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Hebbeler v. First Mariner Bank

United States District Court, D. Maryland

August 10, 2018

ARTHUR F. HEBBELER et al., Plaintiffs,
v.
FIRST MARINER BANK, Defendant.

          MEMORANDUM OPINION

          Ellen Lipton Hollander United States District Judge.

         Plaintiffs Arthur and Deborah Hebbeler have sued their mortgage lender, First Mariner Bank (“FMB” or the “Bank”), alleging, inter alia, breach of contract, fraud, and violations of state and federal laws in connection with a foreclosure proceeding on their home. ECF 2 (Complaint).[1] The Complaint contains nine counts against FMB: Violations of the Maryland Consumer Protection Act (“MCPA”), Md. Code (2013 Repl. Vol., 2017 Supp.), §§ 13-101 et seq. of the Commercial Law Article (“C.L.”) (Count I); Detrimenal [sic] Reliance (Count II); Breach of Contract (Count III); Negligence (Count IV); Unjust Enrichment (Count V); Violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq. (Count VI); Fraud (Count VII); Declaratory Judgment (Count VIII); and Injunctive Relief (Count IX). See ECF 2.

         Pending before the Court is FMB's motion to dismiss the Complaint, pursuant to Fed.R.Civ.P. 12(b)(6). ECF 13. The motion is supported by a memorandum of law (ECF 13-1) (collectively, “Motion”) and several exhibits. Plaintiffs oppose the Motion (ECF 14, “Opposition”), and submitted several additional exhibits. The Bank replied. ECF 17 (“Reply”).

         No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall grant the Motion in part and deny it in part.

         I. Factual and Procedural Background[2]

         Plaintiffs allege that they obtained a mortgage from defendant in July 2002, secured by their home on Hilton Avenue in Catonsville, Maryland (the “Property”). ECF 2, ¶¶ 6-7; see ECF 19. In May 2015, plaintiffs and defendant entered into a Forbearance Agreement. ECF 2, ¶ 9; see ECF 19 (“Forbearance Agreement” or “Agreement”). According to the Forbearance Agreement, plaintiffs defaulted on their mortgage in 2012, and as of April 23, 2015, they were in arrears of $101, 931.66. ECF 2, ¶ 9; ECF 19 at 2-3.

         The Forbearance Agreement provided that FMB would forbear from foreclosing on the Property so long as plaintiffs complied with the terms of the Agreement. ECF 19 at 9. Among those terms was a payment schedule, which stated that plaintiffs were to pay $68, 000 immediately; an additional $20, 284.78 by May 29, 2015; and a further sum of $13, 646.88 by August 1, 2015. ECF 2, ¶ 10; ECF 19 at 4. The Complaint alleges that these payment deadlines were merely “guidelines, and not material terms of the Agreement.” ECF 2, ¶ 10. However, the Forbearance Agreement itself states that the “breach” of “any of the provisions of th[e] Agreement” shall be considered an “Event of Default, ” allowing FMB to “exercise any and all of its default rights and remedies . . . including . . . foreclosing on the Property.” ECF 19 at 5-6. The Agreement also specifies that the “failure of [plaintiffs] to comply with . . . any of the provisions of the Loan Documents” would constitute another “Event of Default.” Id. at 5. The “Loan Documents, ” attached to the Motion by the Bank, specify that plaintiffs were required to make monthly payments of $2, 936.71 on their mortgage. See ECF 13-8 (“Note”) at 1; see also ECF 2, ¶ 23.

         According to plaintiffs, “FMB's records suggest that from May 7, 2015 through August 15, 2015, [plaintiffs] paid a total of $97, 984.78 under the Forbearance Agreement.” ECF 2, ¶ 11. This would imply that plaintiffs were $3, 946.88 short of the amount due under the Agreement. But, plaintiffs contend that “FMB failed to apply two crucial payments, ” totaling $4, 300.00, which plaintiffs “hand delivered” to the Bank on May 8, 2015, and June 22, 2015. Id. ¶¶ 11-12. Plaintiffs maintain that the Bank failed to deposit their checks, and thus the payments were not applied under the Agreement. Id. ¶ 12. According to plaintiffs, had these payments been applied, they would have exceeded the payment amount due under the Forbearance Agreement. Id. ¶¶ 12-13, 18.

         In the ensuing year, plaintiffs allege that they repeatedly contacted FMB to ask that the payments be applied to their account, and consistently maintained that defendant's accounting was incorrect. Id. ¶ 15. Plaintiffs further allege that “FMB's accounting was at times off by at least $25, 000.” Id. ¶ 16.

         For example, on August 9, 2016, Mr. Hebbeler wrote to the Bank, asserting that FMB had failed to provide accurate accounting statements, and asking defendant “to come to a middle ground” by allowing plaintiffs to refinance the mortgage at a lower interest rate, applying all legal fees associated with plaintiffs' prior default towards the mortgage balance, and amending FMB's reporting to the credit bureaus to show plaintiffs in good standing for the prior three months. ECF 19-6 (email of August 9, 2016, from Mr. Hebbeler to FMB). Felipe A. Rojas, FMB's representative, responded, stating: “Until you can provide evidence the Bank's accounting is incorrect we cannot come to a resolution of the outstanding principal, interest, escrow and fees. The Bank cannot assist you without confirming the balances owed.” ECF 19-7 (email of August 23, 2016, from Rojas to Mr. Hebbeler). However, plaintiffs “refused to stipulate to the erroneous accounting.” ECF 2, ¶ 20.

         According to plaintiffs, their letters of inquiry to FMB constituted “qualified written requests” (“QWRs”) under RESPA. ECF 2, ¶ 15. And, the Bank never responded, or responded inadequately, in violation of RESPA. Id.

         On September 11, 2017, defendant allegedly commenced a foreclosure action against plaintiffs in the Circuit Court for Baltimore County. Id. ¶¶ 8, 22; ECF 19-8 (Notice of Intent to Foreclose). The Notice of Intent to Foreclose, dated February 2, 2017, stated that plaintiffs had defaulted on their mortgage on May 1, 2014, and that the most recent loan payment had been received on March 18, 2016. ECF 19-8 at 3. According to the Notice of Intent to Foreclose, the total amount required to cure the default as of February 2, 2017, was $76, 415.60. Id.

         Plaintiffs insist that “FMB clearly failed to apply funds paid by the homeowners toward the mortgage in the amount of at least one full year's worth of mortgage payments - $35, 240.52.” ECF 2, ¶ 25. As a result, plaintiffs allege that FMB “fraudulently embezzled over $35, 240.52 in funds paid by the homeowners, ” which “shows that FMB never intended to keep its promises under the Forbearance Agreement.” Id. ¶ 27. Further, plaintiffs allege that “FMB acted with actual malice.” Id. ¶ 29. Consequently, plaintiffs maintain that they “have incurred economic damages in the form of damage to their credit ratings, and also in the amount of the funds fraudulently embezzled by FMB.” Id. ¶ 30. And, plaintiffs further allege noneconomic damages in the form of mental anguish. Id. They seek compensatory and punitive damages. ECF 2 at 18.

         II. Legal Standard

         A. Choice of Law

         Although this case involves principles of both state and federal law, neither party has addressed the matter of choice of law. The law of the forum state, Maryland, guides the Court's choice-of-law analysis. See Baker v. Antwerpen Motorcars Ltd., 807 F.Supp.2d 386, 389 n.13 (D. Md. 2011) (“In a federal question [claim] that incorporates a state law issue, . . . a district court applies the choice-of-law rules of the state in which it sits unless a compelling federal interest directs otherwise.”).

         In a contract claim, Maryland courts follow the rule of lex loci contractus, applying the substantive law of the state where the contract was formed, unless there is a choice-of-law provision in the contract. Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 573, 659 A.2d 1295, 1301 (1995). Both the Forbearance Agreement (ECF 19) and the underlying loan documents (ECF 13-2) appear to have been executed in Maryland. And, the Property is located in Maryland. Accordingly, I will apply Maryland law in addressing plaintiffs' contract claims.

         For tort claims, Maryland applies the principle of lex loci delicti, i.e., the law of the “place of the alleged harm.” Proctor v. Washington Metropolitan Area Transit Auth, 412 Md. 691, 726, 990 A.2d 1048, 1068 (2010). Given the Property's location, the alleged harm would have occurred in Maryland. Accordingly, I will look to Maryland law with respect to the analysis of plaintiffs' claims sounding in tort.

         In sum, except with respect to the issues of federal law that control plaintiff's RESPA claim, I will apply Maryland law.

         B. Rule 12(b)(6)

         A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd, 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom. McBurney v. Young, 569 U.S. 221 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law “to state a claim upon which relief can be granted.”

         Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed.R.Civ.P. 8(a)(2). That rule provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The purpose of the rule is to provide the defendant with “fair notice” of the claims and the “grounds” for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).

         To survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil actions' ..... (citation omitted)); see also Willner v. Dimon, 849 F.3d 93, 112 (4th Cir. 2017). But, a plaintiff need not include “detailed factual allegations” in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555. Moreover, federal pleading rules “do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” Johnson v. City of Shelby, Miss., __U.S.__, 135 S.Ct. 346, 346 (2014) (per curiam).

         Nevertheless, the rule demands more than bald accusations or mere speculation. Twombly, 550 U.S. at 555; see Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir. 2013). If a complaint provides no more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action, ” it is insufficient. Twombly, 550 U.S. at 555. Rather, to satisfy the minimal requirements of Rule 8(a)(2), the complaint must set forth “enough factual matter (taken as true) to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S. at 556 (internal quotations omitted).

         In reviewing a Rule 12(b)(6) motion, a court “must accept as true all of the factual allegations contained in the complaint” and must “draw all reasonable inferences [from those facts] in favor of the plaintiff.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations omitted); see Semenova v. Maryland Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017); Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473, 484 (4th Cir. 2015); Kendall v. Balcerzak, 650 F.3d 515, 522 (4th Cir. 2011), cert. denied, 565 U.S. 943 (2011). But, a court is not required to accept legal conclusions drawn from the facts. See Papasan v. Allain, 478 U.S. 265, 286 (1986). “A court decides whether [the pleading] standard is met by separating the legal conclusions from the factual allegations, assuming the truth of only the factual allegations, and then determining whether those allegations allow the court to reasonably infer” that the plaintiff is entitled to the legal remedy sought. A Society Without a Name v. Virginia, 655 F.3d 342, 346 (4th. Cir. 2011), cert. denied, 566 U.S. 937 (2012).

         Courts generally do not “‘resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses'” through a Rule 12(b)(6) motion. Edwards, 178 F.3d at 243 (citation omitted). But, “in the relatively rare circumstances where facts sufficient to rule on an affirmative defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed under Rule 12(b)(6).” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc); accord Pressley v. Tupperware Long Term Disability Plan, 533 F.3d 334, 336 (4th Cir. 2009); see also U.S. ex rel. Oberg v. Penn. Higher Educ. Assistance Agency, 745 F.3d 131, 148 (4th Cir. 2014). However, because Rule 12(b)(6) “is intended [only] to test the legal adequacy of the complaint, ” Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993), “[t]his principle only applies . . . if all facts necessary to the affirmative defense ‘clearly appear[ ] on the face of the complaint.'” Goodman, 494 F.3d at 464 (quoting Forst, 4 F.3d at 250) (emphasis added in Goodman).

         In evaluating the sufficiency of a complaint in connection with a Rule 12(b)(6) motion, a court ordinarily “may not consider any documents that are outside of the complaint, or not expressly incorporated therein . . . .” Clatterbuck v. City of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013); see Bosiger v. U.S. Airways, 510 F.3d 442, 450 (4th Cir. 2007). However, without converting a motion to dismiss to a motion for summary judgment, a court may properly consider documents expressly incorporated into the complaint or attached to the motion to dismiss, “‘so long as they are integral to the complaint by reference and authentic.'” U.S. ex rel. Oberg, 745 F.3d at 136 (quoting Philips v. Pitt Cty. Memorial Hosp., 572 F.3d 176, 180 (4th Cir. 2009)); see Six v. Generations Federal Credit Union, 891 F.3d 508, 512-13 (4th Cir. 2018); Goldfarb v. Mayor & City Council of Balt, 791 F.3d 500, 508 (4th Cir. 2015); Anand v. Ocwen Loan Servicing, LLC, 754 F.3d 195, 198 (4th Cir. 2014); Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004). To be “integral” a document must be one “that by its ‘very existence, and not the mere information it contains, gives rise to the legal rights asserted.'” Chesapeake Bay Found, Inc. v. Severstal Sparrows Point, LLC, 794 F.Supp.2d 602, 611 (D. Md. 2011) (citation omitted) (emphasis in original). See also Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”).

         However, “before treating the contents of an attached or incorporated document as true, the district court should consider the nature of the document and why the plaintiff attached it.” Goines, 822 F.3d at 167 (citing N. Ind. Gun & Outdoor Shows, Inc. v. City of S Bend, 163 F.3d 449, 455 (7th Cir. 1998)). Of import here, “[w]hen the plaintiff attaches or incorporates a document upon which his claim is based, or when the complaint otherwise shows that the plaintiff has adopted the contents of the document, crediting the document over conflicting allegations in the complaint is proper.” Goines, 822 F.3d at 167. “Accordingly, if a breach-of-contract plaintiff alleges a failure to perform an act required by the contract, the contract's description of the defendant's duties will prevail over the plaintiffs contrary characterization.” Id. at 166. Conversely, “where the plaintiff attaches or incorporates a document for purposes other than the truthfulness of the document, it is inappropriate to treat the contents of that document as true.” Id. at 167.

         A court may also “consider a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document's authenticity.” Goines, 822 F.3d at 166 (citations omitted); see also Woods v. City of Greensboro, 855 F.3d 639, 642 (4th Cir. 2017), cert. denied, ___U.S.__, 138 S.Ct. 558 (2017); Kensington Volunteer Fire Dep 't. v. Montgomery Cty., 684 F.3d 462, 467 (4th Cir. 2012).

         As noted, plaintiffs attached numerous exhibits to the Complaint. See ECF 19 to ECF 19-8. And, defendant submitted several documents related to plaintiffs' mortgage. ECF 13-2 to ECF 13-11. To the extent these exhibits are integral to the Complaint, I may consider them, and I may do so without converting the Motion to one for summary judgment. See, e.g., Goines, 822 F.3d at 166.

         C. Rule 9(b)

         Plaintiffs allege two claims against FMB that sound in fraud: Count I, for Violations of the MCPA, and Count VII, for fraud. As a preliminary matter, claims that sound in fraud, whether rooted in common law or arising under a statute, implicate the heightened pleading standard of Fed.R.Civ.P. 9(b). See, e.g, E-Shops Corp. v. U.S. Bank N.A., 678 F.3d 659, 665 (8th Cir. 2012) (“Rule 9(b)'s heightened pleading requirement also applies to statutory fraud claims.”); see also Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 781 (4th Cir. 2013) (stating that an MCPA claim that “sounds in fraud[] is subject to the heightened pleading standards of Federal Rule of Civil Procedure 9(b)”).

         Rule 9(b) states: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Under the rule, a plaintiff alleging claims that sound in fraud ”‘must, at a minimum, 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.'” United States ex rel. Owens v. First Kuwaiti Gen l Trading & Contracting Co., 612 F.3d 724, 731 (4th Cir. 2010) (citation omitted). In other words, “‘Rule 9(b) requires plaintiffs to plead the who, what, when, where, and how: the first paragraph of any newspaper story.'” Crest Construction II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011) (citation omitted).

         Rule 9(b) serves several salutary purposes:

First, the rule ensures that the defendant has sufficient information to formulate a defense by putting it on notice of the conduct complained of . . . . Second, Rule 9(b) exists to protect defendants from frivolous suits. A third reason for the rule is to eliminate fraud actions in which all the facts are learned after discovery. Finally, Rule 9(b) protects defendants from harm to their goodwill and reputation.

Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999) (citation omitted).

         Notably, however, Rule 9(b) by its plain text permits general averment of aspects of fraud that relate to a defendant's state of mind. And, a “court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of the particular circumstances for which she will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.” Id. Moreover, Rule 9(b) is “less strictly applied with respect to claims of fraud by concealment” or omission of material facts, as opposed to affirmative misrepresentations, because “an omission ‘cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the ...


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