Wilkins et al v. United States of America, Through the Secretary of Veterans Affairs et al

Filing 17

MEMORANDUM ORDER Granting 3 Motion to Dismiss for Failure to State a Claim. The Court GRANTS Defendants' Motion to Dismiss Plaintiffs' Complaint, ECF No. 3, and Plaintiffs' Complaint is DISMISSED WITHOUT PREJUDICE to Plaintiff s' right to file a formal motion seeking leave to file an amended complaint. If Plaintiffs elect to file a motion to amend, it shall be filed no later than twenty-one (21) days after the entry of this Memorandum Order, and should be accompanie d by a supporting brief, which includes as an exhibit Plaintiffs' proposed amended complaint. If Plaintiffs elect not to pursue amendment within this time period, the dismissal of Plaintiffs' Complaint shall become a dismissal with prejudice. Signed by District Judge Mark S. Davis and filed on 5/9/16. Copies distributed to all parties 5/9/16. (ldab, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA

Norfolk Division

JEFFREY A.

WILKINS

a/k/a JEFFERY A. WILKINS and
KAREN Y.

WILKINS,

Plaintiffs,
Civil No.

v.

2:15cv566

UNITED STATES OF AMERICA,

through the SECRETARY OF VETERANS AFFAIRS,
WELLS FARGO BANK,
SAMUEL I.

WHITE,

N.A.,

and

P.C.,

Defendants.

MEMORANDUM ORDER

This

Fargo

matter

Bank,

("White,"

Wilkins

N.A.

and

Plaintiffs'

a/k/a

before

("Wells

Jeffery

the

Fargo")

collectively

Complaint.

(collectively,

present

comes

and

on

A.

3.

Wilkins
or

"the

action against Defendants,

Defendants'

Samuel

"Defendants")1

ECF No.

"Plaintiffs"

Court

I.

and

White,

Motion

Plaintiffs,
Karen

to

P.C.

Dismiss

"Jeffrey A.
Y.

Wilkinses")

Wells

Wilkins"

initiated

the

alleging breach of contract

and breach of an implied covenant of good faith and fair dealing
claims

related

rescission

of

to

the

foreclosure

foreclosure

of

their

home.

and an award

Plaintiffs

of

seek

compensatory

On April 21, 2016, the parties filed a Joint Stipulation of Dismissal
without Prejudice with respect to Defendant United States of America,
through the Secretary of Veterans Affairs ("VA").
ECF No. 16.
Thus,
as Defendant VA has been dismissed from this matter,
White are the only Defendants remaining.

Wells Fargo and

damages.

Compl.,

ECF No.

l.

Having been fully briefed,

this

matter is ripe for review.
I.

FACTUAL AND PROCEDURAL BACKGROUND

The present claims arise from a mortgage loan, completed on
March 8,

2006 between American Home Mortgage and the Wilkinses,

for purchase of a home in Chesapeake,
The

loan was

evidenced by a promissory note

Deed of Trust.
and

Wells

Id.

Fargo

Deed of Trust.
Wells

Fargo

to

appointed

Id.

I

*h

Compl.

8.

and secured by a

The note was later assigned to Wells Fargo,
White

Ht 10,

invoke

the

as

12.

trustee

of

the

Wilkinses'

The Deed of Trust authorizes

power

of

complying with certain requirements,

agreement.

Virginia.

sale

(foreclosure) , after

if the Wilkinses breach the

Id. H 16; Id., Ex. A, Deed of Trust H 22, ECF No. 1-

[hereinafter "Deed of Trust"].

The Deed of Trust also states

that such sale must comply with
controlling

applicable

regulations,

"applicable law"-that is,

federal,

ordinances

and

state

and

administrative

local
rules

"all

statutes,
and

orders

(that have the effect of law) as well as all applicable final,
non-appealable

judicial

opinions."

Id.

H 18;

Deed

of

Trust

II (J), 22.
At

some

payments.

point,

IcL 1 11.

the

Wilkinses

In 2014,

Fargo for a loan modification.
that

they

did

not

receive

any

fell

behind

on

their

loan

the Wilkinses applied to Wells
Id. H 20.
written

The Wilkinses allege
denial

of

their

loan

modification
instructed

application.

White

to

IcL

foreclose

H 26.
on

Instead,

the

Wilkinses'

responding to the loan modification application.
White advertised the foreclosure sale and,

White conducted the

Wells

foreclosure sale.

home

to,

Fargo's

purchase

was

on November 4,

Id.

backed by,

5111 25,

27.

2014,

At

the

Id. U 27.

and ultimately assigned

the United States through the Secretary of Veterans Affairs

("the VA").
unlawful

Id^ H 30.

detainer

On August 27, 2015, the VA then filed an

action

against

the

Wilkinses

District Court of the City of Chesapeake,
On

without

Id. HH 14, 21.

foreclosure sale, Wells Fargo was the highest bidder.
Wells

Fargo

October

30,

possession of

2015,

the

home

appealed such decision

the

to

General

the

VA.

in

Virginia.

District

Id.

the

The

to the Circuit Court of

Chesapeake, and such appeal remains pending.

Id.

Court

1 41.

General

U 40.

awarded

Wilkinses

the City of

Id.

Based on the foregoing, the Wilkinses filed their Complaint
on December 31,

Wilkinses

assert

2015.

a

ECF No.

breach

of

1.

In their Complaint,

contract

claim,

arguing

the

that

Defendants' foreclosure action violated "applicable law"-namely,
a

Consent

Order,

entered

in case AA-EC-11-19,

by

the United

States Department of the Treasury Comptroller of the Currency
against

Wells

Wilkinses'

Fargo-because

residence

without

Defendants

foreclosed

on

the

responding

in

to

the

Wilkinses' loan modification application.

writing

Id. H 28; Id., Ex. B,

Consent Order,

ECF No.

Wilkinses also assert

1-2

that

[hereinafter "Consent Order"].

The

the foreclosure breached the covenant

of good faith and fair dealing contained in the note and Deed of
Trust.

Id.

H 49.

Wilkinses allege,
The

Wilkinses

As

a

result

of

Defendants'

they sustained damages.

seek

rescission

of

the

Id.

actions,

the

UU 38,

43,

and

return

foreclosure

50.
of

the title to the home, compensatory damages, as well as pre- and
post-judgment interest.

their

Motion

Federal

Rule

February

2016,

of

26,

Defendants'
3,

to

On

Dismiss
Civil

2016,

February 5,

Plaintiffs'

Procedure

Plaintiffs

Motion to Dismiss.

2016,

Defendants

Complaint,

12(b)(6).

filed
ECF No.

ECF

their
11.

filed

pursuant

to

No.

On

3.

Opposition

Finally,

to

on March

Defendants filed their Rebuttal Memorandum in Support

of their Motion to Dismiss.
II.

ECF No.
LEGAL

12.

STANDARD

A complaint must contain "a short and plain statement of
the claim showing that the pleader is entitled to relief."

R. Civ. P. 8(a)(2).

Fed.

A motion to dismiss may be granted when a

complaint

fails

"to state a

claim upon

granted."

Fed. R. Civ. P. 12(b)(6).

which

relief can

be

A complaint fails to state

a claim if it does not allege "enough facts to state a claim to
relief

that is plausible

Twombly, 550 U.S. 544,

be detailed,

on

its face."

570 (2007).

Bell

Atl.

Corp.

v.

Though a complaint need not

"[f]actual allegations must be enough to raise a

right to relief above the speculative level."
at 555; see Ashcroft v. Iqbal,

A motion to dismiss

Twombly, 550 U.S.

556 U.S. 662, 678

tests

the

(2009).

sufficiency of

a complaint

and a district court "'must

without resolving factual disputes,

accept as true all of the factual allegations contained in the
complaint'

and

plaintiff.'"

'draw all
Kensington

Cty. , 684 F.3d 462, 467
Nemours & Co.

v.

Although the

district

courts

the

Volunteer

are

facts"

Inc.,

truth of

not

and

Fire

(4th Cir. 2012)

Kolon Indus.,

2011)).

from

reasonable inferences

"need

not

the

Mkts.,

Inc.

v. Assocs.

2000);

see Iqbal,

556 U.S.

at 678

Montgomery

(quoting E.I, du Pont de

"legal

accept

unreasonable conclusions,
P'ship,

v.

the

440

(4th Cir.

facts alleged is presumed,

inferences,

Ltd.

Dep't

637 F.3d 435,

the

bound by

in favor of

or

213

as

conclusions
true

unwarranted

arguments."
F.3d 175,

E.

180

(citing Twombly,

drawn

Shore

(4th Cir.

550 U.S.

at

555) .
III.

Defendants

assert

that

DISCUSSION

Plaintiffs

have

failed to plead a

claim for breach of contract or a claim for breach of an implied
covenant of good faith and fair dealing under Virginia law.2

2 Since matters of contract are predominantly issues of state law, and
the parties do not dispute that Virginia law is controlling in this
matter, the Court applies Virginia law in its analysis of Plaintiffs'
contract claims.
See Felder v. Casey, 487 U.S. 131, 151, (1988)
("Under Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), when a federal
court exercises diversity or pendent jurisdiction over state-law
claims, 'the outcome of the litigation in the federal court should be

First,

Defendants

"applicable law."
of

the

Consent

Second,

contract

Third,

Order

law,"

related

that

the

Consent

Order

is

not

Thus, Defendants argue, a purported violation

Defendants

"applicable

assert

is

assert

not

breach

that,

Plaintiffs
to

a

the

even

have

Consent

of

if

the

the

failed

to

Order

Deed

of

Consent

plead a

against

Trust.

Order

is

breach of
Defendants.

Defendants assert that Plaintiffs have failed to plead a

claim for breach of an implied covenant of good faith and fair

dealing

against

Defendants.

Finally,

Defendants

argue

that

Plaintiffs' request for compensatory damages should be stricken.3
The Court will address each argument in turn.

substantially the
court.'"
(quoting

same ... as it would
Guaranty Trust Co. v.

be if tried in
York,
326 U.S.

a State
99, 109

(1945))).

3 Defendants also argue that Plaintiffs lack standing to enforce the
Consent
Order
against
Wells
Fargo
because
Plaintiffs
are
not
intentional
third-party
beneficiaries
to
the
Consent
Order.
Plaintiffs do not dispute that they are not intentional beneficiaries
to the Consent Order.
Mem. in Opp'n to Mot. to Dismiss at 7.
As
Plaintiffs are not intentional beneficiaries to the Consent Order,

they may not assert a private cause of action against Wells Fargo
based on breach of the Consent Order.
See Rehbein v. CitiMortgage,
Inc. , 937 F. Supp. 2d 753, 762 (E.D. Va. 2013) (dismissing a claim to
enforce the National Mortgage Settlement Consent Judgment because the

plaintiff was merely an incidental beneficiary to the Consent Judgment
and had no right to bring a third-party suit to enforce the Consent
Judgment).
Instead, Plaintiffs argue that "compliance with the
Consent Order is required under the 'applicable law* provision of the
[D]eed of [Tjrust."
Mem. in Opp'n to Mot. to Dismiss at 7.
As
Plaintiffs seek to advance only state law contract claims, and
Plaintiffs' inability to enforce a violation of the Consent Order
against Wells Fargo is undisputed, the Court need not address such
matter

further.

A.

The

Consent

an examination,

the

Currency

Order

at

Consent Order

issue

conducted

of

the

by

in this

the

United

matter

Office

States

of

is

the

("the

the

result

of

Comptroller

of

OCC"),

of

the

residential real estate mortgage foreclosure processes at Wells
Fargo.

Consent

identified

Order

certain

at

1.

During

deficiencies

mortgage servicing practices.

in

Id.

its

examination,

Wells

Fargo's

the

OCC

residential

After being notified of such

deficiencies, Wells Fargo executed a "Stipulation and Consent to
the Issuance of a Consent Order," on April 13, 2011, in which it
agreed to undertake a variety of steps,

detailed in the Consent

Order, to remedy the deficiencies identified by the OCC.

102.

One

such

step

was

the

requirement

to

id. at

submit

a

plan

regarding loss mitigation or loan modification and foreclosure.

Id.

at 19.

Such plan was required to include

"procedures and

controls to ensure that a final decision regarding a borrower's
loan modification request ... is made and communicated to the

borrower

in writing . . . within

Plaintiffs contend that the Deed of Trust's "applicable

response,

such

incorporated,

as

requirements

within

Defendants

argue

that

a

the

Id.

term
the

at

21.

of

the

Consent

Consent

As

time

above,

agreement,

occurs."

of

any

provision

sale

period

before

law"

foreclosure

a reasonable

parties'

Order.

Order

noted

is

In

not

"applicable law" because it was entered after the Deed of Trust
was

executed.

Plaintiffs
Order is

have

not

"applicable law."

contract under Virginia

as written without
parties.'"

428,

Va.

"A deed of

law,"

adding terms

440

507,

(2010));

515

incorporates

Constr.,

(2014) .

the

'all

contract.'"
828,

841

see

1802659,

is

were not

Va.

Hous.

Va.

(or

v.

at

PNC

*6

Bank,

(E.D.

'applicable law'

(quoting

2012

WL

refers

Condel

Ass'n.,

Apr.

16,

at

No.

2015)

v.
*8

at

the

not

accord

Auth. , 287
of

Townsend,

Trust

is a matter

923 F. Supp.

2d

of

parties

923

F.
8

America,

Va.

2012));

2:14cv523,

(same) .

2015

of

term

law

that

and it does not

Supp.

their agreement"
Condel,
2d

at

WL

"The

already applicable

they entered into the contract.

*8;

280

a

(E.D.

[were]

time

Servs.,

to the then-existing body of

which

(2012)

in

Bank

"incorporate laws

to

733

language)

contract in question,"

relevant)

723,

law"

applies directly to the

otherwise

construed

Deed

similar

2673167,

Nat.

Va.

a

"'Most courts construe narrowly the

law'

2013)

"'is

Dev.

the

"applicable

Consent

construed as

Elevator

whether

the

included by the

283 Va.

Amtech

Consent Order as

3:12cv212,

Simon

trust

Townsend v. Fed. Nat. Mortg. Ass'n,

(W.D.

N.A. , No.

v.

Thus,

applicable

that

Corp.,

Squire v.

of contract interpretation.

phrase

that

Inc.

see

pled

and such contract

Mathews v. PHH Mortg.

(quoting Uniwest
Va.

sufficiently

(even if
at

the

2012 WL 2673167,
841;

Rehbein

v.

CitiMortgage,

Inc.,

precepts

"General

937
of

F.

contract

language to the contrary,
to

incorporate

2673167,

at *8

& Light Co.,

Supp.

future

2d 753,

law

764

direct

that,

courts should not

changes

to

the

400,

405

law."

(1983)).

Va.

2013).

absent

clear

interpret contracts

(citing Energy Reserves Grp.,

459 U.S.

(E.D.

Condel,

Inc.

Instead,

v.

2012

Kan.

WL

Power

"contracts are

generally understood to incorporate only those laws which exist
at

the

Va.

time of

775,

777

Here,

Consent
from

formation."

v.

Gazale,

the Deed of Trust was executed on March 8,

Order,

which

foreclosing

years

(citing Gazale

219

2006.

The

(1979)).

on

Plaintiffs
their

application was pending,

five

Id.

after

the

home

assert
while

precluded
their

loan

Wells

Fargo

modification

was entered on April 13, 2011—more than

Deed

of

Trust

was

executed.

The

plain

meaning of the term "applicable law" does not evidence intent by
the parties in this matter to be bound by such Consent Order, or
"future changes to

intent.

the law,"

Therefore,

the

and this Court will not infer such

Consent

Order's

provisions

are

not

incorporated into the "applicable law" provision of the Deed of
Trust

and

Plaintiffs
the

cannot

violation

of

Consent

contract.

See also Simon,

rely

Order

as

on

Defendants'

grounds

for

purported
breach

of

2015 WL 1802659, at *7 (addressing an

identical issue of law and granting a similar motion to dismiss,

determining that the Consent Order's "provisions

[were]

outside

the language of the Deed").
B.

Alternatively,
law,"

Plaintiffs

Breach of Contract

even

if

the

Consent

Order

have not pled sufficient

facts

breach of contract claim under Virginia law.

for

breach

of

contract

plausibly

allege:

defendant

to

breach

of

a

"(1)

under
a

Virginia

legally

law,

a

Va.

their

612,

enforceable

obligation

plaintiff;

(2)

the

defendant's

and

(3)

injury

619

Complaint,

to make out

plaintiff

obligation;

that

(2004) .

Based

Plaintiffs

have

upon
not

the

"applicable
a

To state a claim

or

plaintiff caused by the breach of obligation."
267

was

must
of

violation

damage

a
or

to

the

Filak v. George,

facts

presented

sufficiently

Defendants had a "legally enforceable obligation"

pled

in

that

to respond to

their loan modification application prior to foreclosure.
Plaintiffs allege that:
In acting through White to conduct the purported
foreclosure
auction,
Wells
Fargo
breached
the
'applicable law' provision of the deed of trust as
recited herein above in this complaint because Wells
Fargo did not comply with [the Consent Order] because
Wells Fargo did not sen[d] any written denial of the
Wilkinses' loan modification application prior to the
November 4,

Compl.

K 28.

presumed,
inferences,

2014 foreclosure.

Although the truth of Plaintiffs'

the

Court

need

unreasonable

not

accept

conclusions,

10

allegations is

Plaintiffs'
or

"unwarranted

arguments."

Contrary

to

Plaintiffs'

Wells

allegation,

Fargo

to

application

in

respond

writing,

requires

programs,

Wells

policies,

said plans,

Consent

to

Plaintiffs'

or

to

send

Fargo

and

programs,

to

finding

submit

that

a

obligation

at

procedures,

policies,

of

failed

to

does

not

loan

a

modification

written

Instead,
a

to

denial

and

and procedures,

of

the Consent

variety

adopt

require

of

plans,

comply

with

and to make any

Consent Order at 23; see Simon,

(addressing a similar Consent Order and

Order

for

simply

handling

requires

the

Defendants

pre-foreclosure

to

activities").

the Consent Order do not impose on Wells Fargo an

to

Plaintiffs,

required proposals
plans

*7

"[t]he

proposal

The terms of

them

submit

revisions requested by the OCC.
2015 WL 1802659,

Order

prior to foreclosure.

their application,
Order

the

which
plead

the
a

but

and plans
OCC

an

to

the

approves.

breach

of

obligation
OCC

and

to
to

Therefore,

contract

claim

submit

the

implement

Plaintiffs
and

the
have

Defendants'

Motion to Dismiss is GRANTED with respect to Count One.
C. Breach of Implied Covenant of Good Faith and Fair Dealing
Finally,

Plaintiffs have not pled sufficient facts to make

out a claim for breach of the implied covenant of good faith and

fair dealing under Virginia law.

"Contracts governed by Virginia

law,

mortgages

trust,

including
contain

dealing."

those
an

Cagle v.

governing

implied

covenant

CitiMortgage,
11

of

Inc.,

such
good

No.

as

a

faith

3:13cv807,

deed
and

of

fair

2015 WL

2063990,
Ltd.

V.

at

*8

W.R.

(E.D.

Va.

Grace & Co.,

May

1,

2015) (citing Va.

156 F.3d 535,

The duty of good faith precludes the

541-42

Vermiculite,

(4th Cir.

"exercise

[of]

1998)).

contractual

discretion in bad faith," but it "does not prevent a party from
exercising
Ltd.,

its

explicit

156 F.3d at 542.

contractual

rights."

Va.

Vermiculite,

Such an implied covenant "cannot be used

to override or modify explicit contractual terms."
Bank v. Linch,

a

36 F.3d 370,

covenant cannot be

contract

Ward's
385

373

(4th Cir.

the vehicle

in order to create duties

Equip.,

Inc.

v.

for

1994).

Riggs Nat'l

Further,

"such

rewriting an unambiguous

that do not

New Holland N.

Am.,

otherwise exist."

Inc.,

254

Va.

379,

(1997).

Plaintiffs

have

not

sufficiently

alleged

that

Defendants

violated an implied covenant of good faith and fair dealing.
Defendants

convincingly

contractual

right,

engage

the

in

foreclosure.

argue,

under

the

actions
Further,

Wells
terms

alleged

of

in

Plaintiffs

Fargo

and

the

the

have

White

Deed

of

had

the

Trust,

Complaint

not

As

to

regarding

alleged

that

any

provision in the note or Deed of Trust required Wells Fargo to
consider

Plaintiffs'

loan

modification

application,

respond to such application before foreclosure.

2063990,
faith

at

and

processing

*8

("Duties

fair

dealing]

of

under
do

[the

implied

not

extend

loan modifications,

absent

12

'to

an

much

Cagle,

covenant
the

2015 WL

of

review

express

less

good
and

provision

indicating

otherwise."

Bank,

No.

5,

N.A.,

2012))).

(quoting

3:10cv670,

Bourdelais

2012 WL 5404084,

Therefore,

Plaintiffs

v.

JPMorgan

at *5

have

(E.D.

failed

Chase

Va.

to

Nov.

allege

sufficient facts to make out a claim for breach of the implied
duty of good faith and fair dealing and Defendants'

Motion to

Dismiss is GRANTED with respect to Count Two.4
IV.

For

the

Defendants'

and

reasons

set

forth

above,

Motion to Dismiss Plaintiffs'

Plaintiffs'

Plaintiffs'

CONCLUSION

Complaint

is

DISMISSED

the

Court

Complaint,

WITHOUT

GRANTS

ECF No.

3,

PREJUDICE

to

right to file a formal motion seeking leave to

an amended complaint.5

file

If Plaintiffs elect to file a motion to

4 As the Court has determined that Plaintiffs'
dismissed in its entirety,
compensatory damages.

Complaint should be

it need not address Plaintiffs'

request for

5 The Federal Rules of Civil Procedure provide that district courts
should allow amendment "freely . . . when justice
R. Civ. P. 15(a)(2).
A district court "should
amend a pleading 'when the amendment would be
opposing party, there has been bad faith on the

so requires."
Fed.
only deny leave to
prejudicial to the
part of the moving

party,
or
the
amendment
would have
been
futile.'"
Norfolk
&
Portsmouth Belt Line R. Co. v. M/V MARLIN, No. 2:08cvl34, 2009 WL
1974298, at *1 (E.D. Va. Apr. 3, 2009) (quoting Laber v. Harvey, 438
F.3d 404,

426

(4th Cir.

2006)

(en banc)).

An amendment

is considered

futile if "the amended complaint could not survive a Rule 12(b)(6)
motion by the party opposing the amendment."
Id. at *2 (citing United
States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 376
(4th Cir. 2008)).
Here, Plaintiffs' Memorandum in Opposition to the
Motion to Dismiss requests leave to amend the Complaint in the event
that the Court grants Defendants' Motion, ECF No. 11, but Plaintiffs

have not submitted a motion requesting leave to amend.
Plaintiffs
also have not submitted a copy of a proposed amended complaint, thus
inhibiting Defendants'
ability to test the merits of Plaintiffs'
informal request for leave to amend.

13

amend,

it

after

shall

the

entry

be

filed

of

no

this

later

than

Memorandum

accompanied by a supporting brief,

amendment

Order

Clerk

to all

IT

IS

this

and

days

should

be

time

If Plaintiffs elect not
period,

the

dismissal

of

Complaint shall become a dismissal with prejudice.

Plaintiffs'
The

within

Order,

(21)

which includes as an exhibit

Plaintiffs' proposed amended complaint.
to pursue

twenty-one

is

REQUESTED

counsel

SO

of

to

send a

copy

of

this

Memorandum

record.

ORDERED.

mzfer

/s/i
Mark
UNITED

Norfolk, Virginia

May _9

, 2016

14

S.

Davis

STATES DISTRICT JUDGE