Opinion
Civil No. 3:18-CV-559
07-23-2019
WILSON P. RICHARD, Plaintiff v. FINANCE OF AMERICA MORTGAGE, LLC formerly known as GATEWAY FUNDING DIVERSIFIED MORTGAGE SERVICES, LP; QBE INSURANCE CORPORATION; PROGRESSIVE SPECIALITY INSURANCE AGENCY, INC.; and GREAT AMERICAN ASSURANCE COMPANY, Defendants
(Judge Mariani)
( ) REPORT AND RECOMMENDATION
I. INTRODUCTION
This is a case about insurance and what kind of indemnification may be owed to the plaintiff, Wilson P. Richard, for two separate incidents of water damage that occurred at Wilson's home in Jim Thorpe, Pennsylvania in March 2016 and February 2017.
Wilson's complaint, which has been amended three times, (Docs. 1, 33, 69, 93), recites that Richard has been harmed by a course of conduct that resulted in the cancellation of his original homeowner's insurance and the substitution of a lender force-placed insurance policy in 2016, which provided him with less coverage at the time that he experienced property damage losses in 2016 and 2017. Richard has pursued these claims in a global, comprehensive fashion, bringing this action against his mortgagee, a mortgage servicing company, two insurance companies and an insurance agency, seeking damages he claims he is owed for water damage to his home. Richard has sued these parties collectively in an attempt to affix blame at the foot of at least one of these companies so that he can be indemnified against the losses he claims he incurred.
"[T]he term 'force-placed insurance' means hazard insurance obtained by a servicer on behalf of the owner or assignee of a mortgage loan that insures the property securing such loan." 12 C.F.R. § 1024.37(a)(1).
Wilson's approach to this case, while perhaps understandable given the number of actors who played a role in this mortgage servicing and homeowner insurance, is flawed since his efforts to cast a wide net in the hopes of recovering damages both reveals some hard truths and sweeps up parties who cannot be held liable for the losses allegedly suffered here. We have previously noted this shortcoming in Richard's pleadings when we dismissed claims lodged by the plaintiff against QBE, the insurance company whose policy was cancelled in December 2015, months before the losses which form the gist of this lawsuit. Richard v. Fin. of Am. Mortgages, LLC, No. 3:18-CV-559, 2019 WL 1980693, at *9 (M.D. Pa. May 3, 2019).
The instant motion to dismiss, filed by Ocwen Loan Servicing, LLC ("Ocwen"), reveals some of the same shortcomings of this far-reaching approach to this litigation. Indeed, the history of Ocwen's involvement in this litigation underscores the tenuous nature of the plaintiff's claims against this loan servicer. Richard named Ocwen as a defendant in his original complaint, (Doc. 1), but then voluntarily dismissed Ocwen without prejudice in June of 2018 after it appeared that Ocwen was not the loan servicer on this mortgage at the time of the critical events in this complaint. (Doc. 34.) Some five months later, Richard filed a second amended complaint and third amended complaint, which renewed his previously dismissed claims against Ocwen, alleging that Ocwen, along with the other named defendants, violated the Real Estate Settlement and Procedure Act (RESPA), and breached its contract with the plaintiff. (Doc. 69 and 93.) Ocwen has now moved to dismiss the claims brought against them in these amended complaints. (Doc. 81.)
This motion was initially cast as a motion to dismiss Richard's second amended complaint. Richard subsequently filed a third amended complaint, which is the operative pleading in this case (Doc. 93), but the parties agree that this motion to dismiss applies with equal force to this latest pleading and should be construed as a motion to dismiss this third amended complaint with respect to Ocwen. (Doc. 95.)
The fundamental premise behind Ocwen's motion can be succinctly stated: The critical events that led to Richard's alleged injuries were the lapsing of Richard's initial homeowner's policy, which occurred on December 12, 2015, and the decision to substitute a significantly less comprehensive lender-placed insurance policy for this lapsed policy in February of 2016. According to Ocwen, both of these events took place after Ocwen had ceased acting as the mortgage servicer since Ocwen transferred these loan servicing responsibilities to Finance of America on December 2, 2015. Therefore, Ocwen argues that it cannot be held responsible to Richard for events that occurred after it relinquished its loan servicing responsibilities.
This motion to dismiss is fully briefed and ripe for disposition. Upon consideration, and for the reasons discussed below, we recommend that the motion be granted.
II. FACTUAL BACKGROUND
The well-pleaded facts, which guide our determination of this motion, are set forth in Richard's third amended complaint, (Doc. 93), which recites as follows:
On or about December 12, 2014, Richard purchased the house located at 12 Poplar Drive, Jim Thorpe, Pennsylvania. (Doc. 93, ¶ 14.) Richard financed the home purchase through a loan issued by Gateway Funding Diversified Mortgage Services, LP ("Gateway"), now known as Finance of America Mortgage LLC ("Finance of America"). (Id.) As part of his loan obligations, Richard issued a mortgage to the lender, and the mortgage required that he escrow real estate taxes and property insurance premiums. (Id., ¶ 15.)
Prior to closing on the property, Richard contacted Progressive Specialty Insurance Agency, Inc. ("Progressive"), and requested assistance in obtaining a homeowner's insurance policy. (Id., ¶ 16.) Through Progressive, Richard secured a policy of insurance from QBE bearing policy number QHP3209975 for the policy period beginning December 12, 2014, through December 12, 2015 (the "QBE Policy"). (Id., Ex. B.)
Immediately after closing on Richard's loan, Gateway transferred loan servicing responsibilities to Ocwen. (Id., ¶ 19.) Richard alleges that the premiums owed on the QBE Policy were to be paid out of his mortgage escrow account, which was managed by Ocwen on behalf of Finance of America. (Id., ¶ 20.) It is undisputed, however, that Ocwen returned servicing rights on Richard's loan to Finance of America on December 2, 2015, ten days prior to the expiration of the QBE policy, although Richard alleges that Ocwen erroneously represented that it had paid these insurances premium prior to the expiration of the policy from monies held in escrow. (Id., ¶ 21.)
According to Richard, Finance of America and/or Ocwen received notice of the non-renewal of this policy but Finance of America, which now had responsibility for servicing this loan, failed to make the payments necessary to avoid cancellation or non-renewal of the QBE Policy on December 12, 2015. (Id., ¶¶ 21-23.) After failing to make the required payments, the QBE Policy lapsed, and Finance of America obtained a lender force-placed insurance policy with Great American, which commenced on February 1, 2016, as a replacement for the QBE Policy. (Id., ¶ 23.) According to Richard, Finance of America failed to notify him of its intent to obtain forced placed insurance until March 1, 2016. (Id., ¶24.) There is no dispute that, pursuant to its terms, the Great American Policy expressly excluded Richard as the mortgagor from coverage under the policy and provided no insurance coverage for the mortgagor's interest or equity in the property. (Doc. 45, Ex. A.)
Notably, Richard does not allege when QBE issued this notice, so we cannot determine whether the notice was even sent during the time when Ocwen was servicing this loan. The chronology in the amended complaint, however, suggests that the QBE policy lapsed at the conclusion of its one year term on December 12, 2015, since the force-placed insurance was not put in place until February of 2016, a timeframe for replacement of insurance which would have been consistent with the loss of insurance at the end of the one year term of the QBE policy.
Approximately six weeks after Finance of America took out this force-placed insurance policy in February of 2016, and two weeks after Finance of America notified Richard of its intention to take out such insurance coverage, Richard suffered the first water damage loss on his home on March 15, 2016. (Id., ¶ 25.) Eleven months later, in February 2017, the property sustained water damage for a second time as a result of ruptures to a faucet on the second floor of the home. (Id. ¶ 33.) Richard alleges that the losses to the property totaled nearly $77,000, and he filed claims with the lender-placed insurance carrier, Great American. (Id., ¶¶ 25-33.) Richard asserts that Great American failed to cover some part of the damages claimed, and he filed the instant action against Ocwen and the other remaining defendants seeking to recoup the monies he claims were spent or are otherwise needed to repair the property.
With respect to Ocwen, several undisputed facts emerge from this chronology set forth in Richard's amended complaint. First, notwithstanding the allegation that Ocwen may have misstated the payment status on this policy, it is evident that Ocwen relinquished its loan servicing responsibilities on December 2, 2015, ten days prior to the expiration of the QBE insurance policy. Therefore, Ocwen had no contractual and legal loan servicing responsibilities on this policy after December 2, 2015. Consequently, Ocwen was not the loan servicer when this policy expired, played no role in the subsequent decision of Finance of America to acquire force-placed insurance coverage in Richard's property in February of 2016, and had no obligation to provide notice to Richard of these policy changes. Finally, Ocwen played no role in the servicing of Richard's loan at the time the losses that form the basis of this complaint took place, on March 15, 2016 and February of 2017.
III. STANDARD OF REVIEW
Ocwen has moved to dismiss the plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that the complaint fails "to state a claim upon which relief can be granted." With respect to this benchmark standard for legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has aptly noted the evolving standards governing pleading practice in federal court, stating that:
Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)]and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal -U.S.-, 129 S. Ct. 1937 (2009) pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss.Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).
In considering whether a complaint fails to state a claim upon which relief may be granted, the Court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom are to be construed in the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court "need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss." Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not "assume that a ... plaintiff can prove facts that the ... plaintiff has not alleged." Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action a plaintiff must provide some factual grounds for relief, which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do." Id. at 555. "Factual allegations must be enough to raise a right to relief above the speculative level." Id.
In keeping with the principles of Twombly, the Supreme Court has underscored that a trial court must assess whether a complaint states facts upon which relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court held that, when considering a motion to dismiss, a court should "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. According to the Supreme Court, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678. Rather, in conducting a review of the adequacy of complaint, the Supreme Court has advised trial courts that they must:
[B]egin by identifying pleadings that because they are no more than conclusions are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.Id. at 679.
Thus, following Twombly and Iqbal, a well-pleaded complaint must contain more than mere legal labels and conclusions. Rather, a complaint must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. As the United States Court of Appeals for the Third Circuit has stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.' In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts.Fowler, 578 F.3d at 210-11.
In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis: "First, the court must 'tak[e] note of the elements a plaintiff must plead to state a claim.' Iqbal, 556 U.S. at 675. Second, the court should identify allegations that, 'because they are no more than conclusions, are not entitled to the assumption of truth.' Id. at 679. Finally, 'where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.' Id." Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010).
The test for the legal sufficiency of a complaint is one of plausibility. As the court of appeals has observed: "The Supreme Court in Twombly set forth the 'plausibility' standard for overcoming a motion to dismiss and refined this approach in Iqbal. The plausibility standard requires the complaint to allege 'enough facts to state a claim to relief that is plausible on its face.' Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual pleadings 'allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.' Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard requires showing 'more than a sheer possibility that a defendant has acted unlawfully.' Id. A complaint which pleads facts 'merely consistent with' a defendant's liability, [ ] 'stops short of the line between possibility and plausibility of "entitlement of relief." ' " Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011) cert. denied, 132 S. Ct. 1861, 182 L. Ed. 2d 644 (U.S. 2012).
In undertaking this task, the court generally relies only on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may also consider "undisputedly authentic document[s] that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents." Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, "documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered." Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also, U.S. Express Lines, Ltd. v. Higgins, 281 F.3d382, 388 (3d Cir. 2002) (holding that "[a]lthough a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss in one for summary judgment.") However, the court may not rely on other parts of the record in determining a motion to dismiss. Jordan v. Fox, Rothschild, O'Brien &Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
IV. DISCUSSION
A. Richard May Not Maintain a RESPA Claim Against Ocwen for Matters That Occurred After Ocwen Relinquished its Loan Servicing Responsibilities.
Richard brings two claims against Ocwen in this amended complaint: First, an allegation that Ocwen violated the Real Estate Settlement and Procedure Act (RESPA), 12 U.S.C. § 2601, et seq., and second, a claim of breach of contract. In our view, however, both claims founder on the same obstacle—Ocwen was not servicing this loan and had no legal or contractual responsibilities with respect to Richard at the time of the events which he alleges led to his injuries.
Turning first to Richard's RESPA claims against Ocwen, we recognize that "RESPA is a federal consumer protection statute applicable to mortgage lending." Hawk v. Carrington Mortg. Servs., LLC., No. 3:14-1044, 2016 WL 4414847, at *3 (M.D. Pa. June 29, 2016), report and recommendation adopted as modified sub nom. Hawk v. Carrington Mortg. Servs., LLC, No. 3:14-CV-1044, 2016 WL 4433665 (M.D. Pa. Aug. 17, 2016). However, as a creature of statute, Richard's RESPA claim must be derived from the statute itself. Therefore, the gist of any RESPA claim must be a loan servicer violation of some duty created by the Act.
In the instant case, Richard's RESPA claims all relate to losses that he alleges flowed from the failure to maintain the original, advantageous homeowner insurance policy on his property and the decision to substitute what Richard contends was inadequate force-placed insurance for the lapsed QBE policy that initially existed on this property. Thus, the gravamen of any RESPA violation in this setting is a failure to comply with the statute's provisions relating to force-placed insurance. On this score, RESPA imposes three statutory duties on loan servicers. First, "[a] servicer of a federally related mortgage shall not--(A) obtain force-placed hazard insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract's requirements to maintain property insurance." 12 U.S.C. § 2605 (k)(1)(A). Thus, a servicer's decision to acquire force-placed insurance must be grounded on a reasonable belief that the borrower's policy coverage has lapsed.
Second, in determining whether the servicer had a reasonable basis for obtaining force-placed insurance, RESPA imposes specific requirements on loan servicers, and states that:
(l) Requirements for force-placed insurance
A servicer of a federally related mortgage shall not be construed as having a reasonable basis for obtaining force-placed insurance unless the requirements of this subsection have been met.
(1) Written notices to borrower
A servicer may not impose any charge on any borrower for force-placed insurance with respect to any property securing a federally related mortgage unless--
(A) the servicer has sent, by first-class mail, a written notice to the borrower containing--
(i) a reminder of the borrower's obligation to maintain hazard insurance on the property securing the federally related mortgage;
(ii) a statement that the servicer does not have evidence of insurance coverage of such property;
(iii) a clear and conspicuous statement of the procedures by which the borrower may demonstrate that the borrower already has insurance coverage; and12 U.S.C. § 2605 (l). Thus, RESPA imposes certain prior notice requirements on a servicer as a pre-condition to the imposition of force-placed insurance and prescribes for loan servicers what constitutes adequate proof of insurance by a borrower who contests the need for acquisition force-placed insurance.
(iv) a statement that the servicer may obtain such coverage at the borrower's expense if the borrower does not provide such demonstration of the borrower's existing coverage in a timely manner;
(B) the servicer has sent, by first-class mail, a second written notice, at least 30 days after the mailing of the notice under subparagraph (A) that contains all the information described in each clause of such subparagraph; and
(C) the servicer has not received from the borrower any demonstration of hazard insurance coverage for the property securing the mortgage by the end of the 15-day period beginning on the date the notice under subparagraph (B) was sent by the servicer.
(2) Sufficiency of demonstration
A servicer of a federally related mortgage shall accept any reasonable form of written confirmation from a borrower of existing insurance coverage, which shall include the existing insurance policy number along with the identity of, and contact information for, the insurance company or agent, or as otherwise required by the Bureau of Consumer Financial Protection.
Finally, RESPA establishes some basic substantive limitations on force-placed insurance charges that may be passed on to borrowers, stating that: "All charges, apart from charges subject to State regulation as the business of insurance, related to force-placed insurance imposed on the borrower by or through the servicer shall be bona fide and reasonable." 12 U.S.C. § 2605(m).
Taken together, these provisions of RESPA provide an important measure of protection for mortgage borrowers against the expenses associated with the undisclosed, unilateral acquisition of force-placed insurance on properties they own by loan servicers. However, in each instance, liability under RESPA is premised upon a violation of one of these statutory duties when a loan servicer acquires force-placed insurance on a property. In the instant case, the well-pleaded facts set forth in Richard's amended complaint alleges that this decision was made by Finance of America in February of 2016, two months after Ocwen relinquished its loan servicing responsibilities for Richard's mortgage. In our view, the immutable fact that Ocwen had no involvement in the acquisition of this force-placed insurance is fatal to any claim that Ocwen is directly liable to Richard on these RESPA force-based insurance violation claims.
Moreover, to the extent that Richard's RESPA claim against Ocwen rests on the notion that by erroneously reporting that it had paid the insurance premium on this property when it relinquished its loan servicing duties on December 2, 2015, Ocwen set in motion a series of events which months and years later resulted in losses for the plaintiff, this claim encounters a separate legal obstacle. Under § 2605 of RESPA:
[W]hen a plaintiff fails to plead or prove a direct causal connection between the RESPA violation and some specific and identifiable damages, the loan servicer is entitled to judgment as a matter of law in its favor. In sum, "when basing a claim on actual damages, 'the borrower has the responsibility to present specific evidence to establish a causal link between the financing institution's violation and their injuries.' Straker v. Deutsche Bank Nat'l Trust, No. 2012 WL 7829989, at *11 (M.D. Pa. Apr. 26, 2012) (internal quotations omitted); see also Gorbaty, 2012 WL 1372260, at *5 ('A plaintiff seeking actual damages under § 2605 must allege that the damages were proximately caused by the defendant's violation of RESPA.'); Hutchinson v. Delaware Sav. Bank FSB, 410 F.Supp.2d 374, 383 (D.N.J. 2006) ('[A]lleging a breach of RESPA duties alone does not state a claim under RESPA. Plaintiffs must, at a minimum, also allege that the breach resulted in actual damages.')(citing 12 U.S.C. § 2605(f)(1)(A))." Giordano v. MGC Mortgage, Inc, No. CV 15-4399 (JLL), 2016 WL 627344, at *2 (D.N.J. Feb. 16, 2016). See e.g., Oliver v. Bank of Am., N.A., No. 13 CV 4888 RMB/KMW, 2014 WL 562943, at *3 (D.N.J. Feb. 11, 2014); Jones v. Select Portfolio Servicing, Inc., No. CIV. A. 08 972, 2008 WL 1820935, at *10 (E.D. Pa. Apr. 22, 2008).Hawk v. Carrington Mortg. Servs., LLC., No. 3:14-1044, 2016 WL 4414847, at *4 (M.D. Pa. June 29, 2016), report and recommendation adopted as modified sub nom. Hawk v. Carrington Mortg. Servs., LLC, No. 3:14-CV-1044, 2016 WL 4433665 (M.D. Pa. Aug. 17, 2016) (Mariani, J.).
In the instant case, any alleged error by Ocwen in reporting on the status of loan payments prior to transferring its responsibilities on this loan to Finance of America on December 2, 2015, does not alter the fact that Richard's actual injuries flowed from a series of intervening events, many of which took place months or years after Ocwen's involvement with this loan ended. These intervening events included: (1) the lapsing of the QBE policy; (2) Richard's failure to receive notice of this policy non-renewal due to the fact that he had changed his address after taking out this insurance; (3) Finance of America's decision in February of 2016 to acquire force-placed insurance on this property; (5) any alleged delay by Finance of America in providing notice of this force-placed insurance to Richard in March of 2016; (6) Richard's failure to timely protest this decision by Finance of America once he received notice; and (7) property losses which occurred on March 15, 2016 and February of 2017. Given this host of intervening factors that led to Richard's injuries, any alleged failure by Ocwen to correctly describe the insurance payment status on this mortgage when it relinquished responsibility for the loan on December 2, 2015 cannot be seen under RESPA as the cause of Richard's loss, and this RESPA claim fails with respect to Ocwen.
Indeed, we note that it seems that full compliance by Finance of America in February of 2016, with the regulations governing loan servicer acquisition of force-placed insurance, may well have avoided this dispute entirely since those regulations required Finance of America to both provide prior notice to Richard before obtaining force-placed insurance, 12 C.F.R. § 1024.37, and also imposed a duty on Finance of America to disburse funds to maintain or renew existing homeowner insurance prior to obtaining force-placed insurance. 12 C.F.R. § 1024.17(k)(5). Therefore, Richard's well-pleaded allegations against Finance of America actually recite facts which describe an intervening cause for the plaintiff's injuries that would absolve Ocwen of any liability here.
B. Richard Cannot Sustain a Breach of Contract Against Ocwen for Matters That Occurred After Ocwen Relinquished its Loan Servicing Responsibilities.
Richard's breach of contract claims against Ocwen encounter a similar obstacle: Ocwen had no contractual obligations to Richard after December 2, 2015 when it transferred loan servicing responsibilities to Finance of America. To state a claim for breach of contract under Pennsylvania law, a plaintiff "must plead: (1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) resultant damage." Papurello v. State Farm Fire & Cas. Co., 144 F. Supp. 3d 746, 762 (E.D. Pa. 2015) (quoting Kane v. State Farm Fire & Cas. Co., 841 A.2d 1038, 1042 (Pa. Super. Ct. 2003)). In this case, Richard's breach of contract claim seems to be premised upon some breach by Ocwen of a contractual duty under the mortgage itself; namely, a duty to pay escrowed funds to prevent a lapse of insurance coverage.
There are at least two fundamental problems with this breach of contract claim as it applies to Ocwen. First, it is entirely unclear as a legal matter what contractual duties Ocwen as a loan servicer had under this mortgage, which was an agreement between the borrower, Richard, and the lender, Gateway or Finance of America. In this factual setting:
[T]he distinction between a "loan servicer" ("servicer") and a "lender" and/or "note holder" becomes important. The "servicing" of a
mortgage, i.e. the right to collect payments from the mortgagor, exists as a separate right that can be transferred independently of other provisions in the mortgage or note. See In re Am. Mortg. Holdings, Inc., 637 F.3d 246, 259-50 (3d Cir.2011) (reiterating the Bankruptcy Court's explanation that mortgages can be sold on a "servicing retained" or a "servicing released" basis); Paslowski v. Standard Mortg. Corp. of Ga., 129 F.Supp.2d 793, 798 (W.D.Pa.2000) (holding that the terms of the assignment did not include the servicing rights, which were retained by the seller). The original parties to the mortgage and note, the "lender" or "note holder," can, accordingly, choose to assign only this right to collection under the debt instruments. See, e.g., Glover v. Udren, No. 08-990, 2011 WL 1204050, at *1 (W.D.Pa. Feb. 28, 2011).Trunzo v. Citi Mortg., 876 F. Supp. 2d 521, 532 (W.D. Pa. 2012), on reargument in part, 43 F. Supp. 3d 517 (W.D. Pa. 2014). In this case, it is entirely unclear from the parties' submissions what contractual duties were assigned by the borrower and lender to Ocwen as loan servicer. In the absence of some greater clarity here, we are left to speculate regarding the terms of any contractual duty owed by Ocwen. Accordingly, as a threshold matter this breach of claim fails because Richard has not shown either: (1) the existence of a contract, including its essential terms; or (2) a breach by Ocwen of a duty imposed by the contract.
More fundamentally, this breach of contract claim against Ocwen fails because it seems that Richard is alleging a breach of contract on December 12, 2015 when his initial homeowner's insurance lapsed, due to non-payment of premiums. At that time, Ocwen had transferred loan servicing responsibilities to Finance of America and no longer owed any contractual obligations to Richard. Notably, we have previously determined that Richard's breach of contract claims lodged against QBE, the insurance company whose policy was cancelled on December 12, 2015, months before the losses which form the gist of this lawsuit, failed as a matter of law. Richard v. Fin. of Am. Mortgages, LLC, No. 3:18-CV-559, 2019 WL 1980693, at *9 (M.D. Pa. May 3, 2019). It would be anomalous to conclude that QBE, whose contractual obligations ended on December 12, 2015, is not liable here, but hold Ocwen, whose contractual obligations ended ten days earlier on December 2, 2015, potentially culpable for a breach of contract.
Simply put, as currently pleaded by Richard, this breach of contract claim is based upon alleged breaches that occurred after Ocwen withdrew from any contractual relationship with Richard. Since Ocwen cannot be held liable for breaches that allegedly occurred after it withdrew from a contractual relationship with Richard, this breach of contract claim fails and should be dismissed. V. RECOMMENDATION
While we note that this Report and Recommendation, if adopted, would result in the dismissal of Ocwen from this action, Richard is not left without some avenue of legal recourse in this case. Quite the contrary, Richard's amended complaint identifies other defendants and advances other discrete theories of culpability against these remaining defendants, none of which are affected by this Report and Recommendation. --------
For the foregoing reasons, we find that the plaintiff has no legally viable claim against Ocwen under any theory alleged in the amended complaint, and it is therefore RECOMMENDED that the pending motion to dismiss (Doc. 81) be GRANTED.
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions.
Submitted this 23d day of July 2019.
/s/ Martin C. Carlson
Martin C. Carlson
United States Magistrate Judge