United States District Court, W.D. North Carolina, Charlotte Division
CLAUDIA E. POLANCO, Plaintiffs,
v.
HSBC BANK USA NATIONAL ASSOCIATION CHRISTIANA TRUST PHH MORTGAGE CORPORATION KNOXVILLE 2012 TRUST 21ST MORTGAGE CORPORATION, Defendants.
ORDER
Graham
C. Mullen, United States District Judge.
THIS
MATTER COMES before this Court on Defendants'
Motion to Dismiss Counts Two through Thirteen of the Amended
Complaint. (Doc. No. 34). Plaintiff responded to the Motion
(Doc. No. 40) to which Defendants replied. (Doc. No. 42). As
such, this matter is ripe for disposition.
I.
FACTUAL BACKGROUND
The
alleged facts relevant to this Motion are as follows.
Plaintiff's husband obtained a loan from Defendant HSBC
to purchase a home in 2007. (Am. Compl. ¶ 20). In 2013,
Plaintiff's husband executed a quitclaim deed in favor of
Plaintiff. (Id. ¶ 21). Plaintiff entered into a
Loan Modification Agreement (“LMA”) with
Defendants concerning that loan on November 5, 2015.
(Id. ¶ 22). The amount outstanding on the loan
at the time of the LMA was $222, 108.21. (Id. ¶
23). The LMA adjusted the interest rate on the loan to 4.000%
with the loan amortized over thirty-seven years and six
months. (Id.). In addition to the monthly payment on
the loan, the promissory note required the borrower
(Plaintiff's husband) to pay into escrow an amount to
cover the annual taxes and homeowner's insurance.
(Id. ¶ 24). All associated monthly payments
totaled $1, 493.46. (Id. ¶ 25).
Defendant
HSBC provided the original loan. (Id. ¶ 20).
Defendant PHH serviced the loan and facilitated the LMA
between HSBC and Plaintiff. (Id. ¶ 26- 27).
Pursuant to the LMA, Plaintiff made her monthly payments of
$1, 493.46 each month starting in November of 2015.
(Id. ¶ 29). In December of 2015, Plaintiff
began recognizing errors in her mortgage statements.
(Id. ¶ 30). Plaintiff started writing and
calling Defendants to alert them of the errors. (Id.
¶ 31). Plaintiff attempted to communicate with
Defendants over a dozen times. (Id. ¶ 32).
The
account statements that Defendants sent Plaintiff showed that
Plaintiff was not making her monthly payments despite the
fact that she had made those payments every month after the
LMA. (Id. ¶ 33, 29). Because the statements
showed she was not making her payments, Plaintiff's
arrearage continued to increase. (Id. ¶34). As
a result of the arrearage increasing, Defendants threatened
to foreclose on Plaintiff's home. (Id. ¶
38). On October 13, 2016, Plaintiff received a letter from
Defendant PHH that indicated Defendants would foreclose on
Plaintiff's home unless Plaintiff paid the sum of $20,
001.73 on or before November 27, 2016. (Id. ¶
39).
On
January 9, 2017, Plaintiff filed a complaint with the North
Carolina Attorney General's Office (“AG's
Office”). (Id. ¶ 45). On January 18,
2017, the AG's Office notified Defendants that the
AG's Office was investigating Plaintiff's situation.
(Id. ¶ 46). Even with the AG's Office
investigating the situation, Defendants sent Plaintiff a
notice in February of 2017 stating that Plaintiff's loan
had been accelerated and the entire $241, 598.95 sum was due
to prevent foreclosure. (Id. ¶ 48). Defendants
ultimately initiated foreclosure proceedings against
Plaintiff on February 27, 2017. (Id. ¶ 50).
On
March 8, 2017, Defendant HSBC acknowledged in a letter to the
AG's Office that mistakes had been made on
Plaintiff's account. (Id. ¶ 68). Defendant
HSBC provided the following explanation for the errors on
Plaintiff's account and the ultimate foreclosure
proceedings on her home.
The loan was approved for a loan modification effective for
the November 1, 2015 payment. However, the investor
guidelines for the investor of the loan, 21st Century
Mortgage Corporation, did not allow any amounts to be
capitalized into the loan that would increase the outstanding
principal balance, including the escrow advance, and at the
time the modification was approved, the escrow advance
totaled $17, 709.75. This amount was reflected due on the
loan modification documents as a “modification
transaction cost” because it could not be capitalized.
At the time the loan was modified, the most recent escrow
analysis had been performed on January 20, 2015; however,
after the loan modification was complete, another escrow
analysis should have been performed and the $17, 709.75
escrow advance referenced in the loan modification spread
over a period of 12 months. Unfortunately, it appears that
certain coding on the account in connection with the loan
modification was not removed from the account in a timely
manner, which prevented the account from being analyzed.
Additionally, that same coding resulted in payments received
from November 1, 2015 to September 2016, in the amount of
$18, 542.38 being placed in suspense. The payments remained
in suspense until September 16, 2016, when the payments were
applied to the account as follows:
$17, 709.95-Applied to the escrow shortage;
$1, 954.12-Applied to the November 1, 2015 payment; and $1,
315.59-Remaining suspense balance.
Because the account was reflected as due for the December 1,
2015 payment, the suspense balance of $1, 315.59 was returned
to the property address on October 10, 2016, and the loan was
referred to foreclosure counsel, Shapiro & Ingle, to
initiate foreclosing proceedings on December 22, 2016.
(Id. at ¶ 69).
After
communication with Plaintiff, HSBC investigated the account
and realized its mistake. Ultimately, Defendant HSBC stated
to the AG's Office that Defendant HSBC would take the
following remedial measures:
PHHMC will be correcting the account by reversing the
September 16, 2016 application of $17, 709.95 to the escrow
advance, and will instead be applying that amount to the
account as monthly payments in the amount of $1, 804.94. This
will bring the account due for December 1, 2016 PHHMC will
also be waiving the $17, 709.95 escrow advance, any
foreclosure fees and cost incurred since the November 1, 2015
loan modification, and the 4 monthly payments due for
December 1, 2016 to March 1, 2017 payments. After the
payments are reversed and re-applied to the account, the loan
will be current and due for the April 1, 2017 payment. PHHMC
will also perform an escrow analysis, and any remaining
escrow shortage will be spread over a period of 60 months.
(Id.).
In
April of 2017, Plaintiff sent her payment of $1, 493.46 as
required under the LMA and the letter sent from Defendant
HSBC to the AG's Office. However, when Plaintiff received
her April statement, her account showed that she owed $2,
880.77: $1, 493.46 of regular payments, $632.85 in shortage,
and $723.46 in expenses. These extra expenses constituted
fees assessed to Plaintiff's account for default-related
services. (Id. ¶ 103).
On May
12, 2017, Plaintiff received a letter from Defendants stating
that Plaintiff's account was two payments past due
despite the fact that she made both the April and May
payments. As of May 16, 2017, Plaintiff's account showed
a negative escrow balance of $7, 001.14 with a suspense
balance of $2, 986.92. Both the May and June statements
showed a late charge fee, returned item charge, shortages,
and other fees of $643.05. The May 16, 2017 statement further
required Plaintiff to remit a sum of $5, 395.64 by June 1,
2017 to avoid foreclosure. Plaintiff managed to pay the sum
prior to June 1, 2017; however, Plaintiff still is unaware of
how those payments were applied to her account. (Id.
¶ 122). Defendants' actions allegedly caused
Plaintiff to suffer from severe mental anguish including
depression, anxiety, and sleeplessness. (Id. ¶
43).
As a
result of the above alleged actions, Plaintiff sued
Defendants in a thirteen count Amended Complaint. Defendants
moved to dismiss Counts Two through Thirteen. Each Count will
be discussed below.
II.
STANDARD OF REVIEW
When
faced with a motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, the Court must
“accept as true all well-pleaded allegations and . . .
view the complaint in a light most favorable to the
plaintiff.” Mylan Labs, Inc. v. Matkari, 7
F.3d 1130, 1134 (4th Cir. 1993). The Court “assume[s]
the[] veracity” of these factual allegations, and
“determine[s] whether they plausibly give rise to an
entitlement to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009). However, the court “need not
accept as true unwarranted inferences, unreasonable
conclusions, or arguments.” E. Shore Mkts., Inc. v.
J.D. Assocs. LLP, 213 F.3d 175, 180 (4th Cir. 2000).
Thus, to survive a motion to dismiss, the plaintiff must
include within his complaint “sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” Iqbal,
556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
III.
DISCUSSION
a.
Tort Claims
First,
Defendants argued that Plaintiff's tort claims should be
dismissed as the only appropriate claim in this case is one
for breach of contract. In North Carolina, a tort
does not lie against a party to a contract who simply fails
to properly perform the terms of the contract, even if that
failure to perform was due to the negligent or intentional
conduct of that party, when the injury resulting from the
breach is damage to the subject matter of the contract.
Rountree v. Chowan Cty., 796 S.E.2d 827, 830 ( N.C.
Ct. App. 2017). Contract law, rather than tort law, provides
proper redress in those situations. Id. In order to
state a tort claim based upon the actions surrounding the
performance of a contract, a plaintiff must state a claim
that is “identifiable and distinct from the primary
breach of contract claim.” Broussard v. Meineke
Disc. Muffler Shops, Inc., 155 F.3d 331, 346 (4th Cir.
1998) (internal citations omitted). "To pursue a tort
claim and a breach of contract claim concerning the same
conduct, a plaintiff must allege a duty owed him by the
defendant separate and distinct from any duty owed under a
contract." Kelly v. Georgia-Pacific, LLC, 671
F.Supp.2d 785, 791 (E.D. N.C. 2009) (internal citations and
quotations omitted).
Defendants
argued in their Motion that Plaintiff has pled only a breach
of contract and not a separate and distinct duty owed to her.
Plaintiff in response argues that North Carolina law,
specifically the North Carolina SAFE Act, provides a separate
and distinct duty that supports her tort actions. The North
Carolina Secure and Fair Enforcement Mortgage Licensing Act
(“SAFE Act”) states the following: “Any
mortgage servicer engaged in the mortgage business as defined
by G.S. 53-244.030(11)c., in addition to duties imposed by
other statutes or at common law, shall do all of the
following: . . . (3) Act with reasonable skill, care, and
diligence.” ...