United States District Court, W.D. Virginia, Harrisonburg Division
WILLIAM T. HERBAUGH, et al., Plaintiffs,
BANK OF AMERICA, N.A., et al., Defendants.
Michael F. Urbanski, United States District Judge
contract action, Plaintiffs William T. Herbaugh and Karen L.
Herbaugh (collectively the "Herbaughs") allege
Defendants Bank of America, NA. ("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. Count II alleges the same conduct amounts
to breaches of the duty of good faith and fair dealing.
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.
Court held a hearing on April 20, 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.
November 7, 2005, the Herbaughs purchased a home at 58
Woodhaven Way, Linden, Virginia 22642, in Warren County (the
"Property"). ECF No. 16, ¶¶ 5-6. 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. at ¶ 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. at ¶ 7.
Fannie Mae backed and controlled servicing of die Loan.
Id. at ¶ 8. Plaintiffs explain that at die time
of die alleged breach, either BANA or Fannie Mae held the
note. Id. at ¶ 9.
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 diat 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, ¶
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
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
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 title 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.
Herbaughs received documents from BANA that purported to
comply with the notice provisions in the Acceleration
Clauses. Id. at Id. 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.
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. at
¶ 15. White advertised in a Warren County newspaper that
a foreclosure sale of the Property was to occur on February
16, 2010. Id. at ¶ 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. at ¶ 23. On September 17, 2010, White
recorded the trustee's deed in Warren County Circuit
Court. Id. at ¶ 26. BANA made multiple reports
to credit agencies indicating that the Property had been
lawfully foreclosed upon. Id. at ¶ 27.
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.
Id. 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. Id. Stephanie Gates,
an employee of White, advised that White had not handled any
documents regarding the Property since 2010. Id. ...