Burns et al v. U.S. Bank, N.A. et al

Filing 26

OPINION AND ORDER as follows: (1) Defendants U.S. Bank, N.A. and Bank of America, N.A.'s motion for summary judgment 15 is granted in part and denied in part. (2) The motion is denied as to plaintiffs Edgar L. Burns, Jr. and Melanie Burns 9;s unlawful-foreclosure claim. This claim will go to trial. (3) The motion is granted as to all remaining claims, with the Burns plaintiffs taking nothing as to these remaining claims. Signed by Honorable Judge Myron H. Thompson on 1/30/2013. (Attachments: # 1 Civil Appeals Checklist)(jg, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION

EDGAR L. BURNS, JR., and
MELANIE BURNS,

)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
U.S. BANK, N.A., and
BANK OF AMERICA, N.A.,
Defendants.

CIVIL ACTION NO.
3:12cv293-MHT
(WO)

OPINION AND ORDER
Plaintiffs Edgar L. Burns, Jr. and Melanie Burns
charge in this lawsuit that defendants U.S. Bank, N.A.
and Bank of America, N.A. unlawfully foreclosed on their
home

after

inducing

them

to

stop

making

mortgage

payments, promising them that their mortgage would be
modified and no foreclosure would occur.

This case was

removed from state to federal court pursuant to 28 U.S.C.
§ 1441, based on 28 U.S.C § 1332 (diversity).

This case

is now before the court on the banks’1 motion for summary
1.

The

record

in

this

case

is

vague

on

the

(continued...)

judgment.

For the reasons that follow, that motion will

be granted in part and denied in part.

I. SUMMARY-JUDGMENT STANDARD
Summary judgment is appropriate “if the movant[s]
show[]

that

material

there

fact

and

is
the

no

genuine

movant[s]

judgment as a matter of law.”

dispute
[are]

as

to

entitled

any
to

Fed. R. Civ. P. 56(a).

The court must view the evidence in the light most
favorable to the non-moving party and draw all reasonable
inferences in favor of that party.

Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986).

Here, the defendants are the movants.

(...continued)

relationship between U.S. Bank and Bank of America,
although it appears that the Burnses’ mortgage is
currently held by U.S. Bank as trustee for Bank of
America, and the mortgage is serviced by the latter. As
both sides’ filings in this case do not distinguish
between the entities, this opinion refers to both
collectively as simply “the banks.”
2

II. BACKGROUND
The Burnses bought a home in Lee County, Alabama,
with bank financing.
difficulty

making

contacted

the

At some point, they began having

their

banks

mortgage

to

inquire

payments
into

and

a

they

possible

modification of their mortgage agreement. Precisely what
occurred next is somewhat unclear from the scanty record
presently before the court, but reading the record in the
light most favorable to the Burnses, it seems to show as
follows.

Responding

to

the

Burnses’

inquiry,

representatives from the banks orally told them that it
was bank policy to modify mortgages only for property
owners

who

were

delinquent

on

payments.

The

representatives advised that, because the Burnses were up
to date on payments, they should stop making payments for
some period and then apply for a modification.

If they

did so, the representatives assured, no foreclosure would
occur while the banks considered the application.

3

The

Burnses

followed

the

banks’

instructions,

stopping payments and applying for a modification.

For

reasons

not

that

are

unclear,

the

application

was

processed in the ordinary manner, and the Burnses were
required to have repeated conversations with the banks.
During these conversations, several bank representatives
assured the Burnses on numerous occasions that the banks
would not foreclose on their home.
Despite those representations, the Burnses received
a letter from a law firm retained by the banks stating
that the Burnses were in default and the banks was
accelerating the remaining unpaid balance (that is, the
full debt, rather than only the monthly payments, would
be due immediately) and, if the Burnses did not pay that
amount, the property would be foreclosed.

Shortly after

that,

front

a

foreclosure

sale

was

held

in

of

the

courthouse in Opelika, Lee County, Alabama, with the
banks themselves purchasing the home.

4

The Burnses brought this lawsuit in state court,
charging unlawful foreclosure, negligence, wantonness,
and fraud.

The banks removed the case to this federal

court.

III. DISCUSSION
Alabama law provides property owners an equitable
cause of action to set aside unlawful foreclosures.

See,

e.g., Farmers’ Sav. Bank v. Murphree, 76 So. 932 (Ala.
1917); Randolph v. Bradford, 86 So. 39 (Ala. 1920).

In

general, a foreclosure is lawful only if it satisfies
certain

statutory

requirements.

§§ 35-10-11 to -16.

See

1975

Ala.

Code

Additionally, when a mortgage by its

own terms contains conditions precedent to foreclosure,
those conditions must be satisfied before a foreclosure
may

be

lawfully

made.

See

Randolph,

86

So.

at

41

(construing a mortgage agreement to contain a condition
precedent to foreclosure and holding that “The mortgagee
or his assignee had no right of foreclosure until ... the

5

condition was fulfilled”); Jackson v. Wells Fargo Bank,
N.A., 90 So. 3d 168, 173 (Ala. 2012) (collecting cases).
Here, the mortgage at issue provides that, “Lender
shall

give

notice

to

Borrower

following Borrower’s [default].”
20), Exh. 1, ¶ 22.

prior

to

acceleration

Pls.’ Br. (Doc. No.

The mortgage goes on to specify the

information required to be in the notice, including,
that, unless the property owner takes certain remedial
action (such as making the late payments), the banks may
choose

to

property.2

2.

accelerate
Id.

the

These

loan

and

provisions,

foreclose
by

on

their

the

clear

Paragraph 22 reads in whole as follows:
“22. Acceleration; Remedies.
Lender
shall give notice to Borrower prior to
acceleration following Borrower’s breach
of any covenant or agreement in this
Security Instrument (but not prior to
acceleration under Section 18 unless
Applicable Law provides otherwise). The
notice shall specify: (a) the default;
(b) the action required to cure the
default; (c) a date, not less than 30
days away from the date the notice is
given to Borrower, by which the default
must be cured; and (d) that failure to
(continued...)

6

(...continued)

cure the default on or before the date
specified in the notice may result in
acceleration of the sums secured by this
Security Instrument and sale of the
Property.
The notice shall further
inform
Borrower
of
the
right
to
reinstate after acceleration and the
right to bring a court action to assert
the non-existence of a default or any
other
defense
of
Borrower
to
acceleration and sale. If the default
is not cured on or before the date
specified in the notice, Lender at its
option may require immediate payment in
full of all sums secured by this
Security Instrument without further
demand and may invoke the power of sale
and any other remedies permitted by
Applicable Law.
Lender shall be
entitled
to
collect
all
expenses
incurred in pursuing the remedies
provided in this Section 22, including,
but
not
limited
to,
reasonable
attorneys’ fees and costs of title
evidence.
“If Lender invokes the power of sale,
Lender shall give a copy of a notice to
Borrower in the manner provided in
Section 15.
Lender shall publish the
notice of sale once a week for three
consecutive
weeks
in
a
newspaper
published in LEE County, Alabama, and
thereupon shall sell the Property to the
highest bidder at public auction at the
(continued...)

7

language, require that the bank, as a condition precedent
to acceleration and foreclosure, first provide notice to
the property owner of the bank’s intent.

See Jackson, 90

So. 3d at 170-73 (construing identical language as such).
If the bank does not provide the property owner with such
notice

and

an

opportunity

to

remedy

subsequent foreclosure is unlawful.
the

Alabama

Supreme

Court

in

Id.

the

default,

a

As explained by

Jackson,

the

mortgage

provision at issue is a standard one, found in countless
mortgages across the country, that is intended to provide

(...continued)

front door of the County Courthouse in
this County.
Lender shall deliver to
the purchaser Lender’s deed conveying
the Property.
Lender or its designee
may purchase the Property at any sale.
Borrower covenants and agrees that the
proceeds of the sale shall be applied in
the following order: (a) to all expenses
of the sale, including, but not limited
to, reasonable attorneys’ fees; (b) to
all sums secured by this Security
Instrument; and (c) any excess to the
person or persons legally entitled to
it.”
Pls.’ Br. (Doc. No. 20), Exh. 1, ¶ 22.
8

property

owners

with

greater

rights

afforded by applicable state law.

than

otherwise

Id.

The Burnses contend that, despite their mortgage
clearly

mandating

pre-acceleration-and-foreclosure

notice,

the

banks

never

because

the

mandatory

gave

notice

such
was

notice
not

subsequent foreclosure is invalid.

and

that,

provided,

the

The banks respond

that they believes proper notice was sent, but they have
not put forth any evidence of that being the case.

As

such, whether proper notice was actually sent is plainly
a dispute of material fact precluding summary judgment.
See id. at 173-74 (reversing lower court’s entry of
summary judgment in favor of the bank without evidence
that proper notice was sent).
The banks make two arguments for why this result
should not follow.
raising

“any

complaint,

The first argument is: Instead of

contractual

the

Burnses

notice

arguments”

“asserted

only

in

the

that

the

foreclosure was ‘conducted in violation of Alabama law,’”

9

and, because the Burnses failed to make their lack-ofnotice

claim

in

the

permitted to do so now.

complaint,

they

should

not

Defs.’ Reply (Doc. No. 22).

be
The

complaint plainly states that, “The foreclosure on the
Burn[se]s’ house was conducted in violation of Alabama
law” and the defendants “did not have the legal right to
foreclose.”

Compl. ¶ 19-20, 21-24.

The banks’ argument

that the Burnses are now attempting to defeat summary
judgment

with

a

“new

claim”

involving

“contractual”

rights rather than “Alabama law” is puzzling.

It is, of

course, Alabama law that requires the banks to abide by
the terms of mortgages (including giving proper preacceleration-and-foreclosure notice when a mortgage so
requires).

But for Alabama law, the mortgage document

has no inherent magical qualities in this federal court.
See Erie R. Co. v. Tompkins, 304 U.S. 64, 75-79 (1938)
(“obligations under contracts” are governed by state law,
and there is no “transcendental body of law outside of
any particular State”).

10

The spirit of the banks’ argument seems to be that
the vague allegations of foreclosure “in violation of
Alabama law” were too imprecise to give the banks notice
of their alleged wrongdoing.

But, after this lawsuit

began, the banks had the right to ask for a court order
requiring the Burnses to clarify their complaint, and the
fault lies with the bank for failing to do so.

See Fed.

R. Civ. P. 12(e) ("A party may move for a more definite
statement

of

a

pleading

...

which

is

so

vague

or

ambiguous that the party cannot reasonably prepare a
response."); Ohio-Sealy Mattress Mfg. Co. v. Kaplan, 90
F.R.D. 21, 24 (N.D. Ill. 1980) (Aspen, J.) (motion for a
more

definite

complaint
[defendant]

is

statement

is

“‘woefully

with

notice

appropriate

deficient’
of

[its]

where

in

alleged

the

providing
wrongful

conduct”).
The banks’ second argument is that, even if the
Burnses were not given formal notice in compliance with
the

mortgage,

they

had

constructive

11

notice,

which

suffices under Alabama law.

For that proposition, the

banks cite Redman v. Federal Home Mortgage Corp., 765 So.
2d 630 (Ala. 1999).

In that case, the Alabama Supreme

Court, addressing an identical mortgage provision as the
one at issue in this case, held that when property owners
claim to have not received formal pre-acceleration-andforeclosure

notice,

the

issue

before

the

court

is

“whether [the property owners], as reasonable persons,
had notice of facts sufficient to cause them to make
further inquiry as to the status of [their] mortgage
Id. at 635.

account with [the bank].”
owners

had

foreclose

such

on

the

constructive
property

notice,

regardless

If the property
the
of

bank

may

whether

the

property owners actually received formal notice.

Id.

The banks, in applying that principle to the facts of
this case, argue that the Burnses obviously were aware
that they were not making their mortgage payments (they
admit as much) and, therefore, they had constructive
notice.

That

argument

misses

12

the

point.

The

constructive notice inquiry is not whether the Burnses
were aware that they were not making payments, but rather
whether

they

were

aware

that

the

bank

intended

to

accelerate their debt and foreclose on their property.
See id. at 635 (“It is clear from the record that the
defendants closed their eyes to avoid ‘discovery’ of the
truth that was reasonably apparent: that the Mortgage was
seriously in arrears and that SouthTrust was ready to
legally foreclose on the property.”) (emphasis added).
The evidence currently before the court, viewed in the
light most favorable to the Burnses, shows that the banks
never sent them formal notice and that, on the contrary,
represented

to

them

orally

that

the

intention to accelerate and foreclose.

banks

had

no

It is obvious

that the Burnses could not have been constructively aware
of the banks’ intent when their agents expressly stated
that the banks had no such intent.

See Alexander v.

Fountain, 70 So. 669, 670 (Ala. 1916) (“Whatever is
sufficient to put one on his guard and call for inquiry

13

is

notice

of

everything

lead.”) (emphasis added).

to

which

the

inquiry

would

As such, the banks’ motion for

summary judgment on the Burnses’ unlawful-foreclosure
claim will be denied.3
In addition to the unlawful foreclosure claim, the
Burnses assert claims for negligence, wantonness, and
fraud.

As for the negligence and wantonness claims, the

Burnses now agree with the banks that summary judgment
should be entered in the banks’ favor, and the court will
do so accordingly.

Regarding the fraud claims, the

Burnses state that they oppose granting summary judgment
to the banks, but, they concede that the current state of
Alabama law does not support those claims.

See Manker v.

CitiMortgage, Inc., 2012 WL 999611, at *5 (M.D. Ala. Mar.
23, 2012) (Watkins, J.) (construing Alabama law as such).
It is, of course, unquestionable that this court, sitting

3. The Burnses also argue that the unlawfulness of
the foreclosure is evident in the low price the property
sold for at auction. Because the court denies summary
judgment on this count on the basis of the notice
dispute, it is unnecessary to reach these arguments.
14

in diversity, does not have “the power to ... create
substantive rights denied by State law.”

Guar. Trust Co.

of N.Y. v. York, 326 U.S. 99, 105 (1945).

In the absence

of Alabama law supporting the Burnses’ purported right,
this court has no choice but to grant judgment for the
bank.
In sum, this case must proceed to trial on the
Burnses’ unlawful foreclosure claim.

As for all other

charges, judgment will be granted to the bank.

***
Accordingly, it is ORDERED as follows:
(1) Defendants U.S. Bank, N.A. and Bank of America,
N.A.’s motion for summary judgment (Doc. No. 15) is
granted in part and denied in part.
(2) The motion is denied as to plaintiffs Edgar L.
Burns,

Jr.

and

Melanie

Burns’s

claim.

This claim will go to trial.

15

unlawful-foreclosure

(3) The motion is granted as to all remaining claims,
with the Burns plaintiffs taking nothing as to these
remaining claims.
DONE, this the 30th day of January, 2013.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE