................................... 14
b. The Mortgage Defendants Were Not Trustees of the Insurance Proceeds ................. 15

2.

HomeFirst Agency, Inc. (“HomeFirst”) and Southwest Business
Corporation (“SWBC”) did not owe Plaintiff a Fiduciary Duty ................................ 16

3.

American Modern Home (“AMH”) did not owe Plaintiff a Fiduciary Duty.............. 17
i

C. Count II – Civil Conspiracy ............................................................................................... 18
1.

The Mortgage Defendants did not Engage in Civil Conspiracy ................................. 19

2.

HomeFirst and SWBC did not Engage in Civil Conspiracy....................................... 20

3.

American Modern Home did not Engage in Civil Conspiracy................................... 21

D. Count III – Breach of Contract .......................................................................................... 21
1.

Vanderbilt did not Breach its Contract with Plaintiff ................................................. 22

2.

WMC and MERS did not Breach a Contract with Plaintiff ....................................... 24

3.

HomeFirst and SWBC did not have a Contract with Plaintiff.................................... 25

4.

AMH did not have a Contract with Plaintiff .............................................................. 25

E. Count IV – Breach of Duty of Good Faith and Fair Dealing ............................................. 26
Count V – Negligent Misrepresentation/Fraud .................................................................. 27

F.
1.

Vanderbilt did not Misrepresent the Terms of the Mortgage or Insurance
Coverage ..................................................................................................................... 28

2.

WMC and MERS did not Misrepresent the Terms of the Mortgage .......................... 29

G. Count VI – Unjust Enrichment .......................................................................................... 30
1.

The Mortgage Defendants were not Unjustly Enriched ............................................. 30

2.

HomeFirst and SWBC were not Unjustly Enriched ................................................... 31

3.

AMH was not Unjustly Enriched ............................................................................... 31

H. Count VII – Trust Liability/Bailment ............................................................................... 31
1.

Constructive Trust ....................................................................................................... 31

2.

Bailment ...................................................................................................................... 33

I.

Count VIII –Diminution in Value and Waste ..................................................................... 34

J.

Count IX – Conversion, Theft, and Misappropriation ....................................................... 35
1.

The Claim of Conversion of the Insurance Proceeds by the Mortgage
Defendants is Without Merit ....................................................................................... 35
a. WMC and MERS........................................................................................................ 35
b. Vanderbilt .................................................................................................................... 35

2.

Plaintiff's Claim of Criminal Theft Also Fails ............................................................ 36

3.

The Claim of Misappropriation of the Insurance Proceeds is Without Merit............. 37

K. Count X – Consumer Law Violations ................................................................................ 37
1.

The Mortgage Defendants did not Violate the Pennsylvania Unfair Trade
Practices and Consumer Protection Law (“UTPCPL”) .............................................. 37

ii

2.

The Pennsylvania Fair Credit Extension Uniformity Act (“PFCEUA”)
Claim Will be Dismissed ............................................................................................ 38

3.

The Mortgage Defendants did not Violate the Fair Debt Collection Practices
Act (“FDCPA”) ........................................................................................................... 38

4.

Plaintiff does not Plausibly Allege a Violation of the Federal Fair Credit
Reporting Act .............................................................................................................. 39

5.

Plaintiff does not Plausibly Allege a Violation of the Real Estate Settlement
Procedures Act ............................................................................................................ 40

6.

The Mortgage Defendants did not Accelerate Plaintiff’s Loan under
Pennsylvania Code Section 31.203(a) ........................................................................ 40

7.

The Mortgage Defendants did not violate the Pennsylvania Usury Law ................... 41

L. Count XI – Negligence Per Se ........................................................................................... 41
V. AMENDING THE AMENDED COMPLAINT WOULD BE FUTILE ......................... 42
VI. CONCLUSION .................................................................................................................... 43

iii

I.

INTRODUCTION
Before the Court are Defendants’ Motions to Dismiss Plaintiff’s Amended Complaint for

failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). 1 Defendants are
WMC Mortgage LLC (Doc. No. 28), Mortgage Electronic Registration Systems, Inc. (“MERS”),
MERSCORP Holdings, Inc. (Doc. No. 19), Vanderbilt Mortgage and Finance, Inc. (Doc. No 18),
American Modern Home (Doc. No. 14), HomeFirst Agency, Inc. (Doc. No. 20), and Southwest
Business Corporation (Doc. No. 17) (collectively “Defendants”).2
On May 24, 2016, Plaintiff commenced this action in the Court of Common Pleas of
Delaware County. In his Amended Complaint, he alleges that Defendants committed federal and
state violations by misappropriating fire insurance proceeds. The fire loss occurred on April 10,
2014 and totally destroyed Plaintiff’s home.3 Plaintiff claims that Defendants withheld from him
the proceeds which would have been used to restore and repair his residential home. (Doc. No.
16 at ¶¶ 10–14.) On June 30, 2016, Vanderbilt Mortgage and Finance, Inc., Mortgage Electronic
Registration Systems, Inc. and MERSCORP Holdings, Inc., and HomeFirst Agency, Inc.,
removed this action to this Court. (Doc. No. 1.)
1

On June 30, 2016, this case was removed by Vanderbilt Mortgage and Finance, Inc., HomeFirst
Agency, Inc., Mortgage Electronic Registration Systems, Inc., and MERSCORP Holdings, Inc.
to this Court. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.

2

In the Amended Complaint, Plaintiff groups Defendants into two broad categories, the
“Mortgage Defendants” and the “Insurance Defendants.” (Doc. No. 16 at ¶ 87-88.) The Court
will use this grouping in this Opinion. The “Mortgage Defendants” are WMC Mortgage LLC,
Mortgage Electronic Registration Systems, Inc. (“MERS”), MERSCORP Holding, Inc., and
Vanderbilt Mortgage and Finance, Inc. MERSCORP Holdings, Inc., is the parent company of
MERS. (Id. at ¶ 4.) The “Insurance Defendants” are American Modern Home, HomeFirst
Agency, Inc., and Southwest Business Corporation.

3

Plaintiff alleges that “on or about April 10, 2014, the Property was destroyed by an electrical
fire.” (Doc. No. 16 at ¶ 51.) Plaintiff claims that as a result of the “misappropriation of the
insurance proceeds, [he] was left with an uninhabitable rubble of a home and had to begin the
slow process of restoration and repair using his own monies.” (Id. at ¶ 75.) (See also Doc.
No. 16 at Ex. I, which is a photograph of the house after the fire showing the loss.)
1

On August 8, 2016, Plaintiff filed an Amended Complaint.

(Doc. No. 16.)

Each

Defendant responded by filing a Motion to Dismiss the Amended Complaint. (Doc. Nos. 14, 17,
18, 19, 20, 28.) Plaintiff filed a response to each motion (Doc. Nos. 22, 31, 32, 33, 35), and all
Defendants submitted replies. (Doc. Nos. 24, 25, 36, 37, 38, 39.) For reasons that follow, the
Court will grant the Motions to Dismiss. (Doc. Nos. 14, 17, 18, 19, 20, 28.)
II.

BACKGROUND
A. Conveyance of the Property and the Terms of the First Mortgage
On October 31, 2006, Plaintiff’s father conveyed to him the Property located at 613

Summer Street, Media, Delaware County, Pennsylvania 19063 (“Property”). (Doc. No. 16 at ¶
10.) To accomplish this sale, Plaintiff secured a loan of $272,000 from WMC Mortgage LLC
and signed a Mortgage and Promissory Note on November 10, 2006 to cover the purchase of the
Property.4 (Id. at ¶ 12.)
The Mortgage was executed in favor of Mortgage Electronic Registration Systems, Inc.
("MERS"), solely as nominee5 for WMC Mortgage LLC (“WMC”), and WMC's successors and
assigns.6 (Doc. No. 16, Ex. B at 2.) The Mortgage provides in relevant part:
4

Plaintiff was required to comply with the covenants of the Mortgage. Relevant covenants
required that Plaintiff: maintain hazard insurance on the Property; not destroy or allow the
Property to deteriorate; be jointly and severally liable as a co-signer; and have the lender
approve any transfer of interest in the Property by the borrower. (Doc. No. 19, Ex. B. at 2-15.)

5

A nominee is defined as “[a] party who holds bare legal title for the benefit of others or who
receives and distributes funds for the benefit of others.” Nominee, BLACK’S LAW DICTIONARY
(10th ed. 2010).

6

The Third Circuit has described MERS as follows:
MERS is a national electronic loan registry system that permits its members to
freely transfer, among themselves, the promissory notes associated with
mortgages, while MERS remains the mortgagee of record in public land records
as “nominee” for the note holder and its successors and assigns. MERS facilitates
the secondary market for mortgages by permitting its members to transfer the
2

(B) “Borrower” is JERRY A. CONQUEST. Borrower is the mortgagor under this
Security instrument.
(C) “MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a
separate Corporation that is acting solely as nominee for Lender and Lender’s
successors and assigns. MERS is the mortgagee under this Security Instrument.
MERS is organized and existing under the laws of Delaware, and has an address
and telephone number of P.O. Box 2026, Flint MI 48501-2026, tel. (888) 679MERS.
(D) “Lender” is WMC MORTGAGE CORP.
(Doc. No. 19, Ex. B at 2.) On November 29, 2006, the Mortgage was recorded with the
Delaware County Recorder of Deeds (“Recorder’s Office”). (Id.) The Promissory Note was
never recorded with the local recorder of deeds. (Id.)
On June 22, 2011, MERS, as the nominee for WMC, executed an Assignment of
Mortgage (“First Assignment”) to Vanderbilt Mortgage and Finance, Inc. (Doc. No. 19, Ex. C at
2.)7 On July 19, 2011, the First Assignment was recorded with the Delaware County Recorder’s

beneficial interest associated with a mortgage—that is, the right to repayment
pursuant to the terms of the promissory note—to one another, recording such
transfers in the MERS database to notify one another and establish priority,
instead of recording such transfers as mortgage assignments in local land
recording offices.
Montgomery Cnty. v. MERSCORP Inc., 7395 F.3d 372, 374 (3d Cir. 2015).
7

The parties disagree on the date that the First Assignment occurred. Plaintiff asserts the First
Assignment occurred on July 19, 2011. (Doc. No. 16 at ¶ 22-25.) Plaintiff fails, however, to
provide the record of the first assignment and states that: “[t]he July 19, 2011 Mortgage
Assignment is not presently available for attachment to this Complaint but it is recorded with
the Delaware County Recorder of Deeds and is accordingly exempt from attachment pursuant
to Pa.R.C.P. 1019(g).” (Id. at ¶ 22, n.10.) In relevant part PA. R. CIV. P. 1019(g) states:
A party may incorporate by reference any matter of record in any State or Federal
court of record whose records are within the county in which the action is
pending, or any matter which is recorded or transcribed verbatim in the office of
the prothonotary, clerk of any court of record, recorder of deeds or register of
wills of such county.
3

Office.

(Id.)

Pursuant to the First Assignment, MERS, on behalf of WMC, assigned to

Vanderbilt all its right, title, and interest in and to the Mortgage.8 (Id.)
The Mortgage required that Plaintiff maintain hazard insurance on the Property.

It

contained the following provision:
Borrower shall keep the improvements now existing or hereafter erected on the
Property insured against loss by fire, hazards included within the term “extended
coverage,” and any other hazards including, but not limited to, earthquakes and
floods, for which Lender requires insurance.
If Borrower fails to maintain any of the coverages described above, Lender may
obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is
under no obligation to purchase any particular type or amount of coverage.
Therefore, such coverage shall cover Lender, but might or might not protect
Borrower, Borrower’s equity in the Property, or the contents of the Property,
against any risk, hazard or liability and might provide greater or lesser coverage
than was previously in effect. Borrower acknowledges that the cost of the
insurance coverage so obtained might significantly exceed the cost of insurance
that Borrower could have obtained. Any amounts disbursed by Lender under this
Section 5 shall become additional debt of Borrower secured by this Security
Instrument. These amounts shall bear interest at the Note rate from the date of

Pa. R. Civ. P. 1019(g). Defendants Vanderbilt Mortgage and Finance, Inc., MERS,
MERSCORP Holding, Inc., and HomeFirst Agency, Inc., note that the First Assignment
occurred on June 22, 2011, and attach a copy of the record to their filings in this case. (See,
e.g., Doc. No. 18, Ex. C at 2.) From the record, it appears that Plaintiff is using the date of the
stamp on the First Assignment, and Defendants are using the date that the First Assignment
was signed. In any event, the exact date of the First Assignment is not critical to the
disposition of the issues raised here.
8

The First Assignment provides:
FOR VALUE RECEIVED, Mortgage Electronic Registration Systems, Inc.
(“MERS”) as nominee for WMC MORTGAGE CORP., its successors and
assigns, hereby assign and transfer to VANDERBILT MORTGAGE AND
FINANCE, INC., its successors and assigns, all its right, title and interest in and
to certain deed of trust/mortgage executed by JERRY A. CONQUEST, and
bearing the date of the 10th day of NOVEMBER 2006 A.D, and recorded on the
29th day of NOVEMBER, 2006 A.D, [sic] in the office of the Recorder of
DELAWARE County, State of PENNSYLVANIA in Book 03967 at Page 0717.
(Doc. No. 19, Ex. C at 2.)
4

disbursement and shall be payable, with such interest, upon notice from Lender to
Borrower requesting payment.
***
In the event of loss, Borrower shall give prompt notice to insurance carrier and
Lender. Lender may make proof of loss if not made promptly by Borrower.
Unless Lender and Borrower otherwise agree in writing, any insurance proceeds,
whether or not the underlying insurance was required by Lender, shall be applied
to restoration or repair of the Property, if the restoration or repair is economically
feasible and Lender’s security is not lessened . . . If the restoration or repair is not
economically feasible or Lender’s security would be lessened, the insurance
proceeds shall be applied to the sums secured by this Security Instrument,
whether or not then due, with the excess, if any, paid to Borrower . . .
(Doc. No. 19, Ex. B at 6-7.)
B. The Fire Insurance Policy
On April 18, 2012, Vanderbilt notified Plaintiff that it had obtained a lender-placed
hazard insurance policy (“Policy”) covering the Property.9 (Doc. No. 16 at ¶¶ 39-40.) American
Modern Home insurance company (“AMH”) issued the Policy to Vanderbilt. (Doc. No. 19, Ex.
D at 4.) The Notice of Placement stated that Vanderbilt purchased the Policy because Plaintiff
failed to provide adequate proof of hazard insurance covering the Property. (Doc. No. 16, Ex. F.)
Vanderbilt obtained the Policy from AMH through two insurance brokers, Southwest Business
Corporation (SWBC) and HomeFirst Agency, Inc. (Id. at ¶ 40.) The Notice of Placement
9

Plaintiff failed to acquire or maintain fire insurance as required by the Mortgage. Therefore,
Vanderbilt purchased the insurance and notified Plaintiff in a document known as a “Notice of
Placement.” The Notice of Placement enclosed the insurance certificate for the Policy. (Doc.
No. 16 at ¶ 40.) In relevant part, the Notice of Placement provided:
This letter is to inform you that a lender-placed hazard insurance policy has been
obtained on your behalf.
We previously notified you explaining the
circumstances surrounding your need to have insurance coverage and explaining
your options, but to date have not received proof of acceptable hazard insurance
coverage.
(Doc. No. 16, Ex. F at 1.)
5

contained the insurance certificate for Plaintiff to review. (Id.) The certificate stated that the
named insured under the Policy was “Vanderbilt Mortgage and Finance Inc.,” the yearly Policy
Premium was $1,614, and the insured value of the Property was $161,420.10 (Doc. No. 19, Ex.
D at 4.)

Additionally, the Notice of Placement stated that if Plaintiff provided proof of

acceptable hazard insurance, the Policy would be canceled. 11 Plaintiff never provided his own
hazard insurance policy. The Policy was renewed twice, first in April 2013 and then in April
2014. (Doc. No. 16 at ¶ 44.)
C. The Second Mortgage Assignment
On December 3, 2012, MERS, again as the nominee for WMC, executed a second
Assignment of [the] Mortgage to Vanderbilt (“Second Assignment”). (Doc. No. 16, Ex. D at 1.)
The Second Assignment was recorded with the local Recorder's Office on December 19, 2012.

10

The name and amounts were taken from the “Evidence of Insurance” document which states:
“Insured/Lender Name & Address VANDERBILT MORTGAGE & FINANCE PO BOX 9800
MARYVILLE, TN 37802.” (Doc. No. 19, Ex. D at 4.) In the calculation of insurance costs
section, the document states: “Premium $1,614.00.” (Doc. No. 19, Ex. D at 4.) In the
“Coverages and Limits of Liability” section, the document states: “Described
Dwelling/Building $161,420. (Doc. No. 19, Ex. D at 4.)

11

The Notice of Placement provides:
You still may obtain insurance of your own choosing on your home. If you
provide us with proof that you have obtained adequate insurance on your home,
we will cancel the insurance that we purchased and refund or credit any unearned
premiums to your advance or escrow account. If, within 30 days after the date
this notice was sent to you, you provide us with proof that you had adequate
insurance on your home as of the date we also purchased insurance and that you
continue to have the insurance that you purchased yourself, we will cancel the
insurance that we purchased without charging you any costs, interest or [any]
other charges in connection with the insurance that we purchased.
(Doc. No. 19, Ex. D at 3.)
6

(Id.) Pursuant to the Second Assignment, MERS, on behalf of WMC, assigned to Vanderbilt all
its right, title, and interest in and to the Mortgage.12 (Id.)
D. Fire Loss and Insurance Proceeds
On April 10, 2014, the Property was destroyed by an electrical fire. (Doc. No. 16 at ¶
51.) The fire resulted in a total loss of Plaintiff’s home. (Id. at ¶ 75.) Thereafter, Plaintiff claims
he contacted AMH and/or one of the other Insurance Defendants. (Id. at ¶ 54.) One or more of
the Insurance Defendants advised Plaintiff that the insurance proceeds would be paid to
Vanderbilt because it was the named insured on the Policy.13 (Id. at ¶ 55.) On May 8, 2014,
policy proceeds in the amount of $161,420 were disbursed to the named insured, Vanderbilt.
(Doc. No. 14 at Ex. F.) Vanderbilt used the insurance proceeds to reduce the Mortgage balance.
(Doc. No. 16 at ¶ 55.) Although the proceeds were insufficient to satisfy the full balance of the
Mortgage, Vanderbilt wrote off the remaining balance, and docketed a satisfaction of mortgage
form with the Recorder’s Office on July 15, 2014. (Id. at ¶ 68.) At this point, Plaintiff was no
longer liable for mortgage payments on the Property.

12

The Second Assignment provides:
FOR VALUE RECEIVED, Mortgage Electronic Registration Systems, Inc.
(“MERS”) . . . as nominee for WMC Mortgage Cor., its successors and assigns,
hereby assigns and transfers to VANDERBILT MORTGAGE AND FINANCE,
INC., its successors and assigns, . . . all its right, title, and interest in and to a
certain Mortgage/Deed of Trust executed by Jerry A. Conquest, dated November
10, 2006, and recorded [on] November 29, 2006, in the office of the Recorder of
Delaware County, State of Pennsylvania as Instrumental Number 2006109366.
(Doc. No. 16, Ex. D at 1.) This assignment is nearly identical to the First Assignment.

13

Plaintiff does not specify which Insurance Defendant gave him this information.
7

In May 2014, Vanderbilt reported to Experian Credit agency that the Mortgage had been
“charged off.”14 (Doc. No. 16, Ex. O at 3.) An Experian report, prepared in 2015 in response to
a dispute Plaintiff asserted, states:
Status: Account charged off. $0 written off.
continue on record until Mar 2020.

This account is scheduled to

Comment: Account information disputed by consumer (Meets requirement of the
Fair Credit Reporting Act). This item was updated from our processing of your
dispute Nov 2015.
(Id.) Additionally, the Experian report noted that Plaintiff’s mortgage payments were “30 days
past due” from May 2013 to the date of the “charge off” in May 2014. (Id.)
E. Alleged Misrepresentations About the Insurance
In order to compel the payment of the insurance proceeds to him, Plaintiff filed a
consumer complaint against Vanderbilt. With the help of the Consumer Financial Protection
Bureau (“CFPB”) and the aid of an United States Congressman, Plaintiff filed a Complaint with
the CFPB alleging that he did not receive these funds to rebuild his home after a fire loss.15
(Doc. No. 16 at ¶ 60; Doc. No. 16, Ex. N.) On August 13, 2014, in response to Plaintiff’s
consumer complaint, Vanderbilt sent him a letter explaining the actions that it had taken
following the fire. Vanderbilt’s letter states as follows:
According to VMF's records the insurance in force at the time of loss was a forceplaced insurance policy. This type of policy is put in place when the owner fails
to provide proof of insurance coverage for the Property. Please find enclosed a
copy of the Mortgage for your review, as well as copies of notices sent to you
regarding the force-placed insurance policy. You should have received a copy of
the policy directly from the insurer. The Mortgage states:
14

A charge-off is defined as “treat[ing] (an account receivable) as a loss or expense because
payment is unlikely; to treat as a bad debt.” Charge-Off, BLACK’S LAW DICTIONARY (10th ed.
2010). Charge-offs often reflect a negative borrowing history of a consumer.

15

Plaintiff does not disclose which United States Congressman he contacted. (Doc. No. 16 at ¶
62.)
8

[T]he Lender may, but is not obligated to, obtain and pay insurance coverage on
behalf of the customer in order to protect their security interest in the Property
when sufficient insurance coverage has not been maintained or proof of such
coverage has not been provided to the Lender. This coverage may or may not
protect the Borrower, their equity in the Property, or contents of said Property, and
the cost of this insurance may exceed the cost of similar insurance coverage the
Borrower could obtain on their own. Furthermore, the amounts disbursed by
Lender would be considered as additional debt of the Borrower and secured by
the Mortgage.
VMF was not required to obtain insurance coverage at all, much less insurance
that would have protected your interest in the Property. The force-placed policy
that VMF procured was a lender interest policy. Accordingly, the insurer paid the
insurance proceeds directly to VMF and VMF applied them to the principal
balance.
(Doc. No. 16, Ex. N at 2.) No further action was taken against Vanderbilt by the Consumer
Financial Protection Bureau or the unnamed United States Congressman regarding the consumer
complaint. (Doc. No. 15 at ¶ 103.)
F. The Instant Action
Plaintiff alleges here that Vanderbilt and the other “Mortgage Defendants,” including
MERS and MERSCORP Holdings, Inc., should have given him the insurance proceeds for
restoration or repair of the Property.

Plaintiff argues, they “misappropriated the insurance

proceeds in violation of the terms of the Mortgage.” (Doc. No. 16 at ¶¶ 57-59.) Plaintiff further
alleges that Vanderbilt subsequently made misrepresentations about the terms of the Mortgage
and the hazard policy. Plaintiff claims these misrepresentations were made in response to the
consumer complaint lodged by him, as justification for Vanderbilt retaining the insurance
proceeds. (Id. at ¶¶ 60-67.) Plaintiff alleges that Vanderbilt, by writing off the remaining
balance of the loan and reporting a “charge-off” to credit agencies, negatively affected his credit
score and his ability to borrow money from other lenders. (Id. at ¶¶ 69-74.)
9

In separate counts in his Amended Complaint, Plaintiff asserts eleven claims against
various Defendants. They are: (1) Breach of Fiduciary Duty; (2) Civil Conspiracy; (3) Breach of
Contract; (4) Breach of the Duty of Good Faith and Fair Dealing; (5) Negligent
Misrepresentation/Fraud; (6) Unjust Enrichment; (7) Bailment Liability/Trust Liability; (8)
Dimuition [sic] in Value & Waste; (9) Conversion, Theft, Misappropriation; (10) Consumer Law
Violations; and (11) Negligence Per Se. (Id. at ¶¶ 86-132.)
In response to Plaintiff’s Amended Complaint, the Motions to Dismiss were filed. On
September 22, 2016, a hearing on the Motions was held. (Doc. No. 40.) The Motions are now
ripe for disposition.
III.

STANDARD OF REVIEW
The motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) is set

forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009). After Iqbal it is clear that “threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements do not suffice” to
defeat a Rule 12(b)(6) motion to dismiss. Id. at 663; see also Bell Atl. Corp. v. Twombly, 550
U.S. 544 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ethypharm S.A.
France v. Abbott Labs., 707 F.3d 223, 231 n.14 (3d Cir. 2013) (citing Sheridan v. NGK Metals
Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010)). “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.” Id. Applying the principles of Iqbal and Twombly, the Third
Circuit in Santiago v. Warminster Twp., 629 F.3d 121 (3d Cir. 2010), set forth a three-part
analysis that a district court in this Circuit must conduct in evaluating whether allegations in a
complaint survive a 12(b)(6) motion to dismiss:

10

First, the court must “tak[e] note of the elements a plaintiff must plead to state a
claim.” Second, the court should identify allegations that, “because they are no
more than conclusions, are not entitled to the assumption of truth.” Finally,
“where there are well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement for
relief.”
Id. at 130 (quoting Iqbal, 556 U.S. at 675, 679). “This means that our inquiry is normally broken
into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike
conclusory allegations, and then (3) looking at the well-pleaded components of the complaint
and evaluating whether all of the elements identified in part one of the inquiry are sufficiently
alleged.” Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
A complaint must do more than allege a plaintiff’s entitlement to relief, it must “show”
such an entitlement with its facts. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (citing
Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008)). “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the complaint
has alleged — but it has not ‘shown’ — ‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at
679. The “plausibility” determination is a “context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.” Id.
The Third Circuit has held that, in addition to the complaint, “a court may consider an
undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if
the plaintiff's claims are based on the document.”

Pension Benefit Guar. Corp. v. White

Consolidated Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Further, “a document integral to or
explicitly relied upon in the complaint may be considered without converting the motion to
dismiss into one for summary judgment.” United States Express Lines v. Higgins, 281 F.3d 383,
388 (3d Cir. 2002).

11

IV.

ANALYSIS16
A. All Claims Made Against MERSCORP Holding, Inc. Will be Dismissed
Plaintiff’s claims against MERSCORP will be dismissed. In the Amended Complaint, his

sole basis for liability by MERSCORP is that it is the parent company of Mortgage Electronic
Registration Systems, Inc. (“MERS”). (Doc. No. 16 at ¶¶ 4, 17.) Plaintiff does not allege that
MERSCORP, in its own capacity, took any action against him regarding the Mortgage, the
Policy, or the insurance proceeds. (See generally, Doc. No. 16.) In essence, Plaintiff’s claims
that MERSCORP is liable under a theory of guilt by association. However, Plaintiff has failed to
plead the nature and extent of the relationship between MERS and MERSCORP that would
make any claims against MERSCORP viable.
“It is a general principle of corporate law deeply 'ingrained in our economic and legal
systems’ that a parent corporation . . . is not liable for the acts of its subsidiaries.” United States
v. Bestfoods, 524 U.S. 51, 61 (1998). “Mere ownership of a subsidiary does not justify the
imposition of liability on a parent.” Pearson v. Component Tech. Corp., 247 F.3d 471, 484 (3d
Cir. 2001). The corporate veil will only be pierced where “the corporate form would otherwise
be misused to accomplish certain wrongful purposes, most notabl[y] fraud, on the shareholder’s
behalf.” CMF Assocs., LLC v. Scout Media, Inc., No. 15-01250, 2015 WL 2125131, at *2 (E.D.
Pa. May 6, 2015) (quoting Bestfoods, 524 U.S. at 62).
The Third Circuit has held that a court must look to the following factors to determine if
it may pierce the corporate veil to hold a parent corporation accountable:
16

This Section of the Opinion covers the claims in the order they are set forth in Plaintiff’s
Amended Complaint. Each subsection will discuss the claim at issue as well as the facts pled
viewed in the light most favorable to Plaintiff. Each argument will be discussed separately.
However, due to the nature of Plaintiff’s claims against MERSCORP Holding, Inc.
(“MERSCORP”) as the parent company to Mortgage Electronic Registration Systems, Inc.
(“MERS”), the claims against MERSCORP will be reviewed first.
12

gross undercapitalization, failure to observe corporate formalities, nonpayment of
dividends, insolvency of debtor corporation, siphoning of funds from the debtor
corporation by the dominant stockholder, nonfunctioning of officers and directors,
absence of corporate records, and whether the corporation is merely a facade for
the operations of the dominant stockholder.
Pearson, 247 F.3d at 484-85. This intensive fact-based analysis is meant to determine whether
the subsidiary’s corporate form is “little more than a legal fiction.” Id. at 485. The plaintiff is
responsible for pleading and demonstrating factual allegations about “the nature and extent of the
relationship between a parent and its subsidiary corporation.” CMF Assocs., LLC, 2015 WL
2125131, at *3 (quoting Richardson v. CSS Indus., Inc., No. 08-cv-3900, 2009 WL 2230761, at
*3 (E.D. Pa. July 27, 2009)).
Here, Plaintiff’s sole allegation against MERSCORP is that it is the parent company of
MERS. (Doc. No. 16. at ¶¶ 4, 17.) He fails to plead the nature and extent of the relationship
between MERSCORP and MERS that would justify piercing the corporate veil to impose
liability on MERSCORP. (See generally, Doc. No. 16.) None of the factors that would justify
piercing the corporate veil have been alleged in the Amended Complaint. In the absence of these
allegations, “[a] corporation . . . is not liable for the acts of its subsidiaries.” Bestfoods, 524 U.S
61. For this reason, all counts against MERSCORP Holdings, Inc., will be dismissed.
B. Count I – Breach of Fiduciary Duty
In Count I, Plaintiff alleges that the Mortgage Defendants and the Insurance Defendants
breached a fiduciary duty they owed to him. (Doc No. 16 at ¶¶ 87-88.) Plaintiff alleges that the
Mortgage Defendants “breached their respective fiduciary duties as trustees of the insurance
proceeds causing severe harm to Plaintiff . . .” (Id. at ¶ 87.) Plaintiff also alleges that the
Insurance Defendants breached their fiduciary duties as insurance carriers by failing to pay to
him the insurance proceeds for purposes of restoration and repair of the Property. (Id. at ¶ 88.)

13

To establish a breach of fiduciary duty under Pennsylvania law, a plaintiff must prove not
only a fiduciary duty, but also “(1) that the defendant negligently or intentionally failed to act in
good faith and solely for the benefit of plaintiff in all matters for which he or she was employed;
(2) that the plaintiff suffered injury; and (3) that the agent’s failure to act solely for the plaintiff's
benefit . . . was a real factor in bring[ing] about plaintiff's injuries.” Dinger v. Allfirst Fin., Inc.,
82 F. App'x 261, 265 (3d Cir. 2003).
The fundamental element to establish a breach of a fiduciary duty is the existence of
fiduciary relationship between both parties. Baker v. Family Credit Counseling Corp., 440 F.
Supp. 2d 392, 414-15 (E.D. Pa 2006). A claimant cannot recover if they are unable to prove a
fiduciary duty exists between the parties. Id. A fiduciary relationship exists “whenever one
occupies toward another such a position of advisor or counselor as reasonably to inspire
confidence that he will act in good faith for the other’s [best] interest.” Id. at 415 (citing Silver v.
Silver, 219 A.2d 659, 662 (Pa. 1966); Basile v. H&R Block, Inc., 777 A.2d 95, 101-02 (Pa.
Super. Ct. 2001)).
1. All Mortgage Defendants – WMC Mortgage LLC (“WMC”), Mortgage
Electronic Registration Systems, Inc. (“MERS”), and Vanderbilt Mortgage and
Finance (“Vanderbilt”) – did not owe Plaintiff a Fiduciary Duty
a. A Fiduciary Relationship Did Not Exist
Plaintiff fails to establish the existence of a fiduciary relationship with WMC, MERS, and
Vanderbilt. Under Pennsylvania law, it is well established that a lender does not owe a fiduciary
duty to a borrower. Allen v. Wells Fargo, N.A., No. 14-5283, 2015 WL 5137953, at *5 (E.D. Pa.
Aug. 28, 2015) (“Under Pennsylvania law, a lender generally does not owe a duty to a
borrower.”); see also Schnell v. Bank of N.Y. Mellon, 828 F. Supp. 2d 798, 806 (E.D. Pa. 2011)
(denying plaintiff’s negligent misrepresentation claim under Pennsylvania law against lender

14

because “a lender acts in his financial interest and does not owe a fiduciary duty to the
borrower.”); Federal Land Bank of Baltimore v. Fetner, 410 A.2d 344, 348 (Pa. Super. Ct. 1979)
(“[T]he relationship between the borrower and lender does not create a confidential
relationship.”). Here, according to the Amended Complaint, WMC was the lender and Plaintiff
was the borrower. (Doc. No. 16 at ¶ 12.) Their relationship was merely an arm’s length one of
lender and borrower. Thus, WMC did not owe a fiduciary duty to Plaintiff.17
Moreover, a fiduciary relationship did not exist between Plaintiff and Vanderbilt.
Pennsylvania law does not recognize the existence of a fiduciary relationship between a
mortgagee and a mortgagor. See, e.g., Schnell, 828 F. Supp. 2d at 806 (citing Federal Land Bank
of Baltimore, 410 A.2d at 344); Caplen v. Sec. Nat’l Servicing Corp., 514 F. Supp. 2d 746, 752
(E.D. Pa. 2007). In addition, Plaintiff had no fiduciary relationship with WMC and MERS at the
time of the fire loss. MERS, in its nominee capacity, assigned the WMC Mortgage to Vanderbilt,
and both WMC and MERS did not hold an interest in the Mortgage when the fire occurred.
(Doc. No. 19, Ex. C at 2; Doc. No. 16, Ex. D at 1.) Therefore, no fiduciary duty could exist
between them at that time. (Doc. No. 15 at ¶¶ 10-85.) Accordingly, Plaintiff has failed to allege
a fiduciary relationship with WMC, Vanderbilt, and MERS.
b. The Mortgage Defendants Were Not Trustees
of the Insurance Proceeds
Plaintiff also alleges that WMC, MERS, and Vanderbilt were fiduciaries because these
three entities were trustees of the insurance proceeds. Neither WMC nor MERS nor Vanderbilt
ever served as trustees of the insurance proceeds. Plaintiff does not allege any facts to support

17

WMC did not retain an interest in the mortgage at the time of the fire loss. See Allen, 2015
WL 5137953, at *5.
15

this claim. (See generally, Doc. No. 16.) Furthermore, WMC and MERS never received the
insurance proceeds.
Additionally, the Court in Caplen v. Sec. Nat’l Servicing Corp. noted:
At least one court has held that the force-placed insurance arrangement does
create a fiduciary duty between homeowner and lender . . . However, even if a
fiduciary relationship was formed by the lender’s contractual undertaking to
purchase insurance on the collateral, that duty would not have extended beyond
the obligations laid out by the unambiguous language of the mortgage and note:
that insurance be purchased to cover up to the existing principal balance on the
mortgage loan in the event that no other insurance paid out to cover those
damages.
Caplen v. Sec. Nat’l Servicing Corp., 514 F. Supp. 2d 746, 752 (E.D. Pa. 2007).
Here, the Mortgage specifically provided that the mortgagee had the option to purchase
hazard insurance if Plaintiff failed to secure it, and to use the funds to pay down the mortgage if
the destruction of the Property made it economically unfeasible to repair. Thus, Vanderbilt had
no obligation to protect Plaintiff’s interest in the Property if there was a total destruction. (Doc.
No. 16, Ex. B at 4-5.) Accordingly, Vanderbilt satisfied its obligation under the Mortgage and
did not owe Plaintiff a duty once the Property was totally destroyed. Consequently, Plaintiff’s
claim of a breach of fiduciary duty against WMC, MERS, and Vanderbilt will be dismissed.
2. HomeFirst Agency, Inc. (“HomeFirst”) and Southwest Business Corporation
(“SWBC”) did not owe Plaintiff a Fiduciary Duty
Plaintiff fails to establish the existence of a fiduciary relationship with HomeFirst or
SWBC. HomeFirst and SWBC are not insurers. (Doc. No. 20, Ex. E at 2.) Plaintiff’s only
claim against HomeFirst and SWBC is that they are “insurance broker[s] . . . in relation to the
insurance policy at issue.” (Doc. No. 16 at ¶ 6.) Viewing the facts in the light most favorable to
Plaintiff, he fails to allege the existence of a fiduciary or even a direct relationship with
HomeFirst or SWBC. (See generally, Doc. No. 16.) Merely stating that they are insurance

16

brokers is not sufficient to create such relationships. As Defendant SWBC correctly notes in its
Memorandum of Law:
Under Pennsylvania law, there is no duty of care owed by an insurance broker or
agent to ensure that homeowners’ insurance coverage is obtained on behalf of a
third-party borrower. See Acme-Hardesty Co., v. Wenger, 2003 WL 1847461 at
*n.4 (Pa. C.P. 2003) (“Insurers, and insurance brokers, do not have a general
affirmative social duty to undertake risk assessments and to provide insurance
coverage to members of the public or their indemnitees with whom they have no
other relationship.”) and Sovereign Bank v. BJ’s Wholesale Club, Inc., 395 F.
Supp. 2d 183, 197 (M.D. Pa. 2005). The duty of care owed by an insurance agent
or broker is owed solely to the customer/insured, who retains their services to
secure insurance on their behalf.
(Doc. No. 17-1 at 9.) See also Harold ex rel. Harold v. McGann, 406 F. Supp. 2d 562, 577 (E.D.
Pa. 2005) (dismissing plaintiff’s claim for breach of fiduciary duty where plaintiff failed to plead
facts supporting the existence of a confidential relationship). Therefore, the claim in Count I
against HomeFirst and SWBC for breach of fiduciary duty will be dismissed.
3. American Modern Home (“AMH”) did not owe Plaintiff a Fiduciary Duty
Plaintiff’s breach of fiduciary duty claim against AMH fails because Pennsylvania law
ordinarily does not recognize the existence of a fiduciary duty arising in a first-party insurance
claim. A first-party insurance claim involves the named policyholder bringing suit against the
insurance carrier.

Polito v. Continental Cas. Co., 689 F.2d 457, 459-60 (3d Cir. 1982).

Pennsylvania law only recognizes a fiduciary duty by an insurer to its insured in the context of a
third-party claim made under a liability insurance policy. A third-party insurance claim involves
someone other than the policy holder bringing suit against the insurance carrier, such as an
injured passenger in motor vehicle accident. See Daniel P. Fuss Builders-Contractors Inc. v.
Assurance Co. of Am., No. 06-1182, 2006 WL 2372226, at *1-3 (E.D. Pa. Aug. 11, 2006). In
this regard:

17

Under Pennsylvania law, a fiduciary duty . . . does not arise out of an insurance
contract until an insurer asserts a stated right under the policy to handle all claims
asserted against the insured.
See Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218, 227-28 (3d Cir. 2000); see also
Hayes v. Am. Int’l Group, No. 09-2874, 2014 WL 3746813, at *18 (E.D. Pa. July 29, 2014)
(“[A]n insurer does not have a fiduciary duty to an insured, except in limited circumstances such
as where the insurer asserts a right to defend claims against the insured.”).
Here, Plaintiff asserts that AMH breached its fiduciary to duty him in his capacity as an
alleged beneficiary of the insurance policy, which is a first-party insurance claim.

Under

Pennsylvania law, this situation does not create a fiduciary relationship between Plaintiff and
AMH. Keefe, 203 F.3d at 227-28 (there is no fiduciary duty for first-party insurance claims).
Therefore, Plaintiff’s claim for breach of fiduciary duty against AMH will be dismissed.
C. Count II – Civil Conspiracy
In Count II, Plaintiff alleges that the “Mortgage Defendants [and the Insurance
Defendants] combined to do an unlawful act (or used unlawful means) to deprive Plaintiff of the
restoration and repair [insurance] proceeds.” (Doc. No. 16 at ¶¶ 90, 92.)
Under Pennsylvania law, to establish a prima facie case of civil conspiracy, a plaintiff
must first allege: “(1) a combination of two or more persons acting with a common purpose to do
an unlawful act by unlawful means or for an unlawful purpose; (2) an overt act done in
furtherance of the common purpose; and (3) actual legal damage.” General Refractories Co. v.
Fireman’s Fund Ins. Co., 337 F.3d 297, 313 (3d Cir. 2003); see also Skipworth by Williams v.
Lead Indus. Ass’n, Inc., 690 A.2d 169, 235 (Pa. 1997); see generally Sarpolis v. Teresheko, 625
F. App’x 594 (3d Cir. 2016). In order to adequately plead conspiracy:

18

[t]he allegations must be sufficient to describe the general composition of the
conspiracy, some or all of its broad objectives, and the defendant's general role in
that conspiracy.
Rose v. Bartle, 871 F.2d 331, 336 (3d Cir. 1989). “[P]roof of conspiracy must be made by full,
clear and satisfactory evidence.” Phillips v. Selig, 959 A.2d 420, 437 (Pa. Super. Ct. 2008).
Additionally, “[p]roof of malice is an essential part of a cause of action for conspiracy.”
Sarpolis, 625 F. App’x at 601 (citing Goldstein v. Philip Morris, Inc., 854 A.2d 585, 590 (Pa.
Super. Ct. 2004)). Malice is found where the conspirators act with the sole purpose of injuring
the plaintiff without a justification. Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466, 472
(Pa. 1979). Malice is not found where there are facts establishing that the person acted for
professional reasons and not solely to injure the plaintiff. Bro-Tech Corp. v. Thermax, Inc., 651
F. Supp. 2d 378, 419 (E.D. Pa. 2009).
1. The Mortgage Defendants did not Engage in Civil Conspiracy
Plaintiff fails to allege that WMC, MERS, and Vanderbilt engaged in a civil conspiracy
against him. (Doc. No. 16 at ¶ 91.) The only evidence of alleged collusion between any of the
Mortgage Defendants is the two assignments of the Mortgage. However, Plaintiff fails to plead
plausible facts demonstrating that the assignments were for the sole purpose of injuring him. In
fact, Plaintiff provides no evidence that these transactions were anything other than regular
business dealings. No plausible unlawful means or purpose is alleged.
WMC executed the loan agreement with Plaintiff and designated MERS as its nominee.
(Doc. No. 16, Ex. B at 2.) MERS, whose primary business function as noted by the Third Circuit
is to transfer mortgage interests, assigned WMC’s interest in the Mortgage to Vanderbilt.18
Vanderbilt then insured its interest in the Property through a force-placed hazard insurance policy
18

Montgomery Cnty. v. MERSCORP Inc., 795 F.3d 372, 374 (3d Cir. 2015); (Doc. No. 16, Ex. C
at 2.)
19

on the Property when Plaintiff failed to do so. (Doc. No. 16, Ex. F; Id. at ¶ 39.) The Mortgage
Defendants engaged in these acts for their own legitimate business reasons and not to harm
Plaintiff. No unlawful purpose or means has been plausibly alleged in the Amended Complaint
by Plaintiff.
Moreover, Plaintiff has failed to plausibly allege that the Mortgage Defendants acted with
malice. As stated in Thompson Coal Co., malice cannot be established where the defendant
acted for professional reasons. 412 A.2d at 472-73.

See Fleet Nat’l Bank v. Boyle, No. 04-

1277, 2005 WL 2455673, at *12 (E.D. Pa. 2005) (dismissing a civil conspiracy claim where
allegations demonstrated the defendant’s actions were intended to advance their own business,
and therefore, plaintiff could not establish requisite malice). Here, Plaintiff fails to allege any
facts that suggest the Mortgage Defendants acted contrary to their own legitimate business
interests or with the sole intent to harm him. (See generally, Doc. No. 16.) For these reasons,
Plaintiff fails to allege that WMC, MERS, or Vanderbilt acted with malice. Accordingly, the
civil conspiracy claim in Count II will be dismissed as to these Defendants.
2. HomeFirst and SWBC did not Engage in Civil Conspiracy
Plaintiff also fails to sufficiently allege that the actions of HomeFirst and SWBC were
part of an alleged conspiracy or that they acted with the sole intent to injure him. Plaintiff
alleges that “[t]he Insurance Defendants together with the Mortgage Defendants combined to do
an unlawful act (or used unlawful means) to deprive Plaintiff of restoration and insurance
proceeds.” (Doc. No. 16 at ¶ 92.) However, as noted above, Plaintiff’s only specific allegation
regarding HomeFirst and SWBC is that they are “insurance broker[s] . . . in relation to the
insurance policy at issue.” (Id. at ¶ 6.) Plaintiff does not assert any specific unlawful actions
taken by HomeFirst and SWBC in connection with the alleged conspiracy.

20

In addition, Plaintiff fails to assert that HomeFirst and SWBC acted with the sole intent to
injure Plaintiff.

Again, as Plaintiff admits, HomeFirst and SWBC are merely “insurance

broker[s].” (Doc. No. 16 at ¶ 6.) The only action taken by HomeFirst and SWBC was facilitating
the purchase of the force-placed hazard policy. (Id. at ¶ 40.) HomeFirst and SWBC were
therefore acting pursuant to their normal business interests. No plausible claim of malice is
alleged in the Amended Complaint. Accordingly, the civil conspiracy claim in Count II against
HomeFirst and SWBC will be dismissed.
3. American Modern Home did not Engage in Civil Conspiracy
Plaintiff also does not plausibly allege that AMH acted with the sole intent to injure
Plaintiff through an unlawful means or with an unlawful purpose. Plaintiff merely alleges that
AMH sent the insurance proceeds to Vanderbilt instead of disbursing the funds to him. (Doc.
No. 16 at ¶ 92.) Here, AMH’s only action was properly paying the insurance proceeds to
Vanderbilt, the only named payee on the insurance policy. (Doc. No. 20, Ex. D at 2.) When
AMH paid the insurance proceeds, it was doing what it was contractually obligated to do. AMH
was acting in its own legitimate business interest by honoring the terms of the force-placed
hazard policy. Thus, viewing the facts alleged in the light most favorable to Plaintiff, he fails to
plead any facts showing that AMH acted with malice toward him or engaged in an unlawful
means to pursue an illegal purpose. (Doc. No. 16 at ¶¶ 10-85.) As a result, Plaintiff fails to state
a plausible claim for civil conspiracy against AMH in Count II.
D. Count III – Breach of Contract
In Count III, Plaintiff alleges the Mortgage Defendants breached the mortgage contract
“by misappropriating the restoration and repair proceeds, . . . by not paying taxes from escrow,
and by making material misrepresentations concerning the authorization to do such acts.” (Doc.

21

No. 16 at ¶ 95). In addition, Plaintiff alleges the Insurance Defendants breached the insurance
agreement by giving the proceeds to Vanderbilt and by enabling Vanderbilt to become the sole
beneficiary of the policy. (Id. at ¶ 96.)
To establish a breach of contract claim:
Pennsylvania law requires that a plaintiff seeking to proceed with a breach of
contract action must establish “(1) the existence of a contract, including its
essential terms, (2) a breach of a duty imposed by the contract[,] and (3) resultant
damages.”
Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003) (quoting CoreStates Bank, N.A. v.
Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999)). “It is fundamental contract law that one
cannot be liable for a breach of contract unless one is a party to that contract.” Electron Energy
Corp v. Short, 597 A.2d 175, 177 (Pa. Super. Ct. 1991), aff’d, 618 A.2d 395 (1993).
1. Vanderbilt did not Breach its Contract with Plaintiff
Plaintiff claims that Vanderbilt breached its mortgage contract by using the insurance
proceeds to protect its own interest in the Property. (Doc. No. 16 at ¶ 95.) Plaintiff was not
entitled to the insurance proceeds because the mortgage did not require the force-placed hazard
policy to cover him if there was a total loss of the Property. In addition, the funds were properly
used under the terms of the policy to pay down the mortgage.
The Mortgage required Plaintiff to place hazard insurance on his Property. (Doc. No. 19,
Ex. B at 6-7) (“Borrower shall keep the improvements now existing or hereafter erected on the
Property insured against loss by fire . . .”).) Plaintiff admits that he failed to obtain fire insurance
for the house and as a result, Vanderbilt obtained an insurance policy to protect itself in

22

accordance with the terms of the Mortgage.19 (Doc. No. 16 at ¶ 39.) When the fire loss
occurred, the insurer, American Modern Home, paid the insurance proceeds to Vanderbilt, who
used the funds to satisfy in part its own interest in the Property.
Vanderbilt’s actions were expressly authorized by the Mortgage:
In the event of loss, Borrower shall give prompt notice to insurance carrier and
Lender. Lender may make proof of loss if not made promptly by Borrower.
Unless Lender and Borrower otherwise agree in writing, any insurance proceeds,
whether or not the underlying insurance was required by Lender, shall be applied
to restoration or repair of the Property, if the restoration or repair is economically
feasible and Lender’s security is not lessened . . . If the restoration or repair is not
economically feasible or Lender’s security would be lessened, the insurance
proceeds shall be applied to the sums secured by this Security Instrument,
whether or not then due, with the excess, if any, paid to Borrower . . .
(Doc. No. 19, Ex. B at 6-7). Accordingly, because there was a total loss of the Property making
it economically unfeasible to restore and repair, Vanderbilt acted within the terms of the
Mortgage by using the proceeds to pay down the mortgage. This use did not constitute a breach
of the Mortgage contract.
Furthermore, Vanderbilt’s actions are not inconsistent with the law regarding force-placed
insurance policies. See Montanez v. HSBC Mortgage Corp. (USA), 876 F. Supp. 2d 504, 508
(E.D. Pa. 2012) (observing that “[t]he purpose of force-placing insurance is to protect the
lender’s security interest in the property in the event the borrower fails to insure the property
adequately.”). Accordingly, Vanderbilt acted within the terms of the Mortgage and did not
breach it. Plaintiff’s claim for breach of contract against Vanderbilt will be dismissed.20

19

Section 5 of the Mortgage provides: “Lender is under no obligation to purchase any particular
type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might
not protect Borrower, Borrower’s equity in the Property . . .” (Doc. No. 19, Ex. B at 6-7.)

20

The allegations in the Amended Complaint do not support a claim that the Mortgage
Defendants were under a contractual obligation to escrow and pay real property taxes from
23

2. WMC and MERS did not Breach a Contract with Plaintiff
Plaintiff’s claims of breach of contract against WMC and MERS will be dismissed
because they were not in a contractual relationship with Plaintiff at the time of the fire loss.
First, WMC did not have an interest in the Mortgage at the time of the fire loss. At the time of
the loss, the Mortgage had been transferred to Vanderbilt. Therefore, WMC had no relationship
with Plaintiff under a contract. In the absence of a contractual relationship, no breach of contract
claim can exist. See Electron Energy Corp., 597 A.2d at 178 (holding that a party was not liable
for breach of contract because he was not a party to the contract).
Second, MERS had no contractual relationship with Plaintiff at the time of the fire loss.
On June 22, 2011, MERS, in its nominee capacity for WMC, assigned all its right, title, and
interest in the Mortgage to Vanderbilt Mortgage and Finance, Inc. (Doc. No. 16, Ex. B at 2.)
Therefore, when the fire loss occurred, MERS had no contractual relationship with Plaintiff.21 In
the absence of a contractual relationship, MERS did not breach the terms of the contract. See

escrowed funds.
Moreover, the allegations do not plausibly show that material
misrepresentations were made about escrowing and paying the real property taxes.
21

Plaintiff alleges that one or both assignments were deficient or defective and did not transfer
any rights to Vanderbilt. However, Plaintiff does not have proper standing to challenge the
validity or effectiveness of the assignments. See Dixon v. Stern & Eisenberg, PC, No. 5:14cv-4551, 2015 WL 3833782 at *11 (E.D. Pa. June 19, 2015) (holding that a borrower lacks
standing to challenge the validity of an assignment of mortgage); Potoczny v. Aurora Loan
Servs., LLC, 33 F. Supp. 3d 554, 566 n.18 (E.D. Pa. 2014) (concluding that the debtor lacked
standing to contest the validity of the assignment “[b]ecause any payments made to the holder
of the note will discharge a debtor's liability under the note, the debtor cannot be harmed by
paying the holder, even if the holder failed to comply with certain transfer requirements”).
Additionally, it is irrelevant which of the two assignments effectively transferred the rights in
the Mortgage from MERS, as nominee, to Vanderbilt. Regardless which assignment
transferred the rights with respect to the Mortgage, Vanderbilt was the holder of the Mortgage
at the time of the alleged fire loss and at the time the insurance proceeds were distributed.
Moreover, Vanderbilt was the named insured on the Policy.
24

Electron Energy Corp., 597 A.2d at 178. Accordingly, Plaintiff’s breach of contract claims
against WMC and MERS will be dismissed.
3. HomeFirst and SWBC did not have a Contract with Plaintiff
Plaintiff’s breach of contract claim against HomeFirst and SWBC fails because they were
not parties to the insurance contract. They did not provide the insurance and were not the named
insureds.22 (Doc. No. 16 at ¶ 97.) According to Plaintiff, HomeFirst and SWBC were merely
“insurance broker[s].” (Id. at ¶ 6.) Consequently, HomeFirst and SWBC cannot be liable for
breach of contract when they were not parties to the insurance contract and had no contractual
relationship with Plaintiff.

See, e.g., Reeves v. Middletown Ath. Ass’n, 866 A.2d 1115, 1125

(Pa. Super. Ct. 2004) (“It is undisputed that a written contract did not exist . . . [the plaintiff]
cannot prevail on a breach of contract claim because no contract existed . . .”). For this reason,
Plaintiff’s breach of contract claim against HomeFirst and SWBC will be dismissed.
4. AMH did not have a Contract with Plaintiff
Plaintiff’s claim for breach of contract against AMH also will be dismissed because he
did not have a contractual relationship with AMH. The Evidence of Insurance form states that
the insured under the policy agreement was Vanderbilt, not Plaintiff. (Doc. No. 19, Ex. D at 4.)
Even if Plaintiff is considered a party to the insurance contract as a beneficiary, AMH did not
breach the insurance contract because it had the right under its terms to pay the proceeds to
Vanderbilt. (Doc. No. 20, Ex. D at 2.) For these reasons, Plaintiff’s claim for breach of contract
against AMH will be dismissed. See, e.g., Reeves, 866 A.2d at 1125.

22

The Policy describes American Modern Home as the insurance provider and Vanderbilt as the
insured. (See Doc. No. 19, Ex. D at 4.)
25

E. Count IV – Breach of Duty of Good Faith and Fair Dealing23
Plaintiff alleges a breach of the duty of good faith and fair dealing as follows:
The mortgagee defendants breached the mortgage contract (i.e. the security
document) by misappropriating the restoration and repair proceeds and by not
paying the taxes from escrow and by making material misrepresentations
concerning the authorization to do such acts. The mortgagee defendants also
breached the contract by wrongfully accelerating the loan repayment schedule and
by characterizing the satisfaction as a charge off. To the extent that no express
contract is found between Plaintiff and any of the mortgage defendants (or their
respective principles in agency), Plaintiff asserts that those defendants maintain a
common law duty to act in good faith which was violated . . . 24
(Doc. No. 16 at ¶ 99.)
The claim of not acting in good faith and not dealing fairly cannot proceed against
Defendants because based on the facts pled, Defendants acted properly and did not breach any
duty of good faith or fair dealing. Defendants did not misappropriate the insurance proceeds or
make material misrepresentations about their right to the proceeds and payment of taxes from
escrow.25

Moreover, Defendants never accelerated loan repayments from Plaintiff, and

characterizing the satisfaction of the loan as a charge-off was proper. It was unlikely that
Plaintiff would continue to pay the Mortgage to reduce the outstanding debt after the insurance
proceeds were applied, and Vanderbilt forgave the payment of the balance of the Mortgage by
23

This count only names WMC, MERS, Vanderbilt, HomeFirst, SWBC, and AMH as
defendants. MERSCORP Holding, Inc. is not named as a defendant.

24

It appears that Plaintiff is alleging the claim of breach of duty of good faith and fair dealing as
an alternative to his breach of contract claim because “Pennsylvania law does not recognize a
separate claim for breach of implied covenant of good faith and fair dealing” when the
allegations that support the bad faith claim are the same ones that support a breach of contract
claim. Sayre v. Customers Bank, No. 14-3740, 2015 WL 3458790, at *14 (E.D. Pa. May 29,
2015) (citing Blue Mountain Mushroom Co., Inc. v. Monterey Mushroom, Inc., 246 F. Supp.
2d 394, 400-01 (E.D. Pa. 2002)).

25

The claim involving “material misrepresentations” is covered infra in Section F (Count VNegligent Misrepresentation/Fraud).
26

Plaintiff. Using the term charge-off to characterize this situation was not an act of bad faith.
Accordingly, Count IV alleging a breach of good faith and fair dealing against all Defendants
will be dismissed.
F. Count V – Negligent Misrepresentation/Fraud26
In Count V, Plaintiff claims that the “Mortgage Defendants negligently and/or
fraudulently mischaracterized the terms of the security agreement and the terms of the insurance
policy to justify their illegal retention of the proceeds.” (Doc. No. 16 at ¶ 103.) While Plaintiff
groups misrepresentation and fraud together, they are separate causes of action.

However,

because each claim requires Plaintiff to plead a misrepresentation and Plaintiff fails to do so,
they will be addressed together.
To state a claim for negligent misrepresentation, a plaintiff must allege: “(1) a
misrepresentation of material fact; (2) made under circumstances in which the misrepresenter
ought to have known its falsity; (3) with an intent to induce another to act on it; and (4) which
results in injury to a party acting in justifiable reliance on the misrepresentation.” Bilt-Rite
Contractors, Inc. v. Architectural Studio, 866 A.2d 270, 277 (Pa. 2005). Similarly, the elements
for a fraudulent misrepresentation are:
(1) a representation; (2) material to the transaction at hand; (3) made falsely, with
knowledge of its falsity or recklessness as to whether it is true or false; (4) with
the intent of misleading another into relying on it; (5) justifiable reliance on the
misrepresentation; and (6) a resulting injury proximately caused by the reliance.
Patel v. Patel, No. 14-5845, 2016 WL 3000821, at *12-13 (E.D. Pa. May 25, 2016) (citing Ira G.
Steffy & Son, Inc. v. Citizens Bank of Pa., 7 A.3d 278, 290 (Pa. Super. Ct. 2010)).

26

Plaintiff makes this claim against WMC, MERS, and Vanderbilt only.
27

1. Vanderbilt did not Misrepresent the Terms of the Mortgage
or Insurance Coverage
Plaintiff’s misrepresentation and fraud claims against Vanderbilt fail because the
Amended Complaint does not plausibly establish that Vanderbilt misrepresented to him the terms
of the Mortgage or the insurance policy issued by AMH.

Plaintiff’s allegations of

misrepresentation relate to Vanderbilt’s August 13, 2014 letter sent to Plaintiff after he filed a
complaint with the Consumer Financial Protection Bureau. (Doc. No. 16 at ¶ 56, 61.) In the
letter, Vanderbilt used language that covered the terms of the mortgage and insurance policy.27

27

The August 13, 2014 letter from Vanderbilt states:
The Mortgage states: [T]he Lender may, but is not obligated to, obtain and pay
insurance coverage on behalf of the customer in order to protect their security
interest in the Property when sufficient insurance coverage has not been
maintained or proof of such coverage has not been provided to the Lender. This
coverage may or may not protect the Borrower, their equity in the Property, or
contents of said Property, and the cost of this insurance may exceed the cost of
similar insurance coverage the Borrower could obtain on their own. Furthermore,
the amounts disbursed by Lender would be considered as additional debt of the
Borrower and secured by the Mortgage.
VMF [Vanderbilt] was not required to obtain insurance coverage at all, much less
insurance that would have protected your interest in the Property.
(Doc. No. 16, Ex. N at 2.) As previously noted, the Mortgage provides:
If Borrower fails to maintain any of the coverages described above, Lender may
obtain insurance coverage, at Lender’s option and Borrower’s expense. Lender is
under no obligation to purchase any particular type or amount of coverage.
Therefore, such coverage shall cover Lender, but might or might not protect
Borrower, Borrower’s equity in the Property, or the contents of the Property,
against any risk, hazard or liability and might provide greater or lesser coverage
than was previously in effect. Borrower acknowledges that the cost of the
insurance coverage so obtained might significantly exceed the cost of insurance
that Borrower could have obtained. Any amounts disbursed by Lender under this
Section 5 shall become additional debt of Borrower secured by this Security
Instrument. These amounts shall bear interest at the Note rate from the date of
disbursement and shall be payable, with such interest, upon notice from Lender to
Borrower requesting payment.
28

(Doc. No. 16, Ex. N at 2.) The Mortgage expressly authorized Vanderbilt to purchase a forceplaced insurance policy to protect its own financial interest in the Property. 28 (Doc. No. 19, Ex.
B at 6.) No material misrepresentation was made in this letter. Therefore, Plaintiff’s claim for
negligent misrepresentation and fraud will be dismissed against Vanderbilt.
2. WMC and MERS did not Misrepresent the Terms of the Mortgage
Plaintiff fails to plausibly allege in the Amended Complaint a misrepresentation made by
WMC or MERS to Plaintiff regarding the Mortgage. (Doc. No 16 at ¶¶ 10-104.) The only
representation made by WMC, MERS, or Vanderbilt about the terms of the Mortgage stem from
allegations concerning Vanderbilt. WMC and MERS are not alleged to have been the subject of
Plaintiff’s complaint to the CFPB. Plaintiff has not pled statements by WMC or MERS that were
misrepresentations. In the absence of a specific misrepresentation, Plaintiff’s claim is not legally
cognizable. See Progress Federal Savings Bank v. Lenders Ass’n, Inc., No. 94-7425, 1995 WL
94788, at * 2 (E.D. Pa. Mar. 6, 1995) (granting defendant’s motion to dismiss on a claim of
misrepresentation for failure to allege a specific misrepresentation made by the defendants to the
plaintiff). Therefore, Plaintiff’s claims for negligent misrepresentation and fraud against WMC
and MERS will be dismissed.

(Doc. No. 19, Ex. B at 6.) While the language used in the letter does not exactly track the
language in the Mortgage, viewing it in the light most favorable to Plaintiff, it does not
substantively diverge from the terms of the Mortgage.
28

As noted, in relevant part, the Mortgage states:
Lender is under no obligation to purchase any particular type or amount of
coverage. Therefore, such coverage shall cover Lender, but might or might not
protect Borrower, Borrower’s equity in the Property, or the contents of the
Property, against any risk, hazard or liability and might provide greater or lesser
coverage than was previously in effect.
(Doc. No. 19, Ex. B at 6.)
29

G. Count VI – Unjust Enrichment
Sixth, Plaintiff alleges as his unjust enrichment claim that “[t]he Mortgage Defendants
received a benefit from the insurance proceeds . . . [and] also received a benefit from the interest
payments paid by [Plaintiff] under the terms of the security document.” (Doc. No. 16 at ¶ 106.)
Plaintiff further alleges that “[t]he Insurance Defendants received a benefit from the insurance
premiums.” (Id. at ¶ 107.) The elements necessary to prove unjust enrichment are:
(1) benefits conferred on defendant by plaintiff; (2) appreciation of such benefits
by defendant; and (3) acceptance and retention of such benefits under such
circumstances that it would be inequitable for defendant to retain the benefit
without payment of value . . . The application of the doctrine depends on the
particular factual circumstances of the case at issue. In determining if the doctrine
applies, our focus is not on the intention of the parties, but rather on whether the
defendant has been unjustly enriched.
Durst v. Milroy Gen Contracting, Inc., 52 A.3d 357, 360 (Pa. Super. Ct. 2012) (quoting Schenck
v. K.E. David, Ltd., 666 A.2d 327, 328 (Pa. Super. Ct. 1995)). The doctrine of unjust enrichment
is “inapplicable when the relationship between parties is founded on a written agreement or
express contract.” Benner v. Bank of Am., N.A., 917 F. Supp. 2d 338, 360 (E.D. Pa. 2013)
(stating that Pennsylvania law precludes a claim for unjust enrichment where the relationship
between the parties is based on a written contract); Schott v. Westinghouse Elec. Corp., 259 A.2d
443, 448-49 (Pa. 1969).
1. The Mortgage Defendants were not Unjustly Enriched
Plaintiff’s claim for unjust enrichment fails against WMC, MERS, and Vanderbilt
because his claims are based on written contracts, the Mortgage and the insurance policy. As the
Pennsylvania Supreme Court has held and this Court has recognized, the doctrine of unjust
enrichment is “inapplicable when the relationship between parties is founded on a written
agreement or express contract.” Benner, 917 F. Supp. 2d at 360; Schott, 259 A.2d at 448-49.

30

Additionally, Plaintiff’s claims against WMC and MERS fails because WMC and MERS were
never in possession of the insurance proceeds. (Doc. No. 16 at ¶¶ 10-110.)

The proceeds were

paid to Vanderbilt and WMC and MERS were never enriched by the proceeds at all. For these
reasons, Count VI will be dismissed against WMC, MERS, and Vanderbilt.
2. HomeFirst and SWBC were not Unjustly Enriched
Plaintiff fails to establish that any benefit was unjustly conferred upon HomeFirst or
SWBC.

Instead, Plaintiff claims “[t]he Insurance Defendants received a benefit from the

insurance premiums.” (Doc. No. 16 at ¶¶ 107-110.) Here, HomeFirst and SWBC were brokers
who placed the insurance for Vanderbilt with AMH. Apparently, they were paid for their services
as brokers in placing the insurance and did not receive proceeds from the insurance claim. As a
result, Plaintiff’s claim that HomeFirst, and SWBC were unjustly enriched is without merit.
3. AMH was not Unjustly Enriched
Plaintiff fails to plausibly explain in the Amended Complaint how AMH was unjustly
enriched. AMH’s sole source of enrichment in this case was the Policy premiums paid by
Vanderbilt. Viewing the facts in the light most favorable to Plaintiff, he fails to plead how AMH,
while acting within the normal course of its business as an insurer, received an unjust benefit.
AMH was paid for services rendered and properly paid the insurance proceeds to Vanderbilt after
the fire loss. For this reason, Plaintiff’s claim for unjust enrichment against AMH also fails.
H. Count VII – Trust Liability/Bailment29
1. Constructive Trust
There are no plausible allegations that the Mortgage Defendants were unjustly enriched
and therefore Plaintiff’s request for an imposition of a constructive trust will be dismissed. In
Count VII, Plaintiff alleges the “Mortgage Defendants received the insurance proceeds to hold
29

Only WMC, MERS, and Vanderbilt are named in Count VII.
31

for a particular purpose (i.e. restoration & repair). A demand for those proceeds was made
repeatedly by Plaintiff and denied by the Mortgage Defendants.” (Doc. No. 16 at ¶ 112.)
Plaintiff additionally asserts that the “[e]ven without an express provision [to hold the insurance
proceeds], a constructive trust exists.”

(Id. at ¶ 113.) Essentially, Plaintiff is arguing that the

Mortgage Defendants owed him the proceeds of the insurance contract because a constructive
trust existed.
“A constructive trust arises where a person who holds title to property is subject to an
equitable duty to convey it to another on the ground that he would be unjustly enriched if he
were permitted to retain it.” Pierro v. Pierro, 264 A.2d 692, 696 (Pa. 1970). Under Pennsylvania
law, a constructive trust works in tandem with unjust enrichment, and for a constructive trust to
be plausible, the elements of unjust enrichment must be adequately pled. Kern v. Kern, 892 A.2d
1, 8-9 (Pa. Super. Ct. 2005); Shepley v. Dobbin, 505 A.2d 327, 330 (Pa. Super. Ct. 1986)
(“Equity will impose a constructive trust under appropriate circumstances. However, our case
law is exigent in demanding evidence of unjust enrichment before a trust will be created.”).
Essentially, without a properly pled argument for unjust enrichment, there can be no argument
for a constructive trust against the Mortgage Defendants.
Plaintiff’s claim for imposing a constructive trust is unpersuasive. As noted above, under
Pennsylvania law, constructive trusts work in tandem with unjust enrichment claims. For a
constructive trust to be imposed, the elements of unjust enrichment must be adequately alleged.
Kern, 983 A.2d at 8-9; Shepley, 505 A.2d at 330. As previously determined, Plaintiff’s claim
against the Mortgage Defendants for unjust enrichment is deficient because the claim is based on
a written contract. Because a written contract exists, no constructive trust can be created.
Moreover, no plausible allegation that the Mortgage Defendants have been unjustly enriched has

32

been set forth in the Amended Complaint. Accordingly, Plaintiff’s request for an imposition of a
constructive trust on WMC, MERS, and Vanderbilt will be dismissed.
2. Bailment
No bailment was created with Vanderbilt because the insurance contract entitled
Vanderbilt to the insurance proceeds.
In Lear v. Eddy, the Pennsylvania Superior Court found that:
A bailment is a delivery of a personalty for the accomplishment of some purpose
upon a contract, express or implied, that after the purpose has been fulfilled, it
shall be redelivered to the person who delivered it, otherwise dealt with it
according to his directions or kept until he reclaims it.
749 A.2d 971, 973 (Pa. Super. Ct. 2000) (quoting Price v. Brown, 680 A.2d 1149, 1151-52 (Pa.
1996)). Plaintiff asserts that the “Mortgage Defendants received the insurance proceeds to hold
for a particular purpose (i.e. restoration & repair),” and these funds should have been turned over
to him. (Doc. No. 16 at ¶ 111.) Plaintiff, however, fails to allege any facts showing that WMC
or MERS received any insurance proceeds, the subject of the bailment. Second, no bailment was
created with Vanderbilt because the insurance contract entitled Vanderbilt to receive the
insurance proceeds. Based on the plain language of the Mortgage and the Policy, Vanderbilt was
legally entitled to the proceeds as the named insured. Since the Property was totally destroyed,
Vanderbilt was entitled to apply the proceeds to the amount due under the mortgage it held.30
Therefore, Plaintiff’s claim for a bailment will be dismissed.
30

As noted, the Mortgage states:
Lender is under no obligation to purchase any particular type or amount of
coverage. Therefore, such coverage shall cover Lender, but might or might not
protect Borrower, Borrower’s equity in the Property, or the contents of the
Property, against any risk, hazard or liability and might provide greater or lesser
coverage than was previously in effect.
(Doc. No. 19, Ex. B at 6.)
33

I. Count VIII –Diminution in Value and Waste31
Count VII of the Amended Complaint alleges that the Mortgage Defendant’s
“misappropriation of the insurance proceeds resulted in diminution in value and waste of real
property.” (Doc. No. 16 at ¶¶ 116-17.)
Under Pennsylvania law, diminution in value is a measure of damages. Centolanza v.
Leigh Valley Diaries, Inc., 658 A.2d 336, 338 (Pa. 1995) (stating that the trial court properly
determined that the plaintiff’s claim for diminution in value of property is a “claim for damages
and not [a] cause of action.”) Therefore, no claim can be asserted against any Defendant for
diminution in value of the real estate as a cause of action. Id.
To establish a cause of action for waste, a plaintiff must prove: “an act constituting waste,
done by one legally in possession of the property, prejudicial to the estate or interest of another.”
Versatile Metals, Inc. v. Union Corp., No. 85-4085, 1985 WL 47, at *1 (E.D. Pa. Dec. 9, 1985).
Here, Plaintiff does not plausibly allege in the Amended Complaint the requisite elements of a
waste cause of action against the Mortgage Defendants. The Amended Complaint contains no
specific or plausible allegations that WMC, MERS, or Vanderbilt were in possession of the
Property at the time of the fire loss. Plaintiff possessed the Property at the time. After the fire,
the receipt and use of the insurance proceeds by Vanderbilt does not amount to waste because the
funds were properly used as discussed above. Accordingly, the Court will dismiss Plaintiff’s
claim for diminution and waste against the Mortgage Defendants.

The “Evidence of Insurance” document specifically states: “Insured/Lender Name
& Address VANDERBILT MORTGAGE & FINANCE PO BOX 9800
MARYVILLE, TN 37802.”
(Doc. No. 19, Ex. D at 4.)
31

This claim pertains only to WMC, MERS, and Vanderbilt.
34

J. Count IX – Conversion, Theft, and Misappropriation
In Count IX, Plaintiff alleges that the “mortgage defendants misappropriated the
insurance proceeds; the misappropriation represents a conversion . . . and theft as contemplated
by 18 Pa. C.S. § 1821, et seq.” (Doc. No. 16 at ¶¶ 120-22.)
1. The Claim of Conversion of the Insurance Proceeds by the Mortgage Defendants
is Without Merit
Plaintiff’s claim for conversion is also without merit. In Pennsylvania, “[c]onversion is a
tort by which the defendant deprives the plaintiff of his right to a chattel or interferes with the
plaintiff's use or possession of a chattel without the plaintiff’s consent and without lawful
justification.” Pittsburgh Const. Co v. Griffith, 834 A.2d 572, 581 (Pa. Super. Ct. 2003). To
establish conversion, the plaintiff must establish that the defendant wrongfully took property
from the plaintiff. Id.
a. WMC and MERS
Here, Plaintiff cannot establish that WMC or MERS wrongfully took Property from him.
Plaintiff broadly states that “[t]he Mortgage Defendants misappropriated the insurance
proceeds.” (Doc. No. 16 at ¶ 120.) Plaintiff fails to allege that either WMC or MERS were in
possession of the insurance proceeds at any time. The only party that ever received the insurance
proceeds is Vanderbilt. Accordingly, Plaintiff’s claim for conversion against WMC and MERS
in Count IX will be dismissed
b. Vanderbilt
Plaintiff’s claim for conversion against Vanderbilt in Count IX also will be dismissed for
two reasons. First, Vanderbilt did not convert the insurance proceeds. As noted previously, the
allegations show that Vanderbilt had a right to the proceeds and Plaintiff’s consent was not
necessary. Second, Plaintiff’s claims are barred by the gist of the action doctrine. “[W]here the
35

success of a conversion claim depends entirely on the [parties’] obligations as defined by a
contract, the gist of the action doctrine applies.” Patel v. Patel, No. 14-5845, 2016 WL 3000821,
at *4 (E.D. Pa. May 25, 2016). The gist of the action doctrine precludes plaintiffs from recasting a breach of contract claim as a tort claim. Id. (citing Hart v. Arnold, 884 A.2d 316, 339
(Pa. Super. Ct. 2005)). In Bruno v. Erie Insurance Exchange, the Pennsylvania Supreme Court
explained:
[The] substance of the allegations comprising a claim in a plaintiff's complaint are
of paramount importance, and, thus, the mere labeling by the plaintiff of a claim
as being in tort . . . is not controlling. If the facts of a particular claim establish
that the duty breached is one created by the parties by the terms of their
contract—i.e., a specific promise to do something that a party would not
ordinarily have been obligated to do but for the existence of the contract—then
the claim is to be viewed as one for breach of contract . . . If, however, the facts
establish that the claim involves the defendant's violation of a broader social duty
owed to all individuals, which is imposed by the law of torts and, hence, exists
regardless of the contract, then it must be regarded as a tort.
106 A.3d 48, 68 (Pa. 2014).
Here, Plaintiff’s claim is essentially based on Vanderbilt obtaining and retaining
possession of the insurance proceeds under the terms of the Mortgage and the Insurance Policy.
Thus, the particular facts of the claim “establish that the duty is one created by the parties by the
terms of their contract.” Id. at 68. Therefore, Plaintiff’s claim for conversion against Vanderbilt
is precluded by the gist of the action doctrine and for this additional reason will be dismissed.
2. Plaintiff’s Claim of Criminal Theft Also Fails
Plaintiff further asserts that the WMC, MERS, and Vanderbilt committed “theft” in
violation of “18 Pa C.S. § 1821.” (Doc. No. 16 at ¶ 122.) Title 18 of Pennsylvania Statutes,
which primarily sets forth criminal violations in this Commonwealth, does not contain a
provision “C. S. § 1821.” But even if Plaintiff meant to cite to the proper criminal provision for
theft, 18 Pa. Const. Stat. Ann. § 3921, his claim could not proceed because a criminal statute of
36

general applicability does not create a private right of action. Agresta v. Goode, 797 F. Supp.
399, 409 (E.D. Pa. 1992); D’Errico v. DeFazio, 763 A.2d 424, 429-30 (Pa. Super. Ct. 2000).
Accordingly, Plaintiff’s claims against all Mortgage Defendants regarding theft will be
dismissed.
3. The Claim of Misappropriation of the Insurance Proceeds is Without Merit
In Pennsylvania, a claim for misappropriation arises in the context of trade secrets. See
12 Pa. Const. Stat. Ann. § 5302 (2012) (defining misappropriation as cause of action for the
improper acquisition of trade secrets); see also Felmlee v. Lockett, 351 A.2d 273, 278 (Pa. 1976)
(discussing a misappropriation claim in the context of trade secrets); Sorbee Int’l, Ltd. v. Chubb
Customs Ins. Co., 735 A.2d 712, 716 (Pa. Super. Ct. 1999) (discussing misappropriation claim in
the context of trade secrets). Plaintiff has not alleged any facts or claims that would suggest that
this case involves trade secrets.

Therefore, Plaintiff’s claim for misappropriation will be

dismissed.
K. Count X – Consumer Law Violations
In Count X, Plaintiff asserts numerous violations of consumer protection statutes against
the Mortgage Defendants. (Doc. No. 16 at ¶¶ 124-27.) The Court will review each in turn.
1. The Mortgage Defendants did not Violate the Pennsylvania Unfair Trade
Practices and Consumer Protection Law (“UTPCPL”)
First, Plaintiff asserts a violation of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law (“UTPCPL”) against all Mortgage Defendants. 73 Pa. Const. Stat.
Ann. § 201-1. To bring a private cause of action under the Unfair Trade Practices and Consumer
Protection Law (UTPCPL), a plaintiff must show that he justifiably relied on the defendant's
wrongful conduct or representation and that he suffered harm as a result of that reliance. Yocca
v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425, 438 (Pa. 2004).
37

Plaintiff’s Amended Complaint here fails to plausibly allege a violation of UTPCPL
against all Mortgage Defendants. Initially, Plaintiff does not allege that WMC or MERS made a
representation about the terms of the mortgage. (Id.) Plaintiff’s only allegations regarding a
misrepresentation are tied to the letter sent by Vanderbilt to Plaintiff, dated August 13, 2014.
(Doc. No. 16, Ex. N at 2.) As discussed above, the representations made to Plaintiff by
Vanderbilt in its August 13, 2014 letter to Plaintiff are consistent with the terms of the Mortgage.
Moreover, Plaintiff does not suggest that he relied upon the letter to his detriment. Thus,
Plaintiff fails to allege a proper claim under the UTPCPL against WMC, MERS, or Vanderbilt.
2. The Pennsylvania Fair Credit Extension Uniformity Act (“PFCEUA”) Claim
Will Be Dismissed
Plaintiff’s claim for violation of the Pennsylvania Fair Credit Extension Uniformity Act
(“PFCEUA”) against the Mortgage Defendants fails.

Private actions for violation of the

PFCEUA are enforceable in private actions under the UTPCPL. They cannot be brought as a
separate cause of action under the PFCEUA. See Parker v. Nationstar Mortgage LLC, No. 2:15cv-874, 2015 WL 6472223, at *8 (W.D. Pa. Oct. 27, 2015) (finding that “FCEUA violations are
enforceable in private actions brought under Pennsylvania’s Unfair Trade Practices and
Consumer Protection Law (UTPCPL).”). For this reason, the PFCEUA claim will be dismissed.
3. The Mortgage Defendants did not Violate the Fair Debt Collection Practices Act
(“FDCPA”)
Next, Plaintiff claims the Mortgage Defendants violated of the Fair Debt Collection
Practices Act (“FDCPA”).

15 U.S.C. § 1692 (2012). The FDCPA’s purpose is to “eliminate

abusive debt collection practices by debt collectors, [and] to insure that those debt collectors who
refrain from using abusive debt collection practices are not competitively disadvantaged . . .” 15
U.S.C. § 1692a(e).

38

To prevail on an FDCPA claim, a plaintiff must prove that (1) she is a consumer,
(2) the defendant is a debt collector, (3) the defendant's challenged practice
involves an attempt to collect a “debt” as the Act defines it, and (4) the defendant
has violated a provision of the FDCPA in attempting to collect the debt.
Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014). Under the FDCPA, a
“debt collector” is defined as:
any person who uses any instrumentality of interstate commerce or the mails in
any business the principal purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or indirectly, debts owed or due
or asserted to be owed or due another.
15 U.S.C. § 1692a(6).
Plaintiff’s claim fails against WMC, MERS, and Vanderbilt because they are not debt
collectors under the meaning of the statute. First, WMC and MERS never attempted to collect a
debt from Plaintiff and therefore cannot be debt collectors. Second, although Plaintiff owed
Vanderbilt payments for the Mortgage, Vanderbilt is not considered a debt collector. A party
acting to collect on a debt owed directly to it is not a debt collector under the statute. Estate of
Coles v. Zucker, Goldberg & Ackerman, 658 F. App’x 105, 111 (3d Cir. 2016) (holding that a
mortgage holder succeeding to the rights of the originating lender is not a “debt collector” under
the “originator exemption” set forth in 15 U.S.C. § 1692a(6)(F)(ii)); Pollice v. Nat’l Tax
Funding, L.P., 225 F.3d 379, 403 (3d Cir. 2000) (“Creditors—as opposed to ‘debt collectors’—
generally are not subject to the FDCPA.”). Therefore, Plaintiff’s claim against WMC, MERS,
and Vanderbilt for violation of the FDCPA will be dismissed.
4. Plaintiff does not Plausibly Allege a Violation of the Federal Fair Credit
Reporting Act
Plaintiff claims a violation of the Federal Fair Credit Reporting Act (“FFCRA”) against
the Mortgage Defendants. Plaintiff does not identify the specific violation of FFCRA, but rather
alleges a blanket violation of “15 U.S.C.A. § 1601 et seq.” But most importantly, Section 1682s39

2(a) does not afford a citizen a private right of action. SimmsParris v. Countrywide Fin. Corp.,
652 F.3d 355, 358 (3d Cir. 2011) (stating that claims for a violation of 15 U.S.C. § 1681s-2(a) are
only available to the government). Because Plaintiff is an individual, he has no claim under the
FFCRA. Consequently, this claim will be dismissed against WMC, MERS, and Vanderbilt.
5. Plaintiff does not Plausibly Allege a Violation of the Real Estate Settlement
Procedures Act
Plaintiff alleges all Mortgage Defendants violated the Real Estate Settlement Procedures
Act (“RESPA”). 12 U.S.C. § 2601 (2012). Plaintiff does not point to the specific provision of
RESPA he claims that the Mortgage Defendants violated. Rather, Plaintiff asserts a general
claim that all Mortgage Defendants engaged in “illicit methods of servicing the loan.” (Doc. No.
16 at ¶ 125.) By doing so, Plaintiff asserts no more than mere conclusory allegations, and does
not satisfy the pleading standard. Accordingly, Plaintiff’s claim for violation of RESPA against
WMC, MERS, and Vanderbilt will be dismissed.
6. The Mortgage Defendants did not Accelerate Plaintiff’s Loan under
Pennsylvania Code Section 31.203(a)
Plaintiff also contends that the Mortgage Defendants violated 12 Pa. Code § 31.203(a) by
accelerating the Mortgage without notice. (Doc. No. 16 at ¶ 126.) Section 31.203(a) covers the
obligation of a mortgagee to provide notice to a borrower before accelerating a mortgage loan.
12 PA. CODE § 31.203(a). Acceleration of a loan occurs when the lender notifies the borrower
that the entire unpaid balance of a loan is immediately due. In re Energy Future Holdings Corp.,
842 F.3d 247, 259 (3d Cir. 2016).
Here, Plaintiff does not plead that any of the Mortgage Defendants accelerated the loan.
Rather, he asserts that insurance proceeds were used to satisfy Vanderbilt’s interest in the
Property. (Doc. No. 16 at ¶ 55.) Viewing these facts in the light most favorable to Plaintiff, this

40

application of the insurance proceeds does not constitute an acceleration of the Mortgage.
Furthermore, 12 Pa. Code § 31.203 does not provide Plaintiff with relief because it does not
establish a private right of action. See 12 Pa. Code § 31.203. It is merely an administrative
provision on the proper notice that must be given before a lender accelerates a loan and
foreclosure. Therefore, Plaintiff’s claim that the Mortgage Defendants violated 12 Pa. Code §
31.203(a) will be dismissed.
7. The Mortgage Defendants did not violate the Pennsylvania Usury Law
Plaintiff also claims that the Mortgage Defendants violated Pennsylvania’s usury law.
See 4 Pa. Const. Stat. Ann. § 502. The law provides:
A person who has paid a rate of interest for the loan or [the] use of money at a rate
in excess of that provided for by this act or otherwise by law or has paid charges
prohibited or in excess of those allowed by this act or otherwise by law may
recover triple the amount of such excess interest or charges in a suit at law against
the person who has collected such excess interest or charges.
Id. Plaintiff contends that the Mortgage Defendants “had no entitlement to collect interest
payments when they had elected to disregard their respective obligations in the security
document.” (Doc. No. 16 at ¶ 127.) Plaintiff’s claim cannot stand under the usury law because
Plaintiff does not contend that the rate of interest associated with the Mortgage was in excess of
the rate permitted by statute. Moreover, no plausible allegations show that these Defendants
disregarded any of their written obligations. Accordingly, Plaintiff’s claim that the Mortgage
Defendants violated Pennsylvania’s usury law will be dismissed.
L. Count XI – Negligence Per Se32
Finally, Plaintiff alleges that the “violation of any of the aforementioned statutes constitutes
negligence per se.” (Doc. No. 16 at ¶ 130.) The Pennsylvania Supreme Court found that:

32

Count XI pertains only to WMC, MERS, and Vanderbilt.
41

In order to prove a claim based on negligence per se, the following four
requirements must be met: (1) The purpose of the statute must be, at least in part,
to protect the interest of a group of individuals, as opposed to the public
generally; (2) The statute or regulation must clearly apply to the conduct of the
defendant; (3) The defendant must violate the statute or regulation; and (4) The
violation of the statute or regulation must be the proximate cause of the plaintiff's
injuries.
Ramalingam v. Keller Williams Realty Grp., Inc., 121 A.3d 1034, 1042-43 (Pa. 2015). As noted
above, Plaintiff’s claims regarding violations of the consumer protection statutes are insufficient
to constitute viable causes of action. Thus, Count XI for negligence per se against the Mortgage
Defendants will be dismissed.
V.

AMENDING THE AMENDED COMPLAINT WOULD BE FUTILE
Even though Plaintiff has not requested that he be granted leave to amend his Amended

Complaint, the Court will not grant him leave to amend because doing so would be futile.
“Leave to amend should be freely given when justice so requires, including for a curative
amendment unless such an amendment would be inequitable or futile.” Free Speech Coalition,
Inc. v. Attorney General of United States, 677 F.3d 519, 545 (3d Cir. 2012). A complaint may
be dismissed without leave to amend when it is “clear from the face of the complaint that the
deficiencies cannot be cured.” Turner v. Spaley, 501 F. App’x 101, 102 n.1 (3d Cir. 2012).
Plaintiff has failed to state any plausible claims for relief. For the reasons given above, the Court
finds that it is “clear from the face of the complaint that the deficiencies cannot be cured.”
Vanderbilt justifiably applied for and received the Mortgage proceeds from AMH and was
entitled to use the proceeds to pay down the Mortgage debt. No plausible facts in the Amended
Complaint show that any other Defendant engaged in the wrongdoing asserted. For these
reasons, the Court will not grant Plaintiff leave to amend.

42

VI.

CONCLUSION
For the foregoing reasons, the Court will grant the Motion[s] to Dismiss of American

Modern Home (Doc. No. 14), Southwest Business Corporation (Doc. No. 17), Vanderbilt
Mortgage and Finance Inc. (Doc. No 18), Mortgage Electronic Registration Systems, Inc. (Doc.
No. 19), MERSCORP Holding, Inc. (Doc. No. 19), HomeFirst Agency, Inc. (Doc. No. 20), and
WMC Mortgage LLC’s (Doc. No. 28). An appropriate order follows.

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