Ralls v. Federal National Mortgage Association et al, No. 3:2018cv00110 - Document 24 (W.D. Va. 2019)
Court Description: MEMORANDUM OPINION. Signed by Senior Judge Glen E. Conrad on 8/12/19. (hnw)
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IN THE UNITED STATES DISTRICT COURT FOR TH E W ESTERN DISTR ICT O F V IRGIN IA CH A RLO TTESV ILLE D IV ISION Ats 12 2219 JUL? , ak DE jptaycu oLsycuzus W ALTER B.M LLS, Plaintiff, CLERK'SAOFFICE U.S.DISX COURT T RGF NOKE,VA ILED CivilAction No.3:18CV00110 M EM ORANDUM OPIM ON FEDEM L NATIONAL M ORTGAGE ASSOCIATION ,eta1., By:Hon.Glen E.Cozlrad SeniorUnited StatesDistrictJudge Defendants. W alter B.Ralls filed this action for fraud and breach of contractagainstFederalNational M ortgageAssociation(çTnnnieM ae'')andSetems,Inc.(ççSete1' us''). Thecaseispresentlybeforethe courton the defendants'm otion to dismiss. Forthe reasons setforth below,the motion willbe granted in partand denied in part. Backeround The following facts are taken from the complaint and doclzm ents relied on therein. See Phillipsv.LClInt'l.lnc.,190 F.3d 609,618 (4th Cir.1999)(noting thatthe courtcan properly considerdocum entsthatare çGintegralto and explicitly relied on in the com plaint''when ruling on a motiontodismiss). In February of2005,Ralls obtained a refinance loan from Countrm ide Hom e Loans,lnc. Theloan wasevidenced by anotesigned by Ralls,and sectlred by a deed oftruston rentalproperty Ralls v. Federal National Mortgage Association et al located at234 Stribling Avenue in Charlottesville,Virginia(theç'Propè1'ty''). The note waslater Doc. 24 assigned to FnnnieM ae. Atsome pointthereafter,Ralls defaulted on the note by failing to make m onthly mortgage payments. SeeCompl.!10,Dkt.No.1-1(G1Ra11sfellintoarrearsonthenote.'');Note!6(B)CtlfIdo notpaythefullnmountofeachmonthlypaymentonthedateitisdue,Iwillbeindefault.''). Seterus, Dockets.Justia.com acting asthe loan servicer and agentfor Fnnnie M ae,initiated foreclosure proceedings. Seterus engaged the1aw fil' m ofOrlans,P.C.($$Orlans'')to serveasforeclosurecounsel,anddirectedALG Trustee,LLC (&çALG''),thesubstitutetrustee,toforecloseontheProperty. ççln July 2017,Ralls,realizing he wasin arrears,called Setenzsto inquire aboutthe statusof theloan.'' Compl.! 14. A representativeofSeterus(thelsFirstSeterusRepresentative'')Gstoldhim thattheloanwasin aforeclosureprocess.'' Id. Rallsinquiredastothenmountofm oneythatwould berequired to btingtheloan current. TheFirstSetenlsRepresentativetoldRallsthathewould need to makeapaym entof$13,671. By letterdated August1,2017,Orlansnotified Rallsthata foreclosure sale would occlzron A ugust22,2017 at2:30 p.m . Thenoticewassentto thephysicaladdressoftheProperty. . At som e pointduring the firsthalf of August,Ralls called Seterus and spoke to another representative (the Gçsecond Setenls Representative''). During the telephone conversation,the Second SeterusRepresentative indicated atleasttwice thatthe foreclosure sale was scheduled for August24,2017,ratherthanAugust22,2017. Rallsdidnothavethewritten noticewith him dming the conversation and therefore was unaware of arly discrepancy between the notice and the inform ationprovided by theSecond SeterusRepresentative. On August 16,2017,Ralls contacted RobertRowley,a friend who had helped him avoid foreclosurein thepast. Rallsadvised Rowley thatheneededto m akeapaymentof$13,671to stop the foreclosure on the Property and reinstate the loan. Rowley, who w as preparing to drive to Indianathatsameday,madearrangem entstobon' ow thenecessaryfundsfrom athirdparty. Rowley also arranged forhisfriend Sharon M illnerto assistin facilitating the transaction. Rallswasawarethathe could stop theforecloslzresale ofthePropertyby fling aChapter13 bankruptcy petition. He also knew a localbankruptcy attorney who could assisthim in doing so. However,Rallsdid notwanttofileabankruptcy petition ifhecouldavoidforecloslzreby bringing the loan current. On themorningofAugust22,2017,Ralls went to his car and fotmd the August 1,2017 notice from Orlans. Upon reading thenotice,Rallsrealized thattheforeclosure salewasscheduled for2:30p.m .thatday,asopposed toAugust24,2017. Rallscalled Orlansandinquiredastowhether hecould sendthelaw firm thenm ountneededto reinstatetheloan and stop the forecloslzresale. An Orlansrepresentativeadvised Rallsthatthe 1aw tirm wasnotauthorized to acceptany reinstatem ent fundsandthatRallsshould contactSetenzs. Rallsimmediately called Seterusand spoketo a manager(the Itsetenls Manager''). The Seterus M anager confrmed that Ralls would need to m ake a paym ent of $13,671 to stop the forecloslzre sale and reinstate the loan. Ralls explained thathe had previously been told thatthe foreclosure salewasscheduled forAugust24,2017,and thathe had m adearrangem entsto pay the required nm ountbythatdate. The SeterusM anagerinstructed Rallsto wirethe $13,671paym entto Seterusassoon aspossible,andto send the SetenzsM anagerthewiretransfernllmber. Rallsand the Seterus M anagerthen discussed the fad thath would take up to two days for Seterusto actually receive the wired ftmds. The Seterus M anager advised Ralls that he would consider the loan reinstated upon receiptofthewiretransfernumber,and thathewouldthen instructOrlansto stop the foreclostlre sale. Realizingthatitwouldtakesom etim etogettheftmdswired,Rallsasked theSeterusM anager Ctwhetherthesalewouldbe stoppedifconfirmation ofthewiringoftheftm dseam eatorslightly after thesaletime.'' Compl.!37. TheSeterusM anagerçltoldRallsthatthesalecouldbeundoneeven afterthe sale and assured Rallsthatifthe wiring notification cnm e soon afterthe foreclosure,the gseterusM anager)wouldtaketheactionnecessarytoreversetheforeclostlrebased on confirmation ofsuchwiretransferofsuch funds.'' Id.!38. RallsallegesthatthisassuranceonthepartoftheSeterusM anagerwasintentionally falseand fraudulent. During the time period at issue,the Gtmajority of foreclosures were stopped by banknzptcies.'' Id.! 43. Ralls alleges thatthe Setel'usM anagerGçknew thatifhe did notgive assurancetoRallsthatRallscouldstop theforecloslzrescheduledfor2:30p.m .on August22,2017 by wiring $13,671 to Setenzs,even ifwired shortly after the 2:30 p.m .foreclosure time,there was a significantprospectthatRallswouldstoptheforeclosurewith aChapter13bnnknlptcy.'' Id.!44. RallsfurtherallegesthattheSetenlsM anagerCçknew thatitwould betotheadvantageofSeterusfor gthemanagerqto leadRallsto believethathewouldstop the2:30p.m.foreclosureby arranging to have the $13,671wired to Setenls on August22,2017 even ifwired afterthe forecloslzre sale had been completed.'' Id. Thus,Ralls claim s thatthe Setenzs M anager's false asstlrance was m ade t&with amotivetopreventRalls9om stoppingtheforeclosureby a Chapter 13banknlptcy.'' Id. Based on the SeterusM anager'srepresentations,Rallsdid notpursuerelieftmderChapter 13 andinsteadpersisted inhiseffortstowiretherequisitepaym entto Seterus. Atorabout2:00p.m .on August22,2017,Ralls finally reached M illnerby telephoneand advised herofthe tlrgentneed to wire $13,671 to Seterus. Ralls also provided M illnerwith the wiring instnlctions. M illnerthen çtrtzshedtothebranchofficeofBnnkofAmericatosendthe$13,671bywiretoSeterus.'' JZ !49. In the meantim e,Rallsraced to the courthouse in Albemarle County,where the foreclosure salewasscheduledto takeplace. Thesale occurred atapproximately 2:30 p.m . FannieM aem ade thehighestbidfortheProperty. Rallsallegesthatthebid price*assubstantially lessthanthevalue oftheProperty. ' At2:38 p.m .,M illnerwired $13,671 to Seterus. Imm ediately thereafter,Ralls called the Seterus M anager and provided the wire transferinform ation. The SeterusM anageradvised Ralls thatthe wiretransferinformation wasççacceptable''and thattûhewassending thewiring irtfonuation to theforecloslzre law firm.'' JZ ! 57. W hen Rallsaskedwhethertheforeclosuresalewould be 4 aborted,theSeterusM anagerSsresponded intheaffirmative.'' J#z. In responseto furtherquestions from Ralls,theSetenlsM anagerlsassured Rallsasecondtimeto theeffectthatihesalewould be aborted''andçsthatRallsdidnotneedtocallback.'' J. és!(58. On themorningofAugust25,2017,RallswenttotheProperty arld fotmd apostingindicating thatFarmie M aewasnow theowneroftheProperty. Thatsameday,Rallslenrned thatthe$13,671 paym enthadbeen retum ed to M illner. RallscalledSetenlsandspoketoanotherrepresentative(theGç-fhirdSeterusRepresentative'). The Third Setenls Representative confinned that the foreclostlre sale had been conducted and claimed that the $13,671 payment çihad not posted on time.'' Id.! 69. Ralls advised the representativethathehad been asstlred by the Setez'usM anagerthatthe foreclosure sale would be cancelled upon receipt of the wire transfer infonnation. The Third Setenls Representative transferred Ralls to @.female representative (the çtlPourth Seterus Representative''). The Fourth Setenzs Representative advised Rallsthatthe paym entwas Sttmtim ely''and thatççthe nm ountofthe paymentwasinsufscient.'' 1és!71. W hen Rallsexplained thathewiredtheamotmtthathehad been told to send,the Fourth Seterus Representative indicated that Ralls should have requested written confirm ation ofthe am ountrequired to bring the loan current,and that Glseteruswas not responsibleforthefiguregiven onthephonebeing the correctreinstatementnmotmt.'' J-1. J.S Ralls allegesthatitlpriortotheforeclosure,Seterushadtoldhim thatheneededtowireannmounthigher than$13,671,hecouldandwouldhavedoneso. J#.!72. ProceduralH istoa On July 24,2018,Ralls filed the instantadion againstFnnnie M ae and Seterusin the Circuit Courtforthe City ofCharlottesville,assertipg claim sofactual9aud and breach ofcontract. Fnnnie . M ae rem oved thecaseto thiscourt. Upon rem oval,Fannie M ae and Seterusm oved to dismissthe complaintpuzsuanttoRule 12(b)(6)oftheFederalRulesofCivilProcedure. Themotion hasbeen fully briefed and isnow ripeforreviem l StandardsofR eview Rule12(b)(6)permitsapartytomovefordismissalofacomplaintforfailuretostateaclaim upon wllichreliefcanbegranted. W hen deciding am otion to dism issunderthisnzle,the courtm ust . acceptastl' ue allwell-pleaded allegationsand draw allreasonablefactualinferencesintheplaintiff's favor. Ericksonv.Pardus,551U.S.89,94(2007). StW hileacomplaintattackedbyaRule12(b)(6) m otion to dism iss doesnotneed detailed factualallegations,a plaintiffs obligation to provide the grotmds of his entitlement to relief requires more than labels and conclusions,and a fonnulaic recitation ofthe elem entsofa cause ofaction willnotdo.'' BellAtl.Cop .v.Tw om blv,550 U .S. 544,555(2007)(internalcitationandquotationmarksomitted). Tosurvivedismissal,ççacomplaint m ustcontain suffcientfactualm atter,accepted astnle,to çstateaclaim forreliefthatisplausibleon itsface.''' Ashcroftv.lcbal,556U.S.662,678(2009)(quotingTwombly,550U.S.at570). D iscussion A ctualFraud In CountOne ofthe complaint,Ralls asserts a claim ofactualfraud against Seterus. This claim isbased on the SeterusM anager'sallegedly falseassurancethatthescheduled foreclostlre sale wouldnottakeplace,orwould bereversed,ifRallswired Setenls$13,671on August22,2017,either beforeorshortly afterthesale. ThepartiesagreethatVirginiasubstantive1aw appliestotheplaintiff'sclaim s. Toprevailon aclaim ofactualfraudunderVirginialaw,aplaintiffmustprovethefollowingelements:çG(1)afalse representation,(2)ofamaterialfact,(3)madeintentionallyandknowingly,(4)withintenttomislead, lThecourthasdeterminedthatoralargumentwouldnotaidthedecisionalprocess. 6 (5)reliancebythepartymisled,and(6)resultingdnmagetothepartymisled.'' EvaluationResearch Corp.1v.Alecluin,439S.E.2d387,390(Va.1994). In moving to dism issCountOne,the defendants firstargue thatRalls hasnotalleged that Seterusm ade an actionable falserepresentation. M orespecifically,the defendantscontend thatthe alleged misrepresentation by the SeterusM anager is not actionable since it was ç1a conditional prom isetotakefutureaction.'' Defs.'Br.Supp.M ot.toDismiss.8,Dkt.No.10. Forthefollowing reasons,thecourtisunpersuaded. Asageneralnlle,tçga)fraud claim cnnnotbepremised &on unslled promisesorstatements aboutfutureevents.''' Hazaimehv.United StatesBankNat'lAss'n,94 F.Supp.3d741,748(E.D. Va.2015)(quoting Albanese v.W C1Communities.,Inc.,530 F.Supp.2d 752,770 (E.D.2007:. However,this nzle is not without exceptions. For instance,the Suprem e Cotlrtof Virginia has redognized thata claim forfraud çGm ay som etimesbepredicated on promiseswhich arem adewith a presentintention notto perform them ,or on prom ises m ade w ithoutany intention to perform them .'' Llovdv.Smith,142 S.E.363,365(Va.1928). Gsrl-hebasisfortheexception isthatdthestateofthe promisor'smind atthetime he makestheprom ise isa fact'so that,ifhem isrepresentslzisstateof mind,çhem isrepresentsathen existing fact.''' M erenstein v.St.PaulFire& M arineIns.Co.,142 F. App'x 136,139 (4th Cir.2005)(quoting Lloyd,142 S.E.at366). In such cases,çiltjhe alleged m isrepresentation isnotsimply a promise to do som ething in the ftzttlre;itis,instead,a deliberate misstatementofan existing factrelated to (dlefendant'spresentintentions.'' TidewaterBeverace Servs..Inc.v.CocaColaCo.,907F.Supp.943,947 (E.D.Va.1995). ln thiscase,RallsallegesthattheSetel'usM anagerasslzred him thatthe scheduledforeclostlre salewould nottakeplace,orwould bereversed,ifRallswired Seterus$13,671on August22,2017, eitherbeforeorshortly afterthe sale. Rallsfurtherallegessuch asslzrance wasçtintentionally false,'' and thatitw asm adew ith theçsm otiveto preventR allsf' rom stopping the foreclos' ureby aChapter 13 bankrnptcy.'' Compl.!44. Acceptingtheplaintiffsallegationsastnle,thecourtconcludesthatthe Seterus M anager's promise regarding futtlre conduct,which was allegedly m ade with present fraudulent intent,constitutes a sufficient predicate for the plaintiff's claim of fraud. See.e.g., Hazaimeh,94F.Supp.3d at749 (holdingthattheplaintiffsstatedaplausibleclaim ofacmalfraud based on the loan servicer's allegedly false representation that it would stop a foreclosttre sale scheduledforthefollowingdayiftheplaintiffswiredacertainnmountoffupdstotheloanservicer); M atanicv.W ellsFarcoBnnk.N.A.,No.3:12-cv-00472,2012U.S.Dist.LEXIS134154,at*19(E.D. Va.Sept.19,2012)(concludingthattheplaintiff'sallegationthatthedefendantintendedtoforeclose on the home regardless of whether it received the requested tax information Sçsatisfieldj the requirem entthatthepromisebefalse atthe time theprom isorm adethe statem entsy''and therefore supportedaclaim ofactualfraud). The courtis also tmpersuaded by the defendants' arglzm ent that the plaintiffs alleged dnmagesdid notresultfrom any actoff' raud on the partofSeterus,butwereinstead caused by the plaintiff'sown failtlretom aketim elypaym ents. Rallsspeciûcally assertsthatifhehadnotreliedon the alleged misrepresentation by the SetenzsM anager,he would have retained a localbanknlptcy attorney to stop the foreclostlre sale by fling a Chapter 13 bankruptcy petition. Consistentwith other decisions,the courtfinds such allegation sufficient to survive a motion to dism iss. See Hazéimeh,94F.Supp.3dat750(concludingthattheplaintiffsadequatelypledresultingdsmageby alleging thpt they did not obtain cotmsel to stop the foreclostlre sale based on the defendant's misrepresentation and thatthey could have stopped thesaleby filing forbnnknlptcy);Thomasv. Bnnk ofAm..N.A.,No.4:12-cv-00142,2013 U.S.Dist.LEXIS 189799,at*13(E.D.Va.M ar.19, 2013)(snme). Finally,thecourtmustrejectthedefendants'argumentthattheclaim ofactualfraudisbarred by Virginia's Gieconom ic loss''or ççsom ce of duty''nlle. This rule is Gdintended to preserve the bedrock principlethatcontractdnmagesbelimited to thosewithin thecontemplation and controlof thepartiesin frnm ing theiragreem ent.'' Richm ondv.M adison M cmt.Grp..lnc.,918F.2d438,446 (4th Cir.1990). TheruleSlpreventsaplaintiff,whoseonlylegitimategrotmdofcomplaintisthata contracthasbeen breached,from collectingin atortaction both economiclossdnmagesand dam ages generally cognizable in tort.'' Id. Gçunder this rule,the distinction between a tortclaim and a contract claim is ascertained by looking to the source of the duty thatwas allegedly breached.'' Crosbyv.ALG Trustee.LLC,822S.E.2d185,189(Va.2018). $$gIJf,whenthestlrfaceisscratched, itappearsthatthedefendanthasbreached adpty imposed by law,notby contract,theeconom ic loss nzle shouldnotapply.'' M adison M gmt.Gp .,918 F.2d at446. ln thiscase,there isno suggestion orindication thatSetenzshad a contractualduty to stop or cancelthe foreclosure oftheProperty. Instead,RallsallegesthatSeterustçviolated a duty imposed by tortlaw,i.e.,theduty notto comm itfraud.'' ld. Consequently,Seterus isçitnotentitled to the protection oftheeconomic lossrule,which protectsonly those defendantswho havebreached only contracttzalduties.''' Hazaimeh,94F.Supp.3dat748(quotingM adison M cmt.Gp.,918F.2dat 447:;seealsoBennettv.Bnnk ofAm..N.A.,No.3:12-cv-00034,2012U.S.Dist.LEXIS54725,at *27(E.D.Va.2012)(findingthedefendant'srelianceontheeconomiclossruleEtmisplaced''sinèethe defendantdidnothaveacontractualdutytocanceltheforeclosureoftheplaintiffshome). Forthesereasons,thedefendants'motionto dism isswillbedeniedwithrespectto CountOne. II. Breach of C ontract ln CountTwo ofthe complaint,Rallsassertsa claim forbreach ofcontractagainstFnnnie M ae. Ralls allegesthatFnnnie M ae breached whathe describes asa bilateraloralcontract,tmder w hich Fnnnie M ae,through Setenls,agreed to abortorreverse any foreclosure sale ifRalls m ade a paymentof$13,671beforeorshortly afterthescheduled sale. Toprevailon a claim forbreach ofan oralcontpct,theplaintiffçtmustfirstprovethatavalid oralcontractexisted.'' Dean v.M onis,756 S.E.2d 430,432 (Va.2014). Eç' l-o provea contract's existence, a11 of the essential elements must be proven.'' 1d. ln particular, çithere must be a complete agreementwhich requiresacceptance ofan offer,aswellasvaluable consideration''from both sides. M ontacnav.Holiday lnnssInc.,269 S.E.2d 838,844 (Va.1980);seealsoAlbayerov. W ellsFargoBnnk.N.A.,No.3:11-cv-00201,2011U.S.Dist.LEXIS 114974,at*17(E.D.Va.Oct.5, 2011)(içunderVirginia law,an enforceablecontractrequirestheexistenceofvalid consideration from al1partiestoan agreement.'')(citingLooneyv.Belcher,192S.E.891(1937)). TheSupreme CourtofVirginiahasheldthatttga)promisetoforbeartheexerciseofalegal rightisadequate consideration to supportacontract.'' Hamm v.Scott,515 S.E.2d 773,774 (Va. 1999). çsl-lowever,t(ajdebtor'sprom'isetopay sllmsalready dueisnotsuftkientconsideration to stlpporta creditor'sagreement'to forbearfrom exercising alegalrightofforeclosure.''' Albayero, 2011U.S.Dist.LEXIS 114974,at*17 (quotingAlbrightv.Btlrke& HerbertBnnk& TrtzstCo.,457 S.E.2d 776,778 (Va.1995$;see also Uplingerv.ReesBroome.P.C.,No.1:09-bk-13129,2011 Bnnkr.LEXIS 3457,at*24 (Bankr.E.D.Va.Sept.8,2011)(çç1n Virginia apromisetopay stlms alreadydueisnotsufficientconsideration,stmldingalone,tocreateabindingcontract.''). Applyingtheseprinciples,the coul'tconcludesthatRallshasfailed toplead sufscientfactsto establish theexistenceofan enforceableoralcontract. Rallsm aintainsthatthepaymentof$13,671 constitutedvalid consideration onhispart. However,thecomplaintmakesclearthatRallshadfallen behind on hisloan paym entsand owed atleastthatam otmtto,bringtheloancurrent. SeeCompl.!! 10,15. Thecom plaintisdevoid ofany suggestion thatthe $13,671paym entexceeded the nm ount already due to Fannie M ae. çEBecause a prom ise to pay an nm ount already due to anotherparty cnnnot operate as valid consideration,the paym ent could not constim te additional consideration supportingan independent,enfbrceablecontract.'' Albayero,2011U.S.Dist.LEXIS 114974,at#18. In theabsenceofsufscientfacmalilegationsto supporttheexistenceofavalidoralcoùtract, thecouz'tconcludesthatCotmtTwoissubjecttodismissalforfailmetos'tateaclnim. Accordingly, the defendants'm otion w illbe granted w1111respectto thatcotmtz Conclusioq Forthere% onsstatedathedefendants'm otiontodismisswillbepanted inpartanddenied in part. TheClerkisdirectedtosendcopiesofthismemorandum opinion andtheaccompanyingorder 'to theplainiffand allcounselofrecord. DATED:This tz day ofAugust, 2019. SeniorUnited StatesDisG ctJudge 2In hisbriefinopppsiiontothem otion todism iss,Rallssllmm arily requestsleavetoRm endthecomplaintin theeventthatthecourtjrantsthedefendsmts'motiontodise ss. Suchrequestisnotprogerandwillnotbeconsideredby thecomt SeeACA Fm.Guar.Corn.v.CitvofBuenaVista.917F.3d206t218(4thCm 2019)(expresslydepliningto fmdthatrequeststoamendmadeinoppositionbriefsoonsututeapropermotontoamend);Coxzmrelliv.' fnsoirePhprms. Inc..549F.3d618,630-31(4thCir.2008)(afsrmingthedenialofleavetoamendwheretheplaintiEs'requestforleave wasin afoom otetc theirresponseto defendants'motion to dismissand,tlm s,didnotqualify asamoEon forleaveto smendn). 11
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