HSBC Bank United States, Nat'l Trust Co. v. Teagarden

• Decision Date: 31 December 2013
• Docket Number: No. 2012–T–0091.,2012–T–0091.
• Parties: HSBC BANK USA, NATIONAL TRUST COMPANY, As Trustee For Mastr Reperforming Loan Trust 2005–1, Plaintiff–Appellee, v. Robert J. TEAGARDEN, et al., Defendants/Third Party Plaintiffs–Appellants, v. Wells Fargo Bank National Association, Third Party Defendant.
• Court: Ohio Court of Appeals

6 N.E.3d 678

HSBC BANK USA, NATIONAL TRUST COMPANY, As Trustee For Mastr Reperforming Loan Trust 2005–1, Plaintiff–Appellee,

v.Robert J. TEAGARDEN, et al., Defendants/Third Party Plaintiffs–Appellants,

v.Wells Fargo Bank National Association, Third Party Defendant.

No. 2012–T–0091.

Court of Appeals of Ohio,

Eleventh District, Trumbull County.

Dec. 31, 2013.

Scott A. King and Terry W. Posey, Jr., Thompson Hine, L.L.P., Dayton, OH, and Matthew I. McKelvey, Lerner, Sampson & Rothfuss, Cincinnati, OH, for plaintiff-appellee.

Philip D. Zuzolo and Patrick B. Duricy, Zuzolo Law Office, LLC, Niles, OH, for defendants/third party plaintiffs-appellants.

DIANE V. GRENDELL, J.

{¶ 1} Defendants-appellants, Robert J. Teagarden and Shelley R. Teagarden, appeal two Judgment Entries of the Trumbull County Court of Common Pleas, dismissing the Teagardens' counterclaims and granting summary judgment in favor of plaintiff-appellee, HSBC Bank USA, National Trust Company. The issues before this court are whether the original lender may be a debt collector for the purposes of the Fair Debt Collection Practices Act (FDCPA) when the debt is assigned to a third party; whether the one-year statute of limitations for FDCPA actions precludes claims based on false affidavits filed in a prior foreclosure action; whether there is justifiable reliance on false affidavits to support a fraudulent misrepresentation claim when the veracity of the affidavits was contested; whether the failure to comply with federal mortgage servicing guidelines may sustain a cause of action for breach of contract; whether the term “branch office” as used in federal regulations refers only to offices with qualified mortgage servicing personnel; and whether actual damages are a necessary element to state a valid claim for a violation of the Real Estate Settlement Procedures Act (RESPA). For the following reasons, we affirm in part and reverse in part the Judgments of the court below.

{¶ 2} On September 13, 2010, HSBC Bank filed a Complaint in Foreclosure and for Reformation of Deed against the Teagardens and others ¹ in the Trumbull County Court of Common Pleas. HSBC Bank alleged that it was the holder of a note secured by a mortgage, executed by the Teagardens, and that there is a balance of $72,764.05 due on the note.

{¶ 3} On December 8, 2010, the Teagardens filed their Answer, Affirmative Defenses, & Counterclaim. The Teagardens counterclaimed against HSBC Bank and third party defendant-appellee, Wells Fargo Bank, N.A., as the servicing agent for HSBC Bank. The Teagardens raised claims under the FDCPA and the Ohio Consumer Sales Practices Act (CSPA), and for fraudulent misrepresentation, breach of contract, and abuse of process.

{¶ 4} On February 12, 2011, HSBC Bank and Wells Fargo filed a Motion to Dismiss the Teagardens' Counterclaim.

{¶ 5} On July 5, 2011, the Teagardens filed an Amended Answer, Affirmative Defenses, & Counterclaim, adding an additional claim for violation of the RESPA.

{¶ 6} On July 18, 2011, HSBC Bank and Wells Fargo filed a Motion to Dismiss the Teagardens' Amended Counterclaim.

{¶ 7} On November 2, 2011, the trial court issued a Judgment Entry, granting HSBC Bank and Wells Fargo's Motion to Dismiss with respect to the Teagardens' counterclaims for violations of the FDCPA and CSPA, fraudulent misrepresentation, and breach of contract.

{¶ 8} On November 18, 2011, HSBC Bank and Wells Fargo filed their Reply to Amended Counterclaim.

{¶ 9} On August 7, 2012, HSBC Bank and Wells Fargo filed a Motion for Summary Judgment.

{¶ 10} On October 18, 2012, the trial court issued a Judgment Entry, granting HSBC Bank and Wells Fargo summary judgment with respect to the Teagardens' counterclaims for abuse of process and violation of the RESPA. The court further found that HSBC Bank was entitled to judgment on the note in the amount of $72,764.05, plus interest. The court did not find that foreclosure of the note was appropriate, “until the Court determines which of the costs, advances, and other charges requested by the Plaintiff [HCBS Bank] are allowable in the interest of justice.”

{¶ 11} On November 8, 2012, the Teagardens filed their Notice of Appeal. On appeal, they raise the following assignments of error:

{¶ 12} “[1.] The trial court erred by dismissing the appellants' counterclaims under the Fair Debt Collection Practices Act, Ohio Consumer Sales Practices Act, Fraudulent Misrepresentation, and Breach of Contract.”

{¶ 13} “[2.] The trial court erred by granting summary judgment in favor of appellees as to their fulfillment of all conditions precedent and against appellants as to the affirmative defense regarding compliance with the loss mitigation guidelines.”

{¶ 14} “[3.] The trial court erred by granting summary judgment in favor of appellees on appellants' claim under the Real Estate Settlement Procedures Act.”

{¶ 15} Under the first assignment of error, the Teagardens challenge the dismissal of their counterclaims for violations of the FDCPA, violations of the CSPA, fraudulent misrepresentation, and breach of contract, pursuant to HSBC Bank and Wells Fargo's Motion to Dismiss.²

{¶ 16} Under Ohio's Civil Rules, a defendant may plead the “failure to state a claim upon which relief can be granted” by motion. Civ.R. 12(B)(6). “In order for a court to dismiss a complaint for failure to state a claim upon which relief can be granted (Civ.R.12(B)(6)), it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery.” O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. In making this determination, all factual allegations contained in the complaint must be presumed true and the non-moving party is entitled to the benefit of all reasonable inferences. Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192, 532 N.E.2d 753 (1988).

{¶ 17} The Teagardens' Amended Counterclaim alleged that HSBC Bank and Wells Fargo violated the FDCPA by engaging in harassing and abusive conduct (15 U.S.C. 1692d), making false and misleading representations (15 U.S.C. 1692e), and using unfair or unconscionable means to collect a debt (15 U.S.C. 1692f).

{¶ 18} In order to establish a claim under the FDCPA, the “defendant must be a ‘debt collector’ as defined by the Act.” Wallace v. Washington Mut. Bank, F.A., 683 F.3d 323, 326 (6th Cir.2012); Montgomery v. Huntington Bank, 346 F.3d 693, 698 (6th Cir.2003) (“[a]s a matter of law, liability under §§ 1692d and 1692e [and 1692f] can only attach to those who meet the statutory definition of a ‘debt collector’ ”).

{¶ 19} A “debt collector” is defined by the FDCPA as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. 1692a(6). Excluded from this definition of a “debt collector,” is “any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity * * * concerns a debt which was originated by such person.” 15 U.S.C. 1692a(6)(F)(ii).

{¶ 20} In the present case, Wells Fargo was the original lender, i.e., originator of the debt, of $76,401 to the Teagardens, and identified as such in the note creating the debt. Therefore, Wells Fargo does not meet the statutory definition of a “debt collector” and cannot be held liable under the FDCPA.

{¶ 21} The Teagardens argue that, even if Wells Fargo “is considered the formal creditor in the original note,” it “is now (and was) collecting debt that is owned by HSBC.” The reasoning behind this argument, however, completely circumvents the plain language of the FDCPA, which presupposes that a person is “collecting * * * any debt * * * owed or due another.” Under the Teagardens' interpretation, the exclusion under (F)(ii) is rendered meaningless. As other courts have concluded, the fact that the original creditor transferred the debt to another party and subsequently attempts to collect the debt on behalf of the other party does not render the original creditor a “debt collector” for the purposes of the FDCPA. Neff v. Flagstar Bank, FSB, S.D.Ohio No. 2:11–cv–1136, 2013 WL 3872115, 4 (July 25, 2013) (the “transfer and reacquisition of the debt is [not] legally relevant” to the original creditor's exempt status under the FDCPA); Capital One Bank (USA) v. Rhoades, 8th Dist. Cuyahoga No. 93968, 2010-Ohio-5127, 2010 WL 4149255, 3 (“Capital One is the original creditor, and as such, * * * cannot be in violation of the FDCPA”).

{¶ 22} The Teagardens argue, in the alternative, that Wells Fargo is subject to the FDCPA as a creditor who, “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S.C. 1692a(6).

{¶ 23} “A creditor collecting its own debt becomes subject to the FDCPA ‘when it uses a name that implies that third party [sic] is involved in collecting its debts, “pretends to be someone else” or “uses a pseudonym or alias.” ’ ” (Citations omitted.) Wolfe v. Bank One Corp., 433 F.Supp.2d 845, 847 (N.D.Ohio 2005); Hayes v. Asset Recovery Mgt. Group, Ltd., N.D.Ohio No. 3:10CV1098, 2011 WL 3566851, 4 (Aug. 12, 2011) (“[t]o state a claim under the ‘false name’ exception, plaintiff must allege the defendants misrepresented themselves a[s] independent debt collectors during one or more of the abusive actions allegedly violating the FDCPA”).

{¶ 24} In the present case, Wells Fargo consistently dealt with the Teagardens as Wells Fargo Home Mortgage, Inc., Wells Fargo Bank, N.A., or Wells Fargo Equity Enhancement Program. The Amended Counterclaim identifies Wells Fargo Home Mortgage as “a division” of Wells Fargo Bank. Wells Fargo Equity Enhancement Program is...