Pike v. Wells Fargo Bank

JOHN H. PIKE and IMMACOLATA PIKE, Plaintiffs, v. WELLS FARGO BANK, N.A s/b/m WACHOVIA BANK, N.A., Defendant.

No. 7:20-CV-00219-M

United States District Court, E.D. North Carolina, Southern Division

April 21, 2022

ORDER

RICHARD E. MYERS II, CHIEF UNITED STATES DISTRICT JUDGE.

This matter comes before the court on Wells Fargo Bank, N.A's (Wells Fargo's) motion for judgment on the pleadings [DE 41]. After their home flooded in Hurricane Florence, the Pikes alleged that their lender's misidentification of their property led it to misrepresent the property's flood hazard status and their need for flood insurance. The court previously dismissed two claims against Wells Fargo and FUNC Holdings, Inc. (FUNC) but allowed the negligent misrepresentation claim against Wells Fargo to proceed. See DE 38 at 13. After answering the Pikes' complaint, DE 39, Wells Fargo now argues that the surviving claim should also be dismissed, see DE 42. The court finds that dismissal based on the statute of limitations would be premature, but Wells Fargo shows that the Pikes do not adequately allege the justified reliance necessary to state a claim. The court thus grants Wells Fargo's motion and dismisses the Pikes' negligent misrepresentation claim without prejudice.

I. Background

The court's prior order sets out this case's background in detail. Here, the court recounts points pertinent only to the Pikes' negligent misrepresentation claim. For Wells Fargo's Rule 12(c) motion, the court considers and accepts as true the factual allegations in the Pikes' complaint as well as those in Wells Fargo's answer that do not contradict the complaint. See Alexander v. City of Greensboro, 801 F.Supp.2d 429, 433 (M.D. N.C. 2011).

A. Factual Background

In 2005, the Pikes financed the construction of a new home in Hampstead, North Carolina. See DE 1-1 ¶¶ 6-7. In November 2007, the Pikes closed on a second mortgage with Wells Fargo's predecessor-by-merger Wachovia Bank, N.A.^[1] See DE 1-1 ¶ 8; DE 39 ¶ 8. Wells Fargo represented to the Pikes that it would obtain an accurate Special Flood Hazard Determination (SFHD) for their property as part of the closing process, DE 1-1 ¶ 10, but misidentified the Pikes' lot in the mortgage documents, see DE 1-1 ¶ 13.

At or around closing, Wells Fargo represented to the Pikes that their property was not in a Special Flood Hazard Area (SFHA).^[2] See DE 1-1 ¶ 11. At some point, Wells Fargo received an SFHD from FUNC's predecessor-by-merger Wachovia Settlement Services, LLC stating that the Pikes' property was in a "low risk zone." See DE 1-1 ¶ 19; DE 39 ¶ 19; see also DE 39 ¶ 30 (explaining what "flood zone 'X'" signifies). Wells Fargo did not, however, produce an SFHD at closing. DE 1-1 ¶ 11. Wells Fargo did not require that the Pikes maintain flood insurance as a condition of their loan, DE 1-1 ¶ 11, and neither the Pikes nor Wells Fargo obtained such coverage on the property, see DE 1-1 ¶ 14; DE 39 ¶ 30.

In September 2018, the Pikes' home flooded during Hurricane Florence, resulting in "a complete loss." DE 1-1 ¶ 15. The Pikes then contacted the Federal Emergency Management Administration (FEMA) and Pender County officials. DE 1-1 ¶ 16. FEMA makes SFHA maps publicly available. See DE 39 ¶ 12. The Pikes learned from these inquiries that their property was in an SFHA at all times before Hurricane Florence. See DE 1-1 ¶ 16.

B. Procedural Background

In October 2020, the Pikes sued Wells Fargo and FUNC (together, Defendants) in Pender County Superior Court alleging three claims under North Carolina law. DE 1-1. Defendants timely removed this case, DE 1, and moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), DE 13. The Pikes responded in opposition, DE 24, and Defendants replied, DE 30.

The court dismissed two of the Pikes' three claims. See DE 38 at 13. The court held that the Pikes' negligence claim was time-barred, see DE 38 at 5-6, and that they failed to adequately allege their unfair or deceptive trade practices claim, see DE 38 at 12. Only the Pikes' negligent misrepresentation claim survived. See DE 38 at 13. The court assumed that the alleged dealings gave rise to a legal duty, see DE 38 at 8 (citing DE 1-1 ¶¶ 10-12), and determined that the Pikes adequately alleged justified reliance, see DE 38 at 9. The court noted, however, that the applicable statute of limitations might also bar this claim. See DE 38 at 9 n.4.

Following the court's order, Wells Fargo answered the Pikes' complaint, DE 39, and moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), DE 41. The Pikes responded in opposition, DE 47, and Wells Fargo replied, DE 48.

II. Legal Standards

A defendant can raise as a defense the plaintiffs failure to state a claim "by motion under Rule 12(c)." See Fed. R Civ. P. 12(h)(2)(B). This motion may be made "[a]fter the pleadings are closed-but early enough not to delay trial." Fed.R.Civ.P. 12(c). A party can move for judgment on the pleadings under Rule 12(c) after having previously moved for dismissal under Rule 12(b)(6). See Taylor v. Bettis, 976 F.Supp.2d 721, 734 n.5 (E.D. N.C. 2013), aff'd, 693 Fed.Appx. 190 (4th Cir. 2017). The court evaluates both motions under the same standards. See Burbach Broad. Co. of Delaware v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002).

The question remains whether the plaintiffs well-pleaded factual allegations, accepted as true, "state a claim to relief that is plausible on its face." See BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Twombly's plausibility standard requires that a plaintiffs well-pleaded factual allegations "be enough to raise a right to relief above the speculative level." Id. at 555. In other words, a speculative claim resting on conclusory allegations without sufficient factual enhancement will not survive the challenge. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009) (quoting Fed.R.Civ.P. 8(a)(2)). At the Rule 12(c) stage, the court considers the factual allegations in the complaint as well as those in the answer that do not contradict the complaint. See Alexander, 801 F.Supp.2d at 433. But factual contentions presented only in briefing will not be considered. See Bush v. Nat 7 Union Fire Ins. Co. of Pittsburgh, PA, 124 F.Supp.3d 642, 654 (E.D. N.C. 2015).

III. Discussion

The Pikes seek recovery for an erroneous flood hazard determination. Put simply, they allege that their lender misidentified their property and, as a result, misstated their flood zone status. The Pikes contend that, had their lender properly required that they obtain flood insurance, the damage done to their home by Hurricane Florence would not have resulted in the same financial hardships. The court previously determined that the Pikes could pursue relief for this alleged wrong under their negligent misrepresentation claim. See DE 38 at 13.

Wells Fargo now advances two arguments why this claim should not proceed as pleaded: (1) it is barred by the applicable statute of limitations and (2) the Pikes do not adequately allege the justified reliance it requires. DE 42 at 6. In response, the Pikes suggest that Wells Fargo's motion was improperly filed. See DE 47 at 5 (contending that the pleadings have not closed). As to Wells Fargo's arguments, the Pikes maintain that they timely brought their claim under the applicable accrual rule, see DE 47 at 5-6, and that they could not-or should not have to- investigate the alleged misrepresentation, see DE 47 at 7-9. The court addresses the propriety of Wells Fargo's motion before turning to the substantive disputes about the Pikes' pleading.

A. Wells Fargo's Rule 12(c) Motion is Procedurally Proper

The Federal Rules of Civil Procedure allow Wells Fargo to move for judgment on the pleadings after moving to dismiss the complaint under Rule 12(b)(6). See Taylor, 976 F.Supp.2d at 734 n.5. The Honorable Judge Thapar identifies some situations when courts should consider granting a Rule 12(c) motion that raises another round of arguments for dismissal, including when:

(1) the court's decision denying the motion to dismiss raises new or unexpected issues; (2) the defendant produces legal authority and/or evidence in response to the court's decision; (3) the plaintiffs claim must fail as a matter of law and cannot be saved with any amount of discovery, and (4) dismissing the claim will save the parties' and the court's resources.

See Estep v. City of Somerset, Ky., No. CIV.A. 10-286-ART, 2011 WL 845847, at *2 (E.D. Ky. Mar. 8, 2011). This case presents such circumstances. The court's prior order inferred an allegation about the Pikes' reliance not expressly presented in their complaint, see DE 38 at 9, and noted a potential issue about the statute of limitations, see DE 38 at 9 n.4. In response, Wells Fargo produced legal authorities and arguments showing that the Pikes' claim fails as a matter of law for lack of justified reliance.

Wells Fargo properly put these arguments before the court by moving for judgment on the pleadings after answering the complaint. See Fed. R. Civ. P. 12(c). The Pikes contend that the pleadings remain open because FUNC has not filed a separate answer. See DE 47 at 5. FUNC maintains that it need not do so because both claims against it have been dismissed. See DE 39 at 1 n. 1. Still, FUNC adopts Wells Fargo's answer "as if it were its own" if a response is required. See Id. Determining FUNC's party status requires parsing the Pikes' pleading as to the remaining negligent misrepresentation claim. After doing so, the court agrees that the Pikes do not plead a negligent misrepresentation claim against FUNC and that FUNC is no longer a party. That issue is ultimately immaterial, though, as FUNC adopts Wells Fargo's answer and the court finds that the...