Hartley v. Bank of Am., N.A.

ROBIN D. HARTLEY, et al., Plaintiffs, v. BANK OF AMERICA, N.A., et al., Defendants.

Case No. C16-1640RSL

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

January 25, 2017

ORDER GRANTING IN PART RCS' MOTION TO DISMISS

This matter comes before the Court on the "Fed. R. Civ. P. 12(b)(6) Motion of Defendant Residential Credit Solutions, Inc." Dkt. # 15. Plaintiffs filed this lawsuit against a number of lenders, loan servicers, trustees, and other banking institutions alleging technical errors and illegal acts that delayed plaintiffs' ability to modify their home loan and caused damage. Residential Credit Solutions ("RCS") seeks dismissal of eight of the claims asserted, arguing that they are not plausible based on the facts alleged. Having reviewed the complaint, the attached exhibits, and the memoranda submitted by the parties,¹ the Court finds as follows:

BACKGROUND

In March 2006, plaintiff Robin Hartley executed a promissory note for $500,800.00, payable to the order of First Magnus Financial Corp. Decl. of Douglas A. Johns (Dkt. # 9), Ex. 2.² The note was secured by a deed of trust on real property located at 17134 111th Ave. NE, Bothell, Washington. Id., Ex. 3. The deed of trust lists First Magnus as the lender, Stewart Title as the trustee, and Mortgage Electronic Registration Systems, Inc. ("MERS") as both the beneficiary of the trust and the "nominee" for the lender. Id.

Plaintiffs began having trouble making their mortgage payments in 2008. At the time, Countrywide Home Loans Servicing LP was servicing plaintiffs' mortgage and communicated with them regarding amounts past due and its intent to accelerate the loan. Id., Exs. 4, 5, and 30. On or about April 29, 2009, Robin Hartley and BAC Home Loans Servicing, LP (identifying itself as the lender) agreed to modify the loan, amending and supplementing the original note and deed of trust to increase the principal balance to $525,243.52 and to reduce the annual interest rate. Robin Hartley signed the Loan Modification Agreement on May 19, 2009. Id., Ex. 6. The modification was not countersigned until three years later, by which time BAC Home Loans Servicing, LP had merged into Bank of America, N.A. Bank of America executed the agreement on September 10, 2012. Id., Ex. 7.

Plaintiffs made their last payment on the loan in July 2009.

In April 2012, MERS purportedly assigned its interests as beneficiary of the deedof trust to Bank of New York Mellon, as trustee for certain certificate holders (hereinafter, "BNYM"). In January 2013, a law firm acting on behalf of an unidentified "Deed of Trust Beneficiary" notified plaintiffs that they were in default. The notice identified BNYM as the owner of the note and Bank of America as the servicer. Plaintiffs requested mediation, and the matter was referred by the Washington Department of Commerce. Months passed while Bank of America decided whether or not it wanted to pursue the notice of default, pursue mediation, and/or offer a loan modification. Id., Ex. 30. Whatever efforts Bank of America was prepared to make were cut off when the servicing of the loan was transferred to RCS in or before September 2013. Id., Exs. 12, 13, and 30. RCS promptly notified plaintiffs that they were in default and that RCS intended to accelerate the loan. Id., Ex. 30. The first mediation session was held on March 31, 2014.

In July 2014, BNYM appointed Northwest Trustee Services, Inc., ("NWTS") as the successor trustee. NWTS issued another Notice of Default, which caused plaintiffs' counsel to file another request for mediation. Despite the first and second mediation requests, NWTS took the next step toward foreclosure by issuing a Notice of Trustee's Sale on September 4, 2014. Id., Ex. 17. A week later, the mediator notified the parties that the second referral from the Department of Commerce was in error because the mediation process was still underway: the second request for mediation was withdrawn (Id., Ex. 30), and NWTS discontinued the trustee's sale (Id., Ex. 18).

Two more mediation sessions were held on March 10, 2015, and May 22, 2015. The mediator ultimately concluded that the Beneficiary had not participated in mediation in good faith under RCW 61.24.163(14) and (16). Id., Ex. 29. The mediator specifically found that:

[T]he practice and behavior of the Beneficiary servicers (first Bank of America and subsequently Residential Credit Servicing) seem out of compliance with the provisions of the [Washington State Foreclosure Fairness Act]. There was considerable dysfunction with regard to instructions delivered to their respective counsel/representatives as well as a curious lack of responsiveness given the requests by their counsel for guidance and direction. There [w]as also multiple and confusing communication from the [Beneficiary]/servicers directly to the Borrowers. . . . In this particular case the counsels/representatives for the beneficiary sought to move the process along but were stymied in their efforts by their clients. . . . For a mediation process to extend for more than two years by virtue of two major transfers (one as to servicer and a second at a later date to a different counsel) by the Beneficiary has definitely disadvantaged the Borrower's right to a timely and fair hearing whilst in mediation . . . .

Id., Ex. 29.

On November 16, 2015, plaintiffs' counsel sent four separate letters to RCS seeking information, namely:

(1) the identity of the owner and servicer(s) of the loan, a copy of the loan documents, and information regarding whether the loan is subject to recourse or an indemnification agreement (Id., Ex. 31);

(2) an itemized cure amount and a pay off statement (Id., Ex. 33);

(3) information regarding available modification programs, borrower qualifications, and program requirements (Id., Ex. 35); and

(4) investor guidelines that applied to the loan (Id., Ex. 37).

RCS sent seven letters acknowledging receipt of plaintiffs' inquiries (Id., Exs. 38-42, 44, and 46) and two letters providing a partial substantive response regarding the identity of the servicer and the investor on the loan (Id., Exs. 43 and 45). On March 1, 2016, the loan was transferred to Ditech Financial LLC for servicing.

RCS seeks dismissal of plaintiffs' claims of quiet title, breach of the covenant of good faith and fair dealing, negligence, intentional infliction of emotional distress, and violations of the Washington Collection Agency Act, the Mortgage Loan Servicing Act, the Washington Lending and Homeownership Act, and the Fair Debt Collections Practices Act. The question for the Court in this context is whether the facts alleged in the complaint or shown by the attached exhibits present a "plausible" ground for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

A claim is facially plausible when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Plausibility requires pleading facts, as opposed to conclusory allegations or the formulaic recitation of elements of a cause of action, and must rise above the mere conceivability or possibility of unlawful conduct that entitles the pleader to relief. Factual allegations must be enough to raise a right to relief above the speculative level. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief. Nor is it enough that the complaint is factually neutral; rather, it must be factually suggestive.

Somers v. Apple, Inc., 729 F.3d 953, 959-60 (9th Cir. 2013) (internal quotation marks and citations omitted). All well-pleaded factual allegations are presumed to be true, with all reasonable inferences drawn in favor of the non-moving party. In re Fitness Holdings Int'l, Inc., 714 F.3d 1141, 1144-45 (9th Cir. 2013). If the complaint fails to state a cognizable legal theory or fails to provide sufficient facts to support a claim, dismissal is appropriate. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010).

A. QUIET TITLE

Plaintiffs allege that any action to foreclose their deed of trust is barred by theapplicable statute of limitations and that they are therefore entitled to quiet title under RCW 7.28.300. Dkt. # 1 at ¶ 111. RCS has no ownership or possessory interest in the property, however, nor does it claim such an interest. It is therefore not a proper defendant to a quiet title action. See Kobza v. Tripp, 105 Wn. App. 90, 95 (2001). Plaintiffs acknowledge that their quiet title claim against RCS fails as a matter of law, but argue that RCS should remain a defendant on this claim - even though there can be no liability - so that it can provide information regarding the amount of the debt that is no longer enforceable. Complete relief on the claim can be had without RCS' involvement, however. Nor is the potential need for discovery a justification for asserting a meritless claim against a particular defendant. Even if all claims against RCS are dismissed, plaintiffs may seek information from RCS under Rule 45.

B. WASHINGTON COLLECTION AGENCIES ACT, RCW 19.16.010 ET SEQ.

Plaintiffs allege that a letter RCS sent on September 21, 2013, failed to include information required by the Washington Collection Agencies Act ("WCAA"). The WCAA does not provide a private right of action, however. RCW 19.16.460; Connelly v. Puget Sound Collections, Inc., 16 Wn. App. 62, 64 n.1 (1976) ("Under the Collection Agencies Act, it appears that only the attorney general or the local prosecuting attorney 'may bring an action' to restrain a violation of the act."). Rather, "the remedy for a WCAA violation is through the [Consumer Protection Act]." Leach v. NCO Fin. Sys., Inc., 2015 WL 5675794, at *5 (W.D. Wash. Sept. 25, 2015). See RCW 19.16.440 (declaring violations of the WCAA to be unfair acts or practices or unfair methods of competition in the...