Baird et al v. The Federal Home Loan Mortgage Corporation
Filing
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MEMORANDUM OPINION. Signed by District Judge Glen E. Conrad on 11/4/2016. (ssm)
CLERK'S OFFICE: U.S. DIST. COURT
AT ROANOKE, VA
FILED
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION
TODD A. BAIRD, et al.,
Plaintiffs,
v.
THE FEDERAL HOME LOAN
MORTGAGE CORPORATION,
Defendant.
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Civil Action No. 3:15CV00041
MEMORANDUM OPINION
Hon. Glen E. Conrad
Chief United States District Judge
Plaintiffs Todd A. Baird and Dana G. Baird bring this action against defendant The
Federal Home Loan Mortgage Corporation ("Freddie Mac"), arising out of the foreclosure of
their home and subsequent eviction. This case is presently before the court on Freddie Mac's
motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the
following reasons, Freddie Mac's motion will be granted.
Factual Background
The following facts, taken from the plaintiffs' amended complaint, are accepted as true
for purposes of the defendant's motions to dismiss. See Erickson v. Pardus, 551 U.S. 89, 94
(2007).
On June 9, 2004, plaintiffs entered into a mortgage loan agreement for their home located
at 3934 Campbell Road in Troy, Virginia (the "Property"). Am. Compl.
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5-6. Through various
transactions, The Federal Home Loan Mortgage Corporation ("Freddie Mac") became the holder
of the mortgage note. GMAC Mortgage, LLC ("GMAC Mortgage") serviced the note on behalf
of Freddie Mac. GMAC Mortgage appointed Professional Foreclosure Corporation of Virginia
("PFC") as trustee.
Plaintiffs eventually defaulted on their mortgage, and GMAC Mortgage sent plaintiffs
notice of default in a letter dated June 1, 2009. GMAC Mortgage then instructed PFC to
foreclose on the Property. Am. Compl.
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23. On October 7, 2009, PFC conducted a foreclosure
sale, whereby Freddie Mac became the record owner of the Property through a recorded trustee's
deed. Id.
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27-29. According to the complaint, notice of foreclosure was defective. Consequently,
plaintiffs allege that they did not become aware of the foreclosure sale until November of 2009.
Id.
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24.
Plaintiffs assert that Freddie Mac knew or should have known of the potential challenge
to the validity of the foreclosure sale because of the defective notice and another issue related to
the appointment of PFC as trustee. Plaintiffs contend that these defects motivated Freddie Mac,
through its agent Titanium Solutions, Inc. ("Titanium"), to encourage plaintiffs to apply for loan
modification. Id.
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33. In response to this encouragement, plaintiffs submitted what amounted to
a written application for loan modification (the "Hardship Letter"). Id.
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34.
Plaintiffs allege that Titanium, acting as Freddie Mac's agent, approved the application
via an email sent by Titanium's agent, Trey Durham ("Durham"). Id.
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36. The email states:
"Homeowner was qualified for reinstatement and all paperwork was sent to Freddie Mac on 1103-2009." Durham also wrote, "Freddie Mac told evicting attorney to hold off on eviction on 121-10." Id. Despite their general contention that other evidence tending to demonstrate a valid
loan modification agreement exists, plaintiffs have failed to provide any documents other than
Durham's email evincing written acceptance of plaintiffs' purported loan modification
application.
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Procedural History
On July 13, 2015, plaintiffs filed a four-count complaint in the Circuit Court of Louisa
County, alleging that neither Freddie Mac nor GMAC Mortgage was entitled to foreclose on the
Property. Plaintiffs also asserted various claims related to the foreclosure of the Property and
their subsequent eviction, including a claim for breach of the loan modification agreement. On
August 11, 2015, Freddie Mac filed a notice of removal pursuant to 42 U.S.C. §§ 1441, 1442.
On March 29, 2016, after Freddie Mac filed its first motion to dismiss pursuant to Rule
12(b)( 6) of the Federal Rules of Civil Procedure, the court dismissed all counts except for
plaintiffs claim of a breach of the loan modification agreement. The court found that plaintiffs
had not established the first element of this claim, that a valid and enforceable contract to modify
the loan existed, but nevertheless allowed plaintiffs time to engage in limited discovery for the
purpose of finding a written copy of such agreement. On May 31, 2016, plaintiffs filed an
amended complaint, attaching Durham's email as evidence of a written loan modification
agreement. On June 14, 2016, Freddie Mac filed a motion to dismiss the amended complaint
pursuant to Rule 12(b)(6). The motions have been fully briefed and are ripe for review.
Standard of Review
."The purpose of a Rule 12(b)( 6) motion is to test the sufficiency of a complaint."
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). When deciding a motion to
dismiss under this rule, the court must accept as true all well-pleaded allegations and draw all
reasonable factual inferences in the plaintiffs' favor. Erickson v. Pardus, 551 U.S. 89, 94 (2007);
see also Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 539 (4th Cir. 2013). "While a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, a plaintiffs obligation to provide the grounds of his entitlement to relief requires
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more than labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citation and
quotation marks omitted). To survive dismissal for failure to state a claim, "a complaint must
contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on
its face."' Ashcroft v. Iqbal, 556 U.S. 662,678 (2009) (quoting Twombly, 550 U.S. at 570).
Discussion
Freddie Mac urges the court to dismiss plaintiffs' breach of contract claim, arguing that
plaintiffs have failed to allege facts supporting acceptance of plaintiffs' offer giving rise to a
valid and enforceable contract. Defendant also · contends that plaintiffs have not asserted
sufficient facts to make plausible the existence of an agency relationship between Freddie Mac
and Titanium, so that Titanium could bind Freddie Mac to a loan modification agreement.
In an action where jurisdiction is based upon diversity of citizenship, the court must
apply the substantive law of the forum state, including the choice of law rules. Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (citing Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78 (1938)). The instant action, however, is not a diversity case. Instead, jurisdiction is based
on 42 U.S.C. §§ 1441, 1442, relating to removal jurisdiction and actions against the United
States or its agents. 1 "A federal court's role under § 1442 is similar to that of a federal court
sitting in diversity." Kolibash v. Committee on Legal Ethics of West Virginia Bar, 872 F.2d 571,
576 (4th Cir.1989). The court will therefore apply the choice of law rule of the forum state to
determine the law applicable to this action, as it would in a diversity action. See Arizona v.
Manypenny, 451 U.S. 232, 240-42 (1981) ("[T]he invocation of removal jurisdiction by a federal
officer does not revise or alter the underlying law to be applied."). According to Virginia choice
of law principles, the law of the place of the performance of the contract governs all questions
Freddie Mac is an agent of the United States for purpose of§ 1442 pursuant to 42 U.S.C. § 1452(±).
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arising in regards to the performance of a contract. Equitable Trust Co. v. Bratwursthaus Mgmt.
Qml,_, 514 F.2d 565, 567 (4th Cir.1975). As the alleged loan modification agreement was to be
performed in Virginia, Virginia law governs this matter.
Under Virginia law, the elements of a cause of action for breach of contract are: "(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 plaintiff caused by the breach of obligation."
Filak v. George, 267 Va. 612, 619 (2004). In addition, all contracts related to the purchase of real
estate-including mortgage liens-must be in writing to satisfy the statute of frauds. Va. Code.
Ann. § 11-2(6). Any modification of a mortgage agreement must also be in writing to be
enforceable. See Lindsay v. McEnearney Assocs., 260 Va. 48, 51-53 (Va. 2000). Freddie Mac
contends that plaintiffs have not pled facts giving rise to the existence of a legally enforceable
obligation of Freddie Mac that satisfies the statute of frauds. The court agrees.
Plaintiffs argue that the Hardship Letter was a written application for a loan modification.
See Mcinnis v. BAC Home Loan Servicing, LP, No. 2:11CV468, 2012 WL 383590, at *7 (E.D.
Va. Jan. 13, 2012) ("When a loan modification is contemplated, the borrower offers the
application to the lender, which the lender can either accept or reject after a determination of the
borrower's eligibility.") (emphasis in original). While the Hardship Letter may have been an
offer, acceptance and consideration are required to create a legally enforceable contract. See
Pierce v. Wells Fargo Bank, 85 Va. Cir. 32, 2012 WL 9735354, at *3 (finding plaintiffs failed to
state a claim for breach of contract when plaintiffs did not allege facts giving rise to an "offer,
acceptance, and consideration ... for the loan modification agreement"). Plaintiffs contend that a
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leg all~ enforceable contract that satisfies the statute of frauds arose when Durham, as an agent
for Titanium, which, in tum, was an agent for Freddie Mac, accepted the loan modification
agreement. Defendant makes two arguments regarding why plaintiffs failed to allege a legal
obligation: (1) plaintiff has not sufficiently asserted facts giving rise to an agency relationship
between Freddie Mac and either Titanium or Durham, and thus Titanium and Durham were
unable to bind Freddie Mac; and (2) even if Titanium and Durham were agents of Freddie Mac,
the email written by Durham did not manifest acceptance establishing a written agreement.
"[A] cceptance of an offer must be identical to the offer; otherwise, there is no meeting of
the minds." Showcase Woodworking, Ltd. v. Fluor Daniel, Inc., No. 89-00656-R, 1990 WL
518129, at *4 (E.D. Va. Apr. 17, 1990) (citing Nolan Bros. v. Century Sprinkler Corp., 220 F.2d
726 (4th Cir. 1955)). Here, plaintiffs' complaint alleges that Durham's email was acceptance of
the offer. The email states, "Homeowner was qualified for reinstatement and all paperwork was
sent to Freddie Mac on 11-03-2009." Am. Compl. 't[ 37. Durham further wrote, "Freddie Mac
told evicting attorney to hold off on eviction on 1-21-10." Id. The court cannot find that these
emails manifested acceptance that was "identical to the offer." Showcase Woodworking, 1990
1990 WL 518129, at *4. Therefore, plaintiffs have not pled what could plausibly be considered
an acceptance by Freddie Mac, and by extension, a legally enforceable obligation on the part of
the defendant. 2 See Filak v. George, 267 Va. 612, 619 (2004) (listing the elements of a breach of
contract claim). Plaintiffs have failed to state a claim for breach of contract, and the court will
grant Freddie Mac's motion to dismiss.
2
Because the court finds that the email from Durham does not amount to an acceptance of plaintiffs' offer~
the court declines to determine whether Durham or Titanium were agents of Freddie Mac, capable of binding
Freddie Mac to such an agreement.
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Conclusion
For the foregoing reasons, Freddie Mac's motion to dismiss will be granted. The Clerk is
directed to strike this case from the court's active docket and to send copies of this memorandum
opinion and the accompanying order to all counsel of record.
DATED: This
'-{}4 day ofNovember, 2016.
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