Christiana Trust, of Wilmington Sav. Fund Soc'y, FSB v. Riddle

• Decision Date: 21 December 2018
• Docket Number: No. 17-11429,17-11429
• Citation: 911 F.3d 799
• Parties: CHRISTIANA TRUST, a Division of Wilmington Savings Fund Society, FSB, as Trustee, Plaintiff, v. Mary Sue RIDDLE, Defendant Third Party Plaintiff – Appellant, v. Bank of America, N.A., Third Party Defendant – Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

911 F.3d 799

CHRISTIANA TRUST, a Division of Wilmington Savings Fund Society, FSB, as Trustee, Plaintiff,

v.Mary Sue RIDDLE, Defendant Third Party Plaintiff – Appellant,

v.Bank of America, N.A., Third Party Defendant – Appellee.

No. 17-11429

United States Court of Appeals, Fifth Circuit.

FILED December 21, 2018

Jack B. Peacock, Jr., David M. Vereeke, Gagnon, Peacock & Vereeke, P.C., Dallas, TX, for Third Party Plaintiff-Appellant.

Connie Flores Jones, Kathryn Buza Davis, Winston & Strawn, L.L.P., Houston, TX, for Third Party Defendant-Appellee.

Before KING, ELROD, and HAYNES, Circuit Judges.^*

JENNIFER WALKER ELROD, Circuit Judge:

Mary Sue Riddle, who took out a home-equity loan from Bank of America, alleges that the bank is vicariously liable for the failure of the bank’s loan servicer to comply with the Real Estate Settlement Procedures Act (RESPA). The district court dismissed Riddle’s claims under Rule 12(b)(6). We affirm for two independent reasons. First, Riddle did not plead an agency relationship between Bank of America and the loan servicer, an essential element of a vicarious liability claim. Second, even if Bank of America had an agency relationship with the loan servicer, the bank cannot be held vicariously liable, as a matter of law, for the servicer’s alleged RESPA violations.

I.

In December 2006, Mary Sue Riddle executed a home-equity note with Bank of America for a loan of $127,000. To secure her obligations on the note, Riddle executed a security instrument—a Homestead Lien Contract and Deed of Trust on her property in San Angelo, Texas—in favor of Bank of America. In September 2012, Bank of America sent a letter to Riddle stating that Ocwen Loan Servicing, LLC (Ocwen), would start servicing the loan.¹ In January 2015, Bank of America assigned the loan, including the security interest in Riddle’s property, to Christiana Trust, a division of the Wilmington Savings Fund Society. In April 2015, Ocwen notified Riddle that BSI Financial Services (BSI) would take over as the new loan servicer.

In October 2016, Christiana Trust filed a complaint against Riddle for judicial foreclosure of her property, alleging that Riddle had failed to make payments on the note. In response, Riddle filed an answer, counterclaims against Christiana Trust, and a third-party complaint against Ocwen, BSI, and Bank of America. Bank of America responded to Riddle’s complaint with a Rule 12(b)(6) motion to dismiss. Riddle then filed both an amended complaint against the same third-party defendants and a response in opposition to Bank of America’s motion to dismiss the original third-party complaint. The amended complaint—like the original one—includes, as relevant for this appeal,² claims under the Real Estate Settlement Procedures Act (RESPA), a federal statute that governs the procedures of mortgage loans. Bank of America quickly moved to dismiss the amended third-party complaint, too. In her response opposing this second motion to dismiss, Riddle clarified her RESPA theory against Bank of America, alleging that "Ocwen was [Bank of America’s] servicing agent" and that Bank of America "is vicariously liable for [Ocwen’s] RESPA violations."

The district court dismissed all of Riddle’s claims against Bank of America with prejudice.³ Soon after, Riddle filed a motion for reconsideration, which the district court denied. Riddle then filed a notice of interlocutory appeal.⁴

II.

We review a district court’s dismissal under Rule 12(b)(6) de novo. Sullivan v. Leor Energy, LLC , 600 F.3d 542, 546 (5th Cir. 2010). We may affirm the dismissal of a claim on any ground made manifest by the record below. See id. We affirm the district court’s dismissal for two independent reasons. First, Riddle’s amended third-party complaint fails to plead that Bank of America had an agency relationship with either Ocwen or BSI, an essential element of her vicarious liability theory. Second, as a matter of law, Bank of America cannot be held vicariously liable for the alleged RESPA violations of its loan servicer—regardless of whether the servicer is Bank of America’s agent.

A.

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); Hinojosa v. Livingston , 807 F.3d 657, 683–84 (5th Cir. 2015). Riddle’s claim for relief, as articulated on appeal, asserts that Bank of America is vicariously liable for Ocwen’s violations of 12 C.F.R. § 1024.41(c)(1). The Consumer Financial Protection Bureau (CFPB) promulgated this regulation pursuant to its rulemaking authority under RESPA. See 12 U.S.C. § 2605(k)(1)(E) (conferring this authority). The regulation imposes duties on servicers who "receive[ ] a complete loss mitigation application more than 37 days before a foreclosure sale." 12 C.F.R. § 1024.41(c)(1). When a servicer receives such an application,⁵ the servicer must—within thirty days of receiving the application—"evaluate the borrower for all loss mitigation options available to the borrower" and "provide the borrower with a notice ... stating the servicer’s determination of which loss mitigation options, if any, it will offer the borrower[.]" Id.

Riddle asserts that Ocwen and BSI received timely loss-mitigation applications but failed to consider them and notify Riddle of her loss-mitigation options.⁶ Specifically, Riddle alleges the following in her amended third-party complaint:

44. Third-Party Defendants, Ocwen and BSI failed to comply with their RESPA obligations under 12 C.F.R. § 1024.41. Specifically, Ocwen and BSI violated 12 C.F.R. § 1024.41(c) because they received a complete or facially complete loss mitigation applications [sic] at least 37 days before a scheduled foreclosure sale, and yet failed to consider Mary for all loss mitigation options and notify Mary in writing of all loss mitigation options available to her.

See Counter-Plaintiff/Third-Party Plaintiff’s First Amended Counterclaim and Third-Party Complaint at 12, Christiana Trust , No. 6:16-CV-59-C (N.D. Tex. Apr. 6, 2017), ECF No. 28.

Noticeably absent from this part of the pleading is any reference to Bank of America. In opposition to Bank of America’s motion to dismiss, Riddle claims that we should overlook this omission because "Ocwen was [Bank of America’s] servicing agent" and Bank of America "is vicariously liable for the RESPA violations of its servicing agent." Her amended third-party complaint does reference vicarious liability principles generally: she states that "mortagees [sic] can be vicariously liable for the RESPA violations of their servicers." The beginning of the complaint also states that whenever she alleges that a "Third-Party Defendant did, or failed to do" something, she means either (1) that the defendant itself did or failed to do it; or (2) that the defendant’s "agents, officers, servants, employees, vice principals, or representatives" did or failed to do it and the defendants are liable under respondeat superior .

But Riddle’s theory of vicarious RESPA liability theory requires pleading facts that suggest an agency relationship between Bank of America and either Ocwen or BSI. Meyer v. Holley , 537 U.S. 280, 285, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003) ("It is well established that traditional vicarious liability rules ordinarily make principals or employers vicariously liable for acts of their agents or employees in the scope of their authority or employment.") (emphasis added). To determine whether an agency relationship exists, the Supreme Court looks to the Restatement of Agency, which requires both the principal’s control over the agent and both parties’ consent to the agent’s acting on the principal’s behalf. Id. at 286, 123 S.Ct. 824 ; see also Restatement (Third) of Agency § 1.01 cmt. f(1) (2006) ("An essential element of agency is the principal’s right to control the agent’s actions. ... The power to give interim instructions distinguishes principals in agency relationships from those who contract to receive services provided by persons who are not agents.").

Riddle’s amended third-party complaint alleges no such facts. Her statement that "mortagees [sic] can be vicariously liable for the RESPA violations of their servicers," sheds no light on the particular relationship between Bank of America and the two loan servicers. And her general respondeat superior statement at the beginning of the complaint runs in only one direction, telling us to read her allegations against principals to include allegations against agents—not vice versa. She never pleads a RESPA violation by Bank of America, the putative principal, so this section does not help her. Without facts suggesting an agency relationship, even if everything Riddle alleges in her complaint is true, her complaint does not "state a [RESPA] claim" against Bank of America at all—let alone one that is "plausible on its face." Hinojosa , 807 F.3d at 683–84 (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). Accordingly, we affirm the district court’s dismissal on this basis.

B.

Even if Riddle had pleaded facts suggesting such a relationship, we hold in the alternative⁷ that the district court appropriately dismissed her RESPA claim for another reason: Bank of America, as a matter of law, is not vicariously liable for the alleged RESPA violations of its servicers. This is an issue of first impression in our circuit, and we are apparently the first circuit court to address it.

By its plain terms, the regulation at issue here imposes duties only on servicers. 12 C.F.R. § 1024.41(c)(1) ("[A] servicer shall ...") (emphasis added); see also 12 U.S.C. § 2605(i)(2), (i)(3) (defining a servicer as the "person responsible" for "receiving any scheduled periodic payments from a borrower ... and making the payments of principal and interest and...