Ogbebor v. J.P. Morgan Chase, N.A.

BOSE OGBEBOR and ALICE OMORGIE, Plaintiffs, v. J.P. MORGAN CHASE, N.A., M&T BANKING,and BAYVIEW LOAN SERVICING, Defendants.

Civ. Action No.: 16-3400 (FLW) (DEA)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

February 2, 2017

*NOT FOR PUBLICATION*

OPINION

WOLFSON, United States District Judge:

Plaintiffs Bose Ogbebor ("Ogbebor") and Alice Omorgie ("Omorgie") (collectively, "Plaintiffs") filed their Complaint asserting various state and federal claims arising from an underlying New Jersey foreclosure action that resulted in the involuntary sale of Plaintiffs' residence. Presently before the Court are two separate motions to dismiss the Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), filed by defendant J.P. Morgan Chase, N.A. ("Chase") and defendants M&T Banking ("M&T") and Bayview Loan Servicing ("Bayview") (collectively, the "M&T Defendants"), respectively. Based on the judgment of foreclosure in the state court, Defendants contend that Plaintiffs' Complaint is barred by the Rooker-Feldman doctrine, the New Jersey entire controversy doctrine, res judicata and collateral estoppel. For the reasons set forth below, Chase's motion to dismiss is GRANTED, and Plaintiffs' claims for breach of contract in Count One, violations of the New Jersey Consumer Fraud Act (the "NJCFA"), N.J. Stat. Ann. 56:8-1, et seq., in Count Two and fraudulent misrepresentation in Count Four are DISMISSED as to Chase. The M&T Defendants' motion to dismiss Plaintiffs' claim for violations of the Real Estate Settlement Procedure Act ("RESPA") against the M&T Defendants in Count Three is DENIED. To the extent that Count Two asserts a NJCFA claim against M&T for conduct that predates the state court judgment of foreclosure, that claim is dismissed, but Plaintiffs are given leave to file an Amended Complaint to assert an NJCFA claim against M&T and/or Bayview for conduct post the foreclosure judgment, within 15 days from the date of the Order accompanying this Opinion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY¹

On April 25, 2007, Plaintiffs executed a mortgage to secure a $358,000 loan from Chase for the purchase of a property located at 15 Riddle Avenue, Hampton, New Jersey 08827 (the "Residential Property"). Compl., ¶¶ 8, 2. From 2007 through 2011, Plaintiffs resided at the Residential Property until Hurricane Irene left the residence uninhabitable. Id. at ¶ 10. After the hurricane, Plaintiffs moved into another residence with their relatives, while the Residential Property remained vacant. Id. Because of financial strain, Plaintiffs allege that they defaulted on their mortgage payments to Chase in November 2011. Id. at ¶ 21. Several months later, inFebruary 2012, Plaintiffs submitted a mortgage modification application to Chase. Id. at ¶ 13. Chase sent Plaintiffs a letter confirming receipt of the application, but Chase allegedly sent another letter stating that it could not locate Plaintiffs' mortgage modification application and requested that Plaintiffs submit a new request. Id. at ¶¶ 13-14. Plaintiff resubmitted their loan modification request to Chase in March 2012. Id. at ¶ 15.

At some time before June 2012, Plaintiffs called Chase to inquire about the status of their pending mortgage modification application. Id. at ¶ 16. Plaintiffs allege that, during that conversation, a Chase representative told Plaintiffs that they must transfer title of Plaintiffs' rental property, located at 82 Willoughby Street, Newark, New Jersey 07112 (the "Rental Property"), to Chase in order to secure a loan modification on the Residential Property. Id. at ¶ 17. The mortgage for the Rental Property was also held by Chase.² Id. at ¶ 21. John Rieger ("Rieger"), a Vice President at Chase, subsequently sent Plaintiffs a letter, dated June 1, 2012, which stated: "Thank you for talking to us about the opportunity to eliminate your mortgage debt and avoid foreclosure. As we discussed, once the release of your property to Chase is complete, you will owe nothing more on your mortgage and will receive modification on the other."³ Id. at ¶ 18, Ex. A. Plaintiffs allege that they accepted Chase's offer of settlement when Plaintiffs "completed and returned byfax to Chase all forms requested by Chase in order to relinquish title to the Rental Property to Chase in exchange for a modification of the mortgage on the [Residential Property]." Id. at ¶ 19.

In August 2012, Plaintiffs called Chase to inquire about "the status of both the deed-in-lieu for the Rental Property and the modification of the [Residential Property's] mortgage." Id. at ¶ 29. Plaintiffs claim that a Chase representative told them that "their modification application had become stale and that an updated application was required." Id. at ¶ 30. Thereafter, Plaintiffs submitted an updated application in September 2012. Id. Nevertheless, in October 2012, Chase allegedly contacted Plaintiffs and requested another application, and Plaintiffs once again complied. Id. at ¶ 31. Over the next couple of months, Plaintiffs claim that "[they] were in constant contact with Chase regarding the status of the modification applications and the additional documents that either needed to be updated or resubmitted per Chase's request," id. at ¶ 34, but Plaintiffs maintain that Chase failed to advise them of the state court action seeking to foreclose on the Residential Property. Id. at ¶ 35.

On October 10, 2012, Chase filed its foreclosure complaint against both Plaintiffs in the New Jersey Superior Court. Id. at ¶ 32; see Declaration of Michael Trainor, Esq. ("Trainor Decl."), Ex. B. When Plaintiffs failed to answer the foreclosure complaint, the state court entered default against Plaintiffs on December 31, 2012. See Compl., Ex. A. Plaintiffs allege that, on February 6, 2013, "[they] reviewed the Court Docket at the Superior Court of New Jersey," and discovered that the state court had entered default against them.⁴ Id. at ¶ 41. According to Plaintiffs, "[t]his was the first time [they] became aware of the existence of the foreclosure action." Id. at ¶ 42. Thefollowing day, Plaintiffs filed a motion to vacate default, but the state court rejected that motion "for non-conformance on February 27, 2013." Id. at ¶ 43. On April 3, 2013, Chase moved for final judgment, and because the motion was uncontested, the state court entered judgment against Plaintiffs on May 1, 2013, and scheduled the Sheriff's Sale for August 31, 2013. Id. at ¶¶ 44-45.

Plaintiffs filed another motion to vacate judgment on June 5, 2013. Id. at ¶ 46. That motion contained a proposed answer to Chase's foreclosure complaint, which stated that Plaintiffs had "been diligently trying to apply for a loan modification with [Chase]," but Chase "is [attempting] to deny [Plaintiffs] the opportunity to seek the foreclosure alternative program available." See Trainor Decl., Ex. C. It further stated that Chase "acted in an unfair and deceptive manner, withholding foreclosure intent from [Plaintiffs]. Made false promise and misrepresentation about modifying [the] loans when it had no intention of doing so." Id. Furthermore, with respect to the proposed affirmative defenses, Plaintiffs asserted that Chase violated the "New Jersey Consumer Act." Id. The state court denied the motion to vacate judgment on July 23, 2013, and issued a written memorandum opinion. Id. at ¶ 46; see Declaration of James Berg, Esq. ("Berg Decl."), Ex. B. In that decision, despite Plaintiffs' argument to the contrary, the state court found that "[Plaintiffs] were fully aware of the pending foreclosure and during their pursuit of a possible modification consciously chose not to file an answer and instead allowed the foreclosure to proceed uncontested." Berg Decl., Ex. B. In addition, the court concluded that, although Plaintiffs asserted "some defenses that purport to challenge [Chase's] standing, [those defenses] are not sufficiently supported to effectively question [Chase's] foreclosure and subsequently obtained judgment." Id.

After the motion to vacate the foreclosure judgment was denied, in early 2014, M&T "became successor-in-interest to [Chase] with respect to the servicing of Plaintiffs' mortgage loan"on the Residential Property. Compl., ¶¶ 4, 51. At around the same time, Bayview assumed the responsibility of servicing agent for M&T. Id. at ¶¶ 5, 51. After the M&T Defendants started servicing Plaintiffs' mortgage, Plaintiffs claim that they "submitted a new loan modification application to Bayview in March 2014." Id. at ¶ 52. On October 1, 2014, however, Chase purchased the Residential Property for $100 at the Sheriff's Sale.⁵ Id. at ¶ 53. Although not alleged in the Complaint, on December 8, 2014, Plaintiffs filed a motion to set aside the sale of the Residential Property in state court. See Trainor Decl., Ex. B. That motion was denied on January 13, 2015, and the state court order was accompanied by a memorandum opinion. Id. at Ex. D. In that opinion, the state court first concluded that "[Plaintiffs] were fully aware of the foreclosure process throughout the relevant time period, regardless of the manner in which they were served with notice." Id. at Ex. A. The court further concluded, "[Plaintiffs'] primary argument is that they had a pending loan modification review at the time of sale. However, there is no right to a loan modification under New Jersey law." Id. Critically, when confronted with the argument that Chase acted in a fraudulent manner, the state court made the following determination: "The record does not support the [Plaintiffs'] claim that they were coerced into loan modification negotiations, or that this was done fraudulently." Id. Instead, the court found that "[i]t is undisputed that [Plaintiffs] failed to pay on their obligation, ultimately permitting [Chase] to force the sale of the property to satisfy such obligation." Id. After that motion was denied, Plaintiffs did not file an appeal to the New Jersey Appellate Division from...