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Miller v. Carrington Mortgage Services LLC

United States District Court, D. Maine

July 3, 2019

JAMES F. MILLER, Individually and on Behalf of Himself and Others Similarly Situated, Plaintiff,
v.
CARRINGTON MORTGAGE SERVICES, LLC, Defendant.

          ORDER ON CARRINGTON MORTGAGE SERVICES, LLC'S MOTION TO DISMISS

          JON D. LEVY, CHIEF U.S. DISTRICT JUDGE.

         James F. Miller brings this putative class action against Carrington Mortgage Services, LLC (“Carrington Mortgage”), alleging that various communications he received from Carrington Mortgage after his bankruptcy discharge violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.A. § 1692 et seq. (West 2019), and the Maine Fair Debt Collection Practices Act (MFDCPA), 32 M.R.S.A. § 11001 et seq. (Westlaw through Ch. 313 of 1st Reg. Sess. of 129th Leg.). See ECF No. 1 ¶ 1. Carrington Mortgage moves to dismiss the complaint (ECF No. 13). For the reasons stated below, I grant in part and deny in part the motion to dismiss.

         I. FACTUAL BACKGROUND

         The complaint alleges the following facts, which I treat as true for the purpose of evaluating the motion to dismiss.

         On July 21, 2008, Miller and his then-wife executed a promissory note and mortgage in favor of Countrywide Bank, FSB, in the amount of $64, 980 to finance the purchase of their home in Washburn, Maine. In 2010, Miller and his wife separated, and they started to fall behind on the loan. The loan has been in arrears ever since. In October 2011, Miller and his wife divorced, and she conveyed her interest in the property to Miller. Miller continued living at the Washburn property for a short time, but he was unable to keep up with the loan payments and fell further behind. Miller then moved to Gray, Maine, in February 2012.

         In November 2012, Miller filed for Chapter 7 Bankruptcy in the U.S. Bankruptcy Court for the District of Maine. By that time, the mortgage had been assigned to Bank of America, which had begun servicing the loan. Bank of America received notice of the bankruptcy filing and all subsequent filings and orders in the bankruptcy case. As part of his Chapter 7 Individual Debtor's Statement of Intention in the bankruptcy case, Miller stated that he would surrender the Washburn property. Miller received his bankruptcy discharge in February 2013, which resulted in the discharge of any personal obligation that Miller had on the mortgage loan. Miller has not made a payment on the mortgage loan since before he filed for bankruptcy.

         Carrington Mortgage began servicing Miller's loan in September 2016 and at that time received from Bank of America the documentation of Miller's bankruptcy case and discharge. From late 2016 until early 2018, a Carrington Mortgage representative called Miller every couple of months about resolving the amounts he purportedly owed on the loan. Each time the representative called, Miller informed them that he had moved out of and surrendered the Washburn property, and that he had received a bankruptcy discharge. During the same time period, Carrington Mortgage also mailed a notice regarding debt relief and several notices regarding the purchase of force-placed hazard insurance for the Washburn property to Miller, but they were sent to an incorrect address in Gray and Miller did not receive them. In July 2017, the loan was assigned to Wilmington Savings Fund Society, FSB (“Wilmington Savings”), as trustee for Sandwich Mortgage Loan Trust. Carrington Mortgage continued to service the loan.

         On May 9, 2018, Miller was served with a summons and foreclosure complaint for a state foreclosure action for the Washburn property, which was brought by Wilmington Savings. The original foreclosure complaint alleged that only Miller's ex-wife was in default on the note and in breach of the mortgage, but Wilmington Savings later filed an amended complaint that sought to hold Miller liable for any deficiency balance remaining due after the sale of the property and application of the proceeds of the sale. With the help of an attorney, Miller alerted Wilmington Savings' counsel to the fact that he was not personally liable for any deficiency balance on the loan because of his bankruptcy discharge. Wilmington Savings amended the foreclosure complaint again to remove the request for a deficiency from Miller.

         While the foreclosure case was pending, Carrington Mortgage sent Miller a series of mortgage statements, as well as letters notifying him that a hazard insurance policy had been purchased for which Miller would be required to pay, each of which Miller alleges violate the FDCPA and the MFDCPA. The complaint alleges that the mortgage statements, the insurance letters, and the foreclosure complaint seeking a deficiency judgment against Miller caused Miller “severe emotional distress and anxiety” and led him to worry that “he would never be free from demands for payment of the Loan and also that somehow Carrington might have found a way of getting around the bankruptcy discharge protections.” Id. ¶ 61.

         The complaint asserts violations of four provisions of the FDCPA and the MFDCPA. Specifically, the complaint alleges that through the telephone calls, forced-placed hazard insurance letters, foreclosure complaint, and monthly mortgage statements, Carrington Mortgage: (1) falsely represented the character, amount, and legal status of the loan debt; (2) used false representations and deceptive means to collect on the loan debt; (3) engaged in conduct the natural consequence of which was to harass, oppress, or abuse Miller in connection with the mortgage debt by attempting to collect the debt despite knowing of the bankruptcy discharge, and (4) used unfair or unconscionable means to collect or attempt to collect on the mortgage loan. ECF No. 1 ¶ 82.

         II. LEGAL ANALYSIS

         Carrington Mortgage moves to dismiss the complaint arguing that it fails to state a claim under either the FDCPA or the MFDCPA because the communications that the complaint describes do not constitute “debt collection.” See ECF No. 13 at 7. Therefore, Carrington Mortgage asserts, the communications are not subject to the protective measures of the FDCPA or the MFDCPA. Id. at 8. In addition, Carrington Mortgage raises two other arguments: (1) that to the extent the claims in the complaint are based on the phone calls from Carrington Mortgage to Miller, those claims are time-barred by the FDCPA's and MFDCPA's respective one-year limitations periods, and (2) that the MFDCPA is preempted by the Bankruptcy Code and the Real Estate Settlement Procedures Act (RESPA) and, therefore, the claims brought under the MFDCPA must be dismissed. Id. at 13-14, 17-19.

         “The sole inquiry under Rule 12(b)(6) is whether, construing the well-pleaded facts of the complaint in the light most favorable to the plaintiff[], the complaint states a claim for which relief can be granted.” Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 7 (1st Cir. 2011). When resolving a motion to dismiss, courts first identify and disregard statements in the complaint that “merely offer legal conclusions” and then treat the remaining non-conclusory factual allegations as true. Id. at 12 (internal quotation marks and alterations omitted). “The make-or-break standard . . . is that the combined allegations, taken as true, must state a plausible, not a merely conceivable, case for relief.” Id. (quoting Sepúlveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         I address each of Carrington Mortgage's arguments in turn.

         A. Whether Communications Constitute Debt Collection

         “The basic premise of the statutory scheme” of the FDCPA[1] “is that its prophylaxis applies in connection with the collection of debts.” Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 23 (1st Cir. 2002) (citing 15 U.S.C.A. § 1692e). A debt is “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes[.]” 15 U.S.C.A. § 1692a(5). “At a minimum, therefore, a complaint must allege a scenario involving the collection (or attempted collection) of a debt.” Arruda, 310 F.3d at 23. “The issue at the pleading stage is whether the allegations, considered alongside the letter[s], ” mortgage statements, and phone calls, “plausibly state a claim that one of the animating purposes . . . was to induce payment by the plaintiff.” Kowalski, 2017 WL 79949, at *12 (internal quotation marks omitted). “[F]or FDCPA purposes, a collection letter is to be viewed from the perspective of the hypothetical unsophisticated consumer.” Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d 98, 103 (1st Cir. 2014). The standard is “objective” and “preserves an element of reasonableness.” Id. at 104. Thus “[a] debt collector will not be held liable based on an individual consumer's chimerical or farfetched reading of a collection letter.” Id.

         1. Mortgage Statements

         The complaint alleges that Carrington Mortgage sent Miller four mortgage statements between July and October of 2018, which violated the FDCPA by attempting to collect on a debt for which Miller was not personally liable. Each of the four mortgage statements includes a box on the front page titled “BANKRUPTCY MESSAGE, ” stating:

Our records show that either you are a debtor in bankruptcy or you discharged personal liability for your mortgage loan in bankruptcy.
We are sending this statement to you for information and compliance purposes only. It is not an attempt to collect a debt against you.
If you want to stop receiving statements, call us or write to us at the address listed above.

ECF No. 1-3 at 1 (emphasis in original); see also ECF No. 1-5 at 1; ECF No. 1-6 at 1; ECF No. 1-8 at 1. In addition to the bankruptcy disclaimer, the first page of each mortgage statement also includes an “Explanation of Amount Due, ” “Payment Amount, ” “Payment Date, ” “Regular Monthly Payment” amount, “Total Payment Amount, ” and a detachable payment coupon with instructions to “[p]lease detach and return with your payment.” E.g., ECF No. 1-5 at 1.[2]

         The third page of each mortgage statement is made up of three columns of small text with bolded headings. Under the heading “Important Notices, ” the following statement appears:

Mini Miranda - This communication is from a debt collector and it is for the purpose of collecting a debt and any information obtained will be used for that purpose. This notice is required by the provisions of the Fair Debt Collection Practices Act and does not imply that we are attempting to collect money from anyone who has discharged the debt under the bankruptcy laws of the United States.

ECF No. 1-3 at 3; see also ECF No. 1-5 at 3; ECF No. 1-6 at 3; ECF No. 1-8 at 3. Several paragraphs later, a bolded paragraph under the heading “Important Bankruptcy Notice” reads:

If you have been discharged from personal liability on the mortgage because of bankruptcy proceedings and have not reaffirmed the mortgage, or if you are the subject of a pending bankruptcy proceeding, this letter is not an attempt to collect a debt from you but merely provides informational notice regarding the status of the loan. . . .

ECF No. 1-3 at 3; see also ECF No. 1-5 at 3; ECF No. 1-6 at 3; ECF No. 1-8 at 3.

         Finally, the fourth and final page of each mortgage statement is titled “A GUIDE TO READING YOUR Chapter 7 or 11 Bankruptcy Mortgage Statement.” E.g., ECF No. 1-3 at 4. An image of the first page of the mortgage statement is reproduced on the right-hand side of the page with numbers next to certain items. On the left-hand side, the numbers appear in a list alongside explanations for each item. The “Guide” pages of the statements Miller received on July 5 and ...


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