Opinion
C. A. 9:21-cv-03175-BHH-MHC
07-19-2022
Richard Cionci, Plaintiff, v. Wells Fargo Bank, N.A., Defendant.
REPORT AND RECOMMENDATION
Molly H. Cherry United States Magistrate Judge
Plaintiff Richard Cionci, proceeding pro se, filed this breach-of-contract action in the Court of Common Pleas for Beaufort County, South Carolina. ECF No. 1-1. Defendant Wells Fargo Bank, N.A. (“Wells Fargo” or “Defendant”) removed the case to this Court based on diversity jurisdiction. ECF No. 1.
Before this Court is Wells Fargo's Motion to Dismiss (“Motion”) the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. ECF No. 15. Plaintiff filed his Response in Opposition, ECF No. 19, and Wells Fargo filed a Reply, ECF No. 20. The Motion is ripe for review.
All pretrial proceedings in this case were referred to the undersigned United States Magistrate Judge pursuant to the provisions of 28 U.S.C. § 636(b)(1)(A) and (B) and Local Rule 73.02(B)(2), D.S.C. This Report and Recommendation is entered for review by the District Judge. For the reasons set forth below, the undersigned recommends that the Motion be granted, in part, and denied, in part.
The facts, and all inferences therefrom, are construed in the light most favorable to Plaintiff for purposes of ruling on Defendant's Motion to Dismiss. See E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011).
On September 29, 2009, to purchase a townhouse in Bluffton, South Carolina, Plaintiff secured an FHA loan in the amount of $199,430 (the “Loan”) by entering into a loan agreement with D.H.I. Lenders and signing a mortgage contract to secure the note. ECF No. 13, Am. Compl. at ¶¶ 8, 9. Plaintiff also signed HUD form 92900-A, which sets forth a number of actions that the “Lender in this transaction, its agents and assigns as well as the Federal Government, its agencies, agents, and assigns, are authorized to take.” Id. at ¶ 10.
In October 2009, the loan and mortgage were assigned or transferred from D.H.I. Lenders to Defendant Wells Fargo as owner and servicer. Id. at ¶ 11. Subsequently, Plaintiff's work hours were reduced and he had unforeseen medical expenses. Id. at ¶ 18. In February 2010, Defendant reported to the FHA the first delinquency in payment. Id. By August 2010, Plaintiff's work hours were restored and he could make full mortgage payments again. Id. at ¶ 19. In September 2010, Plaintiff asked Defendant for assistance so he could get caught up on his mortgage. Id. On December 8, 2011, Plaintiff submitted a partial payment to Defendant, but Defendant refused the payment and returned it. Id. at ¶ 20.
Plaintiff alleges that the note and mortgage both include a paragraph barring acceleration of the debt, foreclosure, and the assessment of any fees “when limited by the regulations issued by the Secretary U.S. Department of Housing and Development (HUD).” Id. at ¶ 15. The paragraph further provides: “In many circumstances regulations issued by the Secretary will limit Lender's rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This security instrument does not authorize acceleration or foreclosure if not permitted by the regulations of the secretary.” Id.
In December 2011, Defendant accelerated the debt and filed a foreclosure action against Plaintiff in the Beaufort County Court of Common Pleas. Id. at ¶ 27. Plaintiff alleges that Defendant failed to “participate in loss mitigation as required by the note and contract,” Id. at ¶ 22, and failed to review Plaintiff “for a forbearance, partial claim, traditional modification, or FHA-HAMP modification before filings its foreclosure action,” Id. at ¶ 23.
Plaintiff filed an Answer to the foreclosure complaint in which he “maintained that the foreclosure was improperly accelerated.” Id. at ¶ 29 (further alleging that Defendant has never denied these facts in any court filings). Plaintiff also signed and returned the notice of foreclosure intervention that was attached to the complaint, and he requested mediation and assistance from the court. Id. at ¶ 30.
Defendant reported to the FHA in November 2011 that Plaintiff's Loan was not eligible for loss mitigation, but Plaintiff was not made aware of this decision. Id. at ¶ 34. In January 2013, Defendant's counsel sent a loan modification application to Plaintiff, which he completed and returned to counsel. Id. at ¶¶ 35-36. Plaintiff received no response. Id. In April 2013, Defendant's counsel requested that Plaintiff complete another loan modification application. Id. at ¶ 37. Plaintiff returned the completed application in June 2013, but again received no response. Id. at ¶ 38. Plaintiff alleges that this lack of communication violated FHA regulations and guidelines. Id. at ¶¶ 39-40.
On December 27, 2013, Defendant's counsel filed with the Beaufort County Court a Certificate of Compliance with South Carolina Administrative Order 2011-05-02-01, and claimed that Plaintiff failed to respond to, or refused to participate in, any loss mitigation assistance. Id. At ¶ 41. Plaintiff alleges that this filing “was perjury, since Plaintiff Cionci completed two loan modification applications and sent both through [counsel] to Defendant.” Id. at ¶ 43.
On January 21, 2014, Defendant filed a motion for summary judgment in the foreclosure case. Id. at ¶ 44. The next day, Plaintiff filed a motion to stay Administrative Order 2011-05-02-01, challenging Defendant's allegation that Plaintiff voluntarily chose not to participate in loss mitigation. Id. at ¶ 46. On April 30, 2014, Defendant filed a motion to stay the Certificate of Compliance and to stay the Motion for Summary Judgment due to “lack of notification.” Id. at ¶ 47.
Over the next eight months, Defendant made, and Plaintiff complied with, two requests for a completed loan modification application and five requests for additional information. Id. at ¶ 50. According to Plaintiff, Defendant “intentionally made it difficult, if not impossible, for Plaintiff Cionci to complete a loan modification application, [or] perform under the terms of the contract, and [Defendant] unnecessarily delayed the process.” Id. at ¶ 49. Plaintiff did not receive any further responses to the applications Plaintiff sent to Defendant. Id. at ¶ 51. However, Defendant reported monthly to the FHA from November 2014 through March 2015 that complete financials were received and in review. Id. at ¶ 52. Defendant reported to the FHA in April 2015 that loss mitigation was denied due to no response from Plaintiff. Id. at ¶ 54.
After receiving no response from Defendant or its counsel, Plaintiff sent another loan modification application to Defendant, receipt of which was acknowledged on April 28, 2015. Id. at ¶ 53. Upon request, Plaintiff provided additional information in June 2015, receipt of which was acknowledged by Defendant's agent. Id. at ¶ 55. In June 2015, Defendant reported to the FHA that complete financials were received and in review. Id. at ¶ 58. The next month, Defendant reported to the FHA that loss mitigation was denied due to no response from Plaintiff. Id. at ¶ 59.
On August 6, 2015, Defendant sent Plaintiff a letter stating “a considerable amount of time has been pending . . . [and] we have not received the required documentation. . . . [A]s a result, Wells Fargo is unable to provide assistance.” Id. at ¶ 60. Shortly after receiving the letter, Plaintiff sent an email to Defendant “requesting that Defendant Wells Fargo cure its deficiencies” and stating that “if something isn't done, Plaintiff Cionci will take the matter to the Court.” Id. at ¶ 61. Plaintiff alleges that this letter was sufficient to put Defendant on notice of his complaints of “[i]mproper analysis of borrower information or denials of loss mitigation options; [f]oreclosure[] initiated or continued in violation of HUD's policy; or any other violation of HUD Collections and Loss Mitigation policies.” Id. at ¶ 63.
Plaintiff filed another completed loan modification application in October 2015, which Defendant acknowledged as received. Id. at ¶ 64. Defendant reported to the FHA in October, November, and December of 2015 that complete financials were received and in review, and it reported to the FHA in January 2016 that loss mitigation was denied due to no response from Plaintiff. Id. at ¶ 67.
In May 2016, Defendant reported to the FHA that the note prequalified for the 601 program (DASP Program). Id. at ¶ 68. Plaintiff alleges that in order for the FHA to send loans to the DASP program, it must accept assignment of the loan from the servicers. Id. at ¶ 82. Plaintiff further alleges that the FHA relies on the information provided to it by the servicers and does not independently check the truth of what is sent. Id. According to Plaintiff, Defendant “informed the FHA that all the conditions for sending the note and mortgage to HUD for the 601 program were met, including [that] loss mitigation [had] expired.” Id. at ¶ 83. However, Plaintiff alleges that loss mitigation had not expired and that Defendant “sent the note and mortgage to the 601 (DASP) program while [he] was still in loss mitigation, in violation of the terms of the note and mortgage,[the] False Statements Accountability Act of 1996, . . . FHA rules and regulations,” and the Administrative Order 2011-05-02-01. Id. at ¶¶ 74, 76, 84-89. According to Plaintiff, Defendant “transmitted knowingly false and perjured information to the FHA in order to meet the requirement that loss mitigation had expired” and that if the FHA had been informed that loss mitigation was still ongoing, his loan could not have been placed in the DASP sale. Id. at ¶ 84.
Without Plaintiff's knowledge, on May 18, 2016, the FHA held its Aged Delinquent Portfolio Loan Sale, at which Plaintiff's Loan was purchased by Stanwich Mortgage Acquisition Company IV, LLC. Id. at ¶ 69. In June 2016, Defendant reported to the FHA that the mortgage was assigned to the 601 (DASP) program. Id. at ¶ 72.
On June 20, 2016, counsel for Defendant informed the Beaufort County Court-without informing Plaintiff-that they would be requesting that a stay be lifted and were preparing a certificate of compliance with Administrative Order 2011-05-02-01. Id. at ¶ 71.
According to the records kept in the Beaufort County Recorder's Officer, the note and mortgage were assigned on June 28, 2016 from Wells Fargo Bank, N.A., to the U.S. Department of Housing and Urban Development, and then from HUD to Carrington. Id. at ¶ 73. As of June 28, 2016, Defendant no longer owned the note or mortgage and was no longer a real party in interest. Id.
On September 22, 2016, counsel for Defendant in the foreclosure case provided a status update to the Beaufort County Court, stating that Defendant was ready to move forward with the case. Id. at ¶ 92. Four months after surrendering the note and debt to the FHA, Defendant filed a certification of compliance with Administrative Order 2011-05-02-01, stating that Plaintiff failed to participate in loss mitigation with Defendant and listing Defendant as a real party in interest. Id. at ¶¶ 94, 95. Plaintiff then filed an objection and motion to stay the certification of compliance, arguing that at no point did he not participate with loss mitigation and that he never received any information from Defendant regarding the status of numerous loan modification applications he had sent. Id. at ¶¶ 96, 97.
The Beaufort County Court set a hearing on Plaintiff's motion for January 11, 2017. Id. at ¶ 97. On January 10, 2017, counsel for Defendant sent an email to the court and Plaintiff stating that there had been a “change of servicer.” Id. at ¶ 98. At the hearing the next day, counsel similarly stated that the loan “has a new servicer” but did not provide any additional information. Id. at ¶ 102. The Beaufort County Court issued an Order Acknowledging Stay on January 28, 2017, in which the court noted that “ownership of the subject Note and Mortgage transferred” and that the “loan's current servicer has consented to review the Defendant [Cionci] for foreclosure intervention.” ECF No. 15-1 at 1; ECF No. 13 at ¶ 105. Plaintiff alleges that after receiving this Order, he was under the belief that Defendant still owned the note, that “Carrington was just the servicer,” and that Carrington had been ordered to make an FHA modification. Id. at ¶ 107. Plaintiff believed that he was still in the FHA program and would be receiving an FHA modification that would not change any of the FHA terms to his note and mortgage. Id.
Carrington, the new servicer, sent Plaintiff a loan modification application that stated that “all terms and provisions of the Loan Documents . . . remain in full force and effect.” Id. at ¶ 114. Plaintiff alleges that he was “under the false belief that he was still holding a[n] FHA insured note,” and that if he had known about the DASP sale, “he would have never signed the modification.” Id. at ¶¶ 114-15. Plaintiff alleges that he “lost his rights and guarantees under the FHA program,” and that his “note and mortgage have been forever altered,” as a result of the DASP sale. Id. at ¶¶ 109-10. He also alleges that if he had known that the note had been sold as a result of a DASP sale, he never would have agreed to stay the foreclosure case and he would have acted differently. Id. at ¶ 111.
Plaintiff alleges that he first learned in March 2020 that “his loan might have been sold through the DASP program, and it wasn't until July 2021[] that he received confirmation of the sale from the FHA.” Id. at ¶ 116.
On August 19, 2021, Plaintiff filed this lawsuit against Defendant in state court, seeking compensation for actual and consequential damages, including emotional distress, a clouded property title, payment of unauthorized fines and fees over a multi-year period, damage to his credit rating, and being forced to sign a modification that resulted in inflated interest amounts and an “absurd balloon payment.” Id. at ¶ 122; see ECF No. 1-1.
LEGAL STANDARD
“The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint.” Williams v. Preiss-Wal Pat III, LLC, 17 F.Supp.3d 528, 531 (D.S.C. 2014); see Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Pursuant to Rule 8 of the Federal Rules of Civil Procedure, a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), such that the defendant will have “fair notice of what the claim is and the grounds upon which it rests,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). “[T]he facts alleged ‘must be enough to raise a right to relief above the speculative level' and must provide ‘enough facts to state a claim to relief that is plausible on its face.'” Robinson v. Am. Honda Motor Co., 551 F.3d 218, 222 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 555, 570). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Conclusory allegations pled in the complaint are undeserving of an assumption of truth and should be accepted only to the extent “they plausibly give rise to an entitlement to relief.” Id. 56 U.S. at 679.
When considering a Rule 12(b)(6) motion, the court is required to accept the well-pled allegations in the pleading as true and draw all reasonable factual inferences in favor of the party opposing the motion. E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011). However, conclusory allegations pled in the complaint are undeserving of an assumption of truth and should be accepted only to the extent “they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679. The court must evaluate “the complaint in its entirety, as well as documents attached or incorporated into the complaint.” Kolon Indus., Inc., 637 F.3d at 448. Moreover, the court may consider a document not attached to the complaint, so long as the document “was integral to and explicitly relied on in the complaint,” and there is no authenticity challenge. Id. (quoting Phillips v. LCI Int'l, Inc., 190 F.3d 609, 618 (4th Cir. 1999)). “A complaint should not be dismissed as long as it provides sufficient detail about the claim to show that the plaintiff has a more-than-conceivable chance of success on the merits.” Goldfarb v. Mayor & City Council of Balt., 791 F.3d 500, 511 (4th Cir. 2015) (internal quotation marks and brackets omitted).
“While no absolute bar exists, a motion to dismiss under Rule 12(b)(6) does not typically resolve the applicability of defenses to a well-pled claim.” Id. at 508; (citing Tobey v. Jones, 706 F.3d 379, 387 (4th Cir. 2013) (stating that a motion to dismiss under Rule 12(b)(6) “does not resolve contests surrounding facts, the merits of a claim, or the applicability of defenses”)). However, “in the relatively rare circumstances where facts sufficient to rule on an affirmative defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed under Rule 12(b)(6).” Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc) (internal quotation marks and bracket omitted). Thus, “[a] defendant can raise a statute of limitations affirmative defense in a Rule 12(b)(6) motion as long as the complaint clearly alleges all of the facts sufficient to rule on the defense.” Davis v. Citimortgage, Inc., No. 0:15-CV-04643-MGL, 2016 WL 4040084, at *2 (D.S.C. July 28, 2016) (citing Goodman, 494 F.3d at 464).
Pro se pleadings are given liberal construction and are held to a less stringent standard than formal pleadings drafted by attorneys. Erickson v. Pardus, 551 U.S. 89, 94 (2007). However, principles requiring generous construction of pro se complaints do “not require courts to conjure up questions never squarely presented to them.” Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985). Giving liberal construction does not mean that the court can ignore a pro se plaintiff's clear failure to allege facts that set forth a cognizable claim. See Weller v. Dept. of Soc. Servs., City of Baltimore, 901 F.2d 387, 391 (4th Cir. 1990) (“Only those questions which are squarely presented to a court may properly be addressed.”). Thus, even under this less stringent standard, a pro se complaint is still subject to summary dismissal. Estelle, 429 U.S. at 106-07.
DISCUSSION
In his Amended Complaint, Plaintiff alleges the following eight causes of action: (1) Breach of Contract; (2) Breach of Contract Accompanied by a Fraudulent Act; (3) Extrinsic Fraud as a Result of Fraud Upon the Court and Negligent and/or Fraudulent Misrepresentation; (4) Fraudulent Concealment; (5) Negligence; (6) Violation of the South Carolina Unfair Trade Practices Act, SC Code Ann. § 39-5-10, et seq.; (7) Alteration of the Note and Mortgage; and (8) Negligence Per Se. ECF No. 13.
Wells Fargo moves to dismiss Plaintiff's Amended Complaint in its entirety for failure to state a claim upon which relief can be granted. ECF No. 15. Upon review of the Amended Complaint and the documents incorporated therein, the undersigned concludes that the Third, Fourth, Fifth, Sixth, Seventh, and Eighth Causes of Action should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.
Because the state court's January 2017 Order Authorizing Stay was integral to and explicitly relied upon in the Amended Complaint, see, e.g., ECF No. 13 at ¶ 105, the undersigned has considered that document for purposes of evaluating the Amended Complaint. See Kolon Indus., Inc., 637 F.3d at 440; ECF No. 15-1 at 1. The undersigned has not reviewed the loan documents, however, because neither party has filed those documents with the Court, notwithstanding that the Amended Complaint makes numerous allegations regarding the note and mortgage.
I. First Cause of Action for Breach of Contract and Second Cause of Action for Breach of Contract Accompanied by a Fraudulent Act
Plaintiff's first cause of action is a claim for breach of contract. ECF No. 13 at ¶¶ 123-31. His second cause of action is a claim for breach of contract accompanied by a fraudulent act. Id. at ¶¶ 132-37. Both claims sound in contract law. See Peeples v. Orkin Exterminating Co., 135 S.E.2d 845, 847 (S.C. 1964) (“An action for breach of contract accompanied by a fraudulent act is an action ex contractu, not ex delicto.”).
Defendant argues that these contract claims should be dismissed for the following reasons: (1) they are “time-barred by the applicable three-year statute of limitations as stated in S.C. Code Ann. § 15-3-530(1)”; and (2) there is no private right of action to enforce any of the various federal regulations which apply to mortgage servicers. ECF No. 15 at 1-2. Upon careful review of the cited law, the parties' arguments, and the allegations in the Amended Complaint, the undersigned recommends denying Defendant's motion to dismiss the two contract claims.
A. Applicable Statute of Limitations
Most breach of contract actions in South Carolina, including claims for breach of contract accompanied by a fraudulent act, are subject to a three-year statute of limitations. See S.C. Code Ann. § 15-3-530(1) (providing a three-year statute of limitations for “an action upon a contract, obligation, or liability, express or implied, excepting those provided for in Section 15-3-520”); see Nat'l Bank of Anguilla (Priv. Banking & Tr.) Ltd. v. Considine, 268 F.Supp.3d 825, 828 (D.S.C. 2017); Davis v. Citimortgage, Inc., No. 0:15-CV-04643-MGL, 2016 WL 4040084, at *3 (D.S.C. July 28, 2016) (“Breach of contract accompanied by a fraudulent act is considered contractual in nature, despite having tortious elements, and is thus governed by the limitation period for contracts actions.”).
However, section 15-3-530(1) contains an exception for “an action upon a bond or other contract in writing secured by a mortgage of real property.” See S.C. Code Ann. §§ 15-3-520(a), 530(1). For such an action, a twenty-year statute of limitations applies. S.C. Code Ann. § 15-3- 520(a).
Defendant argues that Plaintiff's contract claims are subject to the three-year statute of limitations. ECF No. 15 at 1, 8-13. Plaintiff, however, contends that all of his claims-both contract and otherwise-are subject to the 20-year statute of limitations and, therefore, are not time-barred. ECF No. 19 at 3.
Courts in South Carolina have generally applied § 15-3-520(a)'s twenty-year statute of limitations “to actions directly concerning defaults on mortgages and foreclosure proceedings.” Davis, 2016 WL 4040084, at *3; see Considine, 268 F.Supp.3d at 828 (concluding that 20-year statute of limitations applied in action brought by lender to recover monies owed by defaulting mortgagors); Wells Fargo Bank v. Carter, No. CV 9:14-127-SB, 2014 WL 11034776, at *1 (D.S.C. July 22, 2014) (applying twenty-year state of limitations to foreclosure action brought by lender because “South Carolina does not treat the default on a note and mortgage as a general breach of contract claim for purposes of the statute of limitations”); Suttles v. Wood, 312 S.E.2d 574, 576 (S.C. Ct. App. 1984) (finding foreclosure action was not barred when brought within twenty years); see 26 S.C. Jur. Limitation of Actions § 21 (“The twenty-year limitations period has been applied to an action on notes secured by a mortgage of real property.”); 27 S.C. Jur. Mortgages § 106 (“An action to foreclose a mortgage must be brought within twenty years after the maturity date recited on the mortgage.”); but see Carrington v. Mnuchin, No. 5:13-03422-JMC, 2016 WL 316020, at *3 (D.S.C. Jan. 27, 2016) (denying motion to reconsider order dismissing breach of mortgage contract claim where plaintiff did not file an opposition to the motion to dismiss and did not raise the twenty-year statute of limitations until the motion to reconsider).
In Carrington, the borrowers filed suit asserting multiple tort and contract claims following the servicer's alleged failure to comply with provisions of the mortgage concerning an escrow account and the failure to modify plaintiffs' mortgage loan. In initially granting the defendant's motion to dismiss, the court noted that plaintiffs had not filed any opposition to the motion to dismiss, and it applied the three-year statute of limitation to the borrowers' claims for breach of the mortgage agreement. Carrington v. Mnuchin, No. CIV.A. 5:13-03422-JM, 2014 WL 4249876, at *8 (D.S.C. Aug. 27, 2014) (“Therefore, the court concludes that Plaintiffs' claims for breach of contract and violation of RESPA accrued in August 2010 when they had notice that [the lender] had breached the Mortgage by failing to pay taxes on the Property out of funds in escrow.”). The plaintiffs moved for the court to reconsider the order granting the motion to dismiss, arguing for the first time that their claims were not subject to a three-year statute of limitation but instead were governed by the twenty-year statute of limitations. The court denied the motion to reconsider. Carrington, 2016 WL 316020, at *3. The court subsequently denied plaintiffs' Rule 59(e) motion to alter the order on the motion to reconsider, in which plaintiffs again argued that their claims were governed by the twenty-year statute of limitations. Carrington v. Mnuchin, No. 5:13-CV-03422-JMC, 2016 WL 4771288, at *3 (D.S.C. Sept. 14, 2016), aff'd sub nom. Carrington v. IMB HoldCo LLC, 692 Fed.Appx. 715 (4th Cir. 2017).
However, “[c]ourts have instead applied the three-year statute of limitations in actions tangentially related to mortgages but more directly dealing with fraud and forgery.” Davis, 2016 WL 4040084, at *3. In Davis, the plaintiff alleged that his wife forged his name on a deed conveying a half interest of his property to her and then re-financed the mortgage without his consent. Id. at *1. The lender moved to foreclose a few years later. A decade later, Plaintiff was researching his title and discovered the deed containing his forged signature. Id. He then filed a lawsuit against his lender, asserting a claim for breach of contract accompanied by a fraudulent act, in which he challenged the loan origination and asserted that the defendant lender “added moneys to Plaintiff's mortgage, without Plaintiff's actual authorization” and further committed fraudulent acts in doing so. Id. at *3. The court rejected Plaintiff's argument that the twenty-year statute of limitations applied to his claim for breach of contract accompanied by a fraudulent act, finding instead that the claim was time-barred by the general three-year statute of limitations. Id.
Defendant argues that Plaintiff's claims are only “tangentially related” to his mortgage and, therefore, are not subject to the twenty-year statute of limitation. ECF No. 15 at 13. Although the undersigned agrees with Defendant with respect to Plaintiff's other six causes of action, the undersigned finds that the two contract claims, when viewed in the light most favorable to Plaintiff, “directly concern defaults on mortgages and foreclosure proceedings.” See Davis, 2016 WL 4040084, at *3.
In his Amended Complaint, Plaintiff alleges that the note and mortgage both include a paragraph barring acceleration of the debt, foreclosure, and the assessment of any fees “when limited by the regulations issued by the Secretary U.S. Department of Housing and Development (HUD).” ECF No. 13 at ¶ 15. The paragraph further provides: “This security instrument does not authorize acceleration or foreclosure if not permitted by the regulations of the secretary.” Id. Plaintiff further alleges that “the mortgage contains FHA provisions found in Federal Law and the Single Family Housing Book, which require the servicers to follow [sic] before the debt can be accelerated.” Id. at ¶ 128. According to Plaintiff, Defendant failed to “participate in loss mitigation as required by the note and contract” before it accelerated the debt and filed a foreclosure action against Plaintiff in the Beaufort County Court of Common Pleas in December 2011. Id. at ¶¶ 22, 27. Plaintiff alleges that Defendant “breached the contract (specifically paragraph 9d) by failing to complete [a number of express] steps before accelerating the debt as required by the FHA as listed in its Single Family Housing Book.” Id. at ¶ 129.
As alleged in the Amended Complaint, the scope of Plaintiff's breach of contract claim is limited to Defendant's actions leading up to filing the foreclosure lawsuit, which actions allegedly violated specific provisions of the mortgage contract. Thus, Plaintiff has pled allegations from which it can be inferred that his breach of contract claim is subject to the twenty-year statute of limitations, as it is “an action upon a bond or other contract in writing secured by a mortgage of real property.” See S.C. Code Ann. §§ 15-3-520(a), 530(1). As such, accepting the allegations in the Amended Complaint as true and viewing them in the light most favorable to Plaintiff, the undersigned concludes that Plaintiff's breach of contract claim is not barred by the applicable statute of limitations.
Similarly, the claim for Breach of Contract Accompanied by a Fraudulent Act alleges that Defendant breached the contract through fraud by “filing a foreclosure action before completing all the requirements necessary as listed in the FHA regulations and the mortgage contract,” adding unauthorized charges and fees to the loan balance, and “delaying the foreclosure proceedings for years in order to collect the maximum amount of insurance.” ECF No. 13 at ¶ 135. As with the First Cause of Action, this claim focuses on Defendant's alleged breach of the pre-foreclosure requirements in the mortgage contract, such that the undersigned is not persuaded that the claim is only “tangentially relate[d]” to Plaintiff's mortgage “but more directly deals with fraud.” See Davis, 2016 WL 4040084, at *3. Accordingly, the undersigned recommends denying Defendant's motion to dismiss the two contract claims on statute of limitations grounds.
B. Plaintiff's Contract Claims Should Proceed to Discovery
Defendant next argues that even if the two contract claims are not time-barred, they still fail because Plaintiff has failed to allege a viable cause of action. ECF No. 15 at 13. Specifically, Defendant cites a line of cases from outside of South Carolina for the proposition that a “borrower cannot bring a breach of contract claim for damages based on the alleged violation of HUD regulations referenced in a promissory note or mortgage.” Id. at 13-14 (citing Wells Fargo Home Mortgage, Inc. v. Neal, 922 A.2d 538, 541 (Md. 2007); Christenson v. Citimortgage, Inc., No. 12-CV-02600-CMA-KLM, 2013 WL 5291947, at *7 (D. Colo. Sept. 18, 2013); Dixon v. Wells Fargo Bank, N.A., No. 12-10174, 2012 WL 4450502, at *8 (E.D. Mich. Sept. 25, 2012); Mitchell v. Chase Home Fin. LLC, No. CIV A 306-CV-2099-K, 2008 WL 623395, at *4 (N.D. Tex. Mar. 4, 2008)).
In his Response, Plaintiff cites a different line of cases in which courts have recognized breach of contract claims based on a failure to comply with HUD regulations where the mortgage instrument expressly conditions the mortgagee's right to accelerate or sell the property on compliance with HUD regulations. ECF No. 19 at 10 (citing Bates v. JPMorgan Chase Bank, NA, 768 F.3d 1126, 1131 (11th Cir. 2014) (“In view of Georgia's general rule that powers of sale in deeds are to be construed strictly, see Ga. Code Ann. § 23-2-114, we believe Georgia courts would hold that HUD regulations clearly referenced in a deed as conditions precedent to the power to accelerate and the power of sale could form the basis of a breach of contract action.”); In re Silveira, No. 11-44812-MSH, 2013 WL 1867472, at *13 (Bankr. Mass. May 3, 2013) (“While these [HUD] regulations do not provide a mortgagor with a private right of action . . . if they are incorporated into the various loan documents . . . they become enforceable by the parties to the loan documents.”); BAC Home Loans Servicing, LP v. Taylor, 986 N.E.2d 1028, 1033-34 (Ohio Ct. App. 2013); Mathews v. PHH Mortg. Corp, 724 S.E.2d 196, 202 (Va. 2012)).
The undersigned recommends denying Defendant's motion to dismiss Plaintiff's breach of contract claim at this time without deciding which approach the South Carolina courts would be likely to adopt. Because there is no copy of the loan documents in the record before the Court, the only information the Court has about the actual provisions of those documents is what is alleged in the Amended Complaint. Furthermore, those allegations, viewed in the light most favorable to Plaintiff, suggest that the contract does not merely reference the FHA regulations but rather expressly “contains FHA provisions found in Federal Law and the Single Family Housing Book.” ECF No. 13 at ¶ 128. At this stage of the proceedings, there is not enough information before the Court upon which to determine which line of cases is most analogous to the actual contract allegedly breached. Accordingly, the undersigned recommends that the Court deny Defendant's motion to dismiss the First and Second Causes of Action and permit the contract claims to proceed to discovery.
Defendant briefly argues that the two contract claims fail because Plaintiff has not named HUD as a party in this action. ECF No. 15 at 31-32. Defendant contends that HUD is a necessary party because Plaintiff consistently references the sale of his loan through DASP and, therefore, “Plaintiff's dispute lies with HUD and the implementation of the DASP program.” Id. at 31. The undersigned is not persuaded by this argument, however, as there are no allegations in First or Second Causes of Action regarding DASP.
II. Third Cause of Action - Fraud and Negligent or Fraudulent Misrepresentation
Plaintiff's third cause of action is a claim for “Extrinsic Fraud as a Result of Fraud Upon the Court and Negligent and/or Fraudulent Misrepresentation.” ECF No. 13. The allegations in this cause of action focus on three topics: (1) Defendant's alleged failure to comply with federal regulations related to loss mitigation; (2) alleged statements by Defendant's counsel made to the state court in the foreclosure action, and (3) Plaintiff being “induced into a contract with Carrington, in the form of a loan Modification that was more expensive and eronus [sic] for him.” Id. at ¶¶ 139(A)-(E), 142(A)-(E), and 149.
Defendant argues that this claim-no matter whether it is one for fraud, negligent misrepresentation, or fraudulent misrepresentation-should be dismissed for three reasons: (1) there is no private cause of action for violation of HUD regulations; (2) applicable law holds that Plaintiff cannot state a claim for failure to obtain a loan modification; and (3) the claims are barred by the applicable statute of limitations. ECF No. 15 at 16. The undersigned agrees that the claim should be dismissed.
A. To the Extent Plaintiff's Claim is Based on an Alleged Violation of HUD Regulations or for Failure to Obtain a Loan Modification, the Claim Should be Dismissed.
As an initial matter, the undersigned agrees with Defendant that, to the extent Plaintiff's Third Cause of Action can be read as claim for violation of HUD regulations or for failure to obtain a loan modification, Plaintiff has failed to allege a cognizable claim. First, Plaintiff avers in his Response that “nowhere in the complaint is the Plaintiff trying to enforce government regulations,” nor is he “filing a complaint because he didn't get a mortgage modification.” ECF No. 19 at 12. Moreover, the Fourth Circuit has found that the HUD regulation requiring loss mitigation did not create a private cause of action. In re Miller, 124 Fed.Appx. 152 (4th Cir. 2005). Further, courts in this District have consistently found that the denial of loan modification under the federal Home Affordable Modification Program (“HAMP”) or other similar programs does not create a private cause of action. Thomas v. Enter. Bank of S.C., No. 1:16-CV-02793-JMC, 2018 WL 1456738, at *2 (D.S.C. Mar. 23, 2018), aff'd, 739 Fed.Appx. 186 (4th Cir. 2018); Weber v. Bank of Am., N.A., C/A No. 0:13-cv-01999-JFA, 2013 WL 4820446, at *4 (D.S.C. Sept. 10, 2013); Steffens v. Am. Home Mortg. Servicing, Inc., C/A No. 6:10-1788-JMC, 2011 WL 901179, at *3 (D.S.C. Mar. 15, 2011). Accordingly, the undersigned finds that the allegations in the Amended Complaint are insufficient to establish a claim for fraud based on any alleged violation of the loss mitigation regulations or the HAMP. See Carrington, 2014 WL 4249876, at *10.
B. Plaintiff's Third Cause of Action is time-barred.
Plaintiff alleges that on January 10, 2017, Defendant, through counsel, “made false representations to the Beaufort County Court and to Plaintiff Cionci . . . by omitting one or more of the following:” (1) “that the Plaintiff's note was sold, and the mortgage was assigned on June 28, 2016;” (2) “that the Plaintiff's note was assigned to HUD;” (3) “that the Plaintiff's note was sold through the 601 program DASP sale;” (4) that the Plaintiff's note was no longer FHA insured or guaranteed;” and (5) “that as a consequence of the sale, the foreclosure must be stayed for a period of at least 1 year.” ECF No. 13 at ¶ 142. Plaintiff further alleges that he justifiably relied on Defendant's representations and “believed that he was still in the FHA program, that he received an FHA modification, and that the only thing that changed hands was the servicer.” Id. at ¶ 143.
According to Plaintiff, the Beaufort County Court “took Defendant Wells Fargo for their word in issuing its order.” Id. at ¶ 146; see also Id. at ¶ 105 (“As a result of this new and very incomplete information, Judge Dukes ordered a stay of the case, in exchange for a modification to be ‘done' by Carrington.”). Notably, however, in the Order Acknowledging Stay, entered on January 18, 2017, the Beaufort County Court not only stated that the servicer had changed, but it also noted that “ownership of the subject Note and Mortgage transferred.” ECF No. 15-1 at 1 (further stating that the “loan's current servicer has consented to review the Defendant for foreclosure intervention”).
For purposes of the Motion to Dismiss, the Court can consider the Order Acknowledging Stay, as it is integral to and explicitly relied upon in the Amended Complaint, see, e.g., ECF No. 13 at ¶ 105. See Kolon Indus., Inc., 637 F.3d at 440; ECF No. 15-1 at 1. Moreover, the Order is subject to judicial notice. Phillips v. Pitt Cnty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 2009) (courts “may properly take judicial notice of matters of public record”); Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236, 1239 (4th Cir. 1989) (“We note that ‘[t]he most frequent use of judicial notice . . . is in noticing the content of court records.'”).
Finally, Plaintiff alleges that the records kept in the Beaufort County Records Office show that the note and mortgage were assigned on June 28, 2016, from Wells Fargo Bank, N.A., to the U.S. Department of Housing and Urban Development, and then from HUD to Carrington. Id. at ¶ 73. Plaintiff further alleges that the June 2016 “mortgage assignment to HUD wasn't recorded in the Beaufort County Records Office until a year later,” Id. at ¶ 145, which would have been in the summer of 2017.
Under South Carolina law, claims for fraud and negligent misrepresentation are subject to a three-year statute of limitation. S.C. Code Ann. § 15-3-530; Walbeck v. I'On Co., LLC, 827 S.E.2d 348, 361 (S.C. Ct. App. 2019) (holding three-year statute of limitations applied to negligent misrepresentation claim); Moore v. Benson, 700 S.E.2d 273, 277 (S.C. Ct. App. 2010) (applying three-year statute of limitation to fraud claim). The discovery rule applies to fraud and negligent misrepresentation claims, which “must be commenced within three years after the person knew or by the exercise of reasonable diligence should have known that he had a cause of action.” S.C. Code Ann. § 15-3-535. The “exercise of reasonable diligence” means “the injured party must act with some promptness [when] the facts and circumstances of an injury place a reasonable person of common knowledge and experience on notice that a claim against another party might exist.” Dean v. Ruscon Corp., 468 S.E.2d 645, 647 (S.C. 1996) (emphasis in original).
Liberally construed, Plaintiff appears to allege that Defendant's counsel made material misrepresentations to Plaintiff and the state court on or around January 10, 2017, suggesting that while the servicer of the note and mortgage had changed, the owner of those documents had not. However, the undersigned agrees with Defendant that the Order Acknowledging Stay, entered a week after the alleged misrepresentations, clearly states that “ownership of the subject Note and Mortgage transferred.” Id. Accordingly, pursuant to the discovery rule, Plaintiff was on notice, as of late January 2017, that a claim against Defendant might exist as Plaintiff knew or should have known that the owner-not just the servicer-had changed, and that Defendant's prior alleged statements or omissions suggesting the contrary had been misrepresentations. Thus, pursuant to the discovery rule, the three-year statute of limitations for Plaintiff's negligent or fraudulent misrepresentation claim began to run in January 2017 and expired three years later in January 2020. Because Plaintiff did not file this lawsuit until August 2021, the undersigned finds that Plaintiff's Third Cause of Action should be dismissed as time-barred.
C. Equitable Tolling and Equitable Estoppel Are Not Warranted
Alternatively, Plaintiff seeks relief from the statute of limitations through equitable tolling or equitable estoppel. South Carolina courts have held that equitable tolling “is reserved for extraordinary circumstances,” Pelzer v. State, 662 S.E.2d 618, 620 (S.C. Ct. App. 2008), and “should be used sparingly and only when the interests of justice compel its use,” Hooper v. Ebenezer Sr. Servs. & Rehab. Ctr., 687 S.E.2d 29, 33 (S.C. 2009). “The party claiming the statute of limitations should be tolled bears the burden of establishing sufficient facts to justify its use.” Hooper, 687 S.E.2d at 32. Plaintiff has failed to meet this burden.
Plaintiff contends that the statute of limitations should be equitably tolled because Defendant allegedly “misled the Court of Equity into thinking that his loan was simply being serviced by another entity,” as opposed to owned by a different entity. ECF No. 19 at 5-7. As explained above, however, the Order Authorizing Stay shows that as of January 18, 2017, the Court of Equity knew that ownership of the loan had changed. Moreover, Plaintiff alleges that the mortgage assignment, showing a change of ownership as of June 28, 2016, was recorded in the Beaufort County Records Office in the summer of 2017. ECF No. 13 at ¶¶ 73, 145. Thus, it was a matter of public record by the end of August 2017 that the loan was owned by another entity. Accordingly, the undersigned concludes that Plaintiff has failed to demonstrate the type of “extraordinary circumstances” that warrant equitable tolling. See Pelzer, 662 S.E.2d at 620.
Finally, Plaintiff argues that equitable estoppel “should apply in this case because the Defendant's actions hindered Plaintiff Cionci's ability to discover the truth: that his note and mortgage were sold in violation of Federal Law, and thus denied him the ability to discover the existence of any claims arising from such action.” Id. at 8. “In South Carolina, a defendant may be estopped from claiming the statute of limitations as a defense if some conduct or representation by the defendant has induced the plaintiff to delay in filing suit.” Hedgepath v. Am. Tel. & Tel. Co., 559 S.E.2d 327, 338 (S.C. Ct. App. 2001). “An inducement for delay may consist of either an express representation that the claim will be settled without litigation or other conduct that suggests a lawsuit is not necessary.” Id.; see Maher v. Tietex Corp., 500 S.E.2d 204, 210 (S.C. Ct. App. 1998) (explaining that “silence which amounts to misrepresentation or concealment of facts can satisfy the ‘conduct' element of the test for equitable estoppel”).
Upon review of the factual allegations in the Amended Complaint and the parties' arguments, the undersigned finds that Plaintiff has not established any basis for applying the equitable estoppel doctrine. Specifically, an “essential element of equitable estoppel requires that the party claiming estoppel lacked either knowledge, or the means of knowledge, of the true facts.” Maher, 500 S.E.2d at 209. As a result of the state court's January 2017 Order Authorizing Stay and the subsequent recording of the mortgage assignment in the public record in the summer of 2017, the undersigned cannot conclude that Plaintiff lacked knowledge that his note and mortgage had been sold.
III. Fourth Cause of Action - Fraudulent Concealment
Plaintiff's fourth cause of action is a claim for “fraudulent concealment.” ECF No. 13. Defendant first argues that the claim should be dismissed “because it is not a cognizable cause of action under South Carolina law,” ECF No. 15 at 2, but rather “an equitable doctrine used to toll a statute of limitations,” Id. at 21. The undersigned agrees that fraudulent concealment is an equitable doctrine used to toll a statute of limitations. See Edmonson v. Eagle Nat'l Bank, 922 F.3d 535, 549 (4th Cir. 2019). However, it also appears that at least one South Carolina court has recognized a cause of action for fraudulent concealment. See, e.g., Pitts v. Jackson Nat. Life Ins. Co., 574 S.E.2d 502, 510 (S.C. Ct. App. 2002) (analyzing plaintiff's “fraudulent concealment cause of action” and affirming summary judgment upon finding that plaintiff failed to establish that defendant had “any duty to disclose”). Thus, the undersigned does not recommend granting summary judgment on this basis.
Defendant next argues that even if the fraudulent concealment claim is cognizable, Plaintiff still fails to state a claim against Defendant. ECF No. 15 at 21. Specifically, Defendant argues that Plaintiff cannot show that Defendant “had any special duty such as a fiduciary relationship to affirmatively inform Plaintiff about HUD's decision to [sell] his loan through DASP.” Id.
Pursuant to South Carolina law, “[n]on-disclosure becomes fraudulent concealment only when it is the duty of the party having knowledge of the facts to make them known to the other party to the transaction.” Pitts, 574 S.E.2d at 510; see Ardis v. Cox, 431 S.E.2d 267, 270 (S.C. Ct. App. 2013) (“Nondisclosure is fraudulent when there is a duty to speak.”). The South Carolina Court of Appeals has explained:
The duty to disclose may be reduced to three distinct classes: (1) where it arises from a preexisting definite fiduciary relation between the parties; (2) where one party expressly reposes a trust and confidence in the other with reference to the particular transaction in question, or else from the circumstances of the case, the nature of their dealings, or their position towards each other, such a trust and confidence in the particular case is necessarily implied; (3) where the very contract or transaction itself, in its essential nature, is intrinsically fiduciary and necessarily calls for perfect good faith and full disclosure without regard to any particular intention of the parties.Pitts, 574 S.E.2d at 510 (quoting Ardis, 431 S.E.2d at 270); see Jacobson v. Yaschik, 155 S.E.2d 601, 605 (S.C. 1967) (same).
It is well-established in South Carolina that “the normal relationship between a bank and its customer is one of creditor-debtor and not fiduciary in nature.” Regions Bank v. Schmauch, 582 S.E.2d 432, 444 (S.C. Ct. App. 2003); see Weber, 2013 WL 4820446, at *4. Moreover, a fiduciary relationship cannot be created by the unilateral act of one party. Schmauch, 582 S.E.2d at 444.
Plaintiff's Amended Complaint lacks any allegations or assertions of facts that indicate the relationship between Plaintiff and Defendant was anything but that of a creditor and debtor or that Plaintiff expressly or impliedly reposed a “special confidence” or trust in Defendant or its attorneys. See Pitts, 574 S.E.2d at 510. Moreover, there are no allegations indicating that the nature of the transaction between Plaintiff and Defendant was “intrinsically fiduciary.” See Id. As Defendant notes in its Motion, “HUD has repeatedly rejected demands that it require notices to homeowners before their loans are sold through DASP,” and Plaintiff cites no federal regulation requiring that a borrower receive notice about a DASP sale. ECF No. 15 at 21 & n.4 (quoting Geoff Walsh, National Consumer Law Center, Opportunity Denied: How HUD's Note Sale Program Deprives Homeowners of the Basic Benefits of Their Government-Insured Loans, May 2016, p. 1 at ¶ 6, https://www.nclc.org/images/pdf/pr-reports/opportunity-denied-report.pdf). Thus, there appears to be no basis for asserting Wells Fargo had any affirmative duty to speak to Plaintiff in terms of informing him about DASP. Accordingly, the undersigned concludes that Plaintiff has failed to state a claim for fraudulent concealment.
Finally, even if Plaintiff had stated a claim, the undersigned agrees with Defendant that it would be time-barred. Claims of fraud and for breach of fiduciary duties are both subject to a three-year statute of limitations. See Mazloom v. Mazloom, 675 S.E.2d 746, 755 (S.C. Ct. App. 2009) (“[A] claim for breach of fiduciary duty is subject to a three-year statute of limitations.”); Moore v. Benson, 700 S.E.2d 273, 277 (S.C. Ct. App. 2010) (holding an action for fraud was governed by the three-year statute of limitations period). In his Response, Plaintiff asserts that his fraudulent concealment claim arises out of alleged statements and omission made by Defendant's counsel to the state court in early January 2017. ECF No. 19 at 13 (arguing that the Fourth Cause of Action “is the heart of the case,” based on the allegations that “Defendant had a duty to speak because the Master of Equity requested it, and the Defendant responded and volunteered (some 12 hours before the hearing) an incomplete and incorrect answer”). However, as explained in the previous section, Plaintiff was on notice of these alleged misstatements by late January 2017 by virtue of the Order Authorizing Stay, such that the statute of limitations expired in January 2020. Accordingly, Plaintiff's Fourth Cause of Action should be dismissed.
IV. Fifth Cause of Action - Negligence
Plaintiff's fifth cause of action is a claim for negligence. ECF No. 13. To state a claim for negligence under South Carolina law, Plaintiff must allege factual allegations showing the following three elements: (1) a duty of care owed by defendant to plaintiff; (2) breach of that duty by a negligent act or omission; and (3) damage proximately resulting from the breach of duty. See J.T. Baggerly v. CSX Transp., Inc., 635 S.E.2d 97, 101 (S.C. 2006). Liberally construed, Plaintiff's Fifth Cause of Action alleges that Defendant, “under the terms of the Mortgage Contract,” owed Plaintiff a duty of care to provide accurate information to the FHA, ECF No. 13 at ¶ 169; Defendant breached that duty by falsely informing the FHA that Plaintiff was unwilling to cooperate with the loan modification process, which allowed Defendant to send the note and mortgage to the DASP program, Id. at ¶ 171; and Plaintiff was damaged, as a result of the DASP sale, by being forced to accept a mortgage modification agreement that added unwarranted principal, interest, fines and fees, Id. at ¶ 174.
Defendant argues that the negligence claim should be dismissed for the following reasons: (1) Plaintiff has failed to establish that Defendant owed him a duty of care; (2) there is no private cause of action for conduct related to loss mitigation; and (3) the claim is time-barred by the applicable statute of limitations set forth in S.C. Code Ann. § 15-3-530(5). ECF No. 15 at 2, 23- 26. The undersigned agrees that Plaintiff's negligence claim should be dismissed.
Plaintiff's factual allegations are not sufficient to establish that Defendant breached a duty owed to him. See Rogers v. S. Carolina Dep't of Parole & Cmty. Corr., 464 S.E.2d 330, 332 (S.C. 1995) (“An essential element in a cause of action for negligence is the existence of a legal duty of care owed by the defendant to the plaintiff. Without such a duty, there can be no actionable negligence.”). Plaintiff alleges that Defendant owed him a duty to report certain information to the FHA. However, as discussed above, federal law does not create a private cause of action related to FHA or HUD regulations regarding loss mitigation and loan modification. In re Miller, 124 Fed.Appx. 152; Thomas, 2018 WL 1456738, at *2; Weber, 2013 WL 4820446, at *4; Steffens, 2011 WL 901179, at *3.
Moreover, under South Carolina law, a negligence action generally will not lie when the parties are in privity of contract, unless “there is a special relationship between the alleged tortfeasor and the injured party not arising in contract.” Bahringer v. ADT Sec. Servs., Inc., 942 F.Supp.2d 585, 589 (D.S.C. 2013) (quoting Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 463 S.E.2d 85, 88 (S.C. 1995)). Here, Plaintiff alleges that the duty arose as a result of the mortgage contract, and there are no allegations sufficient to establish “a special relationship” between Plaintiff and Defendant not arising in contract. See Weber, 2013 WL 4820446, at *4 (“The mere fact that Plaintiffs are no longer able to make payments-as they agreed to do-on their mortgage does not place a heightened duty on Defendant.”). As such, the undersigned concludes that Plaintiff has failed to state a claim for negligence. See Id. (dismissing mortgagor's negligence claim against lender, finding no allegations showing that a special duty of care existed).
V. Sixth Cause of Action - Unfair Trade Practices
Plaintiff's sixth cause of action is a claim for violation of the South Carolina Unfair Trade Practices Act, SC Code Ann. § 39-5-10 (“SCUTPA”). ECF No. 13. Defendant argues that the SCUTPA claim should be dismissed because it is time-barred by the applicable statute of limitations under S.C. Code Ann. § 39-5-150. ECF No. 15 at 3, 26-27. The undersigned agrees.
Section 39-5-150 provides, in pertinent part, that “[n]o action may be brought under this article more than three years after discovery of the unlawful conduct which is the subject of the suit.” The discovery rule applies to claims under SCUTPA. “Under the discovery rule, the three-year clock starts ticking on the date the injured party either knows or should have known by the exercise of reasonable diligence that a cause of action arises from wrongful conduct.” State ex rel. Wilson v. Ortho-McNeil-Janssen Pharms., Inc., 777 S.E.2d 176, 198 (S.C. 2015).
Plaintiff alleges that Defendant violated the SCUTPA in trying to seize property unjustly and using unethical and deceptive practices in servicing a mortgage contract. ECF No. 13 at ¶ 184. However, Plaintiff also alleges that he notified Defendant of the basis of his SCUTPA claims on August 6, 2015. Id. at ¶¶ 63, 187. Plaintiff also bases his SCUTPA claim on the alleged misrepresentations and omissions Defendant made to the state court and Plaintiff regarding the ownership of the loan. Id. at ¶ 184; see also ¶¶ 69, 73 (alleging that that his loan was sold in the DASP sale on May 18, 2016, and that Defendant “no longer owned the note or mortgage or was a real party of interest” after June 28, 2016). As discussed earlier, however, Plaintiff was on notice of the change of ownership of the Loan based on the Order Acknowledging Stay entered on January 18, 2017. Each of these events fall outside the three-year statute of limitations. As a result, based on the allegations in his Amended Complaint, Plaintiff's claims for violation of SCUTPA are time-barred and should be dismissed.
VI. Seventh Cause of Action - Alteration
Plaintiff's seventh cause of action is a claim for “Alteration of the Note and Mortgage” pursuant to S.C. Code Ann. § 36-3-406(a), a statute under South Carolina's version of the Uniform Commercial Code (“UCC”). ECF No. 13 at ¶¶ 192-201. According to Plaintiff, the terms of his note and mortgage were impermissibly altered when HUD sold his loan through the DASP sale. See Id. at ¶¶ 197, 198.
Defendant argues that the claim should be dismissed for the following reasons: (1) it is not a cause of action recognized under South Carolina law; and (2) even if it were a recognized cause of action, it is time-barred by the applicable statute of limitation set forth S.C. Code Ann. § 36-3-118(g). ECF No. 15 at 3.
In Wachovia Bank, N.A. v. Fed. Rsrv. Bank of Richmond, 338 F.3d 318 (4th Cir. 2003), the Fourth Circuit considered North Carolina's identical version of S.C. Code Ann. § 36-3-406. There, the Federal Reserve Board sought to assert an affirmative cause of action against Wal-Mart alleging Wal-Mart's failure to exercise ordinary care contributed to the alteration of a check. The Fourth Circuit concluded that “this statute provides for a defense but does not expressly create a cause of action.” Id. at 325; see also Halifax Corp. v. Wachovia Bank, 604 S.E.2d 403 (Va. 2004) (concluding Virginia's analogous provision of the Uniform Commercial Code does not create an affirmative cause of action).
Plaintiff does not cite any South Carolina case law in support of his claim for affirmative relief via alteration, and the undersigned has not located any. See generally ECF No. 19. However, the undersigned finds persuasive the reasoning of the Fourth Circuit and Virginia's Supreme Court, and similarly concludes that S.C. Code Ann. § 36-3-406 does not expressly create a cause of action. For this reason, the undersigned recommends that Plaintiff's claim for Alteration of the Note and Mortgage be dismissed.
Alternatively, even if such a claim were a viable affirmative cause of action, the undersigned finds that it is time-barred. The applicable statute of limitations provides as follows:
Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this Article and not governed by this section must be commenced within three years after the cause of action accrues.S.C. Code Ann. § 36-3-118(g). Here, Plaintiff alleges that the alteration of the note and mortgage occurred in May 2016 on the date of the DASP sale. Moreover, based on the allegations in the Amended Complaint, Plaintiff was on notice of this sale as of late January 2017. Because Plaintiff initiated this lawsuit in August 2021-more than four years after the date the statute of limitations began to run-his Seventh Cause of Action is time-barred.
VII. Eighth Cause of Action - Negligence Per Se
Plaintiff's eighth cause of action is a claim for “Negligence Per Se.” ECF No. 13. Defendant argues that “Plaintiff's attempt to attach criminal liability to Wells Fargo in his Eighth cause of action for ‘negligence per se' fails as a matter of law and should be dismissed in its entirety with prejudice because there is no private cause of action under a criminal statute.” ECF No. 15 at 3. The undersigned agrees.
“Negligence per se is established by showing a statute created a duty to the plaintiff and the defendant breached that duty by violating the statute.” Seals by Causey v. Winburn, 445 S.E.2d 94, 96 (S.C. Ct. App. 1994). To establish that a duty of care arises from a statute, a plaintiff must show: “(1) the essential purpose of the statute is to protect from the kind of harm the plaintiff has suffered; and (2) that [the plaintiff] is a member of the class of persons the statute is intended to protect.” Wogan v. Kunze, 623 S.E.2d 107, 117-18 (S.C. Ct. App. 2005) (quoting Rayfield v. S.C. Dep't of Corr., 374 S.E.2d 910, 914-15 (S.C. Ct. App. 1988)).
“Generally, there is no private cause of action under criminal statutes.” Heard v. Fed. Bureau of Investigation, No. CV 9:18-1743-HMH-BM, 2018 WL 4926459, at *2 (D.S.C. Sept. 12, 2018), report and recommendation adopted, 2018 WL 4915825 (D.S.C. Oct. 10, 2018); see also Doe v. Broderick, 225 F.3d 440, 447-48 (4th Cir. 2000) (“The Supreme Court historically has been loath to infer a private right of action from a ‘bare criminal statute' because criminal statutes are usually couched in terms that afford protection to the general public instead of a discrete, well-defined group.”) (quoting Cort v. Ash, 422 U.S. 66, 80 (1975)).
“The primary consideration in deciding whether a private cause of action should be implied under a criminal statute is legislative intent.” Dorman v. Aiken Commc'ns, Inc., 398 S.E.2d 687, 689 (S.C. 1990). “In this respect, the general rule is that a statute which does not purport to establish a civil liability, but merely makes provision to secure the safety or welfare of the public as an entity is not subject to a construction establishing a civil liability.” Whitworth v. Fast Fare Markets of S.C., Inc., 338 S.E.2d 155, 156 (S.C. 1985) (quoting 73 Am. Jur. 2d, Statutes § 432 (1974)).
The undersigned agrees with Defendant that Plaintiff has failed to allege facts showing a duty of care arose from any of the statutes upon which Plaintiff bases his negligence per se claim. See ECF No. 13 at ¶¶ 204-208 (alleging that Defendant violated S.C. Code Ann. § 16-9-20 (uttering false statements); 18 U.S.C. §§ 1001 (statements or entries generally), 1505 (obstruction of proceedings), 1621 (perjury generally)). Indeed, courts throughout the country have found that the federal criminal statutes cited in Plaintiff's Amended Complaint do not give rise to a private cause of action. See Gage v. Wells Fargo Bank, N.A., AS, 555 Fed.Appx. 148, 151 (3d Cir. 2014) (holding 18 U.S.C. § 1505 does not “unambiguously confer a private right of action”); Clements v. Miller, No. 104CV02455REBBNB, 2005 WL 2085497, at *3-4 (D. Colo. Aug. 29, 2005) (holding there is private right of action under 18 U.S.C. §§ 1001 and 1621), aff'd sub nom. Clements v. Chapman, 189 Fed.Appx. 688 (10th Cir. 2006); Piorkowski v. Parziale, No. 3:02CV00963 (GLG), 2003 WL 21037353, at *8 (D. Conn. May 7, 2003) (same).
Moreover, Plaintiff does not cite any South Carolina case law suggesting that S.C. Code Ann. § 16-13-10 implies a private right of action, see generally ECF No. 19, and there is nothing in the plain language of the forgery statute that “purports to establish civil liability,” see Whitworth, 338 S.E.2d at 156. Because there is no private cause of action under any of the criminal statutes cited in Plaintiff's Amended Complaint, Plaintiff's “negligence per se” claim should be dismissed.
CONCLUSION
For the reasons set forth above, it is RECOMMENDED that Wells Fargo's Motion to Dismiss (ECF No. 15) be GRANTED, in part, and DENIED, in part. Specifically, it is RECOMMENDED that the Motion be DENIED as to the First and Second Causes of Action, but GRANTED as to the other six causes of action.
The parties are referred to the Notice Page attached hereto.
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk United States District Court Post Office Box 835 Charleston, South Carolina 29402
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).