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Woods v. Reverse Mortgage USA, Inc.

United States District Court, S.D. West Virginia, Charleston

September 29, 2017

DEWILLA WOODS, Plaintiff,
v.
REVERSE MORTGAGE USA, INC., and REVERSE MORTGAGE SOLUTIONS, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          John T. Copenhaver, Jr., United States District Judge

         Pending is Reverse Mortgage Solutions, Inc.'s ("RMS") motion to dismiss, filed February 3, 2017.

         I. Factual and Procedural Background

         In this action, the plaintiff, Dewilla Woods ("Mrs. Woods"), alleges that the defendant, RMS, has violated various West Virginia common and statutory laws in connection with the origination and servicing of a reverse mortgage transaction between the parties. A reverse mortgage, or a reverse annuity mortgage, is “a nonrecourse loan secured by real property which[] (1) [p]rovides cash advances to a borrower based on the equity in a borrower's owner-occupied principal residence . . . [and] (2) [r]equires no payment of principal or interest until the entire loan becomes due and payable." W.Va. Code § 47-24-3 (2016); see also Reverse Annuity Mortgage, Black's Law Dictionary (10th ed. 2014).

         Mrs. Woods is a resident of Kanawha County, West Virginia. Complaint ("Compl.") ¶ 1. RMS, a Texas company doing business in West Virginia, is a real estate investment company specialized in "making and servicing residential real estate mortgage loans." Id. ¶ 9. On July 14, 2012, Mrs. Woods and her late husband, Billy R. Woods ("Mr. Woods"), closed on a reverse mortgage with Reverse Mortgage USA, Inc ("USA") and the Secretary of Housing and Urban Development ("Secretary"). Id. ¶¶ 15, 36; see Defendant's Memorandum in Support ("Mem. in Supp."), Exhibit ("Exh.") B at 1. USA then "transferred both ownership and servicing rights ... to [RMS]. " Id. ¶ 39.

         In October, 2016, Mrs. Woods first learned that the reverse mortgage contract included the following closing chargesi

a. . . . origination fee of $2, 775.00 . . .;
b. . . . recordation charges and . . . "recording services" fee;
c. . . . "validation" fee;
d. . . . "mobile courier" and "courier" fees;
e. . . . "tax cert fee";
f. . . . fee paid to USA for flood certification; g. $350.00 "Notary Fee"; [and]
h. . . . $550.00 charge for the . . . appraisal, which the Woods had already paid in full.

Id. ¶ 40 (quotations in original). In addition, USA charged the Woods over $7, 000 in "settlement charges." Id. ¶ 41.

         "[O]nly a few months after the July, 2012 [, ] closing/' Mr. Woods passed away. Id. ¶ 47. Mrs. Woods, "over the next several years, " began missing payments on her home's taxes and hazard insurance premiums (together, the "property charges") as those payments became due. Id. ¶ 52. "As a result, RMS force-placed . . . hazard insurance on the home[3 and began paying the . . . real estate taxes." Id. ¶ 53.

         RMS began calling and writing Mrs. Woods, "demanding full and immediate payment of the insurance and tax charges" under the threat of foreclosure. Id. ¶ 54. Mrs. Woods responded that she was unable to pay RMS "immediately and in full" because her monthly income had been reduced after her husband's passing. Id. ¶ 51, 55. Mrs. Woods requested that she be permitted to subscribe to a monthly payment plan to pay off the amount owed, id. ¶¶ 55-56, but RMS "told Mrs. Woods it would only accept payment in full and that if she did not make full payment, her home would eventually be sold, " id. ¶ 59.

         On August 1, 2016, RMS sent Mrs. Woods a letter stating that, to avoid foreclosure, Mrs. Woods must pay within 30 days "$73, 783.25 and any other payments, late charges or fees that may become due prior to the curing of the default/' including "attorney fees and other . . . charges." Id. ¶¶ 64-67. "Mrs. Woods was unable to pay the amount demanded." Id. ¶ 70. RMS foreclosed on the home and scheduled the foreclosure sale for November 1, 2016. Id. ¶ 71.

         Mrs. Woods instituted this action on November 1, 2016, in the Circuit Court of Kanawha County. Pertinently, in Counts II and III, Mrs. Woods claims that RMS' efforts at collecting outstanding payments violated the debt collection provisions of the West Virginia Consumer Credit and Protection Act ("WVCCPA"), W.Va. Code ch. 46A. In Count IV, Mrs. Woods alleges that the reverse mortgage included fees made unlawful by the WVCCPA; the West Virginia Residential Mortgage Lender, Broker and Servicer Act (the "Residential Mortgage Act"), W.Va. Code ch. 31, art. 17; and the Reverse Mortgage Enabling Act (the "Reverse Mortgage Act"), W.Va. Code ch. 47, art. 24. In Count VII, Mrs. Woods insists that RMS breached "express provisions of the contract, as well as its duty of good faith and fair dealing." Mrs. Woods seeks, inter alia, actual damages, a declaration voiding the reverse mortgage and declaring it unenforceable, injunctive relief requiring RMS to engage in loss mitigation efforts, and civil penalties pursuant to the WVCCPA.

         RMS filed an answer on December 30, 2016, and removed the action to this court on January 6, 2017, invoking the court's diversity jurisdiction. On February 3, 2017, RMS moved to dismiss Counts II, III, IV, and VII of the complaint. First, RMS contends that, "[a]s a matter of law, RMS is not a debt collector" within the purview of the WVCCPA. Mem. in Supp. at 4. Second, RMS insists that the Count IV claims are barred by the applicable statute of limitations and that, regardless, the closing charges were permissible under the Residential Mortgage Act. Id. at 7-10. Last, RMS asserts that Mrs. Woods has failed to identify any provision of the reverse mortgage contract that RMS allegedly breached. Id. at 11-12.

         On a procedural note, Mrs. Woods points out, and RMS agrees, that because RMS filed its motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) after it filed an answer, the motion is converted to a motion for judgment on the pleadings under Rule 12(c). Plaintiff's Response ("Resp.") at 8-9; Defendant's Reply ("Reply") at 1 n.l; see Burbach Broad. Co. of Del, v. Elkins Radio Corp., 278 F.3d 401, 405 (4th Cir. 2002) ("Because [the defendant's] answer had been filed, the pleadings were closed at the time of the motion. Thus, we construe the [12(b)(6)] motion as one for judgment on the pleadings.")- As explained below, the conversion "does not have a practical effect upon [the court's] review." Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).

         II. Motion for Judgment on the Pleadings Standard

         Federal Rule of Civil Procedure 8(a)(2) requires that a pleading "contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Correspondingly, Rule 12(b)(6) provides that a pleading may be dismissed for a "failure to state a claim upon which relief can be granted."

         "Rule 12(h)(2) provides that the defense of failure to state a claim upon which relief can be granted as set forth in Rule 12(b)(6) may be raised 'by motion for judgment on the pleadings, or at the trial on the merits.' Therefore, as a matter of motions practice, " a Rule 12(b)(6) motion to dismiss filed after the close of pleading "should be viewed as a Rule 12(c) motion for judgment on the pleadings raising the defense of failure to state a claim upon which relief can be granted." Edwards, 178 F.3d at 243 (quoting Fed.R.Civ.P. 12(h)(2)) (citing 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1367, at 514-15 (2d ed. 1990) and Republic Steel Corp. v. Penn. Eng' g Corp., . 785 F.2d 174, 182 (7th Cir. 1986}). "However, the distinction is one without a difference, as . . . [a] district court[] . . . appl [ies] the same standard for Rule 12 (c) motions as for motions made pursuant to Rule 12(b)(6)." Burbach Broad. Co., 278 F.3d at 406 (citing Edwards, 178 F.3d at 243 and Pacific Ins. Co. v. Am. Nat' 1 Fire Ins. Co., 148 F.3d 396, 405 (4th Cir. 1998)).

         To survive a motion to dismiss, a pleading must recite "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009) (quoting Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008)). In other words, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citation omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ("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."); Andrew v. Clark, 561 F.3d 261, 266 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 555).

         "In resolving a motion pursuant to Rule 12(b)(6)[, ] a district court cannot consider matters outside the pleadings without converting the motion into one for summary judgment." Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013) (citing Fed.R.Civ.P. 12(d)). "A court may, however, consider a 'written instrument' attached as an exhibit to a pleading, 'as well as [documents] attached to the motion to dismiss, so long as they are integral to the complaint and authentic.'" Id. (alteration in original) (internal citation omitted) (quoting Fed.R.Civ.P. 10(c) and Phillips v. Pitt Cty. Mem'1 Hosp, , 572 F.3d 176, 180 (4th Cir. 2009)); see also 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure, § 1357 (3d ed. 2017) ("Numerous cases . . . have allowed consideration of matters incorporated by reference or integral to the claim . . . and exhibits attached to the complaint whose authenticity is unquestioned . . . ."); cf. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007) (stating that, in the context of deciding on a motion under 12(b)(6) "whether the pleaded facts give rise to a 'strong' inference of scienter, " courts may consider "documents incorporated into the complaint by reference").

         A district court's evaluation of a motion to dismiss is underlain by two principles. First, when considering a motion to dismiss, the court "must accept as true all of the factual allegations contained in the [pleading]." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Twombly, 550 U.S. at 555-56). In doing so, factual allegations should be distinguished from "mere conclusory statements, " which are not to be regarded as true. Iqbal, 556 U.S. at 678 ("[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). Second, the court must "draw[] all reasonable factual inferences ... in the [nonmovant's] favor." Edwards v. City of Goldsboro, 17 8 F.3d 231, 244 (4th Cir. 1999); see also Jenkins v. McKeithen, 395 U.S. 411, 421 (1969) ("[T]he complaint is to be liberally construed in favor of plaintiff.").

         III. Discussion

         A. Counts II and III - Violation of the WVCCPA's Debt Collection Provisions

         In Counts II and III, Mrs. Woods alleges that RMS pursued debt collection practices made unlawful by the WVCCPA. Compl. ¶¶ 77-78. Of relevance here, the WVCCPA provides that "[n]o debt collector shall use any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims, " W.Va. Code § 46A-2-127 (2016), and that "[n]o debt collector may use unfair or unconscionable means to collect or attempt to collect any claim, " id. § 46A-2-128. Resolution of these issues first requires careful review of the statutory definitions of the WVCCPA.

A "debt collector" is defined as "any person or organization engaging directly or indirectly in debt collection." Id. § 46A-2-122(d).
The act of "debt collection" is defined as "any action, conduct or practice of soliciting claims for collection or in the collection of claims owed or due or alleged to be owed or due by a consumer." Id. § 46A-2-122(c).
And "claims, " of which a debt collector collects, are defined as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or service which is the subject of the transaction is primarily for personal, family or household purposes." Id. § 4 6A-2-122(b).

         For reasons explained below, the court concludes (1) that RMS was a "debt collector" and (2) that the payments it sought to collect from Mrs. Woods were "claims, " each within the scope of the WVCCPA. Consequently, RMS' motion for judgment of Counts II and III on the pleadings must be denied.

         RMS insists that it is a creditor, not a debt collector, placing it outside the purview of the WVCCPA. Reply at 3-4. RMS notes that the 2015 amendments to the civil remedy provision of the WVCCPA, § 46A-5-101(1), include a cause of action against both creditors and debt collectors, rather than against only creditors as the statute was written before. Id. at 3""4° Compare § 46A-5-10K1) (2016) ("If a creditor or debt collector has violated the provisions of this chapter applying to . . . any prohibited debt collection practice . . . .") with § 46A-5-101(1) (1996) ("If a creditor has violated the provisions of this chapter applying to . . . any prohibited debt collection practice . . . ."). RMS argues that the West Virginia Legislature, by including "debt collector, " intended to draw the same distinction between debt collectors and creditors as drawn by the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., which exempts creditors from liability for debt collection activities. Reply at 4.

         Mrs. Woods responds that RMS was a "debt collector''' within the scope of the statute, asserting that the longstanding meaning of "debt collector" under the WVCCPA is broad and includes any party attempting to collect a debt, including creditors. Resp. at 14-15 (citing Thomas v. Firestone Tire & Rubber Co., 164 W.Va. 763, 768-69 (1980) (finding that the WWCPA's debt collection provisions "appl[y] alike to all who engage in ...


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