Schmitt v. Sec. Nat'l Servicing Corp.

1

DESIREE M. SCHMITT, individually and on behalf of all others similarly situated, Plaintiff, v. SECURITY NATIONAL SERVICING CORPORATION, doing business as SN Servicing Corporation, Defendant.

No. 1:21-cv-01188

United States District Court, N.D. Ohio, Eastern Division

March 28, 2023

MEMORANDUM OPINION AND ORDER

David A. Ruiz, United States District Judge.

This matter is before the Court upon the Defendant's Motion to Dismiss Plaintiff's Complaint. (R. 16). For the following reasons, the Court GRANTS Defendant's Motion.

I. Facts

A. The Parties

Plaintiff, Desiree M. Schmitt, is a person who lives in Cuyahoga County, Ohio. (R. 1, PageID# 1 ¶ 1). As explained in more detail below, this action involves a mortgage loan that was secured by Plaintiff's real property located in Cleveland, Ohio. (Id., PageID# 6 ¶ 28; R. 1-3, PageID# 25).

Defendant, Security National Servicing Corporation (Defendant or SNSC), is a mortgage loan servicer incorporated under the laws of Alaska and doing business in Ohio as a licensed foreign corporation. (R. 1, PageID# 1 ¶ 2). Defendant services the mortgage loan at issue in this case. (Id., PageID# 2 ¶ 5).

B. Plaintiff's Loan and Foreclosure

On September 17, 2004, Plaintiff executed a “Fixed/Adjustable Rate Note” (the Note) in favor of non-party Republic Bank in the amount of $198,000. (Id., PageID# 6 ¶ 28; R. 1-3, PageID# 25). The Note was secured by a Mortgage (together with the Note, the Loan), executed on the same date, which was recorded against Plaintiff's residence in Cleveland. (R. 1, PageID# 6 ¶ 28; R. 1-3, PageID# 25; R. 1-4, PageID# 31). Pursuant to the terms of the Loan, Plaintiff was required to make a monthly payment of $1,139.57 on the first day of each month, beginning on November 1, 2005. (R. 1-3, PageID# 25). After entering into a Loan Modification Agreement with Deferment (the Modification) in August 2012, Plaintiff's monthly payments decreased to $996.42, beginning on October 1, 2012. (R. 1, PageID# 7 ¶ 29; R. 1-5, PageID# 48-50, 52).

In addition to providing for Plaintiff's required monthly payments, the Loan and Modification also contained terms governing Plaintiff's repayment of the Loan. (R. 1-3; R 1-4; R 1-5, PageID# 51). As relevant here, the Loan provided that if Plaintiff failed to remit the full amount of any monthly payment within fifteen calendar days of its due date, there would be a 5.000% late charge on the overdue payment and Plaintiff would be in default on the Loan. (R. 1, PageID# 7 ¶¶ 32-33; R. 1-3, PageID# 27). Moreover, the Loan had an “acceleration provision,” meaning that if Plaintiff defaulted, the holder of the Note could send Plaintiff a written notice explaining that if Plaintiff did not pay the overdue amount by a certain date, then Plaintiff may be required to “pay immediately” the full amount of principal and interest owed on the Loan. (R. 1, PageID# 7 ¶ 33; R 1-3, PageID# 27).

In March 2014, Schmitt failed to make her monthly payment and was in default as a result. (R. 1, PageID# 7 ¶ 34). After Plaintiff defaulted on the Loan, an entity-the Complaint is unsure as to whether it was the “assignee, investor, owner and/or servicer” of the Loan-sent Plaintiff a letter explaining that if Plaintiff failed to pay the overdue balance on her Loan by a specific date, Plaintiff's loan may be accelerated and foreclosure proceedings may begin. (Id., PageID# 8 ¶¶ 35-36). Schmitt admits that she did not make any further payments after receiving this letter. (Id. ¶ 37).

Plaintiff alleges that on August 2, 2017, non-party previous Loan servicer Nationstar Mortgage LLC filed a foreclosure action against Plaintiff in the Cuyahoga County Court of Common Pleas. (Id. ¶ 38). Following the commencement of the foreclosure action, Defendant took over as the servicer of Plaintiff's Loan, effective September 1, 2017, pursuant to a contractual agreement with the then-assignee of the Loan. (Id., PageID# 7-8 ¶¶ 30, 40). Plaintiff alleges that Defendant accelerated the Loan on an unspecified date. (Id., PageID# 8 ¶ 37).

On July 15, 2020, the Cuyahoga County Court of Common Pleas entered a judgment against Schmitt in the foreclosure proceedings. (Id., PageID# 9 ¶ 43). The sale of Plaintiff's property was cancelled in November 2020 due to Plaintiff's bankruptcy filing. (R. 16, PageID# 138).^[1]

C. Plaintiff's Bankruptcy and Loan Late Fees

On November 6, 2020, Plaintiff filed a petition under Title 11, Chapter 13 in the United States Bankruptcy Court of the Northern District of Ohio. (R. 1, PageID# 9 ¶ 44; R. 16-1, PageID# 153). Schmitt alleges that on January 11, 2021, the assignee of the Loan, through SNSC, filed a Proof of Claim (POC) in the bankruptcy proceedings. (R. 1, PageID# 9 ¶ 45; R. 16). The POC included 36 monthly entries between October 2017 and October 2020 for “Late Charge Assessments”-which Plaintiff alleges were improper-each in the amount of $49.82 (i.e., 5.000% of Plaintiff's modified required monthly payments). (R. 1, PageID# 9 ¶¶ 46-47; R. 1-6, PageID# 68-72). According to the POC, two of these monthly late charges were credited, so the total value of the remaining 34 late fee entries was $1,693.88. (R. 1, PageID# 9 ¶ 46; R. 1-6, PageID# 72). Plaintiff alleges that during the bankruptcy proceedings, Plaintiff was required to make payments to a bankruptcy trustee, who used those funds to pay Plaintiff's creditors, including Defendant. (R. 1, PageID# 10 ¶ 48).

In addition to the POC listing what Plaintiff alleges were improper late charges, Plaintiff claims that Defendant separately “demanded payment” of these late fees by sending periodic billing statements to Plaintiff. (Id. ¶ 49).

Plaintiff's bankruptcy proceedings terminated five days before she filed this action. (R. 1; R. 16-1, PageID# 156).

II. Procedural Background

Plaintiff's Complaint alleges violations of the Fair Debt Collection Practices Act (FDCPA) and Ohio Residential Mortgage Lending Act (RMLA), and seeks relief pursuant to the Declaratory Judgment Act. (R. 1, PageID# 13-17 ¶¶ 59-81).^[2]

The Complaint presents individual allegations from Plaintiff, and also seeks to establish a class of plaintiffs pursuant to Federal Rule of Civil Procedure 23, premised on the assertion that Plaintiff's Loan documents contain “substantially similar language” as the purported class members' documents, specifically that their “mortgage loans did not provide for the imposition of late fees or charges after acceleration of their mortgage loans.” (R. 1, PageID# 1-2, 10-12 ¶¶ 7, 51-53).

Defendant has moved to dismiss the Complaint in its entirety (R. 16), to which Plaintiff filed an opposition (R. 21), and Defendant filed a subsequent reply (R. 23).

III. Standard of Review

When ruling upon a motion to dismiss filed under Federal Rule of Civil Procedure 12(b)(6), a court must accept as true all the factual allegations contained in the complaint and construe the complaint in the light most favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); accord Streater v. Cox, 336 Fed.Appx. 470, 474 (6^th Cir. 2009). Nonetheless, a court need not accept a conclusion of law as true:

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” As the Court held in [Bell Atlantic Corp. v. ] Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929, the pleading standard Rule 8 announces does not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (citingPapasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” 550 U.S., at 555, 127 S.Ct. 1955, 167 L.Ed.2d 929. Nor does a complaint suffice if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id., at 557, 127 S.Ct. 1955, 167 L.Ed.2d 929.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id., at 570, 127 S.Ct. 1955, 167 L.Ed.2d 929. 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 556, 127 S.Ct. 1955, 167 L.Ed.2d 929. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.'” Id., at 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (brackets omitted).

Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)).

IV. Discussion

The legal theory behind Plaintiff's claims is straightforward: Plaintiff alleges that Defendant improperly assessed Plaintiff late charges following the Loan's acceleration, in violation of the terms of the Loan and the provisions of the FDCPA and RMLA. The Court will consider each of Plaintiff's claims in turn.

A. FDCPA Claim

Plaintiff claims that Defendant violated FDCPA provision 15 U.S.C § 1692f(1), which states: “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is...