Simon v. PNC Bank
| Decision Date | 28 August 2017 |
| Docket Number | Civil No. 2:16-cv-388 |
| Parties | EMETERIO H. SIMON, et al., Plaintiffs, v. PNC BANK, NATIONAL ASSOCIATION, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
Like too many homeowners affected by the great recession, Plaintiffs Emeterio Simon and Diana Simon ("the Homeowners" or "the Simons") fell behind on their mortgage payments. As a result, Defendant PNC Bank National Association ("the Lender") foreclosed on their Virginia Beach home in 2013. The Simons have remained in the home while the parties to this case have litigated the foreclosure's legality in the state and federal courts. This suit is the latest iteration of that ongoing legal dispute.
The Simons seek to rescind the foreclosure sale based on the Lender's alleged breaches of its obligations to provide notice before foreclosing on the property and to comply with applicable law throughout the foreclosure process. At this juncture, the Defendants—various parties to the loan and foreclosure—have moved to dismiss the Amended Complaint. Because the Homeowners have failed to allege facts establishing that the foreclosure was illegal, the motions to dismiss are granted.
When ruling on a motion to dismiss for failure to state a claim, courts accept a complaint's well-pled factual allegations as true, and draw any reasonable inferences in favor of the plaintiff. See Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012). Accordingly, the Court recites the facts as alleged by Plaintiff. See Am. Compl. (ECF No. 27).
In 2006, the Simons obtained a $317,200 loan, provided by the Lender and partially guaranteed by Defendant Federal Home Loan Mortgage Corporation ("the Backer").1 See Am. Compl. ¶¶ 8, 22. To secure the loan, the Simons used their Virginia Beach home as collateral. See id. They executed a promissory note ("the Note") reflecting this encumbrance on the property and the corresponding debt. See id. ¶¶ 8, 12. To further secure this arrangement, the Simons placed the title to their home in trust. See id. ¶ 8. The terms of that trust were set forth in an agreement among the parties, the "Deed of Trust."2 See Deed of Trust (ECF No. 27-1). This arrangement is known commonly as a mortgage.
The Deed of Trust provided that if the Homeowners defaulted on the loan by failing to make monthly payments Defendant Samuel I. White P.C. ("the Trustee")3 could foreclose, at the Lender's behest. See Am. Compl. ¶ 10, 65. Before selling the home, the Trustee was required to ensure that the Lender had fulfilled certain conditions. See id. Two of these conditions included providing adequate notice of the default and complying with applicable law. See id. ¶¶ 9, 66.
Both the Note and the Deed of Trust contained clauses governing how the Lender would notify the Simons if they were in default. See id. ¶¶ 9, 10. The Note's notice of default provision, Paragraph 6(c) provided in pertinent part:
If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of principal that has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is delivered or mailed to me.
Id. ¶ 9. The Deed of Trust's notice of default provision, Paragraph 22, provided in pertinent part:
Id. ¶ 10; see also Deed of Trust ¶ 22. If the thirty-day deadline for curing the default elapsed without payment, the Deed of Trust entitled to Lender to invoke its power to sell the home. See id. ¶ 65.
The Deed of Trust also required that the foreclosure comply with applicable law. See id. ¶ 66. Specifically, Paragraph 16 stated that "[a]ll rights . . . contained in this Security Instrument are subject to any requirements and limitations of Applicable Law." Deed of Trust ¶ 16. In its "Definitions" section, the Deed of Trust defined "Applicable Law" as "all controlling applicable federal, state and local statutes, regulations, ordinances and administrative rules and orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions." Id. at 3.
In early 2012, the Homeowners began missing mortgage payments. See Am. Compl. ¶ 13. The Lender responded by sending them a notice of default, dated July 23, 2012 ("the Notice of Default" or "the Notice"). See Notice at 1 (ECF No. 27-2). That letter informed the Simons of their default and stated that they were required to pay $3,534.15 by August 22, to avoid acceleration of their payments and foreclosure under the Deed of Trust. See id. ¶¶ 14-15.
The listed sum included the amount past due on the Simons' mortgage and a future installment payment that was not yet due, but would be due on August 1, before the specified payment date. See id. ¶¶ 13-14. The Notice of Default advised the Homeowners of this fact. See Notice at 1 ().
Although not pled, the Simons' failure to cure the outstanding arrearage at that time or afterwards appears undisputed. On May 13, 2013, they sought to resolve their default by applying for a loan modification from the Lender. See Am. Compl. at ¶ 73.
On May 29, 2013, the Trustee, acting on behalf of the Lender, sold the Simons' home at a foreclosure auction. See id. ¶¶ 22-23, 29. The Simons allege that the Lender did not issue a written response to their loan-modification application before the sale. See id. at ¶ 74.
The winning bid of $253,623 was submitted by the Lender itself, but subsequently was assigned to the Backer, who had guaranteed the loan. See id. ¶¶ 31-32, 38-39. The Trustee then executed a trustee's deed conveying the property to the Backer. See id. ¶ 40.
Shortly thereafter, the Backer filed an unlawful detainer summons in Virginia Beach General District Court, which entered an order awarding possession to the Backer. See id. ¶ 44-45. The legal wrangling continued for some time in state court, and appears to remain ongoing today. See id. ¶¶ 47-56.
The Simons have filed this suit, challenging the foreclosure and seeking to rescind the sale of their home. All Defendants have moved to dismiss the Amended Complaint. See Lender's Mot. & Mem. (ECF Nos. 28, 29); see also Trustee's Mot. & Mem. (ECF Nos. 30, 31); Pls.' Lender Opp. (ECF No. 34); Pls.' Trustee Opp. (ECF No. 35). The Court deferred resolution of these motions pending supplemental briefing from the Lender and the Homeowners.4 See Supp. Brief Min. Order (ECF No. 39). Both have submitted supplemental briefs, and the motions are now ripe for resolution by the Court. See Lender's Supp. Brief (ECF No. 41); see also Pl.'s Supp. Brief (ECF No. 42).
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint. "To survive a Rule 12(b)(6) motion to dismiss, a complaint must 'state a claim to relief that is plausible on its face.'" United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "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 678. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "Facts that are 'merely consistent with' liability do not establish a plausible claim to relief." Takeda Pharm., 707 F.3dat 455. Rather, the "'[f]actual allegations must be enough to raise a right to relief above the speculative level,' thereby 'nudg[ing] [plaintiff's] claims across the line from conceivable to plausible.'" Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 543 (4th Cir. 2013) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (first and second alteration in original).
At this stage, "(1) the complaint is construed in the light most favorable to the plaintiff, (2) its allegations are taken as true, and (3) all reasonable inferences that can be drawn from the pleading are drawn in favor of the pleader." 5B CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE & PROCEDURE § 1357 & n.11 (3d ed.) (collecting cases); accord Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012). However, courts "will not accept 'legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.'" Takeda Pharm., 707 F.3d at 455 (quoting Wag More Dogs, 680 F.3d at 365).
Because the claims against the Trustee and the Backer are derivative of the claims against the Lender, they present the same core issue—whether the foreclosure sale was lawful. Therefore, the Court addresses the merits of the pending motions to dismiss jointly.5
The Simons do not dispute that they defaulted on their mortgage. However, they allege that their home's 2013 sale is void or voidable because the preceding foreclosure was unlawful in two ways. First, they allege that the Lender failed to fulfill its obligation to provide sufficient notice when instituting the...
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