Contract – Breach of Contract – Negligence – Negligence Per Se – Unfair and Deceptive Trade Practices – Breach of Fiduciary Duty – Declaratory Judgment – Injunction

Hetzel v. JPMorgan Chase Bank, N.A. (Lawyers Weekly No. 14-02-0717, 7 pp.) (Terrence W. Boyle J.) 4:12-cv-00236; E.D.N.C.

Holding: Plaintiff based his claim to enjoin a foreclosure proceeding on the theory that a property mortgage is invalid because the deed of trust was effectively canceled by the certificate of satisfaction and the re-recorded deed and the rescission of certificate of satisfaction were unauthorized, ineffective, and/or void. Under North Carolina law, a unilateral rescission of a certificate of satisfaction is allowed. Since the plaintiff has not alleged any facts that would entitle him to succeed on the declaratory judgment claim or the foreclosure claim, those amendments are not allowed as they are futile.

Paul Hetzel filed suit against JPMorgan Chase Bank, N.A., TRG Settlement Services, LLP d/b/a CCS Convenient Closing Services, Trustee Services of Carolina, LLC, Select Portfolio Servicing, Inc. and U.S. Bank National Association as trustee for Chase Mortgage Finance Corporation Multi-Class Mortgage Pass-Through Certificates.

The plaintiff owns three properties, two in Maryland and one in North Carolina. The plaintiff had a good credit score and was current on all three of these loans with Chase. The plaintiff developed a plan to refinance all three properties with Merrill Lynch to save over $130,000 a year in interest payments starting with the Spa Drive Property in Maryland. Merrill Lynch hired TRG to handle the closing of the loan and the settlement. Even though the plaintiff followed TRG’s instructions regarding the closing of the loan and disbursement of funds to pay Chase, the funds were misapplied and the Salter Path Road property, the property in North Carolina, was paid off instead of the Spa Drive property. After discovering the mistake, Chase re-recorded unilaterally the deed of trust for the Salter Path property and informed the plaintiff that the Salter Path Road loan was reinstated on June 24, 2009, but did not record the rescission of Certificate of Satisfaction until 2013.

The plaintiff first brought six causes of action. He alleges claims against Chase for negligence, negligence per se, violation of North Carolina’s Unfair and Deceptive Trade Practices Act (UDTP A), and breach of contract. He alleges claims against TRG for negligence, breach of fiduciary duty, and violation of the UDTPA. He also seeks a declaratory judgment that he is the owner of the Salter Path property in fee simple free and clear of Chase’s lien.

The plaintiff now wants to amend his complaint to bring a claim against Trustee Services, to plead additional facts regarding the circumstances surrounding the May 2009 loan closing transaction, to bring a claim for breach of the implied covenant of good faith against Chase, to add Chase as a party to the existing claim for breach of fiduciary duty and to plead additional facts which support his theory of equitable estoppel.

The court denied the plaintiff’s motion to amend as applied to two parties — Trustee Bank and U.S. Bank, and two claims, the claim for declaratory judgment and the claim to enjoin the foreclosure proceedings against the Salter Path Road property.

The court does not allow plaintiff a declaratory judgment that he is the owner of the Salter Path property in fee simple free and clear of Chase’s lien and the deed of trust associated with the Salter Path property mortgage.

The plaintiff’s other amendments are allowed.

Because the Court has allowed to motion to amend in part, the pleaded facts and claims

contained in the complaint now before the Court are different from those contained in the

complaint to which defendants directed their motions to dismiss. In order to better define the

arguments presented, the Court denies without prejudice most of the motions to dismiss in order to allow defendants to refile motions to dismiss that are appropriately tailored to the second amended. The court grants the defendants’ motions to dismiss as relating to the declaratory judgment and to enjoin the foreclosure of the Salter Path property.

Since U.S. Bank and Trustee services are only in the lawsuit concerning the claims for declaratory judgment and to enjoin the foreclosure, these defendants are dismissed from the lawsuit.

The court grants Trustee Services’ motion to dismiss, denies without prejudice TRG’s motion to dismiss, grants in part and denies in part without prejudice Chase and U.S. Bank’s motion to dismiss and grants in part and denied in part the plaintiff’s motion to amend complaint.