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Rocha v. Wells Fargo Bank, N.A.

United States District Court, D. Rhode Island

April 24, 2018

ERNESTO ROCHA, Plaintiff,
v.
WELLS FARGO BANK, N.A. D/B/A WELLS FARGO HOME MORTGAGE d/b/a AMERICA'S SERVICING COMPANY; U.S. BANK N.A. AS TRUSTEE, FOR RESIDENTIAL ASSET SECURITIES CORPORATION, HOME EQUITY MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-EMX1; HARMON LAW OFFICES P.C.; ALL PERSONS UNKNOWN, CLAIMING ANY LEGAL OR EQUITABLE RIGHT, TITLE, ESTATE, LIEN OR INTEREST IN THE PROPERTY DESCRIBED IN THE COMPLAINT ADVERSE TO PLAINTIFF'S TITLE THERETO; INDIVIDUALLY, JOINTLY AND SEVERALLY, Defendants.

          MEMORANDUM AND ORDER

          WILLIAM E. SMITH, Chief Judge.

         Before the Court is Defendants', Wells Fargo Bank, N.A. d/b/a Wells Fargo Home Mortgage d/b/a America's Servicing Company (“Wells Fargo”) and U.S. Bank National Association as Trustee, for Residential Asset Securities Corporation, Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-EMX1 (“U.S. Bank”) (collectively, “Defendants”) Motion To Dismiss Plaintiff's First Amended Complaint for Damages (“Motion”) (ECF No. 48) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff Ernesto Rocha's First Amended Complaint for Damages (“Complaint”) (ECF No. 38) brings claims for breach of contract and breach of fiduciary duty (Count I), initiation of wrongful foreclosure (Count II), conversion and unjust enrichment (Count III), and intentional or negligent infliction of emotional distress (Count IV). For the reasons set forth below, the Court GRANTS in part and DENIES in part Defendants' Motion.

         I. Background[1]

         On November 18, 2005, Plaintiff purchased a house located at 63 Nellie Street, Providence, Rhode Island, which he financed by taking out mortgage loans for $268, 000 and $67, 000 from Wells Fargo. (Compl. 11.) In 2008, Plaintiff sought to modify his loan with Wells Fargo, but was unsuccessful. (Id. at 11-12.) While Plaintiff pursued this loan modification, an arrearage accumulated on his mortgages, which resulted in Wells Fargo sending a letter to Plaintiff stating that his home would be sold in foreclosure in April 2009. (Id. at 12.) Subsequently, on April 9, 2009, Plaintiff sought Chapter 13 bankruptcy protection in the United States Bankruptcy Court for the District of Rhode Island. (Id.)

         In January 2010, the bankruptcy court confirmed a Chapter 13 plan that reduced the principal of Plaintiff's first mortgage loan to $145, 000 and “stripp[ed] off” the second loan. (Id.) Over the next five years, Plaintiff made his Chapter 13 plan payments, which, in March 2015, culminated in the Chapter 13 trustee issuing a notice of final cure mortgage payment, a notice of plan completion, and a final report and account. (Id.) At some point during the bankruptcy proceedings, Wells Fargo submitted a statement that Plaintiff had paid the arrearage in full and was current on all post-petition payments, fees, expenses, and charges. (Id. at 13.) Plaintiff ultimately obtained a discharge order from the bankruptcy court. (Id.)

         While the bankruptcy proceedings were ongoing, Plaintiff alleges that Wells Fargo failed to pay property taxes on his home to the City of Providence. (Id. at 15.) According to Plaintiff, the agreements between him and Wells Fargo gave him the right to rely - and he alleges he did rely - on Wells Fargo to use the money he provided in escrow to pay the property taxes. (Id.) Plaintiff further alleges that all of the mortgage payments he made included an escrow amount to pay the property taxes. (Id.) Although it did not use the escrow funds to pay property taxes, Wells Fargo did use them to purchase force-placed property insurance, despite Plaintiff repeatedly sending Wells Fargo evidence that he had obtained his own insurance. (Id. at 17.)

         In August of 2011, as a result of Wells Fargo's failure to pay property taxes, the Providence City Tax Collector informed Plaintiff that his home had been sold at a tax sale on June 15, 2011. (Id. at 15-16.) In May 2012, Plaintiff received another notice that his home would be sold for unpaid taxes that were owed as of December 2011. (Id. at 16.) Plaintiff again, in April 2013, received a notice that his home would be sold at a tax sale, despite a mortgage statement issued by Wells Fargo that stated it had paid $5, 903.04 to the Providence City Tax Collector and Wells Fargo's representations that it had made regular payments of $1, 407.51 to the City throughout 2013. (Id.) These three tax sales forced Plaintiff to “redeem [his home] when it [was] purchased three times.” (Id. at 2.)

         In addition to failing to pay taxes in accordance with the mortgage agreement, Wells Fargo issued mortgage statements showing inexplicable “late fees, a negative escrow balance and a large amount of mon[ey] held in suspense, not applied to the principal balance or escrow.” (Id. at 16-17.) For example, Plaintiff alleges that a statement dated March 16, 2015, showed that Plaintiff was more than $166, 000 in arrears on his mortgage payments between June 2009 and March 2015; however, three days after Wells Fargo issued this statement, the company represented to the bankruptcy court that Plaintiff was “current on all post-petition payments.” (Id. at 17.)

         Plaintiff also complains that Wells Fargo issued mortgage statements indicating that he had “not paid his mortgage in years and that his escrow account [was] tens of thousands of dollars short.” (Id. at 12.) According to Plaintiff, this was because “all of the payments made to Wells Fargo [were] placed in a suspense account.” (Id.) At various times during the course of these events, Plaintiff alleges that the suspense account contained over $100, 000. (Id. at 18.) Plaintiff specifically alleges that the suspense account contained more than “$123, 000 at a time close to entry of the Discharge Order in Bankruptcy Court.” (Id.) Moreover, Wells Fargo allegedly charged interest on the unpaid balance of the mortgage while it held funds in the suspense account and used the funds in the suspense account to earn and retain money. (Id.)

         Plaintiff allegedly suffered “debilitating” health issues brought on by Wells Fargo's conduct. (Id. at 19.) And in January 2016, unsure of how to extricate himself from the situation, and believing his mortgage had been paid in full, Plaintiff stopped making payments, which he felt was “the only way left to get someone at Wells Fargo to address the problems” with the company's handling of his account. (Id. at 2.) Wells Fargo responded by issuing a notice that a foreclosure sale was scheduled for Plaintiff's home. (Id. at 3.) In an effort to stave off foreclosure, Plaintiff brought the instant suit.[2]

II. Legal Standard

         On a motion to dismiss, the Court must decide whether the complaint has made “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). That is, the Court must decide whether the claim is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007)). In conducting this inquiry, the Court “accept[s] the truth of all well-pleaded facts and draws all reasonable inferences therefrom in the pleader's favor.” García-Catalán, 734 F.3d at 102 (quoting Grajales v. P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012)). The complaint need not include “a high degree of factual specificity.” Grajales, 682 F.3d at 47. But it “must contain more than a rote recital of the elements of a cause of action.” Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 53 (1st Cir. 2013) (citations omitted).

         III. Discussion[3]

         A. Breach of Contract and Fiduciary Duty Plaintiff bases his claims for breach of contract and breach of fiduciary duty on Wells Fargo's negligent servicing practices; misuse of escrow funds and suspense accounts; failure to provide an accurate accounting that explains how Plaintiff's ...


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