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Hill v. Bank of America, N.A.

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

November 1, 2016

BANK OF AMERICA, N.A. Defendant.



         This matter comes before the Court on Defendant Bank of America, N.A.'s Motion to Dismiss Plaintiffs' First Amended Complaint [ECF No. 16].

         I. BACKGROUND

         Plaintiffs Laura Hill and Johnny Hill (“Plaintiffs”) initiated this lawsuit by filing a petition against Defendant Bank of America, N.A. on December 28, 2015 in the Twenty-First Judicial Circuit Court, in St. Louis County, Missouri [ECF Nos. 1, 1-1]. On April 1, 2016, Defendant removed the action to this Court [ECF No. 1]. On May 12, 2016, Defendant filed a motion to dismiss, alleging Plaintiffs failed to state a claim upon which relief can be granted [ECF No. 10]. On Jun 18, 2016, Plaintiffs filed a first amended complaint [ECF No. 14]. On July 8, 2016, Defendant filed this Motion to Dismiss for failure to state a claim upon which relief can be granted pursuant to FRCP 12(b)(6), seeking to dismiss all counts of Plaintiffs' first amended complaint [ECF No. 16]. For purposes of this Motion to Dismiss, the Court accepts the following facts alleged in Plaintiffs' complaint as true. Great Rivers Habitat Alliance v. Fed. Emergency Mgmt. Agency, 615 F.3d 958, 988 (8th Cir. 2010).

         Plaintiffs obtained a loan secured by a mortgage on their real property commonly known as 2326 Wallis Avenue, St. Louis, Missouri, in St. Louis County, Missouri, (“Real Property”) from Defendant. In connection with the loan, Plaintiffs executed a Note on October 12, 2001. On March 18, 2008, Plaintiffs and Defendant entered into a loan modification agreement where Plaintiffs were obliged to pay $830.18 plus interest per month, with the first payment due on May 1, 2008. Plaintiffs continued to make their scheduled monthly payment, after agreeing to the Loan Modification Agreement. When Plaintiffs attempted to make their October 28, 2008 payment, Defendant refused to accept the payment and informed Plaintiffs their loan was in default. Plaintiffs claim they made all the required payments and were not otherwise in default. Further, Plaintiffs claim Defendant failed to apply several payments made by Plaintiffs, including insurance proceeds, to Plaintiffs' loan account. Plaintiffs contacted Defendant several times to urge Defendant to apply the payments to Plaintiffs' loan balance, e but Defendant allegedly never applied these payments. On or about February 23, 2011, Defendant foreclosed on Plaintiff's home. On June 12, 2011, Plaintiffs repurchased the real property for $62, 406.00.

         In Plaintiffs' Complaint, Plaintiffs allege nine counts against Defendant. In Count I, Plaintiffs allege Defendant wrongfully foreclosed on the real property by refusing Plaintiffs' payments and by failing to properly apply those payments towards the loan balance, despite Plaintiffs making all the required payments and not otherwise being in default at the time of the foreclosure. In Count II, Plaintiffs allege Defendant fraudulently misrepresented Plaintiffs by instructing them to stop making loan payments and assuring Plaintiffs they were eligible for a loan modification. In Count III, Plaintiffs allege Defendant breached the deed of trust in not properly applying payments received from Plaintiffs. In Count IV, Plaintiffs allege Defendant negligently misrepresented Plaintiffs by providing them with false information and instructions. In Count V, Plaintiffs allege a claim of money had and received, where they argue Defendant's acceptance and retention of Plaintiffs' loan payment was unjust, because Defendant did not properly apply these payments to Plaintiffs' loan balance. In Count VI, Plaintiffs allege Defendant was unjustly enriched since Defendant retained Plaintiffs' loan payments without applying the payments to Plaintiffs' loan balance. In Count VII, Plaintiffs allege Defendant engaged in conversion of funds by diverting money, paid by Plaintiffs for the specific purpose of satisfying monthly mortgage payments, to a different purpose. In Count VIII, Plaintiffs allege Defendant violated the Missouri Merchandising Practice Act (“MMPA”) by engaging in unfair practices in not applying Plaintiffs' loan payments to their loan balance and making false promises and misrepresentations to Plaintiffs. In Count IX, Plaintiffs allege Defendant's conduct was grossly negligent, and warrants punitive damages to deter Defendant from like conduct in the future. Plaintiffs request the Court award Plaintiffs compensatory damages in a fair and reasonable amount in the excess of Twenty-Five Thousand Dollars ($25, 000) for each count except for Count IX. Defendant now seeks to dismiss all of Plaintiffs' claims pursuant to FRCP 12(b)(6) for failure to state a claim upon which relief can be granted.

         II. STANDARD

         Under FRCP 12(b)(6), a party may move to dismiss a claim for “failure to state a claim upon which relief can be granted.” The notice pleading standard of FRCP 8(a)(2) requires plaintiffs to give “a short and plain statement showing that the pleader is entitled to relief.” To meet this standard and to survive a FRCP 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and citation omitted). This requirement of facial plausibility means the factual content of Plaintiffs' allegations must “allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Cole v. Homier Distrib. Co., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Iqbal, 556 U.S. at 678). Courts must assess the plausibility of a given claim with reference to plaintiffs' allegations as a whole, not in terms of the plausibility of each individual allegation. Zoltek Corp. v. Structural Polymer Group, 592 F.3d 893, 896 n.4 (8th Cir. 2010) (internal citation omitted). This inquiry is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. Court must grant all reasonable inferences in favor of the nonmoving party. Lustgraaf v. Behrens, 619 F.3d 867, 872-73 (8th Cir. 2010).


         Defendant makes multiple arguments in its Motion to Dismiss, where it generally argues each of Plaintiffs' counts in their first amended complaint fails to state a claim for relief. The Court will address each claim individually.

         A. Plaintiffs' Wrongful Foreclosure Claim - Count I

         In Count I, Plaintiffs allege Defendant is liable for wrongful foreclosure because Defendant did not apply Plaintiffs' payment towards their loan balance and Plaintiffs were not otherwise in default. Defendant asserts Plaintiffs' wrongful foreclosure claim fails because multiple and conflicting allegations in the complaint are inconsistent with and contradictory to Plaintiffs' wrongful foreclosure claim, because the other allegations state Plaintiffs were in default at various times and Defendant had a lawful right to foreclose [ECF No. 17 at 3]. Plaintiffs respond Defendant never had a right to foreclose, because Plaintiffs were up to date on their loan payments and even if they were not, Defendant waived its right to insist on the original payments in the first loan modification and its instructions to Plaintiffs to stop making further payments [ECF No. 20 at 4-5]. Defendant replies Plaintiffs' allegations are too implausible and the timeline of the complaint does not support a theory of waiver.

         Under Missouri law, Plaintiffs can pursue a claim in equity as a basis for setting aside a foreclosure sale, or they can let the sale stand and file a tort action to recover damages for wrongful foreclosure. Dobson v. Mortg. Electronic Registration Sys., Inc./GMAC Mortg. Corp., 259 S.W.3d 19, 22 (Mo.Ct.App. 2008). What constitutes a “wrongful foreclosure” sufficient to set aside a sale differs from what constitutes a “wrongful foreclosure” sufficient to recover damages in tort. Id. at 22. Because Plaintiffs only request the Court enter a judgment against Defendant for damages, and not set aside the foreclosure sale, the Court will only examine Plaintiffs' pleading to determine if it states a tort claim for wrongful foreclosure claim.

         “[A] plaintiff seeking damages in a wrongful foreclosure action must plead and prove that when the foreclosure proceeding was begun, there was no default on its part that would give rise to a right to foreclose.” Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887 (8th Cir. 2014) (quoting Fields v. Millsap & Singer, P.C., 295 S.W.3d 567, 571 (Mo.Ct.App.2009)).

         Plaintiffs, in their complaint, allege their mortgage was not in default when the foreclosure proceeding began [ECF No. 14 at 40]. Plaintiffs also allege they complied with the original and modified deed of trust agreement by making payments in the amount of $830.18 plus interest every month and complied with all obligations pursuant to the deed of the trust. Plaintiffs allege sufficient factual matter, if true, could show there was no default on Plaintiffs' part and Defendant had no right to foreclose at the time foreclosure proceedings were commenced.

         Defendant argues Plaintiffs' claims are internally inconsistent and the Court does not need to accept such claims. Parties are allowed to plead alternative and inconsistent theories in their complaints under FRCP 8, and Defendant acknowledges this, but avers Plaintiffs' claims are internally inconsistent with each other and the Court need not accept them. “The liberal policy reflected in Rule 8(d) mandates that courts not construe a pleading ‘as an admission against another alternative or inconsistent pleading in the same case.'” Franke v. Greene, No. 4:11CV1860 JCH, 2012 WL 3156577, at *5 (E.D. Mo. Aug. 2, 2012) (quoting Molsbergen v. United States, 757 F.2d 1016, 1019 (9th Cir. 1985)). Plaintiffs are allowed to plead in the alternative, and the Court does not find these pleadings to be internally inconsistent, other than to the extent they may be alternative pleadings. Adopting Defendant's position would stifle the liberal alternative pleading policy of Rule 8(d). Plaintiffs have stated a claim for wrongful foreclosure, and therefore, the Court denies Defendant's motion with respect to count I.

         B. Plaintiffs' Fraudulent Misrepresentation Claims - Count II

         Plaintiffs allege Defendant engaged in fraudulent misrepresentation when Defendant's agent instructed Plaintiffs to not make any payments on their loan while it was being reviewed. [ECF No. 14 ¶¶ 43-48]. Defendant asserts Plaintiffs' claims for fraudulent misrepresentation fail because: (1) Plaintiffs have not pled sufficient facts; (2) the claims are barred by the economic loss doctrine; (3) a misrepresentation cannot relate to expectations and predictions concerning a future event; and (4) Plaintiffs' claims are barred by the statute of limitations. Plaintiffs respond the fraudulent misrepresentation claims should not be dismissed, because, inter alia, Plaintiffs have properly pled ...

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