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Althaus v. Cenlar Agency, Inc.

United States District Court, D. Minnesota

October 10, 2017

JOSEPH ALTHAUS, Plaintiff,
v.
CENLAR AGENCY, INC., Defendant.

          Daniel M. Eaton, CHRISTENSEN LAW OFFICE PLLC, for plaintiff.

          Hilary L. Palazzolo and Michael J. Steinlage, LARSON KING, LLP, for defendant.

          MEMORANDUM OPINION AND ORDER ON MOTION TO DISMISS

          JOHN R. TUNHEIM CHIEF JUDGE UNITED STATES DISTRICT COURT

         Plaintiff Joseph Althaus brings this action against Defendant Cenlar Agency, Inc., doing business as Cenlar FSB (“Cenlar”), alleging violations of the Real Estate Settlement and Procedures Act (“RESPA”) and the Minnesota Residential Mortgage Originator and Servicer Licensing Act (“MOSLA”). Althaus also brings a claim for breach of contract and seeks declaratory relief. Cenlar moves to dismiss all claims against it under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Because the Court finds Althaus has pleaded a RESPA claim and Althaus's MOSLA claim is not preempted by federal law or regulation, the Court will deny Cenlar's motion with regard to those claims. The Court finds, however, that Althaus's breach of contract claim is duplicative and his declaratory relief claim is not one upon which declaratory relief may be granted, and therefore, the Court will grant Cenlar's motion with regard to those claims.

         BACKGROUND

         Althaus refinanced his mortgage with Axia Capital, LLC on June 9, 2016, and “[s]hortly after, ” Cenlar, a federal savings bank, took over as the loan's servicer. (Am. Compl. ¶¶ 14, 20, Apr. 28, 2017, Docket No. 20.) Pursuant to the terms of the loan, Althaus was to deposit payments into an escrow account that Cenlar would use to make property tax, homeowners insurance, and mortgage insurance payments. (Id. ¶ 7; id., Ex. 2 at 3.) The loan and escrow payments are governed by RESPA. (Id., Ex. 2 at 3.) RESPA provides that a servicer “shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due, ” 12 U.S.C. § 2605(g), and Althaus's mortgage specifies that the “[l]ender shall apply the Funds to pay the Escrow Items no later than the time specified under RESPA, ” (Am. Compl. ¶ 17 (alteration in original)). Federal regulations interpreting RESPA provide that to comply with § 2605(g) a servicer must make payment “on or before the deadline to avoid a penalty.” 12 C.F.R. § 1024.17(k)(1).

         In October 2016, Cenlar failed to timely pay Althaus's property taxes out of his escrow account. (Am. Compl. ¶ 25.) Althaus became aware that his tax payment was delinquent on October 27, 2016, when he sought a home equity loan to pay a time-sensitive medical debt settlement. (Id. ¶¶ 25-27.) Althaus immediately called and notified Cenlar of the problem. (Id. ¶ 27.) Cenlar represented that it would correct its error. (Id. ¶ 28.)

         On November 2, 2016, Althaus paid the full amount owed, $3, 173.64, including the $2, 994.00 overdue payment and “penalties and fees totaling $179.64, ” to Carver County to ensure that he could obtain the equity line of credit to pay his medical debt settlement on time. (Id. ¶¶ 26, 29.) That same day, Althaus called Cenlar to seek reimbursement for the taxes that he paid. (Id. ¶ 32.) Cenlar contended that it had already paid Carver County, but Althaus contacted Carver County on November 9, 2016, and Carver County represented to him that it had not received any payment from Cenlar. (Id. ¶¶ 33-34.)

         Althaus asserts that between November 9 and 30, 2016, he contacted Cenlar “repeatedly” to obtain a refund for his tax payments. (Id. ¶ 36.) Althaus alleges that on November 30, 2016, a Cenlar representative confirmed that Cenlar had received a refund from Carver County and stated that Cenlar would reimburse Althaus within 7-10 days. (Id. ¶ 37.) After not receiving reimbursement within that time period, Althaus again contacted Cenlar on December 13 and 19, 2016. (Id. ¶¶ 38-39.) On December 19, 2016, a Cenlar representative told Althaus that Cenlar would send him a check for $2, 390.87; Althaus requested that the refund include the additional $782.77 that he paid Carver County. (Id. ¶ 39.) Althaus again called Cenlar on December 28, 2016, because he had still not received his refund. (Id. ¶ 40.) According to Althaus, the Cenlar representative told him that Cenlar sent a check for $2, 390.87 but that Althaus's request for the additional $782.77 had been denied. (Id.) On December 31, 2016, Althaus received the check for $2, 390.87. (Id. ¶ 41.) Althaus alleges that on January 2, 2017, a Cenlar representative told him that he would not receive an additional refund because withdrawing that amount would result in a shortfall in his escrow account. (Id. ¶ 42.) But the Cenlar representative also allegedly told Althaus that his escrow account balance was $3, 015.89. (Id. ¶ 43.)

         Althaus filed his complaint on February 13, 2017, alleging that Cenlar violated RESPA by failing to properly reimburse him for the entire amount he paid to Carver County. (Id. ¶¶ 45, 49-64.) Althaus asserts that on March 8, 2017, Cenlar deposited $179.64 into Althaus's escrow account to refund the late fees Althaus paid. (Id. ¶ 46.)

         Althaus alleges that Cenlar has a pattern or practice of making late property tax payments and failing to correct its errors in a timely manner. (Id. ¶¶ 47-48.) For support, Althaus cites posts from ConsumerAffairs.com where other customers complained about Cenlar failing to pay their property taxes. (Id. ¶ 47.) According to the complaint, Cenlar's failure to pay one poster's property taxes “result[ed] in a past due penalty from the County Assessor's Office, ” and, in another instance, the poster's “town [began] advertising [his or her] account as defaulting.” (Id.) Specifically, one post stated that Cenlar purchased the poster's mortgage “3-4 months ago, ” but the poster was “already having trouble with [the] escrow money since [Cenlar] d[id] not want to release any funds for property taxes, ” and the poster “ended up having to pay real estate taxes from [his or her] own funds.” (Id.)

         On April 7, 2017, Cenlar moved to dismiss Althaus's claims for failure to state a claim upon which relief may be granted. On April 28, 2017, Althaus responded to Cenlar's motion by filing an amended complaint, in part, to specify that Cenlar had failed to put Althaus's account in as good of position as it would have been otherwise because Cenlar failed to reimburse Althaus for the late fee until after Althaus commenced suit. (Id. ¶ 46.) On May 12, 2017, Cenlar responded to Althaus's amended complaint by filing its reply memorandum, arguing that Althaus's amended complaint fails for the same reasons as his initial complaint.[1]

         ANALYSIS

         I. ...


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