Court Opinion

ID: 1039287
Source: CourtListenerOpinion
Date Created: 2013-08-29 21:15:47.348857+00
Date Added: 2024-06-11T15:14:13.071051
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 13-1214

ROGER JALDIN; JANET JALDIN,

                Plaintiffs - Appellants,

          v.

RECONTRUST COMPANY, N.A.; BANK OF AMERICA, N.A.; JOHN DOE,

                Defendants - Appellees.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.     Anthony J. Trenga,
District Judge. (1:12-cv-01117-AJT-JFA)

Submitted:   August 13, 2013                 Decided:   August 29, 2013

Before GREGORY, SHEDD, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Gregory   Bryl,   BRYL  LAW  OFFICES,  Washington, D.C.,   for
Appellants.    Joseph Jason Patry, BLANK ROME LLP, Washington,
D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      Roger      and   Janet     Jaldin           appeal        the   district       court’s

dismissal of their claims for declaratory and injunctive relief,

breach of contract, removal of cloud on title, and violations of

the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. and

the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692

et seq.    Finding no error, we affirm.

                                             I.

      On   May    9,   2007,    Mr.        Jaldin    executed         a    deed    of   trust

securing a loan on the property located at 7370 Kincheloe Road

in   Clifton,     Virginia.          The    deed     of    trust,         which   secured   a

promissory note in the amount of $700,000, named “Countrywide

Home Loans, Inc., dba America’s Wholesale Lender” as the lender.

Paragraph 22 of the deed of trust establishes that, in the event

of default, the “Lender shall give notice to Borrower prior to

acceleration.”         J.A.    53.         The    deed     of    trust     specifies     that

notice of intent to accelerate must allow the Borrower thirty

days from the date of receipt of the notice to cure the default.

      In   November     2010,    BAC       Home     Loans       Servicing,        Defendant-

Appellee Bank of America, N.A.’s (BANA) predecessor in interest,

                                             2
sent a notice of intent to accelerate to the Jaldins 1 stating

that they had until December 16, 2010, to cure their default by

paying    the   overdue   amount      of   $11,927.98.         The    notice,      dated

November 16, 2010, arrived on November 22, 2010.                          The Jaldins

did not cure the default.          However, BAC Home Loans Servicing did

not take any action against the Jaldins or the subject property.

     On    October     26,    2011,    BANA      executed     a     substitution     of

trustees for the deed of trust, appointing Defendant-Appellee

ReconTrust Company, N.A., 2 based in Texas, and ALG Trustee, based

in Virginia, as the new deed of trust trustees.                      On October 27,

2011, ReconTrust sent the Jaldins a letter stating that it was

accelerating     the   loan    referenced        in   the    deed    of   trust.      In

November or December 2011, April 2012, and July or August 2012,

ReconTrust sent Jaldin separate notices of upcoming trustee’s

sales at which the property would be sold.                    However, ReconTrust

never held a trustee’s sale nor sold the property.                          The Jaldins

retain    possession,     even   though        they   have   not     made    a   payment

since September 2010.

     1
       Even though the deed of trust and related documents
identify Mr. Jaldin as the Borrower, the first amended complaint
states that Jaldin’s wife, Janet, also has an interest in the
property as a title holder.   She is a named Plaintiff in this
case. As such, we treat the Jaldins as a unit for purposes of
our analysis.
     2
         ReconTrust is a wholly-owned subsidiary of BANA.

                                           3
     In December, 2011, upon the Jaldins’ request, BANA sent a

letter to the Jaldins identifying the owner of the note as “Bank

of   America,    N.A.,      Successor      by     merger       to        BAC   Home   Loan

Servicing, LP FKA Countrywide Home Loan Servicing, LP for the

Benefit of the Halo 2007-2 Trust.”                      J.A. 25.           The Jaldins,

however,   did   not    find   BANA      listed    on    the    publicly        available

documents associated with the HALO 2007-2 Trust.                           On April 25,

2012, the Jaldins’ counsel wrote to BANA, again requesting the

identity of the owner of the debt.                BANA responded, stating that

the owner of the debt was “Deutsche Bank National Trust Company,

as Trustee for holders of the HSI Asset Loan Obligation Trust

2007-2.”    J.A. 236.

     On August 24, 2012, the Jaldins filed suit against BANA,

ReconTrust, and a John Doe Defendant in the Circuit Court of

Fairfax    County,     Virginia,    seeking       declaratory            and   injunctive

relief,    removal     of   cloud   on    title,    breach          of    contract,    and

various TILA and FDCPA violations.                BANA and ReconTrust removed

the case to federal court and made a motion to dismiss pursuant

to Federal Rule of Civil Procedure 12(b)(6).

     On November 9, 2012, the district court granted the motion

to dismiss with leave to amend.               After the Jaldins filed their

Amended Complaint, BANA and ReconTrust again moved to dismiss.

The district court granted the motion and denied the Jaldins’

                                          4
motion for leave to amend.           The Jaldins filed a timely appeal of

which we have jurisdiction pursuant to 28 U.S.C. § 1291.

                                        II.

     We   review     a   district     court’s    dismissal       of    a    complaint

pursuant to Federal Rule of Civil Procedure 12(b)(6) de novo,

accepting all factual allegations in the complaint as true and

drawing all reasonable inferences in favor of the non-moving

party.    Kensington        Volunteer    Fire    Dep’t,       Inc.    v.    Montgomery

Cnty., Md., 684 F.3d 462, 467 (4th Cir. 2012).

                                        A.

     As a preliminary matter, BANA and ReconTrust argue that the

claims for injunctive and declaratory relief are moot because

they have cancelled the trustee sale.                   Appellee’s Br 11.          The

Constitution    authorizes      federal       courts     to    hear    “Cases”    and

“Controversies,” but forbids consideration of matters that are

no longer “live” or where the parties “lack a legally cognizable

interest in the outcome.”            U.S. Const. art. III, § 2; Powell v.

McCormack,     395   U.S.     486,    496     (1969).         There    is    a   well-

established exception to the mootness doctrine, however, where a

controversy is “capable of repetition, yet evading review.”                        S.

Pac. Terminal Co. v. Interstate Commerce Comm’n, 219 U.S. 498,

515 (1911).     Even though currently there is no pending sale of

the Jaldins’ property, if we find these claims moot, BANA and

                                         5
ReconTrust would be able to schedule and execute such a sale in

short order.         Indeed, the Jaldins allege facts indicating that

BANA and ReconTrust have initiated and canceled at least three

trustee sales.        There is no indication that BANA and ReconTrust

do not have plans to initiate such a sale upon resolution of

this case.      Thus, we perceive no basis for concluding that the

Jaldins’ claims for injunctive and declaratory relief are moot.

                                            B.

     The Jaldins first argue that ReconTrust cannot act as a

deed of trust trustee with the power to execute a foreclosure in

Virginia because Virginia Code § 55-58.1 does not allow out-of-

state    entities     to     serve    as     trustees     of   a   security       trust.

Appellant’s Br. 13-26.          BANA and ReconTrust urge us to find that

the 12 U.S.C. § 92(a) of the National Banking Act (NBA) preempts

Virginia Code § 55-58.1.           Appellee’s Br. 12-24.

        Preemption    is    fundamentally         a   question     of    congressional

intent.     English v. Gen. Elec. Co., 496 U.S. 72, 78-79 (1990).

There     are   three      types     of    federal      preemption:       (1)    express

preemption, where Congress explicitly establishes its intent to

preempt     state     law;     (2)        field   preemption,       where       Congress

pervasively occupies an area of law such that there is no room

left for states to supplement the relevant federal law, and; (3)

conflict    preemption,       where       state   law   actually        conflicts   with

federal law.         Decohen v. Capital One, N.A., 703 F.3d 216, 223

                                             6
(4th   Cir.       2012).      Here,      BANA       and    ReconTrust       restrict         their

argument      to    conflict       preemption.            Courts     will    find       conflict

preemption where it is impossible for a party to comply with

both state and federal law or where state law “stands as an

obstacle      to     the    accomplishment           and     execution           of    the    full

purposes and objectives of Congress.”                        English, 496 U.S. at 79

(internal quotations omitted).

       The    Supreme       Court    has      clarified         that    “grants         of    both

enumerated         and    incidental      ‘powers’         to    national         banks      [are]

grants       of    authority       not    normally         limited         by,    but        rather

ordinarily pre-empting, contrary state law.”                               Barnett Bank of

Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 32 (1996).                                   The NBA

grants national banks the power to engage in mortgage lending.

12 U.S.C. § 371(a); Watters v. Wachovia Bank, N.A., 550 U.S. 1,

12 (2007).         “A state law may not significantly burden a national

bank’s own exercise of its real estate lending power, just as it

may not curtail or hinder a national bank’s efficient exercise

of   any     other       power.”      Id.     at     13.        As   the    Eighth        Circuit

explained in a recent decision, “it is . . . clear that the

power to foreclose is incidental to the express power to make

mortgage loans.”           JPMorgan Chase Bank, N.A. v. Johnson, 719 F.3d

1010, 1017 (8th Cir. 2013).                 Indeed, “[t]he power to engage in

real   estate       lending    would     be     rendered        a    nullity      if    national

                                                7
banks could not also foreclose when the borrower defaulted.”

Id. at 1018 (internal quotations omitted).

     ReconTrust is authorized by the Office of the Comptroller

of the Currency (OCC) as a national bank.                      Section 92a(a) of the

NBA states that the OCC may grant authority to national banks to

act as “trustee,” and in all other “fiduciary capacit[ies].”                             12

U.S.C. § 92a(a).         However, Virginia Code § 55-58.1(2) prevents a

national    bank     that      does    not     have    its     principal       office    in

Virginia from acting as the trustee of a security trust.                                 As

such, Virginia law stifles the ability of a national bank such

as ReconTrust from acting as a deed of trust trustee and from

executing foreclosures.           Therefore, Virginia law “substantially

interferes”       with    ReconTrust’s            ability    to      execute     a    power

incidental to its express mortgage lending powers under the NBA.

See JPMorgan Chase Bank, 719 F.3d at 1018.

     It    is    true,    as    the        Jaldins    argue,      that   the    NBA     also

subjects    national      banks       to    state    laws,     but    only     insofar    as

state-based competitors are subject to the same laws.                           12 U.S.C.

§ 92a(b).       Section 92a(b) establishes that

     [w]henever the laws of such State authorize or permit
     the exercise of any or all of the foregoing powers by
     State banks, trust companies, or other corporations
     which compete with national banks, the granting to and
     the exercise of such powers by national banks shall
     not be deemed to be in contravention of State or local
     law within the meaning of this section.

                                              8
Because    Virginia         Code    §    55-58.1      grants       state      banks,   but    not

national      banks    that        do    not    have       their    principal       office    in

Virginia, the power to serve as trustee of a security trust, the

NBA preempts the law.                   See also Cox v. ReconTrust Co., N.A.,

2011 WL 835893, at *3 – 5 (D. Utah Mar. 3, 2011) (unpublished)

(explaining that where state law gives trustee powers to state

entities it does not give to national banks, the NBA preempts

the state law).            The OCC, the agency authorized to implement the

NBA,   has    issued       interpretive         letters       that       provide    additional

support      for     this     conclusion.              A    1995        interpretive       letter

establishes         that    “[a]        state   may        limit    national       banks     from

exercising any or all fiduciary powers in that state, but only

if it also bars its own institutions from exercising the same

powers.”      OCC Interpretive Letter No. 695, 1995 WL 788827, at *5

(1995);      see    also     OCC    Interpretive           Letter       No.   1103,    2008   WL

7448056, at *2 (2008) (explaining that the NBA preempted a North

Carolina      law    that     placed       requirements            on    out-of-state      banks

exercising fiduciary duties that it did not place on state banks

exercising fiduciary duties).

       The Jaldins argue that the NBA does not preempt § 55-58.1

because      deed     of     trust       trustees      are     not       true    trustees     or

fiduciaries within the coverage of the NBA.                             Appellant’s Br. 18.

As such, they urge us to find that ReconTrust cannot derive

                                                9
authority to engage in debt collection by foreclosure by virtue

of its permit from the OCC.          Id. at 23.

       Even if we find that reference to “trustees” in § 92a(a) of

the NBA refers to a different type of trustee, deed of trust

trustees fit within the parameters of the catch-all provision of

§ 92a(a) which applies the NBA to national banks serving in “any

other fiduciary capacity.”           The Supreme Court of Virginia has

repeatedly explained that deed of trust trustees have fiduciary

duties.       Smith v. Credico Indus. Loan Co., 362 S.E.2d 735, 736

(Va. 1987) (“A trustee under a deed of trust is a fiduciary for

both       debtor   and   creditor   and      must   act   impartially      between

them.”) (citing Whitlow v. Mountain Trust Bank, 207 S.E.2d 837,

840 (Va. 1974)). 3          Further, Virginia law governing fiduciaries

includes       provisions     applying     explicitly      to   deed   of    trust

trustees.       See Va. Code. Ann. § 64.2-1423.

       We find that Virginia Code § 55-58.1 “stands as an obstacle

to the accomplishment and execution of the full purposes and

objectives of Congress” because it interferes with ReconTrust’s

       3
       The Jaldins also cite to a Virginia Supreme Court case,
Warner v. Clementson, 492 S.E.2d 655, 657 (Va. 1997), to support
the contrary proposition that deed of trust trustees are not
bound by fiduciary duties.     However, the court in that case
distinguished Smith and Whitlow by explaining that those cases
involved an action by a debtor against trustees while Warner
dealt with a case by a guarantor against a trustee. Id. at 657
n.3. Given that the Jaldins are debtors, not guarantors, Smith
and Whitlow provide the relevant authority in this case.

                                         10
authority under the NBA to act as a deed of trust trustee and to

execute foreclosures -- a power incidental to its real estate

lending power.        See English, 496 U.S. at 79; JPMorgan Chase

Bank, 719 F.3d at 1017-18.

                                         C.

       The Jaldins next argue that the district court improperly

dismissed their claims for breach of contract because BANA and

ReconTrust did not comply with the terms of the deed of trust.

Appellant’s Br. 27-31.           Specifically, they complain that BANA

and ReconTrust improperly drafted and delivered acceleration and

trustee sale notices.       Id. at 27.

       BANA’s    predecessor     in     interest   appears    to    have   sent     a

notice of intent to accelerate to the Jaldins without providing

adequate time to cure.           However, the Jaldins fail to show how

any such violation has damaged them.               See Filak v. George, 594

S.E.2d 610, 614 (Va. 2004) (explaining that “injury or damage to

the plaintiff caused by the breach of the obligation” is an

element of any action for breach of contract).                     There has been

no   foreclosure     and   the   Jaldins      remain    in   possession     of   the

property.       Their contention that the breach in the terms of the

deed   of   trust    damaged     them    because   it   forced     them    to    hire

counsel and other “professionals” is unavailing.                   There does not

appear to be any dispute that the Jaldins were in default of

their loan.         Nothing establishes that they hired counsel and

                                         11
professionals         because     the     notice        of    intent       to    accelerate

provided too little time to cure.                     See Filak, 594 S.E.2d at 614.

Nor   do     the     Jaldins    provide         any     factual      support         in        their

complaint for their allegation that the breach caused “emotional

distress, embarrassment, and loss of enjoyment of life.”                                         See

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining that a

pleading      that     “tenders      naked        assertions        devoid      of        further

factual      enhancement”       will      not     survive      a    motion      to        dismiss

(internal      quotations       omitted)).             We    find    no    error          in    the

district court’s decision to dismiss the Jaldins’ claims for

breach of contract.

                                             D.

      The Jaldins next argue that the district court erred in

dismissing its TILA claims that alleged a failure to “disclose

the   name    [of     the    owner   of    the     debt]     either       directly         (under

§ 1641(g)) or through [BANA] (under § 1641(f)(2)).”                             Appellant’s

Br.   32.      TILA    requires      that       “[u]pon      written      request         by    the

obligor, the servicer shall provide the obligor, to the best

knowledge of the servicer, with the name, address, and telephone

number of the owner of his obligation or the master servicer of

the obligation.” 4          15 U.S.C. § 1641(f)(2).

      4
       TILA also provides that a “new owner or assignee of [the]
debt” must provide identifying information to the borrower upon
request. 15 U.S.C. § 1641(g).

                                             12
       According to the Jaldins’ complaint, when they made written

request for clarification pursuant to TILA, BANA’s December 2,

2011, response identified the owner of the debt as “Bank of

America, N.A. . . . for the benefit of the HALO 2007-2 Trust.”

J.A. 236.       In response to a second request, BANA sent a letter

stating that the owner of the debt was “Deutsche Bank National

Trust Company, as Trustee for holders of the HSI Asset Loan

Obligation Trust 2007-2.”           While BANA may have failed in its

first response to identify Deutsche Bank, each response to the

Jaldins identified the HALO Trust as the ultimate owner of the

debt.     See O’Dell v. Deutsche Bank Nat. Trust Co., No. 1:12-cv-

985,    2013    WL   2389874,    at    *12     (E.D.    Va.   May   30,   2013)

(unpublished) (finding that where a loan was placed in a trust,

the trust was the owner of the debt).                  Further, the Jaldins’

complaint admits that the publicly available documents for the

HALO 2007-2 trust identified Deutsche Bank as trustee for the

HALO 2007-2 trust.          Therefore, we find that BANA’s responses,

while not a model of clarity, were sufficient under TILA.

       The Jaldins’ TILA claims also fail because they made no

showing of detrimental reliance.               Detrimental reliance is an

element    of    a   TILA   claim     for    actual    damages.     Turner   v.

Beneficial Corp., 242 F.3d 1023, 1026 (11th Cir. 2001); Santos

v. Fed. Nat’l Mortg. Ass’n, 889 F. Supp. 2d 1363, 1368 (S.D.

Fla. 2012) (dismissing TILA claim under § 1641(f)(2) for failure

                                        13
to plead sufficient facts supporting detrimental reliance).                          The

Jaldins’    claims    for    damages       under      TILA   do    not    include    any

explanation    of    how    the    alleged      violation      caused     detrimental

reliance.     As such, we conclude that the district court did not

err in dismissing the Jaldins’ TILA claims.

                                           E.

     The Jaldins’ next argue that ReconTrust violated the FDCPA

by threatening to take non-judicial action when it had “no right

to do so,” because ReconTrust was acting as an out-of-state deed

of trust trustee.           Appellant’s Br. 35.              Further, they allege

that BANA violated the FDCPA by falsely claiming it was the

owner of the Jaldins’ debt.               Id.      As explained above, the NBA

authorized    ReconTrust      to    take    foreclosure       action      against    the

Jaldins.     Further, BANA’s response to the Jaldins’ request for

clarification       regarding      the    owner     of    their    debt    accurately

identified    the    HALO    2007-2      Trust.        Because     we    have   already

addressed    these    issues,      we    need   not      recycle   the    analysis    to

dispose of the Jaldins’ FDCPA claims.

     Similarly, we need not address the Jaldins’ claim that the

district court erred when it dismissed their “remove cloud on

title” claim.       That claim rested on the Jaldins’ assertion that

BANA unlawfully appointed ReconTrust as the substitute trustee

of the deed of trust.             Again, ReconTrust derives its relevant

authority from the NBA, which preempts Virginia Code 55-58.1

                                           14
insofar as it prevented ReconTrust from acting in this capacity.

We    find   that    the     district   court    committed    no   error    when    it

dismissed the Jaldins’ claims for violation of the FDCPA and

removal of cloud on title.

                                         III.

       We dispense with oral argument because the facts and legal

contentions are adequately presented in the materials before the

court and argument would not aid in the decisional process.                        For

the    reasons      stated    above,    the    ruling   of   the   district   court

granting BANA and ReconTrust’s motion to dismiss is

                                                                           AFFIRMED.

                                          15