Everette et al v. Bank of America, N.A. et al

Filing 12

MEMORANDUM OPINION & ORDER that Defendants' Motion to Dismiss is GRANTED. ORDERED that Plaintiffs' Motion for Leave to Amend/Correct the Complaint is DENIED. Plaintiffs' claims are hereby DISMISSED with prejudice. Signed by District Judge Raymond A. Jackson and filed on 4/26/2012. (rsim)

__F1LED..._
IN THE UNITED STATES DISTRICT COUR|
FOR THE EASTERN DISTRICT OF VIRGINI
Norfolk Division

APR 2 6 2012
^

v

\''■

CHARLES A. EVERETTE and
TIA H. EVERETTE,

Plaintiffs,
CIVIL ACTION NO. 2:12cvl8

v.

BANK OF AMERICA, N.A., and
RECONTRUST COMPANY, N.A.,
Defendants.

MEMORANDUM OPINION & ORDER

Before the Court is Defendants', Bank of America and Recontrust Company, N.A.
(collectively, "Defendants"), Motion to Dismiss, pursuant to Federal Rule of Civil Procedure
12(b)(6), and Plaintiffs', Charles A. Everette and Tia. H. Everette (collectively "Plaintiffs"),
Motion for Leave to Amend the Complaint, pursuant to Federal Rule of Civil Procedure 15(a). For

the reasons stated herein, Defendants' Motion to Dismiss is GRANTED, and Plaintiffs' Motion
for Leave to Amend the Complaint is DENIED.
I. FACTUAL & PROCEDURAL HISTORY

Plaintiffs own a tract of land located at 802 Gloss Street, in the City of Chesapeake,
Virginia ("the Property"). Compl. ^ 4. On October 30,2006, Plaintiffs entered into a mortgage

loan contract ("the loan") in which they were the borrowers. Compl. f 5. The loan was
memorialized by a note ("the Note") and secured by a deed of trust ("Deed of Trust"). Id.
Steward Title Guaranty was the original trustee under the Deed of Trust, and Recontrust Company

1

was appointed as Substitute Trustee on November 8,2011. Compl. 1ffl 6-7. The Deed of Trust
provides the following:

This Security Instrument shall be governed by federal law and the law of the jurisdiction in
which the Property is located. All rights and obligations contained in this Security
Instrument are subject to any requirements and limitations of Applicable Law....

["Applicable Law" is defined as] all controlling applicable federal, state and local statutes,
regulations, ordinances and administrative rules and orders (that have the effect of law) as

well as applicable final, non-appealable judicial opinions.
Compl. |U 8-9.

In 2010, Plaintiffs began to experience financial hardship and had difficulty making their
monthly mortgage payments. See Compl. f 12. As a result, a foreclosure sale was scheduled for
December 14,2011. Compl. U 17. Pursuant to the Home Affordable Modification Program
("HAMP"), 12 U.S.C. 5219(a)(l), Plaintiffs applied to Bank of America for a loan modification
with the assistance of Heath J. Thompson P.C. ("HJTPC"). Compl. H 14. On November 28,2011,
Plaintiffs learned that there was a scheduled foreclosure date of December 14,2011 for the
Property. Compl. 117. On November 28,2011, HJTPC inquired into the status of Plaintiffs' loan
modification application and the possibility of postponing the foreclosure sale with two different
employees at Bank of America, Sabrina Wilson and Terrance R. Freeman. Compl. fU 15-16,18.
On November 28,2011, Mr. Freeman informed HJTPC that the "Sale will be suspended if all docs

are received." Compl. K 18. On December 6,2011, HJTPC again inquired into the status of
Plaintiffs' loan modification application, and Mr. Freeman informed them that the application was

still under review but that "the sale will be pp until the loan can be reviewed for a modification."
Compl. 119.
On December 12,2011, Plaintiffs filed suit against Defendants in the Circuit Court for the

City of Chesapeake, Virginia, alleging contractual claims arising from Plaintiffs' loan modification

application and the pending foreclosure sale of the Property. See Notice of Removal, Ex. A

("Complaint & Emergency Petition for Preliminary Injunction"). As of the filing of this suit in
Virginia Circuit Court, Plaintiffs had submitted all requested documents for the loan modification
to Bank of America but had received no denial, and the foreclosure sale was still scheduled for

December 14,2011. Compl. If 21.
On January 9,2012, Defendants filed a Notice of Removal with this Court, pursuant to 28
U.S.C. §§1331,1332,1441, and 1446, alleging diversity and federal question jurisdiction. On
January 17,2012, Defendants filed a Motion to Dismiss for failure to state a claim upon which

relief may be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. On
February 22,2012, Magistrate Judge Douglas E. Miller granted Plaintiffs' Motion for Extension of
Time to File Response to Defendants' Motion to Dismiss. Plaintiffs did not respond to

Defendants' Motion to Dismiss and instead filed a Motion for Leave to Amend the Complaint on
March 14,2012.

Plaintiffs claim that Bank of America breached implied and express covenants of good
faith and fair dealing, pursuant to sections 8.1 A-304 and 9.9A-102 of the Code of Virginia.
Compl. ffll 22-28. Plaintiffs allege that Bank of America failed to act in good faith by falsely

assuring Plaintiffs about the status of their loan modification application as described in HAMP, by
failing to consider the Plaintiffs for alternative modification programs, and by failing to meet

governmental prerequisites for the foreclosure of the Property. Compl. f22-24. Plaintiffs further
allege that Bank of America's failure to act in good faith and with fair dealing breached the Note
and Deed of Trust, thereby rendering the Deed of Trust unenforceable. Compl. ffl[ 25-26. As a

result, Plaintiffs seek both an injunction of the foreclosure and a declaratory judgment that, until

Defendants fully comply with HAMP, the Deed of Trust is unenforceable and any foreclosure sale
under that Deed of Trust would be void. Compl. ffl[ 29-34,37.
II. LEGAL STANDARD

A motion to dismiss, under Federal Rule of Civil Procedure 12(b)(6), tests the legal
sufficiency of a complaint. Federal Rule of Civil Procedure 8 only requires a "short and plain

statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

However, a plaintiff still must provide the Court with more than a mere "formulaic recitation of the
elements of a cause of action." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation
omitted). The complaint must be supported by factual allegations that raise a right to relief above

the speculative level. Id. A claim is considered facially plausible when the plaintiff gives the
court more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009).
III. DISCUSSION

A. Motion to Dismiss

/. Breach of Covenants of Good Faith and Fair Dealing

Plaintiffs allege that Bank of America failed to act in good faith by falsely assuring
Plaintiffs about the status of their loan modification application as described in HAMP, by failing

to consider the Plaintiffs for alternative modification programs, and by failing to meet
governmental prerequisites for the foreclosure of the Property. Compl. fflj 22-24.
Many courts have been confronted with plaintiffs asserting rights under HAMP. While

plaintiffs in these cases have made various arguments grounded in many different legal theories,
the result of these cases is generally the same. Courts across the country, including this Court,

have concluded consistently that there is no relief for plaintiffs under HAMP because the program
does not create a private right of action for borrowers against servicers or lenders. See, e.g., Jones
v. Bank ofAm. N.A., et ah, 2:1 Icv443, slip op. at 7-8 (E.D. Va. Feb. 7,2012); Sherman v. Litton
Loan Servicing, L.P., 796 F. Supp. 2d 753, 761 (E.D. Va. 2011); Hoffman v. Bank ofAm., N.A.,
No. C 10-2171 SI, 2010 U.S. Dist. LEXIS 70455, at *14-15 (N.D. Cal. June 30,2010); Marks v.
Bank ofAm., N.A.,No. 3:10-cv-08039,2010 U.S. Dist. LEXIS 61489-PHX-JAT, at *16 (D. Ariz.
June 21,2010).

Plaintiffs' claims of breach of the covenant of good faith and the covenant of fair dealing
are effectively claims based upon violations of HAMP. See Wigod v. Wells Forgo Bank, No. 10
CV 2348, 2011 WL 250501, at *4 (N.D. 111. Jan. 25,2011) (quoting Vida v. One West Bank,

F.S.B., No. 10-987,2010 WL 514873, at *5 (D. Or. Dec. 13,2010) ("[E]ven though the plaintiff
had couched her claim as one for breach of the Trial Period Plan, 'the facts and allegations as
pleaded in this case are premised chiefly on the terms and procedures set forth via HAMP and are

not sufficiently independent to state a separate state law cause of action for breach of contract.' ").
Given that courts in this jurisdiction have held consistently that there is no private right of action

under HAMP, this Court will not permit Plaintiffs to bring a HAMP claim under the guise of

claims for breach of the covenants of good faith or fair dealing. Plaintiffs' allegation that a breach
of these covenants occurred when Bank of America "falsely assured" them of the status of their
HAMP application or that Bank of America failed to comply with HAMP by not modifying their
loans cannot be said to be an independent action arising from anything other than HAMP.
Accordingly, Plaintiffs' claims of breach of the covenants of good faith and fair dealing are
DISMISSED.

2. Preliminary Injunction

Plaintiffs ask the Court for a preliminary injunction to preserve the status quo until the
Complaint can be reviewed. In order for the Court to grant a preliminary injunction, the Court

must determine whether the moving party can prove "that he is likely to succeed on the merits, that
he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of

equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7,20 (2008). As the Court concludes that the Plaintiffs' Complaint
must be dismissed, the Plaintiffs cannot establish that they are likely to succeed on the merits.
Accordingly, Plaintiffs' request for a preliminary injunction is DENIED.
3. Declaratory Judgment

Plaintiffs seek a declaratory judgment that until the Defendants comply with HAMP, the

Deed of Trust is unenforceable and any foreclosure sale under that Deed of Trust would be void.
Under Section 8.01-184 of the Code of Virginia, courts have the power to "make binding

adjudications of right... involving the interpretation of deeds, wills and other instruments of
writing, statutes, municipal ordinances and other governmental regulations." "A plaintiff has

standing to bring a declaratory judgment proceeding if he has 'a justiciable interest' in the subject
matter of the litigation, either in his own right or in a representative capacity." Bd. Supervisors
Henrico Cnty. v. Fralin & Waldron, Inc., 222 Va. 218,223 (1981). Further, "a trial court has the

power to issue declaratory judgments in 'cases of actual controversy,' [and] in 'instances of actual
antagonistic assertion and denial of right.' " Id.

Here, there exists no actual controversy between

the parties because the Plaintiffs have not stated a claim upon which relief may be granted.1
Accordingly, Plaintiffs' request for a declaratory judgment is DENIED.

1 Defendants also assert that they have canceled the foreclosure sale for the Property. Defs.' Mem. Supp. Mot.

Dismiss at 14.

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B. Motion for Leave to Amend the Complaint

Based on the foregoing, the Court concludes that the Plaintiffs' Motion to Amend the
Complaint is futile, as the Plaintiffs have no private right of action against the Defendants where
their claims are premised upon violations of HAMP. Further, Plaintiffs failed to comply with this

Court's instructions to include a copy of the proposed Amended Complaint with their Motion for
Leave to Amend the Complaint. Plaintiffs also failed to comply with this Court's directive to
respond to Defendants' Motion to Dismiss notwithstanding their pending Motion for Leave to

Amend. Accordingly, Plaintiffs' Motion for Leave to Amend the Complaint is DENIED.
IV. CONCLUSION

For the foregoing reasons, it is ORDERED that Defendants' Motion to Dismiss is
GRANTED.

IT IS FURTHER ORDERED that Plaintiffs' Motion for Leave to Amend/Correct the
Complaint is DENIED.

Plaintiffs' claims are hereby DISMISSED with prejudice.

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. Jackson
United States District Judge
Norfolk, Virginia
April#,2012