Howes v. SN Servicing Corp.

JEFFREY HOWES, et al. v. SN SERVICING CORP., et al.

Civil Action No. CCB-20-670

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

March 9, 2021

MEMORANDUM

This action concerns the allegedly improper servicing of a mortgage on the plaintiffs' residence. The plaintiffs, Jeffrey and Tonya Howes, raise thirteen causes of action against eight defendants who at various times between 2001 and the present either held or serviced their mortgage. These defendants include three groups: (1) Wells Fargo Bank, N.A. and U.S. Bank, N.A., as Trustee for WFASC 2003¹ (the "2003 Trust") (collectively, the "WF" defendants); (2) SN Servicing Corporation ("SN Servicing") and U.S. Bank Trust, N.A., as Trustee of PRP II PALS Investments Trust ("PRP") (collectively, the "SN" defendants); and (3) American Mortgage Investment Partners Management, LLC ("AMIP"), FCI Lender Services, Inc. ("FCI"), Wilmington Savings Fund, FSB, as Trustee of Residential Credit Opportunities Trust V-B ("RCO"), and Samuel I. White P.C. ("White") (collectively, the "AMIP" defendants). Before the court are motions to dismiss filed by the WF defendants (ECF 20) and the SN defendants (ECF 21) as well as the AMIP defendants' motion for a more definite statement (ECF 22). The matter has been fully briefed and oral argument was heard on January 29, 2021. For the reasons discussedherein, the WF defendants' motion will be granted, the SN defendants' motion will be granted in part and denied in part, and the AMIP defendants' motion will be granted.

BACKGROUND

What follows in this section is a brief overview of a complex series of events related to this action.² The facts alleged in this suit extend twenty years, back to 2001, when Jeffrey and Tonya Howes executed a construction loan, secured by a mortgage on their residence, in the amount of $696,130. (ECF 8, First Am. Compl. ("FAC") ¶ 21). The loan agreement allowed the lender to assess late fees, attorneys' fees, and other costs. (See id., Ex. A, Construction Note at 146). In 2003, when construction was complete, the loan was modified and converted to a regular residential mortgage note, and the Howes paid an additional $46,130 to reduce the principal balance to $650,000. (Id. ¶ 22). The plaintiffs made timely payments on the mortgage for several years. (Id. ¶¶ 25-26). Then the Great Recession struck; the Howes made several untimely payments on their loan and sought a modification under the Treasury Department's Home Affordable Modification Program. (Id. ¶¶ 28-29). Both before and after the Howes defaulted, the mortgage and the responsibility to service it were transferred numerous times among the various defendants named in this action: it was held and serviced by the WF defendants until 2013, (id. ¶¶ 65-68), by the SN defendants until 2018, (id. ¶ 146), and thereafter by the AMIP defendants. The plaintiffs contend that the various noteholders and servicers have, over the years, imposedexcessive legal and late fees, refused to accept or properly apply timely payments, refused to respond to Qualified Written Requests, and filed improper foreclosure actions, among other things.

The Howes raised these grievances by filing suit on August 19, 2019, in the Circuit Court for Howard County, Maryland.³ (ECF 1, Notice of Removal). The defendants removed the case to this court on March 12, 2020, on the basis of federal question jurisdiction and diversity jurisdiction. (Id.). On July 23, 2020, the defendants moved to dismiss the claims against them and for a more definite statement. The matter has been fully briefed, oral argument has been heard, and the matter is now ripe for resolution.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain a short and plain statement of the claim showing that the pleader is entitled to relief. Each allegation must be simple, concise, and direct. Fed. R. Civ. P. 8(d)(1). When a complaint does not comply with these requirements, the court may strike any portions that are redundant or immaterial. Fed. R. Civ. P. 12(f). Lengthy pleadings offering confusing factual narratives and conclusory statements of law place an unjustified burden on the court and any party who must respond. North Carolina v. McGuirt, 114 F. App'x 555, 558-59 (4th Cir. 2004).⁴ A court therefore may, in its discretion, dismiss a complaint if it is "so confused, ambiguous, vague or otherwise unintelligible that its true substance, if any, is well disguised." Salahuddin v. Cuomo, 861 F.2d 40, 42 (2d Cir. 1988); seealso McGuirt, 114 F. App'x at 559. Additionally, under Rule 12(e), a party may move for a more definite statement of a complaint which is "so vague or ambiguous that the party cannot reasonably prepare a response." A Rule 12(e) motion is typically "designed to strike at unintelligibility rather than simple want of detail." Gladney v. Am. Western Home Ins. Co., No. ELH-15-1559, 2015 WL 5009088, at *5 (D. Md. Aug. 20, 2015) (internal quotation omitted).

To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). "To satisfy this standard, a plaintiff need not 'forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). "Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is 'probable,' the complaint must advance the plaintiff's claim 'across the line from conceivable to plausible.'" Id. (quoting Twombly, 550 U.S. at 570). Additionally, although courts "must view the facts alleged in the light most favorable to the plaintiff," they "will not accept 'legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments'" in deciding whether a case should survive a motion to dismiss. U.S. ex rel. Nathan v. Takeda Pharm. North Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013) (quoting Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012)).

DISCUSSION

The Howes's amended complaint contains thirteen counts, which for clarity of analysis may be condensed into the following seven claims:

1. Declaratory Judgment against all defendants (Counts I, II, and III)2. Violations of Maryland's Credit Grantor Closed End Credit Provisions against all defendants (excluding White) (Counts IV and V)

3. Breach of Contract against AMIP, PRP, and RCO (Count VI)

4. Violations of Maryland's Consumer Protection Act against the SN defendants (Count VII)

5. Violations of Maryland's Mortgage Fraud Protection Act against the SN defendants and the AMIP defendants (excluding White) (Counts VIII and IX)

6. Violations of Maryland's Consumer Debt Collection Act against the SN defendants and the AMIP defendants (Counts X and XI)

7. Violations of the Real Estate Settlement Procedures Act against SN Servicing and FCI (Counts XII and XIII)

The WF and SN defendants challenge the complaint both on the grounds that it fails to conform to the federal pleading requirements of Rule 8(a) and on the grounds that it fails to state a claim for relief. The AMIP defendants challenge the complaint exclusively on the grounds that it fails to conform to the federal pleading requirements of Rule 8(a). Where the complaint is sufficiently clear, the court will reach the merits of the Howes's claims; where it is not, the court will consider what appropriate relief, if any, to order.

I. Declaratory Judgment

In Count I, the Howes seek a declaratory judgment pursuant to Maryland's Uniform Declaratory Judgments Act defining the rights of the defendants to foreclose on the note and specifying the amount owed, if any, by the Howes on the loan agreement.⁵ Federal courts sitting in diversity, as this one is, apply federal procedural law and state substantive law; this court therefore must treat a state court declaratory action removed to federal court as invoking the Federal Declaratory Judgment Act. See Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 261 n.3 (4th Cir. 2013).

The Federal Declaratory Judgment Act provides federal district courts power "[i]n a case of actual controversy" to "declare the rights and other legal relations of any interested party seeking such a declaration, whether or not relief is or could be sought." 28 U.S.C. § 2201(a). "This power has consistently been considered discretionary." Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256 (4th Cir. 1996). A declaratory judgment action is appropriate when "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality[.]" MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (internal quotations omitted). One of the purposes of the act is to allow a party in an uncertain position to "gain relief from the insecurity caused by a potential suit waiting in the wings." United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494 (4th Cir. 1998).

The Howes contend that a declaratory judgment clarifying whether any debt buyers can enforce the note against them is proper in light of a pending foreclosure action. They further argue that it would be inefficient to dismiss the claims against all these defendants while litigating issues regarding their actions, because any judgment in favor of the Howes in this action would provide the debt buyers with claims against these defendants. But in 2013 Wells Fargo and the 2003 Trust transferred the note and the rights to service it, and in 2018 SN Servicing and PRP did the same. (FAC ¶¶ 65-68, 146). These defendants do not assert a right to enforce any note or other financial interest against the Howes, they are powerless to offer the Howes an adjustment or offset to any fees or other...