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Walker v. Deutsche Bank National Trust Co.

United States District Court, D. Connecticut

March 24, 2017

DENNIS WALKER and SALLY O'NEAL WALKER, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR MORGAN STANLEY LOAN TRUST 2 0 05-11AR, and WELLS FARGO BANK, N.A. d/b/a AMERICA'S SERVICING COMPANY, Defendants.

          ORDER RE PARTIAL MOTION TO DISMISS

          Alvin W. Thompson United States District Judge

         For the reasons set forth below, Defendants' Partial Motion to Dismiss Plaintiffs' Complaint (Doc. No. 20) is hereby GRANTED in part and DENIED in part. The motion is being granted with respect to Counts Five (but with leave to replead), Eight, Nine (but with leave to replead), Ten, Eleven (except with respect to any cause of action arising under 12 U.S.C. § 2605(b)), Twelve (but with leave to replead), Thirteen, and Fourteen. The motion is being denied with respect to Counts Two, Four, Seven and any remaining cause of action arising under 12 U.S.C. § 2506(b).

         Counts Two and Four - Good Faith and Fair Dealing

         "[E]very contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement." Rafalko v. Univ. of New Haven, 129 Conn.App. 44, 51 (2011). "[T]o constitute a breach of the [implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." Caires v. JP Morgan Chase Bank, N.A., 880 F.Supp.2d 288, 307-08 (D. Conn. 2012) (quotation marks omitted) (quoting Landry v. Spitz, 102 Conn.App. 34, 42 (2007)). "Bad faith means more than mere negligence; it involves a dishonest purpose." De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 433 (2004) .

Bad faith in general implies [either] actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive.

Habetz v. Condon, 224 Conn. 231, 237 (1992) (emphasis added) (quoting Funding Consultants, Inc. v. Aetna Casualty & Surety Co., 187 Conn. 637, 644 (1982)). "A plaintiff cannot state a claim for breach of the implied covenant simply by alleging a breach of the contract, in and of itself." TD Bank, N.A. v. J & M Holdings, LLC, 143 Conn.App. 340, 349 (2013).

         Here, the plaintiffs allege not only that the defendants "failed" to honor the first modification and second modification agreements, but also that the defendants "refused" to honor these agreements. See Compl. Count Two ¶¶ 20(a), (b) and (c), 21, 24, and Count Four ¶¶ 18(a), and 21. Also, the facts alleged with respect to the fraudulent misrepresentation claim support an inference that the defendants' refusal to honor the modification agreements was designed to mislead or deceive, and that the defendants operated with an interested or sinister motive in their handling of the first modification and second modification agreements. When these factual allegations are read together with those under Count Two and Count Four, the plaintiffs have adequately alleged bad faith.

         Accordingly, the plaintiffs have sufficiently alleged a claim for breach of the implied covenant of good faith and fair dealing in both Count Two and Count Four, and the motion to dismiss is being denied as to these counts.

         Counts Five and Twelve - Fraudulent Misrepresentation and Fraud

          "When a party pleads fraud, the alleged fraud must be pled with the particularity required by Rule 9(b)." Trefoil Park, LLC v. Key Holdings, LLC, No. 3:14-CV-364 (VLB), 2015 WL 1138542, at *5 (D. Conn. Mar. 13, 2015). "Rule 9(b) provides that Mi]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.'" Id. "In this Circuit, therefore, a complaint based on fraudulent acts must Ml) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent."' Id. (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)). While "[m]alice, intent, knowledge and other conditions of a person's mind may be alleged generally, " as a safeguard to a defendant's reputation, plaintiffs "must allege facts that give rise to a strong inference of fraudulent intent." Id. (quoting Parola v. Citibank (South Dakota) N.A., 894 F.Supp.2d 188, 200 (D. Conn. 2012)). "The 'strong inference of fraud' may be established by either alleging facts to show that a defendant had both the motive and opportunity to commit fraud, or facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.'" Id. (quoting Parola, 894 F.Supp.2d at 200)).

         Here, the defendants argue that the complaint fails to satisfy requirements two, three and four of the heightened pleading standard as articulated in Mills. The plaintiffs "have pled that 'authorized agents, representatives, and/or employees' of the Defendants made the representations, " which they contend "states with enough particularity that an authorized individual(s)/representative(s) [sic] of the Defendants allegedly made the representations." Pis.' Mem. (Doc. No. 26) 15. While the plaintiffs correctly point out that courts have permitted reference to a company's agents to satisfy the requirement that the speaker be identified, see Reynolds v. Lifewatch, Inc., 136 F.Supp.3d 503, 523-24 (S.D.N.Y. 2015), the court need not assess whether such a reference is sufficient with respect to the speaker here, because the plaintiffs fail to plead the time and place with particularity.

         The plaintiffs also argue the Complaint "allege[s] that the statements were made in writing or through the mediation program and the dates the agreements were offered and accepted." Pis.' Mem. 14. The court disagrees. The Complaint does not specify that the statements were made in writing or through the mediation program, and even if it did, any such specification would not be sufficient to satisfy the requirement of particularity. For example, with respect to Count Five ¶¶ 28-30 of the Complaint, the plaintiffs do not point to where such statements appear in the first modification agreement, and the court is unable to locate any. See First Modification Agreement, Compl. Ex. 1 (Doc. No. 25). Nor do the plaintiffs give any indication as to when during the mediation program the statement may have been made, whether in writing or orally, whether in person or by telephone. The allegations in ¶¶ 31-33 are similarly insufficient, although the second modification agreement is not attached to the Complaint, and thus the court did not review it.

         In addition, the alleged representations by the defendants to the plaintiffs "that the Plaintiffs had to be in default in order to modify their loan, " Compl. Count Five ¶ 38(g), would have to have been made prior to the plaintiffs' default, so it is not apparent how they would have occurred "through the mediation program, " as the plaintiffs state. For instance, the plaintiffs allege: "Prior to the Plaintiffs defaulting upon the Note, the Plaintiffs contacted the Defendant, Deutsche Bank[, ] to request a modification and at that time the Defendant advised the Plaintiffs that it would not consider a request for modification unless the subject loan was in default." Compl. Count Five ¶ 34. Without more, even when viewed in the light most favorable to the plaintiffs and drawing all reasonable inferences in their favor, such a statement is insufficient to satisfy the third requirement as to particularity.

         The defendants also argue that the plaintiffs fail to explain how the representations were fraudulent, and thus do not satisfy the fourth requirement as to particularity. The court agrees with respect to any statements or allegations related to the "Defendants['] incorporation of erroneous figures in the First Modification [A]greement without the knowledge of the Plaintiffs." Compl. Count Five ¶ 39(c). The plaintiffs fail to specify which figures were false and what made them false. Accordingly, these statements are insufficient to satisfy the fourth requirement as to particularity.

         Therefore, the motion is being granted with respect to Count Five, but with leave to replead. Because the plaintiffs plead no additional facts in Count Twelve, but rather incorporate by reference the allegedly fraudulent statements from Count Five, the motion also is being granted with respect to Count Twelve, but also with leave to replead.

         Count Seven - CUTPA

          "[T]o prevail on a CUTPA claim, the plaintiffs must prove that (1) the defendant[s] engaged in unfair or deceptive acts or practices in the conduct of any trade or commerce . . . and [the plaintiffs suffered] ascertainable loss of money or property as a result of the defendant[s'] acts or practices." Caires v. JPMorgan Chase Bank, N.A., 880 F.Supp.2d 288, 299 (D. Conn. 2012) (quoting Neighborhood Builders, Inc. v. Town ...


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