Tinsley v. Onewest Bank

• Decision Date: 14 March 2014
• Docket Number: Civil Action No. 3:13–23241.
• Citation: 4 F.Supp.3d 805
• Court: U.S. District Court — Southern District of West Virginia
• Parties: Betty TINSLEY, Plaintiff, v. ONEWEST BANK, FSB, dba Financial Freedom, Defendant.

4 F.Supp.3d 805

Betty TINSLEY, Plaintiff,

v.ONEWEST BANK, FSB, dba Financial Freedom, Defendant.

Civil Action No. 3:13–23241.

United States District Court, S.D. West Virginia.

Signed March 14, 2014.

Benjamin Sheridan, Klein & Sheridan, Mitchell Lee Klein, Hurricane, WV, Hoyt E. Glazer, Klein Sheridan & Glazer Huntington, WV, for Plaintiff.

Reid S. Manley, Burr & Forman, Birmingham, AL, for Defendant.

MEMORANDUM OPINION AND ORDER

ROBERT C. CHAMBERS, Chief Judge.

Pending is Defendant's Motion to Dismiss, ECF No. 12, andPlaintiff's Motion Requesting Hearing on Defendant's Motion to Dismiss, ECF No. 26.Defendant's Motion to Dismiss is GRANTED in part and DENIED in part.Plaintiff's breach of contract claim that Defendant required Plaintiff to get flood insurance in excess of what was required under the Deed of Trust, force-placed such insurance, and charged the cost to Plaintiff survives this Motion to Dismiss.Plaintiff's WVCCPA claims that Defendant violated West Virginia Code §§ 46A–6–104 and –102(L) by 1) implying to Plaintiff that she was required under company regulations and federal law to purchase additional flood insurance and 2) twice threatening to foreclose on Plaintiff's property if she did not pay a “property charge” of $1,369.70 also survive this Motion to Dismiss.All other claims—including Plaintiff's other breach of contract claim, all of Plaintiff's fraud and intentional misrepresentation claims, all of Plaintiff's other WVCCPA claims, all of Plaintiff's intentional infliction of emotional distress claims, and all of Plaintiff's negligence or reckless or negligent misrepresentation claims—are DISMISSED.

Plaintiff's Motion Requesting Hearing is DENIED as moot.

I.Background

In August 2013, Plaintiff filed the instant case in the Circuit Court of Putnam County, West Virginia.On September 19, 2013, Defendant removed the case to this Court, and on October 9, 2013, Plaintiff filed a Second Amended Complaint ¹(hereinafter, “Complaint”), seeking compensatory damages, statutory damages, punitive damages, attorneys' fees, and court costs and alleging breach of contract, fraud, intentional misrepresentation, violations of the West Virginia Consumer Credit and Protection Act (“WVCCPA”), intentional infliction of emotional distress, negligence, and reckless or negligent misrepresentation, in connection with a reverse mortgage entered into by Plaintiff and Defendant's predecessor.

In her Complaint, Plaintiff specifically alleges that the Home Equity Conversion Loan Agreement ² which she entered into with Financial Freedom Senior Housing Funding Corporation—the direct predecessor to Defendant Financial Freedom—states,

Lender shall initially set aside from the Principal Limit the amount indicated on the attached payment plain [sic](Exhibit 1) to be applied to payment due for a fixed monthly charge for servicing activities of Lender or its servicer.Such servicing activities are necessary to protect Lender's interest in the Property.A servicing fee set aside, if any, is not available to the Borrower for any purpose, except to pay for loan servicing.

Compl.¶ 30, ECF No. 8.According to Plaintiff, the Agreement provides for a servicing fee set aside of $5,180.17; however, Plaintiff alleges that the parties did not contract for a particular servicing fee amount and that she was never given notice that she would be paying a set monthly servicing fee.Plaintiff alleges that, for the duration of the loan (March 2008 to present), Defendant has charged her a monthly $30 servicing fee.She alleges that this fee, alone, has resulted in approximately $1,920 in monthly servicing charges ($360 a year), on top of the following interest charges: $1,189.42 in 2008, $1,032.59 in 2009, $1,014.78 in 2010, and $1,012.40 in 2011.

Plaintiff further alleges that the Agreement provides that “the lender is to withhold from each monthly payment an amount to pay ... (c) premiums for fire, flood, and other hazard insurance as required by the Security Agreement.”Id.¶ 6.Plaintiff alleges that the First Deed of Trust—benefitting Defendant“Financial Freedom”—states in small lettering, under the label “Fire, Flood and Other Hazard Insurance,” that the “Borrower shall also insure all improvements on the Property, whether now in existence of [sic] subsequently erected, against loss by floods to the extent required by the Secretary.”Id.¶ 7.Additionally, according to Plaintiff, the Second Deed of Trust—benefitting the Department of Housing and Urban Development(“HUD”)—states in small lettering, under the label “Fire, Flood and Other Hazard Insurance,” that the “Borrower shall insure all improvements on the Property, whether now in existence of [sic] subsequently erected, against loss by floods to the extent required by the lender.”Id.¶ 8.Plaintiff states that she presumes this to be the amount required by the Secretary of HUD, based upon the above statement in the First Deed of Trust.

Plaintiff further alleges that, on March 19, 2008, in consideration for the First Deed of Trust, she borrowed approximately $41,818 from Defendant and that, on January 31, 2008, her residence appraised for $111,000.As of May 2013, Plaintiff alleges that the outstanding balance on the reverse mortgage is $83,904.48.

Plaintiff alleges that she had adequate flood insurance through Jim Lively Insurance from March 21, 2010, through March 21, 2011, in the amounts of $100,100 for buildings and $6,800 for contents, with a $2,000 deductible; and that this policy was nearly identical to the policy she had with the same insurer from March 21, 2009, to March 21, 2010—the only difference being that the deductible was $1,000 on the older policy.

Plaintiff alleges that, on or about April 6, 2010, Defendant sent her a letter informing her that her flood insurance policy was inadequate and that she needed an additional $149,900 in flood insurance, which would have brought her flood insurance coverage up to the maximum amount allowable under HUD rules.³The letter allegedly states,

Your mortgage documents and federal law authorize us to require that adequate flood insurance be maintained with respect to all outstanding loans secured by improved property located in a Special Flood Hazard Area [“SFHA”]....Your property is located in an SFHA, so the terms of your mortgage and federal law require you to purchase adequate flood insurance.Our records show that we have not received proof that adequate flood insurance is in force on your property.As a result, if we do not receive proof that you have adequate flood insurance for the property, we will purchase the additional flood insurance (lender-placed insurance) required and charge you for the cost of the insurance....Coverage must be in an amount that is at least equal to, (i) the last known amount of homeowners insurance (Coverage A) that you purchased or (ii) the maximum available coverage under the National Flood Insurance Program (NFIP), (currently $250,000 for residential properties in participating communities), whichever is lowest.

Id.¶ 16.Plaintiff further alleges that, on or about March 21, 2010, Defendant force-placed a second flood insurance policy—for $100,000—on her property through the Lexington Insurance Company and that this policy carried a premium of $516.25, which was charged to Plaintiff's line of credit.

Plaintiff alleges that, on multiple occasions, she requested information from Defendant to explain why this insurance was force-placed.In a letter dated April 26, 2011, Plaintiff alleges that she was again informed that her previous insurance was inadequate and that, because of her failure to get adequate insurance, Defendant force-placed insurance for $181,000 with a premium of $1,801.20, which was again charged to Plaintiff's equity.Plaintiff alleges that $181,000 was $28,747.16 more than double the outstanding mortgage balance of $76,126.42 in April 2011 and that HUD required only coverage sufficient to cover the outstanding balance.

Plaintiff alleges that, in 2011, she filed a complaint with the Attorney General, based, in part, upon Defendant's practice of force-placing excessive flood insurance and depleting her equity with the cost of the premiums.Plaintiff further alleges that, in a response letter to the Attorney General, V. Lyn Niles, Vice President of Loan Administration for Defendant Financial Freedom, stated:

We recently updated our flood policy to accept coverage for the lesser of the improved value (i.e., the dwelling(s)) of the property based on the appraisal or the maximum allowed by the National Flood Insurance program.As such, the minimum flood coverage amount required is now $91,000 (appraised value of $111,000 less a site (land) value of $20,000).

Id.¶ 23.Then, Plaintiff alleges, on March 21, 2012, Defendant force-placed flood insurance on her property for just $91,000, again through the Lexington Insurance Corporation, for the period of March 21, 2012, through March 21, 2013, and provided Plaintiff with notice of the insurance placement.The premium amount of $918.41 was charged to Plaintiff's equity.

However, Plaintiff alleges, Defendant next, through a letter dated April 12, 2012, sent Plaintiff notice that it was force-placing flood insurance on her property in the amount of $182,000,⁴ again through the Lexington Insurance Corporation and again for the period of March 21, 2012, through March 21, 2013.The premium amount of $1,811.01 was also to be charged to Plaintiff's equity.Plaintiff further alleges that, in June 2012, the outstanding balance on the loan was $78,248.60; thus, $181,000 remained more than double the outstanding loan balance.

Plaintiff alleges that, on June 18, 2013, her counsel mailed a 20 day notice of right to cure letter to Defendant's Repayment Department.The letter was signed for by Darryl Mize.In the letter, Plaintiff alleged violations of West Virginia consumer laws and provided Defendant with 20 days to cure those...