Robinett v. Loancare, LLC

          MEMORANDUM DECISION AND ORDER

          DAVID C. NYE, U.S. DISTRICT COURT JUDGE.

         I. OVERVIEW

         This matter comes before the Court on Defendants' Second Motion to Dismiss. Dkt. 21. On January 3, 2018, this Court issued a Memorandum Decision and Order dismissing some of Plaintiffs' original claims with prejudice, dismissing the remaining claims without prejudice, and granting Plaintiffs leave to amend their Complaint. Dkt. 19. Plaintiffs filed an Amended Complaint (Dkt. 20) and Defendants again moved to dismiss it in its entirety, with prejudice. Having reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court decides the Motion on the record without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the Motion to Dismiss.

         II. FACTS

         On January 1, 2012, Plaintiffs Douglas Robinett and Lisa Robinett granted a Deed of Trust in their home in Kamiah, Idaho, (hereinafter “the Property”) to Defendant American Financial Resources, Inc. (“AFR”).^[1] At all relevant times, Defendant LoanCare serviced the indebtedness secured by the Deed of Trust. Under the Deed of Trust, Plaintiffs were obligated to maintain property insurance on the Property and to name the lender as an additional insured. Specifically, the contract provided as follows:

4. Fire, Flood and Other Hazard Insurance.

Borrower shall insure all improvements on the Property, whether now in existence or subsequently erected, against any hazards, casualties, and contingencies, including fire, for which Lender requires insurance. This insurance shall be maintained in the amounts and for the periods that Lender requires. Borrower shall also insure all improvements on the Property, whether now in existence or subsequently erected, against loss by floods to the extent required by the Secretary. All insurance shall be carried with companies approved by Lender. The insurance policies and any renewals shall be held by Lender and shall include loss payable clauses in favor of, and in a form acceptable to, Lender.

In the event of loss, Borrower shall give Lender immediate notice by mail. Lender may make proof of loss if not made promptly by Borrower. Each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Lender, instead of to Borrower and to Lender jointly. All or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and this Security Instrument, first to any delinquent amounts applied in the order in paragraph 3, and then to prepayment of principal, or (b) to the restoration or repair of the damaged Property. Any application of the proceeds to the principal shall not extend or postpone the due date of the monthly payments which are referred to in paragraph 2, or change the amount of such payments. Any excess insurance proceeds over an amount required to pay all outstanding indebtedness under the Note and this Security Instrument shall be paid to the entity legally entitled thereto.

In the event of foreclosure of this Security Instrument or other transfer of title to the Property that extinguishes the indebtedness, all right, title and interest of Borrower in and to insurance policies in force shall pass to the purchaser.

Dkt. 11-2, at 3 (emphasis added). Plaintiffs obtained insurance that satisfied this obligation through Foremost Insurance Group.

         On August 15, 2015, improvements on the Property were destroyed during the Clearwater Complex and Lawyer Complex forest fires. Plaintiffs allege that, due to the “catastrophic nature of the fire, the premises were a total loss.”

         After the complete loss of their home, Plaintiffs made claims to their insurer. On August, 28, 2015, Foremost Insurance Group issued checks in the amount of $97, 650 and $30, 000, payable to Plaintiffs and LoanCare (as an agent/loan servicer for AFR). Plaintiffs endorsed the checks and forwarded them to LoanCare. LoanCare received the checks on or about September 30, 2015.

         On September 10, 2015, Plaintiffs made a written demand to LoanCare for a “payoff amount.” Plaintiffs were seeking to refinance their existing debt through Kamiah Community Credit Union in order to facilitate the rebuilding of their destroyed home. LoanCare received the written demand on or around September 14, 2015.

         Between September 2015 and May 2016, LoanCare (acting first as an agent for AFR and then as an agent for Lakeview)^[2] failed to apply the insurance proceeds to Plaintiffs' debt or to the restoration or make arrangements of any kind to use the insurance proceeds to restore or repair the premises. LoanCare also failed to provide the requested pay-off information to Plaintiffs or to the Kamiah Community Credit Union, and instead assessed interest and late fees against Plaintiffs.

         On November 6, 2015, the Kamiah Community Credit Union rejected Plaintiffs' application for refinancing due to the absence of payoff information that reflected the application of the insurance proceeds to Plaintiffs' then existing indebtedness. Plaintiffs then reapplied for financing from Kamiah Community Credit Union in April of 2016. On April 18 and 26, 2016, Kamiah Community Credit Union made requests to LoanCare seeking Plaintiffs' pay-off information. Each time, LoanCare responded by providing a written pay-off statement that did not reflect the application of the insurance proceeds to the debt.

         On or around May 11, 2016, Mortgage Electronic Registration Systems, Inc., acting as an agent for Lakeview, recorded a Notice of Default regarding the subject real property in the county land records in Idaho County, Idaho. Shortly thereafter, on or about May 20, 2016, LoanCare provided a pay-off statement showing application of the insurance proceeds to Plaintiffs' debt. In June of 2016, after LoanCare applied the insurance proceeds to Plaintiffs' debt, Lakeview's interest in the Property, secured by the Deed of Trust, was released. There was some delay in releasing the ...