Wilson v. Deutsche Bank Tr. Co. Ams.
| Decision Date | 07 November 2019 |
| Docket Number | Civil Action No. 3:18-CV-0854-D |
| Parties | SUSAN LYNN WILSON (THOMAS), et al., Plaintiffs, v. DEUTSCHE BANK TRUST COMPANY AMERICAS, AS TRUSTEE FOR RESIDENTIAL ACCREDIT LOANS, INC., MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-QS5, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
This is a removed action arising from attempts to foreclosure on the residence of pro se plaintiffs Susan Lynn Wilson ("Susan") and Tommy Thomas.1 Defendants Deutsche Bank Trust Company Americas, as Trustee for Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QS5 ("Deutsche Bank"), and loan servicer PHH Mortgage Corporation d/b/a PHH Mortgage Services ("PHH"), as the allegedsurviving entity of a merger between PHH and the Thomases' former servicer, Ocwen Loan Servicing, LLC ("Ocwen"), move under Fed. R. Civ. P. 12(b)(6) to dismiss the Thomases' third amended complaint for failure to state a claim. The Thomases object to PHH's participation in this lawsuit and oppose the motion. They also move to supplement their third amended complaint. For the reasons that follow, the court overrules the Thomases' objection; grants in part and denies in part the motion of Deutsche Bank and PHH to dismiss; raises sua sponte grounds for dismissing some of plaintiffs' claims; and denies plaintiffs' motion to supplement. The court grants the Thomases leave to replead the claims that the court is dismissing on grounds that it has raised sua sponte.2
In 2006 the Thomases obtained a home equity loan from Wachovia Bank ("Wachovia") secured by the Thomases' residence on Berkshire Lane in Dallas.3 They became delinquent on the loan in 2008. The following year, the Thomases' loan servicer, Homecomings Financial, invited them to apply for a loan modification. The Thomases applied, and a new loan servicer—GMAC ResCap, Inc. ("GMAC")—approved their application. Under the terms of the modification agreement, if the Thomases successfully made three on-time payments in an agreed-upon reduced amount, the reduced paymentamount would become permanent. The Thomases allege that, although they upheld their end of the bargain, GMAC did not: GMAC returned the third on-time payment, and Deutsche Bank (the assignee of the lien against the Thomases' residence) attempted to foreclose. Deutsche Bank nonsuited the initial foreclosure action in 2013, but then initiated a new foreclosure action in 2015.
Ocwen began servicing the Thomases' loan at some point after it acquired GMAC in October 2012. In 2016 Ocwen offered the Thomases a loan modification, but when the Thomases contacted Ocwen about the option, the servicer reported that the modification was no longer available. Instead, the Thomases were permitted to apply for loss mitigation. On March 28, 2017 the Thomases submitted a loss mitigation application ("Application") to Ocwen. The following day, on March 29, 2017, while the Application was pending for review, Ocwen and Deutsche Bank, by its substitute trustee, moved for expedited foreclosure. On April 26, 2017 the Application was fully "receipted."
When the Thomases contacted Ocwen to determine why the foreclosure was proceeding, Ocwen's representative informed them that the substitute trustee's law firm had been notified that the Application was complete and that evidence of the notification was in the computer. Despite this evidence, the law firm pursued the foreclosure action, and the Thomases were required to appear at the expedited foreclosure hearing on June 21, 2017 and at subsequent rescheduled hearings. The expedited foreclosure was dismissed in 2018.
On March 9, 2018 the Thomases filed suit against Deutsche Bank and Ocwen in state court, and the case was removed to this court. In April 2019 the Thomases received a letterfrom their new servicer, PHH, advising that they might have loss mitigation options with PHH. PHH joined this lawsuit by filing the instant joint motion to dismiss.
In their third amended complaint, the Thomases allege that defendants violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605(f), and subsections of its implementing regulations, 12 C.F.R. § 1024.41, by "dual tracking" the Application. They also assert that Ocwen violated the Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1639h, by failing to perform an adequate appraisal in conjunction with their request for loss mitigation, and they challenge Deutsche Bank's authority to foreclose based on alleged inaccuracies in the assignment process. In addition to these claims, the Thomases assert a claim under § 1413 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), 15 U.S.C. § 1640(k), as well as additional RESPA claims, including that defendants violated 12 C.F.R. § 1024.37 by placing forced-placed insurance when the Thomases already had coverage; violated § 1024.38 by allegedly failing to maintain reasonable practices and procedures in communicating with borrowers; violated § 1026.36 by misapplying loan payments; and violated 12 U.S.C. § 2605(c) by failing to respond to the Thomases' May 17, 2017 email regarding the expedited foreclosure. The Thomases seek actual, statutory, and exemplary damages as well as injunctive and equitable relief.
Deutsche Bank and PHH move to dismiss the third amended complaint under Rule 12(b)(6). The Thomases object to PHH's participation in this lawsuit and oppose the motion. They also move to supplement their third amended complaint.
The court turns first to the Thomases' objection to PHH's participation in this suit.
Without filing a motion to substitute under Rule 25(c), PHH, together with Deutsche Bank, filed the instant joint motion to dismiss as the alleged successor by merger to Ocwen, the Thomases' former loan servicer. Although the Thomases acknowledge that the loan at issue was transferred to PHH in 2019, they object to defendants' addition of PHH without first seeking leave to join PHH or otherwise giving the Thomases and the court notice of this addition. The Thomases maintain that Ocwen completed the acquisition of PHH in October 2018 but failed to add PHH, a new party, until now. They contend that because their claims are against Ocwen, not PHH, defendants' late addition of PHH to this case is an attempt to thwart the resolution of their loan account issues with PHH as their current servicer. The Thomases also posit that this substitution violates the joinder deadline set by the court's June 8, 2018 scheduling order.
Defendants respond that they have not sought to join a new party to this lawsuit, but instead have substituted the surviving entity of the merger between Ocwen and PHH. They maintain that the merger between PHH and a wholly-owned subsidiary of Ocwen occurred on October 4, 2018, and that Ocwen merged into PHH on June 1, 2019. In support of this contention, defendants attach an announcement from Moody's Investors Service ("Moody's") that indicates that Moody's assigned Ocwen's master servicer assessment to PHH because, "[o]n June 1, 2019, Ocwen Loan Servicing LLC merged into PHH MortgageCorporation," and that "PHH Mortgage Corporation is the surviving entity." Ds. Resp. to Ps. Obj. Ex. A. at 1.4 Defendants allege that referring to PHH as the proper surviving entity does not jeopardize the Thomases' claims in this case or their efforts to resolve the loan account issues with PHH.
The Thomases reply that their interests have been prejudiced by PHH's addition as a party because they can no longer submit a new loss mitigation application to PHH as their alleged transferee servicer unless they do so through PHH's counsel. They contend that the merger between Ocwen and PHH occurred in October 2018 and that defendants' statement that Ocwen merged into PHH in June 2019 is misleading. According to the Thomases, June 2019 is merely the date that the companies completed transferring the remainder of the loans into a new servicing platform. The Thomases maintain that defendants' statement that PHH "stepp[ed] into the shoes of Ocwen" does not demonstrate that PHH is the same entity, and they posit that defendants have used the same phrase to describe the transfer of the Thomases' loan among four different servicers.
The Thomases also contend that, by adding PHH to this lawsuit and thereby requiring the Thomases to communicate with PHH via counsel about their property, defendants'counsel is infringing their constitutional rights, depriving them of their property without due process. The Thomases assert that defendants violated Rule 7.1(b)(2) regarding supplemental filings by failing to promptly file a supplemental statement when they had notice of the merger and change in parties. Finally, the Thomases contend that the addition of PHH to the this lawsuit is a continuation of defendants' practice of withholding information. They request that the court deny PHH's addition to this lawsuit, permit them to communicate with PHH directly, and sanction defendants for alleged violations of the Federal Rules of Civil Procedure.
Rule 25(c) provides that "[i]f an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted . . . or joined with the original party." "A 'transfer of interest,' as described in Rule 25(c), includes circumstances where a corporation is the successor to the original corporate party by merger." IDQ Operating, Inc. v. Aerospace Commc'ns Holdings Co., 2016 WL 6877772, at *1 (E.D. Tex. July 5, 2016) (quoting Luxliner P.L. Exp., Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 71 (3d Cir. 1993)).
Contrary to the Thomases' contentions, Rule 25(c) does not require a successor by merger to file a substitution motion or any other motion before asserting its interests in the action. See FDIC v. SLE, Inc.,722 F.3d 264, 270 (5th Cir. 2013) (per curiam) (...
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