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Hubbard v. PNC Bank National Assoc.

United States District Court, Eighth Circuit

August 20, 2013



JANIE S. MAYERON, District Judge.

The above matter came before the undersigned on defendants' Motion to Dismiss [Docket No. 13]; Plaintiffs' Motion for Preliminary Injunction [Docket No. 19] and plaintiffs' Motion to Amend Their Complaint [Docket No. 33]. Jonathan D. Miller, Esq. appeared on plaintiffs' behalf. Ellen A. Brinkman, Esq. and Danielle Fitzsimmons, Esq. appeared on defendants' behalf. This matter has been referred to the undersigned Magistrate Judge for a Report and Recommendation by the District Court pursuant to 28 U.S.C. § 636(b)(1)(A), (B) and Local Rule 72.1(c).[1]


A. Plaintiffs' Complaint

Plaintiffs W. Bruce Hubbard and Donna M. Hubbard sued defendants in state district court on January 22, 2013. Notice of Removal, p. 1 [Docket No. 1]. Defendants removed the matter to Federal District Court on February 11, 2013. Id.

The facts as alleged in the Complaint are as follows. Plaintiffs purchased property located at 260 Ridgeview Drive, Wayzata, Minnesota ("property") in 1967. Complaint, ¶ 7 [Docket No. 1-1]. Plaintiffs refinanced their mortgage with National City Mortgage Company on or about August 20, 2003. Id., ¶ 8. Plaintiffs' new monthly payment was $2, 121.93 - it was comprised of $1, 807.03 in principal and interest and $314.90 in escrowed taxes. Id., ¶ 9. As a result of personal financial reversals, plaintiffs missed several mortgage payments in early 2009. Id., ¶ 9. Plaintiffs requested a loan modification from National City and submitted an application for a loan modification under the Home Affordable Modification Program ("HAMP") by mail on May 13, 2009, and by facsimile on May 14, 2009. Id., ¶ 13.

Plaintiffs received a Trial Period Plan ("TPP") modification effective September 1, 2009, which increased their monthly loan payment to $2, 361.69. Id., ¶ 14. Plaintiffs contacted National City about the increased monthly payment, but National City did not revise the monthly payments. Id., ¶¶ 15, 16. Plaintiffs made a payment in September 2009, but could not afford to make any additional payments. Id., ¶ 17. PNC National Bank Association ("PNC") obtained an assignment of the mortgage from National City and became responsible for the loan and modification no later than October 1, 2009. Id., ¶ 18. In December 2009, PNC provided plaintiffs with a TPP modification extension, which continued the same payment amount as the initial TPP. Id., ¶ 19. Plaintiffs made a payment under the modified TPP, but PNC returned the payment to them because it was not in certified funds and did not cure the existing default amount. Id., ¶ 20. Plaintiffs tried unsuccessfully to determine the amount they were in default. Id., ¶¶ 21, 23. In July 2010, PNC denied plaintiffs' request for a modification and demanded a payment of $38, 173.28. Id., ¶ 24. On November 21, 2010, plaintiffs applied to PNC for another loan modification. Id., ¶ 26. On February 21, 2011, plaintiffs received a loan modification[2] ("Loan Modification") but the modification did not reduce the amount of their monthly payment or the interest rate, which plaintiffs alleged was the purpose and objective of obtaining a modification. Id . ¶¶ 28, 29.

Plaintiffs made payments under the Loan Modification on June 3, 2011, June 29, 2011, and July 29, 2011, but then stopped making payments and could not pay what PNC claimed was their default amount. Id., ¶¶ 32-36, 41. PNC asked that plaintiffs resubmit an application for modification. Id., ¶ 42. PNC served a notice of foreclosure on plaintiffs on February 27, 2012, and the property was sold at a foreclosure sale on April 10, 2012. Id., ¶¶ 43, 44. PNC assigned its interest in the property to Freddie Mac by limited warranty deed on May 7, 2012. Id., ¶ 45. The redemption period ended on October 10, 2012, and Freddie Mac commenced an eviction action on January 10, 2013. Id., ¶ 48. This action followed.

Based on these facts, plaintiffs pled the following causes of action:

Count I alleged that PNC violated Minn. Stat. § 58.13, subd. 13, which precludes a residential mortgage servicer from making a residential mortgage loan with the intent that the loan will not be repaid and that the mortgage originator would obtain title to the property through foreclosure. Id., ¶¶ 49-54.

Count II alleged that PNC breached its duty of good faith and fair dealing because the Loan Modification was inconsistent with the parties' intentions and plaintiffs' financial circumstances. Id., ¶¶ 55-59.

Count III alleged fraud and misrepresentation against PNC, stating that PNC induced plaintiffs to enter into the Loan Modification by representing that their monthly payments would be reduced. Id., ¶¶ 60-69.

Count IV alleged that PNC violated the Minnesota Consumer Fraud Act ("MCFA"), Minn. Stat. § 325F.69, et. seq. by making false promises, misrepresentations, misleading statements and by using deceptive practices in connection with the loan modification and its inducement of plaintiffs to enter into the loan modification. Id., ¶¶ 70-76. Plaintiffs alleged they could assert a private right of action under the MCFA based on the private attorney general statute, Minn. Stat. § 8.31, subd. 3a, because their action served a public benefit. Id., ¶ 73.

Count V sought a temporary and permanent injunction against Freddie Mac to prevent Freddie Mac from evicting plaintiffs from the property. Id., ¶¶ 77-79.

As relief, plaintiffs sought damages in excess of $50, 000, rescission of the foreclosure and loan modification, and a permanent and temporary injunction preventing Freddie Mac from evicting plaintiffs. Complaint, Prayer for Relief, ¶¶ 1-4.

Defendants moved to dismiss plaintiffs' Complaint [Docket No. 13]. Shortly thereafter, plaintiffs moved for a preliminary injunction staying the eviction proceedings pending in Hennepin County District Court. [Docket No. 19]. Plaintiffs then moved for leave to amend their Complaint to delete a claim (breach of the duty of good faith and fair dealing), add two new claims (equitable estoppel and contract reformation), and beef up their remaining claims. [Docket No. 33].


A. Motions to Dismiss and for Leave to Amend

Defendants have moved for dismissal under Rule 12(b)(6). In considering a motion to dismiss under Rule 12(b)(6), the pleadings are construed in the light most favorable to the non-moving party, and the facts alleged in the complaint must be taken as true. Ashley County, Ark. v. Pfizer, Inc. , 552 F.3d 659, 665 (8th Cir. 2009). In addition, "the court must resolve any ambiguities concerning the sufficiency of the plaintiffs' claims in favor of the plaintiffs, and give the plaintiffs the benefit of every reasonable inference drawn from the well-pleaded facts and allegations in their complaint." Ossman v. Diana Corp. , 825 F.Supp. 870, 880 (D. Minn. 1993) (internal quotation marks and citations omitted). At the same time, to withstand a motion to dismiss under Rule 12(b)(6), litigants must properly plead their claims under Rule 8 of the Federal Rules of Civil Procedure and meet the principles articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly , 550 U.S. 544 (2007) and Ashcroft v. Iqbal , 556 U.S. 662 (2009). The pleading standard articulated by Rule 8 "does not require detailed factual allegations, but it [does demand] more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal , 556 U.S. at 662 (internal quotation marks and citations omitted).

Federal Rule of Civil Procedure 15(a) provides that leave to amend "shall be freely given when justice so requires." The determination as to whether to grant leave to amend is entrusted to the sound discretion of the trial court. See, e.g., Niagara of Wisconsin Paper Corp. v. Paper Indus. Union Mgmt. Pension Fund , 800 F.2d 742, 749 (8th Cir. 1986) (citation omitted). The Eighth Circuit has held that "[a]lthough amendment of a complaint should be allowed liberally to ensure that a case is decided on its merits, ... there is no absolute right to amend." Ferguson v. Cape Girardeau County , 88 F.3d 647, 650-1 (8th Cir. 1996) (citing Thompson-El v. Jones , 876 F.2d 66, 67 (8th Cir. 1989); Chesnut v. St. Louis County , 656 F.2d 343, 349 (8th Cir. 1981)). Denial of leave to amend may be justified by "undue delay, bad faith on the part of the moving party, futility of the amendment or unfair prejudice to the opposing party." Sanders v. Clemco Indus. , 823 F.2d 214, 216 (8th Cir. 1987) (citing Foman v. Davis , 371 U.S. 178, 182 (1962)).

"Denial of a motion for leave to amend on the basis of futility means the district court has reached the legal conclusion that the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Accordingly, in reviewing a denial of leave to amend we ask whether the proposed amended complaint states a cause of action under the Twombly pleading standard...." See Zutz v. Nelson , 601 F.3d 842, 850-51 (8th Cir. 2010) (citation and marks omitted)); In re Senior Cottages of Am., LLC , 482 F.3d 997, 1001 (8th Cir. 2007) (denying a motion to amend on the basis of futility "means that the court reached a legal conclusion that the amended complaint could not withstand a Rule 12 motion."); United States ex. rel. Gaudineer & Comito, L.L.P. v. Iowa , 269 F.3d 932, 936 (8th Cir. 2001) ("The denial of leave to amend based on futility means that the court found that the amended complaint failed to state a claim..."), cert. denied 536 U.S. 925 (2002); DeRoche v. All American Bottling Co. , 38 F.Supp.2d 1102, 1106 (D. Minn. 1998) ("Although we begin with a presumption of liberality, an amendment to a pleading can be successfully challenged on ground of futility if the claims created by the amendment would not withstand a Motion to Dismiss for failure to state a claim on which relief can be granted.")

B. Preliminary Injunctive Relief

A preliminary injunction "is an extraordinary remedy never awarded as a matter of right." Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 9 (2008). "When evaluating whether to issue a preliminary injunction a district court should consider four factors: (1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; (3) the probability that the movant will succeed on the merits; and (4) the public interest." Roudachevski v. All-American Care Centers, Inc. , 648 F.3d 701, 705 (8th Cir. 2011) (citing Dataphase Sys., Inc. v. C L Sys., Inc. , 640 F.2d 109, 114 (8th Cir. 1981) (en banc)). "None of these factors by itself is determinative; rather, in each case the four factors must be balanced to determine whether they tilt toward or away from granting a preliminary injunction." West Publ'g. Co. v. Mead Data Cent., Inc. , 799 F.2d 1219, 1222 (8th Cir. 1986), cert. denied, 479 U.S. 1070 (1987) (citation omitted). "If a party's likelihood of succeeding on the merits is sufficiently low, a court may deny a preliminary injunction even if the other three factors - irreparable harm, balance of harms, and the public interest - weigh in the party's favor." Gottlieb v. Willis, Civ. No. 12-2637 (PJS/JSM), 2012 WL 5439274 at *2 (D. Minn. Nov. 7, 2012) (citing CDI Energy Servs., Inc. v. West River Pumps, Inc. , 567 F.3d 398, 402 (8th Cir. 2009) ("the absence of a likelihood of success on the merits strongly suggests that preliminary injunctive relief should be denied"); Mid-America Real Estate Co. v. Iowa Realty Co. , 406 F.3d 969, 972 (8th Cir. 2005) ("an injunction cannot issue if there is no chance of success on the merits").

With these standards in mind, the Court turns to the parties' motions.


A. Defendants' Motion to Dismiss and Plaintiffs' Motion for Leave to ...

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