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Davis v. Deutsche Bank National Trust Co.

United States District Court, E.D. Pennsylvania

September 19, 2017

DENISE M. DAVIS and R. CRAIG DAVIS, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE, HOMEWARD RESIDENTIAL, INC., and OCWEN LOAN SERVICING, LLC, Defendants.

          MEMORANDUM

          Henry S. Perkin, M.J.

         This matter is before the Court on the Defendants' Motion to Dismiss the entirety of Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(b)(6). The Motion was filed on November 17, 2016, Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion was filed on December 1, 2016 and Defendants' Reply Brief was filed on December 8, 2016. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. This case was originally assigned to the docket of the Honorable Joseph F. Leeson. The parties consented to trial before the undersigned pursuant to 28 U.S.C. § 636 and Judge Leeson approved the consent and ordered the case transferred on January 4, 2017. See Dkt. No. 12. Having reviewed and considered the contentions of the parties, the Court is prepared to rule on this matter.

         I. PROCEDURAL HISTORY.

         Plaintiffs R. Craig Davis and Denise Davis (“Plaintiffs”) initiated this matter on September 16, 2016 against Defendants Deutsche Bank National Trust (“Deutsche Bank”), Homeward Residential, Inc. (“Homeward”), and Ocwen Loan Servicing, LLC (“Ocwen”) (collectively, (“Defendants”) in the Court of Common Pleas of Lancaster County.[1] On October 13, 2016, Defendants filed a Notice of Removal to this Court. In Counts I and III of the Complaint, Plaintiffs allege claims for breach of contract against Deutsche Bank and Homeward. In Counts II and IV of the Complaint, Plaintiffs allege claims for breach of contract against Deutsche Bank and Ocwen. In Count V of the Complaint, Plaintiffs' claim is against Ocwen and Deutsche Bank for violations of the Real Estate Settlement Procedures Act. See 12 U.S.C. § 2605(e).

         II. FACTUAL BACKGROUND.

         Taking the averments in the Complaint in the light most favorable to the Plaintiffs as the non-moving party, the pertinent facts to this Court's determination are as follows:

On January 6, 2006, Plaintiffs obtained a loan from American Home Bank in the amount of $260, 000. Compl., ¶ 21. Plaintiffs granted American Home Bank a mortgage as security for repayment of the loan on their home located at 5 Thicket Lane, Lancaster, PA 17602.[2] Id., ¶ 22. American Home Bank assigned the mortgage to Option One Mortgage Corporation in 2006 which then assigned it to Deutsche Bank in 2015. Compl., Ex. A., p. 1. The mortgage agreement provides that the lender may hire or appoint a loan servicer to collect loan payments and administer the loan. Compl., ¶ 21. The mortgage is a federally qualified loan as defined by the Real Estate Settlement Procedures Act (“RESPA”). Id., ¶ 23. Payments under the loan were $1, 858.18, and it is not apparent that an escrow account for payment of taxes and insurance was established when the property was conveyed. Id., ¶¶ 24, 41.

         The mortgage states that the “[b]orrower shall pay taxes, assessments, charges, and fines and impositions attributable to the property which may attain priority over this security Instrument.” Defs.' Mot., Ex. 1, p. 3 § 4. In and around 2011, the Plaintiffs fell behind in payment of the property taxes. Compl., ¶ 25. In July 2012, Plaintiffs paid delinquent taxes in the amount of $5, 599.54. Id., ¶ 26. Homeward, the loan servicer at the time, also paid the delinquent taxes. Id., ¶ 28. Plaintiffs notified Homeward that the taxes were paid and Homeward received a refund for the duplicate tax payment from the taxing authority. Id., ¶¶ 29, 30. Homeward then began an escrow analysis. Id., ¶ 31. Shortly after the tax refund payment to Homeward, Defendant Ocwen became the Plaintiffs' mortgage loan servicer, replacing Homeward. Id., ¶ 36.

         As the new mortgage servicer, Ocwen required a tax escrow. Id., ¶ 40. Prior to this time, Plaintiffs did not escrow their taxes. Id., ¶ 41. Ocwen demanded a new monthly payment of $2, 424.71, which is $566.53 more than the Plaintiffs' monthly payment when Homeward serviced the mortgage. Id., ¶¶ 46, 47. Plaintiffs continued to make monthly payments of $1, 858.18 despite Ocwen's demand for a new monthly payment of $2, 424.71. Id., ¶¶ 46, 60. Upon notification of the change in payment demand, Plaintiffs wrote to Ocwen on several occasions, requesting that Ocwen review its escrow analysis, which Plaintiffs perceived to be erroneous and double the required amount of taxes. Id., ¶¶ 44, 48. The Plaintiffs wrote to Ocwen on July 21 and August 21, 2013, and Plaintiffs' counsel wrote to Ocwen on August 14, 2014, placing Ocwen on notice of an error regarding the escrow account. Id., ¶¶ 49, 54. Over two weeks after Ocwen received the August 14, 2014 correspondence from the Plaintiffs' counsel, Ocwen responded by sending Plaintiffs' counsel an escrow statement. Id., ¶¶ 55, 56. On August 28, 2014, Plaintiffs' counsel again wrote to Ocwen, placing Ocwen on notice of an error concerning the escrow account. Id., ¶ 57. Ocwen did not respond to that letter. Id., ¶ 58. Ocwen then sued the Plaintiffs in foreclosure on July 8, 2015 in the Court of Common Pleas of Lancaster County. Compl., ¶ 61; Ex. A., p. 1.

         III. STANDARD OF REVIEW.

         On a motion to dismiss for failure to state a claim, courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint the plaintiff may be entitled to relief. Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide grounds for his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 554 (2007)(citation omitted).

         In order to survive a motion to dismiss, a complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 668. “Only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679. When facing a motion to dismiss for failure to state a claim, district courts are directed to conduct a three-part analysis. Connelly v. Lance Constr. Corp., 809 F.2d 780, 787 (3d Cir. Jan. 11, 2016). First, it must “tak[e] note of the elements [the] plaintiff must plead to state a claim.” Iqbal, 556 U.S. at 675. Second, it should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 679. See also Burtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011) (“Mere restatements of the elements of a claim are not entitled to the assumption of truth.” (Citation and editorial marks omitted)). Finally, “[When] there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 566 U.S. at 679.

         IV. DISCUSSION.[3]

         A. Breach of Contract - Homeward and Deutsche Bank (Counts I and III)

         In Count I of the Complaint, Plaintiffs claim that the mortgagee, Deutsche Bank, and the first mortgage loan servicer, Homeward, breached the mortgage contract under Pennsylvania law. In Count III of the Complaint, Plaintiffs allege the following:

74. The mortgage contract between Plaintiff and Deutsche contains limitations on the amount of funds that can be requested to be held in escrow. Exhibit I 75. Lender and their servicer may not request funds in excess of the amount permitted under the Real Estate Settlement Procedures Act. 12 USC 2609(a)
76. This limitation is no more than the amount of yearly taxes, insurance, flood insurance and other detailed charges. Exhibit I 77. Deutsche, through Homeward, demanded escrow in excess of the amounts as allowed by the contract, namely an amount in excess of the property taxes.
78. This demand increased the monthly payment and breached the contract.
79. As a direct and proximate cause of the actions of Homeward as agent for Deutsche Bank, Deutsche breached their contract.
80. As a direct and proximate result of the actions of the Defendants Deutsche and Homeward Plaintiff has been damaged.
81. This illegal demand has created a false “default” resulting in a wrongful foreclosure.

Compl., pp. 9-10 ¶¶ 74-81. In order to bring a claim for breach of contract under Pennsylvania law, the plaintiff must plead the existence of a contract, a breach of that contract, and damages as the result of that breach. Zokaites Contr., Inc. v. Trant Corp., 968 A.2d 1282, 1287 (Pa. Super. 2009). In this case, neither Plaintiffs nor Defendants dispute that a contract existed, but Defendants claim that they did not breach the mortgage and Plaintiffs did not suffer any damages. Defendants correctly contend that the mortgage permits the mortgagee to require an escrow for taxes and reasonable estimates of future expenditures. The Defendants also contend that the law requires an escrow analysis to be completed before an escrow account is established and Homeward followed this requirement.

         In response, Plaintiffs contend that Homeward's alleged failure to properly service the loan resulted in damages to them. The Defendants state that it appears that the Plaintiffs' claim for breach of contract against Deutsche Bank and Homeward may be based on Homeward's completion of an escrow analysis prior to the loan servicing transfer to Ocwen. The ...


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