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Cave v. Wells Fargo Bank, N.A.

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

December 6, 2019

Freeman H. Cave, Plaintiff,
v.
Wells Fargo Bank, N.A., et al., Defendants.

          MEMORANDUM OPINION

          NORMAN K. MOON SENIOR L Nil ED STATES DIS TRIG T JUDGE

         Introduction

         Before the Court is the motion to dismiss for failure to state a claim, submitted by Defendants Wells Fargo Bank, N.A. (“Wells Fargo”) and Federal National Mortgage Association (“Fannie Mae”). On May 6, 2019, Plaintiff Freeman Cave filed a complaint alleging three counts against Defendants Wells Fargo, Dyck-O'Neal, Inc., and Fannie Mae. Count I alleged violations by all three defendants of his automatic stay and discharge injunction resulting from his Chapter 7 bankruptcy proceedings. Count II alleged violations by Dyck-O'Neal of the Federal Debt Collection Practices Act (“FDCPA”). Count III alleged fraud under Virginia state law as against all three defendants. Dkt. 1 at 10-17.

         On June 19, 2019, Defendants Wells Fargo and Fannie Mae filed a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), which Defendant Dyck-O'Neal did not join. Dkt. 19. Dyck-O'Neal filed its answer to Plaintiff's complaint on June 27, 2019. Dkt. 22. In his memorandum in opposition to Wells Fargo and Fannie Mae's motion to dismiss, Plaintiff requested that this case be transferred in its entirety to the bankruptcy court under Local Rule 3(a). On September 5, 2019, a hearing was held on the motion to dismiss. Dkt. 32.

         For the foregoing reasons, the Court will grant Wells Fargo and Fannie Mae's motion to dismiss the claims against them pursuant to Rule 12(b)(6), dismissing Counts I and III as against those Defendants. The Court will decline to refer any claims to the Bankruptcy Court.

         I. Alleged Factual Background

         In 2007, Plaintiff Freeman H. Cave obtained a home equity loan from Wells Fargo in the amount of $32, 000, secured by a mortgage on Plaintiff's home located at 13426 Stonehouse Mountain Road, Culpeper, Virginia. Dkt. 1 at ¶¶ 9-10. In 2012, Plaintiff obtained another loan from Wells Fargo in the amount of $176, 000, also secured by a mortgage against Plaintiff's home in Culpeper. Id. at ¶ 11. Sometime shortly after Plaintiff obtained the home equity loan, Wells Fargo sold the loan to Fannie Mae, while Wells Fargo continued to act as the loan's servicer and was the only entity with which Plaintiff interacted with regarding this loan. Id. at ¶ 13.

         On March 13, 2013, Plaintiff filed for Chapter 7 Bankruptcy in the bankruptcy court for the Charlottesville Division of the Western District of Virginia (Bankruptcy No. 13-60549), listing both aforementioned loans as debts to be discharged in his petition. Id. at ¶¶ 14-15. Plaintiff further alleges that Wells Fargo was informed of Plaintiff's bankruptcy filing and did not file any documents objecting to the discharge of these loans. Id. at ¶¶ 16-17. On June 12, 2013, the bankruptcy court entered its order discharging Plaintiff's debts, including the loans at issue in Plaintiff's complaint. Id. at ¶ 19.

         Plaintiff continued to reside in his home at 13426 Stonehouse Mountain Road for several years after the entry of the bankruptcy court's discharge order. Id. at ¶ 22. During this time, Plaintiff “voluntarily submitted monthly mortgage payments to Wells Fargo, following the terms of his original mortgage agreement with them.” Id. at ¶ 23.[1] Wells Fargo voluntarily accepted these mortgage payments during this period. Despite the payments, Plaintiff alleges that Wells Fargo had not entered into any formal agreement with Plaintiff regarding these payments or the status of the mortgage against the home. Id. at ¶ 23. In 2016, Plaintiff stopped making these monthly mortgage payments to Wells Fargo, and he moved out of his home at Stonehouse Mountain Road in late 2016, advising Wells Fargo of the same.[2] Id. at ¶¶ 24-25. Plaintiff further alleges that, after he left his home, Wells Fargo continued to send Plaintiff loan statements and communicate with Plaintiff in order to collect on them. Id. at ¶ 26.

         Plaintiff alleges that, in May 2017, Wells Fargo sent him a letter advising him the bank was willing to accept a deed in lieu of foreclosure to avoid foreclosing on his home at Stonehouse Mountain Road.[3] Id. at ¶ 27(a). Plaintiff alleges that this letter stated Wells Fargo would “release [him] from [his] obligation to repay [his] mortgage balance” and that the value of the home was sufficient to cover the remaining balance on his mortgage loan. Id. Plaintiff further alleges that Wells Fargo offered to pay $6, 000 to the Wells Fargo Home Equity division, cancelling the remaining balance on the home equity loan. Id. at ¶ 27(b). Lastly, Plaintiff alleges that, as a precondition for Wells Fargo to take these steps, Plaintiff was required to sign a promissory note with Dyck-O'Neal, promising to pay $28, 254. Id. at ¶ 27(c). This promissory note was, as Plaintiff alleges, for the purpose of compensating Fannie Mae for “losses they would suffer relating to [Plaintiff's] mortgage loan if the deed in leu of foreclosure was executed.” Id. at ¶ 29. Plaintiff, at the time, did not take any actions challenging this letter, alleging that he was under the belief that Wells Fargo was “acting in a manner which was permitted by law.” Id. at ¶ 28. Plaintiff admits that, on an unspecified date, he agreed to the terms of Wells Fargo's May 2017 letter, id. at ¶ 30, signing a promissory note to Dyck-O'Neal in the amount of $28, 200. This note required Plaintiff to make payments to Dyck-O'Neal for $235 per month for ten years. Id.

         Plaintiff alleges that, on August 15, 2017, Wells Fargo sent him a letter asking, contrary to the terms of Wells Fargo's May 2017 letter, that Plaintiff arrange to pay $6, 000 to Wells Fargo in order to settle the outstanding balance on his home equity loan. Id. at ¶ 32. Although Plaintiff neither responded to this letter, nor paid the amount requested, he received from Wells Fargo a Certificate and Affidavit of Satisfaction relating to the home equity loan. Id. at ¶ 33. This document, dated September 19, 2017, stated that the home equity loan “has been paid in full, and the lien therein created and retained is hereby released.” Id.

         At some undisclosed point in 2018, Plaintiff began missing his payments on his promissory note to Dyck-O'Neal. Id. at ¶ 35. Plaintiff alleges that, as a result, Dyck-O'Neal began contacting Plaintiff to “attempt to pressure him into paying the amounts set out in the Promissory Note.” Id. There is no indication in the Complaint as to how often and on what dates Dyck-O'Neal contacted Plaintiff. Plaintiff also alleges that Dyck-O'Neal “put information on [Plaintiff's] credit reports indicating that he was seriously behind on these debts, ” which adversely impacted his credit score and his ability to obtain credit. Id. at ¶ 36.

         At some undisclosed time, after seeking legal assistance, Plaintiff's counsel contacted Wells Fargo about this matter. Wells Fargo agreed that “because of the bankruptcy, Plaintiff Cave did not owe them anything on either his home equity or his home mortgage loan.” Id. at ¶ 37. The Complaint alleges that Plaintiff and Wells Fargo further agreed that he did not have to pay any money to Dyck-O'Neal. Id. Plaintiff further contends that the parties arranged for Dyck-O'Neal to refund the sums that Plaintiff had previously paid that company under Plaintiff's promissory note. Id. at ¶ 37.

         Plaintiff filed this complaint on May 6, 2019, seeking compensatory damages, punitive damages, and any other relief that the Court deems just and proper. Dkt. 1 at 17. On June 19, 2019, Wells Fargo and Fannie Mae filed a joint motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. This matter is now fully briefed and ripe for disposition.

         II. Analysis

         Plaintiff has requested that this Court transfer this case to the Bankruptcy Court, pursuant to its authority under 28 U.S.C. § 157(a) and Local Rule 3(a), despite his choice to file the action before this Court. Based on the nature of the Court's reasoning for the dismissal of the claims against Wells Fargo and Fannie Mae in Counts I and III of the Complaint, this Memorandum Opinion declines to analyze those claims' eligibility for referral as against any of the three defendants in this case. The Court will consider, however, whether Count II against Dyck-O'Neal-which has not joined Wells Fargo and Fannie Mae in their motion to dismiss under Fed.R.Civ.P. 12(b)(6)-should be referred to the Bankruptcy Court. The Court will then address the claims for review pursuant to Wells Fargo and Fannie Mae's motion to dismiss.

         A. Referral to Bankruptcy Court Under Local Rule 3(a)

         28 U.S.C. § 1334(b) grants federal district courts original, but not exclusive, jurisdiction over “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” Pursuant to 28 U.S.C. § 157(a), district courts may refer such proceedings to the bankruptcy judges for their respective districts. Making use of this statutory authority, the United States District Court for the Western District of Virginia has promulgated Local Rule 3(a), which dictates that “all cases under Title 11 of the United States Code and all proceedings ...


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