De Vera v. Bank of America, N.A. et al

Filing 25

MEMORANDUM OPINION & ORDER that it is ORDERED that Defendants' Motions to Dismiss Plaintiff's First Amended Complaint are GRANTED. Defendants' motions to dismiss Plaintiff's request for a preliminary injunction are GRANTED. Plaintiff's First Amended Complaint is hereby DISMISSED.. Signed by District Judge Raymond A. Jackson and filed on 6/25/2012. (rsim, )

FILED
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA!

JUN 2 5 2012

Norfolk Division

CLERK, U.S. DISTRICT COURT
NORFOLK. VA

LORETTA DE VERA,
Plaintiff,

CIVIL ACTION NO. 2:12cvl7

V.

BANK OF AMERICA, N.A.,
And

PROFESSIONAL FORECLOSURE

CORPORATION OF VIRGINIA,
Defendants.

MEMORANDUM OPINION & ORDER

Before the Court is Defendants', Bank of America, N.A. ("BOA") and Professional

Foreclosure Corporation of Virginia ("Professional Foreclosure"), Motions to Dismiss,1 pursuant
to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, Defendants' Motions
to Dismiss are GRANTED.

I. FACTS & PROCEDURAL HISTORY

Plaintiff owns a tract of land located at 703 Shadowberry Crest in the City of

Chesapeake, Virginia. Compl. U 1. Plaintiff entered into a mortgage loan contract for a home
located on the land and secured the loan with a deed of trust on May 31,2007. Compl. \ 5.
After a reduction in income, the Plaintiff was unable to continue making the payments on the
mortgage loan. Compl. f 9. Plaintiff then applied for a home loan modification with Defendant,
BOA. Defendant, BOA, notified Plaintiff on June 8, 2011 that her application was received and

would be referred for review. Compl. ^ 11-12. Defendant submitted the loan application to the

1 Defendants, Bank of America, N.A. and Professional Foreclosure Corporation of Virginia filed separate Motions to

Dismiss. This Memorandum Opinion and Order will consider both motions contemporaneously.
1

underwriter on December 8,2011 and requested a postponement of the foreclosure sale of

Plaintiffs home. Compl. ^ 13. The loan modification application was never evaluated,
accepted, or denied. Without the loan modification or an injunction, Plaintiff claims that
Professional Foreclosure will proceed with the foreclosure sale of Plaintiff s property at 703

Shadowberry Crest. Compl. H 14-15.
Plaintiff filed the original complaint in the Circuit Court for the City of Chesapeake on

December 12,2011 alleging that Defendants breached the covenant of good faith and fair
dealing and breached the contract to modify for which the bank is estopped from denying.
Plaintiff sought a preliminary injunction and a declaratory judgment to stop the foreclosure sale.

On January 9,2012, Defendants filed a Notice of Removal to remove the case from the
Circuit Court for the City of Chesapeake to the United States District Court for the Eastern
District of Virginia. Plaintiff filed the First Amended Complaint on March 12,2012 preserving
the claim for breach of the covenant of good faith and fair dealing, the request for preliminary
injunction, and asserting two additional claims. Plaintiff alleges additionally that Defendants

breached the duty to mitigate damages and breached the deed of trust. Plaintiff requests that the
Court enjoin Professional Foreclosure to prevent the foreclosure sale of the home located at 703

Shadowberry Crest. On March 29,2012, Defendant, BOA, filed a Motion to Dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6). On April 5,2012, Defendant, Professional
Foreclosure, filed a Motion to Dismiss the Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). Plaintiff has not responded to Defendants' Motions to Dismiss.
Accordingly, the matter is now ripe for judicial determination.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of an action if the
Court determines that the Plaintiff has failed to state a claim upon which relief can be granted.
Fed. R. Civ. P. 12(b)(6). The motion to dismiss under Rule 12(b)(6) filters out frivolous claims
by testing the adequacy of the plaintiffs complaint. Federal Rule of Civil Procedure 8(a)(2)

requires the complaint to be "a short and plain statement of the claim showing that the pleader is
entitled to relief." Fed. R. Civ. P. 12(b)(6). However, Bell Atlantic v. Twombly extended that
standard, providing that "factual allegations must be enough to raise a right to relief above the
speculative level, on the assumption that all the allegations in the complaint are true even if
doubtful in fact." BellAtl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations stated

in the complaint must have "more than labels and conclusions; a formulaic recitation of the
elements of a cause of action will not do." Id.
Furthermore, a claim must exceed a mere possibility that the defendant is liable for the

alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint must include facts

that plausibly state a claim for relief on its face. Id (emphasis added). A claim is considered to
be facially plausible if it asserts facts that lead the court to reasonably infer that the defendant
may be liable for the alleged actions. Id.
HI. DISCUSSION

In the First Amended Complaint, Plaintiff alleges that Defendant breached the implied
covenant of good faith and fair dealing pursuant to 12 U.S.C. § 5219(a)(l). Plaintiff also argues
that Defendant breached the duty to mitigate damages and breached the deed of trust.

Defendants move to dismiss the Amended Complaint asserting that the Plaintiff failed to state a
claim for which relief may be granted.

Many courts have been confronted with complaints asserting rights under the Home

Affordable Modification Program ("HAMP"). Plaintiffs pursue HAMP rights under a number of
allegations, however, courts have uniformly found them to be meritless claims. Courts agree that

these HAMP allegations fail because there is no private right of action for borrowers against
servicers or lenders. See, Pennington v. PNC, No. 2:10-cv-361,2010 U.S. Dist. LEXIS 143157,
at *11 (E.D. Va. Aug. 11, 2010); Fowler v. Aurora Home Loans, No. 2:10cv623, slip op. at 3-4
(E.D. Va. Mar. 31,2011); Bourdelais v. J.P. Morgan Chase, Civ. No. 3:10CV670-HEH, 2011

WL 1306311, at *3 (E.D. Va. Apr. 1,2011). Plaintiffs claims may only proceed if they are
independent from HAMP. Bourdelais, 2011 WL 1306311, at *3-4 (emphasis added).
Borrowers are not considered third-party beneficiaries, but are merely incidental beneficiaries to
the HAMP agreement. Parks v. BAC Home Loan Servicing, LP, 825 F. Supp. 2d 713,715 (E.D.
Va. 2011); See Edwards v. Aurora Loan Services, LLC, 791 F. Supp. 2d 144 (D.D.C. 2011)
("Fannie Mae and servicers of homeowners' mortgage loans did not intend to make homeowners
third-party beneficiaries of servicers' service participation agreement."); Zoher v. Chase Home
Fin., No. 10-14135-CIV, 2010 WL 4064798, at *4 (S.D. Fla. Oct. 15, 2010) ("Borrowers may
not attempt to enforce HAMP compliance as third-party beneficiaries of a contract.").
This Court has previously held that an application for HAMP loan modification is not a

valid contract unless the plaintiff can prove that the application was more than a mere offer to

apply. Sherman v. Litton Loan Servicing, L.P., 796 F. Supp. 2d 753,761 (E.D. Va. 2011)
reconsideration denied, 2:10CV567,2011 WL 6203256 (E.D. Va. Dec. 13,2011). The Sherman
court found that an offer to apply for a loan modification is merely an offer to consider the
Plaintiffs loan modification application. Id. at 762 (emphasis added). Such an offer does not, as

a matter of law, create a binding contract to modify Plaintiffs mortgage. Id.

A. Breach of the Implied Covenant of Good Faith and Fair Dealing

Plaintiff alleges that Defendant, BOA, breached the implied covenant of good faith and
fair dealing on the Promissory Note and Deed of Trust. Plaintiff contends that BOA breached
this covenant under 12 U.S.C. § 5219(a)(l) specifically by (1) failing to review Plaintiff for a
modification of her loan and (2) failing to properly consider the borrowers for alternative

modification programs. Compl. U 19. Virginia courts have recognized an implied covenant of
good faith and fair dealing in certain contracts. Mclnnis v. BAC Home Loan Servicing, LP,

2:11CV468,2012 WL 383590 (E.D. Va. Jan. 13, 2012) report and recommendation adopted,
Mclnnis v. BAC Home Loan Servicing, LP, 2:11CV468,2012 WL 368282 (E.D. Va. Feb. 3,
2012). However, where parties to a contract create valid and binding rights, the implied
covenant of good faith and fair dealing is inapplicable to those rights. Id.

An implied duty under a contract is simply a manifestation of conditions inherent in
expressed promises. E. Shore Markets, Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 182 (4th
Cir. 2000). The implied covenant of good faith and fair dealing does not compel a party to take
affirmative actions that the party is not obligated to take under the terms of the contract. Id.
Instead, the duty simply bars a party from "acting in such a manner as to prevent the other party
from performing his obligations under the contract." Id. at 183.
The covenant of good faith and fair dealing "cannot be construed to establish new and

independent rights or duties not agreed upon by the parties." Knudsen v. Countrywide Home
Loans, Inc., No. 2:1 l-CV-429,2011 WL 3236000, at *3 (D. Utah July 26,2011). The implied
covenant cannot "rewrite [e] an unambiguous contract in order to create terms that do not

otherwise exist." Mclnnis v. BAC Home Loan Servicing, LP, 2:11CV468,2012 WL 383590

(E.D. Va. Jan. 13,2012) report and recommendation adopted, Mclnnis v. BAC Home Loan
Servicing, LP, 2:11CV468,2012 WL 368282 (E.D. Va. Feb. 3,2012).
Thus, the duty imposed on a party under the implied covenant of good faith and fair

dealing is not an independent claim, but only arises under a contractual relationship. Here,

neither the Promissory Note nor the Deed of Trust creates a duty on the part of BOA to facilitate
loan modification. See Ex. B. Plaintiff attempts to mask HAMP violations under the guise of an
implied covenant of good faith and fair dealing. Courts have routinely dismissed similar HAMP

claims that are disguised as a violation of the duty of good faith and fair dealing. Id. See Young
v. Wachovia Mortg. Co., 11-CV-01963-CMA, 2011 WL 6934110 (D. Colo. Dec. 30,2011)
(stating that the Plaintiffs claim of a breach of good faith and fair dealing "seeks to impose new
duties upon Defendants and grant Plaintiff[s] new rights based on a modification of the original
loan."); Akintunji v. Chase Home Fin., L.L.C., Civ. Action No. H-l 1-389,2011 WL 2470709, at
*4 (S.D. Tex. June 20, 2011) (holding that an alleged failure to assist with the HAMP program
does not amount to a breach of the duty of good faith and fair dealing). Accordingly, Plaintiff
cannot sufficiently allege any action of Defendant BOA that would constitute a breach of the

implied covenant of good faith and fair dealing. Therefore, Defendant BOA's motion to dismiss
count one is GRANTED.
B. Breach of the Duty to Mitigate Damages

Plaintiff asserts that Defendants breached the duty to mitigate damages in violation of 12
U.S.C. § 5219(a)(l). Plaintiff argues that because foreclosure is a damage remedy stemming
from the Plaintiffs breach of the loan contract, then as a matter of law, Defendants have the duty
to mitigate those damages. Compl. \ 25. Title 12 U.S.C. § 5219 (a)(l) provides guidelines for
foreclosure mitigation efforts, stating in pertinent part:

"[T]he Secretary [of Treasury] shall implement a plan that seeks to
maximize assistance for homeowners and use the authority of the
Secretary to encourage the servicers of the underlying mortgages,
considering net present value to the taxpayer, to take advantage of
the HOPE for Homeowners Program under section 1715z-23 of
this title or other available programs to minimize foreclosures. In
addition, the Secretary may use loan guarantees and credit

enhancements to facilitate loan modifications to prevent avoidable
foreclosures."

12 U.S.C. § 5219(a)(l) (emphasis added). The statute requires the Secretary of Treasury to
implement a homeowners' assistance program and encourage servicers to take advantage of the
HOPE for Homeowners Program. The plain language of the statute does not demand that each

private loan modification application shall be granted. Additionally, the Court has already
established that homeowners do not have a private right of action against the Defendants

pursuant to 12 U.S.C § 5219(a)(l) or any other HAMP claim. Thus, the Plaintiff has not
presented sufficient facts to the Court to support a claim for breach of the duty to mitigate

damages; therefore, Defendants' motions to dismiss count two are GRANTED.
C. Breach of the Deed of Trust

Plaintiff alleges that in the Deed of Trust, Defendants agree to be bound by all state and

federal laws. Compl. ^ 28. Accordingly, Plaintiff asserts that Defendants are, therefore bound
by 12 U.S.C. § 5219(a)(l). Compl. f 29. Plaintiff argues specifically that Defendant,
Professional Foreclosure, breached the Deed of Trust pursuant to 12 U.S.C. § 5219(a)(l) by

failing to wait for a verifiable certification that the Plaintiff had been properly and actually
reviewed before proceeding with the foreclosure sale. Comp \ 31. Plaintiff fails to sufficiently
allege how Defendant, BOA, breached the Deed of Trust. Under Virginia law, however, a party

claiming breach of contract must establish three elements to prevail: "(1) a legally enforceable
obligation of a defendant to a plaintiff, (2) the defendant's violation or breach of that obligation,

and (3) injury or damage to the plaOintiff caused by the breach of obligation." Sunrise

Continuing Care, LLCv. Wright, 671 S.E.2d 132, 135 (2009).
As established above, the plain language of the statute does not place an obligation on
individual servicers and lenders to grant each applicant a loan modification. Furthermore, no
provision in the statute explicitly or implicitly requires the Substitute Trustee, Professional

Foreclosure, to wait for certification that the Plaintiffs application had been reviewed before
proceeding with a foreclosure sale. Title 12 U.S.C. §5219(a)(l) merely places an obligation on
the Secretary of Treasury to implement an assistance program. Plaintiff has not identified a
legally enforceable obligation of either Defendant. Because Plaintiff has failed to sufficiently
allege the first prong of the three-part breach of contract test, the Court need not consider the
second and third prongs.

In short, Plaintiff attempts to assert a claim under HAMP by alleging a breach of the

Deed of Trust. The Court has already established that homeowners do not have a private right of

action against HAMP claims, and Plaintiff failed to adequately plead a breach of contract claim
in accordance with Virginia law. Therefore Defendants' motions to dismiss count three are also
GRANTED.

Further, Plaintiff has alleged various claims against Defendant, Professional Foreclosure
in violation of 12 U.S.C. § 5219(a)(l). However, Professional Foreclosure's duties arise from
the Deed of Trust. For reasons stated herein, there is no viable cause of action asserted against
Professional Foreclosure.

IV. CONCLUSION

For the reasons stated above, it is ORDERED that Defendants' Motions to Dismiss

Plaintiffs First Amended Complaint are GRANTED.2
Plaintiffs First Amended Complaint is hereby DISMISSED.

The Court DIRECTS the Clerk to send a copy of this Memorandum Opinion and Order
to counsel of record.
IT IS SO ORDERED.

Raymond A. Jackso"rr

United States District Judr
Norfolk, Virginia
June ^5,2012

2 Defendants have also moved this Court to dismiss Plaintiffs request for preliminary injunction. As set forth in
Winter v. Nat'I Resources Def. Council, Inc., the United States Supreme Court modified the standard for preliminary
injunctions with a four-part test. The Court should consider whether (1) petitioner is likely to succeed on the merits,
(2) if petitioner is likely to suffer irreparable harm if the injunction is not granted, (3) if the balance of equities tips
in favor of petitioner, and (4) the public interest in the issuance of a preliminary injunction. Winter v. Nat'l

Resources Def. Council, Inc., 129 S. Ct. 365, 374 (2008). For the reasons contained within this Memorandum
Opinion and Order, the Court believes the Plaintiff is not likely to succeed on the merits.

Additionally, because Plaintiff is not likely to succeed on the merits, she will not suffer irreparable harm if the

request for injunction is not granted. The balance of equities does not weigh in favor of an injunction, and the public
interest does not suggest that Defendants should be enjoined. Thus, the Court finds that a preliminary injunction is
unwarranted. Defendants' motions to dismiss Plaintiffs request for a preliminary injunction are GRANTED.