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Davis v. Citibank, N.A.

United States District Court, E.D. Missouri, Eastern Division

March 4, 2015

CYNTHIA K. DAVIS, Plaintiff,
CITIBANK, N.A., Defendant.


CATHERINE D. PERRY, District Judge.

Plaintiff Cynthia K. Davis claims that defendant Citibank, N.A., with whom she had a Home Equity Line of Credit, wrongfully charged her a lien subordination fee when she refinanced her underlying home mortgage. The lender with whom fshe sought to refinance, Chase Mortgage, required her to provide documents showing that Citibank's Deed of Trust had been subordinated to the new Chase security interest. When Davis requested subordination from Citi, it told her it would charge a "$200 subordination fee." She paid the fee, Citi provided the subordination, and Davis was therefore able to complete the Chase refinancing as she desired.

Davis has now sued Citibank, seeking to represent a class of persons similarly situated. She alleges that Citibank was unjustly enriched when it charged her the $200 fee, because the home equity loan documents did not specifically say such a fee would be required. She alleges that Citibank's requiring her to pay the $200 was a deceptive practice barred by the Missouri Merchandising Practices Act and constituted common law fraud. Finally, she alleges that the charge violated Missouri's second mortgage loan act.

After careful consideration, I will deny the motion to dismiss as to Counts I and II, as the allegations are sufficient to state a claim for unjust enrichment and violation of the Missouri Merchandising Practices Act. I conclude that Davis has failed to allege the proper elements of a claim under Missouri's second mortgage law, an MSMLA claim, and she has not contested Citi's motion to dismiss her fraud claim, so I will grant Citi's motion as to Counts III and IV of Davis's complaint.

I. Motion to Dismiss Standard

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint. When considering a 12(b)(6) motion, the court assumes the factual allegations of a complaint are true and construes them in favor of the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). The court may consider all materials attached to the complaint as if they were part of the pleadings. See Quinn v. Ocwen Federal Bank FSB, 470 F.3d 1240, 1244 (8th Cir. 2006). In this case plaintiff attached, among other things, the Home Equity Line of Credit Agreement and Disclosure and the letter Citi sent her regarding the $200 fee, so I have considered those documents.

Rule 8(a)(2), Fed. R. Civ. P., provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." In Bell Atlantic Corp. v. Twombly, the Supreme Court clarified that Rule 8(a)(2) requires complaints to contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." 550 U.S. 544, 555 (2007); accord Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Specifically, to survive a motion to dismiss, a complaint must contain enough factual allegations, accepted as true, to state a claim for relief "that is plausible on its face." Twombly, 550 U.S. at 570.

II. Background

Davis and her husband own a property located in St. Louis, Missouri that is subject to a first mortgage held by J.P. Morgan Chase N.A. and a second mortgage, in the form of a home equity line of credit (HELOC), which is secured by a Deed of Trust and held by Citi. In the fall of 2011, Davis began working with Chase to refinance her mortgage and was informed that she would need a subordination agreement from Citi stating that the HELOC was subordinated to the refinanced Chase mortgage. Upon requesting subordination from Citi, Davis was notified that Citi charged a $200 subordination fee. Davis paid the fee, and Citi provided the subordination agreement. Davis now claims the subordination fee was wrongful because it was not provided for in the written terms of her HELOC agreement and was not otherwise disclosed to her until just before it was charged. Citi has moved to dismiss all four of Davis' claims against it.

III. Discussion

A. Count I - Unjust Enrichment

Count I of Davis's complaint asserts that because the HELOC agreement contains no provision regarding subordination fees, Citi had no right to charge such a fee and was unjustly enriched by doing so. Citi argues that this cannot be the basis for a claim of unjust enrichment because it arises out of their written contract. Davis responds that the claim does not arise out of the contract, but instead was unjust because Citi charged something that was not in the contract. Whether this can state a claim for unjust enrichment is a very close case, but I conclude that Davis may be able to prove the claim, and so I will deny the motion to dismiss.

1. Governing Law

A federal court sitting in diversity applies the substantive law of the state in which the district court sits. Urban Hotel Dev. Co. v. President Dev. Co., L.C., 535 F.3d 874, 877 (8th Cir. 2008). The obligation to apply state law extends to the forum state's choice-of-law principles. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. ...

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