United States District Court, W.D. Missouri, Central Division
JOHN W. SMITH, Plaintiff,
SELECT PORTFOLIO SERVICING, INC., et. al., Defendants.
NANETTE K. LAUGHREY United States District Judge.
John W. Smith brings this lawsuit pro se against
Select Portfolio Servicing, Inc., DLJ Mortgage Capital, and
DOES 1 to 100, Inclusive. The dispute concerns Smith's
mortgage loan, held by DLJ and serviced by Select Portfolio.
Smith alleges claims against both defendants for breach of
the implied covenant of good faith and fair dealing, wrongful
foreclosure, and quiet title. Before the Court is
Defendants' Motion to Dismiss Plaintiff's Complaint
for Failure to State a Claim. [Doc. 3].
Plaintiff did not oppose the pending motion, the Court
entered an Order to Show Cause on August 9, 2016, why
Defendants' motion should not be granted. [Doc. 10].
Plaintiff's response was to be filed on or before August
24, 2016. [Id.]. Plaintiff did not file a
response. Therefore, the Court considers Defendants'
motion to be fully briefed. For the reasons set forth below,
the Motion to Dismiss is granted.
following facts from Plaintiff's complaint, [Doc. 1-6],
are taken as true for the purpose of determining whether
Plaintiff's complaint should be dismissed for failure to
state a claim. See Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). When reviewing a pro se
complaint, the Court construes it liberally and draws all
reasonable inferences from the facts in the Plaintiff's
favor. Topchian v. JP Morgan Chase Bank, N.A., 760
F.3d 843, 849 (8th Cir. 2014).
1998, Plaintiff obtained a mortgage loan from HSBC, comprised
of a promissory note secured by a deed of trust on
Plaintiff's residence at 30757 Daffodil Drive, Warsaw,
Missouri. Later, the loan was assigned to DLJ as the mortgage
holder with Select Portfolio as the mortgage servicer. Around
2008, Plaintiff requested a loan modification to his
mortgage, but both Select Portfolio and DLJ denied this
request. In February 2015, Select Portfolio and DLJ recorded
a Notice of Default in the Office of the Recorder for Benton
County, Missouri against Plaintiff's residence in Warsaw,
Missouri. Plaintiff continued to attempt to modify his loan,
but Defendants rejected his modification proposals.
complaint alleges three counts. In Count I, Plaintiff alleges
that Defendants are liable for breaching the implied covenant
of good faith and fair dealing by failing to consider in good
faith his proposed loan modifications. In Count II, Plaintiff
alleges that Defendants are liable for wrongful foreclosure
because they did not own the loan or corresponding note, but
nonetheless, they conducted a non-judicial foreclosure sale.
Finally, in Count III, Plaintiff brings a quiet title action
by alleging his superior interest in the Warsaw, Missouri
Count I: Breach of the Implied Covenant of Good Faith and
alleges that Defendants breached the implied covenant of good
faith and fair dealing by “fail[ing] to consider
Plaintiffs' requests [for loan modifications] in good
faith.” [Doc. 1-6, at ¶ 31]. Missouri law
recognizes an implied duty of good faith and fair dealing in
every contract. Arbos v. Jefferson Bank & Trust Co.,
Inc., 464 S.W.3d 177, 185 (Mo. 2015) (en banc). The
covenant's purpose is to prevent one party from using an
agreement's express terms to “deny the other party
the expected benefit of the contract” or to
“evade the spirit of the transaction.”
Hawthorn Bank and Hawthorn Real Estate, LLC v. F.A.L.
Invest, LLC, 449 S.W.3d 61, 66-67 (Mo.Ct.App. 2014)
(internal quotation marks omitted). This implied covenant,
however, is not “an everflowing cornucopia of
wished-for legal duties; indeed, the covenant cannot give
rise to obligations not otherwise contained in a
contract's express terms.” Comprehensive Care
Corp. v. RehabCare Corp., 98 F.3d 1063, 1066 (8th Cir.
1996) (quoting Glass v. Mancuso, 444 S.W.2d 467, 478
implied covenant claim alleges that Defendants' decision
to reject his mortgage modification requests was made in bad
faith. Specifically, Plaintiff contends that
“Defendants refused to cooperate with Plaintiff, even .
. . where they were made aware of Plaintiffs' situation,
” including “the severe problems countervailing
Plaintiffs' ability to pay the Mortgage Loan.”
[Doc. 1-6, ¶¶ 30, 31].
I, however, fails to state a claim upon which relief may be
granted. First, the pleadings fail to cite any facts or
specific contract terms, such as in the Deed of Trust or
Promissory Note, that give rise to an obligation by
Defendants to consider Plaintiff's loan modification
request. Therefore, Plaintiff's alleged right to a
modification is a mere “wished-for legal dut[y]”
and not required by the implied covenant of good faith and
fair dealing. Comprehensive Care Corp., 98 F.3d at
even if Defendants did have a duty to consider
Plaintiff's loan modification requests, Plaintiff failed
to plead factual information to support his allegation that
Defendants' denials of these requests were arbitrary,
capricious, or an abuse of discretion. In a contract
instilling one party with the discretion to decide issues
arising under the contract, “the question is not
whether the party made an erroneous decision but whether the
decision was made in bad faith or was arbitrary or capricious
so as to amount to an abuse of discretion.”
Missouri Consol. Health Care Plan v. Cmty. Health
Plan, 81 S.W.3d 34, 48 (Mo.Ct.App. 2002). Further, the
covenant does not require parties to exercise reasonableness
in their decision making, and “show[ing] that a party
invested with discretion made an erroneous decision” is
not enough. BJC Health Sys. v. Columbia Cas. Co.,
478 F.3d 908, 914 (8th Cir. 2007) (interpreting Missouri
law). Therefore, even if Defendants' decision to deny
Plaintiff's modification request was arguably
unreasonable, Plaintiff failed to plead sufficient facts
showing that Defendants acted in bad faith. Plaintiff did not
offer any evidence that Defendants exercised their discretion
for the purpose of evading the spirit of the mortgage
agreement or denying Plaintiff the expected benefit of his
bargain. Rather, Plaintiff characterizes Defendants'
actions as “malicious, fraudulent and oppressive”
without any factual support. Without more, such threadbare
recitals of a claim's elements are not enough to state a
plausible claim. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). Accordingly, Plaintiff's claim for
breach of the implied covenant of good faith and fair dealing
is dismissed for failure to state a claim.
Count II: ...