United States District Court, D. Maryland
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withdrawn by Plaintiffs, and it is DISMISSED WITHOUT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 ...