United States District Court, D. Rhode Island
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
...