Marley v. Bank of America
| Decision Date | 13 March 2012 |
| Docket Number | CIVIL ACTION NO. 10-10885-GAO |
| Parties | ROBERT P. MARLEY, Plaintiff, v. BANK OF AMERICA, COUNTRYWIDE FINANCIAL, COUNTRYWIDE HOME LOANS, INC., (nominal defendant), JOHN DOES APPRAISAL SERVICES, JOHN DOE TITLE INSURANCE CORPORATION as Title Agent, Closing Agent, Title Insurance Carrier, and Nominal Trustee on Deed of Trust, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), JOHN DOE REPORTING SERVICES, JOHN OR JANE DOES 1-1000, Unknown Investors, JOHN ROES 1-10, Being Undisclosed Mortgage Aggregators (Wholesalers), Mortgage Originators, Loan Seller, Trustee of Pooled Assets, Trustee for Holders of Certificates of Collateralized Mortgage Obligations, JOHN OR JANE DOES, as Investment Banker, et al., Individually, Jointly and Severally, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
O'TOOLE, D.J.
The plaintiff's original complaint filed in state court asserted claims that existed prior to his Chapter 7 bankruptcy and discharge. After removing the case here, the defendants moved to dismiss that complaint on the ground that the claims should have been scheduled in the bankruptcy but were not, with the consequence that the plaintiff was estopped from asserting them in this forum. The motion to dismiss was denied without prejudice, and the plaintiff was granted leave to seek to reopen the bankruptcy proceedings or to assert claims that were not barred by the failure to identify them in the bankruptcy. His motion to reopen was denied by a bankruptcy judge. He then sought and was granted leave here to file an amended complaint. Inhis amended complaint, his claims are completely different from the ones first asserted; he relies only on post-bankruptcy events.
The defendants have moved to dismiss the amended complaint, and the plaintiff, who is proceeding pro se has opposed that motion.
After careful review of the parties' lengthy submissions, the defendants' motion to dismiss is GRANTED IN PART and DENIED IN PART.
Four of the nine counts in the amended complaint allege claims arising under federal law. Count II alleges a claim under the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691 et seq.; counts III and VI allege claims under the Truth and Lending Act ("TILA"), 15 U.S.C. § 1601 et seq.; and count VII alleges a claim under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p.
The plaintiff's discharge in bankruptcy relieved him of his personal liability under the mortgage note, but the mortgage itself remained an enforceable lien. Marley continued making payments to forestall any attempt at foreclosure. In 2009, he tried to apply for a loan modification on three separate occasions. He alleges that he did not get notice of an "adverse action" on his applications within 30 days as required by the ECOA. See 15 U.S.C. § 1691(d)(6).
Section 1691(d)(6), defining "adverse action," excludes from the definition "a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default." Id. Marley's bankruptcy constituted a default under the original note. For this reason, the failure to notify him of a refusal to modify the loan by extending additional creditwas not a failure to notify him of an adverse action in violation of the statute. See also 12 C.F.R. § 202.2(c)(2)(ii) () Even if a person in Marley's position could apply for a modification under the HAMP, that possibility did not work a redefinition of "adverse action" as expressed in § 1691(d)(6).
The plaintiff has brought two claims, Counts III and VI, against the defendants alleging violations of TILA. In substance, Marley alleges that, following the sale of his mortgage from one defendant to another, the latter was required by law to notify him of that sale within 30 days. The relevant section of TILA requires that if a "mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer." 15 U.S.C. §1641(g). Similarly, Massachusetts law requires that "any person that becomes a covered person as defined in 209 CMR 32.39 shall mail or deliver the disclosures required . . . to the consumer on or before the 30th Calendar day following the acquisition date." 209 CMR 32.39.
The defendant BONY claims that because the plaintiff was discharged from personal liability under the note, he should no longer be considered a "borrower" entitled to notice under the statute. "Borrower" is not a statutorily defined term. On the other hand, "mortgage loan" is defined as "any consumer credit transaction that is secured by the principal dwelling of a consumer." This appears intentionally broad, and it counsels for a correspondingly broad interpretation of who is a "borrower" entitled to notice of the sale of the "mortgage loan." A mortgagor, even if no longer personally liable on the note, should qualify. These counts are adequately pled and therefore will not be dismissed.
In Count VII, the plaintiff alleges that on February 16, 2010, one of the defendants "attempted to collect on a nonexistent debt with the threat of foreclosure" in violation of the FDCPA, 15 U.S.C. § 1692. The FDCPA was enacted to eliminate "abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses" Id., § 1692(e). "To trigger the protections of the [FDCPA], the funds at issue must constitute a debt, and the challenged activity must be conducted by a party that falls within the statutory definition of 'debt collector.'" Skerry v. Mass. Higher. Educ. Assistance Corp., 73 F. Supp. 2d 47, 51 (D. Mass. 1999).
The FDCPA defines a debt collector as "any individual in a business whose principal purpose . . . is the collection of any debts, or who regularly collects or attempts to collect . . . debts owed or due or asserted to be owed or due to another." Chiang v. Verizon New England, 595 F.3d 26, 41 (1st Cir. 2010) (quoting 15 U.S.C. § 1692(a)(6)). However, the statute excludes as a debt collector "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 not in default at the time it was obtained by such person." 15 U.S.C. § 1692(a)(6)(F)(iii).
Count VII does not state a claim for a violation of the FDCPA. A foreclosing entity that is enforcing a security interest is not a debt collector for the purposes of the FDPCA. See Speleos v. BAC Home Loans Servicing, L.P., No. 10-11503, 2011 WL 4899982, at *5-6 (D. Mass. 2011 Oct. 14, 2011); Montgomery v. Huntington Bank, 346 F.3d 693, 700-01 (6th Cir. 2003); Bentleyv. Bank of Am., N.A., 773 F. Supp. 2d 1367, 1371 (S.D. Fla. Mar. 23, 2011). Here, the foreclosing party obtained its interest in the loan prior to a default.
Further, "nearly every court that has addressed the question has held that foreclosing on a mortgage is not a debt collection activity for the purposes of the FDCPA." Beadle v. Haughey, No. Civ. 04-272-SM, 2005 WL 30060, at *3 (D.N.H. 2005); see also Warren v. Countrywide Home Loans, Inc., 342 Fed. Appx. 458, 461 (11th Cir. 2009); Trent v. Mortgage Elect. Registration Sys. Inc., 618 F. Supp. 2d 1356, 1360-62 (M.D. Fla. 2007). Count VII must be dismissed.
The plaintiff alleges that the Bank of America breached its duty to "adhere to HAMP Contracts, Manuals and Supplemental Guidelines." (Pl.'s Compl. 65 (dkt. no. 32).) The plaintiff's claim is premised on the Bank's alleged failure to fulfill its contractual obligations under the Servicer Participation Agreements ("SPAs") with the federal government.
There is no private right of action to enforce HAMP. "By delegating compliance authority to one entity, Freddie Mac, Congress intended that a private cause of action was not permitted." Marks v. Bank of Am. N.A., No. 10-08039, 2010 WL 2572988, at *4, *7 (D.Ariz. June 22, 2010); see also Stagikas v. Saxon Mortg. Servs., Inc., 795 F. Supp. 2d 129, 135 (D. Mass. 2010).
The plaintiff has attempted to circumvent this barrier by bringing a contractual claim for a breach of the implied covenant of good faith and fair dealing. "[T]he implied covenant of good faith and fair dealing governs the conduct of the parties after they have entered into a contract; without a contract, there is no covenant to be breached. Mass. Eye & Ear Infirmary v. QLTPhototherapeutics, Inc., 412, F.3d 215, 230 (1st Cir. 2005). Thus, in order to adequately state a claim on this ground, the plaintiff would need to show that he was a third party beneficiary to the SPA. Courts have frequently held that borrowers are not third party beneficiaries of the SPA. See In re Bank of Am. Home Affordable Modification Program Contract Litig., 2011 WL 2637222 at, *3 () (internal citation omitted). The plaintiff has not set forth anything which illustrates that he was intended to be a beneficiary to the government contract. See Astra USA, Inc. v. Santa Clara County, 131 S. Ct. 1342, 1347-8 () (quoting Virginia Bankshares Inc. v....
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