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Silberstein v. Federal National Mortgage Association

United States District Court, W.D. Arkansas, Fayetteville Division

January 17, 2017




         Currently before the Court is Defendant PHH Mortgage Corporation's ("PHH") Motion for Partial Dismissal or, in the Alternative, for More Definite Statement (Doc. 14). The Motion asks the Court to dismiss Counts Two and Three of Plaintiffs Britt and Amanda Silbersteins' (collectively, "the Silbersteins") Amended Complaint (Doc. 6) pursuant to Federal Rule of Civil procedure 12(b)(6). In the alternative, the Motion asks the Court to order the Silbersteins to make a more definite statement as to Count Two, pursuant to Rule 12(e). The Silbersteins filed an abbreviated and non-substantive Response (Doc. 17) on December 21, 2016. Then, on January 16, 2017, the Silbersteins filed a Motion for Partial Dismissal (Doc. 22) as to certain of their own causes of action. For the reasons discussed below, PHH's Motion (Doc. 14) is GRANTED, and the Silbersteins' Motion (Doc. 22) is MOOT.

         I. BACKGROUND

         The following facts are recited in the light most favorable to the Silbersteins, the non-moving party. On September 16, 2005, the Silbersteins executed a promissory note and mortgage with PHH[1] to facilitate their purchase of real property located at 1623 Theodore Drive, Springdale, Arkansas. On August 26, 2013, the Silbersteins entered into a loan modification agreement with PHH. Pursuant to the loan modification agreement, the Silbersteins remitted payment to PHH for the months of September, October, and November of 2013. However, when the Silbersteins attempted to make payment for the month of December, PHH declined receipt of the payment, and denied the validity of the loan modification agreement. On April 8, 2014, May 15, 2014, and May 27, 2014, the Silbersteins sent letters to PHH requesting certain information about their account, and requesting a response from PHH. The Silbersteins allege that PHH failed to respond to any of these letters, other than one response stating that the May 15, 2014 letter was not a "qualified written request" as defined by 12 U.S.C. § 2605.

         At some point after that time, PHH transferred or assigned the Silbersteins' mortgage and note to Defendant Federal National Mortgage Association ("Fannie Mae"). Then, on September 2, 2016, Fannie Mae-through trustee Wilson & Associates, PLLC-issued a Notice of Default and Intention to Sell (Doc. 6-1) listing a sale date of November 7, 2016. Before the foreclosure sale could proceed, on November 3, 2016, the Silbersteins filed a Petition for Temporary Restraining Order and Preliminary Injunction in the Circuit Court of Washington County, Arkansas. The Circuit Court granted the TRO and scheduled a hearing for November 17, 2016. On November 16, 2016, however, the Circuit Court dismissed Wilson & Associates, PLLC-an entity with its principal place of business in Arkansas-as a defendant in the case, creating complete diversity amongst the parties. PHH accordingly removed the case to this Court on November 17, 2016.

         The next day, the Silbersteins filed their First Amended Petition for Temporary Restraining Order and Preliminary Injunction and Complaint for Breach of Contract (Doc. 6). The Court granted the Silbersteins a TRO and deferred ruling on their request for a preliminary injunction until a hearing on the matter could be set. Before the scheduled hearing date, the parties entered an agreement whereby the Silbersteins would deposit with the Court the sum of $775.65 every month during the pendency of this action and Fannie Mae would be enjoined from foreclosing on their property until the final disposition of the case.

         On December 16, 2016, PHH filed the instant Motion, arguing that Counts Two and Three of the Silbersteins' Amended Complaint fail to state a claim against them, and that alternatively, the Silbersteins should be ordered to produce a more definite statement as to Count Two. Count Two (¶¶ 16-18) of the Complaint claims that PHH violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605, by failing to respond to the Silbersteins' letters. Count Three (¶ 19) alleges that PHH violated the Arkansas Fair Debt Collection Practices Act ("AFDCPA"), Ark. Code Ann. § 17-24-506. In Response (Doc. 17), the Silbersteins only state that they deny the material allegations of PHH's Motion, and offer no substantive legal argument on the merits thereof.


         To survive a motion to dismiss, a complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The purpose of this requirement is to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Be/ At/. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The Court must accept all of the Amended Complaint's factual allegations as true, and construe them in the light most favorable to the Silbersteins, drawing all reasonable inferences in their favor. See Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

         However, the Amended Complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "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." Id. "A pleading that offers labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. In other words, while "the pleading standard that Rule 8 announces does not require 'detailed factual allegations, ' ... it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Id.


         The Court will begin by addressing PHH's argument respecting the AFDCPA. Specifically, PHH contends that the AFDCPA's statute of limitations has run, and alternatively, that it cannot be liable under the AFDCPA because it is not a "debt collector" as that statute defines the term. See Ark. Code Ann. § 17-24-502(5)(A). Pursuant to the AFDCPA, a person may bring a cause of action against "a debt collector who fails to comply" with the statute. Ark. Code Ann. § 17-24-512(a). Such an action must be brought "in a court of competent jurisdiction within one (1) year from the date on which the violation occurs." Ark. Code Ann. § 17-24-512(d).

         The conduct causing PHH's alleged failure to comply with the AFDCPA, per the Silbersteins' Amended Complaint, occurred on December 11, 2013, and January 21, 2014. (Doc. 6, 19). Accordingly, the one-year statute of limitations had long expired by the time the Silbersteins filed their original complaint in state court on November 3, 2016, and their Amended Complaint in this Court on November 18, 2016.

         Even had the statute of limitations not expired, moreover, the Court would find that the Silbersteins' AFDCPA claim fails as a matter of law because PHH is not a "debt collector" as defined by that statute. The AFDCPA defines that term as "a person who uses an instrumentality of interstate commerce or the mails in a business whose principal purpose is the collection of debts or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." Ark. Code Ann. § 17-24-502(5)(A).[2] This definition is materially identical to the federal Fair Debt Collection Practices Act's definition of a debt collector. See In re Humes,496 B.R. 557, 583 n.24 (Bankr. E.D. Ark. 2013); 15 U.S.C. § 1692a(6). And, "[m]any courts hold that mortgage lenders and servicers are not 'debt collectors' under the FDCPA in connection with collecting their own consumer debts as opposed to claims owned by others." In re Larkin,553 B.R. 428, 440 (Bankr. D. Kan. 2016). This includes "FDCPA decisions relating to loan modification offers." Id. (discussing Thomas v. JPMorgan Chase & Co., 811 F. Supp. 2d 781 (S.D.N.Y. 2011) and Polidori v. Bank of Am., N.A., 977 F. Supp. 2d 754 (E.D. Mich. 2013)). These holdings are consistent with the plain language of the statute, which requires a "debt collector" to have as its "principal purpose" the "collection of debts, " or, that a "debt collector" regularly attempt to collect "debts owed ... or due another" Ark. Code Ann. ...

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