Johnson v. PennyMac Loan Servs.

• Decision Date: 10 February 2022
• Docket Number: Civil Action 4:21-cv-0815-TLW-TER
• Parties: BRAD R. JOHNSON, Plaintiff, v. PENNYMAC LOAN SERVICES, LLC, STANDARD GUARANTY INSURANCE COMPANY, and ASSURANT, INC, Defendant.
• Court: U.S. District Court — District of South Carolina

BRAD R. JOHNSON, Plaintiff, v. PENNYMAC LOAN SERVICES, LLC, STANDARD GUARANTY INSURANCE COMPANY, and ASSURANT, INC, Defendant.

Civil Action No. 4:21-cv-0815-TLW-TER

United States District Court, D. South Carolina, Florence Division

February 10, 2022

REPORT AND RECOMMENDATION

THOMAS E. ROGERS, III UNITED STATES MAGISTRATE JUDGE

I. INTRODUCTION

Plaintiff who is proceeding pro se, brings this action alleging claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2607, et seq., as well as a state law claim for breach of contract accompanied by fraud. Presently before the Court are Defendant PennyMac Loan Services, LLC's (PennyMac) Motion to Dismiss (ECF No. 14) and Defendants Standard Guaranty Insurance Company (SGIC) and Assurant, Inc.'s Motion to Dismiss (ECF No. 23). Because he is proceeding pro se Plaintiff was advised pursuant to Roseboro v. Garrison, 528 F.3d 309 (4th Cir. 1975), that a failure to respond to Defendants' motions could result in dismissal of his Complaint. Plaintiff filed responses. All pretrial proceedings in this case were referred to the undersigned pursuant to the provisions of 28 U.S.C. § 636(b)(1)(A) and (B) and Local Rule 73.02(B)(2)(d), DSC.

II. FACTUAL ALLEGATIONS

Plaintiff purchased Lots 16 and 18, Block 186, Section N-6, Long Beach (now Oak Island), North Carolina. Compl. ¶ 6. Lots 16 and 18 were improved with a residence. Compl. ¶ 7. Plaintiff purchased homeowners and flood insurance coverage for the house located on Lots 16 and 18 from Farm Bureau Insurance Company. Compl. ¶ 7. Subsequently, Plaintiff purchased Lots 13, 15 and 17, Block 186, Section N-6, Long Beach (now Oak Island), North Carolina. Compl. ¶ 8. Lots 13, 15 and 17 are vacant lots. Compl. ¶ 9. Plaintiff later combined all Lots (collectively, the Property) for tax and assessment purposes. Compl. ¶ 9. In June 2013, Plaintiff applied for a loan from Weststar Mortgage, Inc., and an appraisal was conducted on the combined Property, including the improved residence. Compl. ¶¶ 10-11. Johnson's loan application was approved (2013 Loan), and a Deed of Trust was recorded. Compl. ¶ 22. The Deed of Trust purports to encumber only Lots 13, 15 and 17, i.e., the vacant lots. Compl. ¶ 20. Later in 2013, the Weststar Mortgage was sold to PennyMac. Comp. ¶ 23.

From the inception of the 2013 Loan until September 20, 2017, first Weststar and then PennyMac created and maintained an escrow account and used the escrowed funds to pay for homeowners and flood insurance coverage for the house. Compl. ¶¶ 10, 26. On September 20, 2017, Plaintiffcalled PennyMac and requested that it discontinue paying for the homeowners and flood insurance because it had a lien on vacant land only. Compl. ¶¶ 10, 26. PennyMac's representative responded that he would look into the situation. Compl. ¶¶ 26. In April of 2018, PennyMac paid to renew the homeowner's insurance. Compl. ¶ 28. Subsequently, PennyMac informed Plaintiff that it would close the escrow account but he was still required to pay for property insurance. Compl. ¶ 29.

In September of 2018 and after, Plaintiff corresponded with PennyMac, who allegedly told him that if he separated Lots 16 and 18 (those on which the house is located) from Lots 13, 15, and 17 (the vacant lots), it would not require him to maintain property insurance coverage on the vacant land, but would continue to require flood insurance. Compl. ¶ 31. On March 22, 2019, Plaintiff separated the vacant lots from Lots 16 and 18. Compl. ¶ 32.

In May and June of 2019, PennyMac sent Plaintiff letters informing him that his homeowners insurance had expired and requested that he purchase homeowners' insurance. Plaintiffstated that he could not purchase homeowner's insurance for vacant land. Compl. ¶¶ 34-35. Therefore, PennyMac purchased lender-placed homeowners' insurance coverage for the home from Defendant SGIC and funded the insurance through the 2013 Loan's escrow account, resulting in an increased monthly payment. Compl. ¶¶ 36-37.

On or about August 20, 2019, Plaintiffwrote a complaint letter regarding PennyMac and SGIC to the North Carolina Commissioner of Banks and the North Carolina Department of Insurance wherein he asserted that the lender placed hazard coverage was improper because PennyMac did not have an insurable interest in the dwelling on which insurance coverage was placed. Compl. ¶ 38. SGIC responded to the complaints by stating that PennyMac is the only party who can address any loan servicing concerns Plaintiff might have, including the issue of insurable interest, and that “[s]hould the loan record be updated to signify that the aforementioned lender placed policy was not necessary, a cancellation will occur and the premium will be refunded to PennyMac (for deposit into [Plaintiff]'s escrow account).” Compl. Ex. 22 (ECF No. 1-22). PennyMac responded with a letter explaining that (i) while the Deed of Trust was prepared with Lots 13, 15 and 17 only in the legal description, Johnson's loan application states that the purpose of the loan was to refinance a then-existing loan encumbering the house on Lots 16 and 18, and (ii) PennyMac had made a title insurance claim to resolve the drafting error in the Deed of Trust's legal description. Compl. Ex. 21 (ECF No. 1-21). In addition, PennyMac also stated that it would not seek payment for homeowners insurance premiums from Plaintiff until the title issue was resolved and that it would remove the insurance premium from Plaintiff's escrow account. Compl. Ex. 21 (ECF No. 1-21).

In January 2020, PennyMac commenced an action in Forsyth County District Court to reform Plaintiff's Deed of Trust to include Lots 13, 15, 16, 17, and 18. Complaint ¶ 44. On February 21, 2020, Plaintiff filed a counterclaim/third party claim against PennyMac, SGIC, and Assurant, asserting violations of the RICO, in particular 18 U.S.C. § 1962(c) & (d), against all defendants, as well as claims for breach of contract and violation of the FDCPA against PennyMac, and removed the entire action to the Middle District of North Carolina. PennyMac Loan Services, LLC. v. Johnson, Case No. 20-cv-175 (M.D.N.C). Thereafter, Plaintiff amended his initial counterclaim. The Middle District of North Carolina remanded the case back to Forsyth County District Court, PennyMac Loan Servs., LLC v. Johnson, 2021 WL 861530, at *7 (M.D. N.C. Mar. 8, 2021), where it was subsequently transferred to the Forsyth County Superior Court.

Defendants moved to dismiss the counterclaims and Plaintiff moved to further amend his counterclaims, to which Defendants objected. On May 24, 2021, the Forsyth County Superior Court denied Plaintiff's motion for leave to amend his counterclaims and dismissed with prejudice Plaintiff's counterclaims. Forsyth County Order (ECF No. 30-1).

III. PENNYMAC'S MOTION TO DISMISS

PennyMac moves to dismiss Plaintiff's claims against it pursuant to Fed.R.Civ.P. 12(b)(1), 12(b)(2), and 12(b)(6).

A. Personal Jurisdiction

PennyMac first argues that this court lacks personal jurisdiction over it because it has no offices in South Carolina and it lacks the minimum contacts with the state necessary to be subjected to the jurisdiction of this court. Whether a court has personal jurisdiction over a defendant is properly challenged under Fed.R.Civ.P. 12(b)(2). When a court's personal jurisdiction is challenged, the burden is on the plaintiff to establish that a ground for jurisdiction exists. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). When the court resolves the motion on written submissions (as opposed to an evidentiary hearing), the plaintiff need only make a “prima facie showing of a sufficient jurisdictional basis.” Id. However, the plaintiff's showing must be based on specific facts set forth in the record. Magic Toyota, Inc. v. Southeast Toyota Distributors, Inc., 784 F.Supp. 306, 310 (D.S.C. 1992). The court may consider the parties' pleadings, affidavits, and other supporting documents but must construe them “in the light most favorable to plaintiff, drawing all inferences and resolving all factual disputes in his favor, and assuming plaintiff's credibility.” Sonoco Prods. Co. v. ACE INA Ins., 877 F.Supp.2d 398, 404-05 (D.S.C. 2012) (internal quotations omitted); Carefirst of Maryland, Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (“In deciding whether the plaintiff has made the requisite showing, the court must take all disputed facts and reasonable inferences in favor of the plaintiff.”). A court considering the issue of personal jurisdiction “need not credit conclusory allegations or draw farfetched inferences.” Sonoco, 877 F.Supp.2d at 205 (internal quotation marks omitted).

A bedrock requirement in any civil action is that the district court in which a complaint is brought must have personal jurisdiction over the defendants. Before addressing the traditional requirements for personal jurisdiction, Plaintiff first argues that this court can assert personal jurisdiction over PennyMac because RICO provides for nationwide jurisdiction. The RICO statute authorizes service of process “in any judicial district in which [the defendant] ... is found.” 18 U.S.C.§ 1965(d).

In ESAB Grp., Inc. v. Centricut, Inc., 126 F.3d 617 626-27 (4th Cir. 1997), the Fourth Circuit ruled that § 1965(d) allows a plaintiff to establish personal jurisdiction over a defendant by effectuating service over the defendant in any district in which the defendant resides. However, as PennyMac argues, “[a] defendant may challenge a plaintiff's reliance on the nationwide service of process provision in a RICO c...