Roosevelt Cayman Asset Co. II v. Mercado

• Decision Date: 22 July 2016
• Docket Number: Civil No. 15–2314 (BJM)
• Parties: ROOSEVELT CAYMAN ASSET COMPANY II, Plaintiff, v. Febian Heredia MERCADO, et al., Defendant.
• Court: U.S. District Court — District of Puerto Rico

259 F.Supp.3d 1

ROOSEVELT CAYMAN ASSET COMPANY II, Plaintiff,

v.Febian Heredia MERCADO, et al., Defendant.

Civil No. 15–2314 (BJM)

United States District Court, D. Puerto Rico.

Signed July 22, 2016

Francisco J. Fernandez–Chiques, Fernandez Chiques LLC, San Juan, PR, for Plaintiff.

Maria C. Cartagena–Cancel, McConnell Valdes, LLC, Omar J. Hopgood–Munoz, Fiddler Gonzalez & Rodriguez, P.S.C, San Juan, PR, for Defendant.

OPINION AND ORDER

BRUCE J. McGIVERIN, United States Magistrate Judge

Plaintiff Roosevelt Cayman Asset Company II ("Cayman") filed a complaint against Febian Heredia Mercado and Clartiza Vera Nieves ("Mortgagors") for collection of monies and mortgage foreclosure. Docket No. 1. Defendants moved for dismissal of the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), Docket No. 17, arguing that the complaint falls short of alleging that Cayman complied with Consumer Financial Protection Bureau ("CFPB") regulations. Id. at 2. Cayman filed a response to the motion to dismiss, Docket No. 23, and Mortgagors filed a reply to this response. Docket No. 26. The parties have consented to proceed before a magistrate judge. Docket Nos. 18, 22. For the reasons set forth below, the motion is DENIED .

BACKGROUND

Cayman's complaint alleges that on March 6, 2004, Mortgagors subscribed a mortgage note payable to RG Premier Bank of Puerto Rico or to its order, for the principal amount of $144,000.00, with a 6.25% annual interest rate. Docket No. 1 at 2 ¶ 6. The note was secured by a first mortgage constituted by deed number 140, executed in Arecibo, Puerto Rico before Notary Public Kermit R. Troche Mercado (Loan Number 800000666). Id. Cayman alleges it is the present owner and holder of the note and mortgage deed, which is duly recorded at page 195 of volume 510 of the Utuado Registry of Property, Utuado Section, and that Mortgagors are the owners of the mortgaged property according to the Registry of Property and Cayman's best knowledge and belief. Id. at 3 ¶¶ 8–9.

Cayman alleges Mortgagors breached the loan repayment obligations by failing to make the agreed-upon payments. Id. at 3 ¶ 10. As of September 3, 2015, Mortgagors owe to Cayman: $119,340.35 in principal, accrued interest which continues to accrue at the annual rate of 6.125% until full payment of the debt, accrued late charges, and any other advance, charge, fee, or disbursements made by Cayman on behalf of Heredia, plus costs and ten percent attorney fees. Id. Cayman alleges its "efforts to try and collect all outstanding amounts have been unsuccessful." Id. at 3 ¶ 11. Cayman seeks payment of the amounts detailed above, or on default, that the property be sold at public auction and the money due to Cayman be paid from the proceeds of the sale. Id. 4 ¶ 12.

Mortgagors moved to dismiss for failure to state a claim upon which relief could be granted, arguing that "Cayman's complaint falls short of alleging that it complied with the [CFPB] rules, which constitute a sine qua non requisite to file a foreclosure complaint." Docket No. 17 at 2; see Fed. R. Civ. P. 12(b)(6). Mortgagors state that Cayman did not allege that it provided written notification of foreclosure alternatives to Mortgagors prior to filing its complaint, as required by CFPB rules. See 12 C.F.R. § 1024.39(b). Mortgagors argue that instead of complying with the CFPB's rules, "[the complaint] simply alleges that [Cayman's] ‘efforts to try to collect all outstanding amounts have been unsuccessful.’ " Id. at 5; see Docket No. 1 at 3 ¶ 11. Mortgagors indicate that the applicable CFPB rules require more than mere collection efforts to commence a foreclosure proceeding. Therefore, Mortgagors posit that the complaint does not set forth sufficient factual allegations respecting each material element necessary to sustain recovery under some actionable legal theory. Docket No. 17 at 5–6.

In its response to defendants' motion to dismiss, Docket No. 23, Cayman contends that as the real party in interest, it is not required, at this stage of proceedings, to describe or detail "all of the steps under the requirements of the [CFPB] and/or under the terms of the loan documents it took before accelerating the debt and filing the complaint." Docket No. 23 at 2 ¶ 5. Cayman further argues that it has set forth all of the factual allegations necessary to sustain recovery, including: an establishment of jurisdiction, a description of the note executed by Mortgagors, a description of the mortgage, a description of the real property over which the mortgage was executed, an allegation that it is the owner and holder of the note, an allegation that Mortgagors are the owners of the mortgaged property, an allegation that Mortgagors defaulted on the loan repayment obligation, an explanation of the outstanding debt, and a notice to Mortgagors that Cayman will file a lis pendens in the Registry of Property. Id. at 3–4 ¶¶ 13–14.

Mortgagors replied that Cayman does not contest the key facts supporting the motion to dismiss. Docket No. 26. Additionally, in a letter dated January 20, 2016, after the complaint was filed, Mortgagors received an invitation from Rushmore Loan Management Services ("Rushmore") to evaluate foreclosure alternatives. On February 8, 2016, Mortgagors formally accepted Rushmore's invitation and requested access to a loss mitigation application. Id. at 1–3. To this date, Mortgagors have not received an answer from Rushmore. Docket No. 26 at 3. Mortgagors allege that Cayman cannot continue foreclosure while Rushmore simultaneously considers their application because this would constitute illegal dual tracking (a practice where servicers institute foreclosure proceedings at the same time that a borrower in default seeks a loan modification). Id. at 2, 4 (citing Kloss v. RBS Citizens, N.A. , 996 F.Supp.2d 574, 585 (E.D. Mich. 2014) ; 12. C.F.R. § 1024.41(f)(2)).

DISCUSSION

Mortgagors argue Cayman's complaint should be dismissed for failure to state a claim upon which relief can be granted because Cayman was required to allege compliance with the newly created rules to state a claim for foreclosure. Docket No. 17; Docket No. 26; see Fed. R. Civ. P. 12(b)(6). Mortgagors also argue that because Cayman cannot legally continue the foreclosure while they await acceptance or denial for the application, Cayman does not have a cause of action. Docket No. 26 at 4.

12(b)(6) Standard

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to relief. This rule does not require detailed or elaborate factual allegations, but a pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not suffice. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ); Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (on a motion to dismiss, courts "are not bound to accept as true a legal conclusion couched as a factual allegation.")).

A trial court considering a Rule 12(b)(6) motion accepts as true all well-pleaded allegations in the complaint, drawing all reasonable inferences in the defendant's favor. To survive dismissal, a complaint must allege a plausible set of facts sufficient "to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. In other words, "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, 663, 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 pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 663, 129 S.Ct. 1937 ; Sanchez v. Pereira–Castillo , 590 F.3d 31, 41 (1st Cir. 2009). Mere conceivability that the plaintiff is entitled to relief based on the factual allegations presented is not sufficient. Iqbal , 556 U.S. at 662, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 567, 127 S.Ct. 1955 ); Torres v. Bella Vista Hosp., Inc. , 523 F.Supp.2d 123, 133 (D.P.R. 2007). Applying the plausibility standard is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 662, 129 S.Ct. 1937.

Cause of Action

In this diversity action, Puerto Rico law applies. See CitiMortgage, Inc. v. Rivera–Anabitate , 39 F.Supp.3d 152, 154 (D.P.R. 2014). It is well settled under Puerto Rico law that "[a] person receiving money or any other perishable thing on loan acquires its ownership, and is bound to return to the creditor an equal amount of the same kind and quality." Puerto Rico Civil Code, Article 1644, P.R. Laws Ann. tit. 31, § 4571. See Espino v. Frias , No. 139, 1904 WL 3781 (P.R. Dec. 19, 1904). Further, "[o]bligations arising from contracts have legal force between the contracting parties, and must be fulfilled in accordance with their stipulations." Puerto Rico Civil Code, Article 1044, P.R. Laws Ann. tit. 31, § 2994. Therefore, courts may not relieve a party of its agreed-upon contractual obligations. See Cerveceria Corona v. Commonwealth Ins. Co. , No. R-83-418, 1984 WL 270942 (P.R. Apr. 26, 1984) ; Hennes v. Sun Life Assurance Co. of Canada , 291 F.Supp. 670, 673 (D.P.R. 1968).

A mortgage "directly and immediately binds an estate and the rights on which it is imposed, whoever its owner or titleholder may be, to the fulfillment of the obligation for the security of which it was constituted." Mortgage Law of 1979, Article 155, P.R. Laws Ann. tit. 30, § 2551. Puerto Rico's Civil Code additionally states that "[a] mortgage directly and immediately subjects the property on which it is imposed, whoever its possessor may be, to the fulfillment...