Roger Jaldin v. ReconTrust Company, N.A. , 539 F. App'x 97 ( 2013 )

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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. § 1692et 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’
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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
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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
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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.
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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
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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.
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