United States District Court, E.D. Virginia, Richmond Division
ANTHONY D. PHILLIPS and REBECCA E. PHILLIPS, Plaintiffs,
WELLS FARGO BANK, N.A., and U.S. BANK NATIONAL ASSOCIATION, TRUSTEE FOR JP MORGAN MORTGAGE ACQUISITION TRUST 2006-WFI, Defendants.
A. Gibney, Jr. United States District Judge.
plaintiffs, Anthony D. Phillips and Rebecca E. Phillips
(collectively, ''the Phillips"), obtained a
mortgage loan from defendant Wells Fargo Bank, N.A.
("Wells Fargo"). They fell behind on their
payments, and Wells Fargo denied their loss mitigation
application, resulting in a foreclosure sale of their home.
their amended complaint, the Phillips sued Wells Fargo and
U.S. Bank National Association, Trustee for JP Morgan
Mortgage Acquisition Trust 2006-WFI ("U.S. Bank"),
for fraud, breach of the duty of good faith and fair dealing,
and breach of the deed of trust's cure notice
requirement. The defendants moved to dismiss the fraud and
cure notice counts.
Phillips have adequately plead actual and constructive fraud,
so the Court denies the motion to dismiss Counts One and Two.
The Phillips, however, fail to state a claim for a breach of
the deed of trust's cure notice requirement. The Court,
therefore, grants the motion to dismiss Count Four.
2006, with Wells Fargo as their lender, the Phillips bought a
home on Winterpock Road in Chesterfield County. In July 2012,
Rebecca Phillips reached out to Wells Fargo to ask about loan
modification or loss mitigation options, including under the
Home Affordability Modification Program ("HAMP"). A
representative from Wells Fargo told Rebecca that she and
Anthony "could not be considered for a HAMP loan
modification (and could not be considered for a loan
modification) unless they fell at least three months in
arrears." (Dk. No. 28, at ¶ 9.) This statement
contradicted HAMP guidelines, which state that borrowers in
imminent danger of default may qualify for loan
modifications. Relying on the representative's statement,
the Phillips fell behind on their payments beginning in
Phillips applied for a loan modification in October 2012.
Wells Fargo indicated that they should not make payments
while it considered their application, so they did not pay
from November 2012 to April 2013. The deed of trust required
Wells Fargo to send a cure notice indicating the action
required to cure a default before accelerating the amount
owed under the note. In April 2017, Wells Fargo provided the
Phillips with a cure notice dated four years earlier, April
5, 2013. The cure notice showed that Wells Fargo had sent the
notice by certified mail to the Phillips's address. The
Phillips acknowledge that Wells Fargo sent a cure notice
specifying that they needed to pay $46, 885.64 by May 10,
2013, but allege they did not receive it. Even if they had
received it, they argue that Wells Fargo's instructions
not to make payments contradicted the contents of the notice.
Fargo denied the loan modification application on May 6,
2013. Wells Fargo then notified the Phillips that it had
referred their mortgage for foreclosure on May 14, 2013. On
May 16, 2013, Wells Fargo conveyed its rights to U.S. Bank,
making U.S. Bank the noteholder and Wells Fargo the servicer
of the Phillips's loan. The Phillips appealed the loan
modification denial, but U.S. Bank proceeded with the
foreclosure process, scheduling a sale for July 27, 2017. The
Phillips attempted to enjoin the sale, but this Court denied
injunctive relief. On July 27, 2017, U.S. Bank bought the
home at the foreclosure sale.
partially dismissing the original complaint and allowing
their breach of the duty of good faith and fair dealing claim
to survive, the Court permitted the Phillips to amend their
complaint. They added U.S. Bank as a defendant and pled
additional counts for fraud and breach of the cure notice
requirement in the deed of trust.
defendants have moved to dismiss Count One for actual fraud
against Wells Fargo; Count Two for constructive fraud against
Wells Fargo; and Count Four for breach of the cure notice
requirement. Both fraud counts concern Wells Fargo's
alleged statement to Rebecca that the bank would not consider
their HAMP modification application unless they defaulted.
Actual and Constructive Fraud (Against Wells
complaint for fraud under Virginia law must plausibly allege:
"(1) a false representation, (2) of material fact, (3)
made intentionally and knowingly, (4) with intent to mislead,
(5) reliance by the party misled, and (6) resulting damage to
the party misled." Evaluation Research Corp. v.
Alqequin, 439 S.E.2d 387, 390 (Va. 1994) (citations
omitted). A claim for constructive fraud contains the same
elements except that "the misrepresentation of material
fact is not made with the intent to mislead, but is made
innocently or negligently." Id. These elements
must meet the pleading requirements of Federal Rule of Civil
Procedure 9(b), which requires a plaintiff to "state
with particularity the circumstances constituting
fraud." Fed.R.Civ.P. 9(b). These circumstances include
"the time, place, and contents of the false
representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby."
Baker v. Elam, 883 F.Supp.2d 576, 580 (E.D. Va.
2012) (quoting Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 784 (4th Cir. 1999)).
Fargo first argues that the statute of limitations bars the
fraud claims. In Virginia, plaintiffs must bring fraud claims
two years from the date the fraud "is discovered or by
the exercise of due diligence reasonably should have been
discovered." Va. Code Ann. §§ 8.01-243(A);
8.01-249(1). The plaintiff bears the burden of showing that
he acted with due diligence but failed to discover the fraud
within the statutory period. Hughes v. Foley, 128
S.E.2d 261, 263 (Va. 1962). When the Court confronts a
statute of limitations argument in a 12(b)(6) motion to
dismiss, all facts necessary for ...