Toggas v. Mortgage

• Decision Date: 11 June 2020
• Docket Number: Case No. 1:19-cv-03407 (TNM)
• Parties: KATHRYN TOGGAS, et al., Plaintiffs, v. WACHOVIA MORTGAGE, FSB, et al., Defendants.
• Court: U.S. District Court — District of Columbia

KATHRYN TOGGAS, et al., Plaintiffs, v. WACHOVIA MORTGAGE, FSB, et al., Defendants.

Case No. 1:19-cv-03407 (TNM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

June 11, 2020

MEMORANDUM AND ORDER

Twelve years ago, during the height of the 2008 housing bubble, Plaintiffs Kathryn and Thomas Toggas executed a $1.35 million adjustable-rate mortgage note to purchase a home at 3112 Legation Street NW, Washington, D.C. A year later, they defaulted. The Toggases' lenders sued for foreclosure. And for many years now, they have been embroiled in that foreclosure lawsuit in the Superior Court for the District of Columbia.¹

Here, in a role-reversal, the Toggases have sued Wells Fargo & Company, Wells Fargo National Association, and U.S. Bank National Association (collectively, "the Lenders").² They claim the Lenders violated a slew of lending laws including the Consumer Protection Procedures Act, Truth-in-Lending Act, Fair Debt Collection Practices Act, and Homeowners Protection Act.Acting pro se, the Toggases claim the Lenders violated these various statutes because they never shared key information about their loan and mismanaged their digital records.

Pending here is the Lenders' motion to dismiss. They argue that the Toggases missed their chance to file these claims long ago in Superior Court, so the claims are now barred by time and claim preclusion. The Toggases oppose the motion. Upon consideration of both parties' arguments and the record of this case, the Court agrees with the Lenders that Counts I through IV of the Toggases' challenges to their twelve-year-old loan are untimely and improper. The Court will therefore grant the motion related to those counts. But the Court will deny the motion for one substantive claim, Count V, as well as the portion of Count VI seeking relief under it.

I.

In May 2008, the Toggases executed an adjustable rate mortgage note with Wachovia Mortgage, FSB for $1,350,000, with a deed of trust on real property at 3112 Legation Street NW, Washington, D.C. (the "Property"). Compl. ¶ 13-14. Wachovia later transferred the debt to U.S. Bank.³ Id. ¶ 14. And Wells Fargo Home Mortgage assumed administration of the loan, "including receipt and processing of payments, resolution of payment-related issues, and response to any other inquiries" about the loan. Id. ¶ 15.

The Toggases defaulted on the loan in August 2009. See Defs.' Mot. Dismiss ("Defs.' Mot."), Ex. A. ¶ 10 ("Sup. Ct. Compl."), ECF No. 3-1.⁴ The Toggases then spent years inbankruptcy proceedings. See Defs.' Mot. Dismiss at 8-9.⁵ In April 2016, Wells Fargo Bank filed a complaint to foreclose the Property in the Superior Court for the District of Columbia. See Wells Fargo Bank, N.A. v. Toggas, Case No. 2016 CA 002847 R(RP) (D.C. Sup. Ct. Apr. 15, 2016); Sup. Ct. Compl.; Defs.' Mot., Ex. H ("Sup. Ct. Docket"), ECF No. 3-8. In their answer in Superior Court, the Toggases asserted counterclaims against Wells Fargo for violating the D.C. Consumer Protection Procedures Act, D.C. Code § 28-3904(e), breach of contract, and unjust enrichment. Am. Answer & Countercls. ("Sup. Ct. Answer"), Wells Fargo Bank, N.A. v. Toggas, Case No. 2016 CA 002847 R(RP) (Oct. 6, 2017). Eventually, the Superior Court dismissed those counterclaims with prejudice and entered summary judgment for Wells Fargo. See Defs.' Mot., Ex. I, ECF No. 3-9; Defs.' Mot., Ex. J, ECF No. 3-10. The Superior Court later substituted U.S. Bank as Plaintiff. See Sup. Ct. Docket at 8-9.

Here, the Toggases allege these violations in their Complaint, which the Court must accept as true for this motion. They say the Lenders "conducted services in violation of the Consumer Protection Procedures Act, the Truth-in-Lending Act, the Fair Debt Collection Practices Act and the Homeowners Protection Act," inflicting "severe damages" on the Toggases "and others similarly situated." Id. ¶ 16. The Toggases have styled their Complaint as a class action on behalf of all similarly situated borrowers.⁶ See Compl. ¶¶ 40-45.

"Upon information and belief," the Toggases allege that the Lenders serviced their loan and collected debt "based on inaccurate and incomplete borrower loan information," caused by the Lenders' failure to input the loan accurately into their electronic databases. Id. ¶ 20. Because of these alleged errors, the Toggases say the Lenders "had to rely upon manual processes and workarounds that have themselves resulted in errors" and caused the Toggases harm. Id. ¶¶ 20-21. The Lenders "communicated, orally and in writing, information to Plaintiffs that they knew or had a reason to know was inaccurate." Id. ¶ 22.

And as a result, the Toggases say the Lenders "collected or attempted to collect inaccurate amounts from Plaintiffs, failed to timely pay Plaintiffs' insurance policies and initiated wrongful foreclosure proceedings upon Plaintiffs' loan." Id. ¶ 23. And they say the Lenders "have routinely failed to send Plaintiffs timely and accurate periodic statements, failed to timely and accurately credit and apply Plaintiffs' payments, and failed to correct billing and payment errors." Id. ¶ 25. The Toggases also allege that the Lenders "charged Plaintiffs improper late fees; reported inaccurate, negative payment information to credit reporting agencies; subjected Plaintiffs to collection calls based on inaccurate information; and wrongly threatened Plaintiffs with foreclosure." Id. ¶ 31. All of this, they say, means the Lenders "supplied Plaintiffs with loans that had unconscionable terms, knowing it provided them no substantial benefits, knowing they had no reasonable probability of payment in full, and knowing the fees stripped them of equity, thereby taking advantage of their inability to understand the language in the agreement." Id. ¶ 37.

The Toggases' Complaint raises six counts against the Lenders. Count I alleges unfair and deceptive trade practices in violation of the D.C. Consumer Protection Procedures Act ("CPPA"), D.C. Code § 28-3904(e). Compl. ¶¶ 46-56. Count II alleges that the Lenders failedto disclose lending terms required by Section 144 of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1664, and Section 226.24(c.) of its implementing regulation, Regulation Z, 12 C.F.R. § 226.24(d). Compl. ¶¶ 57-68. Count III alleges unconscionable and unfair violations of Sections 807(2) and (10) of the Fair Debt Collections Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e(2)(A), (10). Compl. ¶¶ 69-77. Count IV alleges the Lenders failed to terminate private mortgage insurance in violation of Section 4901(b) of the Homeowners Protection Act ("HPA"), 12 U.S.C. § 4901(b). Compl. ¶¶ 78-87. Count V alleges the Lenders violated the TILA, 15 U.S.C. § 1641(g), by failing to notify Plaintiffs "in writing of the transfer of the loan from the original lender, such as Wells Fargo & Company to US Bank." Compl. ¶ 91; see id. ¶¶ 88-97. And Count VI seeks "Declaratory and Injunctive Relief preventing Defendants from the foreclosure sale until a decision on the merits has been made in this case." Compl. ¶ 99; see id. ¶¶ 98-109.

The Lenders timely moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). Defs.' Mot. Dismiss, ECF No. 3. The Toggases filed an Opposition. Pl.'s Opp'n, ECF No. 7. And the Lenders filed a Reply. Defs.' Reply, ECF No. 10. The motion is now ripe for decision.

II.

A party may move to dismiss a complaint because it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." This requires the complaint to contain sufficient factual allegations that, if true, "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

A complaint is insufficient if it merely offers "'labels and conclusions'" or "'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555, 546). Rather, "[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. Plausibility "asks for more than a sheer possibility that a defendant has acted unlawfully," id., and pleading facts that are "merely consistent with" a defendant's liability "stops short of the line between possibility and plausibility." Twombly, 550 U.S. at 545-46.

In evaluating a motion to dismiss under Rule 12(b)(6), the Court must construe the complaint in the light most favorable to the plaintiffs and accept as true all well-pleaded facts. Lovelien v. United States, 422 F. Supp. 3d 341, 346 (D.D.C. 2019). And complaints filed by pro se plaintiffs "must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94 (2007). But pro se plaintiffs must still adequately plead their complaint consistent with the edicts of Iqbal and Twombly. See Atherton v. D.C. Office of Mayor, 567 F.3d 672, 682 (D.C. Cir. 2009). This means that the Court does not accept as true legal conclusions or "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678.

III.

The Lenders argue that the Toggases' Complaint must be dismissed for failure to state a claim. The Court addresses the Lenders' arguments in turn.

A.

The Lenders first argue that Counts I-IV and VI are barred because the Toggases had to bring them as compulsory counterclaims in the Superior Court litigation. Defs.' Mot. at 11.Rule 13 of the D.C. Superior Court Rules of Civil Procedure—which echoes the federal rule—governs here. Under that rule, the Toggases needed to bring as a counterclaim in Superior Court "any claim . . . aris[ing] out of the transaction or occurrence that [was] the subject matter of the [Lenders] claim; and...