Roos v. Seterus, Inc.

          MEMORANDUM OPINION

          RICHARD D. BENNETT UNITED STATES DISTRICT JUDGE

         Plaintiffs, Sandra and Donald Roos (“the Roos” or “Plaintiffs”) bring a six-count Complaint against Seterus, Inc. (“Seterus”) and the Federal National Mortgage Association (“Fannie Mae”) (collectively, “Defendants”) related to a mortgage loan on a property in Ellicott City, Maryland. (Compl., ECF No. 1-2.) Plaintiffs allege violations by Defendants of the Maryland Consumer Debt Collection Practices Act (“MCDCA”), Md. Code Ann., Com. Law § 14-201, et seq.; the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law § 13-101 et seq.; the Maryland Mortgage Fraud Protection Act (“MMFPA”), Md. Code Ann., Real Prop. §§ 7-401, et. seq.; Maryland's prohibition against usury, Md. Code Ann., Com. Law § 12-114; the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605, 12 C.F.R. §§ 1024.35 and 1024.36; and request a declaratory judgment pursuant to Md. Code Ann., Cts. & Jud. Proc. § 3-406. (Id.) The Roos filed their complaint in the Circuit Court for Baltimore City, Maryland on October 19, 2018. (Id.) Defendants removed the case to this Court on December 26, 2018 based on diversity^[1] and federal question^[2] jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332, 1367, 1441, and 1446.

         Now pending before this Court is Defendants' Motion to Dismiss (ECF No. 4) and Plaintiffs' Motion for Leave to File an Amended & Supplemental Complaint (ECF No. 10). The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons that follow, Defendants' dismissal motion shall be GRANTED IN PART and DENIED IN PART, Plaintiffs' motion to amend shall be GRANTED IN PART and DENIED IN PART, and Defendant Federal National Mortgage Association (“Fannie Mae”) is DISMISSED WITH PREJUDICE. Specifically, Count IV - Violation of Md. Code Ann., Com. Law § 12-114 (“Usury Law”) - against Seterus and Fannie Mae is DISMISSED WITH PREJUDICE because Defendants are not lenders as defined by the statute; Counts I and III against Seterus for violations of MCDCA and MMFPA, respectively, are DISMISSED WITHOUT PREJUDICE; Count VI - Declaratory Judgment is considered to have been withdrawn by Plaintiffs, and it is DISMISSED WITHOUT PREJUDICE as to Seterus and DISMISSED WITH PREJUDICE as to Fannie Mae; Defendants' request to dismiss Counts II and V against Seterus for violations of MCPA and RESPA, respectively, is DENIED; and Plaintiffs shall be allowed to amend their complaint within 30 days if they choose to do so, but Plaintiffs' Proposed Amended Complaint (ECF No. 10-3) is not accepted for filing as their amended complaint.

         BACKGROUND

         In ruling on a motion to dismiss, the factual allegations in the plaintiff's complaint must be accepted as true and those facts must be construed in the light most favorable to the plaintiff. Wikimedia Found. v. Nat'l Sec. Agency, 857 F.3d 193, 208 (4th Cir. 2017) (citing SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015)). This Court may also consider documents attached to a motion to dismiss so long as they are “integral to the complaint and authentic.” Thompson v. United States, RDB-15-2181, 2016 WL 2649931, at *2 n.4 (D. Md. May 10, 2016), aff'd 670 Fed.Appx. 781 (4th Cir. 2016) (citation omitted).

         On September 2, 2003, Plaintiffs, Sandra and Donald Roos (“the Roos”), entered into a 15-year refinanced^[3] mortgage loan arranged by SunTrust Mortgage, Inc. pursuant to the guidelines of the Federal National Mortgage Association (“Fannie Mae”) (Compl. at ¶ 19, ECF No. 1-2.) Fannie Mae owns the mortgage loan and is the assignee of the recorded Deed of Trust. (Id. at ¶¶ 5, 7, 14, 19.) Fannie Mae retained Seterus, Inc. (“Seterus”) to service the mortgage. (Id. at ¶ 14.)

         On October 6, 2013, Seterus, on behalf of Fannie Mae, offered the Roos a trial modification of the Roos' loan and later a permanent modification which the Roos accepted. (Id. at ¶ 21.) Beginning July 1, 2015, Seterus began imposing property inspection fees on the Roos' account. (Id. at ¶ 25.) The Roos allege that they reside in the property and have made payments pursuant to the loan modification agreement. (Id. at ¶¶ 20, 22.) On June 30, 2016, Seterus, through its agent BWW Law Group, LLC (“BWW Law Group”), issued multiple Notices of Intent to Foreclose on the Roos. (Id. at ¶ 31.) The Roos then contacted BWW Law Group and made several subsequent payments to Seterus. (Id. at ¶ 33.) Following this, the Roos had a dispute with Seterus and its agent, Lereta, as to the proper application of taxes and tax credits related to the mortgage. (Id. at ¶¶ 34-36.) Between August 23, 2016 and February 27, 2018, the Roos spoke with Seterus' and Lereta's representatives multiple times concerning taxes, credits applied, and escrow analysis of their mortgage account. (Id.)

         On April 19, 2018, the Roos, pursuant to 12 U.S.C. § 2605, requested a reasonable investigation through a Qualified Written Request (“QWR I”) of their account related to these disputes with Seterus. (Id. at ¶ 38.) Dissatisfied with the response by Seterus to QWR I, the Roos sent another qualified written request (“QWR II”) on May 30, 2018. (Id. at ¶ 41.) Dissatisfied with the response to QWR II, the Roos filed a complaint in the Circuit Court for Baltimore City, Maryland on October 19, 2018, pleading six causes of action:

• Count I - Violation of Maryland Consumer Debt Collection Practices Act, Md. Code Ann., Com. Law § 14-201, et seq. (“MCDCA”) - against Seterus

• Count II - Violation of Maryland Consumer Protection Act, Md. Code Ann., Com. Law § 13-101 et seq. (“MCPA”) - against Seterus

• Count III - Violation of Maryland Mortgage Fraud Protection Act, Md. Code Ann., Real Prop. §§ 7-401, et. seq. (“MMFPA”) - against Seterus

• Count IV - Violation of Md. Code Ann., Com. Law § 12-114 (“Usury Law”) -against Seterus and Fannie Mae

• Count V - Violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605, 12 C.F.R. §§ 1024.35 and 1024.36 (“RESPA”) - against Seterus ^[4]

• Count VI - Declaratory Judgment, Md. Code Ann., Cts. & Jud. Proc. § 3-406 -against Seterus and Fannie Mae ^[5]

(Compl., ECF No. 1-2.)

         On December 26, 2018, Defendants Seterus and Fannie Mae removed the case to this Court on the basis of diversity and federal question jurisdiction. (ECF No. 1.) Defendants also filed the pending motion to dismiss. (Mot., ECF No. 4.) The motion is now ripe for decision. On May 1, 2019, the Roos filed the pending Motion for Leave to File an Amended & Supplemental Complaint, which Defendants oppose. (See ECF Nos. 10, 11.) For the reasons that follow, Defendants' dismissal motion shall be GRANTED IN PART and DENIED IN PART, Plaintiffs' motion to amend shall be GRANTED IN PART and DENIED IN PART, and Defendant Federal National Mortgage Association (“Fannie Mae”) is DISMISSED WITH PREJUDICE. Specifically, Count IV - Violation of Md. Code Ann., Com. Law § 12-114 (“Usury Law”) - against Seterus and Fannie Mae is DISMISSED WITH PREJUDICE because Defendants are not lenders as defined by the statute; Counts I and III against Seterus for violations of MCDCA and MMFPA, respectively, are DISMISSED WITHOUT PREJUDICE; Count VI - Declaratory Judgment is considered to have been withdrawn by Plaintiffs, and it is DISMISSED WITHOUT PREJUDICE as to Seterus and DISMISSED WITH PREJUDICE as to Fannie Mae; Defendants' request to dismiss Counts II and V against Seterus for violations of MCPA and RESPA, respectively, is DENIED; and Plaintiffs shall be allowed to amend their complaint within 30 days if they choose to do so, but Plaintiffs' Proposed Amended Complaint (ECF No. 10-3) is not accepted for filing as their amended complaint.

         STANDARD OF REVIEW

         I. Motion to Dismiss

         Rule 8(a)(2) of the Federal Rules of Civil Procedure provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not to 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 United States Supreme Court's opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), “require that complaints in civil actions be alleged with greater specificity than previously was required.” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). In Twombly, the Supreme Court articulated “[t]wo working principles” that courts must employ when ruling on Rule 12(b)(6) motions to dismiss. Iqbal, 556 U.S. at 678. First, while a court must accept as true all factual allegations contained in the complaint, legal conclusions drawn from those facts are not afforded such deference. Id. (stating that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”); see also Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012) (“Although we are constrained to take the facts in the light most favorable to the plaintiff, we need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.” (internal quotation marks omitted)). Second, a complaint must be dismissed if it does not allege “a plausible claim for relief.” Iqbal, 556 U.S. at 679.

         Rule 9(b) of the Federal Rules of Civil Procedure requires that “the circumstances constituting fraud be stated with particularity.” Fed.R.Civ.P. 9(b). The rule “does not require the elucidation of every detail of the alleged fraud, but does require more than a bare assertion that such a cause of action exists.” Mylan Labs., Inc. v. Akzo, N.V., 770 F.Supp. 1053, 1074 (D. Md. 1991). To satisfy the rule, a plaintiff must “identify with some precision the date, place and time of active misrepresentations or the circumstances of active concealments.” Johnson v. Wheeler, 492 F.Supp.2d 492, 509 (D. Md. 2007). As the United States Court of Appeals for the Fourth Circuit stated in United States ex rel. Nathan v. Takeda Pharm. N.A., Inc., 707 F.3d 451 (4th Cir. 2013), the aims of Rule 9(b) are to provide notice to defendants of their alleged misconduct, prevent frivolous suits, eliminate fraud actions where all the facts are learned after discovery, and protect defendants from harm to their goodwill and reputation. 707 F.3d at 456 (citation omitted).

         II. Motion to Amend

         Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to file an amended complaint “shall be freely given when justice so requires.” This “liberal rule” reinforces the “federal policy in favor of resolving cases on their merits instead of disposing them on technicalities.” Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). As noted by the United States Court of Appeals for the Fourth Circuit, Rule 15(a) ensures that the “plaintiff [is] given every opportunity to cure a formal defect in his pleading.” Ostrzenski v. Seigel, 177 F.3d 245, 252-53 (4th Cir.1999) (quoting 5A Charles Allen Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (2d ed.1990)).

         The “liberal rule” of Rule 15(a) is not absolute. A court may deny leave to file an amended complaint 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.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir.1986) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). An amendment is futile if its claims cannot survive a motion to dismiss. Perkins v. United States, 55 F.3d 910, 917 (4th Cir. 1995). Prejudice is analyzed with reference to the “nature of the amendment and the timing, ” as the “further the case progresse[s] before judgment [is] entered, the more likely it is that the amendment will prejudice the defendant or that a court will find bad faith on the plaintiff's part.” Laber, 438 F.3d at 427.

         ANALYSIS

         As an initial matter, in their response to Defendants' motion, Plaintiffs note that they originally filed their claim for declaratory relief under the State Declaratory Judgment Act, and they ask this Court to dismiss their declaratory judgment claims without prejudice. (Pl.'s Resp. 32 n. 20, ECF No. 5.) Accordingly, this Court shall DISMISS Count VI WITHOUT PREJUDICE as to Seterus. However, as discussed below, Count IV, the only other claim alleged against Fannie Mae will be dismissed with prejudice. Therefore, Count VI as alleged against Fannie Mae shall be DISMISSED WITH PREJUDICE.

         I. Inspection Fees

         As a threshold matter to discussion of the remaining causes of action, Defendants contend that all the remaining counts are premised on an alleged violation of Md. Code Ann., Com. Law § 12-121 for illegally imposing property inspection fees. (Mot. Mem. 5, ECF No. 4-1.) Defendants contend that although not expressly referenced except in Count IV, the claims all stem from the alleged violation of the statute. (Id. at 5 n. 6 (citing Compl. ¶¶ 55-61, 69, 71, 82, 96, 98, 104-105, ECF No. 1-2).) Defendants assert three reasons why these claims fail: (1) the Deed of Trust specifically authorized inspection fees; (2) Section 12-121 is inapplicable to Defendants; and (3) Section 12-121 does not have a blanket prohibition on the imposition of inspection fees. (Id.; see also Reply 2, ECF No. 9.) Each shall be addressed in turn.

         A. Inspection Fees Were Authorized Under the Deed of Trust

         Defendants provide the Deed of Trust (Ex. 2, ECF No. 4-3) and the Assignment granted to Fannie Mae (Ex. 3, ECF No. 4-4) to demonstrate that the Roos explicitly authorized the lender or its agent to inspect the property and to charge fees for inspection. (Mot. Mem. 6, ECF No. 4-1 (citing Exs. 2, 3).) Plaintiffs do not question these documents but argue that regardless, the Defendants may not impose or collect property inspection fees because they are barred by Maryland Law. (See Pl.'s Resp. 5-8, see also Compl. ¶ 20, ECF No. 1-2.) Specifically, Plaintiffs cite Md. Code Ann., Com. Law § 12-121, which states:

(a) In this section, the term “lender's inspection fee” means a fee imposed by a lender to pay for a visual inspection of real property.

(b) Except as provided in subsection (c) of this section, alender may not impose a lender's inspection fee in connection with a loan ...