Quinn v. Ocwen Federal Bank Fsb

• Decision Date: 08 December 2006
• Docket Number: No. 06-1982.,06-1982.
• Parties: L. Walter QUINN, III; Terry Quinn, Appellants, v. OCWEN FEDERAL BANK FSB; Wilson & Associates, P.L.L.C., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

470 F.3d 1240

L. Walter QUINN, III; Terry Quinn, Appellants, v. OCWEN FEDERAL BANK FSB; Wilson & Associates, P.L.L.C., Appellees.

No. 06-1982.

United States Court of Appeals, Eighth Circuit.

Submitted: October 18, 2006.

Filed: December 8, 2006.

COPYRIGHT MATERIAL OMITTED

George Jay Bequette, Jr., argued, Little Rock, AR, for appellant.

Rufus E. Wolff, argued, Little Rock, AR (Aaron L. Squyres, Little Rock, AR, on the brief), for appellee.

Before MELLOY, BENTON, and SHEPHERD, Circuit Judges.

PER CURIAM.

L. Walter Quinn and Terry Quinn appeal the dismissal of their case for failure to state a claim upon which relief can be granted. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

In August 2002, the Quinns mortgaged their home to Provident Bank, which is not a party to this litigation. The Quinns also executed an automated clearing house (ACH) authorization permitting Provident Bank, or its successors and assigns, to automatically withdraw the monthly mortgage payment from the Quinns' account at another bank. The ACH authorization provides that an automatic debit will occur on a specified day of the month, but in the next sentence, in all capital letters, places responsibility for payment on the account holder, who acknowledges:

I AM RESPONSIBLE FOR MAKING PAYMENTS ON THE NOTE BY OTHER MEANS IF MY PAYMENT IS NOT DRAFTED ON THE DAY SPECIFIED NO MATTER THE CAUSE.

In October 2002, Provident Bank sold the Quinns' mortgage to Wells Fargo, which engaged Ocwen Federal Bank to service the loan. The Quinns did not execute another ACH authorization permitting Wells Fargo or Ocwen to withdraw from any bank account. Through a series of discussions during the rest of 2002, the Quinns demanded that Ocwen use the ACH authorization (naming Provident Bank or its successors and assigns) to withdraw the monthly mortgage payment from the Quinns' bank account. During this period, the Quinns periodically paid the mortgage by personal check.

On January 13, 2003, Walter Quinn wrote Ocwen stating that an ACH authorization previously had been executed by the Quinns authorizing Provident Bank, or its successors and assigns, to automatically withdraw the monthly mortgage payment. Mr. Quinn further stated that had he known the payment would not be drafted pursuant to the previous ACH authorization, he would have made payment as scheduled. Mr. Quinn also requested that Ocwen take any steps necessary to reverse derogatory reports issued to credit reporting agencies.

Ocwen answered on January 24, writing that it had not made an adverse report to any credit reporting agency about late payment of the mortgage. Ocwen further stated the loan was set up on the ACH program, and the first automatic withdraw is effective on February 15. Ocwen also informed the Quinns that when the servicing of a loan is transferred to Ocwen, automatic draft information is not transferred, and a new application is necessary to begin an automatic draft program with Ocwen. "While Ocwen advised that a new ACH automatic draft application was necessary to begin the automatic draft program with Ocwen, the Quinns had advised Ocwen that they would not be executing a new ACH authorization since the ACH authorization the Quinns executed in favor of Provident had already been assigned to Ocwen." (Complaint ¶ 9).

By June 2003, the mortgage had not been paid in any way for the months of March, April and May. The Quinns agreed to pay for these months via personal check. Subsequently, the mortgage payments for June, July and August were not paid by ACH withdraw or by check.

In August 2003, Ocwen notified the Quinns that their account was transferred to Ocwen's Early Intervention Department, and if necessary, the loan may transfer to the Foreclosure Department. The Quinns did not dispute the validity of the debt, but notified Ocwen that they would make no further payments unless Ocwen used the ACH authorization previously executed naming Provident, or its successors and assigns. Correspondence continued throughout the fall.

By November 2003, no mortgage payment had been made by ACH withdraw or by check since June 2003. The mortgagee, Wells Fargo, by its counsel, Wilson & Associates ("Wilson"), notified the Quinns that a foreclosure sale would take place in December. Additionally, pursuant to the Arkansas foreclosure statute, Wilson, on behalf of Wells Fargo, filed a Notice of Default and Intention to Sell. Later, the foreclosure sale was cancelled, and the Quinns refinanced their mortgage with another lender.

In June 2004, the Quinns sued Ocwen and Wilson in Arkansas state court asserting six claims under state and federal law: Count I, Breach of Contract against Ocwen; Count II, Negligence against Ocwen; Count III, Defamation against Ocwen; Count IV, Violation of Fair Debt Collection Practices Act against Ocwen and Wilson; Count V, Violation of Arkansas statute against Ocwen and Wilson; Count VI, Equitable Relief to Remove Cloud on Title against Ocwen and Wilson. The case was removed to federal court under federal question jurisdiction. Both Ocwen and Wilson moved to dismiss for failure to state a claim. The district court¹ granted their motions, dismissing all claims with prejudice.

II.

This court reviews de novo the grant of a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and affirms only if plaintiffs can prove no set of facts entitling them to relief. Botten v. Shorma, 440 F.3d 979, 980 (8th Cir. 2006). This court assumes as true all factual allegations of the complaint. Abels v. Farmers Commodities Corp., 259 F.3d 910, 914 (8th Cir. 2001). "However, the complaint must contain sufficient facts, as opposed to mere conclusions, to satisfy the legal requirements of the claim to avoid dismissal." DuBois v. Ford Motor Credit Co., 276 F.3d 1019, 1022 (8th Cir. 2002). Further, written instruments attached to the complaint become part of it for all purposes. See Fed.R.Civ.P. 10(c). "For that reason, a court ruling on a motion to dismiss under Rule 12(b)(6) may consider material attached to the complaint." Abels, 259 F.3d at 921. Consequently, the factual allegations here are taken from plaintiffs' complaint, including its attachments.

A. Breach of Contract Under Arkansas Law.

The original ACH authorization between the Quinns and Provident is clear. It authorizes Provident, or its successors and assigns, to withdraw the monthly mortgage payment from the Quinns' bank account. In the ACH authorization document, Provident makes no promise to transfer the authorization to a buyer or assignee of the mortgage. Williamson v. Sanofi Winthrop Pharm., Inc., 347 Ark. 89, 60 S.W.3d 428, 434 (Ark. 2001) ("it is well settled that in order to make a contract there must be a meeting of the minds as to all terms, using objective indicators").

In the ACH authorization document, the account holder (the Quinns) assume certain duties. The Quinns agree: "I will provide the Financial Institution with all documents that the Financial Institution may require to implement the automatic deduction of my monthly payments." Additionally, the Quinns accept responsibility "FOR MAKING PAYMENTS ON THE NOTE BY OTHER MEANS IF MY PAYMENT IS NOT DRAFTED ON THE DAY SPECIFIED NO MATTER THE CAUSE." Provident, by the terms of the ACH authorization, had no duty to assign the authorization to a buyer or assignee of the mortgage.

The Quinns claim that they have a contract with Wells Fargo's servicing agent, Ocwen, that constitutes an ACH authorization. The district court ruled that there was no contract under Arkansas law, because there was no mutual assent between Ocwen and the Quinns to an ACH authorization, and because the correspondence and discussions did not produce a new agreement. See Quinn v. Ocwen Fed. Bank, FSB, No. 04-CV-00678-RSW (E.D.Ark. Feb. 2, 2006).

There is no express ACH authorization between the Quinns and Ocwen. The Quinns emphasize Ocwen's letter of January 24, 2003, which does state that the loan "has been set up on the ACH program." However, the Quinns ignore the later sentences of the same paragraph of the January 24 letter:

When the servicing of a loan is transferred to Ocwen, automatic draft information is not transferred with the loan. A new application is necessary to begin an automatic draft program with Ocwen.

As the complaint says:

While Ocwen advised that a new ACH automatic draft application was necessary to begin the automatic draft program with Ocwen, the Quinns had advised Ocwen that they would not be executing a new ACH authorization since the ACH authorization the Quinns executed in favor of Provident had already been assigned to Ocwen.

Because the Quinns cannot show the existence of a valid contract with Ocwen, they can prove no set of facts entitling them to relief, and the district court properly dismissed their breach of contract claim.

B. Negligence Under Arkansas Law.

The Quinns assert Ocwen owed a duty to draft their bank account and negligently failed to do so, pursuant to the ACH authorization. "In order to prove negligence, there must be a failure to exercise proper care in the performance of a legal duty that the defendant owed the plaintiff under the circumstances surrounding them." Shannon v. Wilson, 329 Ark. 143, 947 S.W.2d 349, 356 (1997). "The law of negligence requires as essential elements that the plaintiff show that a duty was owed and that the duty was breached." Young v. Paxton, 316 Ark. 655, 873 S.W.2d 546, 549 (1994).

As discussed, taking as true all factual allegations of the complaint, the Quinns cannot show that Ocwen owed a legal duty to debit the Quinns' bank account under the ACH authorization. Their negligence claim was correctly dismissed.

C. Defamation Under Arkansas Law.

Taking the Quinns' factual assertions as true, after sporadically paying their mortgage via personal check for several months, they made the last monthly payment in June 2003. In August when...