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Rubenstein v. Dovenmuehle Mortgage

October 28, 2009


The opinion of the court was delivered by: Dalzell, J.


Plaintiffs Wayne and Vicki Rubenstein assert various claims, largely based on an alleged breach of contract, against defendants Matrix Financial Services Corporation ("Matrix") and Dovenmuehle Mortgage Company, Inc. ("Dovenmuehle"), owner and servicer, and subservicer of a mortgage the Rubensteins obtained over twenty years ago to finance a property in Margate, New Jersey. Defendants move to dismiss the amended complaint pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, we will grant defendants' motion in part and deny it in part.

I. Factual Background

Plaintiffs obtained the mortgage financing in question on July 5, 1988 to purchase a property in Margate, New Jersey. Greentree Mortgage Corporation ("Greentree") was mortgagee on this $144,000.00 obligation. Am. Compl. ¶ 9. The mortgage itself was recorded in the office for the recording of deeds for Atlantic County, New Jersey. Am. Compl. ¶ 10. Between September of 1988 and March of 2003, the mortgage passed through a series of owners by assignment while Greentree retained the servicing function. Am. Compl. ¶ 11-19.

From 1989 until 1992, the interest rate on the mortgage was reset and adjusted several times. Am. Compl. ¶ 14. In July of 1993, the Rubensteins converted the mortgage to a fixed rate of interest and paid Greentree the $250.00 conversion fee. Am. Compl. ¶ 15. After the conversion, the interest rate was fixed at 6.375%. Am. Compl. ¶ 16. Plaintiffs contend that during the course of the repayment they would from time to time make principal payments in excess of the minimum payments or make payments prior to their due dates. Am. Compl. ¶ 17. As a result, plaintiffs believe that, although they were unaware of it at the time, they had paid off all of the principal and interest due on the loan by November of 2003. Am. Compl. ¶ 18.

Greentree, which is not a party to this action, and which later became Scopia Mortgage Corporation, never informed the Rubensteins that they had satisfied their loan and continued to collect payments of principal, interest and escrow as if the loan had not been paid in full. Am. Compl. ¶ 19-20. On March 3, 2004, Scopia Mortgage Corporation assigned the mortgage to the Federal Deposit Insurance Corporation, as receiver for Security Federal Savings Bank, even though Greentree's ownership interest was never recorded. Am. Compl. ¶ 20-21. On March 9, 2004, the Federal Deposit Insurance Corporation in turn assigned the mortgage to Mortgage Electronic Registration Systems, Inc. Am. Compl. ¶ 22.

In early 2004, plaintiffs began to suspect that they had been overpaying the loan. Am. Compl. ¶ 24. They asked the "then servicer" and the "then holder" of the loan for a correct statement of the balance due, but were told that the balance shown was correct. Am. Compl. ¶ 24.

Later in March, Matrix became the owner of the mortgage and began servicing it as if it were a floating rate loan as of June 1, 2004. Am. Compl. ¶ 25. Toward the end of October of that year, Matrix proposed that the Rubensteins sign a loan modification agreement, backdated to June 1, 2004, that would make the loan a fixed-rate loan and acknowledge that the remaining principal balance of the mortgage was $102,310.30. Plaintiffs refused. Am. Compl. ¶ 27.

During September and October of 2004, the Rubensteins continued to ask representatives of Matrix about the balance of the mortgage and Matrix repeatedly told them that the balance stated was correct. Am. Compl. ¶ 24. At some point --plaintiffs do not say exactly when -- Matrix informed them that it believed the loan was in default due to a claimed escrow shortage and Matrix reported that alleged default to at least one credit reporting agency. Am. Compl. ¶ 26.

On November 1, 2004, defendant Dovenmuehle became the "servicer or subservicer" of the mortgage, and was thus responsible for collecting payments on behalf of Matrix while Matrix retained ownership of the mortgage. Am. Compl. ¶ 28. Throughout the fall of 2004, the Rubensteins made many telephone calls to representatives of Matrix in an attempt to ascertain the balance, but were always told that the balance was correct, even though, as plaintiffs later discovered, Matrix did not have the payment history prior to mid-2004. Am. Compl. ¶ 30.

In December of 2004, Dovenmuehle proposed that the Rubensteins enter into a loan modification agreement. Plaintiffs do not say whether they signed that agreement. Am. Compl. ¶ 31. The Rubensteins ultimately refinanced their mortgage on February 22, 2008, paying Dovenmuehle $84,341.40 "under protest" to pay off the mortgage. Am. Compl. ¶ 34. After the refinancing, Matrix recorded a Satisfaction of Mortgage in Atlantic County. Am. Compl. ¶ 35.

The Rubensteins filed this lawsuit on February 19, 2009 alleging (a) violation of the Fair Debt Collection Practices Act ("FDCPA")(Count I), (b) violation of the Real Estate Settlement Procedure Act ("RESPA")(Count II), (c) unjust enrichment (Count III), (d) violation of the Pennsylvania Fair Credit Extension Uniformity Act ("FCEUA")(Count IV), (e) violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL")(Count V), (f) breach of contract (Count VI),*fn1 and (g) breach of the covenant of good faith and fair dealing (Count VII).

II. Analysis

The defendants move to dismiss all of plaintiffs' claims under Fed. R. Civ. P. 12(b)(6). Plaintiffs incorrectly cite Conley v. Gibson, 355 U.S. 41 (1957), as the proper standard of review for a motion to dismiss. Pl. Opp., at 1. Defendants correctly note that Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 562 (2007), has laid to rest Conley's "no set of facts" language. Def. Rep., at 2.

Now, a party's factual allegations must raise a right to relief above the speculative level, and a complaint must allege facts suggestive of illegal conduct. Twombly, 550 U.S. at 563; Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (citing Twombly). The Supreme Court recently clarified the Twombly standard in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), where it held that a complaint must contain sufficient factual matter to state a claim for relief that is "plausible on its face." Iqbal, 129 S.Ct. at 1949 (internal quotations omitted). A claim has facial plausibility when the plaintiff pleads facts sufficient to allow the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The plausibility standard is not as demanding as a "probability requirement," but it does oblige plaintiffs to allege facts sufficient to show that there is more than the mere possibility that a defendant has acted unlawfully. Id. (internal quotations omitted).

The Supreme Court enumerated in Iqbal two principles that now underlie a motion to dismiss inquiry. First, although a court must accept as true the factual allegations in a complaint, this does not extend to legal conclusions. Id. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."*fn2 Id. Second, a complaint must state a plausible claim for relief to survive a motion to dismiss. Id. at 1950. Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. If the well-pleaded facts allege, but do not "show," more than the mere possibility of misconduct, then the pleader is not entitled to relief within the meaning of Rule 8(a)(2). Id.

In deciding a motion to dismiss, "courts generally consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim. A document forms the basis of a claim if the document is 'integral to or explicitly relied upon in the complaint.'" Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004) (internal citations omitted).

Before we consider plaintiffs' claims, we will first dispense with defendants' holder in due course defense. Defendants argue that Matrix is a holder in due course and, as such, all but one of plaintiffs' claims must fail.

"Holder in due course" means the holder of an instrument if:

... (1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and (2) the holder took the instrument: (i) for value;(ii) in good faith; (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series; (iv) without notice that the instrument contains an unauthorized signature or has been altered; (v) without notice of any claim to the instrument described in section 3306 (relating to claims to an instrument); and (vi) without notice that any party has a defense or claim in recoupment described in section 3305(a) (relating to defenses and claims in recoupment).

13 Pa. C.S.A. ยง 3302(a). This affirmative defense is not categorically inappropriate at the motion to dismiss stage (as plaintiffs argue), but because defendants have presented us with a motion to dismiss, we must take plaintiffs' alleged facts as true and may not consider facts outside of the amended complaint. Because plaintiffs have not averred sufficient facts to show that ...

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