Hollenshead v. New Penn Fin., LLC

447 F.Supp.3d 283

HOLLENSHEAD, et al., Plaintiffs,

v.NEW PENN FINANCIAL, LLC, et al., Defendants.

CIVIL ACTION No. 18-3102

United States District Court, E.D. Pennsylvania.

Filed March 18, 2020

Robert P. Cocco, Law Offices of Robert P. Cocco PC, Philadelphia, PA, for Plaintiffs.

Autumn Pividori, Kelli A. Lee, Mary Linn O'Rourke, McGuire Woods LLP, Pittsburgh, PA, Thomas M. Brodowski, Blank Rome LLP, Myles A. Seidenfrau, Stradley Ronon Stevens & Young LLP, Philadelphia, PA, Christopher A. Reese, William T. Mandia, Stradley, Ronon, Stevens & Young, LLP, Cherry Hill, NJ, for Defendants.

MEMORANDUM

Goldberg, District Judge

Plaintiffs William Hollenshead ("Hollenshead") and Patricia Mirkin-Hollenshead ("Mirkin-Hollenshead"), husband and wife (collectively, "Plaintiffs"), bring this case alleging that the improper servicing of their home loan has resulted in threats of foreclosure proceedings and wrongful accounting of their loan. They have sued NewRez, LLC d/b/a Shellpoint Mortgage Servicing ("Shellpoint"), Bank of America, N.A. ("BOA"), and Ocwen Loan Servicing, LLC ("Ocwen") under the Real Estate Procedures Settlement Act, 12 U.S.C. § 2605(f)(1), the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-1, et seq., and for breach of contract and unjust enrichment.

Defendant Ocwen has filed the current Motion seeking dismissal of all claims against it. For the following reasons, I will grant the Motion in part and deny it in part.

I. FACTS IN THE SECOND AMENDED COMPLAINT

The following facts are taken from Plaintiff's Second Amended Complaint:¹

Plaintiffs owned a property located at 3098 Merlin Road in Chester Springs, Pennsylvania. In November 2012, Plaintiff Hollenshead entered into a loan modification to resolve an earlier foreclosure action brought by Defendant BOA. Paragraph 3A of the Loan Modification Agreement stated that all existing arrears related to the mortgage loan for the property were capitalized into the loan principal, even to the extent that such arrears included "unpaid" amounts. During that settlement, Defendant Ocwen acted as an agent of BOA. (Sec. Am. Compl. ¶¶ 7–9.)

In June 2014, Hollenshead was threatened with a county tax sale due to a $7,752.22 county property tax bill from 2012 that Defendant Ocwen—the loan servicer—had allegedly failed to capitalize into the loan modification principal. Ocwen paid the tax bill and then assessed the paid tax to Plaintiffs' loan account. (Id. ¶¶ 10–11.)

In January 2016, servicing of the loan transferred from Defendant Ocwen to Defendant Shellpoint. In the course of transferring service, Shellpoint reimbursed Ocwen for advances under the standard terms of loan and lender/servicer servicing contracts. As such, upon assuming the loan's servicing, Shellpoint compensated Ocwen's advance outlay for the unpaid 2012 tax arrears. (Id. ¶¶ 12–13.)

In June 2016, Plaintiff fell into arrears due to Defendants BOA and Shellpoint's increase of the monthly escrow component of the mortgage loan payment to cover the 2012 property tax bill. In August 2016, Plaintiff Mirkin-Hollenshead called Shellpoint regarding the increased monthly payments. Shellpoint told Mirkin-Hollenshead that it would send Plaintiffs a payment plan for the alleged arrears. As of August 2016, Plaintiffs were only one month in arrears. (Id. ¶¶ 14, 17–19.)

On September 1, 2016, Shellpoint sent Plaintiffs an Act 91 pre-foreclosure Notice demanding payment of alleged arrears of $13,668, including a lump sum of late charges in the amount of $2,780.44. Plaintiffs allege that, at that time, they were actually in arrears on principal and interest in the amount of approximately $2,200. The repayment agreement letter sent by Shellpoint, however, demanded payment of the arrears through a down payment of $3,872 and three equal installments of $8,428—an amount over double the regular monthly payments of principal, interest, and escrow payments. (Id. ¶¶ 20–22.)

Plaintiffs allege that, due to the unpaid 2012 property tax bill shortage, Shellpoint committed two errors relating to the servicing of the mortgage loan. First, Shellpoint charged an incorrect amount of monthly escrow on Plaintiffs' account to cover the unpaid 2012 taxes. Second, Shellpoint automatically assessed roughly $2,000 in property inspection fees from September 2013 through 2017, despite the fact that it had no basis to believe the property was vacant and/or not in good condition. (Id. ¶ 23.)

On June 7, 2017, Plaintiffs sent Shellpoint a combined Request for Information and Notice of Error ("RFI/NOE") letter under RESPA requesting correction of the loan's accounting. In a June 25, 2017 response, Shellpoint stated that it did not have any records of a delinquent tax payment for 2012. Yet, Shellpoint's own "pay history" showed the 2012 school tax payment. (Id. ¶¶ 24–25.)

Shellpoint went on to state:

As detailed within the Escrow Analysis from October 26, 2017, an escrow shortage of $430.90 was calculated due to an increased hazard insurance premium. Once spread over 12 months, the monthly shortage payment was $35.91. Meanwhile at that time, Shellpoint anticipated paying a total of $11,373.96 for the upcoming year's bills (comprised of the Hazard Insurance of $3,306.00, School Tax of $6474.57, Town Tax of $233.46 and County Tax of $1,359.98). Once spread over 12 months, the monthly bill payment was $947.83. Accordingly, the monthly escrow payment was $983.74. Along with the monthly principal & interest payment of $2,480.60, the total monthly payment was $3,464.34, effective December 1, 2017.

(Id. ¶ 27 (emphasis in original).) Plaintiffs allege that this response ignored the disputed period and failed to recognize that any escrow re-analysis for the later period was wrongly premised on, among other accounting errors, a double payment of taxes from 2014. (Id. )

Plaintiffs brought this action on July 23, 2018. On July 16, 2019, Plaintiffs filed a Second Amended Complaint against Defendants Shellpoint, BOA, and Ocwen Loan Servicing, alleging (1) violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"); (2) breach of contract; (3) unjust enrichment; and (4) violation of RESPA (only as to Defendant Shellpoint).

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6) ; see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The United States Supreme Court has recognized that "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quotations omitted). "[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" and only a complaint that states a plausible claim for relief survives a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (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 678, 129 S.Ct. 1937. A complaint does not show an entitlement to relief when the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id. at 679, 129 S.Ct. 1937.

The United States Court of Appeals for the Third Circuit has detailed a three-step process to determine whether a complaint meets the pleadings standard. Bistrian v. Levi, 696 F.3d 352 (3d Cir. 2014). First, the court outlines the elements a plaintiff must plead to state a claim for relief. Id. at 365. Next, the court must "peel away those allegations that are no more than conclusions and thus not entitled to the assumption of truth." Id. Finally, the court "look[s] for well-pled factual allegations, assume[s] their veracity, and then ‘determine[s] whether they plausibly give rise to an entitlement to relief.’ " Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ). The last step is " ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ " Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ).

III. DISCUSSION

Defendant Ocwen moves to dismiss the UTPCPL claim, the breach of contract claim, and the unjust enrichment claim. I address each individually.

A. UTPCPL Claim

Plaintiffs' UTPCPL claim alleges that Defendants' September 1, 2016 Act 91 Notice failed to adhere to the requirements set forth in the statute.² Specifically, Plaintiffs assert that the Act 91 Notice failed to itemize the $2,780.44 in late charges and the tax arrears at issue. Moreover, Plaintiffs allege that Defendants failed to state material facts or otherwise misrepresented the true facts regarding the loan, causing Plaintiffs to overpay loan amounts. Plaintiffs go on to contend that the conduct by Defendants constituted unfair or deceptive acts and practices under the UTPCPL.

Ocwen posits that the UTPCPL claim must be dismissed because (a) it is barred by the economic loss doctrine, and (b) Plaintiffs fail to adequately plead a UTPCPL claim.

1. Economic Loss Doctrine

Pennsylvania's economic loss doctrine bars a plaintiff from recovering tort damages for economic losses stemming solely from breach of contract.

Werwinski v. Ford Motor Co., 286 F.3d 661, 671 (3d Cir. 2002). More specifically, it prohibits claims "(1) arising solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract." McGuckin v. Allstate Fire & Cas. Ins. Co., 118 F. Supp. 3d 716, 720 (E.D. Pa. 2015) ...