United States District Court, E.D. Virginia, Norfolk Division
STERLING L. JENNINGS, et al., Plaintiffs,
ROUNDPOINT MORTGAGE SERVICING CORPORATION, et al., Defendants.
UNITED STATES MAGISTRATE JUDGE'S REPORT AND
J. KRASK UNITED STATES MAGISTRATE JUDGE.
L. Jennings and Deirdre D. Jennings brought this action
alleging several claims arising from defendant RoundPoint
Mortgage Servicing Corporation's ("RoundPoint")
initiation of foreclosure proceedings and the foreclosure
sale of plaintiffs' home. RoundPoint filed a motion to
dismiss plaintiffs' claims for breach of contract and for
violations of Regulation X of the Real Estate Settlement
Procedures Act, 12 C.F.R. Part 1024, asserting these portions
of plaintiffs' complaint fail to state a claim for which
relief may be granted pursuant to Federal Rule of Civil
Procedure 12(b)(6). ECF No. 6.
order of reference assigned this motion to the undersigned.
ECF No. 13. Pursuant to the provisions of 28 U.S.C. §
636(b)(1)(B) and (C), Rule 72(b) of the Federal Rules of
Civil Procedure, and Local Civil Rule 72, it is hereby
recommended that RoundPoint's partial motion to dismiss
be GRANTED in part and DENIED in part.
FACTUAL AND PROCEDURAL HISTORY
L. Jennings and Deirdre D. Jennings ("plaintiffs")
brought this action after their home was foreclosed upon.
Compl., ECF No. 1-1 at 9. Plaintiffs seek rescission of the
foreclosure sale, a declaratory judgment stating that the
foreclosure sale is void and invalid, compensatory damages
against RoundPoint in the amount of $50, 000.00, and a stay
of any unlawful detainer proceedings until the claims in this
complaint are resolved. Id.
2015, plaintiffs entered into a mortgage loan contract,
consisting of a note and a deed of trust, by which RoundPoint
financed plaintiffs' purchase of real property located at
408 Quaker Ridge Court, Suffolk, Virginia 23435. Compl.
¶¶ 1, 4-5; see also Note, ECF No. 7-1,
Deed of Trust, ECF No. 7-2. Plaintiffs fell behind on their
payments in September 2016, as a result of an increase in the
monthly payment in early 2016, coupled with an injury that
caused a reduction in plaintiffs' income. Compl.
¶¶ 6, 8. Plaintiffs "began sending in
paperwork to participate in a loan modification review"
in February 2017. Id. ¶ 10. On February 6,
2017, plaintiffs received a letter from RoundPoint requesting
additional information, and the additional documentation was
faxed to RoundPoint on March 2, 2017. Id.
¶¶ 11-12. On March 6, 2017, plaintiffs received
another letter from RoundPoint requesting a subset of the
information requested in the February letter, and the
documentation was faxed again on April 3, 2017. Id.
mid-April, plaintiffs received notice that a foreclosure sale
would take place on May 2, 2017. Id. ¶ 15. On
April 20, 2017, RoundPoint sent plaintiffs a letter
acknowledging that they had a complete loan modification
package on file. Id. ¶ 16. During a telephone
conversation on May 1, 2017, RoundPoint explained "that
the loan modification review was denied because it was
'too close' to the scheduled foreclosure sale."
Id. ¶ 18. The substitute trustee, defendant
Equity Trustees, LLC, foreclosed on the plaintiffs'
property on May 2, 2017. Id. ¶¶ 3, 19.
filed a complaint against defendants RoundPoint and Equity
Trustees, LLC, in the Circuit Court for the City of Suffolk
on July 11, 2017. ECF No. 1 at 1. RoundPoint removed the case
to this Court on August 11, 2017. Id. On August 18,
2017, Equity Trustees, LLC, filed an answer and RoundPoint
filed a partial motion to dismiss. ECF Nos. 5, 6. Plaintiffs
filed an opposition to the partial motion to dismiss on
September 14, 2017, and RoundPoint filed a reply on September
19, 2017. ECF Nos. 10, 12.
STANDARD OF REVIEW
Rule of Civil Procedure 12(b)(6) permits a court to dismiss
complaints, or claims within complaints, upon which no relief
can be granted. Fed.R.Civ.P. 12(b)(6); Sonnier v. Diamond
Healthcare Corp., 114 F.Supp.3d 349, 354 (E.D. Va.
2015). In order to survive a motion to dismiss, the complaint
must contain "a short and plain statement of the claim
showing that the pleader is entitled to relief."
Fed.R.Civ.P. 8(a)(2). This pleading standard requires that
the complaint state a claim for relief that is
"plausible on its face." Bell Art. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). In essence, "[a]
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). Ascertaining whether a complaint states a plausible
claim for relief is a "context-specific task" that
requires the court to "draw on its judicial experience
and common sense." Id. at 679.
motion to dismiss pursuant to Rule 12(b)(6) challenges
"the sufficiency of a complaint; it does not resolve
disputes over factual issues, the merits of a claim, or the
applicability of a defense." SunTrust Mortg., Inc.
v. Simmons First Nat'l Bank, 861 F.Supp.2d 733, 735
(E.D. Va. 2012) (citing Republican Party of N.C. v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992)). Therefore,
"[i]n ruling on a 12(b)(6) motion, a court 'must
accept as true all of the factual allegations contained in
the complaint' and 'draw all reasonable inferences in
favor of the plaintiff.'" Kensington Volunteer
Fire Dep't, Inc. v. Montgomery Cty., Md., 684 F.3d
462, 467 (4th Cir. 2012) (quoting E.I. du Pont de Nemours
& Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th
Cir. 2011)). The factual allegations, however, "cannot
be mere speculation, and must amount to more than 'a
sheer possibility that a defendant has acted
unlawfully.'" Brack v. Conflict Kinetics
Corp., 221 F.Supp.3d 743, 747 (E.D. Va. 2016) (quoting
Iqbal, 556 U.S. at 678). In addition, "legal
conclusions, elements of a cause of action, and bare
assertions devoid of further factual enhancement fail to
constitute well-pled facts for Rule 12(b)(6) purposes."
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250, 255 (4th Cir. 2009) (citing Iqbal, 556
U.S. at 678).
partial motion to dismiss, RoundPoint seeks a dismissal of
plaintiffs' claims for breach of contract, and
plaintiffs' claims that RoundPoint violated Regulation X,
12 C.F.R. Part 1024, promulgated under the Real Estate
Settlement Procedures Act ("RESPA"). ECF No. 7.
RoundPoint argues that each of these claims fails as a matter
of law. Id.
Breach of Contract - Duty of Good Faith and Fair
plaintiffs' breach of contract claim, plaintiffs allege
RoundPoint "breached their duty of good faith and fair
dealing on the Promissory Note." Compl. at 7. Plaintiffs
claim the duty of good faith and fair dealing is implicit in
every contract, including the note and deed of trust.
Id. ¶¶ 39-40. Plaintiffs assert RoundPoint
failed to acknowledge that plaintiffs' "completed
their loan modification application on March 3, 2017, "
requested duplicate information from plaintiffs, and then
waited seven weeks to declare that the application was
complete. Id. ¶ 37. Plaintiffs allege this
"failure to act in good faith gives rise to a cause of
action for breach of contract." Id. ¶ 38.
Plaintiffs further claim RoundPoint "breached the duty
of good faith by dual tracking the loan for foreclosure and
loss mitigation and by failing to acknowledge that
documentation was received timely." Id. ¶
Virginia law, to establish a breach of contract, plaintiffs
must demonstrate: (1) a legally enforceable obligation of
RoundPoint to plaintiffs; (2) RoundPoint's violation or
breach of that obligation; and (3) injury or damage to
plaintiffs caused by RoundPoint's breach of the
obligation. Sunrise Continuing Care, LLC v. Wright,671 S.E.2d 132, 135 (Va. 2009) (citing Filak v.
George,594 S.E.2d 610, 614 (Va. 2004)). Moreover,
contracts governed by Virginia law contain an implied
covenant of good faith and fair dealing. Va. Vermiculite,
Ltd. v. W.R. Grace & Co.,156 F.3d 535, 541-42 (4th
Cir. 1998). This implied duty exists regardless of whether
the contracts fall under the Uniform Commercial Code. See
SunTrust Mortg., Inc. v. United Guar. Residential Ins. Co. of
N.C,806 F.Supp.2d 872, 893-95 (E.D. Va. 2011),
vacated on other grounds,508 Fed.Appx. 243 (4th
Cir. 2013). This duty prohibits the "exercise [of]
contractual discretion in bad faith, " but
"does not prevent a party from ...