Polanco v. HSBC Bank USA National Association

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

CIVIL ACTION NO. 3:17-CV-00466-GCM

CLAUDIA E. POLANCO, )

)

Plaintiffs, )

)

v. )

) ORDER

HSBC BANK USA NATIONAL )

ASSOCIATION, PHH MORTGAGE )

CORPORATION, )

)

Defendants. )

)

THIS MATTER COMES before the Court on the Parties’ cross motions for summary

judgment (Doc. Nos. 58, 60) and Defendants’ Motion to Strike (Doc. No. 76). The Court, having

carefully considered the briefs and materials submitted in support of the respective motions and

the oppositions thereto, and being otherwise fully advised, finds and orders as follows:

I. FACTUAL BACKGROUND

The alleged facts relevant to these motions are as follows. In 2007, Plaintiff’s husband,

Oscar Polanco, obtained a $214,000.00 loan from Defendant HSBC Bank USA National

Association (“HSBC”) secured by Plaintiff’s real property located in Mecklenburg County, North

Carolina. (Doc. No. 1-2, at 24). In 2012, HSBC and Defendant PHH Mortgage Company (“PHH”)

(together “Defendants”) entered into a “Subservicing Agreement” (“Agreement”) whereby PHH

became the servicing agent for Mr. Polanco’s loan. (Doc. No. 67, at 11, 12; Doc. No. 39-15, at 3).

In 2013, Mr. Polanco executed a quitclaim deed in favor of Plaintiff. (Doc. No. 1-2, at 47). In that

same year, the loan went into default. (Doc. No. 60-1, at 2). After defaulting, Plaintiff entered into

a Loan Modification Agreement (“LMA”) with Defendants which modified the loan’s terms and

allowed Plaintiff to keep her home. (Doc. No. 60-1, at 2; Doc. No. 59, at 1; Doc. No. 1-2, at 52).

However, the LMA did not address $17,709.95 in escrow arrearages, which had accrued

as a result of PHH’s payments for taxes and insurance while the account was in default. (Doc. No.

60-1, at 2). Nor did PHH immediately implement the LMA, and, when it did, Plaintiff’s payments

were not applied to the loan correctly. (Doc. No. 60-1, at 2). As a result of the misapplied payments,

the loan was temporarily referred, once again, for foreclosure proceedings, though no foreclosure

was completed, and Plaintiff did not lose possession of her home. (Doc. No. 60-1, at 2).

In response to the misapplication of her funds, Plaintiff filed a complaint with the North

Carolina Attorney General’s Office (“AG’s Office”) in January 2017. (Doc. No. 59, at 1). The

AG’s Office then sent a letter requesting that Defendants investigate Plaintiff’s account. (Doc. No.

59, at 1). Defendants acknowledged that they misapplied Plaintiff’s payments and now allege that

they have corrected those errors by contributing their own funds and making other adjustments to

bring Plaintiff’s loan current. (Doc. No. 60-1, at 2). However, Defendants did not fully waive

Plaintiff’s escrow arrearages. (Doc. No. 60-1, at 1; Doc. No. 59, at 3, 4). Plaintiff alleges that

Defendants’ failure to fully waive the escrow arrearages has caused (and continues to cause) her

harm. (Doc. No. 59, at 2, 3, 4).

II. STANDARD OF REVIEW

Under Fed. R. Civ. P. 56(c), “summary judgment is proper ‘if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that the moving party is entitled to a judgment

as a matter of law.’” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The “party seeking

summary judgment always bears the initial responsibility of informing the district court of the

basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes

demonstrates the absence of a genuine issue of material fact.” Id. at 323. Once the movant has met

the initial burden, the burden then shifts to the non-moving party to identify specific facts showing

there is a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256

(1986). In considering a motion for summary judgment, a Court views all evidence in the light

most favorable to the nonmoving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-24

(4th Cir. 1990). However, “[t]he mere existence of a scintilla of evidence in support of the [non-

moving party’s] position will be insufficient; there must be evidence on which the jury could

reasonably find for the [non-moving party].” Id. at 252.

“If a party fails to properly support an assertion of fact or fails to properly address another

party’s assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed.”

Fed. R. Civ. P. 56(e)(2). Further, where a party “fails to make a showing sufficient to establish the

existence of an element essential to that party’s case, and on which that party will bear the proof

at trial . . .[,] there can be no genuine issue as to [a] material fact, since a complete failure of proof

concerning an essential element of the nonmoving party’s case necessarily renders all other facts

immaterial.” Celotex, 477 U.S. at 322, 323 (citation and quotations omitted). Where parties file

cross motions for summary judgment, a “court must rule on each party's motion on an individual

and separate basis, determining, for each side, whether a judgment may be entered in accordance

with the Rule 56 standard.” Towne Mgmt. Corp. v. Hartford Acci. & Indem. Co., 627 F. Supp. 170,

172 (D. Md. 1985) (citing Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d §

2720.) It is with these standards in mind that the Court considers the present matter.

III. DISCUSSION

Plaintiff moves for summary judgment: (1) that PHH acted as Defendant HSBC Bank USA

National Association’s (“HSBC”) agent when servicing Plaintiff’s loan, (2) that the North Carolina

Secure and Fair Enforcement Mortgage Licensing Act (“SAFE Act”) imposes a legal duty upon

Defendants beyond the contractual relationship of the parties, (3) that violation of the SAFE Act

is a violation of the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”), (4) in

favor of Plaintiff’s UDTPA claim, (5) in favor of Plaintiff’s breach of contract claim, and (6)

against Defendants’ failure to state a claim, laches, statute of limitations, economic loss rule, bona

fide error, and learned profession exception defenses. Defendants move for summary judgment

against Plaintiff’s: (1) negligent infliction of emotional distress (“NIED”) claim, (2) fraud claim,

(3) negligent misrepresentation claim, (3) negligent accounting and servicing (“NAS”) claim, (4)

Mortgage Debt Collection and Servicing Act (“MDCSA”) claim, (5) Real Estate Settlement

Procedures Act (“RESPA”) claim, and (6) UDTPA claim. In addition, Defendants argue, in their

Motion to Strike, that “Mr. Polanco’s testimony at his deposition . . . should not be considered . .

. to determine . . . Plaintiff’s alleged damages for emotional distress.” (Doc. No. 76). The Court

now addresses each issue in turn.

A. Agency

Plaintiff requests summary judgment as to HSBC’s vicarious liability for PHH’s actions

while servicing Plaintiff’s loan. (Doc. No. 59, at 6; Doc. No. 67, at 11). “There are two essential

ingredients in the principal-agent relationship: (1) Authority, either express or implied, of the agent

to act for the principal, and (2) the principal's control over the agent.” Vaughn v. N.C. Dep't of

Human Res., 37 N.C. App. 86, 91, 245 S.E.2d 892, 895 (1978) (citing Sharpe v. Bradley Lumber

Company, 446 F. 2d 152 (4th Cir. 1971), cert. denied 405 U.S. 919, 92 S.Ct. 946 (1972); Julian v.

Lawton, 240 N.C. 436, 82 S.E. 2d 210 (1954)). “Whenever the principal retains the right ‘to control

and direct the manner in which the details of the work are to be executed’ by his agent, the doctrine

of respondeat superior operates to make the principal vicariously liable for the tortious acts

committed by the agent within the scope of his employment.” Vaughn, 296 N.C. at 686 (citations

omitted and emphasis added).

Here, HSBC (1) expressly authorized PHH to act on its behalf and (2) clearly controlled

and directed the manner in which PHH worked. PHH’s authority to act on behalf of HSBC is

illustrated by HSBC’s execution of Limited Powers of Attorney appointing PHH as its true and

lawful attorney-in-fact. (Doc. No. 59-2, at 1, 2). Further, PHH acted on HSBC’s behalf with regard

to Plaintiff’s loan when it sent a letter to the North Carolina Attorney General, signing it as the

“servicing agent for HSBC.” (Doc. No. 39-15, at 2, 3). Similarly, a Corrective Appointment of

Substitute Trustee regarding Plaintiff’s property was filed on October 24, 2014 and signed by an

“Assistant Vice President” of PHH as an “Authorized Agent of HSBC.” (Doc. No. 59-3, at 1, 2).

Defendants’ Rule 30(b)(6) witness (testifying on behalf of both PHH and HSBC) agreed that PHH

had signed that document “as an authorized agent of HSBC.” (Doc. No. 59-1, At 7). Defendants

made no attempt to rebut any of these facts, and the Court considers them undisputed. See Fed. R.

Civ. P. 56(e)(2). Thus, HSBC clearly authorized PHH to act on its behalf when servicing Plaintiff’s

loan.

While Defendants do not appear to contest the fact that HSBC authorized PHH to act on

its behalf, Defendants argue that Plaintiff has not established that HSBC controlled the manner in

which PHH executed its duties with regard to Plaintiff’s loan. (Doc. No. 65, at 12, 13). In response,

Plaintiff argues HSBC exercised control over PHH through a Subservicing Agreement

(“Agreement”) that both parties entered on May 3, 2012. (Doc. No. 67, at 11, 12). In that

Agreement, “PHH agree[d] to provide, and HSBC agree[d] to utilize, the Subservicing Services in

connection with the subservicing of Mortgage Loans, subject to and in accordance with the terms

of the Agreement.” (Doc. No. 67-3. At 3). The Agreement also “contemplate[d] that . . . manuals”

would be used that contain “HSBC-specific requirements [and] policies and procedures that PHH

must follow and with which PHH must comply.” (Doc. No. 67-3, at 4). Further, the Agreement

gave HSBC the “right in its sole discretion to approve . . . or withhold its approval of, any action

or inaction of PHH in providing the Subservicing Services that would have a material adverse

effect on the Subservicing Services or on HSBC or the Customers, cause a security risk, result in

noncompliance with Law or result in additional costs to HSBC.” (Doc. No. 67-3, at 5). The

Agreement even specified what third-party law firms PHH could use. (Doc. No. 67-3, at 6, 7).

Thus, the Agreement clearly provides for HSBC’s control over the manner in which PHH executed

its duties regarding Plaintiff’s loan. Because Plaintiff has demonstrated the absence of a genuine

issue of material fact with regard to both elements of respondeat superior and Defendants, both in

their briefing and at oral argument, have failed to identify facts to the contrary, Plaintiff’s motion

for summary judgement as to HSBC’s vicarious liability for PHH’s actions while servicing

Plaintiff’s loan and within the scope of its employment is GRANTED.

B. Breach of Contract

Plaintiff requests summary judgment on her breach of contract claim. (Doc. No. 59, at 15-

18). In North Carolina, the “elements of a claim for breach of contract are (1) existence of a valid

contract and (2) breach of the terms of that contract.” Crosby v. City of Gastonia, 635 F.3d 634,

645 (4th Cir. 2011) (quotations omitted). While Plaintiff and Defendants agree that the LMA was

a contract (Doc. No. 59, at 16; Doc. No. 65, at 10-11), the parties diverge regarding the second

element of Plaintiff’s breach claim. According to Plaintiff, Defendants violated their contractual

duty to properly apply her loan. (Doc. No. 59, at 17). Defendants acknowledge that they did not

properly apply Plaintiff’s loan payments (Doc. No. 65, at 4, 6), but they assert that by applying

$17,709.85 of PHH’s own funds to Plaintiff’s account, they took corrective action within a

reasonable period after receiving notice of the breach, consistent with the LMA (Doc. No. 65, at

10, 10, n. 1). In response, Plaintiff concedes that Defendants took corrective action but argues that,

because it took fifteen months, the corrective action did not occur within a “reasonable period” as

required by the LMA. (Doc. No. 67, at 11). However, Plaintiff failed to support that assertion with

any citations to the record (Doc. No. 67, at 11), and, consequently, the Court considers Defendants’

assertion that it took corrective action, thereby correcting any breach, unrebutted, see Fed. R. Civ.

P. 56(e)(2). Because Defendants identified specific facts showing that there is a genuine issue of

material fact, Plaintiff’s motion for summary judgment regarding its breach of contract claim is

DENIED.

C. Fraud

Defendants move for summary judgment on Plaintiff’s fraud claim. (Doc. No. 60-1, at 10).

In North Carolina, the elements of fraud are:

(1) [a f]alse representation or concealment of a material fact, (2) reasonably calculated

to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting

in damage to the injured party. An essential element of actionable fraud is that the false

representation or concealment be made to the party acting thereon.

Sain v. Adams Auto Grp., Inc., 244 N.C. App. 657, 662 (2016) (citations omitted). Defendants

argue that Plaintiff has produced no evidence supporting the fourth element of her fraud claim—

that she was deceived regarding the handling of the escrow arrearages. (Doc. No. 60-1, at 10).

Defendants also cite evidence showing that she was not deceived, relying on the following

exchange from Plaintiff’s deposition:

Q. Okay. And do you know—prior to the modification, do you know if the lender

continued paying for taxes and insurance after you stopped making payments?

A. I don’t.

Q. Okay. And the reason I’m asking the questions is to try and figure out if you had

any particular understanding or intent as to how past escrow payments by the lender

would be incorporated in the modification terms. And what I understand you to tell

me right now is that at the time you entered the modification, you were not aware

whether the lender was making escrow payments or was making payments out of

the escrow account?

A. No, I wasn’t aware.

(Doc. No. 60-3, at 5) (emphasis added). According to Defendants, Plaintiff could not have been

deceived as to how the escrow arrearages would be treated under the LMA if she did not even

know that there “were escrow arrearages.” (Doc. No. 60-1, at 11).

Plaintiff responds that she “viewed the LMA as a way to wipe the slate clean of all missed

payments, late fees, and any escrow arrearages and start fresh with the Defendants.” (Doc. No.

66, at 9) (emphasis added). In other words, Plaintiff argues that Defendants led her to believe that

the LMA would include all outstanding issues because Defendants mentioned no exceptions.

However, because Plaintiff did not support that argument with citation to her testimony or to any

other evidence indicating her understanding of the agreement (Doc. No. 66, at 9), the Court treats

Defendants’ factual assertions as undisputed, see Fed. R. Civ. P. 56(e)(2). Thus, there is no genuine

dispute that Plaintiff could not have been deceived about how the escrow arrearages would be

treated under the LMA because she did not know that there were any escrow arrearages, and

Defendant’s motion for summary judgment against that claim is GRANTED.

D. Negligent Misrepresentation

Defendants also move for summary judgment against Plaintiff’s negligent

misrepresentation claim. (Doc. No. 60-1, at 13). The elements of a negligent misrepresentation

claim are that a plaintiff (1) justifiably relied, (2) to his or her detriment, (3) on information

prepared without reasonable care, (4) by one who owed the relying party a duty of care. Walker v.

Town of Stoneville, 211 N.C. App. 24, 30 (2011). Similar to Defendants’ argument above regarding

Plaintiff’s fraud claim, Defendants argue that Plaintiff could not have relied on information from

Defendants about the escrow arrearages and the manner in which they would be treated under the

LMA because she did not even know that there “were escrow arrearages.” (Doc. No. 60-1, at 11).

In making that argument, Defendants cite to statements made by Plaintiff at her deposition. (Doc.

No. 60-3, at 5). Portions of those statements are provided above. See supra at 7. Plaintiff’s

rebuttal—that by not mentioning any exceptions, Defendant HSBC was leading her to believe that

the LMA would include all outstanding issues—fails for the same reason it failed above: It is not

supported by citation to her testimony or to any other evidence indicating her understanding of the

agreement. (Doc. No. 66, at 9). Thus, the Court treats Defendants’ factual assertion—that Plaintiff

did not rely on information from Defendant about the escrow arrearages—as undisputed. See Fed.

R. Civ. P. 56(e)(2). Because Plaintiff has failed to establish the first element of her negligent

misrepresentation claim, Defendants’ motion for summary judgment against that claim is

GRANTED.

E. Negligent Infliction of Emotional Distress

Defendants move for summary judgment against Plaintiff’s NIED claim. (Doc. No. 60-1,

at 4, 7-10). In North Carolina, the elements of a NIED claim are that “(1) the defendant negligently

engaged in conduct, (2) it was reasonably foreseeable that such conduct would cause the plaintiff

severe emotional distress (often referred to as ‘mental anguish’), and (3) the conduct did in fact

cause the plaintiff severe emotional distress.” Johnson v. Ruark Obstetrics & Gynecology Assocs.,

P.A., 327 N.C. 283, 304 (1990) (citations omitted). Defendants argue that Plaintiff presents only

uncorroborated lay testimony insufficient to establish that “Defendants’ actions were the cause of

her alleged [emotional distress]” and that, consequently, “Defendants are entitled to summary

judgment as to” Plaintiff’s NIED claim. (Doc. No. 60-1, at 4, 5).

Plaintiff responds that the evidence she has presented, including testimony from friends

and family, is sufficient to show that Defendants caused Plaintiff’s emotional distress. (Doc. No.

66, at 3, 4). For example, Plaintiff sent a letter to the AG’s Office on January 1, 2017 stating that

she has “been getting physically sick trying to resolve the matter of payments” to Defendants and

that the experience has caused her “disappointment, emotional[] distress, and . . . severe health

issues,” including impediments to her eating and appetite. (Doc. No. 66-8, at 18, 19, 25). However,

in that letter, Plaintiff also stated that the stress of the “foreclosure also tie[d] in with [her] pre

existing condition of throat cancer” and that as she was going through “treatments for throat cancer

that [were] very painful” before Defendants “added” the “stress . . . of foreclosure.” (Doc. No. 66-

8, at 25). Plaintiff reinforced her suggestion that cancer was the root cause of her distress when

she stated, later, that the foreclosure made the distress she felt from fighting cancer “worse.” (Doc.

No. 66-1, at 3). While Plaintiff presents multiple possible causes of her current distress, she

provides no basis for a jury to parse the alleged harm caused by Defendants from the harm caused

by her throat cancer.

The other evidence cited by Plaintiff suffers from a similar flaw. For example, Plaintiff’s

friend Robyn Moore testified that HSBC “cost [Plaintiff’s] marriage,” “caused her

embarrassment,” caused her “suffering and pain,” and caused her to have suicidal ideations and to

“try to commit suicide.” (Doc. No. 66-2, at 2). However, Plaintiff testified that she separated from

her husband before the LMA was executed. (Doc. No. 68-3, at 3, 5). Thus, the misconduct of which

Plaintiff complains in this case (involving the mishandling of the LMA agreement) could not have

caused that separation. In addition, Ms. Moore testified—consistent with Plaintiff’s testimony—

that the stress caused by Defendants was merely “on top of” the stress Plaintiff already suffered as

a result of cancer. (Doc. No. 66-2, at 2). In other words, Ms. Moore testified that Plaintiff was

already suffering as a result of her cancer before Defendants are alleged to have caused Plaintiff

emotional distress. Lastly, Ms. Moore’s testimony (taken July 30, 2018) that Plaintiff had current

suicidal ideations and that she had tried to commit suicide is contradicted by Plaintiff’s May 31,

2018 interview with a mental health provider when Plaintiff reported that she did not have any

current suicidal ideations and that she did not have a history of suicide attempts. (Doc. No. 66-2,

at 4; Doc. No. 60-4, at 2). While Ms. Moore also asserted that Plaintiff had suicidal ideations in

2015 and Plaintiff stated that she had a prior history of suicidal ideations, neither statement shows

that Plaintiff’s suicidal ideations began after the LMA was executed on November 5, 2015. (Doc.

No. 59, at 1).

Plaintiff also relied on testimony from her husband, Oscar Polanco, and her daughter,

Claudia Angel, asserting that Plaintiff and Mr. Polanco separated as a result of Defendants’ actions

and that Plaintiff has become more emotional since Defendants’ alleged mishandling of the LMA.

(Doc. No. 66, at 6). However, as discussed above, Plaintiff separated from her husband before the

LMA was executed. See supra at 10. Further, Plaintiff stated that her cancer diagnosis “was

difficult, both emotionally and physically” and that it occurred “[a]round the same time . . . that

she began receiving notices from the Defendants that her home was headed to foreclosure.” (Doc.

No. 66, at 7). Those statements, once again, present multiple possible causes—throat cancer and

Defendants’ actions—of Plaintiff’s increased emotionality.

Defendants cite additional evidence that, when coupled with the evidence cited by Plaintiff,

makes clear that a reasonable jury could not conclude that Defendants were the proximate cause

of Plaintiff’s emotional distress. Specifically, in 2018 Plaintiff’s mental health provider noted that

she had a history of depression, starting “when she was [diagnosed with] cancer.” (Doc. No. 60-4,

at 2). In addition, Defendants prompted Plaintiff—via interrogatories—to provide statements

supporting her contention that her damages were caused by Defendants, and she declined to do so.

(Doc. No. 60-5, at 5). Put simply: the evidence clearly establishes that Plaintiff’s cancer is at least

the initial cause of her emotional distress, and Plaintiff fails to provide any basis for a jury to

determine that Defendants’ actions, not Plaintiff’s cancer, caused the emotional distress

complained of in this case. Consequently, summary judgment against Plaintiff’s NIED claim is

GRANTED. See Harrison v. Edison Bros. Apparel Stores, 814 F. Supp. 457, 462 (M.D.N.C.

1993) (Dismissing a plaintiff’s negligent retention claim, brought under North Carolina law, where

there was “no doubt” that the plaintiff had suffered emotional distress but where “other stressors

[were] possible alternative causes of [the plaintiff’s] emotional injuries” and there was no evidence

presented as to which possible cause was the correct one.). In addition, Defendants’ Motion to

Strike, which argues that “Mr. Polanco’s testimony at his deposition . . . should not be considered

. . . to determine . . . Plaintiff’s alleged damages for emotional distress,” is DENIED as MOOT

because summary judgment has been granted against Plaintiff’s NIED claim.

F. Negligent Accounting and Servicing

Plaintiff seeks partial summary judgment as to the legal duty elements of her NAS, NIED,

and negligent misrepresentation claims. (Doc. No. 59. At 9). Because the Court has granted

summary judgment against Plaintiff’s NIED and negligent misrepresentation claims, the Court

need only consider Plaintiff’s argument with respect to her NAS claim. Plaintiff argues that

because the Court, in its order on Defendants’ Motion to Dismiss, has previously determined that

“the SAFE Act provides a sufficient legal duty upon which Plaintiff can maintain her tort causes

of action,” there is no genuine issue of material fact as to whether Defendants owed Plaintiff a

duty. (Doc. No. 59, at 9) (citation omitted). Of course, a determination that Plaintiff’s tort claims

should not be dismissed because the SAFE Act may create a duty for Plaintiff to maintain tort

claims simply is not a determination that there is no genuine dispute that Defendants owe Plaintiff

a duty, and the Court finds that argument misguided.

Plaintiff, however, provides other arguments in favor of summary judgment. For example,

Plaintiff cites testimony from Defendants’ corporate representative agreeing that Defendants “have

a duty to act with reasonable skill, care, and diligence in servicing [Plaintiff’s] loan.” (Doc. No.

59, at 8) (citing Doc. No. 59-1, at 25). Defendants respond by arguing exclusively that the SAFE

Act cannot create a duty of care for Plaintiff’s tort claims. (Doc. No. 65, at 13-15). However, that

question has already been resolved by the Court, which determined, as explained above, that the

SAFE Act can create such a duty. (Doc. No. 51, at 7). Further, because Defendants do not address

Plaintiff’s assertion that Defendants’ corporate representative conceded that they owed Plaintiff a

duty when servicing her loan, the Court considers that fact undisputed. See Fed. R. Civ. P. 56(e)(2).

Thus, there is no genuine dispute whether Defendants owed Plaintiff a duty regarding Plaintiff’s

NAS claim and Plaintiff’s motion for summary judgment as to that element is GRANTED.

G. Unfair and Deceptive Trade Practices

Both Plaintiff and Defendants move for summary judgment of Plaintiff’s UDTPA claim.

(Doc. No. 59, at 14; Doc. No. 60-1, at 17). To prevail on a UDTPA claim, a plaintiff must show

an (1) unfair or deceptive act or practice, or an unfair method of competition, (2) in or affecting

commerce, (3) which proximately caused actual injury to the plaintiff or to his business. Brinkman

v. Barrett Kays & Assocs., P.A., 155 N.C. App. 738, 743, 575 S.E.2d 40, 44 (2003). However, the

UDTPA does not govern the “area of commerce regulated by [the North Carolina Debt Collection

Act (“DCA”)].” Musenge v. SmartWay of the Carolinas, LLC, No. 3:15-cv-153-RJC-DCK, 2018

U.S. Dist. LEXIS 158044, at *12 (W.D.N.C. Sep. 17, 2018) (citing N.C. Gen. Stat. § 75-56).

Instead, “[t]he []DCA constitutes the sole remedy for unfair and deceptive trade practices in the

context of debt collection.” Id. (citing DIRECTV, Inc. v. Cephas, 294 F. Supp. 2d 760, 765

(M.D.N.C. 2003) (“If the abusive conduct alleged pertains only to debt collection, the NCDCA

provides a claimant's exclusive remedy.”)).

Defendants allege that Plaintiff’s UDTPA claim is improperly duplicative of her DCA

claim because the DCA, not the UDTPA, is the proper remedy for unfair and deceptive trade

practices in the context of debt collection. (Doc. No. 60-1, at 17). In Plaintiff’s response, each of

the facts she alleges in support of her UDTPA claim involve the collection of debt. For example,

Plaintiff alleges that the Defendants concealed how the escrow arrearages would be handled by

the LMA, that Defendants did not properly apply loan payments, and that Defendants did not take

the “corrective action” that they had promised with regard to the loan. (Doc. No. 66, at 21-24).

Thus, there is no genuine dispute that Plaintiff’s allegations involve the collection of debt. Because

those allegations may not support Plaintiff’s UDPTA claim, Plaintiff has failed to establish the

second element of her UDTPA claim and summary judgment is appropriate. See Celotex, 477 U.S.

at 322, 323. Thus, Plaintiff’s motion for summary judgment in favor of her UDTPA claim is

DENIED, and Defendants’ motion for summary judgment against Plaintiff’s UDTPA is

GRANTED.

H. Mortgage Debt Collection and Servicing Act

Defendants move for summary judgment on Plaintiff’s MDCSA claim, arguing that

Plaintiff failed to comply with pre-suit notice requirements set forth in the MDCSA. The MDCSA

requires mortgage servicers to “[p]romptly correct errors relating to the allocation of payments,

the statement of account, or the payoff balance identified in any notice from the borrower . . . or

discovered through the due diligence of the servicer or other means.” N.C. Gen. Stat. § 45-93(3).

However, a borrower must wait “at least 30 days” after providing notice to the “servicer in writing

of any claimed errors or disputes regarding the borrower’s home loan” before filing a “civil action

for damages against a servicer for violation of this Article.” N.C. Gen. Stat. §45-94.

Defendants argue that Plaintiff never provided notice pursuant to N.C. Gen. Stat. §45-94.

(Doc. No. 60-1, at 17). In support, Defendants assert that Plaintiff “admitted that she never sent

any letters to [Defendants] between the date of the 2015 modification and her complaint to the

N.C. Department of Justice in January 2017, and her communications with Defendants were ‘just

phone calls,’” not written notice. (Doc. No. 60-1, at 17). Plaintiff responds that she wrote an

extensive letter that she sent to the AG’s Office and that the AG’s Office then sent to HSBC on

January 18, 2017. (Doc. No. 66, at 19) (citing Doc. No. 66-8, at 15). Defendants assert that the

AG’s Office’s letter to Defendants did not satisfy N.C. Gen. Stat. §45-94 because Plaintiff’s initial

letter to the AG’s Office was a “complaint.” (Doc. No. 68, at 9, 10). In other words, Defendants

assert that Plaintiff was required to notify Defendants in writing before sending the letter to the

AG’s Office. The Court disagrees. While N.C. Gen. Stat. §45-94 explains that a complaint or

summons does not satisfy the notice requirement, Plaintiff’s letter to the AG’s Office—while

termed a complaint—was not “a civil action for damages” and is not the kind of complaint §45-94

prohibits prior to the completion of the 30-day remedial window. Further, the letter sent on behalf

of Plaintiff from the AG’s Office to HSBC was a notice, in writing, to the servicer of Plaintiff’s

loan that Plaintiff claimed errors regarding her home loan, satisfying N.C. Gen. Stat. §45-94. Thus,

Defendants’ motion for summary judgment on Plaintiff’s MDCSA claim is DENIED.

I. Real Estate Settlement Procedures Act

Defendants allege that Plaintiff’s RESPA claim fails because Plaintiff has provided no

evidence that she sent “Qualified Written Requests” (“QWR”) to Defendants requesting an

accounting of her mortgage loan. (Doc. No. 60-1, at 17). A QWR is a:

written correspondence, other than notice on a payment coupon or

other payment medium supplied by the servicer, that—

(i) includes, or otherwise enables the servicer to identify, the

name and account of the borrower; and

(ii) includes a statement of the reasons for the belief of the

borrower, to the extent applicable, that the account is in error

or provides sufficient detail to the servicer regarding other

information sought by the borrower.

12 U.S.C. § 2605(e)(1)(B). Plaintiff responds that the AG’s Office sent a letter to HSBC on January

18, 2017, meeting all the requirements of the QWR. (Doc. No. 66, at 19). As discussed above, the

letter was submitted on Plaintiff’s behalf. See supra at 12. Further, the letter from the AG’s Office

included an additional letter from Plaintiff “outlining the errors and disputes she had concerning

her loan” and containing Plaintiff’s name, account number, address, and phone number. (Doc. No.

66, at 19) (citing Doc. No. 66-8, at 16, 19). In fact, Plaintiff specifically stated in her letter to the

AG’s Office that it was a “Written Qualified Request.” (Doc. No. 66-8, at 19). Thus, Plaintiff has

shown that there is a genuine issue of material fact that Plaintiff sent a Written Qualified Request,

and Defendants’ motion for summary judgment against Plaintiff’s RESPA claim is DENIED.

J. Defenses

Plaintiff also moves for summary judgment against Defendants’ (1) failure to state a claim,

(2) laches, (3) statute of limitations, (4) bona fide error, (5) economic loss rule, and (6) learned

profession exception defenses. The Court now considers each defense.

1. Failure to State a Claim

The Court has determined, in its Order on Defendant’s Motion to Dismiss (Doc. No. 51)

that each of Plaintiff’s remaining claims state a claim. Thus, summary judgment against

Defendants’ failure to state a claim defense is GRANTED.

2. Laches and Statute of Limitations

Plaintiff asserts that Defendants’ statute of limitations and laches defenses should be

dismissed. (Doc. No. 59, at 18, 19). Defendants agree, with qualifications. (Doc. No. 65, at 15).

Thus, summary judgement against both defenses is GRANTED. To the extent that Plaintiff seeks,

at trial, to make claims barred by the statute of limitations or laches defenses, Defendants may

raise those defenses at trial.

3. Bona Fide Error

Plaintiff argues that Defendants’ bona fide error defense applies only to Plaintiff’s

previously dismissed Fair Debt Collection Practices Act claim and should be dismissed. (Doc. No.

59, at 19). Defendants agree. (Doc. No. 65, at 16-17). Thus, summary judgment against

Defendants’ bona fide error defense is GRANTED.

4. Economic Loss Rule

Plaintiff makes a perfunctory argument—unsupported by citation—that because the Court

has determined that the SAFE Act creates a legal duty sufficient to support her tort causes of action,

“the economic loss rule does not prevent her from recovering tort damages for claims resulting

from Defendants’ breach of contract and the claimed torts.” (Doc. No. 59, at 19). The Court

declines construct Plaintiff’s legal argument in her stead. See Davis v. District of Columbia, 503

F. Supp. 2d 104 (D.D.C. 2007) (For purposes of summary judgment, perfunctory and undeveloped

arguments, and arguments that are unsupported by pertinent authority, are waived.). Thus,

Plaintiff’s motion for summary judgment against Defendants’ economic loss rule is DENIED.

5. Learned Profession Exception

Plaintiff seeks summary judgment against Defendants’ learned profession exception

defense to Plaintiff’s UDTPA claim. (Doc. No. 59, at 19). Because the Court has granted summary

judgment against Plaintiff’s UDTPA claim, Defendants’ learned profession exception defense is

moot. Therefore, Plaintiff’s motion for summary judgment against Defendants’ learned profession

exception defense is GRANTED.

IV. CONCLUSION

For the reasons stated above, Plaintiff’s Motion for Summary Judgment is GRANTED IN

PART and DENIED IN PART and Defendants’ Motion for Summary Judgement is GRANTED

IN PART and DENIED IN PART. Plaintiff’s motion for summary judgment as to HSBC’s

vicarious liability for PHH’s actions committed within the scope of its employment is GRANTED;

Plaintiff’s motion for summary judgment for her breach of contract claim is DENIED;

Defendants’ motion for summary judgment against Plaintiff’s fraud claim is GRANTED;

Defendants’ motion for summary judgment against Plaintiff’s negligent misrepresentation claim

is GRANTED; Defendants’ motion for summary judgment against Plaintiff’s NIED claim is

GRANTED; Plaintiff’s motion for summary judgment in favor of her UDTPA claim is DENIED,

and Defendants’ motion for summary judgment against Plaintiff’s UDTPA claim is GRANTED;

Plaintiff’s motion for summary judgment in favor of the legal duty element of her NAS claim is

GRANTED; Defendants’ motion for summary judgment against Plaintiff’s MDCSA claim is

DENIED; Defendants’ motion for summary judgment against Plaintiff’s RESPA claim is

DENIED; Plaintiff’s motion for summary judgment against Defendants’ failure to state a claim,

laches, statute of limitations, bona fide error, and learned profession exception defenses are

GRANTED; and Plaintiff’s motion for summary judgment against Plaintiff’s economic loss rule

defense is DENIED. In addition, Defendants’ Motion to Strike is DENIED as MOOT. Plaintiff’s

breach of contract, NAS, MDCSA, RESPA, and DCA claims remain.

SO ORDERED.

Signed: February 5, 2020

Lhe Leah

Graham C. Mullen 1 ff

United States District Judge et

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