Johnson v. BAC Home Loans Servicing, LP

867 F.Supp.2d 766

Rosa H. JOHNSON, Edgar W. Johnson, Plaintiffs,

v.BAC HOME LOANS SERVICING, LP fka Countrywide Home Loans Servicing LP, The Law Firm of Hutchens, Senter & Britton, P.A., Substitute Trustee Services, Inc., Deborah N. Hooker, C.T. Salyer, John A. Mundulak, Defendants.

No. 5:10–CV–271–F.

United States District Court,

E.D. North Carolina,

Western Division.

Sept. 29, 2011.

Rosa H. Johnson, Rougemont, NC, pro se.

Edgar W. Johnson, Rougemont, NC, pro se.

Hilton Terry Hutchens, Jr., Hutchens, Senter & Britton, P.A., Fayetteville, NC, for Defendants.

ORDER

JAMES C. FOX, Senior District Judge.

This matter is before the court on the Motion to Dismiss the Amended Complaint pursuant to 12(b)(6) filed by Defendant Substitute Trustee Services, Inc. [DE–61], the Motion to Dismiss the Amended Complaint pursuant to 12(b)(6) filed by Defendant The Law Firm of Hutchens, Senter & Britton, P.A. [DE–62], the Motion to Dismiss the Amended Complaint pursuant to 12(b)(5) filed by Defendants Deborah N. Hooker and John A. Mandulak [DE–71], the Motion to Dismiss the Amended Complaint pursuant to 12(b)(6) filed by Defendants Deborah N. Hooker, C.T. Salyer and John A. Mandulak [DE–73] and the Motion to Dismiss the Counterclaim of Defendant BAC Home Loans Servicing, LP pursuant to 12(b)(6) filed by Plaintiffs Rosa H. Johnson and Edgar W. Johnson [DE–80]. All briefing, responses and replies are complete. Accordingly, the motions are ripe for ruling.

I. PROCEDURAL HISTORY

Plaintiffs Rosa H. Johnson and Edgar W. Johnson (“Plaintiffs” or “the Johnsons”), proceeding pro se, initiated this action by Complaint [DE–1] filed July 2, 2010. On September 27, 2010, Plaintiffs filed an Amended Complaint [DE–53], alleging six counts. Count I alleges a violation of the Fair Debt Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. § 1692 et seq. The remaining counts recite the following state law claims: breach of contract (Count II), breach of implied duty of good faith (Count III), breach of fiduciary duty (Count IV), and violations of the North Carolina Mortgage Debt Collection and Servicing Act, N.C. Gen.Stat. § 45–90 et seq. (Count V), and the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen.Stat. § 75–1.1 et seq. (Count VI). Plaintiff alleges the claims arise out of “improprieties surrounding the servicing of a note and deed of trust secured by real property purchased by Plaintiffs,” which eventually resulted in Plaintiffs' property being sold at a foreclosure sale. Amend. Compl. ¶¶ 1, 4 [DE–53], The court's jurisdiction over Plaintiffs' FDCPA claim arises under 28 U.S.C. § 1331 and 15 U.S.C. § 1692k(d), and over Plaintiffs' state-law claims under 28 U.S.C. § 1367.

On February 11, 2011, Defendants The Law Firm of Hutchens, Senter & Britton, P.A. (“HSB”) and Substitute Trustee Services, Inc., (“STS”) each filed an Answer [DE–59, DE–60], both of which were amended on February 14, 2011 [DE–63, DE–64]. Also on February 14, 2011, both Defendants HSB and STS filed motions to dismiss [DE–61, DE–62]. On March 10, 2011, Plaintiffs filed a joint response [DE–68] to both motions to dismiss.

On March 16, 2011, Defendant BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP (“BAC”) filed an Answer and Counterclaim [DE–69] for residential mortgage fraud in violation of the North Carolina Residential Mortgage Fraud Act (“RMFA”), N.C. Gen.Stat. § 14–118.12, to which Plaintiffs subsequently filed an Answer and Motion to Dismiss [DE–80]. Defendant C.T. Salyer (“Salyer”) filed an Answer [DE–70] on March 16, 2011. On March 17, 2011, Defendants Deborah N. Hooker (“Hooker”), Salyer and John A. Mundulak (“Mundulak”) (collectively, “the Individual Defendants”) filed a motion to dismiss pursuant to 12(b)(6) [DE–73]. That same day, Defendants Hooker and Mundulak filed a motion to dismiss pursuant to 12(b)(5) [DE–71]. On April 12, 2011, Plaintiffs filed responses [DE–78, DE–79] to the motions filed by the Individual Defendants and an Answer to Defendant BAC's counterclaim and a motion to dismiss [DE–80].

II. FACTUAL BACKGROUND

As is proper when considering a motion to dismiss, this court will consider the facts in a light most favorable to Plaintiffs.¹ According to the allegations in the amended complaint, in 2001, Plaintiffs executed a note evidencing a loan, the amount of which is not alleged, for the benefit of Countrywide Home Loans, Inc. (“Countrywide”), which was secured by a deed of trust on 2803 Red Valley Dr., Rougemont, North Carolina (“the property”).² Am. Compl. ¶¶ 1, 20; STS Am. Ans., Exs. D, K [DE–64.5, 64.12]. Thereafter, Bank of America (“BOA”) purchased Countrywide and BOA's subsidiary, Defendant BAC, became the servicer of the note. Am. Compl. ¶ 20. According to Plaintiffs, during the transition from Countrywide to Bank of America, Defendant BAC did not apply a mortgage payment to Plaintiffs' account, causing the account “to appear one month deficient,” and refused to assist Plaintiffs in resolving the issue regarding the lost payment. Id. ¶ 24. Subsequently, Defendant BAC returned two loan payments in February and April 2010. Id. At some point, Defendant BAC advised Plaintiffs that a payment in the amount of $3,181.09 would cure any deficiency and return Plaintiffs' mortgage “to regular servicing.” Id. Plaintiffs submitted a check in the requested amount; however, Defendant BAC returned the payment to Plaintiffs and in February 2010, Defendant BAC initiated foreclosure proceedings against Plaintiffs. Id. ¶¶ 24–25, 27. Defendant BAC did not offer Plaintiffs “loss mitigation” or “pre-foreclosure” services and did not consider whether Plaintiffs qualified for a loan modification under the federal Home Affordable Modification Program (“HAMP”). Id. Defendant STS served as the trustee handling the foreclosure proceedings and was represented by Defendant HSB Id. ¶ 4. The Individual Defendants “were personally involved in handling the foreclosure proceedings in connection with Plaintiffs' property.” Id. ¶ 5.

On May 11, 2010, Defendant STS filed a special proceeding in Durham County for foreclosure of Plaintiffs' deed of trust. STS Am. Ans., Ex. J [DE–64.11]. On May 13, 2010, Defendant HSB, on behalf of Defendant STS, filed a “Notice of Hearing Prior to Foreclosure of Deed of Trust.” STS Am. Ans., Ex. K [DE–64.12]. Plaintiffs allege, however, that they “did not receive the statutorily required information” prior to the foreclosure hearing, including the foreclosure hearing notice. Am. Compl. ¶ 28. On June 16, 2010, the Clerk of Superior Court for Durham County held a foreclosure hearing for the Deed of Trust. STS Am. Ans., Ex. N [DE–64.15]. At the hearing, the Clerk entered an order allowing the foreclosure sale which included the following findings of fact:

(1) BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing LP is the holder of the note sought to be foreclosed and it evidences a valid debt owed by Rosa H. Johnson.

(2) That said note is now in default and the instrument securing said debt gives the note holder the right to foreclose under a power of sale.

(3) That notice of this hearing has been served on the record owners of the real estate and to all other persons against whom the note holder intends to assert liability for the debt.

(4) That the debtors have shown no valid legal reason why foreclosure should not commence.

(5) [ ] The underlying mortgage debt is not a subprime loan as defined in G.S. 45–101(4).

...

STS Am. Ans., Ex. N [DE–64.15]. At the time of the June 2010 foreclosure hearing, Plaintiffs' loan was “at least 60 days delinquent.” Am. Compl. ¶ 18. Plaintiffs allege that the foreclosure hearing was not conducted as required under North Carolina law in that “there was no evidence presented at the hearing as to prove the owner and holder of the note.” Am. Compl. ¶ 29.

Based on the foregoing, Plaintiffs allege the following claims against Defendant BAC: breach of contract, breach of implied duty of good faith and violations of the North Carolina Mortgage Debt Collection and Servicing Act and the North Carolina Unfair and Deceptive Trade Practices Act. Plaintiffs allege the remaining defendants (collectively, the “FDCPA Defendants”), by handling the foreclosure proceedings, violated the FDCPA and breached a fiduciary duty owed Plaintiffs.

III. RULE 12(B)(5) MOTION TO DISMISS

Defendants Hooker and Mundulak contend they have not been “served personally with the Summons and Complaint, nor did any sign the certified mail receipt for service.” Individual Defs.' Mem. at 3 [DE–72]. These defendants contend further that “Plaintiffs failed to follow explicit Orders of this Court in regards to effecting service of Plaintiffs' Amended Complaint” on them. Id. at 4. Plaintiffs counter that they served Defendants Hooker and Mundulak by sending the summons and amended complaint to the dwellings of both defendants via certified mail, and alternatively, by overnight delivery service and regular U.S. mail. Pls.' Resp. at 2 [DE–78]. Plaintiffs counter further that Defendants Hooker and Mundulak “obstructed [ ] Plaintiff[s] in fulfilling the service condition set forth [in this court's order dated January 21, 2011]” by “allow[ing] their certified mail to go unclaimed.” Id.

A. Standard of Review

A plaintiff bears the burden of showing that service of process complies with the requirements set forth in Rule 4 of the Federal Rules of Civil Procedure. Elkins v. Broome, 213 F.R.D. 273, 275 (M.D.N.C.2003). The Fourth Circuit has counseled:

When the process gives the defendant actual notice of the pendency of the action, the rules, in general, are entitled to a liberal construction. When there is actual notice, every technical violation of the rule or failure of strict compliance may not invalidate the service of process. But the rules are there to be followed, and plain requirements for the means of effecting service of process may not be ignored.

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