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Hersh v. Citimortgage, Inc.

United States District Court, Third Circuit

December 30, 2013

RANDY A. HERSH also known as RANDY HERSH AND MELINDA A. HERSH his wife also known as MELINDA HERSH, Plaintiffs,


TERRENCE F. McVERRY, District Judge.

Pending before the Court is the MOTION TO DISMISS COMPLAINT (ECF No. 12) filed by Defendants, CitiMortgage, Inc. ("CitiMortgage"), Citigroup, Inc. ("Citigroup"), and Citibank, N.A. ("Citibank"), with brief in support (ECF No. 13). Randy and Melissa Hersh ("Plaintiffs") have filed a brief in opposition (ECF No. 14). Accordingly, the matter has been thoroughly briefed and is ripe for disposition.

I. Background

This case arises out of a mortgage held by CitiMortgage on property owned by Plaintiffs. For the purpose of this motion, all of the factual allegations in the Amended Complaint have been accepted as true.

Plaintiffs executed a mortgage with ABN AMRO Mortgage Group, Inc. ("ABN AMRO") on or about March 22, 2002. As part of this transaction, Plaintiffs refinanced an existing loan, part of the proceeds of which were allegedly to be used to satisfy a tax lien on Plaintiffs' property held by the Fayette County Tax Bureau. The Amended Complaint alleges that after this transaction ABN AMRO represented to Plaintiffs that all outstanding liens and obligations on the property were, in fact, satisfied by way of the refinancing.

Early the next year, an ABN AMRO representative contacted Plaintiffs and informed them that approximately $7, 000.00 was owed on the loan because the outstanding tax lien had not actually been satisfied through the refinancing.[1] The ABN AMBRO representative also indicated that there was a judgment on the property in the amount of $4, 000.00 that also had to be satisfied. Plaintiffs claim that Mrs. Hersh responded by informing the representative that the tax lien was supposed to have been satisfied through the refinancing. She also allegedly explained that the judgment had been discharged in a prior Chapter 7 bankruptcy proceeding. Plaintiffs aver that the ABN AMRO representative stated "in bad faith" that Plaintiffs were still in default. Shortly thereafter, ABN AMRO filed a foreclosure action against Plaintiffs in the Fayette County Court of Common Pleas. According to Plaintiffs, ABN AMRO "fraudulently alleged the Plaintiffs were in default" when it filed the action.

After the foreclosure action was initiated, Plaintiffs filed for Chapter 13 bankruptcy in the United States Bankruptcy Court for the Western District of Pennsylvania. While Plaintiffs were in bankruptcy, Citigroup merged with ABN AMRO. On November 5, 2007, CitiMortgage entered its appearance in the bankruptcy proceeding, claiming that it had been assigned Plaintiffs' mortgage. Thereafter, the Chapter 13 trustee began making the monthly mortgage payments to CitiMortgage.

On October 31, 2008, CitiMortgage filed a motion in Bankruptcy Court to remove the automatic stay that had been in place since Plaintiffs entered bankruptcy, seeking to be permitted to initiate a foreclosure action against Plaintiffs. On December 9, 2008, Bankruptcy Judge Jeffrey Deller denied CitiMortgage's motion. That same day, Judge Deller issued an order that discharged Plaintiffs from the Chapter 13 proceeding, indicating that they had successfully completed all of the payments under their plan.

Plaintiffs allege that, after their discharge from bankruptcy, they continued to make their monthly mortgage payments to CitiMortgage. On February 18, 2009, however, CitiMortgage sent Plaintiffs a statement "fraudulently alleging" that they were in default in the amount of $7, 261.75. When Mrs. Hersh received the statement, she contacted CitiMortgage and inquired into the nature of the alleged default. A CitiMortgage representative informed her that the Fayette County tax lien and the outstanding judgment had to be satisfied forthwith. In response, Mrs. Hersh again allegedly tried to explain that the tax lien had been fully satisfied in the Chapter 13 proceeding and the judgment had been satisfied in the prior Chapter 7 proceeding. Plaintiffs allege that the CitiMortgage representative refused to consider Mrs. Hersh's explanation and continued to "fraudulently allege" that they were in default.

Plaintiffs apparently never satisfied the lien or judgment but nevertheless continued to make their monthly mortgage payments. CitiMortgage refused to accept such payments, instead returning them to Plaintiffs and claiming that Plaintiffs remained in default because of the unsatisfied lien and judgment.

On May 20, 2009, CitiMortgage brought a foreclosure action in the Court of Common Pleas of Fayette County, alleging that Plaintiffs had been in default since September 1, 2008. CitiMortgage eventually took a default judgment and sold the property at a sheriff's sale in March 2010. The mortgage was then assigned to the Federal Home Loan Mortgage Association ("FHLMA"), which filed an ejectment action on June 1, 2010. A default judgment was thereafter entered in the FHLMA's favor, and on August 24, 2010, Plaintiffs aver that the Fayette County Sheriff forcibly ejected them from their property, in the process causing significant damage, loss and destruction to their personal property.

Plaintiffs initiated this action in the Court of Common Pleas of Fayette County by filing a praecipe for writ of summons on May 9, 2013. Their Complaint followed on August 16, 2013. On September 13, 2013, Defendants timely removed the action to this Court based on diversity jurisdiction.

On September 20, 2013, Defendants filed a motion to dismiss. (ECF No. 7). Rather than responding to Defendants' motion, Plaintiffs filed an Amended Complaint on October 11, 2013. In Count I, they allege that "every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement." Am. Comp. ¶ 39. According to Plaintiffs, Defendants breached the mortgage's implied covenant of good faith and fair dealing by "adding charges they knew they had no right to add, in violation of the discharge order, to the monthly mortgage bills;" "failing to accept and apply Plaintiffs' correct payments to the mortgage, which led to the eventual foreclosure on the Plaintiffs' property;" "initiating a foreclosure action in the Court of Common Pleas of Fayette County on May 20, 2009;" and "taking a default judgment against the Plaintiffs and selling the property through the Fayette County Sheriff's Office." Id. ¶¶ 41, 43, 44, 45 (ECF No. 9). In Count II, Plaintiffs allege that ...

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