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Maley v. Specialized Loan Servicing LLC

United States District Court, E.D. Michigan, Southern Division

April 24, 2019




         Michael Maley defaulted on the second mortgage on his home. He brings this action against the owner of his mortgage and promissory note, E*Trade Bank (“ETB”), and the collection agency employed by it, Specialized Loan Servicing LLC (“SLS”). (ECF No. 1.) Each Defendant filed a Motion to Dismiss. (ECF Nos. 10, 14.) Plaintiff filed responses (ECF Nos. 17, 18), and Defendants jointly replied (ECF No. 19). Having reviewed the briefing, the court determines that a hearing is unnecessary. See E.D. Mich. LR 7.1(f)(2). For the reasons explained below, the court will grant in part and deny in part the motions and Plaintiff will be given limited leave to replead.

         I. BACKGROUND

         The following facts are taken from the general allegations section of Plaintiff's complaint. (ECF No. 1.) In August 2014, Plaintiff took out a second mortgage on his home for $100, 000 with Quicken Loans, who sold the mortgage and note to ETB. Later that year, Plaintiff fell behind on his monthly payments and ETB hired SLS to collect on the mortgage. In February 2015, the parties modified in writing the terms of the mortgage so that the interest rate was 0% and the monthly payment was $1. The unpaid principal balance at that time was $103, 620. Plaintiff received statements consistent with the terms of the modification for many months. Around April 18, 2016, he received the last such statement, which identified the unpaid principal balance as $103, 479.58.

         Plaintiff contacted Defendants to inquire why he had stopped receiving monthly statements, and in October 2016 the parties agreed to a structured settlement of the mortgage. Plaintiff understood its terms as requiring him to pay $200 per month at 0% interest. When he received his next statement around December 8, 2016, however, it indicated that his interest rate was 5.25% and there was a past due balance of $9, 823.44. Around December 13, 2016, Plaintiff received a structured settlement letter from Defendants stating the unpaid balance on the mortgage was $112, 974.87.

         Around April 21, 2017, Plaintiff wrote to Defendants disputing the balance amount. He received a response around May 5, 2017 indicating that his account had accrued $9, 525.29 in interest and administrative fees between March 2016 and December 2016. Plaintiff wrote again on May 16, 2017 requesting an explanation and documentation of the $9, 525.29, including the monthly statements from May 2016 to November 2016 that he never received. Defendants responded around May 25, 2017 explaining that due to a system error they did not have the monthly statements he requested. The response further indicated that the balance to date was $103, 449.58[1], and the previous billing statements Plaintiff received were not in error.

         Plaintiff continued to ask Defendants about the accrual of approximately $10, 000 between May 2016 and December 2016. He wrote to Defendants again around August 18, 2017 asking about it but did not receive a response. Around October 6, 2017, Plaintiff sent what he asserts was a qualified written request to Defendants disputing the charges on his account and seeking an explanation of their accrual. He received a response from Defendants around November 1, 2017, which he claims did not address his question. Plaintiff sent another alleged qualified written request around November 13, 2017 again asking for an explanation of what caused his loan to accrue almost $10, 000 in charges between May 2016 and December 2016. He received a response around March 15, 2018, which “represented that ‘pursuant to the settlement' the unpaid principle [sic] balance would have increased to $112, 974.87” and “that Defendants capitalize the past due balance.” (Id., PageID.8.)

         Plaintiff did not understand how this explanation fit with his monthly statements from Defendants through April 2016 indicating an interest rate of 0%. He sent a written request around April 28, 2018 asking for an explanation of when and why his interest rate changed from 0%. Defendants responded around May 18, 2018 stating that his interest rate was set to 0% in February 2015 but changed to a higher rate in December 2016, and the current interest rate was not in error. Plaintiff understood this to mean that Defendants “retroactively and illegally added interest to his mortgage.” (Id., PageID.9.) The response did not, in Plaintiff's estimation, explain how the new interest rate was calculated. Plaintiff alleges that had he known his interest rate was not 0% or that interest would be applied retroactively to his loan, he would have made larger payments earlier and his current balance would be approximately $95, 000 rather than $122, 500.

         On October 17, 2018, Plaintiff filed an eight-count complaint against Defendants. (ECF No. 1.) Four of the counts were against only SLS: (I) violation of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq.; (III) fraud/ misrepresentation; (VII) violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq.; and (VIII) violation of the Michigan Occupational Code (MOC). The remaining claims were against both Defendants: (II) breach of contract; (IV) unjust enrichment; (V) misrepresentation; and (VI) violation of the Michigan Consumer Protection Act, M.C.L. § 445.903(1).

         SLS filed a motion to dismiss Plaintiff's complaint in its entirety for failure to state a claim, asking that Counts I, III, IV, and V be dismissed with prejudice and the remaining claims be dismissed without prejudice. (ECF No. 10.) Subsequently, ETB filed a motion to dismiss that incorporated and relied upon SLS's motion and brief. (ECF No. 14.) Plaintiff filed a response, agreeing to the dismissal of Counts III, IV, V, and VI and contesting the dismissal the remaining counts (I, II, VII, and VIII). (ECF No. 17, PageID.87.) He seeks leave to file an amended complaint. (Id., PageID.88-90.)

         II. STANDARD

         Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 512 (6th Cir. 2010). A court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P.12(b)(6).

         “To survive a motion to dismiss, a litigant must allege enough facts to make it plausible that the defendant bears legal liability.” Agema v. City of Allegan, 826 F.3d 326, 331 (6th Cir. 2016) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of the cause of action will not do.” Smith v. Tipton Cty. Bd. of Educ., 916 F.3d 548, 551-52 (6th Cir. 2019) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-'that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In determining whether to grant a Rule 12(b)(6) motion, the court “must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.'” United States v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822, 830 (6th Cir. 2018) (quoting Twombly, 550 U.S. at 570). The court does not, however, “accept as true . . . ‘legal conclusions or unwarranted ...

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