Conquest v. WMC Mortg. Corp.

247 F.Supp.3d 618

Jerry A. CONQUEST, Plaintiff,

v.WMC MORTGAGE CORP., et al., Defendants.

CIVIL ACTION NO. 16–03604

United States District Court, E.D. Pennsylvania.

Filed March 30, 2017

Stewart C. Crawford, Jr., The Law Offices of Steward C. Crawford & Associates, Lansdowne, PA, for Plaintiff.

Eric Schnabel, Dorsey & Whitney LLP, Wilmington, DE, David A. Scheffel, Eric B. Epstein, Dorsey & Whitney LLP, New York, NY, Ross G. Currie, Dinsmore & Shohl LLP, Wayne, PA, Cecil J. Jones, Marks, O'Neill, O'Brien, Doherty & Kelly, PC, Steven J. Schildt, Jeffrey M. Brenner, Post & Schell, PC, Philadelphia, PA, Robert John Balch, Post & Schell PC, Allentown, PA, for Defendants.

OPINION

Slomsky, District Judge

Table of Contents

I. INTRODUCTION...626

II. BACKGROUND...626

A. Conveyance of the Property and the Terms of the First Mortgage...626

B. The Fire Insurance Policy...628

C. The Second Mortgage Assignment...629

D. Fire Loss and Insurance Proceeds...629

E. Alleged Misrepresentations About the Insurance...630

F. The Instant Action...631

III. STANDARD OF REVIEW...631

IV. ANALYSIS...632

A. All Claims Made Against MERSCORP Holding, Inc. Will be Dismissed...632

B. Count I—Breach of Fiduciary Duty...633

1. All Mortgage Defendants—WMC Mortgage LLC ("WMC"), Mortgage Electronic Registration Systems, Inc. ("MERS"), and Vanderbilt Mortgage and Finance ("Vanderbilt")—did not owe Plaintiff a Fiduciary Duty...634a. A Fiduciary Relationship Did Not Exist...634

b. The Mortgage Defendants Were Not Trustees of the Insurance Proceeds...634

2. HomeFirst Agency, Inc. ("HomeFirst") and Southwest Business Corporation ("SWBC") did not owe Plaintiff a Fiduciary Duty...635

3. American Modern Home ("AMH") did not owe Plaintiff a Fiduciary Duty...636

C. Count II—Civil Conspiracy...636

1. The Mortgage Defendants did not Engage in Civil Conspiracy...637

2. HomeFirst and SWBC did not Engage in Civil Conspiracy...637

3. American Modern Home did not Engage in Civil Conspiracy...638

D. Count III—Breach of Contract...638

1. Vanderbilt did not Breach its Contract with Plaintiff...638

2. WMC and MERS did not Breach a Contract with Plaintiff...639

3. HomeFirst and SWBC did not have a Contract with Plaintiff...640

4. AMH did not have a Contract with Plaintiff...640

E. Count IV—Breach of Duty of Good Faith and Fair Dealing...640

F. Count V—Negligent Misrepresentation/Fraud...641

1. Vanderbilt did not Misrepresent the Terms of the Mortgage or Insurance Coverage...642

2. WMC and MERS did not Misrepresent the Terms of the Mortgage...642

G. Count VI—Unjust Enrichment...643

1. The Mortgage Defendants were not Unjustly Enriched...643

2. HomeFirst and SWBC were not Unjustly Enriched...643

3. AMH was not Unjustly Enriched...644

H. Count VII—Trust Liability/Bailment...644

1. Constructive Trust...644

2. Bailment...645

I. Count VIII—Diminution in Value and Waste...645

J. Count IX—Conversion, Theft, and Misappropriation...646

1. The Claim of Conversion of the Insurance Proceeds by the Mortgage Defendants is Without Merit...646

a. WMC and MERS...646

b. Vanderbilt...646

2. Plaintiff's Claim of Criminal Theft Also Fails...647

3. The Claim of Misappropriation of the Insurance Proceeds is Without Merit...647

K. Count X—Consumer Law Violations...647

1. The Mortgage Defendants did not Violate the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL")...647

2. The Pennsylvania Fair Credit Extension Uniformity Act ("PFCEUA") Claim Will be Dismissed...648

3. The Mortgage Defendants did not Violate the Fair Debt Collection Practices Act ("FDCPA")...648

4. Plaintiff does not Plausibly Allege a Violation of the Federal Fair Credit Reporting Act...648

5. Plaintiff does not Plausibly Allege a Violation of the Real Estate Settlement Procedures Act...649

6. The Mortgage Defendants did not Accelerate Plaintiff's Loan under Pennsylvania Code Section 31.203(a)...649

7. The Mortgage Defendants did not violate the Pennsylvania Usury Law...649

L. Count XI—Negligence Per Se...650

V. AMENDING THE AMENDED COMPLAINT WOULD BE FUTILE...650

VI. CONCLUSION...650

I. INTRODUCTION

Before the Court are Defendants' Motions to Dismiss Plaintiff's Amended Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).¹ Defendants are WMC Mortgage LLC (Doc. No. 28), Mortgage Electronic Registration Systems, Inc. ("MERS"), MERSCORP Holdings, Inc. (Doc. No. 19), Vanderbilt Mortgage and Finance, Inc. (Doc. No 18), American Modern Home (Doc. No. 14), HomeFirst Agency, Inc. (Doc. No. 20), and Southwest Business Corporation (Doc. No. 17) (collectively "Defendants").²

On May 24, 2016, Plaintiff commenced this action in the Court of Common Pleas of Delaware County. In his Amended Complaint, he alleges that Defendants committed federal and state violations by misappropriating fire insurance proceeds. The fire loss occurred on April 10, 2014 and totally destroyed Plaintiff's home.³ Plaintiff claims that Defendants withheld from him the proceeds which would have been used to restore and repair his residential home. (Doc. No. 16 at ¶¶ 10–14.) On June 30, 2016, Vanderbilt Mortgage and Finance, Inc., Mortgage Electronic Registration Systems, Inc. and MERSCORP Holdings, Inc., and HomeFirst Agency, Inc., removed this action to this Court. (Doc. No. 1.)

On August 8, 2016, Plaintiff filed an Amended Complaint. (Doc. No. 16.) Each Defendant responded by filing a Motion to Dismiss the Amended Complaint. (Doc. Nos. 14, 17, 18, 19, 20, 28.) Plaintiff filed a response to each motion (Doc. Nos. 22, 31, 32, 33, 35), and all Defendants submitted replies. (Doc. Nos. 24, 25, 36, 37, 38, 39.) For reasons that follow, the Court will grant the Motions to Dismiss. (Doc. Nos. 14, 17, 18, 19, 20, 28.)

II. BACKGROUND

A. Conveyance of the Property and the Terms of the First Mortgage

On October 31, 2006, Plaintiff's father conveyed to him the Property located at 613 Summer Street, Media, Delaware County, Pennsylvania 19063 ("Property"). (Doc. No. 16 at ¶ 10.) To accomplish this sale, Plaintiff secured a loan of $272,000 from WMC Mortgage LLC and signed a Mortgage and Promissory Note on November 10, 2006 to cover the purchase of the Property.⁴ (Id. at ¶ 12.)

The Mortgage was executed in favor of Mortgage Electronic Registration Systems, Inc. ("MERS"), solely as nominee⁵ for WMC Mortgage LLC ("WMC"), and WMC's successors and assigns.⁶ (Doc. No. 16, Ex. B at 2.) The Mortgage provides in relevant part:

(B) "Borrower" is JERRY A. CONQUEST. Borrower is the mortgagor under this Security instrument.

(C) "MERS" is Mortgage Electronic Registration Systems, Inc. MERS is a separate Corporation that is acting solely as nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument. MERS is organized and existing under the laws of Delaware, and has an address and telephone number of P.O. Box 2026, Flint MI 48501–2026, tel. (888) 679–MERS.

(D) "Lender" is WMC MORTGAGE CORP.

(Doc. No. 19, Ex. B at 2.) On November 29, 2006, the Mortgage was recorded with the Delaware County Recorder of Deeds ("Recorder's Office"). (Id. ) The Promissory Note was never recorded with the local recorder of deeds. (Id. )

On June 22, 2011, MERS, as the nominee for WMC, executed an Assignment of Mortgage ("First Assignment") to Vanderbilt Mortgage and Finance, Inc. (Doc. No. 19, Ex. C at 2.)⁷ On July 19, 2011, the First Assignment was recorded with the Delaware County Recorder's Office. (Id. )

Pursuant to the First Assignment, MERS, on behalf of WMC, assigned to Vanderbilt all its right, title, and interest in and to the Mortgage.⁸ (Id. )

The Mortgage required that Plaintiff maintain hazard insurance on the Property. It contained the following provision:

Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term "extended coverage," and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance.

If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender's option and Borrower's expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower's equity in the Property, or the contents of the Property, against any risk, hazard or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.

* * *

In the event of loss, Borrower shall give prompt notice to insurance carrier and Lender. Lender may make proof of loss if not made promptly by Borrower. Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender's security is not lessened ... If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to Borrower...

(Doc. No. 19, Ex. B at 6–7.)

B. The Fire Insurance Policy

On April 18, 2012, Vanderbilt notified Plaintiff that it had obtained a lender-placed hazard insurance policy ("Policy") covering the Property.⁹ (Doc. No. 16 at ¶¶ 39–40.) American Modern Home insurance company ("AMH") issued the Policy to Vanderbilt. (Doc. No. 19, Ex. D at 4.) The Notice of Placement stated that Vanderbilt...