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Lebeau v. U.S. Bank N.A.

United States District Court, D. Rhode Island

March 7, 2019

TROY LEBEAU, Plaintiff,



         Before the Court is Defendants' joint Motion to Dismiss Plaintiff Troy Lebeau's Second Amended Complaint under Federal Rule of Civil Procedure Rule 12(b)(6) for failure to state a claim. ECF No. 31. After reviewing the submitted materials and considering the established caselaw on mortgage litigation in Rhode Island, the Court GRANTS the motion.

         Mr. Lebeau bought the house in North Smithfield, Rhode Island in July 2006. He granted a $300, 000.00 mortgage to New Century Mortgage Corporation. ECF No. 31-2 at 6-26.[1]He executed a note in favor of New Century secured by the mortgage. Id. at 28-31. New Century endorsed the note in blank. Id. at 31. Wells Fargo Bank, N.A. AttorneyirrFact foi1 New Century executed an assignment of mortgage, assigning the mortgage to U.S. Bank National Association, as Trustee for Asset-Backed Pass-Through Certificates, Series 2006-NC2. Id. at 33. Mr. Lebeau defaulted on the mortgage loan by failing to make timely monthly payments.

         Meanwhile, Mr. Lebeau filed a Chapter 7 bankruptcy petition, electing to surrender the property. The Bankruptcy Court issued a Chapter 7 discharge and closed the case shortly thereafter. Wells Fargo as servicer for the trustee U.S. Bank sent a notice of right to cure to Mr. Lebeau, advising that the loan was in default. Mr. Lebeau did not cure the default and Wells Fargo scheduled a foreclosure sale but, because of an incomplete trust name[2] listed in the assignment, Wells Fargo cancelled that sale, and a corrective assignment was latter executed, identifying the complete trust name and U.S. Bank as trustee.

         A year later, Mr. Lebeau filed a lawsuit in state court to challenge the rescinded foreclosure. That court granted defendants1 motion for summary judgment, finding that U.S. Bank held Mr. Lebeau's mortgage and note and could enforce its terms as such. ECF No. 46-2 at 4-5. In its order, however, the court mistakenly stated that Accredited Home Lenders, Inc. endorsed the note in blank by even though AHL was never alleged to be involved in Mr. Lebeau's loan. Id. at 4. In fact, the papers attached to the state court record showed an endorsement in blank by New Century, the original lender.

         Mr. Lebeau then filed the present action. Defendants Wells Fargo and U.S. Bank have moved to dismiss twice; both times, Mr. Lebeau moved to amend the complaint and the Court granted the motions. The Second Amended Complaint ("Complaint") is now the operative Complaint (ECF No. 30) and Defendants have again moved to dismiss it.


         In reviewing a motion to dismiss filed under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court accepts as true the well-pleaded factual allegations of the complaint and draws all reasonable inferences in favor of the plaintiff. See Cook v. Gates, 528 F.3d 42, 48 (1st Cir. 2008); McCloskely v. Mueller, 446 F.3d 262, 266 (1st Cir. 2006). To withstand "a motion to dismiss, a complaint must allege 'a plausible entitlement to relief."' ACA Fin. Guar. Corp. v. Aclvest, Inc., 512 F.3d 46, 58 (1st Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)); see also Ashcroft v. Iqbal 556 U.S. 662, 678-87 (2009). "[A] plaintiff. . . is . . . required to set forth factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory." Gooley v. Mobile Oil Corp., 851 F.2d 513, 515 (1st Cir. 1988).

         Moreover, the "tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678 (citing Twombly 550 U.S. at 555). A complaint "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citing Papasan v. Attain, 478 U.S. 265, 286 (1986)).

         As these mortgage foreclosure cases tend to be document heavy, the Complaint incorporates many documents into the complaint and both sides rely on documents outside the four corners of the complaint. "Under First Circuit precedent, when 'a complaint's factual allegations are expressly linked to and admittedly dependent upon a document (the authenticity of which is not challenged),' then the court can review it upon a motion to dismiss." Diva's Inc. v. City of Bangor, 411 F.3d 30, 38 (1st Cir. 2005) (alteration in original) (quoting Alternative Energy Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 34 (1st Cir. 2001)). So, the Court will consider both incorporated and appended documents.


         I. Count I-Violation of the Real Estate Settlement and Procedures Act (RESPA)

         In Count I, Mr. LeBeau asserts that 12 C.F.R. § 1024, specifically Regulation X, prohibits a servicer from conducting a foreclosure sale during a loss mitigation application review received at least 37 days before a scheduled sale-he alleges this is dual tracking. In response, Wells Fargo argues that this claim should be dismissed because merely noticing a foreclosure sale does not violate the regulation, a submitted loss mitigation application must be complete, not just facially complete, and the noticed foreclosure sale did not go forward.

         In his case, Mr. Lebeau alleges that he received a May 12, 2017 foreclosure sale notice informing him of a July 6, 2017 sale. He then submitted a facially complete loss mitigation application on May 18, 2017. EOF No. 30 at ¶ 18. Wells Fargo received it on May 22, 2017. Id. This is 57 clays before the purported sale date. Id. at ¶ 32. According to Regulation X, Wells Fargo had to review this package because it received it more than 37 days before the sale. Id. at ¶ 33. He alleges that he never heard from Wells Fargo that it needed any additional documents but does not allege that he ever submitted anything more to complete his application. Id. at ΒΆ 17, The problem with this timeline is that Wells Fargo noticed the foreclosure six days before Mr. Lebeau started the loss mitigation process by submitting a facially complete loss mitigation package. Wells Fargo cannot be accused of dual tracking when it noticed the foreclosure sale before ever receiving airy ...

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