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Thompson v. JP Morgan Chase Bank, N.A.

United States District Court, D. Maryland, Northern Division

August 27, 2014

SHERRY L. THOMPSON, et al., Plaintiffs,
v.
JP MORGAN CHASE BANK, N.A. Defendant.

MEMORANDUM OPINION

WILLIAM D. QUARLES, Jr., District Judge.

Sherry L. Thompson and David F. Thompson ("the Thompsons") sued JP Morgan Chase Bank, N.A. ("Chase") for violating the Fair Debt Collection Procedures Act ("FDCPA"), [1] the Equal Credit Opportunity Act ("ECOA"), [2] the Maryland Consumer Protection Act ("MCPA"), [3] and the Maryland Mortgage Fraud Protection Act ("MMFPA"), [4] and for common law trespass. ECF No. 1. Pending is the defendant's motion to dismiss. ECF No. 7. No. hearing is necessary. Local Rule 105.6 (D. Md. 2011). For the following reasons, the motion will be granted in part and denied in part.

I. Background[5]

In 2001 the Thompsons purchased real property located at 1417 Bittersweet Road, Severn, Maryland 21144 ("Bittersweet Road" or the "Property"). ECF No. 1 ¶ 9. From 2001 until 2005 the Thompsons resided at Bittersweet Road. Id. ¶¶ 10, 12-13. During that time, the Thompsons "raised their family, celebrated holidays, birthdays, anniversaries[, ] and engaged in family activities." Id. ¶ 10. In 2005, financial difficulties forced the Thompsons to move in with Mrs. Thompson's parents and they placed Bittersweet Road on the market. Id. ¶¶ 12-13. In January 2006, when it failed to sell, the Thompson leased Bittersweet Road to tenants. Id. ¶ 17.[6]

On November 22, 2006, the Thompson executed a Note in the amount of $361, 500.00 secured by a Deed of Trust to Bittersweet Road. ECF No. 1-9 at 3. The Deed of Trust identified Chase as the lender. ECF No. 1-13 at 1. In 2007, the Thompsons purchased their current home at 49730 School House Lane, Dameron, Maryland 20628. Id. ¶¶ 6, 24.

On July 1, 2009, the Thompsons failed to make the monthly payment then due, and - on July 2, 2009 - the loan went into default. ECF No. 1-9 at 3; see also ECF No. 1 ¶ 109. On April 20, 2012, Chase sent the Thompsons a Notice of Intent to Foreclose on the Property ("Foreclosure Notice"). ECF No. 1-11 at 1. The Foreclosure Notice identified Chase as the loan servicer and Federal Home Loan Mortgage Corporation ("FHLMC") as the secured party. Id. at 4.

On or around December 24, 2012, the Thompsons, through their attorney, submitted a Request for Mortgage Assistance ("RMA") under the federal government's Home Affordable Modification Program ("HAMP"). ECF No. 1 ¶ 99. In the RMA the Thompsons requested a reduction in the amount of the principal owing on the loan. Id. ¶¶ 106-109.[7] On February 15, 2013, Chase denied the RMA for reason of incompleteness. Id. ¶ 105. On March 2, 2013, Chase issued a letter informing the Thompsons that a "recent inquiry about [their] loan" was "under review" and to expect a timely response. Id. ¶ 69; ECF No. 1-5 at 1.[8] On March 5, 2013, Chase again wrote the Thompsons stating:

We have received your request to be considered again for a mortgage modification. We are not able to approve your request. We can't begin to determine if you are eligible until we receive all the documents we need from you. If you have received this letter more than once, it's because we still need one or more of the documents listed below. ECF No. 1 ¶ 70.

The Thompsons allege that Chase had received a completed application as of March 5, but they did not receive subsequent notice from Chase regarding its decision on the completed application. Id. ¶¶ 71, 85.[9] On March 29, 2013 Chase entered, [10] changed the locks on, and "winterized" the Property. Id. ¶ 59.[11]

On July 9, 2013, the Thompsons filed suit alleging violations of the FDCPA (Counts One and Two), the MCPA (Count Three), the ECOA (Counts Four and Six), and the MMFPA (Count Five). ECF No. 1.[12] The Thompsons further allege that Chase committed trespass (Count Seven). Id. On September 27, 2013, Chase moved to dismiss the complaint. ECF No. 7. On November 12, 2013, the Thompsons opposed the motion. ECF No. 11. On December 2, 2013, Chase replied. ECF No. 12.

II. Analysis

A. Legal Standard for Motion to Dismiss

Under Federal Rule of Civil Procedure 12 (b) (6), an action may be dismissed for failure to state a claim upon which relief can be granted. Rule 12 (b) (6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).

The Court bears in mind that Rule 8(a) (2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Although Rule 8's notice-pleading requirements are "not onerous, " the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

This requires that the plaintiff do more than "plead[] facts that are merely consistent with a defendant's liability;'" the facts pled must "allow[] 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) ( quoting Twombly, 550 U.S. at 557). The complaint must not only allege but also "show" that the plaintiff is entitled to relief. Id. at 679 (internal quotation marks omitted). "Whe[n] the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. (internal quotation marks and alteration omitted).

B. FDCPA Claims

Count One alleges that Chase violated § 1692c(a) (2)[13] of the FDCPA by "knowingly communicat[ing] with the Thompsons through direct written and oral communications" after the Thompsons had informed Chase they were represented by counsel. ECF No. 1 ¶¶ 35-47. Count Two alleges that Chase violated § 1692f[14] of the FDCPA by "deceptively us[ing] the [loan] modification process in order to seize control of the Bittersweet Road property" and "[i]n violation of the terms of the Deed of Trust" asserted "dominion and control over the property." Id. ¶¶ 48-63.[15]

Chase argues that the Thompsons' FDCPA claims fail because Chase is not a "debt collector" as it was not "attempting to collect a debt of another." ECF No. 7 at 5-6. Accordingly, Chase argues that it is not subject to the FDCPA. Id. at 6. The Thompsons respond that the Foreclosure Notice sent by Chase identified the secured party as FHLMC and Chase as the servicer, and, thus, Chase was collecting on the debt of another. ECF No. 11 at 12.

The FDCPA defines "debt collector" as "any person who uses any instrumentality of interstate commerce or the mails in any business the principle purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." FDCPA § 1692a(6). Section 1692a(6) expressly exempts from the term "debt collector"

any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity:
(i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;
(ii) concerns a debt which was originated by such person;
(iii) concerns a debt which was not in default at the time it was obtained by such person.... FDCPA § 1692a (6) (F).

Mortgage servicers are generally not considered debt collectors because they are not collecting on the debts of another. See Allen v. Bank of Am., N.A., 933 F.Supp.2d 716, 729 (D. Md. 2013). A Servicer may be a debt collector, however, when it acquires a loan already in default. See id.; Minson v. CitiMortgage, Inc., No. DKC 12-2233, 2013 WL 2383658 at *6 (D. Md. May 29, 2013); Zervos v. Ocwen Loan Servicing, LLC, No. 1:11-cv-03757-JKB, 2012 WL 1107689 at *3 (D. Md. Mar. 29, 2012).

To establish a FDCPA claim, plaintiffs must allege, inter alia, facts showing that "the defendants is a debt collector as defined by the FDCPA." Willis v. Bank of Am. Corp., No. ELH-13-02615, 2014 U.S. Dist. LEXIS 105339 at *89 (D. Md. Aug. 1, 2014) (granting motion to dismiss when plaintiff alleged that defendant serviced the subject loan because servicers are not "debt collectors").[16] The Thompsons's Complaint alleges that Chase is a debt collector in a conclusionary fashion. ECF No. 1 ¶¶ 37, 50. Thus, the Thompsons have not alleged sufficient facts showing that Chase was a debt collector.

The Thompsons have requested leave to amend. ECF No. 11 at 12. They may do so only with the defendants' consent[17] or the Court's permission. Fed.R.Civ.P. 15(a) (2); Rice v. PNC Bank, N.A., No. PJM-10-0007, 2010 WL 1711496, at *2 (D. Md. Apr. 26, 2010). Leave should be freely given when justice requires;[18] it "should be denied only when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile." Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (en banc) ( quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986) (internal quotations omitted)). Here, there has been no showing of bad faith or futility. Accordingly, Chase's motion to dismiss Counts One and Two will be granted without prejudice, and the Thompsons will be given leave to amend.

C. MCPA and MMFPA Claims

Count Three alleges that "representations made by Chase constitute deceptive and unfair trade practices" in violation of §§ 13-301(1) and (6) of the MCPA.[19] ECF No. 1 ¶¶ 64-82. Count Five alleged that Chase violated § 7-402[20] of the MMFPA by deliberately misrepresenting that the Thompsons were under consideration for a loan modification "with the intent that [the misrepresentations] be relied upon" and that "[t]he Thompsons reasonably relied on the deliberate misrepresentation, " thereby suffering "the loss of their house." Id. ¶¶ 86-94.

Chase argues that the Thompsons are ineligible for relief under either the MCPA or the MMFPA because they did not use Bittersweet Road primarily for personal purposes. ECF No. 7 at 7. Thus, Chase argues, the Thompsons are not "consumers" as defined by the MCPA, and the subject loan is not a "mortgage loan" as defined by the MMFPA. Id. at 8-9. The Thompsons respond that the Property constituted a "personal asset originally purchased as their family home" and that they "were not in the business of renting property." ECF No. 11 at 10.

The MCPA prohibits "[u]nfair or deceptive trade practices, " including any "[f]alse, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers." Md. Code Ann., Com. Law § 13-301(1) (West 2010). "Consumer" is defined, in pertinent part, as "an actual or prospective... recipient of... consumer credit." Com. Law § 13-101(c)(1). "Consumer credit" is defined as credit that is "primarily for personal, household, family, or agricultural purposes." Com. Law § 13-101(d).[21] To determine whether use is personal, household, family, or agricultural, courts assess the "primary" or "most significant use." Boatel Indus., Inc. v. Hester, 77 Md.App. 284, 301-02 (Md. Ct. Spec. App. 1988) ( citing In re Bell, 6 U.C.C.R.S. 740 (D. Colo. 1696); In re Ware, 59 B.R. 549 (N.D. Ohio 1986)) (yacht not "primarily personal" when purchased and titled in corporate name and purchaser expected business-related benefits from the transaction).

Section 7-402 of the MMFPA prohibits mortgage fraud. "Mortgage fraud" is defined as "any action by a person made with the intent to defraud" and "that involves... [k]nowingly making any deliberate misstatement, misrepresentation, or omission during the mortgage lending process with the intent that the misstatement, misrepresentation, or omission be relied on by a mortgage lender...." Md. Code Ann., Real Prop., § 7-401(d)(1) (West 2010). "[M]ortgage lending process" is "the process by which a person seeks or obtains a mortgage loan." Real Prop. § 7-104(e)(1). A "mortgage loan" is defined as "any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate on which a dwelling is constructed or intended to be constructed." Md. Code Ann., Fin. Inst., § 11-501(1) (West 2010) (emphasis added); Real Prop. § 7-401(f).

Here, the Thompsons alleges that Bittersweet Road was their primary residence from 2001 until 2005. ECF No. 1 ¶¶ 9-13. During that time they "raised their family, celebrated holidays, birthdays, anniversaries[, ] and engaged in family activities." Id. ¶ 10. The Thompsons contend that they are "not in the business of renting property" and that they "rented their primary residence to another party in order to attempt to save their property from foreclosure." ECF No. 11 at 9-10. Although the evidence may ultimately show that the Thompsons did not use Bittersweet Road for personal purposes, at this stage, the Thompsons have plausibly alleged personal use. Accordingly, the motion to dismiss Counts Three and Five will be denied.

D. ECOA Claims

Count Four alleges that Chase violated § 1691(d)(1)[22] of the ECOA when it failed to "notify the Thompsons of its actions on the [RMA]" if in fact "Chase was considering them for a modification." ECF No. 1 ¶¶ 83-85. Count Six alleges that Chase violated § 1691(d) (2)[23] of the ECOA by failing to provide the Thompsons with a "statement of reason" in its February 15, 2013 denial of the RMA. Id. ¶¶ 95-119.

a. 15 U.S.C. § 1691(d)(1)

Chase argues that the Thompsons' claim fails under ECOA § 1961(d)(1) because Chase notified the Thompsons of the RMA denial 24 days after receiving the completed application, within the required 30-day timeframe. ECF No. 7 at 10. The Thompsons assert that Chase has "never filed a timely response" because subsequent letters from Chase indicated that the RMA was still under review. ECF No. 11 at 6-7, n. 2; see also ECF No. 1 ¶ 85.

Section 1691(d)(1) requires that "[w]ithin thirty days... after receipt of a completed application for credit, a creditor shall notify the applicant of its action taken on the application." When an application is incomplete, paragraph (c) of Regulation B implementing the ECOA provides that "the creditor shall notify the applicant either: (i) Of action taken, in accordance with paragraph (a) of this section; or (ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section." 12 C.F.R. § 202.9(c)(1). "If the applicant supplies the requested information within the designated time period, the creditor shall take action on the application and notify the applicant in accordance with paragraph (a) of this section." 12 C.F.R. § 202.9(c) (2).[24]

Here, the Thompsons allege that they submitted a complete application on January 22, 2013.[25] ECF No. 1 ¶ 103. They acknowledge that - on February 15, 2013 - Chase denied the application for reason of incompleteness. Id. ¶ 105; ECF No. 11 at 6. The Thompsons further allege, however, that subsequent letters from Chase indicated that Chase was still completing its RMA review.[26] ECF No. 1 ¶¶ 84-85. On March 2, 2013, Chase sent the Thompsons a letter stating that a "recent inquiry about [their] loan" was "under review" and that they would receive "a response in a timely manner." Id. ¶ 69; ECF No. 1-5 at 1. Then, on March 5, 2013, Chase again wrote the Thompsons a letter stating:

We have received your request to be considered again for a mortgage modification. We are not able to approve your request. We can't begin to determine if you are eligible until we receive all the documents we need from you. If you have received this letter more than once, it's because we still need one or more of the documents listed below. ECF No. 1 ¶ 70.

The Thompsons allege that they had submitted a complete application - notwithstanding Chase's contention that the application was incomplete - as of March 5, 2013 and that "Chase did not notify the Thompsons of its actions on the application." See id. ¶¶ 71, 85. Thus, the Thompsons have alleged facts showing that Chase was required to take action on the completed application. Accordingly, Chase's motion to dismiss Count Four will be denied.

b. 15 U.S.C. § 1691(d)(2)

Chase argues that the Thompsons were not entitled to a statement of reasons for the RMA denial because Chase's decision did not constitute an "adverse action, " as the Thompsons "were delinquent on the loan." ECF No. 7 at 10-11. The Thompsons contend that they were not seeking additional credit - but rather a principal reduction - and thus the denial was an adverse action despite their delinquency. ECF No. 1 ¶¶ 106-109.

Section 1692(d)(2) states that "[e]ach applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor." The term "adverse action" includes "[a] refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer...." 12 C.F.R. § 202.9(c)(1)(i). It does not include, inter alia, "a refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit." ECOA § 1692(d)(6); "Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account" is not an "adverse action." 12 C.F.R. § 202.2(c) (2) (ii).

Here, the Thompsons allege they were delinquent on the loan for which they requested the RMA. ECF No. 1 ¶ 109. Thus, the request to modify the loan by reducing the amount of principal owed on the loan was not an "adverse action" requiring a statement of reason from Chase.[27] See Casey v. Litton Loan Servicing LP, No. RDB-11-0787, 2012 WL 502886 at *4, 16-18 (D. Md. Feb. 14, 2012) (dismissing ECOA claim when delinquent borrower requesting refinancing did not receive a statement of reason for denial). Accordingly, the Thompsons have failed to state a claim under ECOA § 1691(d)(2) and Chase's motion to dismiss Count Six will be granted.

E. Trespass Claim

Count Seven alleges that Chase trespassed on the Property in violation of the Deed of Trust. ECF No. 1 ¶¶ 122-24. The Thompsons argue that Chase had a "limited license to enter the property in order to protect the property if abandoned, " and that "[t]he property was not abandoned." ECF No. 1 ¶¶ 122-23. Chase argues that it did not trespass on the Property because it acted in compliance with one of two provisions in the Deed of Trust granting the lender the right to enter the Property. ECF No. 7 at 13. Chase contends that it had contractual authority to enter the Property under § 9(a) of the Deed of Trust because the Thompsons were delinquent on the loan. Id.

To state a claim of trespass, plaintiffs must allege "(1) an interference with a possessory interest in [their] property; (2) through the defendant's physical act or force against that property; (3) which was executed without [their] consent." Royal Investment Grp., LLC v. Wang, 961 A.2d 665, 688 (Md.App. 2008) ( quoting Ford v. Baltimore City Sheriff's Office, 149 Md.App. 107, 129 (2002)). Consent can be provided by a deed of trust. See, e.g., McCray v. Specialized Loan Servicing, No. RDB-12-02200, 2013 WL 1316341 at *5 (D. Md. Mar. 28, 2013).[28]

Here, the Thompsons "were admittedly delinquent" on the loan they sought to modify. ECF No. 1 ¶ 109.[29] Thus, the Thompsons failed to perform the first covenant[30] of the Deed of Trust requiring timely payment. ECF No. 1-13 at 3-4. Section 9 of the Deed of Trust permits the lender to enter the property when the borrower has defaulted on the loan secured by the Deed of Trust. ECF No. 7 at 13. The Thompsons' delinquency triggered Chase's right to enter the property under the first provision of § 9 to do "whatever is reasonable or appropriate" to secure its interest in the Property, including "securing and/or repairing the Property." ECF No. 11 at 5.[31] Accordingly, the Thompsons' trespass claim - Count Seven - must be dismissed.

III. Conclusion

For the reasons stated above, the defendants' motion to dismiss will be granted in part and denied in part.


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