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Johnson v. Federal Home Loan Mortg. Corp.

United States Court of Appeals, Ninth Circuit

July 14, 2015

JOEL JOHNSON, a single person, Plaintiff-Appellant,
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION, a foreign corporation, Defendant-Appellee

Argued and Submitted June 8, 2015, Seattle, Washington

Appeal from the United States District Court for the Western District of Washington. D.C. No. 2:12-cv-01712-TSZ. Thomas S. Zilly, Senior District Judge, Presiding.

SUMMARY[*]

Mortgages

The panel affirmed the district court's Fed.R.Civ.P. 12(b)(6) dismissal of a homeowner's claims for breach of contract and breach of fiduciary duty brought against the Federal Home Loan Mortgage Corporation (" Freddie Mac" ), arising after the homeowner's home was foreclosed.

Freddie Mac had purchased the homeowner's mortgage from Taylor, Bean & Whitaker Mortgage Co., the loan originator. Taylor Bean, which had continued to service the loan after selling it to Freddie Mac, failed to pay the insurance premium from an escrow account and caused the homeowner's insurance to be cancelled.

The panel held that the homeowner failed to allege facts that would establish that Freddie Mac had a contractual duty to service the loan where Freddie Mac never agreed to assume the servicing obligations when it purchased the loan from Taylor Bean, the Deed of Trust provided that the obligations would remain with Taylor Bean, and Washington law did not prohibit the arrangement. The panel also held that Freddie Mac did not assume the fiduciary duty of an escrowee because under the Deed of Trust the duty to hold money for the insurance premiums in escrow remained with the loan servicer, Taylor Bean.

Joel B. Hanson (argued), Seattle, Washington, for Plaintiff-Appellant.

Steven K. Linkon (argued), Joshua S. Schaer, RCO LEGAL, P.S., Bellevue, Washington, for Defendant-Appellee.

Before: J. Clifford Wallace, Andrew J. Kleinfeld, and Ronald M. Gould, Circuit Judges.

OPINION

Per Curiam

Joel Johnson, a homeowner, appeals from a 12(b)(6) dismissal of his action against the Federal Home Loan Mortgage Corporation, doing business as Freddie Mac, for breach of contract and breach of fiduciary duty. Freddie Mac had purchased Johnson's mortgage from Taylor, Bean & Whitaker Mortgage Co. (" Taylor Bean" ), the loan originator, on a secondary market. Taylor Bean, which had continued to service the loan after selling it to Freddie Mac, failed to pay the insurance premium from an escrow account and caused Johnson's insurance to be cancelled. The district court dismissed the complaint against Freddie Mac because it concluded that Freddie Mac did not assume any liability for Taylor Bean's conduct when it purchased the loan, and in the alternative, even if it did, the Merrill doctrine precludes liability. Because Johnson expressly agreed in the mortgage contract that a subsequent purchaser of the loan would not assume any servicing obligations, we affirm without addressing the applicability of the Merrill doctrine.

FACTS

In 2008, Johnson refinanced his home loan with Taylor Bean, secured by a Deed of Trust. His contract, the Deed of Trust, named Johnson as " Borrower" and Taylor Bean as " Lender." The contract required Johnson to have a homeowner's insurance policy, which he purchased from Safeco Insurance Co. The contract required him to pay the insurance premium to an escrow ...


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