Sarsfield v. Citimortgage, Inc.

• Decision Date: 21 October 2009
• Docket Number: Civil No. 1:09-CV-00835.
• Parties: Neil L. SARSFIELD and Shelley Sarsfield, Plaintiffs v. CITIMORTGAGE, INC. s/b/m to ABN Amro Mortgage Group, Inc., Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

667 F.Supp.2d 461

Neil L. SARSFIELD and Shelley Sarsfield, Plaintiffs v. CITIMORTGAGE, INC. s/b/m to ABN Amro Mortgage Group, Inc., Defendant.

Civil No. 1:09-CV-00835.

United States District Court, M.D. Pennsylvania.

October 21, 2009.

Jason A. Ostendorf, Law Office of Jason Ostendorf LLC, Baltimore, MD, Laurence C. Kress, Scaringi & Scaringi, P.C., Harrisburg, PA, for Plaintiffs.

Jeffrey J. Chomko, Marshall Dennehey Warner Coleman & Goggin, Philadelphia, PA, for Defendant.

MEMORANDUM

SYLVIA H. RAMBO, District Judge.

Before the court is Defendant Citimortgage, Inc.'s ("Citimortgage") motion to dismiss Plaintiffs Neil and Shelly Sarsfield's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim. The parties have briefed the issues, and the matter is ripe for disposition. For the reasons that follow, the court will grant in part and deny in part Defendant's motion to dismiss, and will grant Plaintiffs leave to file an amended complaint.

I. Background

A. Facts

The following facts are taken from Plaintiffs' complaint and the attachments thereto. Plaintiffs are residents of Adams County, Pennsylvania who, on November 2, 2007, purchased a home located at 3125 Emmitsburg Road, Gettysburg, Pennsylvania, through a mortgage loan issued by ABN Amro Mortgage Group, Inc. ("ABN Amro"). Defendant is the successor by merger to ABN Amro.¹

Plaintiffs' decision to purchase this house was based on the Initial Escrow Account Disclosure Statement (the "initial disclosure") provided by Defendant which estimated their monthly mortgage payments as $3,053.37 per month. Of this amount, $524.19 per month would be placed into escrow to pay private mortgage insurance and real estate taxes on the property, and the rest would be applied to principal and interest. The initial disclosure estimated the yearly school taxes to be $1,577.88, and the yearly city and county taxes to be $546.82. Thus, the total real estate tax estimate was $2,124.70 per year.

On July 7, 2008, after they had purchased the house, Plaintiffs received a new Escrow Account Disclosure Statement from Defendant (the "subsequent disclosure"). The subsequent disclosure revealed that the yearly school tax was actually $4,143.08, and the yearly city and county taxes totaled $1,195.97. Thus, according to the subsequent disclosure, the total taxes were $5,339.05 per year, a difference of $3214.35 from the initial disclosure. The subsequent disclosure also revealed a total escrow shortage of $6,632.74 due to the initial disclosure's incorrect estimate of the applicable taxes. All of this caused Plaintiffs' monthly mortgage payments to increase from $3,053.37 per month to $3,878.24 per month.

Plaintiffs state that had they been provided with a more accurate estimate of their yearly tax obligations they would not have taken out the loan or purchased the house, and would not have incurred various expenditures in connection with the property. Plaintiffs raise two claims in their complaint. First, they assert that Defendant violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., and the federal regulations implementing RESPA, 24 C.F.R. §§ 3500.7(c)(2) and 3500.17(g)(1)(i) and (k), because it did not conduct an escrow account analysis to reasonably estimate the amount of money that was needed in escrow. Second, Plaintiffs aver that Defendant was negligent when it provided them with the grossly underestimated initial disclosure. Specifically, Plaintiffs state that Defendant owed them a duty to use reasonable care in servicing the mortgage, including providing a reasonable estimate of the escrow expenses, and that they breached this duty causing them damages. Plaintiffs contend that this duty arose from the requirements of RESPA, as well as from the fact that Defendant assumed a special relationship with Plaintiffs. Plaintiffs seek actual and punitive damages for the alleged violations of RESPA and for Defendant's alleged negligence.

B. Procedural History

Plaintiffs filed their complaint on May 4, 2009. (Doc. 1.) Defendant filed its motion to dismiss, (Doc. 9), on July 6, 2009. Plaintiffs filed their brief in opposition to the motion to dismiss on July 21, 2009. No reply brief has been filed. The motion is now ripe for disposition.

II. Legal Standard

Among other requirements, a sound complaint must set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). This statement must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).

In deciding a motion to dismiss under Rule 12(b)(6), the court is required to accept as true all of the factual allegations in the complaint, Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007), and all reasonable inferences permitted by the factual allegations, Watson v. Abington Twp., 478 F.3d 144, 150 (3d Cir.2007), viewing them in the light most favorable to the plaintiff, Kanter v. Barella, 489 F.3d 170, 177 (3d Cir.2007). Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008). If the facts alleged are sufficient to "raise a right to relief above the speculative level" such that the plaintiff's claim is "plausible on its face," a complaint will survive a motion to dismiss. Twombly, 550 U.S. at 555, 570, 127 S.Ct. 1955; Phillips, 515 F.3d at 234; see also Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (explaining 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"). Further, when a complaint contains well-pleaded factual allegations, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S.Ct. at 1950. However, a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice." Id. at 1949 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

"To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993) (citations omitted); see also Sands v. McCormick, 502 F.3d 263, 268 (3d Cir.2007). The court may consider "undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] document[s]." Pension Benefit, 998 F.2d at 1196. Additionally, "documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002) (citation omitted); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir.2002) ("Although a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment.") (internal quotation omitted). However, the court may not rely on other parts of the record in making its decision. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994).

III. Discussion

Defendant seeks dismissal of Plaintiffs' complaint in its entirety. It argues that Plaintiffs' RESPA count should be dismissed because there are inadequate facts pled to support a claim, and Plaintiffs' own documents reveal that the appropriate disclosures were made in connection with the loan. As for Plaintiffs' negligence claim, Defendant argues that it should be dismissed because there are insufficient facts pled demonstrating a duty on behalf of Defendant, and because there was no causation between any conduct by Defendant and Plaintiffs' claimed damages. Defendant also argues that Plaintiffs' negligence claim should be barred by the gist of the action doctrine. Alternatively, Defendant argues that if Plaintiffs' claims survive then their punitive damages claims must fail because (1) RESPA does not authorize punitive damages, and (2) there are insufficient facts supporting willful, wanton, or malicious conduct. The court will address each of these in turn.

A. RESPA

Defendant asserts generally, that Plaintiffs have failed to state a RESPA claim because there are insufficient facts supporting their entitlement to relief. The crux of Defendant's argument appears to be that since the disclosures were timely made and were clearly labeled only as estimates, the fact that they may have been inaccurate is immaterial and Plaintiffs should not have relied on those estimates in deciding whether to purchase the house. In contrast, Plaintiffs argue that RESPA imposes an obligation upon lenders like Defendant to conduct an escrow analysis and provide an estimate of taxes that reasonably anticipates those items to be paid during the escrow account computation year, and Defendant's failure to do so renders it liable pursuant to 12 U.S.C. § 2614. Unfortunately, Plaintiffs' complaint is not a model of clarity concerning the substantive provisions of RESPA that they allege Defendant violated. To explain the confusion, the court will highlight a few provisions of Plaintiffs' complaint that are less than clear.

First, in Paragraph 16 of their complaint, Plaintiffs assert that Defendant is liable under 12 U.S.C. § 2614 for violations of 12 U.S.C. § 2605,...