PLOOG v. HOMESIDE LENDING

The opinion of the court was delivered by: Guzman, District Judge.

Heather Ploog ("Ploog") has sued First Chicago NBD Mortgage Co.'s ("First Chicago") for breach of contract and breach of fiduciary duty and has sued HomeSide Lending, Inc. ("HomeSide") for violating the Cranston-Gonzales Amendments to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605 et seq., as well as for negligence, and breach of fiduciary duty. Before the Court is First Chicago's motion to dismiss Ploog's breach of contract (Count II) and breach of fiduciary duty (Count III) claims pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) and 12(b)(7) and 28 U.S.C. § 1367(c)(4). Also before the Court is HomeSide's motion to dismiss Counts I, IV, and V pursuant to Rule 12(b)(1). For the reasons provided in this Memorandum Opinion and Order, both motions are denied.

FACTS

On April 30, 1998, Ploog and her husband, David B. Bixby ("Bixby") purchased a home with a residential mortgage loan ("Bixby-Ploog Mortgage") from First Chicago. (Second Am. Compl. ¶ 7.) First Chicago paid several property taxes based on the Property Identification Numbers ("PIN") in the Bixby-Ploog Mortgage for which Ploog was not responsible with Ploog's escrow funds which created a negative tax escrow balance of $5,919.77. (Id. ¶ 8.) Thereafter, servicing of the Bixby-Ploog Mortgage was transferred to HomeSide. (Id. ¶ 9.) On June 4, 1999, HomeSide sent Ploog a letter stating that her tax escrow balance was a negative $5,919.77. (Id. ¶ 10.)

On June 7, 1999, Ploog made a phone call to HomeSide and inquired as to the nature of this negative escrow balance. (Id. ¶ 11.) Between June 1999 and November 1999, Ploog made several phone calls to HomeSide asking that her escrow balance be corrected. (Id. ¶ 12.) On November 18, 1999, Ploog determined that HomeSide had four PIN numbers on her account that were all incorrect. (Id. ¶ 13.) On November 18, 1999, Ploog sent HomeSide a letter informing it that taxes were incorrectly paid from her account, giving HomeSide her correct PIN number and demanding that HomeSide correct its records, and requesting that HomeSide make no escrow payments from her account. (Id. ¶ 14.) Despite this letter, HomeSide made an incorrect tax payment on December 20, 1999. (Id. ¶ 15.) Ploog made additional attempts to correct her account with HomeSide. (Id. ¶ 16-20.)

Prior to the filing of her original complaint, Ploog never received a substantive response in writing from HomeSide regarding her November 18, 1999 letter or her March 6, 2000 letter. (Id. ¶ 21.) As of the date of filing her original complaint, HomeSide had not corrected Ploog's tax escrow problem. (Id. ¶ 22.) HomeSide had not corrected Ploog's tax escrow problem within 60 business days of either her November 18, 1999 letter or her March 6, 2000 letter. (Id. ¶ 23.)

On October 30, 2000, after HomeSide had purportedly corrected Ploog's tax escrow problem, HomeSide sent Ploog a letter stating that her scheduled payment was $2,488.96, which was incorrect, and that her payment of $1,059.76 was insufficient to complete her escrow payment. (Id. ¶ 25-26.) Ploog wrote HomeSide again on December 1, 2000, requesting that HomeSide correct her tax escrow account and change her scheduled payment to $1,059.12. (Id. ¶ 27.) Ploog also enclosed an escrow waiver and requested that she be allowed to make her own tax payments. (Id.) HomeSide sent Ploog a letter that did not address the issues in her letter, but stated that Ploog's escrow payments were overdue and charging her a $52.96 late fee. (Id. ¶ 28.) The letter from HomeSide also stated that it would report Ploog to the credit bureaus if she did not bring her loan current. (Id. ¶ 28.) Ploog wrote to HomeSide on January 2, 2001 requesting that HomeSide correct its miscalculation and demanding that HomeSide not report her to any credit bureau. (Id. ¶ 29.) On January 12, 2001, HomeSide sent Ploog a letter addressing her escrow, but this letter did not mention any of the previous letters from Ploog, except to state that her escrow payment would be $1,059.12. (Id. ¶ 30.) Shortly thereafter, Ploog received a letter from HomeSide dated January 11, 2001 and postmarked January 19, 2001 stating that she was in default. (Id. ¶ 31.) On January 23, 2001, HomeSide sent Ploog two letters stating that Ploog and Bixby were reported to a credit bureau as being delinquent and that HomeSide had requested a correction. (Id. ¶ 32.)

Ploog filed this lawsuit, three counts of which assert claims against HomeSide and two counts of which assert claims against First Chicago. In Count I, she asserts a class claim and an individual claim against HomeSide for violations of the Cranston-Gonzales Amendments to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2606. On September 28, 2001, this Court denied Ploog's motion to certify the classes, so the entire complaint must be viewed as alleging individual claims. Count I, Count IV and Count V are against HomeSide. In Count I, Ploog claims HomeSide violated RESPA. In Count IV, she claims HomeSide was negligent for continually paying the wrong taxes from her escrow account. In Count V, Ploog alleges that HomeSide breached a fiduciary duty.

Counts II and III are against First Chicago. In Count II, Ploog alleges breach of contract for First Chicago's paying property taxes from her escrow account to properties not owned by her. In Count III, Ploog claims that First Chicago breached a fiduciary duty.

HomeSide has moved to dismiss Count I based on their Rule 68 offer, which they claim is greater than any award Ploog can receive in trial and thus makes Count I moot. HomeSide has also moved to dismiss Counts IV and V based on Rule 12(b)(1) for lack of Subject Matter Jurisdiction over the state law claims once the only federal claim is dismissed.

First Chicago has moved to dismiss Counts II and III pursuant to Rule 12(b)(6) and 12(b)(7) for failure to state a claim upon which relief can be granted and the failure to add an indispensable party, namely Bixby. First Chicago also argues that this Court should exercise its discretion to deny supplemental jurisdiction with regard to Counts II and III because there is no common basis of fact or evidence between Ploog's claims against them and Ploog's RESPA claim, the only claim over which the Court has original jurisdiction.

DISCUSSION

In ruling on a motion to dismiss, the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Gomez v. Ill. State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). If, when viewed in the light most favorable to the plaintiff, the complaint fails to state a claim upon which relief can be granted, the court must dismiss the case. FED. R. CIV. P. 12(b)(6); Gomez, 811 F.2d at 1039. A motion to dismiss may be granted only if the court concludes that "no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

A. RESPA Claim

Ploog claims that HomeSide has violated RESPA by failing to take corrective action pursuant to 12 U.S.C. § 2605(e), by failing to provide a response in writing within 60 business days setting out the corrective action taken or why corrective action is not warranted pursuant to 12 U.S.C. § 2605(c), and for reporting persons to credit bureaus within 60 days of those persons sending in a qualified written request pursuant to 12 U.S.C. § 2605(c)(3). Ploog identifies five instances where HomeSide failed to respond to her qualified written requests: November 18, 1999; March 6, 2000; October 30, 2000; December 1, 2001; and January 2, 2001. Ploog argues that she has demonstrated a "pattern or practice of noncompliance" through these five qualified written requests and is entitled to $1,000 for each totaling $5,000 on the face of her complaint. Ploog alleges that she has suffered actual damages as well, in that HomeSide's actions has affected her job and caused her mental anguish. HomeSide argues that 12 U.S.C. § 2605(f)(1)(B)'s granting a maximum of $1,000 for demonstrating a "pattern or practice of noncompliance" is not for every violation and so a $1,000 statutory maximum is all Ploog could recover. Further, HomeSide asserts that mental anguish is not included in "actual damages" under 12 U.S.C. § 2605(f). HomeSide asserts that their $6,000 offer of settlement with regard to Count I is therefore more than Ploog could recover in court, thus making her Count I claim moot.

The Cranston-Gonzales Amendments to RESPA place requirements on servicers of federally related mortgage loans when they receive a qualified written request from a borrower. 12 U.S.C. § 2605 et seq. The servicer must provide a written response acknowledging the receipt of a qualified written request within 20 days of receiving the borrower's letter. 12 U.S.C. § 2605(e)(1)(A).

The servicer must then do one of three things within sixty days of receiving the letter: