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Barr v. Flagstar Bank, FSB

United States District Court, D. Maryland

March 27, 2018

BRUCE BARR, et al., Plaintiffs
v.
FLAGSTAR BANK, FSB, Defendant.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge

         THIS MATTER is before the Court on Defendant Flagstar Bank, FSB's (“Flagstar”) Motion to Dismiss (ECF No. 11). This case arises out of Plaintiffs Bruce and Anne Barr's (the “Barrs”) attempts to modify their mortgage loan, which is serviced by Flagstar. The Motion is ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant the Motion.

         I. BACKGROUND[1]

         A. The Loan and Foreclosure Action

         The Barrs are the owners of a property located at 416 Chesapeake Avenue, Stevensville, Maryland (the “Property”), which they purchased in March 2005. (Am. Compl. ¶ 29, ECF No. 8). On June 26, 2007, the Barrs refinanced the mortgage (the “Loan”) on the Property with Residential Mortgage Solutions, Inc. for $413, 000.00, at which time Flagstar became the loan's servicer. (Id. ¶ 30).

         The Barrs fell behind on their mortgage during the economic down turn of 2008. (Id. ¶¶ 31-33). In April 2009, in an attempt to keep the Property, Mr. Barr filed for bankruptcy. (Id. ¶ 34). A few months later, in June 2009, Flagstar sent the Barrs a letter demanding they vacate the Property by July 2009. (Id. ¶ 35). The Barrs vacated the Property, moving to Texas to live with family. (Id.). The Barrs ultimately returned to Maryland in November 2009, although they lived with relatives and not at the Property. (Id. ¶ 36).

         In March 2010, the Barrs received a letter from Flagstar regarding a possible modification for the Loan. (Id. ¶ 37). On the advice of a Flagstar representative, the Barrs moved back into the Property in March 2010 and made it their primary residence. (Id. ¶ 38). The Barrs then submitted a loan modification application. (Id.). Nevertheless, in May 2010, the Barrs received a letter from Flagstar notifying them of a scheduled foreclosure sale on the Property on June 15, 2010. (Id. ¶ 40). The Barrs then learned that Flagstar had denied their requested loan modification because the Property was not the Barrs' primary residence. (Id.). The Property was sold, but, in July 2010, the Circuit Court for Queen Anne's County, Maryland vacated the sale. (Id. ¶ 41). The Circuit Court further ruled that the Barrs should be eligible for a Home Affordable Modification Program (“HAMP”) loan modification. (Id.).

         In October 2010, the Barrs submitted to Flagstar the HAMP loan modification paperwork. (Id.). Flagstar denied the Barrs' loan modification in December 2010. (Id. ¶ 42). The Barrs again went to the Circuit Court, and the court ordered the Barrs and Flagstar to “resolve the loan modification issue.” (Id. ¶ 43).

         B. Trial Period Plans and Loan Modification Agreements

         In order to keep the Property, the Barrs entered into three Trial Period Plan (“TPP”) agreements with Flagstar, with the first TPP agreement beginning in August 2011. (Id. ¶¶ 44, 47, 56). The terms of the TPP agreements stipulated that the Barrs' loan would be permanently modified if the Barrs made three required monthly payments and complied with all other conditions. (Id. ¶¶ 44, 47, 56).

         On or about March 26, 2015, the Barrs entered into their third TPP agreement (the “Third TPP Agreement”) with Flagstar, under which the Barrs were obligated to make three monthly payments of $2, 499.74, with the first payment due on May 1, 2015. (Id. ¶ 56). The Barrs made the required payments. (Id. ¶ 58).

         On July 13, 2015, Flagstar sent the Barrs “a package containing two letters and a Loan Modification Agreement” (the “Original LMA”). (Id. ¶ 59). The first letter stated that the Barrs' “Modification Payment Amount” under the Original LMA was $2, 508.73 and explained how to accept the offered loan modification (the “First How to Accept Letter”). (Id. ¶ 60). The second letter explained that the Modification Payment Amount “included modified principal and interest payment[s] and escrow payments including taxes and insurance.” (Id. ¶ 61). The Barrs rejected the Original LMA. (See id. ¶¶ 62- 64).

         On September 18, 2015, Flagstar sent the Barrs a Revised Loan Modification Agreement (the “Revised LMA”). (Id. ¶ 64). The cover letter accompanying the Revised LMA stated that the Modification Payment Amount was $2, 041.43 and explained how to accept the loan modification offer (the “Second How to Accept Letter”). (Id. ¶ 65). The Second How to Accept Letter instructed the Barrs to return two signed and notarized copies of the Revised LMA along with $2, 041.43 to accept the offer. (Id.). The Second How to Accept Letter also stated that the Revised LMA would not be effective until both the Barrs and Flagstar signed it. (Def.'s Mot. Dismiss [“Def.'s Mot.”] Ex. E [“2d How to Accept Letter”] at FLAG0057, ECF No. 11-6).[2] On September 28, 2015, the Barrs returned executed copies of the Revised LMA and the required payment. (Am. Compl. ¶ 67). On October 7, 2015, a Flagstar representative signed the Revised LMA. (Def.'s Mot. Ex. F [“Executed LMA”], ECF No. 11-7). Almost a year later, on August 24, 2016, Flagstar returned a fully executed copy of the Revised LMA to the Barrs. (Am. Compl. ¶ 85).

         From September 2015 through January 2016, the Barrs made monthly payments of $2, 041.43. (Id. ¶¶ 69, 76). During the same period of time, Flagstar sent the Barrs mortgage statements which stated that the required monthly payment was $2, 833.45, that the Barrs' payments of $2, 041.43 were only partial payments, and that Flagstar had not applied these payments to the Barrs' account. (Id. ¶ 69).

         On December 17, 2015, Flagstar sent the Barrs a corrected modification agreement (the “Corrected LMA”), which provided that the modified monthly payments would be $2, 501.43. (Id. ¶¶ 71-72). The Barrs rejected the Corrected LMA, considering the Revised LMA the binding contract between them and Flagstar. (Id. ¶ 74). On January 19, 2016, Flagstar sent the Barrs a mortgage statement reflecting that $234, 009.39 was past due, the interest rate on the loan was 6.875%, the payment due date was August 1, 2009, and added a $118.31 late fee. (Id. ¶ 75). The statement also explained that the Barrs previous payments were partial payments, which were unapplied to their balance, and threatened foreclosure. (Id.). After receiving this mortgage statement, the Barrs tendered $2, 041.43 as payment. (Id. ¶ 76). Flagstar refused the payment. (Id.).

         C. Qualified Written Requests

         On December 15, 2015, the Barrs sent to Flagstar the first of two letters, which they allege are Qualified Written Requests (“QWRs”) under the Real Estate Settlement Procedures Act (“RESPA”). (Id. ¶ 70). The December 15, 2015 letter (the “December 2015 Letter”) requested a long list of documents related to the Loan's ownership and requested that their account be “reconciled” because “recent mortgage account statements do not accurately reflect payments [the Barrs] continued to remit pursuant to [their] loan modification agreement.” (Def.'s Mot. Ex. I [“Dec. 15, 2015 Letter”], ECF No. 11-10). Flagstar responded to the Barrs' December 2015 Letter on February 2, 2016. (Am. Compl. ¶ 77; Def.'s Mot. Ex. K [“1st Resp.”], ECF No. 11-12). In its response, Flagstar stated that the Barrs' monthly payment amount was $2, 682.61, the unpaid principal balance on the Loan was $413, 000.00, and the interest rate was 6.875%. (Am. Compl. ¶ 77; 1st Resp. at FLAG00172). Flagstar also noted that the Barrs were required to return the executed Corrected LMA and closing funds by November 6, 2015. (Am. Compl. ¶ 77; First Resp. at FLAG00175).

         On March 1, 2016, the Barrs sent Flagstar a second letter and “Notice of Error, ” this time through counsel (the “March 2016 Letter”) (collectively, with the December 2015 Letter, the “Letters”). (Am. Compl. ¶ 79; Def.'s Mot. Ex. L [“Mar. 1, 2016 Letter”], ECF No. 11-13). The March 2016 Letter stated that there were errors in a January 19, 2016 account statement and requested several documents. (Am. Compl. ¶ 79; Mar. 1, 2016 Letter). On April 1, 2016, Flagstar responded to the March 2016 Letter with over 200 pages of documents. (Def.'s Mot. Ex. N [“2d Resp.”], ECF No. 11-15).

         D. The Barrs Sue Flagstar

         On October 26, 2016, the Barrs commenced suit against Flagstar. (ECF No. 1). On January 20, 2017, Flagstar filed its first Motion to Dismiss. (ECF No. 5). In response, on February 23, 2017, the Barrs filed an Amended Complaint, alleging the following counts: Fraud (Count I); violations of the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law [“CL”] §§ 13-301(1), (3), (4) (West 2018) (Count II); violations of the Maryland Mortgage Fraud Protection Act (“MMFPA”), Md. Code Ann., Real Prop. [“RP”] § 7-402 (West 2018) (Count III); violations of RESPA, 12 U.S.C. § 2605(e) (2018) (Count IV); violations of the Maryland Consumer Debt Collection Act (“MCDCA”), CL §§ 14-202(8) (West 2018) (Count V); Breach of Contract (Count VI); and violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 (2018) and Regulation Z, 12 C.F.R. § 1026 (2018) (Count VII). (ECF No. 8). Ms. Barr also brings a single count against Flagstar for the violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681a(d) (2018) (Count VIII). The Barrs seek compensatory damages, statutory damages, punitive damages, and attorneys' fees and costs. (Am. Compl. ¶¶ 109, 117, 128, 135, 142, 152, 159). On March 23, 2017, Flagstar filed its Motion to Dismiss. (ECF No. 11). On April 28, 2017, the Barrs filed a Response. (ECF No. 17). Flagstar filed a Reply on May 13, 2017. (ECF No. 20).

         II. DISCUSSION

         A. Standard of Review

         “The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint, ” not to “resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999)). A complaint fails to state a claim if it does not contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), or does not “state a claim to relief that is plausible on its face, ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “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. (citing Twombly, 550 U.S. at 556). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Though the plaintiff is not required to forecast evidence to prove the elements of the claim, the complaint must allege sufficient facts to establish each element. Goss v. Bank of Am., N.A., 917 F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012)), aff'd sub nom., Goss v. Bank of Am., NA, 546 F.App'x 165 (4th Cir. 2013).

         In considering a Rule 12(b)(6) motion, a court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm'rs of Davidson Cty., 407 F.3d 266, 268 (4th Cir. 2005) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). But, the court need not accept unsupported or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979), or legal conclusions couched as factual allegations, Iqbal, 556 U.S. at 678.

         Several of the Barrs' claims implicate the heightened pleading standard under Rule 9(b). Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This particularity standard requires the plaintiff to “describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Galante v. Ocwen Loan Servicing LLC, No. ELH-13-1939, 2014 WL 3616354, at *9 (D.Md. July 18, 2014) (quoting United States ex rel. Owens v. First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724, 731 (4th Cir. 2010)).

         B. Analysis

         1. Relevant Materials and Allegations

         Before reaching the merits of Flagstar's Motion, the Court must determine which extra-pleading materials the Court can consider in assessing it and address the Barrs' attempts to amend their Amended Complaint through their Opposition.

         i. Documents Attached to Flagstar's Motion

         At bottom, the Court concludes that it can consider the Revised LMA, the Second How to Accept Letter, the Barrs' December 2015 and March 2016 Letters, and Flagstar's responses to the Letters because they were integral to and explicitly relied on in drafting the Amended Complaint.

         Generally, “a court may not consider extrinsic evidence at the 12(b)(6) stage.” Chesapeake Bay Found., Inc. v. Severstal Sparrows Point, LLC, 794 F.Supp.2d 602, 611 (D.Md. 2011). If, however, “a defendant attaches a document to its motion to dismiss, ‘a court may consider it in determining whether to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] the plaintiffs do not challenge its authenticity.'” Id. (alterations in original) (quoting Am. Chiropractic Ass'n, Inc. v. Trigon Healthcare Inc., 367 F.3d 212, 234 (4th Cir. 2004)). An integral document is a one that by its “very existence, and not the mere information it contains, gives rise to the legal rights asserted.” Walker v. S.W.I.F.T. SCRL, 517 F.Supp.2d 801, 806 (E.D.Va. 2007). In the event that any properly considered extra-pleading materials conflict with the “bare allegations of the complaint, ” the extra-pleading materials “prevail.” Fare Deals Ltd. v. World Choice Travel.com, Inc., 180 F.Supp.2d 678, 683 (D.Md. 2001) (citing Fayetteville Inv'rs v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991)).

         In the context of fraud claims, courts' concern over examining documents outside of the complaint-lack of notice to the plaintiff-is mitigated where the plaintiff has “actual notice” and has “relied upon” the documents “in framing the complaint.” Trigon, 367 F.3d at 234 (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)). This rule is meant to prevent a plaintiff from maintaining a fraud claim by “extracting an isolated statement from a document and placing it in the complaint, even though in the full context of the document it would be clear that the statement is not fraudulent.” Id. (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426).

         In this case, Flagstar attached several documents as exhibits to its Motion, including the Revised LMA, the Second How to Accept Letter, the Barrs' December 2015 and March 2016 Letters, and Flagstar's responses to the Letters.[3] The Barrs do not dispute the authenticity of any of these documents. In fact, the Barrs cite to them in their Opposition. All that remains, then, is for the Court to determine whether they were integral to and explicitly relied on in drafting the Amended Complaint. And, for claims that sound in fraud, whether the Barrs had actual notice of a document's contents. The Court considers the documents in turn.

         First, because the Revised LMA is the contract upon which the Barrs base their breach of contract claim and the Barrs detail several of its terms in the Amended Complaint, the Court concludes that it can consider the Revised LMA. See Chesapeake Bay, 794 F.Supp.2d at 611; Walker, 517 F.Supp.2d at 806.

         Second, the Barrs' common law fraud claim, and MCPA and MMFPA claims, which are also claims that sound in fraud, are based on a statement contained in the Second How to Accept Letter-the Modification Payment Amount. As a result, it is an integral document. See Chesapeake Bay, 794 F.Supp.2d at 611; Walker, 517 F.Supp.2d at 806. In addition, the Barrs quote from the Second How to Accept Letter in the Amended Complaint. Therefore, they have actual notice of its contents and explicitly relied on it in drafting the Amended Complaint. See Trigon, 367 F.3d at 234 (quoting ...


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