ROST et al v. AVELO MORTGAGE, LLC et al, No. 1:2015cv03254 - Document 25 (D.N.J. 2015)
Court Description: OPINION filed. Signed by Judge Joseph H. Rodriguez on 11/3/2015. (drw)
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ROST et al v. AVELO MORTGAGE, LLC et al Doc. 25 UNITED STATES DISTRICT COURT DISTRICT OF NEW J ERSEY STEPHEN ROST and SUSAN ROST, : : Plaintiffs, v. Hon. J oseph H. Rodriguez Civil Action No. 15-3254 : OPINION AVELO MORTGAGE, LLC; GOLDMAN : SACHS BANK USA; LITTON LOAN SERVICING, LP; OCWEN FINANCIAL : COMPANY, LLC; WILMINGTON SAVINGS FUND SOCIETY, FSB DBA : CHRISTIANA TRUST AS TRUSTEE FOR HLSS MORTGAGE MASTER TRUST, : Defendants. : This m atter is before the Court on m otions to dism iss the Com plaint filed by Defendants (1) Litton Loan Servicing LP; Ocwen Financial Corporation; and Wilm ington Savings Fund Society, FSB d/ b/ a Christiana Trust as Trustee for HLSS Mortgage Master Trust [Doc. 11] 1; and (2) Avelo Mortgage, LLC; and Goldm an Sachs Bank USA2 [Doc. 15]. The Court heard oral argument on the m otions on Novem ber 3, 20 15 and the record of that proceeding is incorporated here. For the reasons expressed on the record and those set forth below, Defendants’ m otions will be granted. Wilm ington Trust is the trustee of a REMIC securitization trust which is the beneficial owner of the loan at issue in this case. (Com pl. p. 2, ¶ 5.) 2 Defendant Goldm an Sachs Bank USA has been alleged to have been the parent of wholly owned subsidiaries Defendants Avelo Mortgage, LLC and Litton Loan Servicing LP. 1 1 Dockets.Justia.com Background Plaintiffs Stephen and Susan Rost own their residence at 133 Sunnyside Lane, Bellm awr, New J ersey. They allege that Defendants wrongfully denied them a m ortgage modification in violation of their contractual obligations under the United States Treasury’s Hom e Affordable Modification Program (HAMP). 3 Plaintiffs took out a loan on February 12, 20 0 8 in the am ount of $ 20 1,985, and executed a prom issory note to secure that debt in favor of Mortgage Electronic Registration System s, Inc., as nom inee for Defendant Avelo Mortgage, LLC d/ b/ a Senderra Funding, its successors and assigns. (Slipakoff Decl., Ex. A.) The prom issory note was secured by a m ortgage signed by Plaintiffs, which was secured by the Sunnyside Lane property. (Slipakoff Decl., Ex. B.) In J anuary 20 11, Plaintiffs becam e unable to m ake their monthly m ortgage payments. (Com pl. p. 23, ¶ 45.) On J uly 22, 20 11, Avelo assigned the Plaintiffs’ note and m ortgage to Defendant Litton Loan Servicing LP. (Slipakoff Decl., Ex. C.) Plaintiffs generally allege that Defendants Litton and Ocwen received m oney from the Troubled Asset Relief Program (TARP) and agreed to participate in HAMP by executing its Servicer Participation Agreem ent. (Com pl. p. 13, ¶¶ 8-10 .) Further, as part of the sale of Litton to Ocwen, in August 20 11, Ocwen signed an Agreement on Mortgage Servicing Practices with the New York State Banking Departm ent. (Compl., Ex. A.) 3 2 In August 20 11, Plaintiffs contacted Litton because they were unable to m ake their m ortgage payment, but wanted to keep their hom e. (Com pl. p. 23, ¶ 46.) Litton offered Plaintiffs a “Repayment Plan Agreement,” whereby Plaintiffs allegedly were imm ediately to wire $ 4,0 0 0 .oo to Defendant Litton and thereafter m ake m onthly paym ents of $ 2,674.39 for a year to bring their m ortgage current. (Com pl. p. 23, ¶ 48.) Plaintiffs allege that the upfront paym ent required was prohibited by HAMP. (Id.) Also allegedly prohibited was a $ 1,0 40 charge to Plaintiffs for servicer advances including “attorney fees and costs, property preservation expenses, inspections and other expenses.” (Compl. p. 24, ¶ 50 .) Plaintiffs next allege that Litton “lost” the $ 4,0 0 0 they wired via Western Union on August 2, 20 11 in attem pt to com ply with the Repayment Plan Agreem ent. (Com pl. p. 24, ¶ 51.) 4 On or about October 4, 20 11, Plaintiffs received acknowledgement of receipt and processing of their application for m odification. (Com pl. p. 24, ¶¶ 53-54.) They also received notice nam ing their “relationship m anager” as J ason Bravada, who allegedly instructed Plaintiffs via telephone conference to refrain from m aking m ortgage paym ents while their loan In opposing the instant m otions, Plaintiffs have produced a Western Union form dated August 2, 20 11, for $ 4,0 0 0 to be sent to Litton, Texas. (Guice Decl., Ex. A.) 4 3 m odification was being processed. (Com pl. pp. 24-25, ¶¶ 55-56.) Further e-m ail inquiries regarding the pending loan m odification allegedly went unanswered. In response to their February 20 12 follow-up letter, Plaintiffs allegedly were instructed again to file for a loan m odification, which they did on March 13, 20 12 with a new relationship m anager, Grayson J ohnson. On J uly 16, 20 12, Litton assigned the Plaintiffs’ note and mortgage to Defendant Ocwen Loan Servicing, LLC. (Slipakoff Decl., Ex. D.) Plaintiffs also contend that on March 11, 20 13, a Kayla Frost was assigned as their relationship m anager, 5 but on March 31, 20 14, they were inform ed that Frost was no longer with Ocwen, so Christina Hernandez would be their new relationship manager. On April 23, 20 14, Plaintiffs’ counsel sent a letter to Hernandez inquiring about the status of the loan m odification, (Com pl., Ex. B), but allegedly received no response. Plaintiffs allege that they “have continually been strung along by Defendants with no guidance whatsoever.” (Compl. p. 27, ¶ 69.) Plaintiffs’ loan m odification request ultim ately was denied. (Com pl. p. 27, ¶66.) In opposing the m otions to dism iss, Plaintiffs state that they subm itted a third com pleted loan m odification package on March 28, 20 13. (Pl. Br., p. 11; Guice Decl., Ex. B.) 5 4 On J uly 30 , 20 14, Ocwen assigned Plaintiffs’ note and m ortgage to Defendant Wilm ington Savings Fund Society, FSB d/ b/ a Christiana Trust as Trustee for HLSS Mortgage Master Trust. On April 2, 20 15, Wilm ington served a foreclosure com plaint on Plaintiffs. (Guice Decl., Ex. D.) Plaintiffs filed the Com plaint in this m atter on April 13, 20 15 in the Superior Court of New J ersey, Law Division, Cam den County. Defendants rem oved the case here based on diversity of citizenship jurisdiction. Count I of the Com plaint asserts Breach of Contract/ Breach of Duty of Good Faith and Fair Dealing in that Plaintiffs were third party beneficiaries of the Agreement between Defendants and the United States Treasury executed as part of HAMP procedures in order that Defendants could continue to receive federal funding. Plaintiffs allege that Defendants were obligated to advise Plaintiffs of their right to seek loan m odification once they were sixty or m ore days in default of their m ortgage loan, but failed to do so resulting in an unjust enrichm ent. Plaintiffs assert that Litton’s, GSB’s, and Ocwen’s breach of the Agreem ents with the federal governm ent and New York State caused them dam ages including payment of increased interest, longer loan payoff times, higher principal balances, etc. 6 6 “Plaintiffs at all tim es material hereto were third party beneficiaries of the SPA between Defendants and United States Treasury and/ or Agreement between Defendants and State of New York. . . . Defendants failed to perform their duties owed to the third party beneficiaries, under the term s 5 Count II claim s Prom issory Estoppel, in the alternative, in that Defendants should not prevail because their representative advised Plaintiffs to stop m aking m ortgage paym ents for their m odification application to be approved, and Defendants further ignored Plaintiffs’ telephone calls and follow-up em ails. 7 Count III asserts violations of the New J ersey Consum er Fraud Act, N.J . Stat. Ann. § 56:8-1. 8 Count IV alleges negligent hiring, im proper training, and vicarious liability. 9 of the contract. . . . As a result of Defendants, Litton, GSB and Ocwen’s breach of the SPA and Agreem ent, Plaintiffs have suffered and will continue to suffer reasonable and foreseeable consequential dam ages resulting from such breaches[.]” Com pl. pp. 28-30 , ¶¶ 2-3, 13. 7 “Defendants by way of their participation in the HAMP program made a representation to plaintiffs that they could be saved from foreclosure or other legal proceedings regarding their hom e. . . . Plaintiffs relied upon the statements of Defendants, Litton, Ocwen and GSB, individually, jointly, severally and in the alternative, that they would abide by the m andates set forth by the United States Treasury and State of New York Department of Banking.” Com pl. p. 30 -32, ¶ 2, 9. 8 Plaintiffs cite Defendants’ “practice of leading borrowers to believe that defendants would offer loan m odifications as required under HAMP” and state “Plaintiffs have suffered an actual and ascertainable loss of m oney or other property . . . including but not lim ited to: paym ent of increased interest, longer loan payoff tim es, higher principle balances, deterrence from seeking other remedies to address their default and/ or unaffordable m ortgage payments, dam age to their credit, additional incom e tax liability, costs and expenses incurred to prevent or fight foreclosure and other dam ages.” Compl. p. 34-35, ¶¶ 4, 6. 9 “At all tim es m aterial hereto, Defendants were required under the SPA and Agreement to: ‘ensure that employees and m anagers engaged in loan servicing, collection, loss m itigation, foreclosure prevention and foreclosure processing and/ or proceedings participate in a com pliance training program .’ . . . At all tim es m aterial hereto, Defendants failed to properly train their em ployees as required.” Com pl. pp. 35-36, ¶¶ 2-3. 6 Applicable Standard Federal Rule of Civil Procedure 12(b)(6) allows a party to m ove for dism issal of a claim based on “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A com plaint should be dism issed pursuant to Rule 12(b)(6) if the alleged facts, taken as true, fail to state a claim . Fed. R. Civ. P. 12(b)(6). When deciding a m otion to dism iss pursuant to Rule 12(b)(6), ordinarily only the allegations in the com plaint, m atters of public record, orders, and exhibits attached to the com plaint, are taken into consideration. 1 See Chester County Interm ediate Unit v. Pa. Blue Shield, 896 F.2d 80 8, 812 (3d Cir. 1990 ). It is not necessary for the plaintiff to plead evidence. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977). The question before the Court is not whether the plaintiff will ultim ately prevail. Watson v. Abington Twp., 478 F.3d 144, 150 (20 0 7). Instead, the Court sim ply asks whether the plaintiff has articulated “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twom bly, 550 U.S. 544, 570 (20 0 7). 1“Although a district court m ay not consider m atters extraneous to the pleadings, a document integral to or explicitly relied upon in the com plaint m ay be considered without converting the m otion to dism iss into one for sum m ary judgment.” U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 20 0 2) (internal quotation m arks and citations om itted) (em phasis deleted). Accord Lum v. Bank of Am ., 361 F.3d 217, 221 n.3 (3d Cir. 20 0 4) (citations om itted). 7 “A claim has facial plausibility2 when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (citing Twom bly, 550 U.S. at 556). “Where there are wellpleaded factual allegations, a court should assum e their veracity and then determ ine whether they plausibly give rise to an entitlem ent to relief.” Iqbal, 556 U.S. at 679. The Court need not accept “‘unsupported conclusions and unwarranted inferences,’” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 20 0 7) (citation om itted), however, and “[l]egal conclusions m ade in the guise of factual allegations . . . are given no presum ption of truthfulness.” Wyeth v. Ranbaxy Labs., Ltd., 448 F. Supp. 2d 60 7, 60 9 (D.N.J . 20 0 6) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see also Kanter v. Barella, 489 F.3d 170 , 177 (3d Cir. 20 0 7) (quoting Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 20 0 5) (“[A] court need not credit either ‘bald assertions’ or ‘legal conclusions’ in a com plaint when deciding a m otion to 2 This plausibility standard requires m ore than a m ere possibility that unlawful conduct has occurred. “When a com plaint pleads facts that are ‘m erely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlem ent to relief.’’” Id. 8 dism iss.”)). Accord Iqbal, 556 U.S. at 678-80 (finding that pleadings that are no m ore than conclusions are not entitled to the assum ption of truth). Further, although “detailed factual allegations” are not necessary, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlem ent to relief’ requires m ore than labels and conclusions, and a form ulaic recitation of a cause of action’s elem ents will not do.” Twom bly, 550 U.S. at 555 (internal citations om itted). See also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by m ere conclusory statements, do not suffice.”). Thus, a m otion to dism iss should be granted unless the plaintiff’s factual allegations are “enough to raise a right to relief above the speculative level on the assum ption that all of the com plaint’s allegations are true (even if doubtful in fact).” Twom bly, 550 U.S. at 556 (internal citations om itted). “[W]here the well-pleaded facts do not perm it the court to infer m ore than the m ere possibility of m isconduct, the com plaint has alleged-but it has not ‘shown’-‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). 9 Analysis As an initial m atter, the Court notes that no facts have been alleged against Avelo to support any claim against it. In addition, GSB is im plicated only as parent of Litton, but no allegations form the basis for piercing the corporate veil to hold GSB liable for actions of its form er subsidiary. 10 Therefore, the m otion of these two Defendants will be granted for these independent grounds from those articulated next. Plaintiffs’ first claim m ust fail because there is no private right of action to enforce com pliance with HAMP. Sinclair v. Citi Mortgage, Inc., 519 Fed. App’x 737, 738 (3d Cir. 20 13); In re O’Biso, 462 B.R. 147, 151 (D.N.J . 20 11) (citing Stolba v. Wells Fargo & Co., No. 10 -cv-60 14, 20 11 WL 34440 78, D.N.J . Aug. 8, 20 11)). With regard to the HAMP Servicer Participation Agreem ent, this Court has held that an “SPA does not provide a vehicle for creating a cause of action under the HAMP: ‘the HAMP Guidelines, effectuated through the servicer’s execution of the SPA, m ay not be enforced by a mortgagee under a third party beneficiary theory.’” Shaffery v. Bank of Am ., N.A., No. 14-cv-6123, 20 15 WL 1189622, at *1 “It is a general principle of corporate law deeply ‘ingrained in our econom ic and legal systems’ that a parent corporation . . . is not liable for the acts of its subsidiaries.” U.S. v. Bestfoods, 524 U.S. 51, 61 (1998 ). It follows that “[m ]ere ownership of a subsidiary does not justify the im position of liability on a parent.” Pearson v. Com ponent Technology Corp., 247 F.3d 471, 484 (3d Cir. 20 0 1). 10 10 (D.N.J . Mar. 16, 20 15) (quoting Thom as v. U.S. Bank Nat’l Ass’n, 474 B.R. 450 , 459 (D.N.J . 20 12)). Plaintiffs also are not third-party beneficiaries of the Mortgage Practices Agreem ent. Under New J ersey law, to be a third-party beneficiary the contracting parties m ust have “intended others to benefit from the existence of the contract,” it is insufficient that “the benefit so derived arises merely as an unintended incident of the agreement.” See Broadway Maintenance Corp. v. Rutgers, the State University, 447 A.2d 90 6, 90 9 (N.J . 1982). If a contract is silent, the court m ust look to the surrounding circum stances and the relevant provisions in the agreement to determ ine that intent. Id. If no such intent is found, the third person is m erely an incidental beneficiary without contractual standing to bring a claim . Id. The Mortgage Practices Agreem ent here was entered into three years after the origination of Plaintiffs’ m ortgage. There is no m ention in the Mortgage Practices Agreement of third party beneficiaries or a private right of action to m ortgagors. Plaintiffs are at best incidental beneficiaries of the Mortgage Practices Agreement, which does not give them enforceable rights under that agreem ent. Further, Even if Plaintiffs possessed third-party beneficiary status, their claim would still fail because there is no guaranteed right to a loan m odification under HAMP. See Stolba, 20 11 WL 34440 78, at *3 (“the plain 11 language of the relevant TPP docum ents m akes clear that satisfying the TPP conditions for permanent m odification does not guarantee that Plaintiff would receive such m odification”). A borrower has no right to unilaterally dem and a loan m odification from a lender. O’Biso, 462 B.R. at 151. Plaintiffs argue in opposition to the m otions to dism iss that their breach of contract/ im plied covenant of good faith and fair dealing claim is based upon breach of covenants contained in the original note, in that (1) Defendant Litton lost and/ or failed to apply a $ 4,0 0 0 paym ent to the principal and interest of the original note and (2) Defendants intentionally m isled Plaintiffs for over three years regarding their application for a loan m odification [that the m odification would be granted] to drive up costs associated with the original note and build principal and interest. (Pl. Br., p. 14, 17.) “‘It is axiom atic that the com plaint m ay not be am ended by the briefs in opposition to a m otion to dism iss.’” Pennsylvania ex rel. Zim m erm an v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (citation om itted); accord Frederico v. Home Depot, 50 7 F.3d 188, 20 1-0 2 (3d Cir. 20 0 7) (“we do not consider after-the-fact allegations in determ ining the sufficiency of [a] com plaint under Rules 9(b) and 12(b)(6)”). Next, to establish a claim for prom issory estoppel, Plaintiffs m ust show: (1) a clear and definite prom ise by the prom isor; (2) the prom ise m ust be m ade with the expectation that the prom isee will rely thereon; (3) 12 the prom isee m ust in fact reasonably rely on the prom ise, and (4) detriment of a definite and substantial nature m ust be incurred in reliance on the prom ise. Malaker Corp. Stockholders Protective Com m ittee v. First J ersey Nat’l Bank, 395 A.2d 222, 230 (N.J . Super. Ct. App. Div. 1978). Plaintiffs m ay have been told that they would be considered for a loan m odification if they adhered to the term s of the proposed Agreement and refrained from m aking regular paym ents. Plaintiffs were not guaranteed a loan m odification, and Defendants were under no obligation to grant them one. Therefore, it would have been unreasonable for Plaintiffs to rely on any such statement as a prom ise, and this is not a sufficient basis for Plaintiffs’ prom issory estoppel claim . To state a valid claim for a violation of the NJ CFA, a plaintiff m ust allege each of the following elem ents: “‘(1) unlawful conduct by the defendant; (2) an ascertainable loss on the part of the plaintiff; 11 and (3) a causal relationship between the defendant’s unlawful conduct and the plaintiff’s ascertainable loss.’” Weinberg v. Sprint Corp., 173 N.J . 233, 250 (20 0 2). See also Maniscalco v. Brother Int’l Corp., 627 F. Supp. 2d 494, 499 (D.N.J . 20 0 9). An ascertainable loss is a loss that is “quantifiable or m easurable”; it is not “hypothetical or illusory.” Lee v. Carter-Reed Co., LLC, 20 3 N.J . 496, 522 (20 10 ); see also Barows v. Chase Manhattan Mortgage Corp., 465 F. Supp. 2d 347, 353 (D.N.J . 20 0 6). 11 13 As stated above, Plaintiffs do not have standing to bring a claim under HAMP. Further, neither HAMP nor the Mortgage Practices Agreement guarantees any mortgagor the “right” to m odification. Finally, Plaintiffs have not alleged an ascertainable loss that they actually suffered which was caused by any Defendant’s conduct, rather than by their own default. Regarding the negligence claim , Plaintiffs m ust show: (1) a duty of care; (2) breach of that duty; (3) proxim ate cause; and (4) actual dam ages. Ram irez v. U.S., 81 F. Supp. 2d 532, 540 (D.N.J . 20 0 0 ). Under New J ersey law, “[t]he question of whether a duty exists is a m atter of law properly decided by the court, not the jury, and is largely a question of fairness or policy.” Wang v. Allstate Ins. Co., 125 N.J . 2, 15 (1991). The econom ic loss doctrine bars claims for negligence between parties to a contract. SRC Const. Corp. of Monroe v. Atl. City Hous. Auth., 935 F. Supp. 2d 796, 80 0 (D.N.J . 20 13). “Under New J ersey law, a tort remedy does not arise from a contractual relationship unless the breaching party owes an independent duty im posed by law. . . . But m ere failure to fulfill obligations encom passed by the parties’ contract, including the im plied duty of good faith and fair dealing, is not actionable in tort.” Skypala v. Mortgage Elec. Registration Sys., Inc., 655 F. Supp. 2d 451, 460 (D.N.J . 20 0 9). Without an independent duty im posed by law, Plaintiffs’ negligence claim is barred. 14 Plaintiffs will be granted leave to file a Motion to Am end the Com plaint within 20 days insofar as they wish to assert claim s not considered here or claim s that would not be barred by the legal holdings the Court has m ade herein. See Phillips v. County of Allegheny, 515 F.3d 224, 245 (3d Cir. 20 0 8) (providing that plaintiffs whose claim s are subject to a Rule 12(b)(6) dism issal should be given an opportunity to am end their com plaints unless am endment would be inequitable or futile). An appropriate Order will be entered. Dated: November 3, 20 15 / s/ J oseph H. Rodriguez J OSEPH H. RODRIGUEZ USDJ 15
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