U.S. Bank Nat'Lass'N v. Tait, CASE NO. C16-767-JCC
| Decision Date | 21 September 2016 |
| Docket Number | CASE NO. C16-767-JCC |
| Court | U.S. District Court — Western District of Washington |
| Parties | U.S. BANK NATIONAL ASSOCIATION, Plaintiff, v. JOSEPH C. TAIT, et al., Defendants. |
THE HONORABLE JOHN C. COUGHENOUR
This matter comes before the Court on Plaintiff/Counter-Defendant U.S. Bank National Association's motion to dismiss counterclaims (Dkt. No. 21). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS in part and DENIES in part the motion for the reasons explained herein.
On May 16, 2016, Plaintiff/Counter-Defendant U.S. Bank National Association filed a complaint for judicial foreclosure in King County Superior Court against Defendants/Counter-Plaintiffs Joseph C. Tait, Kazumi G. Tait, Discover Bank, and any other unknown parties in possession or claiming possession. (Dkt. No. 1-7.) The Taits are husband and wife and the record owners of the real property at issue in the foreclosure action. (Id. at 2; Dkt. No. 19 at 7.) Discover Bank is a judgment creditor of the Taits and nominal party in this matter. (See Dkt. No. 1-7 at 1.)
The dispute centers around a promissory note the Taits executed and delivered to U.S. Bank on December 7, 2004, secured by a deed of trust (Deed) encumbering the property. (See id. at 3.) The Taits promised to pay the principal sum of $235,000.00 together with interest thereon at the rate of 5.625% per annum in monthly installments of $1,372.95. (Id.) Mortgage Electronic Registration Systems, Inc. (MERS) assigned the Deed to U.S. Bank through a written assignment. (Id.) On July 3, 2012, the loan was modified. (Id.) The new loan balance was $236,063.66. (Dkt. No. 19 at 10.) The Taits allege U.S. Bank failed to credit the Taits' first payment on their modified note and suspended numerous timely payments beginning in 2012, totaling approximately $11,076.74. (Dkt. No. 19 at 10.) The Taits failed to make their monthly payment due on April 1, 2013, and have not made any payments on the loan since. (Dkt. No. 1-7 at 3.)
In October 2014, the Taits were referred to foreclosure mediation under Washington's Foreclosure Fairness Act (FFA), Wash. Rev. Code. § 61.24.163 et seq., and submitted their first loan modification application to U.S. Bank. (Dkt. No. 19 at 11; Dkt. No. 19-14 at 2.) The Taits allege U.S. Bank delayed providing required mediation documents for months. (Dkt. No. 19 at 12.) On August 7, 2015, U.S. Bank denied the loan modification because "requested documents have yet to be received." (Dkt. No. 19-11 at 3.) The Taits allege they submitted at least two complete loan modification applications. (Dkt. No. 19-15 at 3.)
On September 22, 2015, the parties began a second mediation session. (Dkt. No. 19 at 13.) U.S. Bank denied the Taits' loan modification application for insufficient income on October 23, 2015. (Dkt. No. 19-12 at 3.) However, the Taits allege U.S. Bank acknowledged that it miscalculated the Taits' income and allowed the Taits to resubmit a loan modification application if the Taits agreed to sign a waiver releasing U.S. Bank of any liability. (Dkt. No. 19-14 at 3.) On February 10, 2016, the foreclosure mediator issued a bad faith certification against U.S. Bank indicating U.S. Bank "failed to provide timely and/or accurate documents." (Dkt. No.19 at 14.)
As a result of the default originating in April 2013, U.S. Bank exercised its option in the Deed to declare the whole of the balance and the principal in interest thereon due and payable and filed this action in King County Superior Court. (Dkt. No. 1-7 at 4.) U.S. Bank requested a judgment against the Taits or in the event of nonpayment, a judicial foreclosure sale. (Id. at 4-5.)
On May 25, 2016, the Taits filed a notice of removal (Dkt. No. 1) and filed an answer to the complaint (Dkt. No. 19) on June 24, 2016. In their answer, the Taits also filed counterclaims against U.S. Bank. (Id. at 15-31.) The Taits essentially allege U.S. Bank's delay in processing the Taits' loan modification application caused the Taits to owe more than they should on the loan. (Id.) The Taits allege eight counterclaims against U.S. Bank in connection with the foreclosure proceedings during mediation: (1) violation of the Washington Consumer Protection Act (CPA); (2) violation of the Truth in Lending Act (TILA); (3) violation of the Real Estate Settlement Procedures Act (RESPA); (4) violation of the Equal Credit Opportunity Act (ECOA); (5) violation of the Fair Housing Act (FHA); (6) violation of their "civil rights" under 42 U.S.C. § 2000d; (7) violation of 42 U.S.C. § 1981; and (8) breach of the implied duty of good faith and fair dealing. (Id.) U.S. Bank filed a motion to dismiss the counterclaims for failure to state claims upon which relief can be granted. (Dkt. No. 21.)
A defendant may move for dismissal when a plaintiff "fails to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference the defendant is liable for the misconduct alleged. Id. at 678. The plaintiff is obligated to providegrounds for his entitlement to relief that amount to more than labels and conclusions or a formulaic recitation of the elements of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007). "[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A dismissal under Fed. R. Civ. P. 12(b)(6) "can [also] be based on the lack of a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988).
The Taits allege U.S. Bank "violated its duty to mediate in good faith and committed a per se violation" of the CPA, Wash Rev. Code § 19.86, et seq. (Dkt. No. 19 at 15.) In order to recover under the CPA, a plaintiff must prove "(1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; (5) [and] causation." Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 533 (Wash. 1986) (en banc).
U.S. Bank does not dispute, for purposes of its motion to dismiss the counterclaims, that the Taits have provided sufficient allegations on the first three elements of a CPA claim. (Dkt. No. 21 at 5-6.) The Court agrees. However, U.S. Bank argues the Taits have not sufficiently pled the elements of injury or causation. To prove causation, the "plaintiff must establish that, but for the defendant's unfair or deceptive practice, the plaintiff would not have suffered an injury." Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 170 P.3d 10, 22 (2007). The Taits allege their injury occurred in the form of a "far more expensive mortgage because [U.S. Bank's] delay permitted the loans [sic] principle [sic] to bloat by operation of the accrual of capitalization of interest, fees, charges, and fines." (Dkt. No. 19 at 16-17.) U.S. Bank argues the Taits' injury was self-inflicted and caused by their default, not U.S. Bank's bad faith during mediation, and therefore causation is not met. (Dkt. No. 21 at 6-7; Dkt. No. 24 at 5-6.) At this stage of the litigation, the Court need not determine which of the parties' allegations are true asto what caused the Taits' injury of an increased principal. The Court looks only at the face of a complaint to decide a motion to dismiss. Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). The Taits have alleged enough facts to survive a motion to dismiss because they have provided facts to support each element of a CPA claim, including causation and injury. Therefore, U.S. Bank's motion is DENIED as to the CPA counterclaim.
The Taits allege various violations of TILA, 15 U.S.C. § 1601 et seq., including: (1) U.S. Bank misapplying or improperly suspending payments made by the Taits between 2012 and March 2013, (Dkt. No. 19 at 18-19); (2) "U.S. Bank's mute and un-collaborative appearance at foreclosure mediation," (Id. at 20-21); and (3) U.S. Bank's failure to give proper notice of the Taits' right to rescind the transaction, (Id. at 19-20). The Taits seek damages and rescission of the contract.
U.S. Bank argues the Taits' first two TILA violations are outside the statute of limitations, and in the alternative, fail to state a claim on which relief can be granted. (Dkt. No. 21 at 7-8.) Any action for damages under TILA must be brought "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). Here, the Taits made their last payment in March 2013 (Dkt. No. 1-7 at 3) and began mediation in October 2014 (Dkt. No. 19-14 at 2). However, they did not file these counterclaims until August 2016. Therefore, any damages claims based on alleged misappropriations of the payments or mediation bad faith are time barred.
The Taits argue under these circumstances equitable tolling is available because of U.S. Bank's alleged false communications and because the payment application issues were discussed during the foreclosure mediation. (Dkt. No. 23 at 8.) The Taits argue "it would not have made sense, and may have well been deemed bad faith, for the Taits to have initiated litigation" while ...
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