Hazelwood v. Bayview Loan Servicing

KEITH HAZELWOOD, Plaintiff, v. BAYVIEW LOAN SERVICING, LLC, et al., Defendants.

Case No. 1:20-cv-726

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

February 19, 2021

Dlott, J.

Bowman, M.J.

REPORT AND RECOMMENDATION

Through counsel, Plaintiff Keith Hazelwood initiated this lawsuit on September 15, 2020 against Defendant Bayview Loan Servicing, LLC ("Bayview") and JPMorgan Chase Bank, N.A. ("Chase"). Currently pending is Defendant Bayview's motion to dismiss, which has been referred to the undersigned magistrate judge for preliminary consideration. (Doc. 2). Pursuant to that referral, the undersigned now recommends the dismissal of two of Plaintiff's four claims.

I. Standard of Review

In evaluating the pending motion under Rule 12(b)(6), this Court must "construe the complaint in the light most favorable to the nonmoving party, accept the well-pled factual allegations as true, and determine whether the moving party is entitled to judgment as a matter of law." Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007). At the same time, this Court

need not accept the plaintiff's legal conclusions or unwarranted factual inferences as true. Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000). To state a valid claim, a complaint must contain direct or inferential allegations respecting all the material elements under some viable legal theory. Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005), cert. denied, 547 U.S. 1111, 126 S. Ct. 1911, 164 L.Ed.2d 663 (2006).

Id., 508 F.3d at 336-37. While the determination of whether Plaintiff's allegations state any claim rests primarily upon the allegations of its complaint, "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001) (internal quotation and citation omitted); accord Luis v. Zang, 533 F.3d 619, 632 (6th Cir. 2016). Without converting Bayview's motion to one for summary judgment, the undersigned considers the allegations in the instant complaint and the 219 pages of exhibits attached thereto. (See Doc. 1).

II. Background and Key Allegations

Plaintiff's complaint concerns residential property located at 3906 Riley Street, South Lebanon, Ohio ("the Property"). (Doc. 1 at ¶ 1). Hazelwood alleges that he purchased the Property with his now ex-wife, non-party Virginia Hazelwood, to be their primary residence at the time of purchase. Hazelwood and his ex-wife executed a mortgage on the Property in July 2005 ("the Loan"). Defendant JPMorgan Chase Bank, N.A. ("Chase") serviced the Loan until Chase transferred servicing rights to Bayview effective on or about March 1, 2018.(Doc. 1 at ¶¶ 2, 5).

At some point after purchasing the Property, Plaintiff divorced Virginia Hazelwood and moved to Fort Thomas, Kentucky, where he lives with his current wife, non-party Lori Hazelwood. (Doc. 11 at ¶ 20). Plaintiff alleges that he notified Chase of his move "and received correspondence regarding the Loan from Chase for many years" at his Kentuckyaddress. (Doc. 1 at ¶ 21). Although servicing of the loan transferred from Chase to Bayview on or around March 1, 2018, Hazelwood alleges that he never received notice of that transfer because it was mailed to the Property in Ohio instead of to his Kentucky address. (Doc. 1 at ¶¶ 23-24). Plaintiff alleges that he made his usual electronic payments of the Loan to Chase on or around the 23rd day of each month, for the payments due April 1 through September 1 of 2018, through the bill payment feature of his checking account. (Id. at ¶ 28).

Plaintiff alleges that he first received notice that his payments had not been received through a letter dated September 18, 2018 from a law firm retained by Bayview to initiate a foreclosure action. (Id. at ¶ 29). The September 18, 2018 letter was mailed to Plaintiff in Kentucky. (Id. at ¶ 30). On September 19, 2018, Bayview filed a foreclosure action against Plaintiff in state court. (Id. at ¶ 31). Thereafter, Plaintiff received a letter from Chase dated September 26, 2018 at his Kentucky address, stating that a single mortgage payment of $764.48 had been received but was being returned. (Id. at ¶ 33). Plaintiff notified Chase and Bayview in writing on September 26, 2018 that he had not received notice of the transfer, had remitted timely payments, and that those payments had not been returned. In response, Chase maintained that it had forwarded Plaintiff's April and May 2018 payments to Bayview, and returned payments from June through September to Plaintiff. (Id. at ¶ 35).

On October 1, 2018, Hazelwood received a letter from Bayview's foreclosure counsel demanding a total of $8,091.33 to reinstate the loan, consisting of six allegedly "missed" payments (April through September 2018), inspections, and foreclosure fees.(Id. at ¶ 36). In correspondence from Bayview dated October 31, 2018, Plaintiff alleges that Bayview falsely claimed that Plaintiff himself had sent documentation to Bayview in June 2018, that notice of the loan transfer had been mailed to Plaintiff in Kentucky, and that Bayview did not receive the May 2018 payment. (Id. at ¶ 37). Shortly before receiving the October 31, 2018 correspondence from Bayview, Plaintiff retained counsel. (Id. at ¶ 39).

Plaintiff also asserts that Bayview failed to comply with a legal requirement that it send Plaintiff a Flex Modification Trial Period Plan Solicitation offer at the required time, prior to initiating foreclosure. (Id. at ¶¶ 42-44). Bayview claimed to have sent an April 10, 2019 Flex Modification, but no copy was received prior to April 19, 2019. Plaintiff made the Flex Modification payments for May, June and July 1, 2019 on May 31, 2019, but Bayview again allegedly failed to properly apply them and instead submitted new Flex Modification offers dated June 7, 2019 and September 13, 2019. (Id. at ¶¶ 45-47).

On September 24, 2019, after reconciling the prior trial plan payments, Bayview sent a permanent modification offer ("the Modification") that required the first payment to be made before August 1, 2019, prior to the date of the offer. The permanent Modification increased the amount due on the Loan and included foreclosure costs. (Id. at ¶ 48). Represented by counsel at the time, Plaintiff alleges he "promptly accepted that permanent modification" and returned it to Bayview's foreclosure counsel with a check that covered August through October 2019 payments. (Id. at ¶ 49). However, Plaintiff alleges that Bayview failed to return a fully executed copy of the Modification and has not filed it with the Warren County, Ohio Recorder. (Id. at ¶ 50).

On or around July 23, 2020, Plaintiff sent a "Notice of Error" ("NOE") that listed seventeen errors allegedly made by Bayview in servicing the loan. Bayview acknowledged receipt of the Notice of Error on August 5, 2020. (Id. at ¶¶ 51, 53). Approximately two weeks later, Plaintiff sold the Property and paid off the Loan including the non-applied payments from March, April and May 2018 and nearly $4,000 in allegedly improper foreclosure fees. (Id. at ¶ 54). On September 15, 2020, Plaintiff filed this lawsuit, alleging breach of contract, a failure to respond to the NOE, violations of the Ohio Residential Mortgage Lending Act and the Ohio Consumer Sales Practices Act. On December 7, 2020, Bayview moved to dismiss under Rule 12(b)(6), Fed. R. Civ. P.

III. Analysis

A. Plaintiff's Breach of Contract Claim

Defendant Bayview first argues persuasively that it is entitled to dismissal of the breach of contract claim under Ohio's voluntary payment doctrine, based upon Plaintiff's acceptance of the Loan Modification and payment in full of the Loan when he sold the Property. The doctrine, which is an affirmative defense, holds that one who voluntarily pays another with full knowledge of the facts is not entitled to recovery. See Nationwide Life Ins. Co. v. Myers, 67 Ohio App.2d 98, 103, 425 N.E.2d 952, 956 (1980). Described as an "ancient" doctrine adopted by many states, the voluntary payment doctrine has common-law roots derived from English law. See Randazzo v. Harris Bank Palatine, N.A., 262 F.3d 663, 667 (7th Cir. 2001). In a description that appears equally applicable to Ohio's version of the doctrine, the Seventh Circuit explained the genesis and history of the doctrine as applied in Illinois. The "reason for the rule" is

quite obvious when applied to a case of payment on a mere demand of money unaccompanied with any power or authority to enforce such demand, except by a suit at law. In such case, if the party would resist an unjust demand, he must do so at the threshold. The parties treat ... each other on equal terms, and if litigation is intended by the one of whom the money is demanded, it should precede payment. When the person making the payment can only be reached by a proceeding at law, he is bound to make his defense in the first instance, and he cannot postpone the litigation by paying the demand in silence or under a reservation of right to litigate the claim, and afterward sue to recover the amount paid.

Id., 262 F.3d 663, 668 (quoting Smith v Prime Cable of Chicago, 276 Ill. App.3d 843, 658 N.E.2d 1325 (Ill Ct. App. 1st Dist., 1995) (additional quotation omitted)).

Ohio's version of the same doctrine was summarized in Scott v. Fairbanks Capital Corp., 284 F.Supp.2d 880, 894 (S.D. Ohio 2003).

As articulated by the Ohio Supreme Court: "In the absence of fraud, duress, compulsion or mistake of fact, money, voluntarily paid by one person to another on a claim of right to such payment, cannot be recovered merely because the person who made the payment mistook the law as to his liability to pay." State ex rel. Dickman v. Defenbacher, 151 Ohio St. 391, 395, 86 N.E.2d 5, 7 (1949). Simply stated, "a person who voluntarily pays another with full knowledge of the facts will not be entitled to restitution."

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