Ayres v. PHH Mortg. Corp.

ANGELA AYRES, et al., Plaintiffs, v. PHH MORTGAGE CORPORATION, et al., Defendants.

Case No.: GJH-20-275

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Southern Division

June 29, 2020

MEMORANDUM OPINION

Pro se Plaintiffs Angela Ayres and Stephan Ayres sued Defendants PHH Mortgage Corporation ("PHH"), Ocwen Loan Servicing, LLC ("Ocwen"), and Bank of New York Mellon, N.A. ("Bank of New York Mellon") in the Circuit Court for Prince George's County, Maryland alleging that a loan modification agreement they entered into violated the Maryland Consumer Protection Act ("MCPA"), MD. CODE ANN., COM. LAW § 13-101 et seq., the Maryland Consumer Debt Collection Act ("MCDCA"), MD. CODE ANN., COM. LAW § 14-201 et seq., and the Maryland Mortgage Fraud Protection Act ("MMFPA"), MD. CODE ANN., REAL PROP. § 7-401 et seq., or, in the alternative, that the loan modification agreement constituted common law negligence. ECF No. 2. Defendants subsequently removed the case to this Court. ECF No. 1. Now pending before the Court are Defendants' Motion to Dismiss, ECF No. 10, Plaintiffs' Motion to Remand, ECF No. 11, and Plaintiffs' Motion to Strike Defendant's Motion to Dismiss, ECF No. 14. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2018). For the following reasons, Defendants' Motion to Dismiss is granted, Plaintiffs' Motion to Remand is denied, and Plaintiff's Motion to Strike Defendant's Motion to Dismiss is denied.

I. BACKGROUND¹

On March 18, 1991, Plaintiff Stephen Ayres borrowed $72,660.00 (the "Loan") from Market Street Mortgage Corporation in order to finance the purchase of a property (the "Property"). ECF No. 2 ¶ 17; ECF No. 2 at 47. The Loan was evidenced by a Note signed by Mr. Ayres, see id. at 47-48, and it was secured by a Deed of Trust in favor of Market Street Mortgage Corporation, see id. at 43-46.

In 2013, Salomon Brothers Realty Corp. ("Salomon Brothers") was the holder of the Note, id. ¶ 21, and Defendant Ocwen was the mortgage servicer, id. ¶ 20. On June 3, 2013, Plaintiffs sued Defendant Ocwen and prior mortgage servicers and noteholders in this Court. See Ayres v. Ocwen Loan Servicing, LLC, No. CCB-13-1597, ECF No. 1 (D. Md.) ("Ayres I"). On August 27, 2014, the Court dismissed the case, but granted Plaintiffs leave to amend. See Ayres I, ECF Nos. 55, 56. On October 24, 2014, Plaintiffs filed an amended complaint against Defendant Ocwen and Salomon Brothers. See Ayres I, ECF No. 61 ¶¶ 11, 12. Relevant to this case, the amended complaint alleged that the defendants violated the MCPA, MCDCA, and MMFPA or, in the alternative, committed negligence by misrepresenting facts related to the status of the Loan and attempting to collect sums related to the Loan that were not due.² See Ayres I, ECF No. 61. The amended complaint also requested declaratory and injunctive relief, including an accounting of the amounts due on the Loan. Id. On September 8, 2015, the Court dismissed the MMFPA claim with prejudice because the amended complaint did not allege that Plaintiffs had relied on any misrepresentations made by the defendants or suffered any damagesbased on that reliance, and it dismissed the negligence claim with prejudice because the defendants did not owe any duty to Plaintiffs. See Ayres I, ECF No. 89 at 46-51.

On October 19, 2015, Plaintiffs filed a second amended complaint. Ayres I, ECF No. 100. It realleged the same claims as the previous two complaints, including the MMFPA and negligence claims that had previously been dismissed with prejudice. Id. On November 9, 2016, the Court granted summary judgment to the defendants on Plaintiffs' MCPA claim because the evidence established that Plaintiffs "did not rely upon any alleged misrepresentation made by defendants," and "there was no evidence that defendants made any misrepresentation with actual knowledge or with reckless to disregard as to the falsity of the asserted right." Ayres I, ECF No. 158.

Plaintiffs appealed, see Ayres I, ECF No. 161, and the United States Court of Appeals for the Fourth Circuit remanded the case back to this Court with instructions to enter a final judgment with respect to the MCDCA claim and claim for declarative and injunctive relief, ECF No. 163. This Court entered a clarifying order on October 23, 2017 that unambiguously entered judgment in favor of the defendants. See Ayres I, ECF No. 171. The order clarified that the prior order had dismissed the MCDCA claim because "there was no evidence that defendants made any misrepresentation with actual knowledge or with reckless disregard to the falsity of the asserted right," and that the declaratory judgment claim was "barred under Section 3-409(b) of the Declaratory Judgment Act because a special form of remedy is otherwise provided by statute." Id. On May 7, 2018, the Fourth Circuit affirmed this Court's decisions to dismiss the case with prejudice and rule as a matter of law against Plaintiffs. Ayres I, ECF No. 179.

At some point during the Ayres I litigation, Defendant Bank of New York Mellon became the new holder of the Note and assignee of the Deed of Trust. ECF No. 2 ¶¶ 10, 21. On June 25,2018, Plaintiffs' unpaid balance on the Loan was $51,072.31, with a payment due date of July 1, 2018. Id. at 51. On July 5, 2018, Defendant Ocwen mailed Plaintiffs a Notice of Default stating that they would need to pay the total amount of $51,072.31 by August 11, 2018 in order to cure the default. Id. at 49-51. On November 1, 2018, Plaintiffs entered into a Loan Modification Agreement ("LMA") with Defendant Ocwen modifying the terms of repayment for the Loan. Id. at 33-41. The LMA provided that the principal balance due upon maturity of the Loan would be $89,132.83, together with accrued interest and all advancements made under the terms of the mortgage. Id. At some point later, Defendant Ocwen merged with Defendant PHH, and PHH became the new mortgage servicer for the Loan. Id. ¶ 9.

On September 26, 2019, Mrs. Ayres sent a Qualified Written Request ("QWR") to Brett L. Messinger, an attorney representing Defendant PHH. Id. at 79-81. The QWR stated that the Loan was not in default when Ocwen took over as servicer in 2011 because the previous loan servicer, Litton, had misapplied payments to a nonexistent forbearance plan. Id. It stated further that the LMA Plaintiffs had entered into with Ocwen was predatory because it claimed amounts not owed and it was based on erroneous accountings by Defendant Ocwen. Id. It demanded an accounting of how Defendant Ocwen had arrived at the amounts demanded in the LMA and that Plaintiffs be offered a new, fair loan modification agreement. Id.

On December 2, 2019, Mr. Messinger sent a Response to Mrs. Ayres based on Defendant PHH's "review of the servicing records and publicly recorded information regarding [the Property]." Id. at 82-84. The Response stated that based on its records, the Loan was in default in 2011 when Ocwen became the servicer. Id. It explained that the misapplication of payments about which Mrs. Ayres complained occurred before Ocwen took over, but if Mrs. Ayres provided proof of payment for that period, Defendant PHH could evaluate whether the paymentswere properly credited. Id. The Response also stated that the LMA was not predatory and that Mrs. Ayres' calculations in the QWR regarding the amount actually owed were inaccurate because Mrs. Ayres' amount included only the principal, simple interest, and late charges; according to Defendant PHH, the unpaid principal balance includes all outstanding amounts, including interest arrearage, escrow advances, and other fees and costs assessed to the account under the terms of the Note and Deed of Trust. Id.

On January 4, 2020, Mrs. Ayres received information regarding a mortgage audit she had requested from a third-party called Loantech. Id. at 85. The auditor reported that it was his opinion that Plaintiffs' ongoing loan balance had been incorrectly calculated and that the future balloon payment due upon maturity of the Loan should be $29,211.60, not $89,132.83. Id. at 86.

On January 7, 2020, Plaintiffs filed a Complaint in the Circuit Court for Prince George's County, Maryland related to the allegedly fraudulent LMA. ECF No. 2. In Count One, it alleges that Defendants violated the MCPA and Defendant Ocwen violated the MCDCA by misrepresenting the status of the Loan, failing to investigate and correct the amount owed on the Loan, and attempting to collect an amount not owed. Id. In Count Two, it alleges that Defendants violated the MMFPA by executing a LMA that included amounts not owed. Id. As an alternative to the claims in Counts One and Two, Count Three alleges that Defendants were negligent in making misrepresentations about the amount owed on the Loan through the LMA. Id. In Count Four, Plaintiffs request declaratory and injunctive relief, including an accounting of the true amounts owed prior to the LMA and an order that Defendants "proffer a fair and equitable modification inclusive of [a] principle reduction" of $89,133.00 to $29, 211.60.³

On January 31, 2020, Defendants removed the case to this Court based on diversity jurisdiction. ECF No. 1. On February 7, 2020, Defendants filed a Motion to Dismiss based on res judicata and failure to state a claim. ECF No. 10. On February 14, 2020, Plaintiffs filed a Motion to Strike Defendants' Motion to Dismiss and a response to Defendants' Motion to Dismiss, ECF No. 14, and Defendants filed a reply in support of their Motion to Dismiss and a response to Plaintiffs' Motion to Strike on February 28, 2020, ECF No. 17. Also on February 7, 2020, Plaintiffs filed a Motion to Remand. ECF No. 11. Defendants filed a response on February 21, 2020, and Plaintiffs filed a reply on February 25, 2020, ECF No. 16.

II. MOTION TO REMAND

Plaintiffs contend that the Court must remand this case to state court because the Complaint alleges only state law claims and the amount in controversy is not greater than $75,000. ECF No. 11 ¶ 4. Pursuant to 28...