United States District Court, E.D. Pennsylvania
DENISE M. DAVIS and R. CRAIG DAVIS, Plaintiffs,
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE, HOMEWARD RESIDENTIAL, INC., and OCWEN LOAN SERVICING, LLC, Defendants.
S. Perkin, M.J.
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.
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
(“Defendants”) in the Court of Common Pleas of
Lancaster County. 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).
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. 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.
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.
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.
STANDARD OF REVIEW.
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).
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.
Breach of Contract - Homeward and Deutsche Bank (Counts I and
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
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
79. As a direct and proximate cause of the actions of
Homeward as agent for Deutsche Bank, Deutsche breached their
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.
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 ...