Fiecke-Stifter v. MidCountry Bank

Background

Sandra K. Fiecke-Stifter, acting for herself and the Estate of Doris M. Fasching, alleged that MidCountry Bank unlawfully foreclosed on a home owned by Doris. MidCountry was the lender, note holder, and mortgagee; Taft Stettinius & Hollister LLP represented MidCountry in the foreclosure. Sandra alleged that MidCountry breached the mortgage contract and violated the federal Truth in Lending Act (TILA), and that Taft violated the Fair Debt Collection Practices Act (FDCPA).

Doris’s mortgage included a due-on-sale provision stating that MidCountry could accelerate the debt after a transfer or sale of the property, subject to restrictions imposed by federal law. Sandra alleged that MidCountry treated Doris’s death as a default, even though payments were current, and later returned payments she had made. MidCountry and Taft argued that the foreclosure instead resulted from missed or incomplete payments.

Motion and governing standard

The defendants sought judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court applied the same standard used for a motion to dismiss for failure to state a claim: it accepted the complaint’s factual allegations as true, drew reasonable inferences in Sandra’s favor, and considered whether the allegations stated plausible claims. The court could consider the contract documents and certain public records, but it could not rely on disputed MidCountry records to reject Sandra’s factual allegations at this stage.

Breach-of-contract claim

The court granted the motion as to Count I and dismissed it without prejudice. Sandra offered two contract theories.

First, she argued that the mortgage incorporated a federal regulation restricting the enforcement of due-on-sale clauses after a borrower’s death. The court held that the mortgage’s statement that the due-on-sale right was “subject to” federal-law restrictions did not incorporate those restrictions as contractual terms or create a contractual duty. Under Minnesota law, the court found that this interpretation was unambiguous and that the theory was therefore implausible.

Second, Sandra argued that MidCountry breached the contract by returning payments instead of crediting them under 15 U.S.C. § 1639f(a), a TILA provision. The court rejected this theory because the contract did not mention or incorporate that provision, and Sandra identified no other contract term requiring MidCountry to credit the returned payments. The court did not treat the federal statute itself as a contractual obligation.

TILA claim

The court granted the motion as to Count II and dismissed it without prejudice. Section 1639f(a) generally requires a loan servicer to credit a payment to a consumer’s account as of the date of receipt, subject to stated exceptions. The court found that Sandra did not plausibly allege that MidCountry failed to credit her payments when it received them. Instead, she alleged that MidCountry initially accepted or credited the payments and later returned them. She also did not allege that delayed crediting caused late charges, additional interest, or similar penalties of the type addressed by the statute. The TILA claim was therefore dismissed as pleaded.

FDCPA claim

The court denied the motion as to Count III, which alleged that Taft violated the FDCPA by pursuing foreclosure even though MidCountry allegedly lacked a present right to possession of the property. The court understood the amended complaint to rely on 15 U.S.C. § 1692f(6), concerning unfair or unconscionable means of collecting a debt when the collector lacks a present right to possession of property.

The court did not accept the defendants’ MidCountry-generated billing statements and past-due notices as a basis for dismissing this claim. Those records were disputed and were not properly considered on a Rule 12(c) motion. Because dismissing the claim would require accepting the defendants’ description of the payment history and rejecting Sandra’s allegations, the court denied the motion as to the FDCPA claim. The opinion stated that the claim could proceed only to the extent the defendants’ dismissal arguments required construing disputed facts in their favor. It also stated that any FDCPA theories other than § 1692f(6), if Sandra intended to assert them, were waived or not included in the amended complaint.

Disposition

Judge Eric C. Tostrud ordered that the defendants’ motion for judgment on the pleadings was GRANTED in part and DENIED in part. The motion was granted as to Count I, breach of contract against MidCountry Bank, and Count II, TILA violations against MidCountry Bank; both counts were DISMISSED WITHOUT PREJUDICE. The motion was denied as to Count III, the FDCPA claim against Taft Stettinius & Hollister LLP.