Hunter v. Bank of Am., N.A.
| Decision Date | 11 March 2019 |
| Docket Number | CASE NO. C16-1718 RAJ |
| Parties | KEITH HUNTER, an individual, and ELAINE HUNTER, an individual, Plaintiffs, v. BANK OF AMERICA, N.A., et al., Defendants. |
| Court | U.S. District Court — Western District of Washington |
HONORABLE RICHARD A. JONES
This matter comes before the Court on Defendants Nationstar Mortgage LLC ("Nationstar") and HSBC Bank USA, N.A.'s ("HSBC") (collectively, "Defendants") Motion to Dismiss Plaintiff's Third Amended Complaint ("Motion to Dismiss"). Dkt. # 56. Plaintiffs oppose the Motion to Dismiss, and Defendants have filed a Reply. Dkt. ## 58, 60. For the reasons that follow, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion to Dismiss.1
Elaine and Donald Hunter signed a promissory note to Countrywide that is secured by a deed of trust concerning the property located at 7022 NE 170th Street in Kenmore, Washington. Dkt. # 51 at ¶¶ 10-18. The Hunters purchased the home for themselves and their son, Plaintiff Keith Hunter. Plaintiffs claim that that the property was purchased for Keith Hunter, who began living on the property soon after it was purchased and made payments. Id. Plaintiffs allege that under the terms of the note, the initial interest rate was set at 7.25 percent for five years, at most, and then subject to an annual adjustment. Id. at ¶¶ 19-30. Plaintiffs allege that payments during the first five years were to go to only to a portion of interest owed and payments on the remaining interest and all principal were deferred until the loan ballooned to 115% or was recast after the initial five years, whatever came first. Id.; see also Id. at Ex. A. Plaintiffs allege that within a few months of origination, the loan was bundled with a pool of residential mortgages, including approximately 63 from Washington, converted to a mortgage-backed security, and sold on the secondary market to a trust overseen by Defendant HSBC. Id. at ¶¶ 31-50.
Defendant Bank of America, N.A. ("BANA") acquired Countrywide and began servicing the Hunters' loan. Dkt. # 51 at ¶¶ 51-55. Plaintiffs allege they made consistent monthly loan payments to BANA. Id. Sometime in 2011, BANA began returning Plaintiffs' mortgage payments without crediting their account. Id. at ¶¶ 56-58. Plaintiffs contacted BANA on several occasions to resolve the issue. Id. at ¶¶ 59-65. Plaintiffs contend that BANA did not give any clear answers or instructions, and so Plaintiffs continued to send their payments to BANA. Nevertheless, BANA continued to return the checks without crediting the account. Id.
Eventually, Plaintiffs arranged a meeting with Paul Mills, a vice president and mortgage specialist at BANA. Dkt. # 51 at ¶ 77. Mr. Mills advised the Hunters to apply for a loan modification. Id. at ¶¶ 82-85. Mr. Mills was so confident that BANA would modify the loan that he told the Hunters not to "bother [sending their mortgage payments], you have a new mortgage coming, it's on the underwriter's desk." Id. at ¶ 116. When the Hunters attempted to find out why BANA had been returning the payments, Mr. Mills allegedly brushed off the issue as "one hand not talking to the other." Id .at ¶ 119.
Ultimately, BANA sold the note and did not modify the Hunters' loan. Id. at ¶¶ 122-23. BANA then characterized the loan as in default. Id. at ¶ 125. The Hunters continued to submit monthly mortgage payments in an attempt to pay off the loan. Id. at ¶ 126. Nationstar Mortgage, LLC ("Nationstar") began servicing the loan in 2014. Id. at ¶ 144. In early 2015, Quality Loan Servicing Corporation of Washington ("QLS") began to initiate foreclosure, identifying HSBC Bank USA N.A. ("HSBC") as the beneficiary. Id. at ¶ 168. Foreclosure proceedings are currently stayed.
The Hunters filed suit in state court against BANA, Nationstar, and HSBC, among others. Dkt. # 1-1. Defendants removed the action to this Court and moved the Court to dismiss Plaintiffs' claims. Dkt. ## 5, 20. On May 25, 2017, this Court granted in part and denied in part Defendants' initial motion to dismiss. Dkt. # 27. The Court dismissed Plaintiffs' claims as to Nationstar and HSBC, finding that they had failed to allege claims against these Defendants under the Washington Consumer Protection Act ("CPA"), Deed of Trust Act ("DTA"), Intentional and/or Negligent Infliction of Emotional Distress, Misrepresentation, and Promissory Estoppel. Id. The Court granted Plaintiffs leave to amend their Complaint to state CPA, outrage, misrepresentation, and promissory estoppel claims against Nationstar and HSBC. Id. at 10-11.
Plaintiffs filed a Second Amended Complaint on June 8, 2017, which Nationstar and HSBC moved to dismiss on July 13, 2017. Dkt. ## 28, 32. While this motion waspending, Plaintiffs moved for leave to file a Third Amended Complaint, adding factual allegations against Nationstar and HSBC with additional details learned through discovery, which the Court granted on April 24, 2018. Dkt. ## 43, 50.
Plaintiffs then filed their Third Amended Complaint on May 4, 2018. Dkt. # 51. This Complaint added a number of new factual allegations against both Nationstar and HSBC. For instance, Plaintiffs allege that after Nationstar began servicing the loan in 2014, Nationstar carried forward an improper calculation of Plaintiffs' interest rate (7.25%), even though the terms of the note dictated should have been adjusted no later than February 1, 2012 to a much smaller interest rate until 2017. See, e.g., Dkt. # 51 at ¶¶ 145-48; 165. Plaintiffs allege that Nationstar failed to review a completed loan modification application submitted to the previous servicer, and failed to implement policies to facilitate the transferring of such service, allegedly in violation of the Real Estate Settlement Procedure Act, 12 U.S.C. §§ 2601 et seq. and Regulation X, 12 C.F.R. §§ 1024.30-.41. Id. at ¶¶ 149-60. Plaintiffs allege these failures caused significant delays, accrual of inaccurate interest, and forced them to start the loss mitigation process all over again. Id. Plaintiffs contend that Nationstar required them to submit another loan modification application, but delayed processing it. Id. at ¶¶ 161-62. Plaintiffs allege that Nationstar sent a notice of default in 2015 that reflected the incorrect interest rate, and continued sending reinstatement quotes and monthly mortgage statements that maintained this incorrect 7.25% rate. Id. at ¶¶ 186, 190; Ex. D.
Plaintiffs also allege misconduct by Nationstar during the parties' foreclosure mediation, which was continued several times because Nationstar claimed more documentation was necessary. Id. at ¶¶ 176-81. Plaintiffs allege Nationstar participated in bad faith in these proceedings by (1) not informing Plaintiffs of the loss mitigation options available, including HSBC's Principal Write-Down Modification program ("PWD") program which would have helped Plaintiffs write down principal instead of interest; (2) not considering Plaintiffs for these additional loss mitigation programs; (3)declining to modify Plaintiff's loan or fix the incorrect interest rate; and (4) demanding a doubling of Plaintiffs' monthly payments and a lump sum "contribution" of $15,000. Id. at ¶¶ 176-201.3
Plaintiffs then argue that after the mediation failed, QLS set a foreclosure sale for July 2015, noting the beneficiary as HSBC; this sale was the re-set twice, once to July 2015 and then again to June 2016. Dkt. # 51 at ¶¶ 207-12. Plaintiffs allege that HSBC did not own the Note during these proceedings. Id. Plaintiffs then allege that the sale was re-set for October 2016, but this sale was postponed after Plaintiffs retained counsel and stipulated to the entry of a preliminary injunction enjoining the sale subject to monthly payments of $3,226.72 into the Court registry. Id. at 211-16; see also Dkt. ## 15, 18.
Finally, Plaintiffs allege that under the terms of the note, Plaintiffs' loan would have been "recast" no later than February 2017, which would reflect an adjusted interest rate and payment amount that included both interest and principal. Dkt. # 51 at ¶¶ 217-18. Plaintiffs contend that Nationstar did not recast their loan, and instead continued demanding payments based on an incorrect interest rate and for interest only, and included "excessive and inaccurate amounts for fees, charges, escrow and allegedly overdue payments." Id. at ¶¶ 219-23.
Defendants Nationstar and HSBC moved to dismiss Plaintiff's Third Amended Complaint, which alleges claims against these Defendants for violations of the CPA, breach of contract, breach of the covenant of good faith and fair dealing, and intentional and/or negligent infliction of emotional distress. Dkt. # 56. Defendants' Motion to Dismiss is now before this Court.
Fed. R. Civ. P. 12(b)(6) permits a court to dismiss a complaint for failure to state a claim. The rule requires the court to assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). A court "need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The plaintiff must point to factual allegations that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 568 (2007). If the plaintiff succeeds, the complaint avoids dismissal if there is "any set of facts consistent with the allegations in the complaint" that would entitle the plaintiff to relief. Id. at 563; Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
The court typically cannot consider evidence beyond the four corners of the complaint, although it may rely on a document to which the complaint refers if the document is central to the party's claims and its authenticity is not in question. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). The court may also consider evidence...
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