Herbaugh et al v. Bank of America, N.A.
Filing
44
MEMORANDUM OPINION. Signed by District Judge Michael F. Urbanski on 7/15/2016. (jat)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
HARRISONBURG DIVISION
WILLIAM T. HERBAUGH, et al.,
Plaintiffs,
v.
BANK OF AMERICA, N.A., et al.,
Defendants.
)
) Civil Action No. 5:15cv71
)
)
) By: Michael F. Urbanski
)
United States District Judge
)
)
MEMORANDUM OPINION
In this contract action, Plaintiffs William T. Herbaugh and Karen L. Herbaugh (collectively
the "Herbaughs") allege Defendants Bank of America, N.A. ("BANA") and Federal National
Mortgage Association ("Fannie Mae") repeatedly violated the terms of a deed of trust and
promissory note as a result of their failure to provide proper cure notice and requiring the
Herbaughs to make their next month's payment prior to accelerating the Herbaughs' mortgage loan.
Count I alleges Defendants' actions breached the explicit terms of the deed of trust and promissory
note. 1 Count II alleges the same conduct amounts to breaches of the duty of good faith and fair
dealing.
Pursuant to Fed. R. Civ. P. 12(b)(6), Defendants move to dismiss Counts I and II, arguing
the Herbaughs' claims are (1) time-barred, (2) barred by res judicata, and (3) fail to allege facts
sufficient to state a claim on either count.
The Court held a hearing on Apri120, 2016. For the reasons set forth below, both Counts I
and II are time-barred. Accordingly, Defendants' motion to dismiss, ECF No. 25, is GRANTED
and this case DISMISSED with prejudice.
I.
1
To be clear, both Counts alleges that a series of actions taken by the Defendants amount to multiple breaches of the
contract and of the duty of good faith and fair dealing.
1
On November 7, 2005, the Herbaughs purchased a home at 58 Woodhaven Way, Linden,
Virginia 22642, in Warren County (the "Property"). ECF No. 16, ~~ S-6. On the same day, the
Herbaughs entered a mortgage loan agreement (the "Loan") with Cerdent Mortgage Corporation
("Cerdent") and agreed to a promissory note (the "Note") secured by a deed of trust (the "Deed of
Trust"). Id.
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6. The Deed of Trust was recorded in Warren County Circuit Court and appointed
John P. Kromer ("Kromer") trustee. Id. Cerdent assigned the note to BANA. Id.
Mae backed and controlled servicing of the Loan. Id.
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7. Fannie
8. Plaintiffs explain that at the time of the
alleged breach, either BANA or Fannie Mae held the note. Id.
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9.
Paragraph 6(C) of the Note contained the following provision related to notice prior to
acceleration:
If I am in default, the Note Holder may send me a written notice
telling me that if I do not pay the overdue amount by a certain date,
the Note Holder may require me to pay immediately the full amount
of Principal which has not been paid and all the interest that I owe
on that amount. That date must be at least 30 days after the date on
which the notice is mailed to me or delivered by other means.
Id. at~ 10, ECF No. 26-1, ~ 6.2
Paragraph 22 of the Deed of Trust contained a similar requirement:
22. Acceleration; Remedies. Lender shall give notice to Borrower
prior to acceleration following Borrower's breach of any covenant or
agreement in this Security Instrument.
The notice shall specify (a) the default; (b) the action required to cure
the default; (c) a date, not less than 30 days from the date of notice
given to the Borrower, by which the default must be cured; and (d)
that failure to cure the default on or before the date specified in the
notice may result in acceleration of the sums secured by this Security
2 The Herbaughs' amended complaint contains neither a copy of the Deed of Trust nor the Promissory Note; it only
includes descriptions and excerpts from these documents. Attached to Defendants' brief in support of their motion to
dismiss, ECF No. 26, are copies of both documents. In ruling on a motion to dismiss, the court may consider
documents attached to briefs that "are integral to the complaint and authentic." Philips v. Pitt County Memorial Hosp.,
572 F.3d 176, 180 (4th Cir. 2009). The documents attached to Defendants brief, ECF Nos. 26-1 and 26-2, comport
with the description in the Herbaughs' complaint. These are the very contracts that the Herbaughs allege give rise to
this case and, therefore, are integral to the complaint. Accordingly, the court will consider the copies of the Deed of
Trust and Note attached to Defendants brief.
2
Instrument and sale of the Property. The notice shall further inform
Borrower of the right to reinstate after acceleration and the right to
bring a court action to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale. If the default is
not cured on or before the date specified in the notice, Lender at its
option may require immediate payment in full of all sums secured by
this Security Instrument without further demand and may invoke the
power of sale and any other remedies permitted by Applicable Law.
Lender shall be entitled to collect all expenses incurred in pursuing
the remedies provided in this Section 22, including but not limited to,
reasonable attorney's fees and costs of tide evidence.
ECF Nos. 16, ~ 11, 26-2, ~ 22. In sum, paragraph 6(C) of the Note and paragraph 22 of the Deed
of Trust (hereinafter the "Acceleration Clauses") require that notice be provided to the Herbaughs
30 days or more prior to the Defendants' acceleration of the Loan and sale of the Property.
The Herbaughs received documents from BANA that purported to comply with the notice
provisions in the Acceleration Clauses. Id.
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13. The Herbaughs allege that because these
documents were backdated and required payment of the next month's rent to prevent acceleration
and foreclosure, the notices are faulty. Id. at~ 13.3
BANA substituted Samuel I. White P.C. (''White") for Kromer as trustee of the Deed of
Trust and instructed White to foreclose on the Herbaughs' home. Id.
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15. White advertised in a
Warren County newspaper that a foreclosure sale of the Property was to occur on February 16,
2010. I d.
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18. The Herbaughs learned of the pending foreclosure of their home through this
advertisement. ECF No. 16-3. At the February 16, 2010 foreclosure sale, BANA offered the
highest bid. ECF No. 16, ~ 20. On February 16, 2010, White and BANA executed a trustee's deed
conveying the Property to Fannie Mae. Id.
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23. On September 17, 2010, White recorded the
3 At the hearing held on April 20, 2016, counsel for the Herbaughs explained that the allegations contained in the
amended complaint do not stem from knowledge of notices actually received by the Herbaughs or memory of such
notices. Instead, the allegations arise from the assertion that BANA systematically backdated notice letters related to
Acceleration Clauses. The Herbaughs' complaint contains neither the letter(s) that purported to provide notice, nor any
information as to when the letter(s) were received.
3
trustee's deed in Warren County Circuit Court. Id.
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26. BANA made multiple reports to credit
agencies indicating that the Property had been lawfully foreclosed upon. Id.
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27.
In October 2010, a Fannie Mae representative explained to the Herbaughs that the Property
had been purchased by Fannie Mae from BANA at a courthouse auction. ECF No. 16-3.
Thereafter, the Herbaughs allege that they contacted BANA and Fannie Mae separately to determine
which entity owned the Property. Id. Fannie Mae advised that BANA owned the Property, but
BANA indicated the Property was sold to Fannie Mae. I d. In spring of 2011, Jeanette Campbell
("Campbell"), with Fannie Mae Cash for Keys, issued an eviction notice to the Herbaughs. Id.
Campbell advised the Herbaughs that Fannie Mae's sale of the Property was stayed as Fannie Mae
had agreed to "work with [the] mortgage." Id. Campbell instructed the Herbaughs to contact
White. I d. Stephanie Gates, an employee of White, advised that White had not handled any
documents regarding the Property since 2010. Id. The Herbaughs allege through January of2012,
BANA sent correspondence indicating that until April30, 2012, an agreement could be reached
allowing the Herbaughs could retain possession of the Property. Id.
On March 12, 2012, Fannie Mae filed an unlawful detainer action in Warren County General
District Court seeking to evict the Herbaughs from the Property. ECF No. 16, ~.29. The General
District Court ruled in favor of Fannie Mae. I d.
Warren County Circuit Court. Id.
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32. The Herbaughs appealed the case to
33. During the course of the appeal, Fannie Mae and the
Herbaughs entered a consent order whereby the Herbaughs agreed to vacate the Property by
January 1, 2014. Id.
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35. The Herbaughs filed suit in Warren County Circuit Court on
September 17, 2015, alleging that Defendants failed to comply with the notice provisions of the
Acceleration Clauses, giving rise to claims of breach of contract and breach of the covenant of good
faith and fair dealing. The case was subsequently removed to federal court.
II.
4
To survive a motion to dismiss, a complaint must contain sufficient factual matter which,
accepted as true, "state[s] a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Ad. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Under the
plausibility standard, a complaint must contain "more than labels and .conclusions" or a "formulaic
recitation of the elements of a cause of action." Twombly, 550 U.S. at 555. This plausibility
standard requires a plaintiff to demonstrate more than "a sheer possibility that a defendant has acted
unlawfully." Iqbal, 556 U.S. at 678. When ruling on a motion to dismiss, the court must "accept the
well-pled allegations of the complaint as true" and "construe the facts and reasonable inferences
derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States, 120 F.3d 472,
474 (4th Cit. 1997). While the court must accept as true all well-pled factual allegations, the same is
not true for legal conclusions. "Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678; see also Wag More Dogs.
LLC v. Cozart, 680 F.3d 359, 365 (4th Cit. 2012) ("Although we are constrained to take the facts in
the light most favorable to the plaintiff, we need not accept legal conclusions couched as facts or
unwarranted inferences, unreasonable conclusions, or arguments.") (internal quotation marks
omitted). Thus, in order to survive a motion to dismiss, the complaint must present sufficient
nonconclusory factual allegations to support a reasonable inference that the plaintiff is en tided to
relief and the defendant is liable for the unlawful act or omission alleged. See Francis v. Giacomelli,
588 F.3d 186, 196-197 (4th Cit. 2009) (citing Iqbal, 556 U.S. at 678-79, and Gooden v. Howard
Cnty .. Md., 954 F.2d 960, 969-70 (4th Cit. 1992) (en bane)). Determining whether a complaint states
a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense." Iqbal, 556 U.S. at 679.
The statute of limitations is an affirmative defense that may be raised on a Fed. R. Civ. P.
12(b)(6) motion. U.S. v. I
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