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Blick v. Shapiro & Brown, LLP

United States District Court, W.D. Virginia, Charlottesville Division

December 2, 2016

Harold Blick, Plaintiff,
Shapiro & Brown, LLP, Professional Foreclosure Corporation of Virginia, Select Portfolio Servicing, Inc., Defendants.



         Plaintiff brings several causes of action challenging the validity of a foreclosure on his property. This is his fourth suit attacking the foreclosure on this particular property and his seventh suit challenging foreclosure on any one of his properties. In this suit, Plaintiff alleges violations of notice requirements in the Deed of Trust, two violations of the Virginia Code, one violation of the Truth in Lending Act (“TILA”), and two violations of the Federal Debt Collection Practices Act (“FDCPA”). Defendants, in response, assert various affirmative defenses, including res judicata, statute of limitations, and failure to state a claim under the FDCPA. Considering the asserted affirmative defenses and Plaintiff's insufficiently pled complaint, the majority of claims will be dismissed. However, one of the FDCPA claims against defendant Shapiro & Brown LLC (“Shapiro”) will be allowed to proceed because it is adequately stated and not otherwise barred.

         I. Background

         a. Facts as Alleged

         This controversy stems from the foreclosure sale of Plaintiff's property located at 6525 Dick Woods Road, Charlottesville, Virginia (“the Property”). (Dkt. 1-1 at 1.) Plaintiff and his then wife obtained a loan in 2005 secured by a deed of trust on the Property. (Id. at 3.) In 2013, servicing on the loan associated with the Deed of Trust was transferred to Select Portfolio Servicing, Inc. (“SPS”). (Id.) Professional Foreclosure Corporation of Virginia (“Pro Foreclosure”) is the substitute trustee for the property, which gives it the right to foreclose upon the property in the event of a default. (Id.) Shapiro & Brown LLC (“Shapiro”) is a law firm associated with Pro Foreclosure that was retained with respect to enforcement of the Deed of Trust on the Property. (Id.)

         A series of letters creates the basis of Plaintiff's claims. On August 2, 2013, Plaintiff received a letter from SPS in response to his request for validation of the debt associated with the Deed of Trust. (Id. at 4.) Because the copy of the original promissory note (“Note”) attached to the response letter was not endorsed as a negotiable instrument, Plaintiff claims that SPS has no right to service the loan. (Id.) Plaintiff also alleges he never received the notice of default required under the Deed of Trust because notice was sent to his former wife but not to him on August 3, 2015. (Id.) However, eleven days later, Plaintiff sent a letter to Shapiro in which he explicitly responded to the August 3rd letter and disputed the validity of the debt. (Id.) Shapiro never responded to this request for validation (Id.) On May 11, 2016, Shapiro sent a letter to Plaintiff notifying him of the foreclosure sale on the Property by Pro Foreclosure scheduled for June 6, 2016. (Id.) However, on its last two pages, the letter mistakenly described a different property and different substitute trustee. (See dkt. 9-7.) After Plaintiff wrote complaining of this discrepancy, Shapiro sent another notice dated May 23, 2016, but which was sent on May 24th and did not reach Plaintiff until May 27th. (See dkt. 9-13.) Plaintiff contends that the foreclosure sale was improper because he personally was never notified of his default and because he was not properly notified of the foreclosure sale at least fourteen days beforehand. Additionally, Plaintiff alleges that Defendants' conduct violated several statutes, discussed below. Plaintiff seeks several remedies as a result of these alleged violations, including actual damages, legal costs, declaratory judgment, and criminal penalties.

         b. Prior Proceedings

         The present litigation is the fourth in a series of cases that Plaintiff has brought seeking to invalidate the foreclosure and sale of the Property.[1] Additionally, Plaintiff brought two similar cases related to the foreclosure of his adjacent property.[2] Because Defendants in large part rely upon the theory of res judicata, a review of the prior proceedings is prudent.

         In Blick I, Plaintiff brought four claims against two defendants: (1) to quiet title on the property, (2) improper foreclosure on the property because he had not been shown the original note, (3) violations of the FDCPA, and (4) derogatory reporting of debt to credit agencies under the Fair Credit Reporting Act (“FCRA”). Blick I at *2. The claims were brought against mortgage servicer JP Morgan Chase, N.A. (“JP Morgan”) and substitute trustee Deutsche Bank National Trust Company (“Deutsche”). Id. at *1-2. Ultimately, this Court rejected Plaintiff's core theory that transfer of a note and inability to produce the original note invalidated the foreclosure, and was subsequently affirmed by the Fourth Circuit. See 475 F. App'x 852 (4th Cir. 2012).

         In Blick II, Plaintiff brought similar claims against the trust itself, rather than the trustee that was sued in Blick I. See Blick II at *3. This Court held that all claims were barred by res judicata. Id. at *12. Applying the relevant Virginia factors, this Court found that the trust and trustee were in privity for purposes of res judicata, and that all claims brought in Blick II could have been brought in the earlier action. Id. at *9. Again, the Fourth Circuit affirmed. See 539 F. App'x 126 (4th Cir. 2013).

         Finally, in Blick III, Plaintiff brought another claim against Deutsche, alleging that invalid documents submitted in the Blick I litigation constituted fraud. Blick III at *1. This court dismissed the claims upon the defenses of res judicata and statute of limitations. Id. at *7. Under the statute of limitations analysis, the dispositive factor was that the claim accrued when the allegedly fraudulent document was submitted to the court more than two years prior. Id. at *5.

         In this case, Plaintiff brings three types of claims against three Defendants. First, Plaintiff argues that Defendants failed to notify him of the foreclosure in violation both of the terms of the Deed of Trust and Virginia law. (Dkt. 1-1 at 7-8.) Second, Plaintiff alleges violations of the FDCPA stemming from a failure to validate debts and misrepresentations made in communications. (Id.) Finally, Plaintiff asserts a claim under Virginia Code § 18.2-178 for fraudulent misrepresentation of ownership of the Note. (Id. at 8.) The defendants in this case are SPS (loan servicer), Pro Foreclosure (substitute trustee), and Shapiro & Brown LLP (law firm working on behalf of Pro Foreclosure to enforce foreclosure).

         II. Standard of Review

         When evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, the Court must accept as true all well-pleaded allegations. See Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 539 (4th Cir. 2013); see also Erickson v. Pardus, 551 U.S. 89, 94 (2007). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires 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 citations and quotation marks omitted). Stated differently, in order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

         III. Discussion

         a. Failure to Notice Claims

         Plaintiff brings three separate claims alleging a failure to properly notice him of foreclosure activities. First, Plaintiff alleges that he was never notified of his default in violation of the terms of the Deed of Trust. (Dkt. 1-1, Claim 1(a).) The Deed of Trust required that he be notified of acceleration of his debt thirty days in advance of entering a default, so that he might have time to cure it. (Dkt. 9-3 at 12.) According to Plaintiff, notice of the default was only sent to his ex-wife, a former co-owner of the property. (Id. at 4.) Second, Plaintiff claims that Defendants violated Virginia Code § 55-59.1 by failing to notify him of the foreclosure sale at least fourteen days beforehand. (Id., Claim 2(a).) See Va. Code § 55-59.1(A) (“Mailing of a copy of the advertisement or a notice containing the same information to the owner by certified or registered mail no less than 14 days prior to such sale . . . .”). While he did receive a letter on May 11, 2016 that was properly fourteen days prior to the sale, that letter identified the incorrect property and substitute trustee on two pages. The corrected notice was dated fourteen days prior to the foreclosure sale, but was mailed only thirteen days prior to the sale. (See dkt. 9-13.) Third, by violating § 55-59.1, Plaintiff alleges that Defendants also breached the terms of the Deed of Trust, which required “notice of sale as required by Applicable Law.” (Dkt. 1-1, Claim 1(b).)

         In response to all notice claims, Defendants argue that Plaintiff received adequate notice years prior in the preceding foreclosure efforts and accompanying litigation.[3] Citing admissions made in the prior litigations and in his attached exhibits, Defendants assert that Plaintiff for several years prior had actual knowledge of (1) a default on the loan, (2) Pro Foreclosure's appointment as substitute trustee, and (3) the intent by Pro Foreclosure to foreclose on the Property. Therefore, Defendants argue, Plaintiff had actual knowledge of all relevant issues, and the timing and sufficiency of mailings in 2016 is irrelevant.

         i. Breach of Contract

         Defendants' argument supports a finding that Plaintiff has failed to state a claim for breach of contract, although not for the reason articulated by Defendants. Plaintiff seeks damages stemming from two counts of breach of contract (i.e. the Deed of Trust). Under Virginia law, a claim for breach of contract must allege: “(1) a legally enforceable obligation of a defendant to a plaintiff; (2) defendant's breach or violation of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.”[4] O'Connor v. Sand Canyon Corp., No. 6:14-CV- 00024, 2014 WL 4983487, at *5 (W.D. Va. Oct. 6, 2014) (citing Sunrise Continuing Care, LLC v. Wright, 671 S.E.2d 132, 135 (Va. 2009)). However, Plaintiff has failed to allege facts here indicating that that he incurred damages. See Mayo v. Wells Fargo Bank, N.A., 30 F.Supp.3d 485, 493 (E.D. Va. 2014), aff'd, 622 F. App'x 250 (4th Cir. 2015) (finding in a case challenging the validity of notice under a deed of trust that “to raise a viable breach of contract claim under Virginia law, Plaintiff must demonstrate that she was injured by the breach.”). Plaintiff merely makes conclusory legal statements that he is entitled to actual damages, but does not allege any facts making it plausible that he was injured by Defendants' breach.

         Further, as Defendants argue, Plaintiff had knowledge of all the necessary facts well before the required notice periods. Accordingly, none of the alleged failures in notice would have been likely to cause injury to Plaintiff. The complaint illustrates that Plaintiff was aware of the alleged default on his loan at all relevant times. For instance, Plaintiff describes the lengthy procedural history of the attempts to foreclose on his house dating back several years. (See dkt. 1-1 at 5.) The litigation in these cases centered around whether the exact loan at issue here was in default, so Plaintiff must have had some notice that his lender considered the loan in default. More recently, Plaintiff ...

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