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Simon v. PNC Bank, National Association

United States District Court, E.D. Virginia, Norfolk Division

August 29, 2017

EMETERIO H. SIMON, et al, Plaintiffs,



         Like too many homeowners affected by the great recession, Plaintiffs Emeterio Simon and Diana Simon ("the Homeowners" or "the Simons") fell behind on their mortgage payments. As a result, Defendant PNC Bank National Association ("the Lender") foreclosed on their Virginia Beach home in 2013. The Simons have remained in the home while the parties to this case have litigated the foreclosure's legality in the state and federal courts. This suit is the latest iteration of that ongoing legal dispute.

         The Simons seek to rescind the foreclosure sale based on the Lender's alleged breaches of its obligations to provide notice before foreclosing on the property and to comply with applicable law throughout the foreclosure process. At this juncture, the Defendants-various parties to the loan and foreclosure-have moved to dismiss the Amended Complaint. Because the Homeowners have failed to allege facts establishing that the foreclosure was illegal, the motions to dismiss are granted.

         I. BACKGROUND

         When ruling on a motion to dismiss for failure to state a claim, courts accept a complaint's well-pled factual allegations as true, and draw any reasonable inferences in favor of the plaintiff. See Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012). Accordingly, the Court recites the facts as alleged by Plaintiff. See Am. Compl. (ECF No. 27).

         A. The Loan

         In 2006, the Simons obtained a $317, 200 loan, provided by the Lender and partially guaranteed by Defendant Federal Home Loan Mortgage Corporation ("the Backer").[1] See Am. Compl. ¶¶ 8, 22. To secure the loan, the Simons used their Virginia Beach home as collateral. See Id. They executed a promissory note ("the Note") reflecting this encumbrance on the property and the corresponding debt. See Id. ¶¶ 8, 12. To further secure this arrangement, the Simons placed the title to their home in trust. See Id. ¶ 8. The terms of that trust were set forth in an agreement among the parties, the "Deed of Trust."[2] See Deed of Trust (ECF No. 27-1). This arrangement is known commonly as a mortgage.

         The Deed of Trust provided that if the Homeowners defaulted on the loan by failing to make monthly payments Defendant Samuel I. White P.C. ("the Trustee")[3] could foreclose, at the Lender's behest. See Am. Compl. ¶ 10, 65. Before selling the home, the Trustee was required to ensure that the Lender had fulfilled certain conditions. See Id. Two of these conditions included providing adequate notice of the default and complying with applicable law. See Id. ¶¶ 9, 66.

         1. The Notice Requirement

         Both the Note and the Deed of Trust contained clauses governing how the Lender would notify the Simons if they were in default. See Id. ¶¶ 9, 10. The Note's notice of default provision, Paragraph 6(c) provided in pertinent part:

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 that 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 delivered or mailed to me.

Id. ¶ 9. The Deed of Trust's notice of default provision, Paragraph 22, provided in pertinent part:

Lender shall give notice to Borrower . . . 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 is 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.

Id. ¶ 10; see also Deed of Trust ¶ 22. If the thirty-day deadline for curing the default elapsed without payment, the Deed of Trust entitled to Lender to invoke its power to sell the home. See id. ¶ 65.

         2. The "Applicable Law" Requirement

         The Deed of Trust also required that the foreclosure comply with applicable law. See Id. ¶ 66. Specifically, Paragraph 16 stated that "[a]ll rights ... contained in this Security Instrument are subject to any requirements and limitations of Applicable Law." Deed of Trust ¶ 16. In its "Definitions" section, the Deed of Trust defined "Applicable Law" as "all controlling applicable federal, state and local statutes, regulations, ordinances and administrative rules and orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions." Id. at 3.

         B. The Default

         In early 2012, the Homeowners began missing mortgage payments. See Am. Compl. ¶ 13. The Lender responded by sending them a notice of default, dated July 23, 2012 ("the Notice of Default" or "the Notice"). See Notice at 1 (ECF No. 27-2). That letter informed the Simons of their default and stated that they were required to pay $3, 534.15 by August 22, to avoid acceleration of their payments and foreclosure under the Deed of Trust. See Id. ¶¶ 14-15.

         The listed sum included the amount past due on the Simons' mortgage and a future installment payment that was not yet due, but would be due on August 1, before the specified payment date. See Id. ¶¶ 13-14. The Notice of Default advised the Homeowners of this fact. See Notice at 1 ("This amount includes the 8/1/2012 payment and applicable late charges, property inspection fees and non-sufficient funds fees.").

         Although not pled, the Simons' failure to cure the outstanding arrearage at that time or afterwards appears undisputed. On May 13, 2013, they sought to resolve their default by applying for a loan modification from the Lender. See Am. Compl. at ¶ 73.

         C. The Foreclosure Sale

         On May 29, 2013, the Trustee, acting on behalf of the Lender, sold the Simons' home at a foreclosure auction. See Id. ¶¶ 22-23, 29. The Simons allege that the Lender did not issue a written response to their loan-modification application before the sale. See Id. at ¶ 74.

         The winning bid of $253, 623 was submitted by the Lender itself, but subsequently was assigned to the Backer, who had guaranteed the loan. See Id. ¶¶ 31-32, 38-39. The Trustee then executed a trustee's deed conveying the property to the Backer. See Id. ¶ 40.

         Shortly thereafter, the Backer filed an unlawful detainer summons in Virginia Beach General District Court, which entered an order awarding possession to the Backer. See Id. ¶ 44- 45. The legal wrangling continued for some time in state court, and appears to remain ongoing today. See Id. ¶¶ 47-56.

         D. Proceedings ...

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