Bagley et al v. Wells Fargo Bank, N.A. et al
Filing
21
MEMORANDUM OPINION. Signed by District Judge James R. Spencer on 1/29/2012. Copies to counsel.(cmcc, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
EDWARD M. BAGLEY, et al,
Plaintiffs,
v.
WELLS FARGO BANK, N.A., et al,
Defendants.
Civil Action No. 3:12–CV–617
MEMORANDUM OPINION
THIS MATTER is before the Court on a Motion to Dismiss Plaintiffs’ Amended
Complaint filed by Defendants Wells Fargo Bank, N.A. (“Wells Fargo”) and Equity Trustees,
L.L.C. (“Equity Trustees”)(collectively the “Defendants”) pursuant to Federal Rule of Civil
Procedure 12(b)(6)(ECF No. 10). Plaintiffs seek compensatory damages against Defendants
and an order quieting title following the foreclosure of their home, as well as a declaratory
judgment stating that Plaintiffs are not liable for the foreclosure‐related costs. The Court
dispenses with oral argument because the facts and legal contentions are adequately
presented in the materials presently before the Court, and argument would not aid in the
decisional process. E.D. Va. Loc. Civ. R. 7(J). For the reasons discussed below, the Court
GRANTS IN PART and DENIES IN PART Defendants’ Motion.
I.
BACKGROUND
On October 15, 2008, Plaintiffs Edward and Laura Bagley entered into a home
mortgage loan for a residence in Richmond, Virginia. Guaranteed Home Mortgage
Company, Inc. (“Guaranteed Home”) was the lender and the loan was evidenced by a Note
and secured by a Deed of Trust. Guaranteed Home assigned the Note to Defendant Wells
Fargo, and Wells Fargo became the Note holder. The Deed of Trust appointed Samuel I.
White, P.C. (“White”) as trustee.
Plaintiffs assert that the loan was governed by Fair Housing Act (“FHA”) regulations
promulgated by the Department of Housing and Urban Development (“HUD”), and that the
Note and Deed of Trust permitted Defendants to accelerate the Note or proceed with
foreclosure only if allowed by FHA regulations. Specifically, Plaintiffs allege that Defendants
were subject to regulation 24 C.F.R. § 203.604, which requires the mortgagee to have a
face‐to‐face interview with the mortgagor, or to make a reasonable effort to arrange such a
meeting, before three full monthly payments on the loan are unpaid. Plaintiffs further
allege that Defendants were subject to 24 C.F.R. § 203.501, which states that mortgagees
“must consider the comparative effects of their elective servicing actions, and must take
those appropriate actions which can reasonably be expected to generate the smallest
financial loss to the Department [of Housing and Urban Development].” § 203.501. §
203.501 then lists examples of loss mitigation actions which the mortgagee might take.
Lastly, Plaintiffs assert that Defendants were subject to 24 C.F.R. § 203.605,1 which requires
that “[b]efore four full monthly installments due on the mortgage have become unpaid, the
mortgagee shall evaluate on a monthly basis all of the loss mitigation techniques provided
at § 203.501 to determine which is appropriate. Based upon such evaluations, the
mortgagee shall take the appropriate loss mitigation action.” § 203.605.
Plaintiffs fell more than three months behind on their mortgage payments. Plaintiffs
claim that Edward Bagley tried to communicate with Wells Fargo in order to resolve the
1 The Amended Complaint mistakenly cites this regulation as § 203.501.
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debt, but “was rebuffed by Wells Fargo.” (Am. Compl. ¶ 16.) Plaintiffs also assert that Wells
Fargo “refused to accept any payment for less than an amount sufficient to bring the loan
current.” (Am. Compl. ¶ 15.) Plaintiffs claim that no creditor, including Wells Fargo, ever
held or attempted to arrange a face‐to‐face meeting with Plaintiffs or “ever considered a
deed in lieu of foreclosure as an alternative to foreclosure on the home or fairly considered
any forbearance or recasting of the mortgage.” (Am. Compl. ¶ 14.)
On March 16, 2011, Plaintiffs allege that Wells Fargo removed White as trustee on
the Deed of Trust and appointed Defendant Equity Trustees as substitute trustee. Plaintiffs
assert that, on Wells Fargo’s instructions, Equity Trustees advertised the home for
foreclosure and conducted a foreclosure sale on June 24, 2012, where Wells Fargo made
the high bid. Plaintiffs contend that, at the time of the foreclosure sale, Plaintiffs “had
approximately $15,000.00 that they were prepared to apply to arrearage on the loan.” (Am.
Compl. ¶ 23.) On August 11, 2011, Wells Fargo filed an unlawful detainer against Plaintiffs
in the General District Court of Henrico County, Virginia and was awarded possession of the
home on December 2, 2011. Plaintiffs appealed, and as of the filing of Plaintiffs’ suit, the
unlawful detainer matter was pending in the Circuit Court of Henrico County, Virginia.
In Count One, Plaintiffs allege that Defendants breached the terms of the Note and
Deed of Trust by failing to comply with FHA regulations. Specifically, Plaintiffs claim that
Defendants failed to arrange or attempt to arrange a face‐to‐face meeting under § 203.604
or to consider loss mitigation actions under § 203.501. Plaintiffs contend that this
purported failure to comply with FHA regulations renders Wells Fargo’s filing of an
unlawful detainer action a further breach of the Note and Deed of Trust. For these reasons,
Plaintiffs maintain that the foreclosure sale and trustee’s deed are void, or alternatively,
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voidable. In Count Two, Plaintiffs allege that, as a result of the conduct alleged in Count
One, Defendants breached an implied covenant of good faith and fair dealing in the Note
and Deed of Trust. In Count Three, Plaintiffs seek a declaratory judgment that they are not
responsible for Wells Fargo’s foreclosure‐related expenses. Plaintiffs claim that they
suffered: the loss of title to and quiet enjoyment of their home; legal expenses; damage to
their credit history; and substantial inconvenience. Accordingly, Plaintiffs assert that they
have superior title and ask for an order quieting title and compensatory damages in the
amount of $60,000.00.
Defendants filed a Motion to Dismiss on August 30, 2012, and Plaintiffs amended
their Complaint on September 20, 2012.2 Defendants filed a Motion to Dismiss the
Amended Complaint on October 4, 2012. Defendants argue that the Amended Complaint
should be dismissed pursuant to Rule 12(b)(6) on the following grounds: (1) Plaintiffs have
failed to state a breach of contract claim for a violation of FHA regulations; (2) Virginia does
not recognize an independent cause of action for breach of implied duty of good faith and
fair dealing, and even so, the Uniform Commercial Code (“U.C.C.”) which does allow for this
implied covenant does not apply to home mortgage loans; (3) Plaintiffs are not entitled to a
declaratory judgment because the claim is based on speculative action by Wells Fargo; and
(4) Plaintiffs have not sufficiently alleged that they have superior title to the home, and are
not entitled to a rescission of the foreclosure sale. This motion has been fully briefed and
this matter is now ripe for review.
2 In light of the Motion to dismiss the Amended Complaint, the Court thus DENIES AS MOOT
Defendants’ Motion to Dismiss Plaintiff’s original Complaint (ECF No. 4.)
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II.
LEGAL STANDARD
A motion to dismiss for failure to state a claim upon which relief can be granted
challenges the legal sufficiency of a claim, rather than the facts supporting it. Fed. R. Civ. P.
12(b)(6); Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007); Republican Party of
N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A court ruling on a Rule 12(b)(6) motion
must therefore accept all of the factual allegations in the complaint as true, see Edwards v.
City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999); Warner v. Buck Creek Nursery, Inc., 149
F. Supp. 2d 246, 254‐55 (W.D. Va. 2001), in addition to any provable facts consistent with
those allegations, Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), and must view these
facts in the light most favorable to the plaintiff. Christopher v. Harbury, 536 U.S. 403, 406
(2002). The Court may consider the complaint, its attachments, and documents “attached
to the motion to dismiss, so long as they are integral to the complaint and authentic.” Sec’y
of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).
To survive a motion to dismiss, a complaint must contain factual allegations
sufficient to provide the defendant with “notice of what the . . . claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). Rule 8(a)(2) requires the complaint to allege facts showing
that the plaintiff’s claim is plausible, and these “[f]actual allegations must be enough to
raise a right to relief above the speculative level.” Twombly, 540 U.S. at 545; see id. at 555
n.3. The Court need not accept legal conclusions that are presented as factual allegations, id.
at 555, or “unwarranted inferences, unreasonable conclusions, or arguments,” E. Shore
Mkts., Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000).
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III.
DISCUSSION
Defendants argue that Count One should be dismissed because Plaintiffs have not
sufficiently stated a claim that Defendants failed to comply with FHA regulations, and even
so, Plaintiffs have not alleged that they were harmed as a result of the alleged failure to
comply with the regulations. Further, Defendants argue that a failure to comply with FHA
regulations is an affirmative defense to foreclosure, but does not create a private cause of
action. Defendants argue that Count Two should be dismissed because there is no
independent cause of action for breach of an implied duty of good faith and fair dealing in
Virginia, and even if Plaintiffs had pled this claim within the context of a breach of contract
claim, the U.C.C. does not apply to a creation or transfer of an interest in or lien on real
property. In addition, Defendants assert that they were merely exercising their rights
under the Deed of Trust by foreclosing on the home, and thus, Plaintiffs cannot establish
that Defendants breached an implied covenant of good faith and fair dealing. Defendants
argue that Count Three should be dismissed because Plaintiffs’ claim for declaratory
judgment is based on hypothetical future action by Wells Fargo. Lastly, Defendants
challenge Plaintiffs’ action to quiet title because Plaintiffs do not claim that they have
satisfied their debts under the Note and Deed of Trust. The Court discusses below the
sufficiency of each of Plaintiffs’ claims.
A. Count One: Breach of Note and Deed of Trust
Under Virginia law, a party alleging breach of contract must establish that the
defendant owed the plaintiff a legally enforceable obligation, the defendant violated that
obligation, and the plaintiff suffered injury or damage as a result of the defendant’s breach.
See Filak v. George, 594 S.E. 2d 610, 619 (Va. 2004). Further, “[a] material breach is a failure
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to do something that is so fundamental to the contract that the failure to perform that
obligation defeats an essential purpose of the contract.” Countryside Orthopaedics, P.C. v.
Peyton, 261 Va. 142, 154 (2001). “The essential purposes of a deed of trust are two‐fold: to
secure the lender‐beneficiary's interest in the parcel it conveys and to protect the borrower
from acceleration of the debt and foreclosure on the securing property prior to the
fulfillment of the conditions precedent it imposes.” Mathews v. PHH Mortgage, 283 Va. 723,
732 (Va. 2012).
Plaintiffs allege that Defendants breached the Deed of Trust by foreclosing on the
house without complying with specific FHA regulations. Paragraph 9(d) of the Deed of
Trust provides that “[i]n many circumstances regulations issued by the Secretary [of HUD]
will limit Lender’s rights, in the case of payment defaults, to require immediate payment in
full and foreclose if not paid. This Security Instrument does not authorize acceleration or
foreclosure if not permitted by regulations of the Secretary.” (Am. Compl. Ex. A. 7.)
Firstly, Plaintiffs argue that Wells Fargo failed to comply with § 203.604, which
provides:
The mortgagee must have a face‐to‐face interview with the mortgagor, or
make a reasonable effort to arrange such a meeting, before three full monthly
installments due on the mortgage are unpaid. If default occurs in a
repayment plan arranged other than during a personal interview, the
mortgagee must have a face‐to‐face meeting with the mortgagor, or make a
reasonable attempt to arrange such a meeting within 30 days after such
default and at least 30 days before foreclosure is commenced, or at least 30
days before assignment is requested if the mortgage is insured on Hawaiian
home land pursuant to section 247 or Indian land pursuant to section 248 or
if assignment is requested under § 203.350(d) for mortgages authorized by
section 203(q) of the National Housing Act.
§ 203.604(b). Plaintiffs assert that they “fell more than three months behind on the note
while living in the home,” (Am. Compl. ¶ 13), and that “no creditor entity had a face‐to‐face
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meeting with the Bagleys or with either of them, or made any attempt to arrange for such
face‐to‐face meeting.” (Am. Compl. ¶ 14.) Accordingly, Plaintiffs assert that the foreclosure
sale was void, or alternatively, voidable.
Defendants argue that Plaintiffs have not sufficiently stated a claim because
Plaintiffs conflate the two situations in which § 203.604 requires a face‐to‐face meeting: (1)
before three full monthly installments are unpaid; or (2) at least 30 days before
commencement of foreclosure if default occurs in a repayment plan arranged other than
during a personal interview. See Mathews, 283 Va. at 742‐43(Kinser, J., concurring).
Further, Defendants argue that Plaintiffs do not claim that they were ready, willing, and
able to cure the default if they had had the meeting, and thus, Plaintiffs cannot establish
that they were damaged by a failure to comply with § 203.604.
Plaintiffs have sufficiently alleged that Defendants violated the Deed of Trust by
foreclosing on the home without complying with § 203.604. In Virginia, “a lender must
comply with all conditions precedent to foreclosure in a deed of trust even if the borrowers
are in arrears.” Mathews, 283 Va. at 730; see also Bayview Loan Servicing, LLC v. Simmons,
275 Va. 114 (2008). Further, the Supreme Court of Virginia held in Mathews v. PHH
Mortgage, a case in which the deed of trust also required compliance with FHA regulations,
that “the face‐to‐face meeting requirement [of § 203.604(b)] is a condition precedent to the
accrual of the rights of acceleration and foreclosure incorporated into the Deed of Trust.”
283 Va. at 736‐37. In this case, Plaintiffs clearly allege that they failed to pay their mortgage
installments for more than three months, and that the Defendants violated § 203.604
because they never arranged a face‐to‐face meeting or attempted to do so. (See Am. Compl.
¶¶ 13‐14.) Accordingly, by asserting that Defendants failed to comply with § 203.604,
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Plaintiffs have sufficiently alleged that Defendants failed to satisfy a condition precedent to
foreclosing on the home, and thus, have breached the Deed of Trust.3
Further, Plaintiffs have sufficiently pled that they were harmed by Defendants’
alleged failure to comply with § 203.604. Although Plaintiffs have not alleged that they
were ready, willing, and able to fully satisfy the debt if Defendants had arranged the face‐
to‐face meeting required by § 203.604, Plaintiffs would have been able to communicate in
person with Wells Fargo representatives about other ways that they could resolve their
debt. Instead, Plaintiffs assert that they were unable to meet face‐to‐face with Wells Fargo
representatives about their default and that Edward Bagley was rebuffed when he
attempted to communicate with Wells Fargo about the debt. 12 U.S.C. § 1715, which
authorizes HUD to implement § 203.604, requires lenders to engage “in loss mitigation
actions for the purpose of providing an alternative to foreclosure” when a borrower is in
default or facing imminent default. 12 U.S.C. § 1715 (emphasis added); see Mathews, 283
Va. 741 n.6. The face‐to‐face meeting creates an opportunity for homeowners in default to
avoid foreclosure,4 thus surely a plaintiff may be harmed if they are denied this
opportunity, even if they are not able to pay the full debt at the time of the meeting.
Therefore, Plaintiffs have sufficiently stated a claim that Defendants breached the Deed of
Trust by failing to comply with § 203.604. The Motion to dismiss this claim is thus DENIED.
Defendants also seek to dismiss Count One on the ground that a failure to comply with
FHA regulations is an affirmative defense to foreclosure, but does not create a private cause
of action. However, while the plaintiffs in Mathews sought a declaratory judgment that their
foreclosure was void rather than compensatory damages, Mathews expressly held that
“[b]orrowers may sue to enforce conditions precedent to foreclosure.” 283 Va. at 733.
4 Seemingly, there would be no reason to hold a face‐to‐face meeting to discuss the default
if the borrowers were prepared to fully cure the debt at that point anyways. For this
reason, HUD requires that the face‐to‐face meetings are conducted by “staff that is
adequately trained to discuss the delinquency and the appropriate loss mitigation options.”
Mathews, 283 Va. at 740.
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Secondly, Plaintiffs allege that Defendants violated § 203.501, which provides that:
Mortgagees must consider the comparative effects of their elective servicing
actions, and must take those appropriate actions which can reasonably be
expected to generate the smallest financial loss to the Department. Such
actions include, but are not limited to, deeds in lieu of foreclosure under §
203.357, pre‐foreclosure sales under § 203.370, partial claims under §
203.414, assumptions under § 203.512, special forbearance under §§
203.471 and 203.614, and recasting of mortgages under § 203.616. HUD may
prescribe conditions and requirements for the appropriate use of these loss
mitigation actions, concerning such matters as owner‐occupancy, extent of
previous defaults, prior use of loss mitigation, and evaluation of the
mortgagor's income, credit and property.
§ 203.501. Plaintiffs claim that Defendants never considered a deed in lieu of foreclosure or
“fairly considered any forbearance or recasting of the mortgage.” (Am. Compl. ¶ 14.)
Plaintiffs further assert that Edward Bagley was rebuffed by Wells Fargo when he tried to
resolve the debt on the loan and that Wells Fargo refused to accept any payment less than
the full amount needed to bring the loan current. At the time of the foreclosure sale,
Plaintiffs allegedly had $15,000.00 that they were prepared to apply to the arrearage.
Plaintiffs have not sufficiently stated a claim for breach of the Deed of Trust by
alleging that Defendants violated § 203.501. § 203.501 requires Defendants to consider the
comparative effects of their elective servicing actions, and Plaintiffs have alleged no facts
indicating that Defendants failed to do so. In addition, § 203.501 provides a non‐exhaustive
list of loss mitigation actions that the mortgagee may consider taking, and Defendants were
not required to take any specific action on the list as long as they took any appropriate
actions which could reasonably have been expected to most significantly reduce HUD’s
financial loss. The allegations that Wells Fargo “rebuffed” Edward Bagley or refused to
accept payment for less than the amount needed to bring the loan current do not, without
more, sufficiently state a claim that Defendants failed to comply with these provisions of §
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203.501. Accordingly, Plaintiffs have failed to state a breach of contract claim for failure to
comply with § 203.501, and the Court GRANTS the motion with respect to this claim.5
B. Count Two: Breach of Implied Covenant of Good Faith and Fair Dealing
Plaintiffs argue that in violating FHA regulations as alleged in Count One, Defendants
also violated an implied duty of good faith and fair dealing in the Note and Deed of Trust.
Specifically, Plaintiffs contend that “foreclosing on the Bagleys’ home after representatives
of Wells Fargo refused to communicate with the Bagleys regarding loss mitigation
alternatives and failed to comply with FHA regulations incorporated into the Bagleys’ note
and deed of trust constitutes a breach of the implied duty of good faith and fair dealing.”
(Pls.’ Mem. Opp. Mot. Dismiss 11.) Plaintiffs further argue that Defendants used their
discretion to foreclose the home in bad faith by filing an unlawful detainer action when the
foreclosure was in violation of Defendants’ contractual duties, and by falsely reporting to
credit agencies that there had been a foreclosure when the foreclosure was void, or
alternatively, voidable. Plaintiffs assert that “[b]ecause the note was a negotiable
instrument under the UCC, and because Va. Code Ann. § 8.1A‐304 imposed the duty of good
faith and fair dealing on the holder of the note, the deed of trust also carried with it an
implied duty of good faith and fair dealing as required by the statute.” (Am. Compl. ¶ 43.)
Plaintiffs have not sufficiently stated a claim for breach of an implied covenant of
good faith and fair dealing. “Under Virginia law, every contract contains an implied
covenant of good faith and fair dealing; however, a breach of those duties only gives rise to a
5 The Amended Complaint also cites § 203.605, which sets forth a duty to mitigate before
four full monthly installments have become unpaid and requires the mortgagee to evaluate
on a monthly basis the loss mitigation techniques provided in § 203.501 to determine if any
are appropriate. However, Plaintiffs do not actually allege that Defendants violated this
regulation. Therefore, to the extent that Plaintiffs seek to state a breach of contract claim
for violation of § 203.605, they have failed to do so, and the Court DISMISSES this claim.
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breach of contract claim, not a separate cause of action.” Albayero v. Wells Fargo Bank, N.A.,
3:11CV201‐HEH, 2011 U.S. Dist. LEXIS 114974, at *15(E.D. Va. Oct. 5, 2011)(quoting Frank
Brunckhorst Co., L.L.C. v. Coastal Atlantic, Inc., 542 F.Supp.2d 452, 462 (E.D. Va.
2008))(emphasis added). See Charles E. Brauer Co. v. NationsBank of Va., N.A., 466 S.E.2d
382, 385 (Va. 1996)(“[T]he failure to act in good faith . . . does not amount to an
independent tort.”) Even if Plaintiffs had alleged a breach of contract claim stemming from
a failure to act in good faith and fair dealing, Virginia law “does not recognize an implied
covenant of good faith and fair dealing in contracts outside of those governed by the
Uniform Commercial Code (U.C.C.), and the U.C.C. expressly excludes the transfer of realty
from its provisions.” Harrison v. US Bank National, 3:12CV224, 2012 U.S. Dist. LEXIS 85735,
at *5‐6 (E.D. Va. June 20, 2012) (quoting Greenwood Assocs. Inc. v. Crestar Bank, 448 S.E.2d
399 (1994)) (internal quotations omitted); see Va. Code Ann. § 8.9A‐109(d)(11).6 For the
above reasons, the Court GRANTS Defendants’ Motion to dismiss Count Two.
C. Count Three: Claim for Declaratory Judgment
Plaintiffs seek a declaratory judgment stating that Plaintiffs are not responsible for
Wells Fargo’s foreclosure‐related costs and that these costs cannot be added to Plaintiffs’
remaining obligations on the home. Plaintiffs maintain that their “rights are in doubt and in
peril” and argue that “[t]he competing positions of Wells Fargo and the Bagleys as to who
should bear the said foreclosure related expenses establish that a real and actual
6 Although the Note is a negotiable instrument governed by the U.C.C., the Deed of Trust is a
secured instrument which is not governed by the U.C.C. See Gibson v. Wells Fargo Bank, N.A.,
1:10‐cv‐304, 2011 U.S. Dist. LEXIS 5391, * 8 (E.D. Va. Jan. 19, 2011)(“Virginia is a non‐
judicial foreclosure state in which the law of real property governs deeds of trust”)(citing
Gen. Elec. Credit Corp. v. Lunsford , 209 Va. 743, 747 (1969)(“[T]he note may and does
confer one right and the security another. The former is governed by the law [of the]
merchant, and the latter by the law of real property . . . ”).
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controversy exists as to the respective rights of the parties to this matter.” (Am. Compl. ¶
52.) While Defendants argue that this claim is based on speculative future action by Wells
Fargo to impose on Plaintiffs costs that have already been incurred, Plaintiffs insist that
their claim for a declaratory judgment is sufficient because the matter relates to the
ongoing controversy between the parties as to whether or not the foreclosure sale was
valid, both in this court and in the appeal of the unlawful detainer action.
Plaintiffs have not sufficiently stated a claim for a declaratory judgment. The
Declaratory Judgment Act authorizes a federal court to grant declaratory relief when “the
facts alleged, under all the circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuances of a declaratory judgment.” Maryland Casualty Co. v. Pacific Coal & Oil
Co., 312 U.S. 270, 273 (1941). Declaratory relief “is designed to apply prospectively to
prevent or mandate reasonably certain, future conduct.” Trull v. Smolka, 3:08CV460‐HEH,
2008 U.S. Dist. LEXIS 70233, at *24 (E.D. Va. Sept. 18, 2008); see Horvath v. Bank of N.Y.,
N.A., No. 1:09‐CV‐1129, 2010 U.S. Dist. LEXIS 19965, at *1 (E.D. Va. Jan. 29,
2010)(“Declaratory relief is reserved for forward looking actions and is appropriate if the
relief sought will serve a useful purpose in clarifying and settling the legal relations in
issue, and will terminate and afford relief from the uncertainty, insecurity, and controversy
giving rise to the proceeding”)(internal citations omitted).
In this case, there is no reasonably certain future conduct to be prevented or
mandated because the foreclosure sale has already occurred, and the issue of which party
is responsible for the related costs will be addressed by the underlying contract claim
resolving whether the foreclosure sale is void or valid. See Estrella v. Wells Fargo Bank, N.A.,
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2:11cv414, 2011 U.S. Dist. LEXIS 148778, at *17‐18 (E.D. Va. Dec. 28, 2011)(dismissing an
identical claim for declaratory relief by plaintiff homeowners for failure to state a claim
when the foreclosure sale had already occurred and plaintiffs sought a declaratory
judgment that they were not responsible for the costs associated with the foreclosure sale).
For these reasons, the Court GRANTS the Motion to dismiss Count Three.
D. Action to Quiet Title
Based on the conduct alleged in Counts One and Two, Plaintiffs argue that the
foreclosure sale and trustee’s deed are void or voidable, and thus seek an action to quiet
title as a remedy, “either by an order striking the purported trustee’s deed from the public
land records or by an order appointing a constructive trustee with direction to convey
record title to the home to [Plaintiffs], subject to the lien of the deed of trust.” (Am. Compl.
¶ 37.) Plaintiffs assert that because of Defendants’ alleged conduct, Plaintiffs’ “right to title
to the home is superior to any other entity, including Wells Fargo, provided however, that
their right to title is subject to the lien of the deed of trust.” (Am. Compl. ¶ 36.) Defendants
argue that Plaintiffs have not sufficiently alleged that they have superior title since
Plaintiffs do not claim that they have fully satisfied their obligations or that the debts have
otherwise been canceled or forgiven. Defendants further assert that Plaintiffs’ claim for an
order quieting title essentially asks for a rescission of the foreclosure sale, and that such an
action is improper because equitable relief is only appropriate where the plaintiff alleges
that he has no adequate remedy at law. Defendants maintain that Plaintiffs have an
adequate remedy at law in this case, namely, their action for damages.
Plaintiffs have failed to sufficiently state a claim for an action to quiet title. In
Virginia, “[a]n action for quiet title is based on the premise that a person with good title to
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certain real or personal property should not be subjected to various future claims against
the title.” Maine v. Adams, 277 Va. 230, 238 (Va. 2009). In order to assert a claim for quiet
title, the plaintiff must plead that he has fully satisfied all legal obligations to the party in
interest. See Tapia v. U.S. Bank, 718 F. Supp. 2d 689, 700 (E.D. Va. 2010), aff’d 441 F. App’x
166 (4th Cir. 2011); see also Matanic v. Wells Fargo Bank, N.A., 3:12CV472, 2012 U.S. Dist.
LEXIS 134154, * 21‐22 (E.D. Va. Sept. 19, 2012)(denying plaintiff’s claim for quiet title
because plaintiff admitted owing money on the note and deed of trust). In this case,
Plaintiffs do not plead that they have satisfied their obligations under the Note and Deed of
Trust and they admit that they owe money on the Note and Deed of Trust. (See Am. Compl.
¶ 50.) Accordingly, Plaintiffs’ claim for quiet title fails. Further, because Plaintiffs have not
sufficiently stated a claim for an action quieting title, the Court need not address whether
or not rescission of the foreclosure sale would be an appropriate means of quieting title.
IV.
CONCLUSION
For the above reasons, the Court GRANTS IN PART and DENIES IN PART the Motion
to Dismiss the Amended Complaint. The Court DENIES the Motion to Dismiss Plaintiffs’
breach of contract claim in Count One for a failure to comply with § 203.604, but GRANTS
the Motion with respect to Plaintiffs’ claims concerning § 203.501 and §203.605, and
DISMISSES the latter two claims. The Court GRANTS the Motion to dismiss Counts Two and
Three and DISMISSES these claims against Defendants.
Let the Clerk send a copy of this Memorandum Opinion to all counsel of record.
An appropriate order shall issue.
ENTERED this 29th day of January 2013.
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_____________________/s/________________
James R. Spencer
United States District Judge
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