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Mastin v. Ditech Financial, LLC

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

January 23, 2018

ROBERT L. MASTIN, et al., Plaintiffs,
DITECH FINANCIAL, LLC, et al., Defendants.


          Robert E. Payne Senior United States District Judge



          I. Factual Background

         The facts are set out as alleged in the Amended Complaint. And, they must be taken as true for purposes of assessing whether the Amended Complaint satisfies Fed.R.Civ.P. 12(b)(6).

         On November 2, 2005, Robert L. Mastin and Jodi A. Mastin (collectively "Plaintiffs") executed a promissory note (the "Note"), in which they were borrowers, and a deed of trust ("Deed of Trust") (collectively the "Loan") in order to finance their purchase of real property located at 7207 Towles Mill Road, Spotsylvania, Virginia 22553 (the "Property"). (ECF No. 18, Amend. Compl. ¶¶ 5-6 ("Amend. Compl.")); (ECF No. 8, Defendant's Reply in Support of Their Motion to Dismiss Plaintiffs' Complaint, Ex. A ("Def. First Reply")).[1] Plaintiffs first "fell behind" on their loan payments in 2009. (Amend. Compl. ¶ 7). The term "fell behind, " as used in the Amended Complaint, is taken to mean that the Mastins were then in default.

         In November 2013, the Loan was transferred and Ditech and Greentree Servicing, LLC ("Ditech"), assumed servicing of the Loan. "Shortly after" the Loan was transferred, Plaintiffs began submitting paperwork to Ditech for a loan modification, in response to which Ditech appointed several points of contact to Plaintiffs' file. (Amend. Compl. ¶¶ 9-10). When Plaintiffs called Ditech, Plaintiffs were not able to speak with the same point of contact more than once. (Amend. Compl. ¶ 11) . In 2014, the Property was destroyed in a house fire, prompting Ditech to deny Plaintiffs7 loan modification review due to lack of occupancy. (Amend. Compl. ¶¶ 12-13).

         Sometime after the denial, Plaintiffs hired MVP Home Solutions, LLC ("MVP"), to assist them in their loan modification review. (Amend. Compl. ¶ 14). MVP ceased working for Plaintiffs after two years, at which time Plaintiffs began consulting directly with Ditech to work towards a loan modification. (Amend. Compl. ¶¶ 15-19) . On August 22, 2016, Plaintiffs submitted a loan modification application to Ditech. (Amend. Compl. ¶ 20) . Following this submission, Plaintiffs contacted Ditech "daily regarding their application, " had trouble reaching Ditech, and were asked for "duplicative information" when they did reach Ditech. (Amend. Compl. ¶ 21) . Ditech also requested a profit and loss statement from Plaintiffs, which Plaintiffs submitted on August 30, 2016. (Amend. Compl. ¶ 22).

         In the "days leading to the foreclosure sale, " Ditech informed Plaintiffs of a "math error" on their profit and loss statement and that if they submitted a revised copy the planned foreclosure sale would be cancelled; Plaintiffs resubmitted this document to Ditech "that same day." (Amend. Compl. ¶¶ 23-25). The foreclosure auction, however, was not postponed and Commonwealth Trustees, LLC ("Substitute Trustee"), as substitute trustee, foreclosed on the Property on November 9, 2016, at which time the Property was sold to Bank of New York Mellon Corporation ("BONY"). (Amend. Compl. ¶¶ 26-28).

         Over the course of the next two months, Plaintiffs and Ditech had correspondence regarding the Loan, in which Plaintiffs were given conflicting information regarding the possibility of "workout options" and the cancellation of the foreclosure sale; in one of these correspondence, Plaintiffs sent Ditech a "Notice of Error, " to which Ditech7s response omitted any mention of cancelling the foreclosure sale. (Amend. Compl. ¶¶ 29-33) . Since 2013, Plaintiffs have on multiple occasions attempted to make payments to Ditech on the Loan, Ditech, however, has refused to accept any such payments; as a result, BONY is seeking possession of the Property in the General District Court for the County of Spotsylvania. (Amend. Compl. ¶¶ 34-35) .

         II. Procedural Background

         On April 17, 2017, Plaintiffs commenced this action against Ditech, BONY, and Substitute Trustee (collectively "Defendants"), in the Circuit Court for the County of Spotsylvania, Case No. CL17-395. (ECF No. 1, Defendant's Notice of Removal, Ex. A ("Def. Not. of Remove.")). Plaintiffs alleged claims of breach of contract, violation of the Virginia Consumer Protection Act, and violation of the Consumer Financial Protection Bureau's Regulation X. As a remedy, Plaintiffs requested rescission of the foreclosure sale. (Def. Not. of Remove., Ex. A ¶¶ 36-68). On May 11, 2017, Ditech and BONY filed a Notice of Removal in this Court (to which Substitute Trustee consented) alleging jurisdiction to be proper under 28 U.S.C. §§ 1331, 1332, and 1367. (Def. Not. of Remove. ¶¶ 9-12). Although Plaintiffs filed a motion to remand the matter to state court, the Court found jurisdiction to be proper under 28 U.S.C. § 1331 and 28 U.S.C. § 1367. (ECF No. 11, Plaintiffs' Motion to Remand; ECF No. 16, Order Denying Plaintiffs' Motion to Remand).

         On May 18, 2017, Ditech and BONY filed a motion to dismiss Plaintiffs' complaint for failure to state a claim upon which relief could be granted, and, on July 28, 2017, the Court found "that...the...[c]omplaint fail[ed] to plead sufficient factual allegations to support any claim upon which relief [could] be granted, " ordered the complaint dismissed without prejudice, and granted Plaintiffs leave of court to file an amended complaint within 21 days. (ECF No. 17) . The Plaintiffs were admonished that the Court had "serious doubts as to the viability of the claims...pled and the relief requested." Id.

         Plaintiffs filed an Amended Complaint against the Defendants on August 18, 2017. (Amend. Compl.). In their Amended Complaint, Plaintiffs alleged violations of Regulation X, 12 C.F.R. § 1024.1 et seq., which implements provisions of the Real Estate Settlement Procedures Act ("RESPA"), and Regulation Z, which implements the Truth in Lending Act ("TILA"), 12 C.F.R. § 1026.1 et seq. Although Plaintiffs no longer sought relief under state law, (See Amend. Compl. ¶¶ 36-46), [2] they once again sought rescission of the foreclosure sale as a remedy. (Amend. Compl. ¶¶ 47-52) .

         On August 31, 2017, the Substitute Trustee filed a motion to dismiss the Amended Complaint. (ECF Nos. 19, 20) . Following suit, Ditech and BONY filed this motion to dismiss the Amended Complaint. Plaintiffs filed a response in opposition to the motion to dismiss filed by Ditech and BONY who then filed a reply. However, because Plaintiffs did not file a response to the Substitute Trustee's motion to dismiss the Amended Complaint, the Court granted the Substitute Trustee's motion and dismissed the Amended Complaint with prejudice as to the Substitute Trustee. (ECF No. 26). Thus, Plaintiffs, Ditech and BONY are the only remaining parties before this Court.


         Fed. R. Civ. P. 12(b)(6) permits the dismissal of a plaintiff's claim when a plaintiff fails "to state a claim upon which relief can be granted." Fed. R. Civ. Pro. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint. Schatz v. Rosenberg, 943 F.2d 485, 489 (4th Cir. 1991) . In testing the legal sufficiency of a complaint, a court must "assume the truth of all facts alleged in the complaint" and "must take the facts in the light most favorable to the plaintiff." Eastern Shores Mkts., Inc. v. J.D. Assoc. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). A court need not, however, "accept the legal conclusions drawn from the facts" or accept as true any inferences, conclusions or arguments. Id.

         In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is considered "plausible" if a plaintiff pleads sufficient facts to allow a court to go beyond mere speculation and draw a reasonable inference that the defendant is liable for the alleged misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see Twombly, 550 U.S. at 555. A motion to dismiss should be granted, however, if a plaintiff's complaint does no more than set forth a recitation of the elements of a claim, supported by mere legal conclusions. Iqbal, 556 U.S. at 678; see Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (reiterating that mere legal conclusions are entitled to no deference and are not sufficient to survive a motion to dismiss under Rule 12(b) (6)); Hooker v. Disbrow, No. 1:16-cv-1588-GBL-JFA, 2017 U.S. Dist. LEXIS 57403, at *5-6 (E.D. Va. April 13, 2017).

         If the Court dismisses Plaintiffs' claims, it must decide whether to give Plaintiffs leave to amend their complaint. Because Plaintiffs may no longer amend their complaint as a matter of course, either the opposing party's consent or leave of court is required. Fed. R. Civ. Pro. 15(a). Leave of court to amend a complaint is governed by Rule 15(a) (2) of the Federal Rules of Civil Procedure, which states that “[t]he court should freely give leave when justice so requires." Fed. R. Civ. Pro. 15(a)(2). The rule has been interpreted "to provide that 'leave to amend a pleading should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would . . . be[] futile.'" Labor v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)).


         I. Alleged Violation of Regulation Z. 12 C.F.R. § 1026.36(c)(1)(ii)[3]

         Plaintiffs allege that, since "early 2013" they have attempted to make payments on the Loan and that Ditech "continuously refused to accept payment on the note." (Amend. Compl. ¶ 34) . Plaintiffs allege that Ditech violated Regulation Z, 12 C.F.R. § 1026.36 (c) (1) (ii) because Ditech "could have accepted partial payments [on the Loan] [under 12 C.F.R. § 1026.36(c) (1) (ii)] and held them in a suspense account for application to the [L]oan when the account came to full payment." (Amend. Compl. ¶ 37). Plaintiffs claim that Ditech's "blatant refusal to exercise this option...caused the Plaintiff's [sic] to suffer harm." Id.

         This claim, however, is based on a misapprehension of the regulation in question. It also runs afoul of the provisions of the Deed of Trust, which specifically allows for Ditech's refusal of partial payments.

         The claims fails in the first instance because the regulation on which it is based is not mandatory. 12 C.F.R. ...

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