Cox v. Mortg. Elec. Registration Sys., Inc.

• Citation: 685 F.3d 663
• Decision Date: 12 July 2012
• Docket Number: No. 11–2646.,11–2646.
• Parties: Gary COX; Jill Cox, Appellants, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; Aurora Loan Services, Inc., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

685 F.3d 663

Gary COX; Jill Cox, Appellants,

v.MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; Aurora Loan Services, Inc., Appellees.

No. 11–2646.

United States Court of Appeals, Eighth Circuit.

Submitted: March 15, 2012.

Filed: July 12, 2012.

Christopher Parrington, argued, Patrick Boyle, on the brief, Minneapolis, MN, for appellants.

Michael R. Sauer, argued, Eric D. Cook, Christina M. Weber, on the brief, Woodbury, MN, for appellees.

Before MURPHY, BRIGHT, and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

Gary and Jill Cox (“homeowners”) filed this lawsuit in Minnesota state court against Mortgage Electronic Registration Systems, Inc. and Aurora Loan Services, Inc. (collectively “lender”) seeking legal and equitable relief from the lender's foreclosure and sale of their home. The lender removed the case to federal court, invoking jurisdiction under 28 U.S.C. § 1332, and subsequently moved to dismiss the complaint for failure to state a claim upon which relief can be granted or alternatively for summary judgment. The district court ¹ dismissed the suit, and the homeowners appeal. We affirm.

I. BACKGROUND

In January 2004, the homeowners obtained $472,500 for a home purchase through a mortgage agreement with the lender. In February 2009, the homeowners were experiencing financial hardship and contacted the lender to explore potential financial accommodations. They subsequently applied to the lender for a loan modification pursuant to the United States Department of the Treasury's Home Affordable Mortgage Program (“HAMP”). In September 2009, the lender notified the homeowners that they “potentially qualified for a modification” and would be put on a trial modification plan with monthly payments of $2,779.38 to demonstrate their capacity to make the payments if the loan was permanently modified. The homeowners submitted the trial payments in October, November, and December. On December 28, 2009, Terry Martin, one of the lender's employees, “instructed [the homeowners] to discontinue payment pursuant to the Trial Payment Plan, as [they] had already demonstrated [their] ability to make payments pursuant to the modification, and could expect to receive notice of the modification approval shortly.” In reliance on Martin's statements, the homeowners discontinued making their trial payments and awaited notification of a permanent modification.

On February 4, 2010, the lender denied the homeowners' modification application because the ratio of the loan to the home value was too high. The denial letter informed the homeowners that “[i]f you do not bring your loan current immediately, any foreclosure action will resume from the point at which it was suspended without further notice.” The letter also stated that the homeowners “may be eligible for other alternatives to foreclosure.” On March 8, 2010, the lender informed the homeowners that they “may not be eligible” for a HAMP modification but that the loan had been placed in a thirty-day review period. The lender also stated that the homeowners should continue to make monthly payments under the trial plan, that they would “continue to be eligible for HAMP consideration,” and that they would “receive an additional written communication of the status of [the] modification” at the end of the thirty-day review period. On March 24, 2010, before the end of the thirty-day review period, the lender served the homeowners with notice of a foreclosure sale, which indicated that the homeowners needed to pay $31,846.30 to “bring your mortgage up to date.” The lender purchased the property at the foreclosure sale on October 4, 2010, for $511,941.78.

On November 4, 2010, the homeowners initiated the present lawsuit and attached the February 4 letter, the March 8 letter, and the March 24 foreclosure notice to the complaint. In Count I, the homeowners sought “a detailed accounting of [the lender's] activities relating to [the homeowners'] request for a forbearance or loan modification.” The homeowners next alleged four counts under which they sought to recover damages. In Count II, they alleged that the lender violated a duty of good faith and fair dealing imposed by Minnesota Statute section 580.11. In Count III, the homeowners alleged that the lender breached the implied duty of good faith and fair dealing arising from their mortgage agreement. In Counts IV and V, respectively, the homeowners alleged fraudulent and negligent misrepresentation. Finally, in Count VI, the homeowners requested injunctive relief staying the foreclosure proceedings. Upon the lender's motion, the district court dismissed the suit pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure because “[the homeowners'] claims are entirely based on the loan modification request under HAMP” and HAMP creates no private right of action. The district court also held in the alternative that the homeowners did not plead plausible claims under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The homeowners appeal, contending that HAMP does not preempt their state-law claims and that they pled the claims with sufficient particularity to state a claim.

II. DISCUSSION

We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6). Carter v. Arkansas, 392 F.3d 965, 968 (8th Cir.2004). To survive such a motion, “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 Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “A claim has facial plausibility when the plaintiff [has pleaded] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). We make this determination by considering only the materials that are “necessarily embraced by the pleadings and exhibits attached to the complaint.” Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n. 4 (8th Cir.2003).

The parties agree that Minnesota law governs our analysis of the homeowners' state-law claims. See Kaufmann v. Siemens Med. Solutions USA, Inc., 638 F.3d 840, 843 (8th Cir.2011). We review de novo the district court's interpretation of Minnesota law, Triton Corp. v. Hardrives, Inc., 85 F.3d 343, 345 (8th Cir.1996), and, unless the outcome of the case is dictated by Minnesota Supreme Court precedent, we “must attempt to predict what that court would decide if it were to address the issue,” Raines v. Safeco Ins. Co. of Am., 637 F.3d 872, 875 (8th Cir.2011).

A. Count I: Accounting

In Count I, the homeowners requested “a detailed accounting of [the lender's] activities relating to [the homeowners'] request for a forbearance or loan modification, including ... an Order releasing the entire contents of [the homeowners'] loan file from [the lender's] custody.” The district court dismissed Count I, concluding that an accounting is an extraordinary equitable remedy that is unwarranted here because there is an adequate remedy available at law through normal discovery requests. We agree that the information the homeowners seek is available through discovery if they can plead any valid claim, and the existence of this legal remedy renders an accounting unwarranted. See Border State Bank, N.A. v. AgCountry Farm Credit Servs., FLCA, 535 F.3d 779, 784 (8th Cir.2008) (holding that the extraordinary equitable remedy of an accounting was not justified because the plaintiff did not explain why it could not obtain the necessary information through discovery). Furthermore, the homeowners' reliance on Vernon J. Rockler & Co. v. Glickman, Isenberg, Lurie & Co., 273 N.W.2d 647 (Minn.1978), is unavailing because that case involved a professional malpractice claim against an accounting firm, not the equitable remedy of accounting requested here. Because the homeowners have not explained why discovery is not an adequate remedy, the district court did not err in dismissing Count I.

B. Count II: Violation of Section 580.11

Minnesota's foreclosure-by-advertisement statute provides that the sheriff or sheriff's deputy sell the premises foreclosed upon to the highest bidder at a public venue. Minn.Stat. § 580.06, subdiv. 1. The statute specifically authorizes “[t]he mortgagee, the mortgagee's assignee, or the legal representative of either or both [to purchase the premises] fairly and in good faith” at the sale. Minn.Stat. § 580.11. The district court dismissed Count II, concluding that any duty imposed under section 580.11 applies only to the fairness of the purchase itself and that the homeowners did not allege that the lender acted unfairly or in bad faith in purchasing the home at the foreclosure sale. The homeowners do not contend on appeal that the lender acted unfairly or in bad faith in making the purchase itself, but they contend that the lender violated a duty imposed under section 580.11 by acting unfairly and in bad faith “while foreclosing.” The homeowners contend that the lender breached this duty by first informing them that it would work with them to “resolve [their] minor deficiency on the Mortgage,” and then later failing to respond to status requests and refusing to release their loan file. The homeowners also contend that the lender breached this duty by stating that they would have a permanent modification if they made the trial payments.

Section 580.11 imposes on a mortgagee a “duty to act ‘fairly and in good faith’ when it purchase[s] the property at the foreclosure sale.” Sprague Nat'l Bank v. Dotty, 415 N.W.2d 725, 726–27 (Minn.App.1987). The homeowners cite no persuasive authority establishing that section 580.11 imposes a general fiduciary duty on foreclosing lenders beyond conduct that...