Mapp v. Deutsche Bank National Trust Company et al

Filing 29

MEMORANDUM OPINION AND ORDER DENYING Mapp's 20 motion for reconsideration; further ORDERING that Mapp's 20 motion for certification of this interocutory order as appealable is GRANTED. Signed by Honorable William Keith Watkins on 10/28/09. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION B E N JA M IN K. MAPP, P la in tif f , v. D E U T S C H E BANK NATIONAL T R U S T COMPANY, et al., D e f e n d a n ts. ) ) ) ) ) ) ) ) ) )

CASE NO. 3:08-CV-695-WKW [WO]

M E M O R A N D U M OPINION AND ORDER P la in tif f Benjamin K. Mapp ("Mapp") has filed a motion (Doc. # 20) asking the court to reconsider its opinion (Doc. # 12) denying his motion to remand this case to state court or, in the alternative, to certify the denial of remand for interlocutory appeal pursuant to 28 U .S .C . § 1292(b). A response in opposition was filed by Defendant Deutsche Bank National T ru s t Company ("Deutsche Bank") (Doc. # 23), to which Mapp filed a reply (Doc. # 24).1 F o r the reasons to follow, the motion for reconsideration is due to be denied, and the motion f o r certification is due to be granted. I . STANDARD OF REVIEW A district court has broad discretion to reconsider an interlocutory order. See Toole v . Baxter Healthcare Corp., 235 F.3d 1307, 1315 (11th Cir. 2000); see also United States v. A c o s ta , 669 F.2d 292, 293 (5th Cir. Unit B 1982) ("[T]he district court has broad power to
Mapp also has requested oral argument. (Doc. # 20.) Because the court finds that the briefs are adequate and that oral argument will not materially aid in the resolution of the motion to reconsider, the request for oral argument is denied.
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reconsider the correctness of its interlocutory rulings.")2 It may reconsider an interlocutory ru lin g "for any reason it deems sufficient." Canaday v. Household Retail Servs., Inc., 119 F . Supp. 2d 1258, 1260 (M.D. Ala. 2000), aff'd sub nom. Perry v. Household Retail, 268 F .3 d 1067 (11th Cir. 2001). I I . BACKGROUND M a p p originally filed this lawsuit in the Circuit Court of Chambers County, Alabama, a g a in s t Deutsche Bank and GSPRM Loan Trust 2006-1 (collectively "Defendants"). In his c o m p la in t, Mapp claims that Defendants negligently, wantonly, and otherwise wrongfully a tte m p te d to foreclose on the mortgage on his home. He seeks unspecified compensatory and p u n itiv e damages, as well as injunctive relief preventing foreclosure. Deutsche Bank timely re m o v e d the action on the basis of diversity jurisdiction. Mapp moved to remand the case to state court. That motion was denied. III. DISCUSSION T h e sole issue presently is the amount in controversy. Mapp insists that the amount in controversy is his equity in the real estate. From Mapp's perspective, after subtracting the m o rtg a g e debt and other liens (about $113,500) from the value of the real estate (about $ 1 2 5 ,7 0 0 ) , the value of the equity in his home is approximately $12,000, an amount well b e lo w the jurisdictional amount. (Doc. # 20, at 4.) However, in previously denying the m o tio n to remand, this court found that the amount in controversy was the value of the real
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Decisions of Unit B of the former Fifth Circuit are binding precedent in this circuit. See Stein v. Reynolds Sec., Inc., 667 F.2d 33, 34 (11th Cir. 1982).

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estate, at least $120,500, as established unambiguously by the note and mortgage, copies of w h ic h were included in the removal documents. (Doc. # 12, at 7.) Other federal courts in Alabama, including three judges in this district, have taken o n e of four approaches to establish the amount in controversy in claims involving wrongful f o r e c l o s u r e s : either (1) the value of the property; (2) the amount of the mortgage (i.e., the b a la n c e due on the promissory note secured by the mortgage); (3) the value of a temporary d e la y of a foreclosure; or (4) a plaintiff's equity in the real estate subject to foreclosure. See W o o d v. Option One Mortgage Corp., 580 F. Supp. 2d 1248, 1252 (N.D. Ala. 2008) (H o p k in s , J.) (finding that allegation in complaint referencing the amount of the mortgage in a wrongful foreclosure case is not sufficient to establish jurisdictional amount); Horace v . Lasalle Bank Nat'l Ass'n, No. 08-1019, 2009 WL 426467, at *1-2 (M.D. Ala. Feb. 17, 2 0 0 9 ) (Thompson, J.) (same); James v. U.S. Bank Nat'l Assoc., No. 09-247, 2009 WL 2 1 7 0 0 4 5 , at *2 (M.D. Ala. July 17, 2009) (Thompson, J.) (finding that the amount in c o n t r o v e rsy is not the value of the property but rather the value of a temporary delay of a f o re c lo s u r e ); Carstarphen v. Deutsche Bank Nat'l Trust Co., No. 08-0511, 2009 WL 1 5 3 7 8 6 1 , at *4-5 (S.D. Ala. June 1, 2009) (Steele, J.) (same); Sanders v. Homecomings Fin. L L C , No. 08-369, 2009 WL 1151868, at *3 (M.D. Ala. April 29, 2009) (Fuller, C.J.) (finding th a t the plaintiff's interest is not the value of the mortgage but rather his equity in the home); In g r a m v. Countrywide Home Loans, No. 08-251 (M.D. Ala. July 14, 2008) (Walker, J.) (s a m e ).

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In view of the diversity of opinion, this court ought to have rendered a more thorough a n a lys is than the issue has been given thus far by any of the referenced courts, including this o n e in its first opinion. Although Mapp's motion for reconsideration has been carefully c o n s id e re d , the initial ruling has not changed for the reasons stated below. A. C a lc u la tin g the Amount in Controversy 1. T h e Value of Declaratory and Injunctive Relief

A s the parties are aware, when declaratory or injunctive relief is sought, "`it is well e s ta b li s h e d that the amount in controversy is measured by the value of the object of the litig a tio n .'" Ericsson GE Mobile Commc'ns, Inc. v. Motorola Commc'ns & Elecs., Inc., 120 F .3 d 216, 218 (11th Cir. 1997) (quoting Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 3 3 3 , 347 (1977)).3 The Eleventh Circuit has paraphrased Ericsson's holding this way: "In o th e r words, the value of the requested injunctive relief is the monetary value of the benefit th a t would flow to the plaintiff if the injunction were granted." Cohen v. Office Depot, Inc., 2 0 4 F.3d 1069, 1077 (11th Cir. 2000). In the Eleventh Circuit, the value of the object of the litig a tio n is measured solely from the plaintiff's perspective; the value to the defendant is irre le v a n t. See Ericsson, 120 F.3d at 219-20. The plaintiff's viewpoint rule, however, does n o t permit a plaintiff to set subjectively the value of the object of the litigation. Rather, the c a s e s upon which the Ericsson court relied emphasized that the relevant "value" is the value o f the right that the plaintiff is seeking to enforce. See id. (citing Vraney v. County of

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The sole claim for relief in Ericsson was injunctive relief.

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Pinellas, 250 F.2d 617 (5th Cir. 1958); Alfonso v. Hillsborough County Aviation Auth., 308 F .2 d 724 (5th Cir. 1962)). Nor can the value include benefits that are "speculative and im m e a su ra b le ." Id. at 221-22. 2. A la b a m a Mortgage and Foreclosure Law

A mortgage is at bottom a contract.4 It is a contract that secures payment of another c o n tra c t, a promissory note. In Alabama, a mortgage conveys fee simple title subject to a c o n d itio n subsequent that, if the debt created by the promissory note is paid according to its te rm s , title will revert to the mortgagor. See Trauner v. Lowrey, 369 So. 2d 531, 534 (Ala. 1 9 7 9 ). Although it is commonly referred to as a mortgage lien, technically, a mortgage in A la b a m a does not create a lien. Id. The mortgagor, having conveyed fee simple title to the m o rtg a g e e subject to a condition subsequent, retains an equity of redemption. Bailey M o r tg a g e Co. v. Gobble-Fite Lumber Co., 565 So. 2d 138, 143 (Ala. 1990). L ik e many other states, including Georgia, but not Florida,5 Alabama allows n o n ju d ic i a l foreclosure under a power of sale in the mortgage instrument. Ala. Code § § 35-10-1, et seq. A foreclosure sale in Alabama is basically a public sale conducted by the a g re e m e n t of the parties, that agreement being the power of sale contained in the mortgage in s t r u m e n t . Nonjudicial foreclosure is the usual method of foreclosing on mortgages in

The complaint affirms the contractual nature of some of the claims: "The underlying action is based on a contract . . . . The action is brought to enforce the contractual remedies allowed in paragraph 22 of the mortgage document." (Compl. ¶ 4.) Paragraphs 13 and 21 reference conditions precedent and paragraph 10 refers to the "security agreement that underlies [the] foreclosure action." Id.
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Florida is a judicial foreclosure jurisdiction. See Fla. Stat. §§ 702.01­.10.

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Alabama. See David E. Hudgens, An Advanced Look at Alabama Real Estate Law (2004 N a tio n a l Business Institute). A foreclosure sale terminates the mortgagor's equity of re d e m p tio n and entitles the mortgagor to a statutory right of redemption. Ala. Code §§ 6-52 4 7 et seq.; 35-10-1, 5, 11h; Dominex, Inc. v. Key, 456 So. 2d 1047, 1052-53 (Ala. 1984). The purchaser at a foreclosure sale obtains fee simple determinable title, and the condition d e t e rm in a b le on the title is the mortgagor's statutory right of redemption. Dominex, 456 S o . 2d at 1057. A t a foreclosure sale, the property is always sold to the highest bidder for cash. "Because any excess must be paid to junior lien holders or the mortgagor, determining the a p p ro p ria te bid price is important . . . ." Hudgens, supra, at 7. To protect its financial in te re s ts , a mortgagee will typically bid the lower of the mortgage debt or the appraised fair m a rk e t value of the property. William L. Longshore III, Real Property Foreclosure

P ro c e d u r e s , at 9 (National Business Institute 2004). If there are third-party bidders, the o p e n in g bid price will be made by the mortgagee. Id. The mortgagee owes the mortgagor th e duty of conducting the sale in good faith and in a fair manner. See Springer v. Baldwin C o u n ty Fed. Sav. Bank, 562 So. 2d 138, 139 (Ala. 1989). The sale price must not be so s h o c k in g ly low or inadequate as to be unconscionable. Mt. Carmel Estates, Inc. v. Regions B a n k , 853 So. 2d 160, 168 (Ala. 2002). The sale price is closely tied to fair market value to p ro te c t the mortgagor, junior mortgagees, and other lien holders. See Austin Apparel, Inc. v . Bank of Prattville, 872 So. 2d 158 (Ala. Civ. App. 2003). If the value of the property is

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less than the mortgage balance, the recommended course is to bid the fair market value, not th e mortgage balance, as the former allows recovery of the deficiency from the mortgagor a f te r the foreclosure sale. Longshore, supra, at 9. In sum, it is the value of the property that f e e d s the foreclosure formula. In a foreclosure sale, the condition subsequent is extinguished and title to the real e s ta te is formally transferred. The sale results in a foreclosure deed to the purchaser which is normally recorded in the probate office like any other deed. The property sells at fair m a rk e t value, not the "equity" claimed by the mortgagor. The fair market value (such as it is in the foreclosure market) is paid for the property, and cash generated by the sale is tra n s f e rre d to the mortgagee to settle the promissory note debt and expenses of sale. While t h i s is frequently a transaction "on the books" of the mortgagee,6 the financial aspect of a f o re c lo s u re sale is essentially like any other sale of real estate in that the proceeds are divided a m o n g various claimants. The primary benefit flowing to the mortgagor is cancellation of th e debt, at least up to the value of the real estate. The only way the "equity" of the m o rtg a g o r is ever a factor is if the property sells for more than the accumulated debts and e x p e n s e s associated with the mortgage, junior mortgagees and other lien holders. Even then, th e full purchase price changes hands after the sale, and the funds are allocated among the in te re s te d parties according to the contracts and law, with any "equity" going to the

In most cases, the mortgagee will be buying the property at the foreclosure sale. Longshore, supra, at 9.

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mortgagor. Therefore, the enjoinder of a foreclosure sale prohibits a transaction involving th e whole value of the property.7 " T h e most appropriate way to measure the value of th[e rights at stake when a f o re c lo s u re is at issue] is the value of the property itself." Garland v. Mortgage Elec. R e g is t r a t io n Sys., Inc., Nos. 09-71, 09-72, 09-342, 09-430, 2009 WL 1684424, at *2 (D. M in n . June 16, 2009); see id. at *4 (finding that, in an action on the validity of a foreclosure, th e "fundamental dispute . . . is about who owns the property"). This circuit has long re c o g n iz e d this principle. See Frontera Transp. Co. v. Abauza, 271 F. 199, 201 (5th Cir. 1 9 2 1 ) (holding, in a suit to cancel a mortgage and remove the mortgage as a cloud on title, th a t "the value of the lands, not the amount required to redeem, is the amount in c o n tro v e rs y" ).8 Similarly, the Eleventh Circuit more recently held that, in an action for s p e c if ic performance of a contract to purchase land, the fair market value of the property, and

Stated differently, ownership of property is often referred to as a "bundle of rights," NCNB Texas Nat'l Bank, N.A. v. West, 631 So. 2d 212, 223 (Ala. 1993), and at least one of those rights, the right of peaceful possession and enjoyment of the property at stake, is implicated in actions alleging wrongful foreclosure. See Gatter v. Cleland, 87 F.R.D. 66, 69 (E.D. Pa. 1980) ("In this action, plaintiffs seek to enjoin the private lenders from foreclosing their mortgages. Thus, the property right sought to be protected is the right to peaceful possession and enjoyment of the homes, not merely the right to the equity owned therein."). In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit Court of Appeals adopted as binding precedent all of the decisions of the former Fifth Circuit Court of Appeals that were handed down prior to the close of business on September 30, 1981. Frontera was cited in the prior opinion, but neither party has addressed it. (Doc. # 12, at 7.)
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not the contract price, established the amount in controversy. Occidental Chem. Corp. v. B u lla r d , 995 F.2d 1046, 1048 (11th Cir. 1993).9 3. A p p lic a tio n

In the instant case, Mapp seeks, among other requested relief including damages, to e n jo in Defendants from foreclosing on his property. (Compl. ¶ 4.) Notwithstanding the fact th a t Alabama is a title theory state, Bailey Mortgage Co. v. Gobble-Fite Lumber, 565 So. 2d 1 3 8 , 143 (Ala. 1990), and that the mortgagee therefore holds legal title to the property, the m o rtg a g o r, for all equitable and practical purposes, is deemed the "owner" of the property. Thus, Mapp's ownership interest in the real property ­ and the value thereof ­ is at stake in th is litigation.
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The same analysis holds for other areas of real estate law. Frontera cited Greenfield v. United States Mortgage Co. of Scotland, Ltd., 133 F. 784 (E.D. Ark. 1904), a case in which the court considered a motion to remand for a lack of the jurisdictional amount in controversy in an action to redeem after foreclosure. The court held that the law of quieting title, proceedings to collect rent on premises that were the subject of a failed purchase agreement, and proceedings to set aside fraudulent conveyances were informative in the foreclosure arena when considering the amount in controversy: But the equitable as well as the legal considerations involved in the cause are to be considered. The effect of the judgment is to adjust the legal and equitable claims of the parties to the subject of the suit. The subject of the suit is not merely the amount of rent claimed, but the title of the respective parties to the land under the contract.

....
For the purpose of determining the jurisdictional amount in a bill to quiet title, the whole value of the property, the possession or enjoyment of which is threatened by Defendant, is the measure of the value of the matters in controversy.

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In a proceeding to set aside certain conveyances as fraudulent and a cloud upon the plaintiff's title, the matter in dispute is the value of the land in controversy. Id. at 788 (internal quotation marks and citations omitted). Greenfield summed up the unifying principle: "This being an action involving the title to lands, and their value being in excess of the [jurisdictional amount], the necessary diversity of citizenship existing, it was properly removed, and the motion to remand must be overruled." Id.

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At least one of the bundle of property rights that Mapp is seeking to enforce or protect th ro u g h this litigation is his right to peacefully possess and enjoy his home. See Gatter, 87 F .R .D . at 69. He is not seeking merely to delay Defendants' foreclosure action or to obtain th e value of the equity in his home. Foreclosure will require him to vacate his home and will c o s t him its title. From Mapp's perspective, then, it is the whole title and its "bundle of rig h ts " at issue. NCNB Texas Nat'l Bank, 631 So. 2d at 222. To employ Cohen's phraseology, if the injunction were permanently granted, the b e n e f its obtained by Mapp would be the right to retain ownership of and title to his home, a s well as the right to occupy the home. See 204 F.3d at 1077. Ownership, title and p o s s e s s i o n , thus, are not only the objects of this lawsuit, see Hunt, 432 U.S. at 347, but s im ila rly represent the value of the rights sought to be protected by an injunction enjoining th e foreclosure, see Ericsson, 120 F.3d at 347. In monetary terms, these benefits, objects and rig h ts are best measured by the value of the home itself. To determine whether the value of Mapp's property meets the jurisdictional amount, th e court is limited to examining Defendants' removal documents. Lowery v. Ala. Power C o ., 483 F.3d 1184, 1213-14 (11th Cir. 2007). Removal documents include contracts u n d e rlyin g the causes of action. Id. at 1214 n.66. If the initial complaint and the notice of re m o v a l do not "unambiguously establish federal jurisdiction," id. at 1213, "neither the d e f e n d a n ts nor the court may speculate in an attempt to make up for the notice's failings," id . at 1214-15 (citation omitted). Therefore, the determination is a rather simple process:

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"If the jurisdictional amount is either stated clearly on the face of the documents before the c o u rt, or readily deducible from them, then the court has jurisdiction. If not, the court must re m a n d ." Id. at 1211. The removal documents consist of the Notice of Removal, the state court complaint, a n d the note and mortgage at issue between the parties. The latter two documents are c o n tra c ts that establish the fair market value of Mapp's property interest, which undisputedly e x c e e d s the jurisdictional amount. Because jurisdiction was evident from the removal d o c u m e n ts , the motion to remand was denied.10 T h e re f o re , in sum, the case is removable when viewed from a real property p e rs p e c tiv e or a contract perspective. And not to be overlooked here is that there is more f re ig h t on the dock that just an injunction. Mapp repeatedly alleges that Defendants lack s ta n d in g to foreclose (Compl. ¶¶ 10, 23, 50) and that the assignment between non-party Bank o f America and Deutsche Bank is "defective, void, or otherwise unenforceable" (Compl. ¶ 12), or "void, voidable, illegal, without legal effect and is otherwise invalid and u n e n f o rc e a b le as a matter of law." (Compl. ¶ 24). Moreover, Mapp claims in a separate p a ra g ra p h of the complaint that "the foreclosing entity lacks standing to pursue foreclosure . . . and that to allow it to foreclose could cause the petitioner to lose his home without being re lie v e d of his contractual obligation on the debt." (Compl. ¶ 50.) Obviously, Mapp has pled

Ordinarily, important state law issues should be decided by state courts. Neither party specifically briefed this point. On balance, the law of amount in controversy with respect to title to real estate and contracts is sufficiently clear to satisfy the removal standard and to overcome abstention concerns.

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the whole debt into issue, and he cannot now complain that the action is freighted with his o w n load of allegations. Injunctive relief hardly establishes the amount in controversy when s o many substantive issues are in play. Accordingly, the court finds that Mapp's motion for re c o n s id e ra tio n is due to be denied. B. I n te r lo c u to r y Appeal

Nevertheless, this case meets the requirements of 28 U.S.C. § 1292(b). Because f e d e ra l courts in Alabama, indeed within this district, disagree on how to measure the value o f the object of the litigation when foreclosure is involved, the court finds that this "order in v o lv e s a controlling question of law as to which there is a substantial ground for difference o f opinion" on how to view the amount in controversy. § 1292(b). The court further finds th a t "an immediate appeal from th[is] order may materially advance the ultimate termination o f the litigation[.]" Id. The court, therefore, finds that Mapp's motion for certification is due to be granted. I V . CONCLUSION A c c o rd in g ly, it is ORDERED that Mapp's motion for reconsideration (Doc. # 20) is D E N IE D . It is further ORDERED that Mapp's motion for certification of this interlocutory order a s appealable (Doc. # 20) is GRANTED. DONE this 28th day of October, 2009. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE 12