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Castle v. Capital One, N.A.

United States District Court, Fourth Circuit

January 15, 2014



WILLIAM M. NICKERSON, Senior District Judge.

Before the Court is a Motion to Dismiss, filed by Defendant Capital One, N.A., ECF No. 5, and a Motion to Substitute Party filed by Richard Castle, as personal representative for the estate of Plaintiff, Jane M. Castle. ECF No. 14. For the reasons stated, the Court determines that no hearing is necessary, Local Rule 105.6, the Motion to Dismiss will be granted, and, no opposition having been filed, the Motion to Substitute will be granted.


Plaintiff Jane Castle[1] ("Castle") received, together with her now-deceased husband, a $75, 000.00 mortgage loan from Chevy Chase Bank, a division of Capital One, N.A., in 2009, which was secured by a deed of trust (the "Deed of Trust") on a parcel of improved residential real property located in Hagerstown, Maryland (the "Castle property"). Pursuant to the Deed of Trust, the Castles were required to purchase homeowners' insurance.[2] Specifically, section 5 of the Deed of Trust states:

Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by fire, hazards included within the term "extended coverage, " and any other hazards including, but not limited to, earthquakes and floods, for which Lender requires insurance. This insurance shall be maintained in the amounts (including deductible levels) and for the periods that Lender requires. What Lender requires pursuant to the preceding sentences can change during the term of the Loan. The insurance carrier providing the insurance shall be chosen by Borrower subject to Lender's right to disapprove Borrower's choice, which right shall not be exercised unreasonably.... If Borrower fails to maintain any of the coverages described above, Lender may obtain insurance coverage, at Lender's option and Borrower's expense. Lender is under no obligation to purchase any particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not protect Borrower, Borrower's equity in the Property, or the contents of the Property, against any risk, hazard, or liability and might provide greater or lesser coverage than was previously in effect. Borrower acknowledges that the cost of the insurance coverage so obtained might significantly exceed the cost of insurance that Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall become additional debt of the Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment.

ECF No. 5-2 at 7.

The Castles elected, at the time they received the loan, to pay for taxes and insurance separately from their loan and interest payments. The monthly loan payment, inclusive of interest, was fixed at $396.91. The loan has since been sold to Fannie Mae, and Defendant Capital One, N.A., is the servicer of the loan.

Castle obtained a homeowners' insurance policy from Nationwide Insurance ("the Nationwide Policy"), which identified Capital One as having an additional interest in the Nationwide Policy. The limits of the Nationwide Policy were approximately three times greater than the amount of the loan secured by the Deed of Trust. Castle paid the Nationwide Policy from November 15, 2011 until February 6, 2012, when the Policy lapsed as a result of Castle's inability to pay the premium. The Castle property remained uninsured through March 29, 2012. Castle obtained new insurance, through Farmers Insurance, effective March 30, 2012, which again exceeds the loan amount by at least double ("the Farmers Policy").

Capital One, in a letter to Castle dated April 6, 2012, indicated that, as a result of the lapse in insurance coverage occurring on February 6, it "secured temporary insurance coverage in the form of a sixty day binder through AMERICAN SECURITY INSURANCE COMPANY" (the "ASIC Policy") to cover the period of lapse. The letter indicated that Castle would be charged for the temporary insurance coverage through her mortgage account. The policy limits on the ASIC Policy were more than three times the loan balance secured by the Deed of Trust, and cost substantially more than either the Nationwide or Farmers policies. Despite Castle's acquisition of the Farmers Policy, Castle alleges that Defendant "demanded that Castle retain the ASIC Forced Place Insurance, " that the "ASIC forced place insurance covered periods of time in the past when there were no losses, " and that, as a result of charges related to the ASIC Policy, Castle was unable to make her August 2012 loan payment to Capital One. Foreclosure proceedings were subsequently initiated against Castle in the Circuit Court for Washington County, Maryland.

According to Plaintiff, Capital One has an established practice of purchasing force-placed hazard insurance through ASIC. Specifically, Plaintiff alleges that Capital One entered into a contract with non-party Assurant, Inc., the parent company of ASIC, through which it purchases force-placed insurance for its borrowers. Under the agreement with Assurant, Capital One receives a financial benefit "unrelated to any contractual or other bona fide interest in protecting the lender's interest in the mortgage loan" through inflated premium costs. Compl. ¶ 2. Plaintiff alleges that Capital One elected to purchase higher-priced insurance through Assurant in order to "giv[e] and receiv[e] kickbacks' in the form of purported fees, payments, unearned commissions, rebates' and/or other things of value from providers of force-placed insurance" and "fail[ed] to disclose the reasons for the high cost of force-placed insurance to Named Plaintiff and Class and Subclass members." Compl. ¶ 33.

Castle, through her "authorized attorney in fact Richard S. Castle, " filed a putative class action Complaint against Capital One, purportedly "on behalf of all persons in Maryland who have or had a residential mortgage loan or line of credit originated and/or served by Defendant Capital One, National Association ("Capital One") and in connection therewith were required to pay for lender-placed or force-placed' hazard insurance policies provided by American Security Insurance Company [] and its related affiliates through Assurant, Inc." Compl. ¶ 1. Plaintiff's lengthy Complaint focuses mainly on general industry practices in regard to force-placed insurance, and describes in detail recent regulatory efforts and investigations regarding such practices. Plaintiff states that she "does not challenge the rates of the force-placed hazard insurance as excessive nor Defendants' right to force-place insurance." Rather, she challenges "Capital One's decision to purchase force-placed hazard insurance from insurers, including Assurant and ASIC, that provide a financial benefit to itself and/or its affiliates and at prices that far exceed borrower-purchased hazard insurance (while providing substantially less coverage) and imposing charges unrelated to the provision of force-placed insurance on borrowers who were force-placed." Compl. ¶ 35.

In Count I, Plaintiff seeks a declaration on behalf of the proposed class that "Capital One has unfairly or deceptively failed to disclose the details of its arrangements with Assurant regarding force placed insurance, " an order requiring Capital One to "disgorge all amounts [and benefits] that it has obtained or charged for unnecessary or duplicative force-placed insurance, " and should be "enjoined from continuing to (i) charge for and collect unnecessary or duplicative force-placed insurance and (ii) receive monetary or other benefits from the sale of force placed insurance." Compl. ¶¶ 111-14. In Count II, Plaintiff alleges that Defendant has engaged in mortgage fraud "by knowingly making... deliberate omissions during the mortgage lending process, " including its financial relationship with Assurant and ASIC, which resulted in "economic and noneconomic damages" to the Plaintiff and class members. Compl. ¶¶ 125-26. Count III asserts a violation of the Maryland Consumer Debt Collection Act, alleging that "Defendant has asserted a debt collection claim with knowledge that the right does not exist" by attempting to collect charges for "unnecessary or duplicative force-placed insurance." Compl. ¶ 129. Finally, Count IV alleges that, by failing to disclose material facts related to the force-placed insurance, Capital One engaged in unfair or deceptive trade practices in violation of the Maryland Consumer Protection Act.


A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. Edwards v. City of Goldsboro , 178 F.3d 232, 243 (4th Cir. 1999). To survive a 12(b)(6) challenge, a complaint need only present sufficient factual content to render its claims "plausible on [their] face" and enable the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic ...

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