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Pickett v. Ditech Financial, LLC

United States District Court, D. Rhode Island

August 3, 2018


         Clifford Pickett filed suit against several financial institutions and mortgage servicers seeking $207, 241.02 in insurance proceeds he alleges he was due after an accidental fire damaged his home in Jamestown, Rhode Island. All Defendants, Ditech Financial, LLC ("Ditech"), Residential Credit Solutions, Inc. ("RCS"), Bank of America Corporation ("BAC"), [1]and The Bank of New York Mellon Corporation ("BONY')[2] have moved to dismiss under Federal Rules of Civil Procedure 12(b)(6). ECF Nos. 32, 33.

         I. Facts

         On January 9, 2007, Mr. Pickett obtained a loan for $423, 000 from America's Wholesale Lender for property located in Jamestown, R.I. ("Property"). The parties entered into a uniform Mortgage Security Instrument ("mortgage").[3] In compliance with Section 5 of the mortgage, Mr, Pickett insured the Property through the Fireman's Fund Insurance Company ("FFIC"). The Mortgage Electronic Registration System ("MERS") assigned the mortgage on August 25, 2010 to The Bank of New York Mellon as Trustee for the Benefit of Alternative Loan Trust 2007-7T2 Mortgage Pass-Through Certificates, Series 2007-7T2.

         On or about July 20, 2014, the Property sustained serious damage due to an accidental fire. ECF No. 30. Mr. Pickett alleges that beginning on or about July 27, 2014, and for some time thereafter, a licensed general contractor performed restoration and repairs to the Property. On or about September 3, 2014, Mr. Pickett alleges that FFIC released insurance proceeds of $207, 241.02 to RCS and BAC. However, RCS and/or BAC never disbursed the monies to Mr. Pickett or his contractor. Section 5 states, "[d]uring such repair and restoration period, Lender shall have the right to hold such insurance proceeds until Lender has had an opportunity to inspect such Property to ensure work has been completed to Lender's satisfaction, provided that such inspection shall be iindertaken promptly." ECF No. 32-3 at 6.[4] Mr. Pickett alleges that the Lender failed to inspect the Property.

         Section 5 of the mortgage further states, "if the Lender acquires the Property under Section 22 or otherwise, the Borrower hereby assigns to the Lender (a) Borrower's rights to any insurance proceeds in an amount not to exceed the amounts unpaid under the Note or this Security Instrument." Id. Mr. Pickett defaulted on his mortgage. After default, the mortgagee applied the Proceeds to the outstanding principle balance and neither Mr. Pickett nor his contractor received any of the insurance proceeds.

         Mr. Pickett filed a multi-count complaint, later amended, for negligence, breach of contract, conversion, unjust enrichment, and vicarious liability against all Defendants, alleging that these institutions' failure to turn over the insurance proceeds so that he could pay his contractor was in violation of the mortgage contract and common law. All remaining Defendants have moved to dismiss. ECF Nos. 32, 33. Mr. Pickett objected to both motions. ECF Nos. 34, 35.

         II. Standard of Review

         To survive a motion to dismiss for failure to state a claim, a complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly 550 U.S. 544, 570 (2007). At the same time, the Court "must accept a plaintiffs allegations as true and construe them in the light most favorable to them." Gargano v. Liberty Int'l Underwriters, 572 F.3d 45, 48 (1st Cir. 2009). "A Rule 12(b)(6) motion will be granted only if, when viewed in this manner, the pleading shows no set of facts which could entitle plaintiff to relief." Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir. 1988) (citing Conley v. Gibson, 355 U.S. 41, 45-48 (1957)).

         Ill Analysis

         Mr. Pickett's amended complaint contains five claims: negligence, breach of contract, conversion, unjust enrichment, and vicarious liability. As not all of Mr. Pickett's claims are against every defendant and each defendant's role vis-a-vis the mortgage and Mr. Pickett's status as homeowner differs, the Court will discuss each of the Defendants and the claims brought against them in turn, after setting forth the legal elements of each claim.


         Under Rhode Island law, "[t]o maintain a cause of action for negligence, the plaintiff must establish four elements: (1) a legally cognizable duty owed by defendant to plaintiff; (2) breach of that duty J (3) that the conduct proximately caused the injury; and (4) actual loss or damage." Medeiros v. Sitrin, 984 A.2d 620, 625 (R.I. 2009).

         Breach of Contract

         "To succeed on a breach of contract claim under Rhode Island law, a plaintiff must prove that (1) an agreement existed between the parties, (2) the defendant breached the agreement, and (3) the breach caused (4) damages to the plaintiff." Barkan v. Dunkin'Donuts, Inc., 627 F.3d 34, 39 (1st Cir. 2010).


         "The gravamen of an action for conversion lies in the defendant's taking the plaintiffs personalty without consent and exercising dominion over it inconsistent with the plaintiffs right to possession. To maintain an action for conversion, a plaintiff must establish that she was in possession of the personalty, or entitled to possession of the personalty, at the time of conversion." Alex & Ani, LLC v. Elite Level Consulting, LLC, 31 F.Supp.3d 365, 371 (D.R.I. 2014) (internal citations omitted). The focus of inquiry is "whether the defendant has appropriated to his own use ...

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