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Kent v. Seterus, Inc.

United States District Court, W.D. Missouri, Western Division

December 7, 2017

KELLY W. KENT, Plaintiff,
v.
SETERUS, INC., LERETA, LLC and QUICKEN LOANS INC., Defendants.

          ORDER GRANTING IN PART DEFENDANT SETERUS'S MOTION TO DISMISS

          GREG KAYS, UNITED STATES DISTRICT COURT CHIEF JUDGE

         This case arises out of unpaid real estate taxes. Plaintiff Kelly Kent (“Kent”) alleges Defendants collected monthly escrow payments from him, earmarked for his real estate taxes, but never actually paid the monies over to the taxing authority, thereby causing his real estate taxes to fall into arrears. Kent sued Defendants for violations of the Real Estate Settlement Practices Act (“RESPA”), violations of the Missouri Merchandising Practices Act (“MMPA”), various common law negligence claims, and breach of contract.

         Now before the Court is Defendant Seterus, Inc.'s (“Seterus”) motion to dismiss Kent's claims (Doc. 10). As explained below, Kent's motion is GRANTED IN PART.

         Background

         The amended complaint (Doc. 28) alleges the following:

         In October 2007, Kent purchased a condo in Chicago, Illinois, with the proceeds from a mortgage loan with Capital Funding Mortgage Company, LLC, (“CFMC”) and a loan with First American Bank (“FAB”). Plaintiff lived in the condo as his primary residence until April 2011, when he relocated to Kansas City, Missouri. He moved for several reasons including, a “downturn in the economy” and to care for an ill parent. Am. Compl. (Doc. 28 ¶ 64-64.2). Kent alleges he is actively seeking employment in Chicago and intends to move back into the condo.

         During the time Plaintiff was in Kansas City, he decided to rent the property to friends and family. The rate he charged was lower than his monthly expenses on the condo. From April 2011 through March 2017, Kent rented the condo reporting the rental income and expenses on his yearly tax return, claiming a loss each year. From April 2011 until July 2012, the loss was $800 per month and from August 2012 through March 2017, the loss was $400 per month.

         On July 19, 2012, Kent refinanced the CFMC mortgage with Defendant Quicken Loans Inc. (“QLI”). The QLI loan called for property taxes to be held in an escrow account. It also stated that Kent was to make periodic payments for taxes and that QLI “shall apply the funds to pay escrow items no later than time specified under RESPA.” Am. Compl. ¶ 15.4. The QLI loan also states that QLI shall provide Kent an annual accounting of the escrow items. The QLI loan included a 1-4 Family Rider excusing Kent from occupying the home, which was otherwise required. Another section of the QLI loan alerted Kent that another company could service his QLI loan, meaning collecting the payments due and performing the “other mortgage loan servicing obligations” as defined in the document. Am. Compl. ¶ 15.6.

         On September 1, 2012, QLI assigned, sold, or transferred the servicing of Plaintiff's QLI loan to Seterus. Sometime later, QLI authorized Seterus to outsource the property tax reporting and monitoring services on Plaintiff's loan to Lereta, LLC (“Lereta”).

         Plaintiff made timely payments on his loan and escrow items. Plaintiff received yearly mortgage statements reflecting the beginning and ending balance of his loan, beginning and end balance of his escrow account, and real estate taxes paid.

         On November 10, 2016, Plaintiff learned his 2012 real estate taxes owed to Cook County, Illinois, had been sold to ATCF II Illinois, LLC (“ATCF”) at the county's annual tax sale, due to non-payment. Plaintiff later learned that his real estate taxes for years 2013, 2014, and 2015 had also not been paid, despite his yearly mortgage statements indicating they had. On that same day, Plaintiff contacted Seterus and it indicated it would research the issue. On November 16, 2016, Plaintiff contacted Seterus again and Seterus responded that the issue would be resolved by November 27, 2016. On November 30, 2016, Plaintiff called Seterus a third time and Seterus stated there was an issue with the property account number and that issue had been resolved.

         On December 8, 2016, Plaintiff received an escrow account statement indicating the account had a deficiency of $4, 252.86. Then on January 3, 2017, Defendants redeemed the delinquent real estate taxes, including those sold to ATCF, for $9, 782.70. This redemption payment included penalties of $1, 176.56. Kent continued to receive statements claiming the escrow account had a shortage. Kent claims his escrow payment increased to cover the shortfall caused at least in part by the penalties assessed for the late payment of his taxes.

         Kent sued Seterus and Lereta for violations of RESPA, violations of the MMPA, various common law negligence claims, and breach of contract. Seterus moved to dismiss the claims against it. After the motion was fully briefed, Kent moved to amend the complaint to add QLI as a party and clarify certain facts alleged. In granting the motion to amend his complaint, the Court permitted the parties to file supplemental briefing on the pending motion to dismiss.

         Standard

         To survive a 12(b)(6) motion to dismiss, the complaint must do more than recite the bare elements of a cause of action. Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). Rather, it must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although a complaint is not required to have detailed factual allegations, a plaintiff must provide more than mere “labels and conclusions” or “formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 545. In reviewing the complaint, the court assumes ...


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