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TOWNSEND V. FED. NAT'L MORTG.ASS'NW.D. Va.

United States District Court, W.D. Virginia, Charlottesville Division.

Case No. 3:12–cv–000 !.

2013"02"12

Vel#a and $andon %&WNS'ND, (lainti))s, v. *'D'+ $ N %-&N $ &+%/ /'SS&C- %-&N, et al., De)endants.

enr Woods c$aughlin, ---, %he $a &))ice o) enr c$aughlin (C, +ich#ond, V , )or(lainti))s. unter Wil#er Si#s, r., 4au)#an 5 Canoles, (.C., Nor)ol6, V , %err Catherine*ran6, 4au)#an 5 Canoles, (.C., +ich#ond, V , )or De)endants.

N&+ N 4. &&N

7831831 enr Woods c$aughlin, ---, %he $a &))ice o) enr c$aughlin (C, +ich#ond,V , )or (lainti))s. unter Wil#er Si#s, r., 4au)#an 5 Canoles, (.C., Nor)ol6, V , %err

Catherine *ran6, 4au)#an 5 Canoles, (.C., +ich#ond, V , )or De)endants.

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

(lainti))s Vel#a and $andon %o nsend 9 (lainti))s;< co##enced this action = )iling aco#>laint in the *luvanna Count Circuit Court against the *ederal National ortgage

ssociation 9 *annie ae;< and Sa#uel -. White, (.C. 9 S-W(C;<. *annie ae and S-W(Cti#el re#oved and )iled a #otion to dis#iss. (lainti))s then )iled an #ended Co#>laint, in

hich the added Wells *argo ?an6, N. . 9 Wells *argo;< as a de)endant. (lainti))s see6 to

=ring clai#s )or =reach o) contract, violation o) the *air De=t Collection (ractices ct, and to@uiet title a)ter an allegedl unla )ul )oreclosure on their real >ro>ert . *annie ae, S-W(C, andWells *argo 9collectivel , De)endants;<, have #oved to dis#iss the #ended Co#>laint )or)ailure to state a clai# under *ederal +ule o) Civil (rocedure 129=<9A<. *or the )ollo ingreasons, - ill grant De)endantsB #otion in >art and den it in >art.

I. B c!gr"u#d

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(lainti))s allege that at all ti#es relevant to this case the o ned a ho#e in Scottsville, V . -n200 , (lainti))s entered into a #ortgage loan in hich the ere the =orro ers and #erican

o#e ortgage 9 #erican o#e;< as the lender. %he loan as evidenced = a note 9theNote;< signed = (lainti))s and secured = a deed o) trust 9the Deed o) %rust;< also signed =

(lainti))s and recorded in the cler6Bs o))ice o) the *luvanna Count Circuit Court. #erican

o#e assigned the Note to Wells *argo.

&n ul 1 , 2011, Wells *argo sent (lainti))s an acceleration notice,; a letter in)or#ing the#that their loan as in de)ault )or )ailure to #a6e >a #ents due and stating that uEnless the

>a #ents on our loan can =e =rought current = ugust 1A, 2011, it ill =eco#e necessar tore@uire i##ediate >a #ent in )ull 9also called acceleration< o) our ortgage note and >ursuethe re#edies >rovided )or in our ortgage or Deed o) %rust, hich include )oreclosure.; Wells*argo sent another acceleration notice on ugust 22, 2011. ccording to the #endedCo#>laint, Wells *argo also re#oved the original trustees on the Deed o) %rust and a>>ointedS-W(C as su=stitute trustee. &n &cto=er !, 2011, S-W(C sent (lainti))s a letter in)or#ing the#that S-W(C had =een instructed to initiate )oreclosure >roceedings. %he letter also >rovided

in)or#ation a=out the de=t, including the identit o) the creditor, the a#ount o ed, and a >rocedure = hich (lainti))s could dis>ute the de=t. S-W(C >laced a )oreclosure notice in ane s>a>er having a general circulation in *luvanna Count , and on Nove#=er 10, 2011, S-W(Cconducted a 7832832)oreclosure auction at hich Wells *argo entered the highest =id. Wells*argo su=se@uentl trans)erred title o) the >ro>ert to *annie ae. (lainti))s )iled this suitsee6ing da#ages )ro# Wells *argo and S-W(C and see6ing to @uiet title to the >ro>ert .

II. Leg $ St #d rd

#otion to dis#iss >ursuant to *ederal +ule o) Civil (rocedure 129=<9A< tests the legalsu))icienc o) a co#>laint to deter#ine hether the >lainti)) has >ro>erl stated a clai#F it does

not resolve contests surrounding the )acts, the #erits o) a clai#, or the a>>lica=ilit o) de)enses.; Republican Party of N.C. v. Martin, G80 *.2d G 3, G!2 9 th Cir.1GG2<. -n considering a +ule129=<9A< #otion, a court #ust acce>t all )actual allegations in the co#>laint as true and #ustdra all reasona=le in)erences in )avor o) the >lainti)). Erickson v. Pardus, !!1 U.S. 8G, G , 12S.Ct. 21G , 1A $.'d.2d 1081 9200 <. $egal conclusions in the guise o) )actual allegations,ho ever, are not entitled to a >resu#>tion o) truth. Ashcroft v. Iqbal, !!A U.S. AA2, 12G S.Ct.1G3 , 1G!0–!1 , 1 3 $.'d.2d 8A8 9200G<. lthough a co#>laint does not need detailed )actualallegations, a >lainti))Bs o=ligation to >rovide the grounds o) his entitle #entE to relie) re@uires#ore than la=els and conclusions, and a )or#ulaic recitation o) a cause o) actionBs ele#ents illnot do.; ell Atl. Corp. v. !"o#bly, !!0 U.S. ! , !!! , 12 S.Ct. 1G!! , 1A $.'d.2d G2G 9200 <9citations and @uotations o#itted<. *actual allegations #ust =e enough to raise a right to relie)

a=ove the s>eculative level,; id., ith all the allegations in the co#>laint ta6en as true and allreasona=le in)erences dra n in the >lainti))Bs )avor. Chao v. Rivendell $oods, Inc., 1! *.3d 3 2,3 A 9 th Cir.200!<. -n su#, +ule 129=<9A< does not re@uire heightened )act >leading o) s>eci)ics,

=ut onl enough )acts to state a clai# to relie) that is >lausi=le on its )ace.; !"o#bly, !!0 U.S. at! 0 , 12 S.Ct. 1G!! . Conse@uentl , onl a co#>laint that states a >lausi=le clai# )or relie)survives a #otion to dis#iss.; Iqbal, 12G S.Ct. at 1G!0 .1

1.

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.*ederal +ule o) Civil (rocedure 109c< >rovides that a co> o) a ritten instru#ent that is aneHhi=it to a >leading is dee#ed a >art o) the co#>laint. !ho#pson v. %reene, 2 *.3d 2A3, 2A8 9 th Cir.200!<. -n evaluating a #otion to dis#iss, the court #a consider docu#ents eHtrinsic tothe co#>laint i) the are integral to and eH>licitl relied on in the co#>laint.; &ee Robinson v.

A#. 'onda Motor Co., !!1 *.3d 218, 222–23 9 th Cir.200G< 9citing Phillips v. (CI Int)l Inc., 1G0

*.3d A0G, A18 9 th Cir.1GGG<<F see also &ec)y of &tate v. !ri#ble Navi*ation (td., 8 *.3d 00,0! 9 th Cir.200 <F +avis v. %eor*e Mason niv., 3G! *.Su>>.2d 331, 33! 9'.D.Va.200!<. ere,(lainti))s eH>licitl re)erenced in their co#>laint several eHhi=its that ere attached to it. -t isa>>ro>riate to consider those docu#ents )or the >ur>ose o) deciding this #otion.

III. Discussi"#

A. %$ i#ti&&s' A$$eged F i$ure t" %r" ide N"tice "& Suit

De)endants )irst argue that Counts &ne and % o o) the #ended Co#>laint, hich allege =reaches o) the ter#s o) the Note and the Deed o) %rust, #ust =e dis#issed =ecause (lainti))s did

not give Wells *argo the notice re@uired = the Deed o) %rust =e)ore )iling this action. Section 20o) the Deed o) %rust >rovides that:

Neither ?orro er nor $ender #a co##ence ... an Iudicial action 9as either an individuallitigant or the #e#=er o) a class< that arises )ro# the other >art Bs actions >ursuant to thisSecurit -nstru#ent or that alleges that the other >art has =reached an >rovision o), or an duto ed = reason o), this Securit -nstru#ent, until such ?orro er or $ender has noti)ied the other

>art 9 ith such notice given in co#>liance 7833833 ith the re@uire#ents o) Section 1!< o)such alleged =reach and a))orded the other >art hereto a reasona=le >eriod a)ter the giving o)such notice to ta6e corrective action.-n su>>ort o) their argu#ent, De)endants cite t o 'asternDistrict o) Virginia cases that ere dis#issed solel =ased on si#ilar )ailures to >rovide notice

under deeds o) trust containing the sa#e language. &ee Niya- v. ank of A#erica, No. 1:10cv GA,2011 W$ A3A!!, at 72 9'.D.Va. an. 3, 2011< 9dis#issing co#>laint against loan originator, theo ner o) the de=t o=ligation, the loan servicer, and the su=stitute trustee =ecause all o) the

>lainti))Bs allegations arose )ro# action ta6en >ursuant to the Deed o) %rust;<, aff)d 2*ed. >>H. 838 9 th Cir.2011< 9>er curia#<F ohnson v. Country"ide 'o#e (oans, Inc., No.1:10cv1018, 2010 W$ !1383G2, at 72 9'.D.Va. Dec. 10, 2010<.

(lainti))s contend that *annie ae and S-W(C cannot raise J 20 as grounds )or dis#issal =ecause the ere not >arties to the Deed o) %rust. *urther#ore, ith res>ect to Wells *argo,the argue that ohnson and Niya- ere rongl decided and that this Court should instead)ollo ennett v. ank of A#erica, N.A., No. 3:12cv3 , 2012 W$ 13! ! A 9'.D.Va. >r. 18,

2012<, hich addressed the sa#e issue raised in Niya- and ohnson. %he de)endant in ennett also argued that the case should =e dis#issed =ecause the >lainti)) )ailed to >rovide notice o) suitas re@uired = the ter#s o) the deed o) trust. Id. at 7!. lthough the court agreed that uEnderVirginia la , a >art ho )irst #ateriall =reaches a contract cannot en)orce that contract,; id. 9citing 'orton v. 'orton, 2! Va. 111 , 8 S.'.2d 200, 203 91GG <<, the court also noted that acourt #a rule on such an a))ir#ative de)ense at the 129=<9A< stage onl i) all )acts necessar tothe a))ir#ative de)ense clearl a>>ear on the )ace o) the co#>laint.; Id. 9@uoting%ood#an v.

Pra/air, Inc., G *.3d !8, A 9 th Cir.200 << 9internal @uotation #ar6s o#itted<. -n ennett,

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=ecause the Co#>laint didE not indicate hether ?ennett did, or did not, send such re@uisitenotice,; the court held that it could not address the de)endantBs argu#ent at the #otion to dis#issstage. Id.

- )ind that in this case, as in ennett, the #ended Co#>laint does not indicate hether (lainti))s

sent ritten notice =e)ore co##encing this action, as re@uired = the Deed o) %rust. s the ennett court noted, the argu#ent >resented = De)endants is an a))ir#ative de)ense, theconsideration o) hich is #ore >ro>erl reserved )or consideration on a #otion )or su##ar

Iudg#ent.; Id. 9@uoting Rich#ond, 0redericksbur* 1 Poto#ac R.R. v. 0orst, *.3d 2 , 2!0 9 th Cir.1GG3<<. %here)ore, - ill not dis#iss this case =ased on (lainti))sB alleged )ailure to

>rovide De)endants ith ritten notice o) this suit.

B. %$ i#ti&&'s ($ i) &"r Bre c* "& t*e N"te #d t*e Deed "& Trust

%urning to the su=stance o) the #ended Co#>laint, (lainti))s allege in Count &ne thatDe)endants =reached one >rovision o) the Note and one >rovision o) the Deed o) %rust and that

as a result, the )oreclosure o) (lainti))Bs >ro>ert as void or voida=le. *irst, (lainti))s allege thatDe)endants =reached J A9C< o) the Note, hich >rovides:

-) - a# in de)ault, the Note older #a send #e a ritten notice telling #e that i) - do not >athe overdue a#ount = a certain date, the Note older #a re@uire #e to >a i##ediatel the)ull a#ount o) (rinci>al hich has not =een >aid and all the interest that - o e on that a#ount.%hat date #ust =e at least 30 da s a)ter the date on hich the notice is #ailed to #e or delivered

= other #eans.783 83 Second, (lainti))s allege that De)endants =reached J 22 o) the Deed o)%rust, hich >rovides:

$ender shall give notice to ?orro er >rior to acceleration )ollo ing ?orro erBs =reach o) an

covenant or agree#ent in this Securit -nstru#ent.... %he notice shall s>eci) : 9a< the de)aultF 9=<the action re@uired to cure the de)aultF 9c< a date, not less than 30 da s )ro# the date the notice isgiven to ?orro er, = hich the de)ault #ust =e curedF and 9d< that )ailure to cure the de)ault onor =e)ore the date s>eci)ied in the notice #a result in acceleration o) the su#s secured = thisSecurit -nstru#ent and sale o) the (ro>ert . %he notice shall )urther in)or# ?orro er o) theright to reinstate a)ter acceleration and the right to =ring a court action to assert the non"eHistenceo) a de)ault or an other de)ense o) ?orro er to acceleration and sale. ccording to (lainti)), thet o acceleration notices sent = Wells *argo did not co#>l ith J A9C< o) the Note or J 22 o)the Deed o) %rust. S>eci)icall , (lainti))s allege that Wells *argo violated the ter#s o) the Noteand the Deed o) %rust = : 9i< in)lating the a#ount re@uired to avoid acceleration o) the note and)oreclosure = re@uiring >a #ent o) an a#ount not et overdueF and 9ii< )ailing to state that

(lainti))s could )ile a court action to assert de)enses against acceleration and )oreclosure. - illdiscuss each o) these alleged =reaches in turn.

1. Inflation of Amount Due

%he )irst acceleration notice, dated ul 1 , 2011, stated that the total delin@uenc as o) that dateas K8,1A8.A , and read: %o avoid the >ossi=ilit o) acceleration, ou #ust >a this a#ount on

or =e)ore ugust 1A, 2011.; (lainti))s do not dis>ute that this satis)ied the 30–da notice >eriod

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re@uired = the ter#s o) the Note and the Deed o) %rust ith res>ect to the a#ount due as o) thatdate. ?ut the notice also stated that )Eor the loan to =e current and not in de)ault, any additional #onthly pay#ents, late charges, and other charges that #a =e due under the note, #ortgage anda>>lica=le la a)ter the date o) this notice #ust also =e >aid.; 9'#>hasis added<. -n other ords,to cure the de)ault that eHisted as o) ul 1 , (lainti))s ould also have to #a6e their regularl

scheduled #onthl >a #ent, hich as due on ugust 1, =e)ore the end o) the 30–da cure >eriod. Under the ter#s o) the acceleration notice, i) (lainti))s )ailed to >a = ugust 1A =oththe a#ount in de)ault as o) ul 1 and the a#ount due ugust 1, Wells *argo had the right to

>roceed ith acceleration. 2

2.

%he second acceleration notice, dated ugust 22, 2011, contains the sa#e language and re@uiredan analogous >rocedure.

(lainti))s clai# that the acceleration notice violated the ter#s o) the Note =ecause it re@uired

>a #ent o) an a#ount that had not et co#e due, let alone =een de)aulted on, to =e >aid in orderto cure a >re"eHisting de)ault. (lainti))s suggest that once the ere in de)ault and had receivednotice o) such, a su=se@uent )ailure to #a6e their regular #onthl >a #ent during the 30–dacure >eriod ould constitute a se>arate de)ault, and the =an6 ould have to >rovide the# ith ane notice and give the# 30 #ore da s )ro# the date o) that ne notice to cure the ne ,se>arate de)ault.

&ther )ederal courts in Virginia have reIected the ver argu#ent #ade = (lainti))s in this case.&ee Matanic v. $ells 0ar*o ank, N.A., No. 3:12cv 2, 2012 W$ 321A3 , at 7 9'.D.Va. Se>t.1G, 2012< 9addressing virtuall identical )acts and 783!83!)inding that rEe@uiring su=#issiono) the neHt regular #onthl >a #ent in order to cure de)ault does not =reach the agree#ent

=et een the >arties.;<F Estrella v. $ells 0ar*o, No. 2:11cv 1 , 2011 W$ A82!A1G 9'.D.Va. Dec.28, 2011<F see also elote v. ank of A#erica, N.A., No. 3:12CV!2A, 2012 W$ AA08G 3, at 739'.D.Va. Dec. 18, 2012<. %he court in Matanic stated that the acceleration noticeBs re@uire#entthat the =orro er >a his regular #onthl >a #ent as not a =reach o) the Note =ecause it asa re#inder to the =orro er that >a ing the a#ount re@uired to cure the de)ault does not relievehi# o) >a ing the regularl scheduled >a #ent due =e)ore the cure >eriod ends.; 2012 W$

321A3 , at 7 . %he reason )or this is that J A9?< o) the Note states that iE) - do not >a the )ulla#ount o) each #onthl >a #ent on the date it is due, - ill =e in de)ault.; &ee id. *ollo ing thereasoning in Matanic, - also conclude that the acceleration letterBs re@uire#ent that (lainti))s#a6e their regularl scheduled >a #ent in order to cure their de)ault does not violate the ter#so) the Note or the Deed o) %rust. 3

3.

ad (lainti))s =een a=le to cure the a#ount in de)ault as o) ul 1 , 2011, =e)ore their neHt >a #ent ca#e due, the al#ost certainl ould have =een entitled to a ne notice and a )resh30–da cure >eriod i) the su=se@uentl )ailed to #a6e the ugust 1 >a #ent on ti#e. Si#ilarl ,i) the #issed the ugust 1 >a #ent, =ut ere a=le to cure the a#ount in de)ault as it eHisted on

ul 1 >rior to the end o) the cure >eriod, the #ight have a #ore >ersuasive argu#ent.

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2. Adequacy of the Acceleration Notices

(lainti))s also allege that the acceleration notices did not satis) the ter#s o) the Deed o) %rust =ecause the did not eH>licitl state that (lainti))s could )ile a court action to assert de)ensesagainst acceleration and )oreclosure. Section 22 o) the Deed o) %rust >rovides that an

acceleration notice shall )urther in)or# ?orro er o) the right to reinstate a)ter acceleration andthe ri*ht to brin* a court action to assert the non"eHistence o) a de)ault or an other de)ense o)?orro er to acceleration and sale.; 9'#>hasis added<. ? contrast, the acceleration noticesstated that iE) )oreclosure is initiated, ou have the ri*ht to ar*ue that ou did 6ee> our

>ro#ises and agree#ents under the ortgage Note and ortgage, and to >resent an otherde)enses that ou #a have.; 9'#>hasis added<. (lainti))s argue that the di))erence in language#atters =ecause )oreclosures in Virginia are al#ost al a s >er)or#ed ithout the )iling o) acourt action, so the right to argue; #entioned in the acceleration notice e))ectivel #eans theright to atte#>t to >ersuade the trustee or su=stitute trustee rather than the right to =ring ala suit. ccording to (lainti))s, = not trac6ing the language o) the Deed o) %rust eHactl , Wells*argo intended to steer challenges to )oreclosure to a decision = a su=stitute trustee that Wells

*argo could select at its sole o>tion, rather than a court, >resu#a=l =ecause the su=stitute trusteeselected = the =an6 ould >rovide a )riendlier decision"#a6er .

.

-n their res>onse =rie), (lainti))s add that the acceleration notice inade@uatel conve ed thein)or#ation re@uired = the Deed o) %rust in t o other res>ects as ell: 9i< = i#>l ing that a

=orro er #ust ait until )oreclosure is initiated to eHercise the right to reinstate a)teraccelerationF and 9ii< ea6ening the language in the Deed o) %rust descri=ing the right to assertthe non"eHistence o) a de)ault or an other de)ense.; %hese allegations do not a>>ear in the

#ended Co#>laint itsel), so - do not address the#.

gain, other )ederal courts in Virginia have reIected the sa#e argu#ent (lainti))s #a6e here. -nCole v. %MAC Mort*a*e, ((C, No. 1:10–cv–8 8, 2011 W$ 00 A 2, at 73 9'.D.Va. Se>t. ,2011<, the court held that a notice in)or#ing =orro ers that the have the right to assert or783A83Ade)end the non"eHistence o) a de)ault and that the E #a have other rights under statela ; co#>lied ith the ter#s o) a deed o) trust identical to the relevant ter#s in the Deed o)%rust in this case. %he court held that such language >rovides (lainti))s ith reasona=le noticeregarding the right to assert a legal de)ense des>ite the a=sence o) the ords Lto =ring a courtaction.M lthough (lainti))s argue that the lenderBsE )ailure to include this eHact language is o)conse@uence, an de)icienc in that regard is i##aterial.; Id. %he language in the accelerationnotice in this case di))ers slightl )ro# the language in the notice in Cole, =ut the sa#e reasoning

a>>lies. -n )act, in Matanic, 2012 W$ 321A3 , at 7!, the court considered an acceleration noticecontaining the eHact sa#e o>erative language as that in this case, and si#ilarl concluded thatthe language used in the cceleration $etter as slightl di))erent )ro# the language used in the

Deed o) %rust =ut in e))ect as the )unctional e@uivalent.; -n Abraha#s v. .&. ank, N.A., No.1:12–cv– !3, D6t. No. 20 9'.D.Va. ul 30, 2012<, the court orall reIected the sa#e argu#entand dis#issed the case.

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%he underl ing rationale o) these cases is that the s>eci)ic language used to conve to =orro ershat rights the have is not #aterial to the essential >ur>oses o) a deed o) trust. %he Su>re#e

Court o) Virginia has identi)ied t o essential >ur>oses o) a Deed o) %rust: Lto secure the lender" =ene)iciar Bs interest in the >arcel it conve s and to >rotect the =orro er )ro# acceleration o) thede=ts and )oreclosure on the securing >ro>ert >rior to the )ul)ill#ent o) the conditions >recedent

it i#>oses.M ; Matanic, 2012 W$ 321A3 , at 7! 9@uoting Mathe"s v. P'' Mort*. Corp., 283Va. 23, 2 S.'.2d 1GA, 200 92012<<. Using the ords the right to argue; rather than the rightto sue; does not a))ect these essential >ur>oses. Id. %hus, - conclude that the acceleration noticessent = Wells *argo did not violate the ter#s o) the Deed o) %rust.

(. T*e A$$eged FD(%A Vi"$ ti"#

(lainti))sB clai#s in Counts % o and %hree =oth arise out o) an alleged violation o) the *air De=tCollection (ractices ct 9 *DC( ;<, 1! U.S.C. JJ 1AG2–1AG2>, = S-W(C. -n Count %hree,(lainti))s clai# that S-W(C violated the *DC( = >roceeding ith )oreclosure hen the ter#so) the statute >rohi=ited it )ro# doing so. ccording to (lainti))s, =ecause Wells *argo as a are

o) S-W(CBs actions that allegedl violated the *DC( and *annie ae as in >rivit ith Wells*argo, the )oreclosure as invalid and (lainti))s are entitled to =ring an action to @uiet title. !

?ased on this sa#e alleged violation o) the *DC( , (lainti))s clai# in Count % o thatDe)endants =reached the ter#s o) the Deed o) %rust =ecause the incor>orated >>lica=le$a .; Since Counts % o and %hree =oth de>end on hether (lainti))s can state a >lausi=le clai#that S-W(CBs actions violated the *DC( , - ill anal e that issue )irst.

!.

%he @uestion hether (lainti))s can =ring an action to @uiet title at all a>>ears to =e distinct )ro#the @uestion o) hether the have a via=le clai# that De)endants violated the *DC( . - ill

discuss the la regarding @uiet title actions se>aratel =elo .

(lainti))s clai# S-W(CBs violation o) the *DC( arose )ro# a letter S-W(C sent to (lainti))s on&cto=er !, 2011. %he *DC( re@uires a de=t collector to send a de=tor a ritten noticecontaining certain in)or#ation a=out the de=t it is atte#>ting to collect. &ee1! U.S.C. J 1AG2g9a<.Section 1AG2g9=< >rovides that:

-) the consu#er noti)ies the de=t collector in riting ithin the thirt "da >eriod descri=ed insu=section 9a< o) this section that the de=t, or an >ortion 783 83 thereo), is dis>uted, or that theconsu#er re@uests the na#e and address o) the original creditor, the de=t collector shall ceasecollection o) the de=t, or an dis>uted >ortion thereo), until the de=t collector o=tains veri)ication

o) the de=t or a co> o) a Iudg#ent, or the na#e and address o) the original creditor, and a co>o) such veri)ication or Iudg#ent, or na#e and address o) the original creditor, is #ailed to theconsu#er = the de=t collector. Collection activities and co##unications that do not other iseviolate this su=cha>ter #a continue during the 30–da >eriod re)erred to in su=section 9a< o)this section unless the consu#er has noti)ied the de=t collector in riting that the de=t, or an

>ortion o) the de=t, is dis>uted or that the consu#er re@uests the na#e and address o) the originalcreditor. n collection activities and co##unication during the 30–da >eriod #a notovershado or =e inconsistent ith the disclosure o) the consu#erBs right to dis>ute the de=t or

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re@uest the na#e and address o) the original creditor.%he &cto=er ! letter sent = S-W(C9attached to the #ended Co#>laint as 'Hhi=it *< stated in all ca>ital letters that it as a

N&%-C' +'OU-+'D ?P % ' * -+ D'?% C&$$'C%-&N (+ C%-C'S C%; and in)or#ed(lainti))s that S-W(C had =een instructed to initiate )oreclosure >roceedings. -n accordance ithJ 1AG2g9a<, the notice re@uired (lainti))s to noti) S-W(C in riting o) an dis>ute ithin 30

da s, and (lainti))s allege that the sent such a ritten res>onse ithin the 30–da >eriod.A

(lainti))s argue that under the *DC( , S-W(C could not >roceed ith )oreclosure until itinvestigated the dis>ute raised in riting = the (lainti))s and sent a res>onse, along ith astate#ent o) the original creditor. %he )urther allege that S-W(C sent no res>onse to theirdis>ute letter >rior to the )oreclosure, and that the )oreclosure as there)ore unla )ul. SinceS-W(C as acting as an agent o) Wells *argo, (lainti))s argue, S-W(CBs 6no ledge thatcollection activities should have ceased should =e i#>uted to Wells *argo, and the )oreclosureshould =e set aside.

A.

(lainti))s did not attach an such res>onse to the #ended Co#>laint, =ut given that this is a#otion to dis#iss, - #ust acce>t as true the )actual allegation that the sent a ti#el rittenres>onse dis>uting the de=t. *urther#ore, although the #ended Co#>laint alleges that S-W(Creceived the ritten res>onse = Nove#=er 10, 2012, hich is 00 da s a)ter it sent thecollection letter, (lainti))s state that the date as a t >o and that in )act, the res>onse asreceived = Nove#=er 10, 2011, the date o) the )oreclosure sale.

1. Is I!P" "o#ered Under the $D"PA%

s a threshold #atter, - #ust consider hether the *DC( Bs de)inition o) de=t collector; evencovers S-W(C. lthough the *DC( includes in its de)inition o) de=t collector; an >erson ...

ho regularl collects or atte#>ts to collect, directl or indirectl , de=ts o ed or due or assertedto =e o ed or due another,; 1! U.S.C. J 1AG2a9A<, the statute s>eci)icall eHcludes )ro#coverage an >erson collecting or atte#>ting to collect an de=t o ed or due or asserted to =eo ed or due another to the eHtent such activit ... is incidental to a =ona )ide )iduciar o=ligationor a =ona )ide escro arrange#ent.; Id. J 1AG2a9A<9*<9i<. De)endants argue that S-W(C, inserving in its )iduciar ca>acit as trustee o) the Deed o) %rust, )alls ithin this eHe#>tion.

%his argu#ent #ust )ail in light o) the *ourth CircuitBs decision in $ilson v. +raper 1 %oldber*, P.(.(.C., 3 *.3d 3 3 9 th Cir.200A<. -n$ilson, the de)endants ere a la )ir# and one o) itsla ers ho acted as su=stitute trustees in ta6ing actions to )oreclose on a deed o) trust.2343343Id. at 3 . %he de)endants sent a letter to the >lainti)) =orro er that identi)ied itsel) as

an atte#>t to collect a de=t and stated that it as ritten >ursuant to the >rovisions o) the*DC( E.; Id. %he de)endants also sent a notice that gave s>eci)ic in)or#ation concerning Lthea#ount o) the de=t,M the Lcreditor to ho# the de=t is o ed,M and the >rocedure )or validating thede=t,; =ut that notice eH>ressl stated that the de)endants ere not de=t collectors or acting inconnection ith the collection o) a de=t. Id. at 3 !. %he *ourth Circuit held that trustees,including attorne s, acting in connection ith )oreclosure can =e Lde=t collectorsB under the ct.;

Id. at 3 !. $i6e S-W(C, the de)endants in $ilson argued that as trustees )oreclosing on a

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>ro>ert >ursuant to a deed o) trust, the ere )iduciaries =ene)itting )ro# the eHe#>tion o) J1AG2a9A<9*<9i<.; 3 *.3d at 3 . %he *ourth Circuit disagreed, concluding that:

a trusteeBs actions to )oreclose on a >ro>ert >ursuant to a deed o) trust are not LincidentalM to its)iduciar o=ligation. +ather the are central to it. %hus, to the eHtent De)endants used the

)oreclosure >rocess to collect >lainti))BsE alleged de=t, the cannot =ene)it )ro# the eHe#>tioncontained in J 1AG2a9A<9*<9i<. Id. -n %oodro" v. 0ried#an 1 Mac0adyen, P.A., 88 *.Su>>.2dA , 0 9'.D.Va.2011<, a district court a>>lied $ilson to )ind that the >lainti)) had >ro>erl

alleged that a su=stitute trustee as a de=t collector under the *DC( .

Since $ilson, ho ever, so#e courts have )ound that trustees )oreclosing on >ro>erties >ursuantto deeds o) trust did not act as de=t collectors; under the *DC( , not ithstanding the *ourthCircuitBs holding. &ee, e.*., lick v. $ells 0ar*o ank, N.A., No. 3:11–cv–81, 2012 W$ 103013 ,at 78 9W.D.Va. ar. 2 , 2012<F Moore v. Co##on"ealth !rs., ((C, No. 3:0GCV 31, 2010 W$

2 2G8 , at 73 9'.D.Va. &ct. 2!, 2010<F la*o*ee v. Equity !rs., ((C, No. 1:10–CV13, 2010 W$2G33GA3, at 7!–A 9'.D.Va. ul 2A, 2010<. -n general, these courts )ound that although the *ourth

Circuit held that )oreclosure trustees could =e de=t collectors under the *DC( , that does notnecessaril #ean that all )oreclosure trustees actuall are de=t collectors under the ct. &ee, e.*., Moore, 2010 W$ 2 2G8 , at 73. %hese courts each identi)ied so#e )actual variations thatdistinguished the cases )ro# $ilson. -n la*o*ee, )or eHa#>le, although the su=stitute trusteesent notices ith the state#ents %his Co##unication is *ro# a De=t Collector,; and this is anatte#>t to collect a de=t,; the court held that $ilson as distinguisha=le =ecause the ?lagogeesnever received an eH>ress de#and )or >a #ent, notice o) the >erson to ho# their de=t should

=e >aid, or a state#ent indicating that the trusteeE as atte#>ting to collect a de=t.; la*o*ee, 2010 W$ 2G33GA3, at 7A. Si#ilarl , the court in Moore, 2010 W$ 2 2G8 , at 7 , )ound that

=ecause there as no eH>ress de#and )or >a #ent or notice o) to ho# the de=t should =e >aidin a notice sent to the >lainti)), the letter did not constitute Lcollection activit M nor as the

author a Lde=t collectorM as de)ined in the *DC( .; &ee also lick, 2012 W$ 103013 , at 789)ollo ing Moore <.

.

-ndeed, the *ourth Circuit said in $ilson that its decision as not intended to =ring ever la)ir# engaging in )oreclosure >roceedings under the a#=it o) the ct.; 3 *.3d at 3 G.

aving considered the )acts alleged = (lainti))s and the language o) the notice sent = S-W(C, -)ind that this case, li6e %oodro", is on all )ours ith $ilson. %he letter S-W(C sent to (lainti))sidenti)ied itsel) as a notice re@uired = the *DC( , and it contained the )ollo ing #essage:

783G83G

&'I I AN A&&EMP& &O "O((E"& A DE)&

T+IS IS A (OMM NI(ATION FROM A DEBT (OLLE(TOR AN- INFORMATIONOBTAINED WILL BE SED FOR T+AT % R%OSE $i6e the notices in $ilson and%oodro", and unli6e the notices in la*o*ee, Moore, and lick, S-W(CBs letter )urther identi)ied

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the a#ount o) the de=t, the creditor to ho# it as o ed, and >rovided the in)or#ation re@uired = 1! U.S.C. J 1AG2g9a< a=out the 30–da veri)ication >eriod during hich the de=tor coulddis>ute the validit o) the de=t. %he &cto=er ! letter as not si#>l a notice that )oreclosure

ould ta6e >lace on a >articular date. -n )act, it contained no in)or#ation a=out hen the)oreclosure ould ta6e >lace, and instead contained in)or#ation al#ost entirel related to

collection o) the de=t. *or these reasons, - )ind that (lainti))s have su))icientl alleged thatS-W(C as acting as a de=t collector atte#>ting to collect a de=t under the *DC( .

2. Did I!P" *iolate the $D"PA%

aving decided that S-W(C does )all ithin the *DC( Bs de)inition o) a de=t collector,; the@uestion re#ains hether (lainti))s have alleged )acts su))icient to state a >lausi=le clai# thatS-W(C actuall violated that la . s discussed in #ore detail a=ove, (lainti))s allege thatS-W(C violated 1! U.S.C. J 1AG2g9=< = >roceeding ith )oreclosure a)ter (lainti))s dis>utedtheir de=t in riting. +el ing on a sta)) co##entar issued = the *ederal %rade Co##ission9 *%C;< and a Seventh Circuit decision, artlett v. 'eibl, 128 *.3d G , !01 9 th Cir.1GG <,

De)endants argue that J 1AG2g9=< does not >reclude a trustee )ro# >roceeding ith )oreclosure.%he *%C co##entar stated that:

n attorne de=t collector #a ta6e legal action ithin 30 da s o) sending the re@uiredvalidation notice, regardless o) hether the consu#er dis>utes the de=tF i) the consu#er dis>utesthe de=t, the attorne #a still ta6e legal action =ut #ust cease other collection e))orts 9e.g.,letters or calls to the consu#er< until veri)ication is o=tained and #ailed to the consu#er.!3 *ed.+eg. !00G –!0110 9Dec. 13, 1G88<. -n artlett, 128 *.3d at !01 , the court stated that a de=tcollector is >er)ectl )ree to sue ithin thirt da sF he Iust #ust cease his e))orts at collectionduring the interval =et een =eing as6ed )or veri)ication o) the de=t and #ailing the veri)icationto the de=tor.; De)endants suggest that the ords cease collection o) the de=t; reall #ean

so#ething li6e cease contacting the de=tor )or the >ur>ose o) tr ing to collect his de=t.; Undertheir theor , a de=t collector #a still en)orce legal o=ligations related to the de=t so long as thede=t collector does not continue to send collection notices or engage in si#ilar activit .

(lainti))s essentiall res>ond that collection o) the de=t; #ust include a )oreclosure sale =ecausethat is the #echanis# = hich the de=t collector actuall collects #one o ed to the creditor.%he contend that the ver language in artlett cited = De)endants in )act su>>orts theirargu#ent. oreover, the suggest that De)endantsB reliance on the *%C co##entar @uoteda=ove is invalid in light o) the Su>re#e CourtBs decision in 'eint- v. enkins, !1 U.S. 2G1, 2G8, 11! S.Ct. 1 8G , 131 $.'d.2d 3G! 91GG!<, in hich the Court stated that it could not giveconclusive eight to a state#ent in the co##entar , hich itsel) states that it is not =inding on

the Co##ission or the >u=lic.; -n 'eint-, the Court held that the ter# de=t collector; as de)inedin the *DC( a>>lies to la ers ho Lregularl M engage in consu#er"de=t"collection activit ,even hen that activit consists o) litigation.; 2356356Id. at 2GG,11! S.Ct. 1 8G . Contrar to(lainti))sB suggestion, the Court did not co#>letel reIect the validit o) the entire co##entar .+ather, it )ound that its inter>retation o) one >art o) the ct )ell outside the range o) reasona=leinter>retations o) the ctBs eH>ress language. &ee id. at 2G8, 11! S.Ct. 1 8G . %he Court saidnothing a=out the issue >resented in this caseQ hether a de=t collector can >roceed ith)oreclosure during the 30–da veri)ication >eriodF the Court held onl that la ers can )all

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ithin the de)inition o) de=t collector.; &ee id. %hus, the *%CBs co##entar , hile certainl not =inding, #a have so#e >ersuasive )orce.

?ecause district courts have )re@uentl )ound that su=stitute trustees are not de=t collectors;under the *DC( , the generall have not reached the @uestion hether )oreclosure a)ter recei>t

o) ritten notice dis>uting the de=t violates the >rovisions o) J 1AG2g9=<. 'ven in other conteHts,courts di))er a=out hat it #eans to cease collection o) a de=t; and hether =ringing legalaction to en)orce the de=t violates J 1AG2g9=<. -n +ikun v. &treich, 3AG *.Su>>.2d 81, 88 9'.D.Va.200!<, the court held that the >lainti)) stated a valid clai# under 1! U.S.C. J 1AG2g9=<

hen she alleged that the de)endant )iled a arrant in de=t in a state court ithout >roviding the >lainti)) ith veri)ication o) the de=t. -n Anderson v. 0rederick . 'anna 1 Associates, 3A1*.Su>>.2d 13 G, 1382–83 9N.D./a.200!<, the de)endants )iled suit a)ter having received averi)ication re@uest, and the court granted su##ar Iudg#ent in )avor o) the >lainti)) on herclai# that de)endants violated J 1AG2g9=<. Citing artlett, the court held that once a de=torre@uests veri)ication, the collector #ust >rovide it =e)ore resu#ing collection e))orts, and

de)endantsB argu#ent that a la suit to collect a de=t is not a Lcollection activit M is >atentl

)rivolous.; Anderson, 3A1 *.Su>>.2d at 1383 . ? contrast, in &hi#ek v. $eiss#an, No"ack,Curry 1 $ilco, P.C., 3 *.3d 1011, 1013 911th Cir.200 < 9>er curia#<, the 'leventh Circuitcited artlett )or the >ro>osition that tEhe >lain language o) J 1AG2g9=< does not eHtinguish acreditorBs right to secure a de=t under state la , =ut instead #erel >rohi=its dece>tive collectiontechni@ues.;

Ulti#atel , the statutor language is clear: a creditor #ust cease collection o) a de=t.; $i6e thecourts in +ikun and Anderson, - )ind that the >lain #eaning o) that >hrase #ust #ean that acreditor cannot ta6e action, in this case )oreclosure, that ould result in the collection o) thede=t, until it has satis)ied the >rere@uisites i#>osed = the statute. %here)ore, (lainti))s havealleged su))icient )acts in the #ended Co#>laint to state a clai# that hen S-W(C )oreclosed

on (lainti))sB ho#e, it violated 1! U.S.C. J 1AG2g9=<.

+. "an an $D"PA *iolation )reach the &erms of the Deed of &rust%

-n Count % o o) the #ended Co#>laint, (lainti))s allege that =ecause the Deed o) %rustincor>orates >>lica=le $a ,; a violation o) the *DC( constitutes a =reach o) the Deed o)%rust. lthough the #ended Co#>laint is unclear a=out hich counts (lainti))s assert against

hich de)endants, it a>>ears that (lainti))s =ring Count % o against Wells *argo onl , since*annie ae and S-W(C ere not >arties to the Deed o) %rust. (lainti))s concede the cannot

=ring a clai# against Wells *argo directl )or violations o) the *DC( =ecause Wells *argo is acreditor and thus does not )all ithin the statutor de)inition o) de=t collector.; &ee lick, 2012

W$ 103013 , at 7 9 CEreditors, #ortgag eesE, and #ortgage servicing co#>anies are not de=tcollectors and are statutoril eHe#>t )ro# lia=ilit under the *DC( .;< 9@uoting Ru**ia v. $ash. Mut., 1G *.Su>>.2d A 2, A – 8 9'.D.Va.2010<, aff)d 78 18 1 2 *ed. >>H. 81A 9 thCir.2011<<. Nor can creditors =e held vicariousl lia=le )or *DC( violations = inde>endentde=t collectors acting on their =ehal). &ee $ashin*ton v. CitiMort*a*e, Inc., No. 3:10–CV–88 ,2011 W$ 18 1228, at 713 9'.D.Va. a 1A, 2011<.

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-nstead, (lainti))s see6 to hold Wells *argo lia=le )or S-W(CBs alleged *DC( violationindirectl = #eans o) the Deed o) %rust. %o do so, the clai# that: 9i< the Deed o) %rustincor>orated the *DC( as >>lica=le $a F; 9ii< S-W(C acted as Wells *argoBs agent andS-W(CBs alleged 6no ledge that (lainti))s dis>uted the de=t should =e i#>uted to Wells *argoF9iii< S-W(CBs alleged violation o) the *DC( =reached the ter#s o) the Deed o) %rust re@uiring

that all actions ta6en under it =e conducted in accordance ith >>lica=le $a F; and 9iv< as aresult, the )oreclosure as void or voida=le. %his logic o) this argu#ent is tenuous at =est, and -)ind that it )ails at its ver )irst ste>: the Deed o) %rust does not incor>orate the *DC( as

>>lica=le $a .;

%he argu#ent that the *DC( is incor>orated into the Deed o) %rust de>ends on three instanceshere the Deed o) %rust #entions >>lica=le $a .; *irst, J 22 >rovides that, in case o) a

=orro erBs )ailure to cure a de)ault, $ender at its o>tion #a re@uire i##ediate >a #ent in )ullo) all su#s secured = this Securit -nstru#ent ithout )urther de#and and #a invo6e the

>o er o) sale and an other re#edies >er#itted = >>lica=le $a .; Second, hen invo6ing the >o er o) sale, the lender or trustee #ust give notice o) sale as re@uired = >>lica=le $a .; Id.

%hird, J 1A >rovides that it shall =e governed = )ederal la and the la o) the Iurisdiction inhich the (ro>ert is located. ll rights and o=ligations contained in this Securit -nstru#ent aresu=Iect to an re@uire#ents and li#itations o) >>lica=le $a .; %he Deed o) %rust s>eci)icallde)ines >>lica=le $a ; to #ean all controlling a>>lica=le )ederal, state and local statutes,regulations, ordinances and ad#inistrative rules and orders 9that have the e))ect o) la < as ellas a>>lica=le )inal, non"a>>eala=le Iudicial o>inions.;

deed o) trust is construed as a contract under Virginia la ,; see, e.*., Mathe"s, 2 S.'.2d at200, and iEt is construed as ritten, ithout adding ter#s that ere not included = the

>arties.; Id. at 201. %hus, hether the Deed o) %rust incor>orates the *DC( in its ter#s is a#atter o) contract inter>retation. ost courts construe narro l the >hrase Lall a>>lica=le la M

9or si#ilar language< in a contract.; Condel v. ank of A#erica, N.A., No. 3:12CV212, 2012 W$2A 31A , at 78 9'.D.Va.2012<. -n Condel, the court stated that language incor>oratinga>>lica=le la ; does not a>>ear to incor>orate la s hich are not already a>>lica=le 9even i)

other ise relevant< to the >arties or their agree#ent.; Id. %he De)endants argue that ta6en in its >lain ordinar #eaning, the *DC( is not a =od o) la that a>>lies directl to the Deed o)%rust. s a creditor, Wells *argo is not su=Iect to the la Bs >rovisions and the Deed o) %rustcontains no evidence that the >arties intended to incor>orate the la . Nor do the three >rovisionscited = (lainti))s a>>ear to enco#>ass the alleged violation o) the *DC( .

(lainti))s argue that this Court should )ind the *DC( incor>orated into the Deed o) %rustBster#s under Mathe"s. &ee 2 S.'.2d at 203 . -n that case, the Su>re#e Court o) Virginia heldthat a deed o) trust incor>orated as a condition >recedent to )oreclosure certain regulations

>ro#ulgated = the De>art#ent o) ousing and Ur=an Develo>#ent. Id. at 200. %hat case iseasil distinguisha=le, ho ever, =ecause the deed o) trust eH>licitl 78 28 2identi)ied UDregulations as i#>osing li#its on the lenderBs actions. Id. at 201. -n this case, there is nore)erence to the *DC( in the Deed o) %rust. ccordingl , =ecause - )ind that the *DC( is notincor>orated into the ter#s o) the Deed o) %rust, a violation o) the *DC( cannot su>>ort aclai# )or =reach o) that agree#ent, and Count % o #ust =e dis#issed.

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D. %$ i#ti&&s' uiet Tit$e ($ i)

-n each o) the #ended Co#>laintBs three counts, (lainti))s state that the are =ringing an actionto @uiet title. -n Virginia, an action to @uiet title is =ased on the >re#ise that a >erson ith goodtitle to certain real or >ersonal >ro>ert should not =e su=Iected to various )uture clai#s against

that title.; Maine v. Ada#s, 2 Va. 230 , A 2 S.'.2d 8A2, 8AA 9200G<. >lainti)) asserting a @uiettitle clai#, ho ever, #ust assert that he has rights su>erior to others asserting an interest in the >ro>ert . &ee %allant v. +eutsche ank Nat)l !rust Co., AA *.Su>>.2d 1 , 1G 9W.D.Va.2011<F!apia v. .&. ank, N.A., 18 *.Su>>.2d A8G, 00 9'.D.Va.2010<. -n lick, 2012 W$ 103013 , at7 , this Court dis#issed a clai# to @uiet title here >lainti))s )ailed to allege that the hadsatis)ied their o=ligations under their note. &ther )ederal courts in Virginia have done the sa#e.&ee !apia, 18 *.Su>>.2d at 00 F Matanic, 2012 W$ 321A3 , at 7 . (lainti))s in this caseac6no ledge that the de)aulted on their note and have there)ore )ailed to allege that the hadsatis)ied their o=ligations.

(lainti))s >rotest that !apia con)licts ith longstanding Virginia case la governing actions to

rescind )oreclosures,; and cite a *air)aH Count Circuit Court decision )inding ad#ission thatthe >ro>ert re#ains encu#=ered = the Deed o) %rust does not >reclude aE @uiet title clai#.;&ala-ar v. .&. ank N.A., 82 Va. Cir. 3 , 3 G 92011<. (lainti))sB counsel #ade this sa#eargu#ent in a nearl identical conteHt in Matanic, and the court reIected it, )inding &ala-ar =othnot =inding on the court and easil distinguisha=le. &ee Matanic, 2012 W$ 321A3 , at 7 n. 3.%hus, to the eHtent that (lainti))s atte#>t to =ring a @uiet title clai# inde>endent o) their otherclai#s, such @uiet title clai# #ust =e dis#issed.

IV. ("#c$usi"#

*or the )oregoing reasons, - ill grant De)endantsB #otion to dis#iss Counts &ne and % o in

their entiret . s )or Count %hree, De)endantsB #otion is granted ith res>ect to *annie ae andWells *argo, and denied ith res>ect to S-W(C. %o the eHtent that (lainti))s see6 to =ring a @uiettitle clai#, such clai# is also dis#issed. -n su#, the onl clai# re#aining is (lainti))sB clai#against S-W(C )or =reach o) the *DC( F all other clai#s are dis#issed. n a>>ro>riate orderacco#>anies this #e#orandu# o>inion.

%he Cler6 o) the Court is here= directed to send a certi)ied co> o) this #e#orandu# o>inionand the acco#>an ing order to all counsel o) record.

ORDER

%his #atter is =e)ore the Court u>on De)endantsB #otion to dis#iss (lainti))sB #endedCo#>laint. *or the reasons set )orth in the acco#>an ing #e#orandu# o>inion, De)endantsB#otion 9doc6et no. 1 < is here= /+ N%'D -N ( +% and D'N-'D -N ( +%. S>eci)icall ,De)endantsB #otion to dis#iss Counts &ne and % o o) the #ended Co#>laint is /+ N%'D

ith res>ect to all De)endants. Count %hree is also dis#issed ith res>ect to De)endants *ederal National ortgage ssociation and Wells *argo ?an6, N. . o ever, De)endantsB #otion todis#iss Count %hree is D'N-'D ith res>ect to De)endant Sa#uel -. White, (.C.

8/19/2019 Townsend V

http://slidepdf.com/reader/full/townsend-v 14/14

78 38 3

-n addition, De)endantsB #otion to dis#iss (lainti))sB original co#>laint 9doc6et no. !< is here=D'N-'D as &&%.

%he Cler6 o) the Court is here= directed to send a certi)ied co> o) this order and theacco#>an ing #e#orandu# o>inion to all counsel o) record.

-t is so &+D'+'D.""""""""Notes: