United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
G. FLEISSIG UNITED STATES DISTRICT JUDGE
matter is before the Court on Defendant's motion to
dismiss Count II (Breach of the Implied Duty of Good Faith
and Fair Dealing) and Count III (Negligence) of
Plaintiff's complaint, pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the reasons set forth below, the
motion will be granted.
Delmar Financial Company (“Delmar”), a Missouri
company, is a mortgage lender that originates loans and holds
loan servicing rights. Defendant Ocwen Loan Servicing, LLC
(“Ocwen”), a mortgage loan servicer, is
incorporated in Delaware, with its principal place of
business in Florida. On January 1, 2014, Delmar and Ocwen
entered into a Subservicing Agreement
(“Agreement”) under which Ocwen was to act as
Delmar's subservicer, providing services such as
collecting payments from borrowers and remitting those
payments to secondary market investors. Under the Agreement,
Ocwen was required to act “consistent with . . .
Accepted Servicing Practices, Applicable Law and the Approval
Matrix.” ECF No. 5-1 at 18.
Agreement also stated that Ocwen “shall comply in all
material respects with Applicable Law and employ Accepted
Servicing Practices except and to the extent that such
practices conflict with the requirements of this
Agreement.” Id. at 20. “Accepted
Servicing Practices” is defined by the Agreement as:
With respect to any Portfolio Loan or REO Property, (i) the
Fannie Mae Guides, (ii) any applicable mortgage insurer
guides, (iii) the VA Regulations applicable for any VA
Mortgage Loan and FHA regulation applicable for any FHA
Mortgage Loans, and (iv) to the extent not inconsistent
therewith, those mortgage servicing practices of mortgage
lending institutions which service mortgage loans of the same
type as Portfolio Loan or REO Property in the jurisdiction
where the related Mortgaged Property is located, exercising a
reasonable standard of care in performing those practices.
Id. at 5. The Agreement included an indemnification
provision which stated:
[T]he Subservicer shall defend and indemnify [Delmar] . . .
against any and all Liability sustained by [Delmar] . . .
arising from the failure of the Subservicer to perform its
duties under this Agreement or the Subservicer's breach
of the terms of this Agreement, including taking any action
or failing to take any action in accordance with the Approval
Id. at 59. The indemnification provision also
provided that Ocwen would indemnify Delmar for liability
resulting from “the assertion of any claim or the
commencement of any proceeding or investigation by any Person
not a party hereto . . . subject to [certain] terms and
conditions.” Id. The Agreement provided that
it would be construed in accordance with New York law.
Id. at 80.
complaint, Delmar alleges that Ocwen “failed to perform
in material respects obligations set forth in the
[Agreement].” ECF No. 5 at 3. Delmar outlines a number
of acts that, according to the complaint, constituted a
breach of contract, a breach of the implied duty of good
faith and fair dealing, and/or negligence, as follows. Ocwen
used REALServicing as its loan servicing platform, and that
platform lacked “the basic system architecture and
design necessary to properly service loans, ” which
caused “great disruption” and “impacted
Delmar's loans.” Id. Ocwen's failure
to initiate foreclosure or convey property in a timely manner
led to interest curtailments, additional property damage, and
additional preservation costs. Ocwen also performed
unnecessary repair work, and it made mistakes with respect to
various USDA Rural Development loans that have caused Delmar
to sustain losses. And Ocwen “failed to follow the
conventional and government loan claim process in a timely
and accurate manner.” Id. at 4.
complaint further alleges that Ocwen failed to adhere to
Governmental National Mortgage Association's
(“Ginnie Mae”) program requirements by placing
custodial funds into interest bearing accounts, which caused
Ginnie Mae to send Delmar a Pre-Penalty Notice. As a result,
Delmar will allegedly need to retain and pay an attorney to
file a response or risk paying a penalty. The complaint
states that Ocwen made assurances to Delmar that it would pay
the fine, but has not done so. The complaint also states
that, on several occasions, Delmar was charged for items that
Ocwen admitted were caused by its fault, and although Ocwen
agreed to indemnify Delmar, it has not done so.
complaint alleges that, in one instance, a borrower on a loan
subserviced by Ocwen claimed that Ocwen erred in its duties
by failing to properly apply reinstatement funds to cure a
default. The borrower brought suit against Ocwen, and Ocwen
sought to shift liability and payment of legal fees to
Delmar, despite the indemnification provision in the
Agreement requiring Ocwen to “defend and indemnify
Delmar against any and all liability arising from Ocwen's
failure to perform its duties.” Id. at 5.
asserts that Delmar submitted two claims for indemnification
to Ocwen in April 2017, which Ocwen accepted as “test
claims” to be used as a template for future claims.
Delmar states that it has yet to receive payment on these two
claims. Delmar additionally filed 14 claims, none of which
have been indemnified by Ocwen. The total of the unpaid
claims to date is $274, 000. Delmar alleges a total of $950,
000 in losses as a result of Ocwen's conduct.
Count I of the three count complaint, Delmar claims that
Ocwen breached the Agreement by, “among other things,
failing to comply with Accepted Servicing Practices, failing
to comply with Agency regulations and standards and being
unable to even board new loans in certain states in which
Delmar does business.” Id. at 7. In Count II,
Delmar claims that Ocwen breached an implied duty of good
faith and fair dealing by “its conduct herein.”
Id. at 8. And in ...