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Ogbebor v. J.P. Morgan Chase, N.A.

United States District Court, D. New Jersey

February 2, 2017

BOSE OGBEBOR and ALICE OMORGIE, Plaintiffs,
v.
J.P. MORGAN CHASE, N.A., M&T BANKING, and BAYVIEW LOAN SERVICING, Defendants.

          ORDER

          Freda L. Wolfson United States District Judge

         Plaintiffs Bose Ogbebor (“Ogbebor”) and Alice Omorgie (“Omorgie”) (collect “Plaintiffs”) filed their Complaint asserting various state and federal claims arising fro underlying New Jersey foreclosure action that resulted in the involuntary sale of Plain residence. Presently before the Court are two separate motions to dismiss the Complaint, pur to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), filed by defendant J.P. Morgan C N.A. (“Chase”) and defendants M&T Banking (“M&T”) and Bayview Loan Serv (“Bayview”) (collectively, the “M&T Defendants”), respectively. Based on the judgme foreclosure in the state court, Defendants contend that Plaintiffs' Complaint is barred b Rooker-Feldman doctrine, the New Jersey entire controversy doctrine, res judicata and coll estoppel. For the reasons set forth below, Chase's motion to dismiss is GRANTED, and Plain claims for breach of contract in Count One, violations of the New Jersey Consumer Fraud Ac “NJCFA”), N.J. Stat. Ann. 56:8-1, et seq., in Count Two and fraudulent misrepresentation in Four are DISMISSED as to Chase. The M&T Defendants' motion to dismiss Plaintiffs' claim for violations of the Real Estate Settlement Procedure Act (“RESPA”) against the M&T Defendants in Count Three is DENIED. To the extent that Count Two asserts a NJCFA claim against M&T for conduct that predates the state court judgment of foreclosure, that claim is dismissed, but Plaintiffs are given leave to file an Amended Complaint to assert an NJCFA claim against M&T and/or Bayview for conduct post the foreclosure judgment, within 15 days from the date of the Order accompanying this Opinion.

          I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY[1]

         On April 25, 2007, Plaintiffs executed a mortgage to secure a $358, 000 loan from Chase for the purchase of a property located at 15 Riddle Avenue, Hampton, New Jersey 08827 (the “Residential Property”). Compl., ¶¶ 8, 2. From 2007 through 2011, Plaintiffs resided at the Residential Property until Hurricane Irene left the residence uninhabitable. Id. at ¶ 10. After the hurricane, Plaintiffs moved into another residence with their relatives, while the Residential Property remained vacant. Id. Because of financial strain, Plaintiffs allege that they defaulted on their mortgage payments to Chase in November 2011. Id. at ¶ 21. Several months later, in February 2012, Plaintiffs submitted a mortgage modification application to Chase. Id. at ¶ 13. Chase sent Plaintiffs a letter confirming receipt of the application, but Chase allegedly sent another letter stating that it could not locate Plaintiffs' mortgage modification application and requested that Plaintiffs submit a new request. Id. at ¶¶ 13-14. Plaintiff resubmitted their loan modification request to Chase in March 2012. Id. at ¶ 15.

         At some time before June 2012, Plaintiffs called Chase to inquire about the status of their pending mortgage modification application. Id. at ¶ 16. Plaintiffs allege that, during that conversation, a Chase representative told Plaintiffs that they must transfer title of Plaintiffs' rental property, located at 82 Willoughby Street, Newark, New Jersey 07112 (the “Rental Property”), to Chase in order to secure a loan modification on the Residential Property. Id. at ¶ 17. The mortgage for the Rental Property was also held by Chase.[2] Id. at ¶ 21. John Rieger (“Rieger”), a Vice President at Chase, subsequently sent Plaintiffs a letter, dated June 1, 2012, which stated: “Thank you for talking to us about the opportunity to eliminate your mortgage debt and avoid foreclosure. As we discussed, once the release of your property to Chase is complete, you will owe nothing more on your mortgage and will receive modification on the other.”[3] Id. at ¶ 18, Ex. A. Plaintiffs allege that they accepted Chase's offer of settlement when Plaintiffs “completed and returned by fax to Chase all forms requested by Chase in order to relinquish title to the Rental Property to Chase in exchange for a modification of the mortgage on the [Residential Property].” Id. at ¶ 19.

         In August 2012, Plaintiffs called Chase to inquire about “the status of both the deed-in-lieu for the Rental Property and the modification of the [Residential Property's] mortgage.” Id. at ¶ 29. Plaintiffs claim that a Chase representative told them that “their modification application had become stale and that an updated application was required.” Id. at ¶ 30. Thereafter, Plaintiffs submitted an updated application in September 2012. Id. Nevertheless, in October 2012, Chase allegedly contacted Plaintiffs and requested another application, and Plaintiffs once again complied. Id. at ¶ 31. Over the next couple of months, Plaintiffs claim that “[they] were in constant contact with Chase regarding the status of the modification applications and the additional documents that either needed to be updated or resubmitted per Chase's request, ” id. at ¶ 34, but Plaintiffs maintain that Chase failed to advise them of the state court action seeking to foreclose on the Residential Property. Id. at ¶ 35.

         On October 10, 2012, Chase filed its foreclosure complaint against both Plaintiffs in the New Jersey Superior Court. Id. at ¶ 32; see Declaration of Michael Trainor, Esq. (“Trainor Decl.”), Ex. B. When Plaintiffs failed to answer the foreclosure complaint, the state court entered default against Plaintiffs on December 31, 2012. See Compl., Ex. A. Plaintiffs allege that, on February 6, 2013, “[they] reviewed the Court Docket at the Superior Court of New Jersey, ” and discovered that the state court had entered default against them.[4] Id. at ¶ 41. According to Plaintiffs, “[t]his was the first time [they] became aware of the existence of the foreclosure action.” Id. at ¶ 42. The following day, Plaintiffs filed a motion to vacate default, but the state court rejected that motion “for non-conformance on February 27, 2013.” Id. at ¶ 43. On April 3, 2013, Chase moved for final judgment, and because the motion was uncontested, the state court entered judgment against Plaintiffs on May 1, 2013, and scheduled the sheriff's Sale for August 31, 2013. Id. at ¶¶ 44-45.

         Plaintiffs filed another motion to vacate judgment on June 5, 2013. Id. at ¶ 46. That motion contained a proposed answer to Chase's foreclosure complaint, which stated that Plaintiffs had “been diligently trying to apply for a loan modification with [Chase], ” but Chase “is [attempting] to deny [Plaintiffs] the opportunity to seek the foreclosure alternative program available.” See Trainor Decl., Ex. C. It further stated that Chase “acted in an unfair and deceptive manner, withholding foreclosure intent from [Plaintiffs]. Made false promise and misrepresentation about modifying [the] loans when it had no intention of doing so.” Id. Furthermore, with respect to the proposed affirmative defenses, Plaintiffs asserted that Chase violated the “New Jersey Consumer Act.” Id. The state court denied the motion to vacate judgment on July 23, 2013, and issued a written memorandum opinion. Id. at ¶ 46; see Declaration of James Berg, Esq. (“Berg Decl.”), Ex. B. In that decision, despite Plaintiffs' argument to the contrary, the state court found that “[Plaintiffs] were fully aware of the pending foreclosure and during their pursuit of a possible modification consciously chose not to file an answer and instead allowed the foreclosure to proceed uncontested.” Berg Decl., Ex. B. In addition, the court concluded that, although Plaintiffs asserted “some defenses that purport to challenge [Chase's] standing, [those defenses] are not sufficiently supported to effectively question [Chase's] foreclosure and subsequently obtained judgment.” Id.

         After the motion to vacate the foreclosure judgment was denied, in early 2014, M&T “became successor-in-interest to [Chase] with respect to the servicing of Plaintiffs' mortgage loan” on the Residential Property. Compl., ¶¶ 4, 51. At around the same time, Bayview assumed the responsibility of servicing agent for M&T. Id. at ¶¶ 5, 51. After the M&T Defendants started servicing Plaintiffs' mortgage, Plaintiffs claim that they “submitted a new loan modification application to Bayview in March 2014.” Id. at ¶ 52. On October 1, 2014, however, Chase purchased the Residential Property for $100 at the sheriff's Sale.[5] Id. at ¶ 53. Although not alleged in the Complaint, on December 8, 2014, Plaintiffs filed a motion to set aside the sale of the Residential Property in state court. See Trainor Decl., Ex. B. That motion was denied on January 13, 2015, and the state court order was accompanied by a memorandum opinion. Id. at Ex. D. In that opinion, the state court first concluded that “[Plaintiffs] were fully aware of the foreclosure process throughout the relevant time period, regardless of the manner in which they were served with notice.” Id. at Ex. A. The court further concluded, “[Plaintiffs'] primary argument is that they had a pending loan modification review at the time of sale. However, there is no right to a loan modification under New Jersey law.” Id. Critically, when confronted with the argument that Chase acted in a fraudulent manner, the state court made the following determination: “The record does not support the [Plaintiffs'] claim that they were coerced into loan modification negotiations, or that this was done fraudulently.” Id. Instead, the court found that “[i]t is undisputed that [Plaintiffs] failed to pay on their obligation, ultimately permitting [Chase] to force the sale of the property to satisfy such obligation.” Id. After that motion was denied, Plaintiffs did not file an appeal to the New Jersey Appellate Division from the state court foreclosure action judgment. Compl., ¶ 47. Plaintiffs claim that they “were dissuaded from appealing the Court's decision by counsel and by counsel for Chase, who assured Plaintiffs that a modification would be forthcoming and that no action to sell the [Residential Property] would proceed.” Id.

         After the motion to set aside the sale of the property was denied, Plaintiffs' eviction was scheduled for February 2, 2015. Five days prior to the eviction, however, Ogbebor filed a Chapter 13 petition in the United States Bankruptcy Court for the District of New Jersey. On May 11, 2015, Ogbebor filed an adversary proceeding in the Bankruptcy Court, asserting various state and federal claims against Chase, M&T and Bayview based on nearly identical allegations as the instant Complaint. See Berg Decl., Ex. E. In that proceeding, Chase filed a motion to dismiss, and the Bankruptcy Court issued a written opinion denying, in part, the motion.[6] See In re Ogbebor, No. 15-11420, 2015 WL 5177739, at *1 (Bankr. D.N.J. Sept. 3, 2015). On March 28, 2016, the adversary proceeding was terminated when the main bankruptcy petition was dismissed.

         On June 10, 2016, Ogbebor and Omorgie filed the instant Complaint. In Count One, Plaintiffs assert a breach of contract claim against Chase because “Plaintiffs and Chase entered into a written Agreement whereby Plaintiffs agreed to convey their interest in a separate Rental Property to Chase, and in exchange Chase agreed not to initiate a foreclosure action against Plaintiffs' [Residential Property] and grant her a modification of her mortgage loan for that property.” See id. at ¶ 57. However, Plaintiffs' claim that “Chase breached the contract by surreptitiously commencing foreclosure proceedings against Plaintiffs and failing to provide her with a mortgage modification despite Plaintiffs' acceptance of and full performance under the Agreement.” Id. at ¶ 60. With respect to the relief sought, Plaintiffs allege that they are entitled to $269, 500 in ascertainable losses because, “[i]n reliance on the June 2012 Agreement, Plaintiffs declined the pending offer for sale on the Rental Property and forewent the opportunity to sell the Rental Property at market value, ” thereby depriving Plaintiffs of “approximately $60, 000 in lost equity.” See id. at ¶ 61. Additionally, Plaintiffs allege that they invested approximately $209, 500 into “an addition, alterations, repairs, and renovations” on the Residential Property. Id. at ¶ 62.

         In Count Two, Plaintiff allege that Chase and M&T violated the NJCFA, because “Chase induced Plaintiffs to enter into the June 2012 Agreement by affirmatively representing to Plaintiffs that [Chase] would not initiate and prosecute a foreclosure and would grant Plaintiffs a loan modification if Plaintiffs conveyed their interest in [the Rental Property to Chase].” Id. at ¶ 67. However, Plaintiffs claim that various Chase representatives, including Rieger, made false or misleading statements to Plaintiffs “that Chase would not foreclose on either the Rental Property or the [Residential Property], when in fact Chase was continuing its foreclosure and collection activities full bore.” Id. at ¶¶ 68-69. Furthermore, Plaintiffs allege that Chase and M&T purposefully delayed the loan modification process by “repeatedly request[ing] multiple submissions of information and documentation from Plaintiffs, claiming that the information was lost or never received.” Id. at ¶ 72. According to Plaintiffs, “Chase and M&T Bank never intended to provide Plaintiffs with a mortgage modification and Chase never intended to honor its agreement with Plaintiffs and thus all representations made to Plaintiffs by Chase and/or M&T Bank were false and Defendants, and each of them, new [sic] them to be false.”[7] Id. at ¶ 73. As a result, Plaintiffs assert that they “have suffered an ascertainable loss in the amount equal to $269, 500, ” id. at ¶ 74, as well as treble damages, attorneys' fees and costs. Id. at ¶ 75.

         In Count Three, Plaintiffs assert a claim against the M&T Defendants under RESPA, alleging that Plaintiffs “submitted a loss mitigation application... to Defendant M&T's servicing agent, Defendant Bayview Loan Servicing, ” see id. at ¶ 77, but “[w]hile Plaintiffs' loss mitigation application was still under review, Defendants M&T and Bayview, both scheduled and conducted a sheriff's Sale of Plaintiff's [Residential Property] in October 2014.”[8] Id. at ¶ 79. Moreover, Plaintiffs allege that the M&T Defendants “did not send Plaintiffs a notice that they were not eligible for any loss mitigation option prior to conducting the foreclosure sale.” Id. at ¶ 83. Indeed, Plaintiffs claim that, “[a]t the time of the October 2014 sheriff's Sale, [they] had not been offered any loss mitigation options to either accept or reject.” Id. at ¶ 84. Based on these alleged violations of RESPA, Plaintiffs assert that they “are entitled to actual damages, statutory damages, and reasonable attorneys' fees.” Id. at ¶ 86.

         In Count Four, Plaintiffs bring a claim against Chase for fraudulent misrepresentation. Similar to their claim under the NJCFA, Plaintiffs allege that Chase made false statements to Plaintiffs in order to mislead them into thinking that the parties had entered into an agreement to restructure Plaintiffs' mortgage on the Residential Property, but Chase had actually initiated a foreclosure action in state court. See id. at ¶¶ 88-92. Because Plaintiffs relied on Chase's misleading statements, see id. at ¶ 93, “Plaintiffs suffered damages, including but not limited to, a loss in equity in the Rental Property; costs incurred to repair and renovate the [Residential Property]; service charges, late fees, legal fees, valuation fees, inspection fees and delinquent tax fees assessed against Plaintiffs during the relevant time period; deterrence from seeking other remedies to address their default and/or mortgage payments; and damage to credit.” Id. at ¶ 94.

         On July 8, 2016, the M&T Defendants filed their motion to dismiss, and Chase filed a separate motion to dismiss on July 22, 2016. Plaintiffs have opposed both motions.

         II. LEGAL STANDARD

         When reviewing a motion to dismiss on the pleadings, courts “accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal quotation marks omitted). Under such a standard, the factual allegations set forth in a complaint “must be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Indeed, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “[A] complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to ‘show' such an entitlement with its facts.” Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).

         However, Rule 12(b)(6) only requires a “short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the… claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. The complaint must include “enough factual matter (taken as true) to suggest the required element. This does not impose a probability requirement at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.” Phillips, 515 F.3d at 234 (internal quotation marks and citation omitted); Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir. 2013) (“[A] claimant does not have to set out in detail the facts upon which he bases his claim. The pleading standard is not akin to a probability requirement; to survive a motion to dismiss, a complaint merely has to state a plausible claim for relief.”) (internal quotation marks and citation omitted).

         In sum, under the current pleading regime, when a court considers a dismissal motion, three sequential steps must be taken: first, “it must take note of the elements the plaintiff must plead to state a claim.” Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (internal quotations marks and brackets omitted). Next, the court “should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id. (internal quotation marks omitted). Lastly, “when there are well-pleaded factual allegations, the court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. (internal quotation marks and brackets omitted).

         III. DISCUSSION

         In this matter, while there are two separate motions to dismiss, all of the Defendants contend that Plaintiffs' Complaint is barred by the Rooker-Feldman doctrine, the New Jersey entire controversy doctrine, res judicata and collateral estoppel.[9] Distilled to its essence, Defendants argue that Plaintiffs are attempting to relitigate the underlying state court foreclosure action because they are dissatisfied with the result of that proceeding. In response, Plaintiffs argue that their claims are not barred, since the Complaint asserts claims arising from Defendants' breach of a loan modification agreement and their deceptive and fraudulent conduct, which is unrelated to the state court foreclosure judgment. In addition, Plaintiffs reason that their claims are not germane to the foreclosure action because they do not relate to the mortgage itself.

         a. Rooker-Feldman Doctrine

          1. The Adversary Proceeding in Bankruptcy Court

         In January 2015, Ogbebor file a Chapter 13 petition in the Bankruptcy Court, and, shortly thereafter, she filed an adversary complaint, asserting nearly identical claims as the instant Complaint.[10]See Berg Decl., Ex. E. However, there is one major difference: in the adversary proceeding, Ogbebor specifically requested that the Bankruptcy Court invalidate the sheriff's Sale and reinstate the mortgage in the adversary proceeding. Id. In response, Chase filed a motion to dismiss Ogbebor's adversary complaint, and the Bankruptcy Court issued a written decision, dated September 3, 2015. See In re Ogbebor, 2015 WL 5177739, at *1. Here, without providing any authority to ...


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