Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_15-cv-01792/USCOURTS-alnd-2_15-cv-01792-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

RICHARD K. DUNCAN, et al.,

Plaintiffs,

v.

MGC MORTGAGE, INC., et al.,

Defendants.

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}

}

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Case No.: 2:15-CV-1792-RDP

MEMORANDUM OPINION

This matter is before the court on Defendants’ Motion to Dismiss Plaintiffs’ Amended 

Complaint. (Doc. # 16). The Motion has been fully briefed. (Docs. # 18 and 19). 

I. Background

On January 6, 1998, Plaintiffs borrowed money from Appleton Mortgage Corporation to 

finance the purchase of a home. (Doc. # 11 ¶¶ 10, 13). At that time, Plaintiffs executed a 

promissory note in favor of Appleton in the amount of $103,000.00. (Doc. # 11 ¶¶ 13-14; Doc. 

# 16-1 pp. 1-6). The Note was secured by a mortgage granting to Appleton a first priority

security interest in the Property. (Doc. # 11 ¶ 13; Doc. # 16-1 pp, 8-13). The same day the Loan 

was originated, the Mortgage, together with the Note and Indebtedness secured by the Mortgage, 

was assigned to New South Federal Savings Bank. (Doc. # 11 ¶ 18; Doc. # 16-1 at 15). The 

Note also contains an endorsement from Appleton to New South. (Doc. # 16-1 at 3). 

The Loan Documents were eventually assigned ultimately to LPP. (Doc. # 11 ¶¶ 16, 18, 

19; Doc. # 16-1). Plaintiffs’ Loan is serviced by MGC Mortgage, Inc., a corporate affiliate of

LPP. (Doc. # 11 ¶¶ 18, 24). Plaintiffs had difficulty making their monthly mortgage payments 

and asked to be evaluated for loss mitigation options. (Doc. # 11 ¶ 24). 

FILED

 2016 May-23 AM 10:55

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 1 of 16
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On February 12, 2015, Plaintiffs were offered a loan modification. (Doc. # 11 ¶ 29). In 

order to accept the loan modification, Plaintiffs were required to execute a Closing Instruction 

Letter and a Loan Modification Agreement, and return both of those documents within 14 days 

to MGC, together with a $6000.00 down payment and a first modified mortgage payment of 

$1,046.70. (Doc. # 11 ¶¶ 29, 31; Doc. # 16-1 p. 25).

Plaintiffs signed and returned the Loan Modification Agreement, but failed to execute the 

Closing Instruction Letter setting out the conditions for acceptance of the loan modification, and 

also failed to remit the required $6000.00 down payment. (Doc. # 11 ¶¶ 31, 34). Furthermore, 

the first payment, which was due on March 1, 2015, was not received until March 23, 2015. 

(Doc. # 16-1 at 40). 

On March 30, 2015, MGC wrote Plaintiffs a letter advising that they were no longer

eligible for the loan modification offered to them because “they did not accept the offer for a

foreclosure alternative within the required time frame.” (Doc. # 11 ¶¶ 42, 46; Doc. # 16-1 pp. 

27-28). On May 19, 2015, Plaintiffs were notified that the Loan had been accelerated to maturity 

and the Property would be sold at foreclosure on June 22, 2015. (Doc. # 11 ¶ 50; Doc. # 16-1 

pp. 30-32). 

On or about June 18, 2015, Plaintiffs, through their counsel, wrote a letter to MGC 

pursuant to 12 C.F.R. § 1024.35 of Regulation X asserting that MGC committed an error by 

failing to implement and honor the Loan Modification Agreement. (Doc. # 11 ¶¶ 51-52; Doc. # 

16-1 pp. 35-36). MGC timely acknowledged receipt of the Notice of Error and cancelled the 

June 22, 2015 foreclosure sale so that it could fully investigate the claims raised in Plaintiffs’

Notice of Error. (Doc. # 11 ¶ 54). 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 2 of 16
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On July 16, 2015, MGC timely and fully responded Plaintiffs’ Notice of Error by 

explaining that the loan modification was not implemented because Plaintiffs did not accept

MGC’s loan modification offer by signing the Closing Instruction Letter and remitting a

$6000.00 down payment, nor did they make their first modified payment of $1046.70 by the

March 1, 2015 deadline. (Doc. # 16-1 pp. 40-41). 

A few days later, on July 22, 2015, Plaintiffs were again notified that the Loan had been

accelerated to maturity and the Property would be sold at foreclosure on September 4, 2015. 

(Doc. # 11 ¶¶ 56, 60; Doc. # 16-1 pp. 96-98).

The day before the scheduled foreclosure sale, Plaintiffs initiated this lawsuit. (Doc. # 1-

1). 

II. Standard of Review

The Federal Rules of Civil Procedure require only that the complaint provide “a short and 

plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 

8(a)(2). However, the complaint must include enough facts “to raise a right to relief above the 

speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Pleadings that 

contain nothing more than “a formulaic recitation of the elements of a cause of action” do not 

meet Rule 8 standards, nor do pleadings suffice that are based merely upon “labels and 

conclusions” or “naked assertion[s]” without supporting factual allegations. Twombly, 550 U.S. 

at 555, 557. In deciding a Rule 12(b)(6) motion to dismiss, courts view the allegations in the 

complaint in the light most favorable to the non-moving party. Watts v. Fla. Intl. Univ., 495 F.3d 

1289, 1295 (11th Cir. 2007). 

To survive a motion to dismiss, a complaint must Astate a claim to relief that is plausible 

on its face.@ Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 3 of 16
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factual content that allows the court to draw the reasonable inference that the defendant is liable 

for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although “[t]he 

plausibility standard is not akin to a ‘probability requirement,’” the complaint must demonstrate 

“more than a sheer possibility that a defendant has acted unlawfully.” Id. A plausible claim for 

relief requires “enough fact[s] to raise a reasonable expectation that discovery will reveal 

evidence” to support the claim. Twombly, 550 U.S. at 556.

In considering a motion to dismiss, a court should “1) eliminate any allegations in the 

complaint that are merely legal conclusions; and 2) where there are well-pleaded factual 

allegations, ‘assume their veracity and then determine whether they plausibly give rise to an 

entitlement to relief.’” Kivisto v. Miller, Canfield, Paddock & Stone, PLC, 413 Fed. Appx. 136, 

138 (11th Cir. 2011) (quoting Am. Dental Assn. v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 

2010)). That task is context specific and, to survive the motion, the allegations must permit the 

court based on its “judicial experience and common sense . . . to infer more than the mere 

possibility of misconduct.” Twombly, 550 U.S. at 556. Further, “courts may infer from the 

factual allegations in the complaint ‘obvious alternative explanation[s],’ which suggest lawful 

conduct rather than the unlawful conduct the plaintiff would ask the court to infer.” Am. Dental, 

605 F.3d at 1290 (quoting Iqbal, 556 U.S. at 682). If the court determines that well-pleaded 

facts, accepted as true, do not state a claim that is plausible, the claims are due to be dismissed. 

Twombly, 550 U.S. at 556.

III. Discussion

Defendants have moved to dismiss all eight of the claims asserted in Plaintiffs’

Complaint. For the reasons set forth below, Defendants’ Motion is due to be granted as to all 

counts. 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 4 of 16
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A. Count One - Negligence/Wantonness

In Count One of their Amended Complaint, Plaintiffs’ claim that MGC negligently 

and/or wantonly failed to “properly book the modification agreement which would have brought 

the loan current.” (Doc. # 11 ¶¶ 85-102). Plaintiffs further allege that Defendants failed to 

“[e]valuate the borrower for all loss mitigation options available to the borrower” and “[p]rovide 

the borrower with a notice in writing stating . . . which loss mitigation options, if any, it will 

offer to the borrower on behalf of the owner or assignee of the mortgage” under 12 C.F.R. § 

1024.41(b)-(j). This count actually asserts two different claims.

“The elements of a negligence claim are a duty, a breach of that duty, causation, and 

damage.” Armstrong Bus. Servs., Inc. v. AmSouth Bank, 817 So.2d 665, 679 (Ala. 2001). 

Wantonness is not just a higher level of negligence, but involves “the conscious doing of some 

act or the omission of some duty while knowing of the existing conditions and being conscious 

that, from doing or omitting to do an act, injury will likely or probably result.” Ex parte Essary, 

992 So. 2d 5, 9 (Ala. 2007) (emphasis in original).

Plaintiffs’ negligence and wantonness claims fail as a matter of law based on the 

allegations of Plaintiffs’ Amended Complaint. The allegations of the Amended Complaint 

establish that Defendants indeed fulfilled their obligations to evaluate Plaintiffs for a 

modification, and in fact offered Plaintiffs a modification, but Plaintiffs failed to fulfill the 

requirements to properly accept that modification. In their Amended Complaint, Plaintiffs have 

identified no legal duty with which Defendants failed to comply. Thus, there is no valid 

negligence claim here.

Moreover, “federal courts applying Alabama law have repeatedly rejected attempts to 

assert wantonness claims based on a lender’s actions handling and servicing a mortgage once the 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 5 of 16
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mortgage is executed.” U.S. Bank Nat. Ass’n v. Shepherd, 2015 WL 7356384, at *12 (Ala. Nov. 

20, 2015) (citing James v. Nationstar Mortgage, LLC, 92 F.Supp.3d 1190, 1198-1200 (S.D. Ala.

2015)). Therefore, Plaintiffs’ negligence and wantonness claims asserted in Count One of their 

Amended Complaint is due to be dismissed. 

B. Count Two - Breach of Contractual Obligations of Good Faith and Fair 

Dealing

Count II of Plaintiffs’ Amended Complaint alleges that Defendants had “a contractual 

duty to act in good faith and to deal fairly with [them] with regard to the note and mortgage,” and 

that Defendants breached this duty by allegedly failing to honor to the terms of the Note, 

Mortgage and/or Loan Modification Agreement. (Doc. # 11¶¶ 107-112). 

Alabama recognizes that every contract carries an implied obligation of good faith and 

fair dealing, which has been defined as “an implied covenant that neither party shall do anything 

which will have the effect of destroying or injuring the rights of the other party to receive the 

fruits of the contract.” Lloyd Noland Found., Inc. v. City of Fairfield Healthcare Auth., 837 So. 

2d 253, 267 (Ala. 2002) (quoting Seller v. Head, 261 Ala. 212, 217, 73 So.2d 747, 751 (1954)). 

“The parameters of this claim have not been well defined. However, it is clear that the 

obligation is not actionable unless the breach of that duty can be tied to the performance of a 

specific term of the contract.” Shedd v. Wells Fargo Home Mortgage, Inc., 2015 WL 6479537 

*5 (S.D. Ala. Oct. 26, 2015) (citing Lake Martin/Alabama Power Licensee Assoc. v. Alabama 

Power Co., Inc., 601 So. 2d 942, 945 (Ala. 1992) (emphasis added). More specifically, Alabama 

courts have recognized the duty of good faith and fair dealing when “the contract fails to specify 

all the duties and obligations intended to be assumed.” Lloyd Noland Found., 837 So.2d at 267. 

In those instances, “the law will imply an agreement to do those things that according to reason 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 6 of 16
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and justice the parties should do in order to carry out the purpose for which the contract was 

made.” Id.

In Count Two of their Amended Complaint, Plaintiffs set forth no factual allegations to 

support their conclusory contention that Defendants failed to act in good faith and deal fairly 

with Plaintiffs. (Doc. # 11 && 106-112). Plaintiffs have made a bald assertion that Defendants 

made it impossible for Plaintiffs to perform on their mortgage contract. (Doc. # 11 & 110; Doc. 

# 18 p.16). However, they have failed to point to any allegation that would tie their claim to any 

specific contractual term obligating Defendants in any way. Plaintiffs admit they were behind on 

their mortgage. They were offered a loan modification but, according to their own allegations, 

they failed to comply with the conditions necessary to accept that modification. At best, the 

factual allegations of Count Two merely assert that Defendants took certain actions that they 

were entitled to take under the contractual documents at issue. Because Plaintiffs’ Amended 

Complaint does not allege a breach of duty related to any specific contractual term, their claim 

for breach of implied duty of good faith and fair dealing is due to be dismissed. See Shedd, 2015 

WL 6479537 at *5.

C. Count Three - Breach of Contract

In Count III of their Complaint, Plaintiffs allege that Defendants breached the parties’

agreement by failing to “comply with essential terms of paragraph 2 [of the Mortgage] regarding 

the application of payment and the notice requirements of paragraph 21 [of the Mortgage].” 

(Doc. # 11 ¶ 114). Plaintiffs further allege that Defendants failed to properly apply payments 

and assessed improper fees and expenses. However, Plaintiffs’ conclusory allegations fail to 

identify or describe the misapplied payments, what fees or expenses were improperly assessed, 

and the contractual obligations requiring Defendants to accept the payments or prohibiting them 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 7 of 16
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from assessing the fees. (Doc. # 11 ¶¶ 116-118). Plaintiffs were undisputedly in default on their 

loan and undisputedly failed to perform the actions necessary to accept the offered loan 

modification. (Doc. # 11 && 29-34). 

Additionally, Plaintiffs’ admitted default entitled Defendants to enforce certain rights 

under the Note, including charging late fees and requiring the payment of the full amount of 

unpaid principal. (Doc. # 16-1 at 2-3). Furthermore, although Plaintiffs have made conclusory 

allegations that the Notice of Acceleration was not in compliance with the terms of the 

Mortgage, a review of the Notice of Acceleration (Doc. # 16-1 at 30-31) reveals that all of the 

conditions Plaintiffs allege were violated were in fact met. The parties had previously 

corresponded regarding a loan modification. Plaintiffs were approved for the loan modification 

and were offered the loan modification, but Plaintiffs did not fulfill all of the conditions of 

acceptance. Plaintiffs may have intended to accept the loan modification; but did not comply 

with all applicable prerequisites. (Doc. # 11 && 29-34). 

Plaintiffs’ Amended Complaint simply fails to identify any plausible breach by 

Defendants of an enforceable contractual term. Therefore, Plaintiffs’ breach of contract claim is 

due to be dismissed. 

D. Count Four - Violation of 12 C.F.R. § 1024.41(f)

Plaintiffs allege that Defendants violated 12 C.F.R. § 1024.41(f) by proceeding with 

foreclosure activities when Plaintiffs had submitted a loss mitigation application. (Doc. # 11 && 

132-141). 

Title 12 C.F.R. § 1024.41(f) provides as follows:

(f) Prohibition on foreclosure referral.

(1) Pre-foreclosure review period. A servicer shall not make the first notice or 

filing required by applicable law for any judicial or non-judicial foreclosure 

process unless:

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 8 of 16
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(i) A borrower’s mortgage loan obligation is more than 120 days delinquent;

(ii) The foreclosure is based on a borrower’s violation of a due-on-sale clause; or

(iii) The servicer is joining the foreclosure action of a subordinate lienholder.

(2) Application received before foreclosure referral. If a borrower submits a 

complete loss mitigation application during the pre-foreclosure review period set

forth in paragraph (f)(1) of this section or before a servicer has made the first 

notice or filing required by applicable law for any judicial or non-judicial 

foreclosure process, a servicer shall not make the first notice or filing required by 

applicable law for any judicial or non-judicial foreclosure process unless:

(i) The servicer has sent the borrower a notice pursuant to paragraph (c)(1)(ii) of 

this section that the borrower is not eligible for any loss mitigation option and the 

appeal process in paragraph (h) of this section is not applicable, the borrower has 

not requested an appeal within the applicable time period for requesting an 

appeal, or the borrower’s appeal has been denied;

(ii) The borrower rejects all loss mitigation options offered by the servicer; or

(iii) The borrower fails to perform under an agreement on a loss mitigation option.

12 C.F.R. § 1024.41

The applicable regulation requires a servicer to accept and process one complete loss 

mitigation application. 12 C.F.R. § 1024.41(i) (“A servicer is only required to comply with the 

requirements of this section for a single complete loss mitigation application for a borrower’s 

mortgage loan account.”). See Mortgage Servicing Rules Under the Real Estate Settlement 

Procedures Act (Regulation X), 78 Fed. Reg. 10696-01, 10836 (Feb. 14, 2013) (“The [Consumer 

Financial Protection] Bureau believes that it is appropriate to limit the requirements in § 1024.41 

to a review of a single complete loss mitigation application. Specifically, the Bureau believes 

that a limitation ... to a single complete loss mitigation application provides appropriate 

incentives for borrowers to submit all appropriate information in the application ....”).

Although Plaintiffs allege in Count Four that “they had not rejected an offer nor failed to 

comply with the terms of an agreement,” the allegations of their own Amended Complaint 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 9 of 16
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establish that Defendants accepted and processed Plaintiffs’ loss mitigation application and 

offered Plaintiffs a modification, but that Plaintiffs failed to comply with the instructions on how 

to properly accept the loan modification. In particular, Plaintiffs were instructed to “return 2 

copies” of the Modification Agreement and “return 1 copy” of the Cover page. As to the 

Modification Agreement, the instructions further directed Plaintiffs to return “two signed and 

notarized copies to us along with a certified check or money order for the required $6,000.00 

down payment and the first modified payment of $1,046.70 due for March 1, 2015 in the prepaid envelope.” (Doc. # 11 at && 29-35; Doc. # 16-1 at 25)). Plaintiffs allege that they 

“executed the Loan Modification Agreement ... [and] returned the agreement to MGS next day 

air via FedEx.” (Doc. # 11 at & 34). Nowhere do Plaintiffs allege that they complied with the 

other instructions to accept the Loan Modification, including making the required payments.

Under 12 C.F.R. § 1024.41, a servicer is prohibited from proceeding with a foreclosure 

sale until the servicer either (a) notifies the borrower of its decision regarding loss mitigation 

options, (b) the borrower rejects all loss mitigation options offered, or (c) the borrower fails to 

perform under an agreement on a loss mitigation option. Ramos v. Wells Fargo Bank, N.A., 2016 

WL 233142 *4 (S.D. Fla. Jan. 13, 2016); Lage v. Ocean Loan Servicing LLC, 2015 WL 7294854 

(S.D. Fla. Nov. 19, 2015) (citing 12 C.F.R. § 1024.41(g)). The loan modification closing 

instructions required Plaintiffs to do more than return an executed copy of the Loan Modification 

agreement. The instructions required them to return “two signed and notarized copies to us along 

with a certified check or money order for the required $6,000.00 down payment and the first 

modified payment of $1,046.70 due for March 1, 2015 in the pre-paid envelope” within 14 days 

of receipt. (Doc. # 11 at && 29-35; Doc. # 16-1 at 25) (emphasis added). Plaintiffs did not send 

the $6,000 down payment, nor did they make the first payment by March 1, 2015. (That 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 10 of 16
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payment was not received until March 23, 2015. (Doc. # 16-1 at 40)). By failing to comply with 

all of the instructions to accept the loan modification, Plaintiffs failed to accept Defendants’ loan 

modification agreement. At that point, Defendants had fulfilled all obligations under 12 C.F.R. § 

1024.41.1 

For all these reasons, Plaintiffs’ claim alleging a violation of 12 C.F.R. § 1024.41(f) is 

due to be dismissed.

E. Count Five - Violation of 12 C.F.R. § 1024.41(c)

Title 12 C.F.R. § 1024.41(c), provides: “[i]f a servicer receives a complete loss mitigation 

application ... within 30 days of receiving a borrower’s complete loss mitigation application, a 

servicer shall: (a) [e]valuate the borrower for all loss mitigation options available to the 

borrower; and (b) [p]rovide the borrower with a notice in writing stating the servicer’s 

determination of which loss mitigation options, if any, it will offer to the borrower on behalf of 

the owner or assignee of the mortgage[.]” Ramos, 2016 WL 233142, at *4. 

Count Five of Plaintiffs’ Complaint alleges that Defendants violated 12 C.F.R. § 

1024.41(c) because they “wholly failed to evaluate the borrower for all loss mitigation options 

available and provide written notice to the borrower stating which loss mitigation options, if any, 

it will offer to the borrower ... .” (Doc. # 11 ¶ 149). For reasons similar to those already 

addressed, however, this allegation is belied not only by the allegations of the Amended 

Complaint which establish that Defendants evaluated Plaintiffs for loss mitigation and offered a 

loan modification (Doc. # 11 ¶¶ 24 - 31), but also by the correspondence to Plaintiffs offering the 

 

1

In addition, the court questions whether Plaintiffs’ claim under 12 C.F.R. § 1024.41(f) is ripe. See 

Simmons v. Wells Fargo Bank, N.A., 2015 WL 4759441 *4 (D. N.H. Aug. 11, 2015) (citing Wenegieme v. Bayview 

Loan Servicing, 2015 WL 2151822 *2 n. 3 (S.D. N.Y. May 7, 2015)). In Wenegieme, the plaintiffs asserted a claim 

that the defendants were liable to them for violating 12 C.F.R. § 1024.41(f). Wenegieme, 2015 WL 2151822 at *2. 

The court dismissed that claim on grounds that a § 1024.41(f) claim does not become ripe until the plaintiff has lost 

his or her property to foreclosure. Id; see also 2015 WL 4759441 at *4.

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 11 of 16
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loan modification (Doc. # 16-1 at 25). Therefore, Count Five of Plaintiffs’ Amended Complaint 

is due to be dismissed.

F. Count Six - Violations of the Fair Debt Collection Practices Act 15 U.S.C. §

 1692 et. seq.

Plaintiffs’ Amended Complaint contains two count Sixes. The first Count Six of 

Plaintiffs’ Amended Complaint utterly fails to state a claim. (Doc. # 11 ¶¶ 153-159). That count 

sets forth the purpose for which 15 U.S.C. § 1692 was enacted (Doc. # 11 ¶¶ 153-155) and 

makes the conclusory assertion that Defendants’ unspecified “acts or omissions ... constitute 

numerous and multiple violations” of the Federal Debt Collection Practices Act (“FDCPS”). 

(Doc. # 11 ¶ 158). The problem here is that this Count Six is virtually devoid of any factual 

allegations. Pleadings that are based merely upon “labels and conclusions” or “naked 

assertion[s]” without supporting factual allegations do not suffice to withstand a motion to 

dismiss. Twombly, 550 U.S. at 555, 557. 

Moreover, Congress enacted the FDCPA to “eliminate abusive debt collection practices 

by debt collectors. . . .” 15 U.S.C. § 1692(e) (emphasis added). The FDCPA both requires and 

forbids specific conduct by debt collectors. See, e.g., id. at §§ 1692g(a) (collector must provide 

thirty-day notice to dispute debt), 1692e (prohibition of use of “false, deceptive, or misleading 

representation or means in connection with” debt collection). To prevail on a FDCPA claim, a 

plaintiff must show, among other things, that (1) Defendant is a “debt collector” and (2) the 

challenged conduct is related to debt collection. Reese v. Ellis, Painter, Ratterree & Adams, 

LLP, 678 F.3d 1211, 1216 (11th Cir. 2012).

“A debt collector is anyone whose principal business is the collection of debts or the 

enforcement of security instruments or anyone who regularly attempts to collect debts owed to 

another.” Saint Vil v. Perimeter Mortgage Funding Corp., 630 F. App’x 928, 930 (11th Cir. 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 12 of 16
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2015) (citing 15 U.S.C. § 1692a(6)) (emphasis added). However, “an enforcer of a security 

interest, such as [a mortgage company] foreclosing on mortgages of real property . . . falls 

outside the ambit of the FDCPA except for the provisions of section 1692f(6).”

2

 Warren v. 

Countrywide Home Loans, Inc., 342 Fed. Appx. 458, 460-61 (11th Cir. 2009) (per curiam) 

(collecting cases); accord Ausar-El ex el. Small, Jr. v. BAC (Bank of America) Home Loans 

Servicing LP, 448 Fed. Appx. 1, 1 (11th Cir. 2011) (per curiam) (“an enforcer of a security 

interest only qualifies as a ‘debt collector’ for the purpose of § 1692f(6)”); see also Dunavant v. 

Sirote & Permutt, P.C., 603 Fed. Appx. 737, 739-40 (11th Cir. 2015) (favorably discussing 

Warren’s holding). 

Moreover, and in any event, Defendant MGC assumed the mortgage debt in 

approximately 2010 (Doc. # 11 & 19), years before instituting foreclosure proceedings, which 

reasonably suggests that Defendants’ business is not primarily to collect debts but rather to 

finance and service mortgages. Thus, Defendants are not a “debt collectors” as that term is 

defined by the FDCPA.

Finally, the potential foreclosure of Plaintiffs’ home is not a “debt collection” for 

purposes of the FDCPA. See Roberts v. Chase Home Fin., No. 12-1883, 2012 WL 2862033, at 

*2 (N.D. Ala. July 11, 2012) (citing Warren, 342 Fed. Appx. at 460-61). “[I]f a person enforcing 

a security interest is not a debt collector, it likewise is reasonable to conclude that enforcement of 

a security instrument through the foreclosure process is not debt collection for purposes of the 

[FDCPA].” Warren, 342 Fed. Appx. at 460.

 

2

Section 1692f(6) does not apply here. It prohibits “[t]aking or threatening to take any nonjudicial action 

to effect dispossession or disablement of property if – (A) there is no present right to possession of the property 

claimed as collateral through an enforceable security interest; (B) there is no present intention to take possession of 

the property; or (C) the property is exempt by law from such dispossession or disablement.” 15 U.S.C. § 1692f(6). 

Plaintiffs have not alleged a threat to take any nonjudicial action to effect dispossession or disablement of property. 

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 13 of 16
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For all these reasons, the first Count Six of Plaintiffs’ Amended Complaint, alleging a 

violation of 15 U.S.C. § 1692, is due to be dismissed.

G. Count Six [sic] - Violation of 12 C.F.R. § 1024.35

The second Count Six contained in Plaintiffs’ Complaint asserts that, although 

Defendants timely responded to Plaintiffs’ Notice of Error, they “failed to provide a meaningful 

investigation of the errors to correct the errors.” (Doc. # 11 ¶¶ 162-165). Plaintiffs further allege 

the conduct of MGC with regard to the notices of errors “constitutes a willful violation of the 

applicable provisions of Regulation X.” (Doc. # 11 ¶ 165). Again, however, Plaintiffs have not 

provided any factual detail to support these conclusory allegations. Thus, again, the allegations

of this count do not suffice to withstand a motion to dismiss. Twombly, 550 U.S. at 555, 557. 

Moreover, Regulation X, codified at 12 C.F.R. § 1024, delineates procedures for 

responding to a borrower’s Notice of Error. The regulations impose the following obligations 

upon a servicer with respect to its response to a Notice of Error:

(e) Response to notice of error.

(1) Investigation and response requirements.

(i) In general[,] ... a servicer must respond to a notice of error by either:

(A) Correcting the error or errors identified by the borrower and providing the 

borrower with a written notification of the correction, the effective date of the 

correction, and contact information, including a telephone number, for further 

assistance; or

(B) Conducting a reasonable investigation and providing the borrower with a 

written notification that includes a statement that the servicer has determined that 

no error occurred, a statement of the reason or reasons for this determination, a 

statement of the borrower’s right to request documents relied upon by the servicer 

in reaching its determination, information regarding how the borrower can request 

such documents, and contact information, including a telephone number, for 

further assistance.

12 C.F.R. § 1024.35(e) (emphasis added).

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 14 of 16
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Plaintiffs’ counsel’s Notice of Error reported as follows:

On February 22, 2015 the Duncans executed and timely returned (via FedEx) a

loan modification agreement to MGC Mortgage, Inc., which modified the UPB to

$79,534.02 making the first payment of $867.25 due the first day of March 2015.

The March 16, 2015 statement clearly acknowledged receipt of the modification

and noted “You accepted a Modification. Please refer to your documentation.” In 

accordance with the modification, the Duncans made their March payment in the 

amount of $867.25. However, on March 23, 2015 MGC Mortgager, Inc. [sic]

wrongfully returned the check indicating the account had been referred to Sirote

for foreclosure. When the Duncans contacted Sirote they were advised the file

was closed on December 26, 2014 because of the acceptance of a loan

modification. Then on March 30, 2015 MGC Mortgage, Inc. wrote the Duncans

wrongfully advising them the modification was denied because they did not

accept the modification within the required timeframe.

(Doc. # 11 at & 52; Doc. # 16-1 at 35-36). 

Defendants appropriately acknowledged the Notice of Error and provided a substantive 

response to the Notice within thirty days. (Doc. # 16-1 at 40-94). That response indicated, as is 

otherwise established by the allegations of Plaintiffs’ own Amended Complaint, that although 

Plaintiffs “were approved for a loan modification in February 2015,” Defendants “did not receive 

the signed cover letter [] or the $6,000 required down payment,” and that “the first payment, 

which was due on March 1, 2015, was not received until March 23, 2015.” (Doc. # 16-1 at 40). 

Defendants fully complied with their obligations under 12 C.F.R. § 1024.35 in response to 

Plaintiffs’ Notice of Error. Therefore, the second Count Six of Plaintiffs’ Amended Complaint, 

alleging a violation of 12 C.F.R. § 1024.35, is due to be dismissed.

H. Count Seven - Declaratory and Injunctive Relief

To state a valid claim for injunctive relief, a plaintiff must show: “(1) that he has 

prevailed in establishing the violation of the right asserted in his complaint; (2) there is no 

adequate remedy at law for the violation of this right; (3) irreparable harm will result if the court 

does not order injunctive relief; and (4) if issued, the injunction would not be adverse to the 

public interest.” Thomas v. Bryant, 614 F.3d 1288, 1317 (11th Cir. 2010).

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To establish any right to declaratory and injunctive relief, a plaintiff must establish that 

he has “prevailed in establishing the violation of the right asserted in his complaint.” The only 

rights which Plaintiffs contend were violated arose in connection with other claims in Plaintiffs’

Amended Complaint. For the reasons discussed above, all of those other claims are due to be 

dismissed. Therefore, it follows that Plaintiffs’ claim for declaratory and injunctive relief is 

likewise due to be dismissed.

IV. Conclusion

For the foregoing reasons, all of the claims in Plaintiffs’ Amended Complaint are due to 

be dismissed. A separate order will be entered.

DONE and ORDERED this May 23, 2016.

_________________________________

R. DAVID PROCTOR

UNITED STATES DISTRICT JUDGE

Case 2:15-cv-01792-RDP Document 24 Filed 05/23/16 Page 16 of 16