United States District Court, D. Idaho
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 ...