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Fischer v. Ocwen Loan Servicing, LLC

United States District Court, D. Montana, Billings Division

November 25, 2014

OCWEN LOAN SERVICING, LLC, FEDERAL HOME LOAN MORTGAGE CORPORATION, RECONTRUST COMPANY, NA, and all persons unknown claiming any right, title, estate, lien or interest in or to the real property described herein, or any part thereof, adverse to the Plaintiffs' title, Defendants.


CAROLYN S. OSTBY, Magistrate Judge.


This action arises out of a trustee's sale of real property. In their Amended Complaint, Plaintiffs John David Fischer, Jerald Duane Fischer, and Angie Lee Fischer (the "Fischers"), assert the following claims against Ocwen Loan Servicing, LLC ("Ocwen"), Federal Home Loan Mortgage Corporation ("FHLMC"), and ReconTrust Company, NA.:

Count I - Quiet Title
Count II - Montana Consumer Protection Act
Count III - Fraud
Count IV - Alternative Fraud I
Count V - Alternative Fraud II
Count VI - Constructive Fraud
Count VII - Deceit
Count VIII - Negligence/Negligent Misrepresentation
Count IX - Implied Covenant of Good Faith and Fair Dealing
Count X - Punitive Damages

See ECF 19. [1] These claims are all based on state law. The Amended Complaint is not entirely clear as to which claims are asserted against which Defendants.

Now pending are Ocwen and FHLMC's (referred to herein as "Defendants") Motion for Judicial Notice (ECF 4) and Motion to Dismiss (ECF 2 ).


According to documents submitted by Defendants, [2] Plaintiff Jerald Fischer borrowed $220, 000 from AEGIS and, in connection with that loan, executed a Deed of Trust on property on Rosebud Drive in Billings, Montana. ECF 10-1. John Fischer and Angie Fischer later acquired interest in the property by way of quitclaim deeds. ECF 10-2, 10-3. Defendants contend that the Jerald Fischer defaulted on the loan in January 2012, and that foreclosure proceedings were commenced.

The following facts are alleged in Plaintiffs' Amended Complaint and, for purposes of considering the pending motion to dismiss, are assumed to be true.

In December 2011 or January 2012, Plaintiffs "began the application process for a mortgage payment modification through the Federal Government's Home Affordable Modification Program (hereinafter HAMP') through Bank of America." ECF 19 at ¶ 5. As part of that process, Bank of America informed Plaintiffs that foreclosure processes may be initiated, but that Plaintiffs' home "would not be foreclosed on." Id. at ¶ 6. In April 2012, Plaintiffs were notified of a pending trustee's sale scheduled for August 22, 2012, but Bank of America again assured Plaintiffs "that this notification was part of the HAMP modification process and... that their home would not be foreclosed on." Id. at ¶¶ 7-8.

In June 2012, Bank of America sold Plaintiffs' Deed of Trust to Ocwen and, as a result, Plaintiffs were asked to re-complete the HAMP modification packet through Ocwen. Id. at ¶¶ 9, 10. Plaintiffs completed the modification packet as requested by Ocwen. Id . at ¶ 11.

Unbeknownst to Plaintiffs, Ocwen proceeded with the trustee's sale on August 22, 2012. Thereafter, by letter dated September 4, 2012, Ocwen thanked Plaintiffs for submitting their application for assistance and stated that they were "processing [Plaintiffs'] request as quickly as possible." ECF 19-1 at 1. In the letter, Ocwen also stated: "While we consider your request, we will not initiate a new foreclosure action and we will not move ahead with the foreclosure sale on an active foreclosure as long as we have received all required documents and you have met the eligibility requirements." Id. at 2. The letter also stated: "[N]o foreclosure sale will be conducted and you will not lose your home during the HAMP evaluation." Id. (emphasis in original).

Ocwen recorded the Trustee's Deed transferring the subject property to FHLMC on January 8, 2013. Id. at ¶¶ 15-16.


FHLMC argues there are no facts alleged as to FHLMC under Counts II-X, and it should be dismissed from each Count. ECF 3 at 16-17, 21, 24, 26, 28, and 29.

Ocwen presents nine arguments for dismissal of the Amended Complaint for failure to state a claim under Rule 12(b)(6). First, Defendants argue that the Fischers cannot bring a quiet title action because they are not the legal owners and the Fischers' "interest in the property was conveyed to FHLMC by the Trustee's Deed." Id. at 14. They further argue that quiet title would be inappropriate because the Fischers "do not allege that the debt has been satisfied, that they have offered to pay the debt or that the debt is unenforceable." Id. at 15.

Second, Ocwen argues that the Fischers fail to state a claim under the Montana Consumer Protection Act ("MCPA") because the MCPA does "not include enforcing a security interest against a debtor, especially when the debtor received statutorily required notices and does not contest his default." Id. at 18.

Third, Ocwen argues that the fraud claims do not meet the heightened pleading standard required by Rule 9(b). It further argues that the Complaint fails to meet "the basic element of a misrepresentation[, ]" id. at 23, because Ocwen did not conceal any material facts and the Fischers "do not state what was concealed and how the alleged fact that was concealed was material." Id. at 24.

Fourth, Ocwen argues the Fischers' claim for constructive fraud fails because Ocwen did not have a duty to the Fischers, nor did it breach a duty "with an intent to create an advantage against Plaintiffs." Id. at 25. Ocwen further argues that the letter sent on September 4, 2012, was automatically generated and was not sent to "fraudulently induce Plaintiffs to act or to create an advantage over Plaintiffs." Id.

Fifth, Ocwen argues the deceit claim should be dismissed because the Fischers do not allege they had ever been approved for a loan modification or that the trustee's sale had been canceled. Id. at 26. Ocwen also argues that there are no facts suggesting the Fischers changed their position based on the September 4, 2012 letter. Id.

Sixth, Ocwen argues there is no "duty to modify or negotiate a defaulted loan." Id. at 27. It argues that absent some duty, the Fischers fail to state a claim for negligence. Ocwen further argues that nothing alleged in the Complaint suggests Ocwen "went beyond the ordinary role of the lender." Id.

Seventh, Ocwen argues the Fischers did not properly allege negligent misrepresentation because the Fischers were aware of the trustee's sale on August 22, 2012, and knew that it "would proceed if all of the documents were not received and ...

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