Belyea v. Litton Loan Servicing, LLP
| Decision Date | 15 July 2011 |
| Docket Number | Civil Action No. 10-10931-DJC |
| Parties | Carol and Bruce Belyea, Lucille and Wayne Botelho, and Chardon Mahan, Plaintiffs, v. Litton Loan Servicing, LLP, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Plaintiffs Carol and Bruce Belyea, Lucille and Wayne Botelho, and Chardon Mahan are all homeowners whose home mortgages were serviced by Defendant Litton Loan Servicing, LLP ("Litton"). Seeking to modify their mortgage payments, the Belyeas, the Botelhos, and Mr. Mahan each entered into a standardized Trial Period Plan Agreement ("TPP Agreement") with Litton. Plaintiffs contend that the TPP Agreements constitute binding contracts with Litton and that Litton failed to satisfy its contractual obligations. Both on their own behalf and on behalf of a purported class of homeowners who signed similar TPP Agreements with Litton, Plaintiffs assert four state-law claims against Litton: breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, and violation of the Massachusetts Consumer Protection Act, Mass. G. L. c. 93A.
Litton has moved to dismiss Plaintiffs' amended complaint in its entirety pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons discussed below, Litton's motion is DENIED.
Whether a complaint should survive a motion to dismiss depends upon whether the pleading satisfies the "plausibility" standard. Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). The First Circuit has recently addressed the principles a district court should follow when considering a motion to dismiss. As Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 8-9 (1st Cir. 2011) (applying Iqbal and Twombly), makes clear, dismissal of a complaint pursuant to Rule 12(b)(6) is inappropriate if the complaint satisfies the two-pronged requirement in Rule 8(a)(2) of "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 8 (citing Fed. R. Civ. P. 8(a)(2)). As to the first prong, a "short and plain" statement "needs only enough detail to provide a defendant with 'fair notice of what the . . . claim is and the grounds upon which it rests.'" Id. (quoting Twombly, 550 U.S. at 555). However, in order to satisfy the second prong of showing an entitlement to relief, "a complaint must contain enough factual material 'to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).'" Id. (quoting Twombly, 550 U.S. at 555). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (quoting Iqbal, 129 S. Ct. at 1949). "In short, an adequate complaint must provide fair notice to the defendants and state a facially plausible legal claim." Id.
"In resolving a motion to dismiss, a court should employ a two-step approach." Ocasio-Hernandez, 640 F.3d at 9. "It should begin by identifying and disregarding statements in the complaint that merely offer 'legal conclusion[s] couched as . . . fact[]' or '[t]hreadbare recitals of the elements of a cause of action.'" Id. (quoting Iqbal, 129 S.Ct. at 1949). "A plaintiff is not entitled to 'proceed perforce' by virtue of allegations that merely parrot the elements of the causeof action." Id. On the other hand, "[n]on-conclusory factual allegations in the complaint must be treated as true, even if the allegations seem incredible." Id. "If that factual content, so taken, 'allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,' the claim has facial plausibility." Id. (quoting Iqbal, 129 S.Ct. at 1949). "The make-or-break standard . . . is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief." Id. (quoting Sepúlveda-Villarini v. Dep't. of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010) (Souter, J.)). "Although evaluating the plausibility of a legal claim requires the reviewing court to draw on its judicial experience and common sense, the court may not disregard properly pled factual allegations, even if it strikes a savvy judge that actual proof of those facts is improbable." Id. (citations and quotations omitted). "Nor may a court attempt to forecast a plaintiff's likelihood of success on the merits; 'a well-pleaded complaint may proceed even if a recovery is very remote and unlikely.'" Id. (quoting Twombly, 550 U.S. at 556). "The relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw from the facts alleged in the complaint." Id.
The following facts are alleged in the complaint and are taken as true for the purposes of this motion. Purportedly factual allegations in the complaint that are mere legal conclusions couched as fact or threadbare recitals of the elements of a legal cause of action have been disregarded by the Court and are not included in the following factual summary. Ocasio-Hernandez, 640 F.3d at 9.
In February 2009, faced with a nationwide foreclosure crisis, the Secretary of the Treasury and the Director of the Federal Housing Finance Agency exercised their authority under the Emergency Economic Stabilization Act, the American Recovery and Reinvestment Act, and theTroubled Asset Relief Program, 12 U.S.C. §§ 5201-5253, and created the "Home Affordable Mortgage Program" ("HAMP"). HAMP is "a national [home mortgage] modification program aimed at helping 3 to 4 million at-risk homeowners - both those who are in default and those who are at imminent risk of default - by reducing monthly payments to sustainable levels" by restructuring the mortgages, without discharging any of the underlying debt. Am. Compl., Ex. 2, Supplemental Directive 09-01 ("SD 09-01") at 1. HAMP was designed to create a "uniform loan modification process," governed by federal standards, that could be used by any loan servicer that voluntarily opted to participate. Id. As an incentive for servicers to participate in HAMP, the federal government awards servicers three annual $1,000 payments for each permanent mortgage loan successfully modified pursuant to HAMP. Id. at 23.
A HAMP modification consists of two stages. First, the loan servicer gathers financial information about a homeowner and the homeowner's mortgage to determine whether the mortgage appears to be HAMP-eligible. SD 09-01 at 2-12. If it is, the servicer offers the homeowner a Trial Period Plan, id. at 17, which consists of a three-month period in which the homeowner makes three monthly mortgage payments in an amount determined by a fixed process known as the "waterfall," id. at 8-10, and submits additional financial information to the lender to facilitate verifying whether the homeowner is in fact HAMP-eligible. Id. at 10-12. The homeowner is also required to open an escrow account and may be required to undergo credit counseling. The trial period is governed by a form TPP Agreement, which is discussed further below.
Second, if the homeowner complies with the terms of the TPP Agreement and the servicer verifies the homeowner's income representations, HAMP's governing documents direct the servicer to offer the homeowner a permanent modification at the end of the three-month period. SD 09-01at 17-18.1
Multiple courts in this district have noted that a TPP Agreement "has the appearances of a contract." Durmic v. J.P. Morgan Chase Bank, N.A., 10-CV-10380-RGS, 2010 WL 4825632, at *1 (D. Mass. Nov. 24, 2010); Bosque v. Wells Fargo Bank N.A., 762 F.Supp.2d 342, 348 (D. Mass. 2011) (quoting Durmic). The TPP Agreement "characterizes itself as an agreement, contains signature lines for the Lender and the Borrower and includes distinctly contractual phrases such as 'under seal' and 'time is of the essence.'" Durmic, 2010 WL 4825632 at *1 n.4; Bosque, 762 F.Supp.2d 348 n.8 (quoting Durmic). The first sentence of each of the TPP Agreements in this case provides:
If I am in compliance with this Trial Period Plan and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Home Affordable Modification Agreement, as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.
Am. Compl., Ex. 7, Belyea TPP Agreement at 1. Four sentences later, the TPP Agreement states, "I understand that after I sign and return two copies of this Plan to the Lender, the Lender will send me a signed copy of the Plan if I qualify for the Offer or will send me written notice that I do not qualify for the Offer." Id.
Section 2 of the TPP Agreement sets forth the amount and date of each monthly payment, and states that "TIME IS OF THE ESSENCE under this Plan." Id. ¶¶ 2, 2(A). It next details three conditions under which the TPP would not result in a permanent modification: if, prior to the Modification Effective Date, (1) the Lender does not provide the borrower with a fully executedcopy of the plan and permanent modification agreement, or (2) the borrower does not make all payments provided under the plan, or (3) the financial representations made in the eligibility assessment stage are no longer correct. Id. ¶ 2(F).
Section 3 explains how the permanent loan modification will be calculated. It then provides:
If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true in all material respects, the Lender will send me a Modification Agreement for my signature which will modify my Loan Documents as necessary to reflect this new payment amount . . . .
Carol and Bruce Belyea have owned their home in Roslindale, Massachusetts...
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