Nicholas v. Saxon Mortgage Svs., Inc.

• Court: Superior Court of Maine
• Decided: September 16, 2011
• Docket: CUMre-10-571
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION DOCKET NO: R~/10/571 LJf~ \;\}- Cvti\1) ~ ~/ lfol :)-0 II

WALTER D. NICHOLAS, ET AL.

Plaintiffs, ORDER ON DEFENDANT'S v. MOTION TO DISMISS

SAXON MORTGAGE SERVICES, INC.

Defendant

Plaintiffs Walter D. Nicholas and Deborah A. Nicholas ("Plaintiffs") filed

this multi-count complaint (the "Complaint") against defendant Saxon Mortgage

Services, Inc. ("Defendant") seeking an accounting of their mortgage payments

and remedies under Maine's Truth in Lending Act and Unfair Trade Practices

Act. The Defendant has filed a motion to dismiss the Complaint pursuant to

M.R. Civ. P. 12(b)(6).

BACKGROUND

The action arises from property owned by the Plaintiffs located at 18

Deborah Lane, Steep Falls, Maine. Compl. errerr 1, 2. On or about November 15,

2006, the Plaintiffs granted a mortgage on this property to New Century

Mortgage Corporation, securing a loan in the amount of $141,000. Com pl. err 5.

The Defendant services this loan for New Century Mortgage Corporation.

Compl. err 8.

1 The Plaintiffs made timely mortgage payments until early 2009 when they

began having financial difficulties. Compl.

applied with the Defendant to participate in the Home Affordable Modification

Plan ("HAMP"). Compl.

written HAMP Trial Period Plan ("TPP") with the Defendant that was signed by

the lender on August 25, 2009. Compl.

Plaintiffs made three monthly payments in the amount of $1,346.41, pursuant to

the TPP. Compl.

Beginning in October 2009, the Plaintiffs received several letters from the

Defendant regarding the status of their application for a HAMP modification. A

letter, dated October 1, 2009, stated that the Plaintiffs had not submitted all of the

required paperwork for the modification and were required to make two

additional monthly payments. Compl.

letter, sent December 30, 2009, from the Defendant stating that the paperwork

was incomplete and that a Final Modification would be denied if it were not

received. Compl.

the Plaintiffs stating that, because of "additional guidance" announced by the US

Treasury, the modification may be affected, that the Plaintiffs "MUST" continue

to make the TPP payments, and that failure to continue payments would result

in a denial of the modification and future ineligibility for HAMP and other

assistance. Compl.

TPP. De£. Mot. Dismiss, Ex. A.

On March 23, 2010, the Defendant sent the Plaintiffs notice that they failed

to qualify for the HAMP modification because their monthly housing expense

was less than or equal to thirty-one percent of their gross monthly income.

2 Compl. err 18. The Defendant then sent a Default Notice on April 16, 2010 stating

that the Plaintiffs owed a total of $8,728.60 in unpaid mortgage obligations.

Compl. err 19. On April17, 2010 the Defendant sent the Plaintiffs a mortgage loan

statement indicating that Plaintiff's owed $14,867.88 in unpaid mortgage

obligations. Compl. err 20. The Plaintiffs assert that, as of February 28, 2010, they

only owed $674.03 in unpaid mortgage obligations. Compl. err 22.

The Complaint was filed on November 24,2010 in Cumberland County

Superior Court. Defendant removed the matter to the United States District

Court for the District of Maine on February 28, 2011 based on diversity of

citizenship and amount in controversy, under 28 U.S.C. §§ 1332, 1441, and 1446.

Defendant filed a motion to dismiss on February 14, 2011. Judge Hornby

dismissed Counts I, III, and IV and ordered the parties to show cause why the

remaining counts should not be remanded for failure to meet jurisdictional

requirements. On May 20, 2011, Judge Hornby ordered that the remaining

counts II, V, and VI be remanded to this Court because of the parties' failure to

respond to the order to show cause.

The Defendant filed a motion to dismiss the remaining counts of the

Complaint on June 6, 2011. The Plaintiffs have filed an opposition and the

Defendant have also filed a reply.

STANDARD OF REVIEW

The purpose of a motion to dismiss is to test the legal sufficiency of the

complaint. McAfee v. Cole, 637 A.2d 463,465 (Me. 1994). The court examines "the

complaint in the light most favorable to the plaintiff to determine whether it sets

forth elements of a cause of action or alleges facts that would entitle the plaintiff

to relief pursuant to some legal theory." Id. When testing the complaint under

3 M.R. Civ. P. 12(b)(6), the material allegations of the complaint must be taken as

admitted. Id. "Dismissal is warranted when it appears beyond a doubt that the

plaintiff is not entitled to relief under any set of facts that he might prove in

support of his claim." Johanson v. Dunnington, 2001 ME 169,

1246.

M.R. Civ. P. 12(b) states that if the court considers "matters outside the

pleadings" the motion to dismiss must be treated as a motion for summary

judgment pursuant to M.R. Civ. P. 56 and all parties be given the opportunity to

provide all materials pertinent to a motion for summary judgment. However,

the Maine courts recognize a narrow exception to this rule and may consider

official public documents, those documents that are central to the plaintiff's

claim, and documents referred to in the complaint without converting the motion

to dismiss into a motion for summary judgment. Moody v. State Liquor & Lottery

Comm., 2004 ME 20,

Plaintiffs' June 16, 2010 letter to Defendant, written pursuant to 5 M.R.S. § 213(1-

A), and Defendant's September 2, 2010 response. Both documents are attached

to the Defendant's Motion to Dismiss and there has been no challenge to their

authenticity in the Plaintiffs' Opposition. As such, the Court considers the

Plaintiffs' June 16, 2010 letter and Defendant's September 2, 2010 response as

part of the Complaint.

DISCUSSION

1. Countii

In Count II the Plaintiffs seek an accounting of all payments they have

made on the mortgage since its inception in 2006. An accounting is an equitable

remedy used to prevent a party from being unjustly enriched. Horton &

4 McGhee, Maine Civil Remedies,§ 8-1 at 199 (4th ed. 2004). "To seek an accounting,

a party should allege in the complaint facts sufficient to establish that an

accounting should be ordered, and should include in the prayer for relief a

request for an accounting." Id. § 8-3 at 202. While an accounting has

traditionally been used where the parties are in a fiduciary relationship or

maintain mutual accounts, equity jurisdiction may be based solely on the need

for an accounting to provide complete relief. Id. at 201-02; Graffam v. Wray, 437

A.2d 627, 640 n.12 (Me. 1981). Furthermore, it is not necessary for the plaintiff to

include the allegation that there is "not a plain, adequate and complete remedy

at law" in the pleadings, as long as the other facts in the complaint show that

jurisdiction exists. Lovejoy v. Coulombe, 131 A.2d 450 (Me. 1957); Goodwin v. Smith,

89 Me. 506, 508, 36 A. 997, 998 (1897).

The Plaintiffs' basis for requesting an accounting is the discrepancy

between their assertion that the unpaid balance on the mortgage as of February

28, 2010 is $674.03 and the Defendants two conflicting statements of the unpaid

balance of $8,728.60 on April16, 2010 and $14,867.88 on April17, 2010. Compl.

<[<[ 34, 35, 36. The Plaintiffs also allege that the Defendant has not properly

credited to the Plaintiffs' account mortgage payments that have been made.

Comply.<[ 22. The logical implication of these allegations is that the Defendant

has unjustifiably retained certain sums of money that, while rightfully belonging

to the Defendant, were not properly credited to the Plaintiffs' account. Although

the Plaintiffs admit that no money is owed to them and that they in fact continue

to be behind in payments, the consequence of this discrepancy may result in

foreclosure. This count sounds in unjust enrichment and the Plaintiffs have

5 pleaded sufficient facts to state such a claim and seek an accounting as a remedy.

The Court DENIES the Defendant's motion as to Count II.

2. CountV

In Count V the Plaintiffs allege that the Defendant has violated 9-A M.R.S.

§ 8-206J(l)(B)(l), (2), and (3), Maine's statutory Residential Mortgage Loan

Requirements under the Truth in Lending Act. The statute states:

B. In connection with a consumer credit transaction secured by a consumer's principal dwelling, a servicer may not:

(1) Fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency or except as provided in subparagraph (4);

(2) Impose on the consumer any late fee or delinquency charge in connection with a payment, when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period;

(3) Fail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer's obligation in full as of a specified date; or

(4) Fail to credit a payment as of 5 days after receipt if a servicer specifies in writing requirements for the consumer to follow in making payments, but accepts a payment that does not conform to the requirements ....

9-A M.R.S. § 8-206J(l)(B) (2009).

The Complaint states that the Defendant received payments from the

Plaintiffs, placed those payments in a suspension account, and improperly

credited the Plaintiffs' account, resulting in the imposition of late fees and

causing the Plaintiffs "to appear even further delinquent." Compl.

The September 3, 2011letter from the Defendant purports to explain how the

Plaintiffs' payments were posted to their account. It states that whenever a

6 partial payment is received it is put into a "suspense account until the full

contractual amount is due." De£. Mot. Dismiss, Ex. A. Based on the figures

included in this letter, the Court understands this statement to mean that a

payment is not credited to a debtor's account until the Defendant has received

enough money to cover one full monthly payment. In viewing the Complaint

and the other documents in the light most favorable to the Plaintiffs, it appears

that the Defendant held $3,913.34 in payments made by the Plaintiffs on

December 9, 2009 and January 16, 2010 without crediting any "full contractual

payments" to the Plaintiffs' account and without explanation for this failure. See

De£. Mot. Dismiss, Ex. A.

The Plaintiffs claim that the Defendant violated 9-A M.R.S. § 8-

206J(l)(B)(l) by not posting full payments to their account and that this failure

resulted in their "appearing even further delinquent." Compl. 9I 53. The

Defendant argues that the Complaint does not allege any charge to the consumer

resulting from the delay in crediting because paragraph 53 only cites the

appearance of further delinquency as the injury. However, given the standard of

review on a motion to dismiss, the Court finds that the allegation in paragraph

51 (that the Defendant charged the Plaintiffs late fees in connection with the

delay in crediting the account) is sufficient to support the "charge to the

consumer" element of section 1.

The Plaintiffs also allege that they have been charged late fees in violation

of 9-A M.R.S. § 8-206J(l)(B)(2). Again, given the standard of review on a motion

to dismiss, the Court finds that the Plaintiffs have sufficiently alleged that the

Defendant charged late fees at some point after allegedly not crediting payments

to the Plaintiffs' account. The Defendant argues that the September 3, 2010 letter

7 clarifies that the Plaintiffs were not charged a late fee in violation of the statute

but that letter does not, in fact, clarify how or why the late fees were charged.

Taking the allegations in the Complaint as true the Court finds the Complaint

sufficient to state a claim under this section.

The Plaintiffs also allege that the Defendant failed to provide an accurate

statement of the total outstanding balance on the mortgage loan within a

reasonable time of their June 16, 2010 request, in violation of 9-A M.R.S. § 8-

206J(l)(B)(3). Compl. <[<[54, 55. It is unclear from the Complaint when and how

the Plaintiffs sought this information from the Defendant. Regardless, the

Plaintiffs have sufficiently stated a claim on which relief may be granted under

the first two subsections of this statute. The Court DENIES the motion as to

CountY.

3. CountVI

In Count VI the Plaintiffs allege that the Defendant entered into the TPP

with the Plaintiffs with the knowledge that the Plaintiffs did not and would not

qualify for a mortgage modification under the HAMP. Compl. <[57. Thereby,

the Plaintiffs allege that the Defendant was engaged in an unfair or deceptive

trade or practice and that the Plaintiffs suffered monetary loss as a result.

Compl. <[ 57.

The Maine Unfair Trade Practices Act declares unfair methods of

competition and unfair or deceptive acts or practices to be unlawful. 5 M.R.S. §

207 (2009). It further provides a private remedy for actual damages, restitution,

or other equitable relief to any person

who purchases or leases goods, services or property, real or personal, primarily for personal, family or household purposes who thereby suffers any loss of money or property, real or

8 personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 207. Id. at§ 213(1). As a condition precedent to filing a private action, a plaintiff must

make a "settlement offer" to the defendant identifying the claimant, identifying

the unfair act or practice relied upon and injuries suffered, and identifying the

relief requested. Id. at§ 213(1-A). Failure to comply with the technical

requirements of the settlement offer is not jurisdictional, although it may result

in disallowance of certain protections of the statute. Kilroy v. Ne. Sunspaces, Inc.,

2007 ME 119,

Owners Ass'n v. Peachtree Doors, 659 A. 2d 267, 272-73 (Me. 1995).

An unfair or deceptive act must be substantial, must not be outweighed

by any countervailing benefit to consumers or competitors, and the injury must

be an injury that consumers themselves could not reasonably have avoided."

Bangor Publ'g Co. v. Union St. Mkt., 1998 ME 37,

Suminski v. Me. Appliance Warehouse, Inc., 602 A.2d 1173, 1174 n.1 (Me. 1992)).

"An act or practice is deceptive if it is a material representation, omission, act or

practice that is likely to mislead consumers acting reasonably under the

circumstances." State v. Weinschenk, 2005 ME 28,

means that the information involved is important to the customer and would

affect the customer's choice of or conduct regarding a product. Id. It does not

matter that the defendant acted in good faith or without the intent to deceive. Id.

The Plaintiffs have alleged sufficient facts to withstand the motion to

dismiss Count VI. They allege the unfair act was the Defendant's entering into

the TPP while knowing that the Plaintiffs ultimately would not qualify for a

modification. They also allege continued requests from the Defendant for

additional payments beyond the original three-month TPP. Compl.

9 These requests indicated that eligibility for HAMP would be jeopardized if the

Plaintiffs did not comply. The Plaintiffs allege that they suffered a loss of money

because the TPP payments made between July 2009 and March 2010 were in an

amount greater than their monthly mortgage payment: an amount likely to be

considered substantial. The Defendant argues that because the Plaintiffs

initiated the HAMP modification and entered the TPP "voluntarily and

knowingly" there could not have been a deceptive act. Def. Mot. Dismiss 8.

Entering into the TPP voluntarily and knowingly does not negate the allegation

that the Defendant had information that it did not share with the Plaintiffs until

ten payments had been made. Furthermore, whatever technical deficiencies the

Plaintiffs' settlement offer letter may contain does not preclude their bringing

this claim. The Defendant's motion to dismiss Count VI is DENIED.

The entry is

The Defendants' motion to dismiss is DENIED.

DATE: September 16, 2011 ~AGWh~ Justice, Superior Court