Phillips v. Caliber Home Loans

Background

Stephen Phillips and Mary Tourville-Phillips filed this proposed class action against Caliber Home Loans, Inc. They alleged that Caliber routinely charged fees for making Federal Housing Administration (FHA) mortgage payments online, through a mobile application, or through an automated telephone system. The plaintiffs alleged that these “Pay-to-Pay fees” were not authorized by the Secretary of the U.S. Department of Housing and Urban Development and exceeded Caliber’s actual costs.

The plaintiffs’ mortgage stated that the lender could collect fees and charges authorized by the Secretary. The FHA Handbook, as described in the opinion, permits certain fees only if they are reasonable and customary, based on actual costs or out-of-pocket expenses, and within HUD’s maximum amount. The mortgage’s servicing rights had been assigned to Caliber.

The amended complaint asserted three claims: breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment. Caliber moved to dismiss all three claims under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Count I: Breach of Contract

Caliber argued that the plaintiffs’ contract claim was barred by the voluntary-payment doctrine. That doctrine generally prevents recovery of a payment made voluntarily when the payer was not legally required to make it. The court declined to apply the doctrine at the dismissal stage because the parties disputed whether the plaintiffs knew the material facts about the fees, including whether the fees greatly exceeded Caliber’s actual costs. The court also noted that the doctrine is an affirmative defense and generally cannot support dismissal unless the complaint clearly establishes the defense.

Caliber also argued that it could not be sued for breach of the mortgage because it was not the original lender or a party to the mortgage. The court declined to adopt a categorical rule that a loan servicer can never be in a contractual relationship with a borrower. It held that the plaintiffs’ claim was viable at this stage, although they would ultimately need to establish their relationship with Caliber and a valid assignment of contractual duties. The court denied the motion to dismiss Count I.

Count II: Implied Duty of Good Faith and Fair Dealing

The court granted the motion to dismiss Count II. It concluded that the amended complaint merely repeated the contract allegations and did not allege facts showing that Caliber unjustifiably hindered the plaintiffs’ performance or acted in bad faith. The opinion states that bad faith involves refusing to fulfill a duty or contractual obligation for an ulterior motive, rather than making an honest mistake about contractual rights or duties.

Count III: Unjust Enrichment

The court denied the motion to dismiss Count III. It concluded that the plaintiffs had alleged the basic elements of unjust enrichment by claiming that Caliber accepted and retained a benefit to which it was not entitled. The court also held that the plaintiffs could plead unjust enrichment as an alternative to their contract claim, including because Caliber disputed that it was a party to the mortgage.

Disposition

The court ordered that Caliber’s motion to dismiss was granted as to Count II and denied as to Counts I and III. The order resolved only whether the amended complaint stated plausible claims under the dismissal standard; it did not decide the ultimate merits of those claims.