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Stamatakos v. Wells Fargo Bank, National Association

United States District Court, D. Rhode Island

March 22, 2018



          William E. Smith Chief Judge.

         Before the Court is Magistrate Judge Patricia A. Sullivan's Report and Recommendation (“R&R”) (ECF No. 35) recommending that the Motion To Dismiss (ECF No. 21) filed by Defendants Wells Fargo Bank, National Association and U.S. Bank National Association, as Trustee for Structured Asset Investments Loan Trust 2006-3 (collectively, “Defendants”) be granted as to Counts III and IV of Plaintiff's Complaint (ECF No. 1-4) but denied as to Counts I and II.[1] Defendants timely objected to the R&R (ECF No. 42) (“Objection”). After careful review of the R&R and the relevant papers, [2] the Court accepts the R&R and adopts its recommendations and reasoning. See 28 U.S.C. § 636(b)(1).

         First, Defendants challenge Magistrate Judge Sullivan's Count I recommendation and suggest that Plaintiff fails to plausibly allege entitlement to a permanent loan modification. (Defs.' Obj. to R. & R. 2-3, ECF No. 42.) Defendants posit that, because the complaint “expressly acknowledges” that making the three trial payments was only “part” of the contract, and because Plaintiff does not allege what those other “parts” were, it must be that Plaintiff has not satisfied his other contractual obligations. Defendants made this same argument before Magistrate Judge Sullivan, who appropriately rejected it. (See R. & R. 6 (“The argument turns the analysis proper at the 12(b)(6) phase on its head; in considering a motion under Fed.R.Civ.P. 12(b)(6), the Court must draw all reasonable inferences in favor of the claimant, not the movant.”). Defendant's argument is no more persuasive now than it was before. And the Court agrees that it is not appropriate for a motion to dismiss. “[T]he most that defendants' arguments have done is inject a degree of ambiguity into the contract. They fall far short of showing that the only reasonable interpretation of [it] supports their position.” Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 235 (1st Cir. 2013). At this motion-to-dismiss stage, the Court may not upend the applicable standard and pile inference upon inference against Plaintiff, particularly when that Plaintiff is pro se. See Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 75-76 (1st Cir. 2014) (“And we construe pro se complaints . . . liberally.”) (citing Erickson v. Pardus, 551 U.S. 89, 94 (2007)). Instead, the Court must resolve ambiguities in favor of Plaintiff. See Lass v. Bank of America, N.A., 695 F.3d 129, 137 (1st Cir. 2012) (reversing district court's rejection of plaintiff-homeowner's proposed interpretation of ambiguous mortgage and reinstating her breach-of-contract claim).

         Defendants' suggestion that Plaintiff fails to state a claim for breach of the implied covenant of good faith and fair dealing is similarly unavailing. On this score, Defendants argue that Magistrate Judge Sullivan “conflated the standards for breach of contract, and for breach of the covenant of good faith and fair dealing” by suggesting that she recommended that because Plaintiff pleaded a breach-of-contract claim, he necessarily pleaded a breach of the implied covenant of good faith and dealing. (Defs.' Obj. to R. & R. 5.) Defendants mischaracterize Magistrate Judge Sullivan's analysis. And the case they suggest Magistrate Judge Sullivan overlooked, Miller v. Wells Fargo Bank, N.A., 160 A.3d 975 (R.I. 2017), is inapposite. There, the Rhode Island Supreme Court's holding that plaintiff's claim for breach of the implied covenant of good faith and fair dealing did not pass muster hinged on it adopting the trial justice's factual finding that there was no “contractual obligation on behalf of the lender to either modify the mortgage loan or exercise discretion in evaluating a potential modification . . . .” Miller, 160 A.3d at 980-81. Here, at this early stage of the case, the Court cannot draw such an inference in Defendants' favor. And, in any event, based on Magistrate Judge Sullivan's reasoning, Defendants' concern for conflation between the two standards is unfounded. Rather than hold that Plaintiff necessarily pleaded a plausible claim for breach of good faith and fair dealing because Plaintiff pleaded a plausible breach-of-contract claim, Magistrate Judge Sullivan focused on Plaintiff's “described conduct, ” which she concluded amounted to a viable arbitrary and unreasonable claim in light of Defendants' plausible contractual obligations. (See R. & R. 7.) Plaintiff's Count I claim survives Defendants' motion to dismiss.

         Finally, Defendant's attack on Magistrate Judge Sullivan's Count II recommendation is no more compelling. (Defs.' Obj. 6-8.) Defendants suggest Magistrate Judge Sullivan's treatment of the promissory-estoppel claim was inappropriate because “[g]iven Plaintiff's ongoing payment obligations, the Complaint fails to plausibly allege that by making the three trial period payments Plaintiff changed his position or did anything that he would not have done in the absence of the alleged promise” and “also fails to allege Plaintiff suffered harm from making the trial period payments.”[3] (Id. at 7-8.) Once again, Defendants' averment is premature at the motion-to-dismiss stage and requires the Court to draw inferences adverse to Plaintiff, which it is not willing to do at this juncture. For the reasons outlined by Magistrate Judge Sullivan, the Court is satisfied that Plaintiff alleges a plausible claim for detrimental reliance sufficient to clear Defendants' motion to dismiss.

         Accordingly, the R&R (ECF No. 35) is ACCEPTED. Defendants' Motion To Dismiss (ECF No. 21) is GRANTED as to Counts III and IV and DENIED as to Counts I and II.

         IT IS SO ORDERED.

         January 5, 2018


          PATRICIA A. SULLIVAN, United States Magistrate Judge.

         This matter is before the Court on the motion to dismiss (ECF No. 21) filed by Defendants Wells Fargo, National Association, (“Wells Fargo”) and U.S. Bank National Association, as Trustee for Structured Asset Investments Loan Trust 2006-3 (“U.S. Bank”), seeking the dismissal of Plaintiff's Complaint (ECF No. 1-4) in its entirety. Plaintiff, represented by counsel, filed his four-count complaint in Rhode Island Superior Court to challenge the foreclosure of his home, located at 322 Branch Avenue, Providence, Rhode Island. Defendants removed the litigation to this Court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. Shortly after removal, Plaintiff's counsel moved to withdraw (ECF No. 4), which motion was granted by this Court on March 20, 2017. With leave of the Court, Plaintiff now proceeds pro se. Consequently, the Court has afforded Plaintiff's subsequent filings the measure of leniency that is appropriate under applicable law. Erickson v. Pardus, 551 U.S. 89, 94 (2007).

         I. BACKGROUND

         Plaintiff bought the property at 322 Branch Avenue in January 2006, executing a mortgage and note to First Horizon Home Loan Corporation (“First Horizon”) for $210, 000. ECF No. 1-4 ¶¶ 1, 8; ECF No. 21-2. Soon after, First Horizon assigned the mortgage to Defendant U.S. Bank. ECF No. 21-3. At the time of the assignment, Defendant Wells Fargo, operating as “America's Servicing Company” or “ASC” (collectively “Wells Fargo”), took over the servicing of the loan. With their opposition, Defendants have submitted copies of the versions of the mortgage and assignment filed in the land records; as clarified during a phone conference with the Court held in connection with this motion, Plaintiff does not challenge the authenticity of these documents.[1] However, Plaintiff does challenge the validity of the assignment alleging that it was not executed by an officer of the assignor with the necessary authority. ECF No. 1-4 ¶¶ 36-37.

         On or around August 21, 2009, according to Plaintiff, he and Wells Fargo entered into a verbal contract, subsequently confirmed in writing, [2] pursuant to which he claims that Wells Fargo agreed to permanently modify the terms of the mortgage if he complied with certain requirements during a trial period. ECF No. 1-4 ¶ 12; see Young v. Wells Fargo, N.A., 717 F.3d 224, 229 (1st Cir. 2013) (U.S. Treasury Department guidelines direct loan servicers to offer permanent loan modifications to borrowers who comply with terms set forth during trial period). On his part, Plaintiff promised to make three monthly payments to Wells Fargo. Id. ¶ 12. Plaintiff alleges that he fulfilled his end of the bargain, while Defendants “breached the agreement with Plaintiff by failing and refusing to permanently modify the Stamatakos mortgage.” Id. ¶ 13. Instead of complying, Defendants turned the matter over to Harmon Law Offices, P.C., which proceeded to sell the house at a foreclosure sale, first to an individual buyer in 2011 who failed to follow through with the purchase, and then to U.S. Bank on April 19, 2012. See id. ¶¶ 14-15. Plaintiff alleges that the foreclosure deed is void because the person who executed it lacked the proper power of attorney; he challenges the viability of the related power of attorney based on its failure specifically to identify the mortgage loan to be foreclosed. Id. ¶ 34. Since the foreclosure sale, Plaintiff has been fighting his eviction in the Superior Court and now in this Court.[3] See ECF Nos. 10, 16, 32; R.I. Superior Court No. PD-2017-1431.

         In Count I, Plaintiff alleges that he was, and remains, ready, willing and able to perform under the modification agreement and that Defendants' breach of that agreement resulted in the foreclosure sale. He alleges that this breach also constitutes a breach of the implied covenant of good faith and fair dealing inherent in every contract. In his alternative Count for promissory estoppel, Plaintiff alleges that he detrimentally relied on Defendants' false promises to permanently modify his loan, resulting in the foreclosure of his home. In a third Count, Plaintiff alleges that Defendants' breach was a violation of Rhode Island's deceptive trade practices act, R.I. Gen. Laws § 6-13.1-1, et. seq. (“DTPA”). And in a fourth Count, Plaintiff alleges that the foreclosure deed is void and seeks a judgment to quiet title declaring him to be the lawful owner of the property.

         For the reasons that follow, I recommend that Defendants' motion be granted in part, dismissing Plaintiff's Counts alleging deceptive trade practices and seeking to quiet the title, and denied in part, preserving the two Counts alleging breach of contract and promissory estoppel for future judicial activity.

         II. ...

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