Witengier v. U.S. Bank Na

Decision Date21 April 2017
Docket NumberCase No. 4:16-CV-1855 (CEJ)
PartiesJULIAN L. WITENGIER and MARCELINE M. WITENGIER, Plaintiffs, v. U.S. BANK NA, et al., Defendants.
CourtU.S. District Court — Eastern District of Missouri

This matter is before the Court on the motion of defendant U.S. Bank, N.A. to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs have responded in opposition, and the issues are fully briefed.1

I. Background

On January 21, 2010, defendant U.S. Bank issued a loan to plaintiffs for the purchase of real property, secured by a note and deed of trust. The parties recorded the deed of trust with the St. Louis County Recorder of Deeds on February 2, 2010. Several years later, on August 1, 2014, the parties purportedly entered into a loan modification agreement.2

Defendants contend that plaintiffs defaulted on the loan, and plaintiffs do not dispute that claim.3 [Doc. #17 at 1 n.1]. Plaintiffs allege that they contacted Anthony Catlin, a U.S. Bank employee who was assigned to help them find a solution to their mortgage difficulties. However, Catlin did not help them but instead referred them to SouthLaw, P.C..

On September 14, 2016, defendant U.S. Bank appointed SouthLaw as the successor trustee under the deed of trust. [Doc. #15-1]. The Recorder of Deeds filed that instrument on September 21, 2016. Id. Defendants state that on September 26, 2016, SouthLaw sent notice to plaintiffs that a trustee's sale would take place on October 13, 2016. [Doc. #17 at 2; Doc. #15 at 1]. That notification also allegedly identified SouthLaw as the successor trustee.4 [Doc. #17 at 2]. Plaintiffs successfully halted the foreclosure after filing for bankruptcy.5 [Doc. #15 at 2].

Plaintiffs initiated this action pro se in the Twenty-First Judicial Circuit Court of Missouri (County of St. Louis) after the attempted foreclosure. See [Doc. #1-1]. Defendant U.S. Bank subsequently removed the action to this Court on the basis of diversity of citizenship jurisdiction, 28 U.S.C. § 1332. Plaintiffs are Missouri citizensand defendants U.S. Bank and Catlin are Ohio citizens.6 In the complaint, plaintiffs assert claims of breach of contract and breach of the covenant of good faith and fair dealing. They also assert a quiet title claim.7

Plaintiffs base their claims on a number of alleged defects in the both the security instruments and the attempted foreclosure process. First, with regard to the security instruments, plaintiffs allege that (1) they did not receive an executed copy of the modified loan agreement, (2) Southlaw was not properly designated as the successor trustee,8 and (3) U.S. Bank fraudulently assigned the note and concealed its "true" holder.9 [Doc. #1-1 at 4, 10]. Plaintiffs additionally contend that defendants did not provide adequate notice of the trustee's sale. Specifically, defendants allegedly (1) directed notice to a "doe tenant," (2) sent notice fewer than twenty days before the scheduled foreclosure sale, and (3) did not record such notice in "official records." Id. at 4; see Mo. Rev. Stat. § 443.325. Furthermore, plaintiffs claim that upon inquiry, defendants did not provide a "single point of contact" and evaded plaintiffs' attempts to ascertain the reinstatement amount. Id. at 5-8.10 Finally, plaintiffs summarily assert that U.S. Bank and Southlawperpetrated "a series of fraudulent transactions" by "modifying loan documents, manipulating property values and making loans that were in violation of a multiplicity of [s]tate laws." Id. at 9.11

In the instant motion, defendant U.S. Bank argues that Counts I and II assert a claim for attempted wrongful foreclosure, which is not a cause of action under Missouri law. The defendant also argues that plaintiffs' contract claims are negated by plaintiffs' allegation that the alleged contract with U.S. Bank is "ineffective." Finally, defendant U.S. Bank argues that Count II should be dismissed because plaintiffs have failed to allege the requisite elements of a quiet title action under Missouri law.

II. Legal Standard

The purpose of a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is to test the legal sufficiency of the complaint. The factual allegations of a complaint are assumed true and construed in favor of the plaintiff, "even if it strikes a savvy judge that actual proof of those facts is improbable." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n.1 (2002)); Neitzke v. Williams, 490 U.S. 319, 327 (1989) ("Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations"); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (a well-pleaded complaint may proceed even if it appears "that a recovery is very remote and unlikely"). The issue is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence insupport of his claim. Id. A viable complaint must include "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp., 550 U.S. at 570; see also id. at 563 ("no set of facts" language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), "has earned its retirement."). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555.12 A district court may consider public records on a motion to dismiss. Stahl v. United States Dep't of Agric., 327 F.3d 697 (8th Cir. 2006).

III. Discussion
Breach of Contract and Covenant of Good Faith & Fair Dealing

Under Missouri law, extrajudicial foreclosure is not a statutory right but rather "'a contractual right established by the power of sale provision in the deed of trust.'" Mildfelt v. Circuit Court of Jackson Cty., Mo., 827 F.2d 343, 346 (8th Cir. 1987) (quoting Fed. Nat'l Mortg. Ass'n v. Howlett, 521 S.W.2d 428, 432 (Mo. 1975) (en banc)). And, under Missouri law, a breach of contract claim requires a showing of (1) "the existence of an enforceable contract between the parties," (2) "mutual obligations arising under the terms of the contract," (3) "defendant did not perform," and (4) "plaintiff was thereby damaged from the breach." Rice v. W. End Motors, Co., 905 S.W.2d 541, 542 (Mo. Ct. App. 1995).

Missouri law implies a covenant of good faith and fair dealing in every contract. Arbors at Sugar Creek Homeowners Ass'n v. Jefferson Bank & Trust Co., Inc., 464 S.W.3d 177, 185 (Mo. 2015).13 To state a claim for breach of thecovenant, a plaintiff must allege facts that defendant "acted, or exercised a judgment conferred by the terms of the Note, in such a manner as to evade the spirit of the transaction or to deny . . . the expected benefit of the Note." Reliance Bank v. Paramont Props., LLC, 425 S.W.3d 202 (Mo. Ct. App. 2014). "This implied covenant, however, is not 'an overflowing cornucopia of wished-for legal duties; indeed, the covenant cannot give rise to obligations not otherwise contained in a contract's express terms." Smith v. Select Portfolio Servicing Inc., No. 2:16-CV-04203-NKL, 2016 WL 4942029, at *2 (W.D. Mo. Sept. 15, 2016) (quoting Comprehensive Care Corp. v. RehabCare Corp., 98 F.3d 1063, 1066 (8th Cir. 1996)).

As an initial matter, plaintiffs do not refer to the specific provision(s) of the deed of trust that defendant U.S. Bank violated.14 See Smith v. Select Portfolio Servicing, Inc., No. 2:16-CV-04203 (NKL), 2016 WL 4942029, at *2 (W.D. Mo. Sept. 15, 2016)(complaint that failed to cite facts or contract terms giving rise to defendant's obligation to consider plaintiff's loan modification request failed to state a claim); see also Riou v. Bank of Am. Corp., No. 14-1051-CV-W-ODS, 2015 WL 12781258, at *2 (W.D. Mo. Feb. 5, 2015) (complaint for breach contract thatcontained no allegation of terms allegedly breached failed to state a claim). Furthermore, plaintiffs make conclusory allegations that defendant U.S. Bank engaged in behaviors amounting to extortion, conspiracy, and mail and wire fraud, but provide no factual support. The Court finds that plaintiffs have failed to allege facts sufficient to support a plausible breach of contract claim. See Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009) ("It is the conclusory nature of [plaintiff's] allegations . . . that disentitles them to the presumption of truth.")

Plaintiffs' allegations regarding fraudulent sale of the note do not suffice as a basis for their breach of contract claim. The sale of the note without notice to the borrower is expressly permitted under the terms of the deed of trust.15 Similarly, plaintiffs' allegation that the substitution of the trustee was conducted improperly is insufficient, as defendants submitted proof of the recorded appointment of trustee instrument.16 Finally, because no foreclosure, any issues regarding reinstatement and notice of the foreclosure sale are moot. See Jenkins v. Thayer, 760 S.W.2d 932, 937 (Mo. Ct. App. 1988). At best, the claims plaintiffs assert in Counts I and II simply amount to attempted wrongful foreclosure, which is not a valid cause of action under Missouri law. McWilliams v. J.P. Morgan Chase Bank, Nat'l Ass'n, No. 4-14-CV-768 (CEJ), 2015 WL 430216, at *1 (E.D. Mo. Feb. 2, 2015) (citing Reesev. First Missouri Bank & Trust Co. of Creve Coeur, 736 S.W.2d 371 (Mo. 1987) (en banc). Similarly, there is no private right of action for mortgage fraud under Missouri law. Mo. Rev. Stat. § 443.930.3.

The Court finds the same infirmities in plaintiffs' claim for breach of the covenant of good faith and fair dealing. Because the covenant cannot give rise to obligations not otherwise contained in a contract's express terms, and plaintiffs provide no examples of how express terms were contravened, the Court does not find this claim plausible. See Smith, 2016 WL 4942029 at *2 (action for breach of covenant of good faith and fair dealing dismissed for failure to state a claim where plaintiff "failed to plead sufficient facts...

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