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Sykes v. RBS Citizens, N.A.

United States District Court, D. New Hampshire

March 4, 2014

Lewis B. Sykes, Jr.
RBS Citizens, N.A. et al

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For Lewis B. Sykes, Jr., Plaintiff: Kristina Cerniauskaite, Terrie L. Harman, LEAD ATTORNEYS, Harman Law Offices, Portsmouth, NH.

For RBS Citizens, N.A., CCO Mortgage Corporation, Federal National Mortgage Association, Defendants: Andrea Lasker, LEAD ATTORNEY, Harmon Law Offices PC, Newton, MA.

For Bank of America, N.A., Bank of New York Mellon, Defendants: Gary M. Burt, Thomas J. Pappas, LEAD ATTORNEYS, Primmer Piper Eggleston & Cramer PC (Manchester), Manchester, NH.


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Joseph A. DiClerico, Jr., United States District Judge.

Lewis B. Sykes, Jr. brought suit in state court against RBS Citizens, N.A.(" RBS" ); CCO Mortgage Corporation (" CCO" ); Federal National Mortgage Association (" FNMA" ); Bank of America, N.A. (" Bank of America" ); Bank of New York Mellon (" BNYM" ); and Citibank, N.A. (" Citibank" ), alleging claims arising from the defendants' involvement in the foreclosure of his home. Bank of America removed the case to this court, and the defendants, other than Citibank, moved to dismiss the complaint.

In response, Sykes moved for leave to amend his complaint to add factual allegations and to add claims for violation of the Truth in Lending Act (" TILA" ), 15 U.S.C. § 1601 et seq.,[1] fraud, breach of the implied covenant of good faith and fair dealing, and conversion. RBS, CCO, and FNMA (collectively, " mortgage defendants" ) filed an objection, and Bank of America and BNYM (collectively, " bank defendants" ) filed a separate objection.[2] Both objections argue that granting Sykes leave to amend the complaint would be futile.[3]

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Sykes moved for leave to file replies. The bank defendants filed an objection. Sykes's motions for leave to file replies (document nos. 34 & 35) are granted,[4] and the replies have been considered in deciding the motion for leave to amend.[5]

Standard of Review

Under Federal Rule of Civil Procedure 15(a)(2), " [t]he court should freely give leave [to amend the complaint] when justice so requires." The liberal standard under Rule 15(a)(2) does not mean that all requests to amend will be granted. Manning v. Boston Med. Ctr. Corp., 725 F.3d 34, 61 (1st Cir. 2013). Instead, " a district court may deny leave to amend when the request is characterized by undue delay, bad faith, futility, or the absence of due diligence on the movant's part." Nikitine v. Wilmington Tr. Co., 715 F.3d 388, 390 (1st Cir. 2013).

A proposed amendment to a complaint is futile if, as amended, " the complaint still fails to state a claim." Abraham v. Woods Hole Oceanographic Inst., 553 F.3d 114, 117 (1st Cir. 2009). Therefore, review for futility is identical to review under Federal Rule of Civil Procedure 12(b)(6). Edlow v. RBW, LLC, 688 F.3d 26, 40 (1st Cir. 2012).

For purposes of a motion to dismiss, the court " separate[s] the factual allegations from the conclusory statements in order to analyze whether the former, if taken as true, set forth a plausible, not merely conceivable, case for relief." Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 276 (1st Cir. 2013) (internal quotation marks omitted). " If the facts alleged in [the complaint] allow the court to draw the reasonable inference that the defendants are liable for the misconduct alleged, the claim has facial plausibility." Id. (internal quotation marks omitted).


On August 31, 2005, Lewis Sykes and his mother, Dorothy W. Sykes, entered into a loan with CCO for $225,000. The loan was secured by a mortgage on Lewis and Dorothy's home at 1047 Banfield Road in Portsmouth, New Hampshire. At some point thereafter, Lewis entered into a loan with Bank of America, which was secured by a second mortgage on the home.

In November and December of 2008, Lewis Sykes received mortgage bills with a $400 charge in addition to his required monthly mortgage payment. Sykes sent CCO several letters over the next few

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months to ask why he was charged an additional $400, but he did not receive an explanation. Sykes alleges that because CCO failed to explain the additional $400 charge, he stopped making his monthly mortgage payments.[6] He also alleges that he did not receive a monthly billing statement after December of 2008.

CCO eventually responded to Sykes's inquiries via letter on January 6, 2009,[5] but the letter either did not address or did not resolve to Sykes's satisfaction the nature of the $400 charge. Sykes alleges that CCO " never explained nor resolved the issue of the additional $400 charge." Compl. ¶ 22. Sykes " made multiple requests for information about his mortgage" over the next several months after receiving CCO's letter, but did not receive any response. Id. ¶ 42.

Although Sykes was unaware of it at the time, CCO assigned the mortgage to FNMA on July 30, 2009. Despite this assignment, Sykes claims that he received two documents after that date which led him to believe that CCO still held the mortgage. The first was an annual escrow account disclosure statement from CCO dated September 23, 2009. The second was a letter dated September 28, 2009, from RBS offering to modify Sykes's loan and informing him that a foreclosure sale would be conducted on October 2, 2009.[6] Sykes interpreted the second letter to represent that CCO was the owner of the mortgage.[7]

On October 2, 2009, Sykes, while mowing the lawn at his home, noticed several people and cars parked at the end of the driveway. Sykes approached the group and learned that his home was being sold at a foreclosure auction that day. BNYM purchased Sykes's home at the auction but, as discussed below, Sykes was led to believe that Bank of America, and not BNYM, purchased the home. Sykes alleges that he " learned by observing the auction that CCO [] was the seller" of the property at the auction, but that the foreclosure deed lists FNMA as the seller. Compl. ¶ 50; see id. ¶ 54.

In October of 2009, Robert Kelley, a real estate broker working on behalf of Bank of America, delivered a " cash for keys" written proposal to Sykes. Compl. ¶ 58. The proposal stated that " BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A. acquired [Sykes's home] through foreclosure sale and subsequent Trustee's Deed." Id. Sykes rejected the proposal because it required him to move out of the home by a certain date and he did not believe he would be able to move out in time. Sykes contacted Bank of America several times after that date to try to repurchase or rent the home, but Bank of America did not respond.

On November 2, 2009, one or more of the defendants left an undated eviction notice on Sykes's front door. The eviction notice listed the evicting entity as " Bank

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N.Y. Mellon f/k/a The Bank of New York, As Trustee for CWHEQ Revolving Home Equity Loan Trust, Series 2007-C of 10561 Telegraph Road, Glen Allen, VA 23059." Compl. ¶ 61. Sykes alleges that the address on the eviction notice is the address of CCO Mortgage. Sykes asked Kelley why the eviction notice listed BNYM, and not Bank of America, as the owner of the property, and Kelley explained that it was a clerical error.

In late November of 2009, Kelley caused the utilities at the home to be shut off. The lack of heat in the home caused the pipes to freeze and burst, damaging the home and Sykes's property. Sykes vacated the home on November 25, 2009.

BNYM instituted a possessory action in Portsmouth District Court in December of 2009 (" possessory action" ). Sykes was not aware of the possessory action until April of 2011 because notice of the action was left on the door of the home he had vacated in November. The district court issued a landlord-tenant writ to BNYM in December of 2009 and a writ of possession to Citibank on January 22, 2010. The home was sold to a third party on May 27, 2010.

On April 25, 2011, after Sykes had filed a complaint against Bank of America with the Office of the Comptroller of the Currency, Sykes received from Bank of America notices of default, acceleration, and foreclosure; the foreclosure deed; the landlord-tenant writ; and the writ of possession. The notice of default was dated December 8, 2008, a date on which CCO held the mortgage. Sykes alleges that until he received these notices, he did not know the reasons for the foreclosure and had not been informed of his rights provided in the notice of default.

Sykes alleges that after his eviction, he was unable " to find housing which could accommodate his equipment and tools necessary to continue his employment . . . ." Compl. ¶ 105. He also alleges that the foreclosure and eviction negatively impacted his mental health, and that he was diagnosed with depression, anxiety, and post traumatic stress disorder in the summer of 2010. Sykes alleges that because of his mental health issues, " he did not and could not assert his legal rights and bring legal action against responsible parties, many of whom were still unknown," until now. Id. ¶ 109.


In the original complaint, Sykes alleged claims for breach of contract (Count I); wrongful foreclosure (Count II); wrongful eviction (Count III); violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq., (" RESPA" ) (Count IV); and civil conspiracy (Count V). The mortgage defendants and the bank defendants moved to dismiss the original complaint.

Sykes seeks to amend his complaint to add claims for violation of TILA, 15 U.S.C. § 1641 (Count V)[8]; fraud (Count VII); breach of the implied covenant of good faith and fair dealing (Count VIII); and conversion (Count IX). Sykes contends that granting him leave to amend the complaint will not prejudice the defendants or result in any delay because discovery has not yet commenced.

I. Mortgage Defendants

The mortgage defendants object to Sykes's motion for leave to amend, arguing that all the claims in the amended complaint should be dismissed and, therefore, amendment would be futile. In support, the mortgage defendants argue that Sykes's claims for wrongful eviction, fraud, and conversion are alleged against the

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bank defendants and/or Citibank only. They also contend that Sykes's claims for breach of contract, wrongful foreclosure, civil conspiracy, and breach of the implied covenant of good faith and fair dealing fail because Sykes does not allege facts to support those claims. They further argue that all the claims alleged against them are time-barred under the statutes of limitations applicable to each claim.

In his reply to the mortgage defendants' objection, Sykes argues that he has sufficiently alleged claims for breach of contract, wrongful foreclosure, civil conspiracy, and breach of the implied covenant of good faith and fair dealing against the mortgage defendants. He also contends that none of his claims against the mortgage defendants is time-barred because he did not become aware of their wrongful conduct until shortly before he filed suit. He further contends that even if his claims would otherwise be time-barred, the statutes of limitations should be tolled because (i) the mortgage defendants fraudulently concealed information necessary for Sykes to bring his claim and (ii) he was mentally incompetent due to the shock of losing his home.

A. Claims Not Alleged Against Mortgage Defendants

The mortgage defendants contend that the amended complaint does not allege their involvement in the claims for wrongful eviction (Count III), fraud (Count VII), or conversion (Count IX). Sykes's reply to the mortgage defendants' objection did not address the arguments concerning those claims.

Sykes's claims for wrongful eviction and conversion allege wrongful conduct by the bank defendants and Citibank. See Compl. ¶ ¶ 135-146 & 210-215. The claim for fraud alleges wrongful conduct by Bank of America. Id. ¶ ¶ 195-204. None of these claims is directed against the mortgage defendants. Therefore, the amended complaint does not state claims for wrongful eviction, fraud, or conversion against the mortgage defendants.

B. Merits

The mortgage defendants argue that the amended complaint fails to state claims for breach of contract (Count I), wrongful foreclosure (Count II), civil conspiracy (Count VI), and breach of the implied covenant of good faith and fair dealing (Count VIII) against them.[9] Sykes contends in his reply that he has sufficiently pled these claims.

1. Breach of Contract

Sykes alleges that the mortgage defendants breached the mortgage agreement " by not providing [him] with the notice of default, notice of acceleration and notice of foreclosure sale" prior to foreclosing on his home as required by paragraph twenty-two of the mortgage agreement. Compl. ¶ 113. The mortgage defendants contend that they provided Sykes with the notice of default on December 8, 2008, the notice of acceleration on July 6, 2009, and the notice of foreclosure sale on September 2, 2009. They attach each letter as an exhibit to their objection. They also attach as an exhibit a letter from Harmon Law Offices (" Harmon" ) dated October 2, 2009, referencing a conversation between Harmon and Sykes and stating that " copies

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of the original notice of sale letters send [sic] certified mail" were enclosed. Sykes maintains in his reply that he did not receive the notices in accordance with the provisions in the mortgage agreement, and contends that the mortgage defendants did not include certified mail return receipts in the exhibits to show that they sent the notices on the days they were dated.

Assuming without deciding that the court could consider the documents attached to the mortgage defendants' objection,[10] the amended complaint states a breach of contract claim against the mortgage defendants for purposes of a futility analysis. Sykes alleges that he received a notice of default dated December 8, 2008, and that he received a notice of acceleration and a notice of foreclosure. He alleges, however, that he did not receive these notices until April of 2011, well after the foreclosure auction. Although the notices may have been in compliance with paragraph twenty-two of the mortgage agreement had they been sent on the dates listed on the notices, the court cannot determine for purposes of a futility analysis whether the notices were sent or received on those dates. Therefore, even if the court could consider the documents attached to the mortgage defendants' objection, those documents do not, ...

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