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Shinn v. Champion Mortgage Co.

February 5, 2010


The opinion of the court was delivered by: William J. Martini Judge



Dear Litigants:

This matter comes before the Court on the Motion to Dismiss of Defendant Champion Mortgage Company, Inc. (AChampion@), pursuant to Federal Rule of Civil Procedure 12(b)(6). Oral arguments were not held. Fed. R. Civ. P. 78. For the reasons set forth below, Defendant Champion=s motion is GRANTED in part and DENIED in part.


This action arises out of a mortgage loan obtained by Plaintiffs Stanley and Catherine Shinn (Athe Shinns@) from Defendant Champion in 2001. Cmplt. & 13. The Shinns are New Jersey residents. Cmplt. & 8. Champion, a non-depository licensed lender with its principal place of business in New Jersey, is a division of Key Bank USA, N.A. (AKey Bank@). Cmplt. && 2, 14. Key Bank is a national bank headquartered in Ohio. Cmplt. & 7. Defendant retained the law firm of Fein, Such, Kahn, & Shepard ("Fein") as its counsel. Cmplt. & 3.

The Shinns' mortgage, obtained for the purchase of a home in Oaklyn, NJ, was in the amount of $102,000. Cmplt. Ex. B; id. & 1. The mortgage contract was executed on April 23, 2001. Cmplt. & 13. By October 2004, the Shinns had begun to miss payments. Cmplt. & 15. On February 22, 2005, Champion initiated foreclosure proceedings against the Shinns. Cmplt. & 16. On that same day, Champion also sent Plaintiffs a letter offering to reinstate the original mortgage and abstain from going forward with the foreclosure in exchange for a reinstatement fee in the amount of $7,981.07 (the Areinstatement fee@). Cmplt. & 17. The reinstatement fee was broken down as follows: $4,190.55 in principal and interest, $209.55 in late fees, $377.19 in deferred late fees, $60 in non-sufficient fund charges, $550.68 for a corporate advance balance, and $2,593.10 in attorneys' fees and costs. Cmplt. Ex. A. The letter specified that the reinstatement fee would have to be paid by March 7, 2005, or new figures would need to be obtained. Id.

On June 22, 2005, Champion sent the Shinns a new letter and contract (the AForbearance Agreement@) adjusting the amount of the required fees to $12,905.24, with a required down payment of $7,000. Cmplt. Ex. B. The document was on Champion letterhead. Id. The Forbearance Agreement also clearly states that AChampion Mortgage is a debt collector attempting to collect a debt and any information obtained will be used for that purpose.@ Id. The terms of the Forbearance Agreement were approved by Champion=s mitigation loss manager and agreed to by the Shinns. Cmplt. & 19. There are no allegations by any party that the Forbearance Agreement is in default, and according to the Complaint, it has been paid in full. Id. There is no additional information about the status of the Shinns= reinstated mortgage.

On January 2, 2009, the Shinns filed a complaint with this Court against Champion and Fein.*fn1 They seek to bring the matter as a class action.*fn2 The Complaint contains ten counts against Champion: (1) breach of contract, (2) negligence, (3) breach of the duty of good faith and fair dealing, (4) unjust enrichment, (5) unfair and deceptive assessment and collection of fees, (6) violation of the Fair Foreclosure Act, (7) violation of New Jersey court rules for attorneys' fees, (8) violation of the New Jersey Consumer Fraud Act, (9) violation of the Truth-in-Consumer Contract, Warranty, and Notice Act, and (10) violation of the Licensed Lenders Act. Specifically, Plaintiffs allege that Champion and Fein Aengaged in a uniform scheme and course of conduct to inflate their profits by charging and collecting various fees not authorized by the loan documents or applicable law,@ including attorneys= fees and costs in excess of those actually incurred. Cmplt. & 20. The Complaint contains few additional or supporting factual details. The gravamen of Plaintiffs= claims appears to be that Champion overcharged the Shinns in connection with their mortgage and the Forbearance Agreement.


A. Standard of Review

In evaluating a motion to dismiss under Fed. R. Civ. P. 12(b), all allegations in the complaint must be taken as true and viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc., v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). When deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the plaintiff=s claims are based upon those documents. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after viewing the allegations in the complaint in the light most favorable to the plaintiff, it appears that no relief could be granted Aunder any set of facts that could be proved consistent with the allegations,@ a court may dismiss a complaint for failure to state a claim. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

Although a complaint does not need to contain detailed factual allegations, Athe >grounds= of [the plaintiff=s] >entitlement to relief= requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.@ Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff=s right to relief above a speculative level. See id. at 1964-65. Furthermore, although a court must view the allegations as true in a motion to dismiss, it is Anot compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions disguised as factual allegations.@ Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007).

B. Count I-Breach of Contract

Count I alleges that the mortgage agreement and note contained a provision allowing Champion to be reimbursed only for actual expenses incurred, that Champion has charged Plaintiffs fees in excess of actual expenses, and therefore that Champion violated the terms of the contract. Cmplt. && 20, 39, 41. Plaintiffs also allege that Champion failed to disclose in advance additional fees such as a $60 charge for returned checks. Cmplt. & 40. However, Plaintiffs do not cite or allege the existence of any contractual provision requiring such disclosures. Furthermore, Plaintiffs do not attach the note or mortgage, and the Complaint does not provide the specific language of any contractual provisions that were allegedly breached. Rather, the Complaint says only that the loan documents were "standard form notes and mortgages" and that their provisions were "uniform." Cmplt. & 38.

To prevail on a breach of contract claim under New Jersey law, a plaintiff must prove four elements: (1) the existence of a valid contract between plaintiff and defendant; (2) defendant breached the terms of the contract; (3) plaintiff performed its obligations under the contract; and (4) plaintiff was injured as a result of defendant's breach. Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 275 F. Supp. 2d 543, 566 (D.N.J. 2003) (citing Coyle v. Englander's, 199 N.J. Super. 212, 223 (App. Div. 1985)).

Here, Plaintiffs' allegations are exceedingly vague, and Plaintiffs' failure to attach copies of the mortgage or note make it difficult for the Court to determine whether a breach has been sufficiently alleged to survive a motion to dismiss. To the extent that Plaintiffs allege breach of contract with respect to Defendant's failure to provide advance notice of fees such as the returned check fee, this claim fails and will be dismissed. Plaintiffs do not allege the existence of any contractual provision requiring advance disclosure of such fees. Without a contractual provision to that effect, there can be no breach. Likewise, to the extent that Plaintiffs allege that Defendant in general breached the Forbearance Agreement, this claim also fails. If Plaintiffs fail to allege the existence of a provision that was breached or specific conduct that constituted the breach, the claim cannot survive.

However, to the limited extent that Plaintiffs allege breach of a contractual provision prohibiting the charging of fees in excess of those actually incurred, Plaintiffs appear to have sufficiently stated a claim for which relief can be granted. Cmplt. & 41. Although Plaintiffs do not identify the specific language of the provision, at this stage in the proceedings, the Court must accept as true Plaintiffs' allegations that such a provision exists and that Defendant charged fees in excess of those incurred. See Baraka, 481 F.3d at 211. Plaintiffs also identify a breach of the provision, namely that with respect to attorneys' fees, costs of suit, recording fees, certificate fees, and sheriff's fees, Defendant allegedly charged them amounts higher than those actually expended. Cmplt. & 20. Plaintiffs further allege that they paid Defendant for these excessive charges and that they were harmed in the amount of the difference between the incurred charges and the amount actually charged by Plaintiffs. Cmplt. &19.

Plaintiffs concede that they cannot ascertain the precise amount that they were overcharged, because Defendant has never provided them with itemized bills. Pl. Br. at 2-3. Nevertheless, Plaintiffs have sufficiently alleged the elements of the cause of action and provided sufficient background facts for this one narrow theory of liability only. Furthermore, the 12(b)(6) motion to dismiss standard requires the Court to use its common sense when deciding whether or not a plaintiff has sufficiently stated a claim for relief. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009) (stating that "[d]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense"); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The common sense and judicial experience of this Court suggest that in ordinary business circumstances, when a service is performed, it is typically accompanied by an itemized bill, particularly when one is requested. The Defendant's apparent failure to provide an itemization by no means conclusively establishes ...

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