Deutsche Bank Trust Company America v. Garst
MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 9/11/13. (SAC )
2013 Sep-11 PM 02:02
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
DEUTSCHE BANK TRUST COMPANY
AMERICAS, AS TRUSTEE FOR RALI }
ASHLEY T. GARST,
GMAC MORTGAGE, LLC,
Counterclaim Defendant. }
CIVIL ACTION NO.
This case follows upon a mortgage default and subsequent
Plaintiff and counterclaim defendant Deutsche Bank
Trust Company Americas, as trustee for RALI 2005QS10, (“Deutsche”)
brought suit for ejectment against defendant and counterclaim
residence after a foreclosure sale at which Deutsche was the
Garst denies that Deutsche has a present right to
possession and seeks damages against Deutsche under a variety of
For ease of reference, Deutsche and Garst will be referred
to by name, rather than by “plaintiff” or “defendant.” However,
for the sake of citations to the record,“plaintiff” is Deutsche
and “defendant” is Garst.
Before the court is Deutsche’s motion for summary judgment for
ejectment and for dismissal of all of Garst’s counterclaims (Doc.
22). The court concludes for the following reasons that Deutsche’s
motion must be granted in part and denied in part.
The Mortgage and Foreclosure
On May 16, 2005, Garst received a loan of $104,000.00 from
Homecomings Financial Network, Inc. (“HFN”). Garst Dep., Pl.’s Ex.
B, at 26-28.
The loan was memorialized by a promissory note (“the
Note”), Pl.’s Ex. 1, and secured by a mortgage (“the Mortgage”),
Pl.’s Ex. 2.
The Note was made payable to and delivered directly
to the lender, HFN, Pl.’s Ex. 1, whereas the named Mortgagee was
Mortgage Electronic Registration Systems, Inc. (“MERS”), as the
nominee of HFN, Pl.’s Ex. 2.
Both the Note and the Mortgage were
by their terms fully assignable.
See Pl.’s Ex. 1, 2.
In 2008, Garst began to struggle with his payments.
Facts ¶ 5; Pl.’s Facts ¶ 6.
Despite efforts to modify the
Mortgage, he defaulted on it in mid-2009, and has been in default
Def.’s Facts ¶ 6; Pl.’s Facts ¶ 8.
There is some dispute as to the path of ownership of the
Mortgage, and it is made no clearer by the fact that most of the
entities involved appear to own each other in some way or another.
This court has frequently made clear its unhappiness with the “once
mighty global secondary mortgage loan market.”
Duke v. Nationstar
Mortgage, L.L.C., 893 F. Supp. 2d 1238, 1241 (N.D. Ala. 2012).
This unhappiness is shared by many courts, including the Ninth
Circuit, which began an opinion as recently as August 8, 2013, with
The U.S. Department of the Treasury, acting under the
direction of Congress, launched the Home Affordable
Modification Program (“HAMP”) in 2009 to help distressed
homeowners with delinquent mortgages, but the program
seems to have created more litigation than it has happy
Corvello v. Wells Fargo Bank, NA, 11-16234, 2013 WL 4017279, at *1
(9th Cir. Aug. 8, 2013).
The instant case will make this court no
This court is unfamiliar with RALI 2005QS10, apparently
the cestui que trust for which, or for whom, Deutsche is acting as
Curiosity will not cause the court to ask Deutsche to
reveal the nature of RALI 2005QS10, which for aught appearing is a
microdot in the sky or a device for packaging a divided ownership.
Mortgage to Deutsche.
Pl.’s Ex. 3.
This assignment included an
“Agreement for Signing Authority” that divided or purported to
divide the handling of the Mortgage among MERS, counterclaim
defendant GMAC Mortgage, LLC (“GMAC”), and Sirote & Permutt, P.C.,
a law firm.
Presumably any one of these three could act as
Who would decide which of the three would actually
perform the duties of servicer is not found in the record, but it
was GMAC that took upon itself the responsibility for servicing the
It was GMAC with whom Garst worked, throughout 2011, in
an attempt to reach a loan modification agreement to cure his
Def.’s Facts ¶ 7; Pl.’s Facts ¶ 10.
In June, 2011, GMAC
rejected Garst’s application for modification, Def.’s Fact ¶ 50,
sent him a notice of acceleration, Pl.’s Facts ¶ 11, and scheduled
a foreclosure sale for July, id.
Nevertheless, modification forms
continued to fly back and forth throughout the summer and into the
fall of 2011, Def.’s Facts ¶¶ 52-55, and the foreclosure sale was
rescheduled for September 12, 2011, Pl.’s Facts ¶¶ 13-14.
On August 29, 2011, GMAC notified Garst that, despite their
voluminous correspondence, Garst’s modification application was
still deficient because it lacked required information and that
there would be no further review of his application.
¶ 58; Pl.’s Facts ¶ 14.
In contradiction to this seemingly final
decision, correspondence continued, now by telephone, as the second
foreclosure date approached.
GMAC had a policy requiring all
modification packages to be received at least seven days prior to
a foreclosure sale.
Pl.’s Facts ¶ 15.
While this policy had been
included in the earlier forms mailed to Garst, id., it was not
mentioned during 11th hour telephone negotiations, Def.’s Facts ¶¶
Deutsche did not hang up the telephone on Garst.
it continued to listen.
On September 9, 2011, Garst finally completed his modification
package with all essential information on the required forms.
Def.’s Facts ¶ 67.
By telephone, GMAC confirmed receipt of this
amended application, and, according to Garst, assured him that his
application was being reviewed.
Def.’s Facts ¶¶ 66-71.
Despite this conversation, the foreclosure sale took place on
September 12, 2011.
Pl.’s Facts ¶ 17.
property as the highest bidder.
Deutsche purchased the
Id. ¶ 19.
On September 13, the
next day, Deutsche sent a Demand for Possession letter to Garst.
Id. ¶ 20.
On September 14, GMAC notified Garst in writing that his
September 9 modification papers would not be reviewed because they
had been received too close to the date of the foreclosure sale.
Id. ¶ 22.
Why GMAC did not simply say that there could be no
review because the sale had already taken place is anybody’s guess.
There was no mention of the telephone assurance of September 9 that
application was being reviewed.
On September 19, 2011, after Garst refused to vacate the
foreclosed property which was his home, Deutsche brought this
action for ejectment in the Circuit Court of Jefferson County,
Garst answered with a denial of Deutsche’s claim of a
valid title, and counterclaimed on numerous federal and state law
grounds related to the pre-foreclosure negotiations.
thereafter removed the case to this court based on federal question
jurisdiction over Garst’s state law claims and Deutsche’s ejectment
On May 14, 2012, GMAC filed for bankruptcy.
against it were therefore automatically stayed, so that only
Deutsche and Garst remain as parties for purposes of this opinion.
Now, after significant discovery, Deutsche seeks summary judgment
on its affirmative ejectment action and dismissal of all of Garst’s
For purposes of this opinion, the parties’ many arguments
are sorted into three categories: (1) Garst’s federal claims
under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C.
§ 1692 et seq.; (2) Garst’s state law claims; and (3) Deutsche’s
claim of ejectment.
GARST’S FDCPA CLAIMS
The FDCPA is a federal statute designed to “eliminate
abusive debt collection practices by debt collectors, to insure
that those debt collectors who refrain from using abusive debt
collection practices are not competitively disadvantaged, and to
More recently, the parties have described the court’s
subject matter jurisdiction over the state law claims as based on
diversity under 28 U.S.C. § 1332. Am. Countercl. ¶ 3. The court
is satisfied that it has jurisdiction over the entire case under
promote consistent State action to protect consumers against debt
15 U.S.C. § 1692(e).
Garst alleges that
Deutsche made false or misleading representations in violation of
§ 1692e, used unfair collection methods in violation of § 1692f,
harassed and abused him in violation of § 1692d, and failed to
provide him proper notice of collection under § 1692g.
Deutsche seeks summary judgment on either or both of two
grounds: (1) the FDCPA does not apply because Deutsche is not a
“debt collector” as defined in § 1692a, Pl.’s Mot. at 26, and/or
(2) no violation is possible because the foreclosure occurred
only after default and notice, id. at 27.
The court takes these
two arguments in turn.
Is Deutsche a “Debt Collector”?
The FDCPA’s prohibitions apply only to “debt collectors.”
See, e.g., §§ 1692e-1692f.
Under the statute, a debt collector
is one who “regularly collects or attempts to collect, directly
or indirectly, debts owed or due or asserted to be owed or due
Deutsche argues that it does meet this
definition for three reasons: first, because it was enforcing a
security interest, not collecting a debt; second, because any
debts being collected were not “due another,”; and third, because
the FDCPA definition does not allow for vicarious liability, and
therefore Deutsche cannot be held liable for the actions of GMAC,
Deutsche’s argument that it was not collecting debt stems
from Warren v. Countrywide Home Loans, Inc., 342 Fed. App’x 458,
460 (11th Cir. 2009), an unpublished opinion holding that
“enforcement of a security interest through the foreclosure
process is not debt collection for purposes of the [FDCPA].”
also Ausar-El ex rel. Small, Jr. v. BAC (Bank of Am.) Home Loans
Servicing LP, 448 Fed. App'x 1, 2 (11th Cir. 2011).
court based its analysis on the proviso in § 1692a(6) that,
“[f]or the purpose of section 1692f(6) of [the statute], such
term [“debt collector”] also includes any person . . . in any
business the principal purpose of which is the enforcement of
342 Fed. App’x at 460.
Drawing on the
interpretive canon expressio unius est exclusio alterius, the
court reasoned that the express inclusion of security interest
enforcers as “debt collectors” for the purposes of one section of
the statute (§ 1692f(6)) impliedly excluded security interest
enforcers from liability under the rest of the statute (e.g.,
Applying this rule, Deutsche should be entitled to
summary judgment on Garst’s non-1692(f)(6) claims.
However, the Warren rule has been undermined, if not
overturned, by two subsequent Eleventh Circuit opinions,
including one that is published and thus, unlike Warren, is
binding on this court.
See Reese v. Ellis, Painter, Ratterree &
Adams, LLP, 678 F.3d 1211, 1216-19 (11th Cir. 2012); Birster v.
Am. Home Mortg. Servicing, Inc., 481 F. App'x 579, 581-83 (11th
Cir. 2012); see also Santiago v. EverBank, 1:12-CV-2793-VEH, 2013
WL 1176074, at *3-*4 (N.D. Ala. Mar. 19, 2013).
If nothing else,
it is now clear that “the enforcer of a security interest [can]
be held liable under the FDCPA beyond § 1692f(6)” because, in one
fell swoop, “an entity can both enforce a security interest and
collect a debt.”
Birster, 481 F. App’x at 583 (emphasis added)
(citing Reese, 678 F.3d at 1217-18).
As explained by the Reese
That rule [that security interest enforcement actions are
excluded per se from FDCPA coverage] would create a
loophole in the FDCPA. A big one. In every case involving
a secured debt, the proposed rule would allow the party
demanding payment on the underlying debt to dodge the
dictates of § 1692e by giving notice of foreclosure on
the secured interest. The practical result would be that
the Act would apply only to efforts to collect unsecured
debts. So long as a debt was secured, a lender (or its
law firm) could harass or mislead a debtor without
violating the FDCPA. That can't be right. It isn't. A
communication related to debt collection does not become
unrelated to debt collection simply because it also
relates to the enforcement of a security interest. A debt
is still a “debt” even if it is secured.
678 F.3d at 1217-18.
Thus, so long as Deutsche was attempting to
collect a debt, it is subject to the FDCPA guidelines, regardless
of whether it was simultaneously enforcing a security interest.
In this case there is more than adequate evidence upon which
Garst can proceed to trial on his allegation that Deutsche was
collecting a debt.
First, as discussed in greater detail in the
section that follows, Deutsche acquired a mortgage that was
already in default.
Thus, it acquired not only the security
interest in the subject property, but the monetary obligation
that was secured, including monies that had accrued but had not
Second, like the defendant in Reese, 678 F.3d at
1216-17, Deutsche acquired possession of the Note along with an
assignment of the Mortgage.
Pl.’s Facts ¶ 4.
A promissory note
constitutes “a ‘debt’ within the plain language of § 1692a(5).”
Reese, 678 F.3d at 1216-17 (citations omitted).
Deutsche repeatedly held itself out to Garst as a debt collector.
Def.’s Facts ¶ 26; Montoya Dep., Def.’s Ex. E, at 157-58.
entity’s own description of its function may not be dispositive
on the subject, see Prickett v. BAC Home Loans, 2:12-CV-0826-LSC,
2013 WL 2248135, at *11 (N.D. Ala. May 21, 2013) (“[T]he relevant
test of whether an entity is a debt collector under the FDCPA is
whether the statutory definition applies, not whether the entity
has ever stated in a document that it is a debt collector.”), but
it is highly relevant, see Reese, 678 F.3d at 1217 (ruling
defendant was a debt collector “[i]n light of all [the] language
stating that the law firm is attempting to collect a debt”); see
also Birster, 481 F. App’x at 583.
Even if an entity is collecting a debt, it is not a “debt
collector” under the FDCPA unless the debt is “due another.”
The term “debt collector” does not include a person
“collecting or attempting to collect any debt owed or due or
asserted to be owed or due another to the extent such activity .
. . (ii) concerns a debt which was originated by such person [or]
(iii) concerns a debt which was not in default at the time it was
obtained by such person.”
Put more simply, the
FDCPA does not apply to creditors who seek to collect only what
is owed them.
It only applies to third party debt collectors.
Under this definition, “a mortgagee and its assignee,
including mortgage servicing companies, are not debt collectors
under the FDCPA when the debt is not in default at the time the
mortgage-holder acquires the debt.”
Prickett, 2013 WL 2248135,
at *10 (citing Perry v. Stewart Title Co., 756 F.2d 1197, 1208
(5th Cir. 1985)) (emphasis added).
However, as Prickett
recognizes, a different scenario is presented when the debt is
already in default at the time it is acquired.
§ 1692a(F) (excluding from coverage only any debt that was “not
in default at the time it was obtained”).
circumstances, the acquiring party acquires the debt, and not
just the security interest, and so becomes a “debt collector”
under the statute.
The parties agree that Garst’s first missed payment on his
mortgage was in mid-2009.
See Pl.’s Facts ¶ 8 (“[Garst
d]efaulted on or about May 1, 2009."); Def.’s Facts ¶ 6 (“As of
July 2, 2009, Garst had missed a payment and was in default on
The parties also agree that the Mortgage and the
Note were assigned to Deutsche on August 9, 2010.
Facts ¶ 4; Def.’s Facts ¶ 29; Pl.’s Ex. 3.3
thus acquired the rights to over a year’s worth of delinquent
payments along with a security interest, it became a debt
collector under the FDCPA.
Deutsche’s final defense to Garst’s attempt to classify it
as a debt collector is that all of the debt collection
correspondence relied upon by Garst was undertaken by GMAC, one
of the three mortgage servicers, rather than by Deutsche itself.
Pl.’s Reply at 8-9.
The FDCPA’s narrow focus on debt collectors,
Deutsche argues, means that a non-debt-collector principal cannot
be held liable under respondeat superior for the actions of its
The Eleventh Circuit has not addressed this issue directly,
and it is tempting to avoid the issue under the rule that an
issue raised for the first time in reply is not properly before
During discovery, a representative of Deutsche testified
that Deutsche had actually acquired the Mortgage five years
earlier, in July, 2005. See Montoya Dep., Def.’s Ex. E, at 15967. But this date contradicts the date provided in Deutsche’s
Statement of Facts, Pl.’s Facts ¶ 4, and is otherwise unsupported
by any documentary evidence. At best, the assertion creates a
bothersome question of fact that must be resolved at trial. It
again illustrates the foggy landscape under the MERS regime.
See Herring v. Sec'y, Dep't of Corr., 397 F.3d 1338,
1342 (11th Cir. 2005) (collecting cases).
this issue until its reply brief.
Deutsche did not raise
See Pl.’s Reply at 8-9.
However, because the court concludes that Deutsche is not immune
from vicarious liability, it is unnecessary to determined whether
the issue has been waived.
The parties agree that Pollice v. Nat'l Tax Funding, L.P.,
225 F.3d 379, 404-05 (3d Cir. 2000) provides the rule that
governs this issue; indeed, Pollice has been cited with approval
by the Eleventh Circuit for the closely related proposition that
a general partner of a debt collector partnership can be held
liable for the partnership’s violations of the FDCPA.
LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1201 (11th Cir.
The Pollice court determined that “an entity which itself
meets the definition of ‘debt collector’ may be held vicariously
liable for unlawful collection activities carried out by another
on its behalf.”
225 F.3d at 405.
However, “vicarious liability
[can]not be imposed [when] the [principal] company itself [does]
not meet the definition of ‘debt collector’.”
Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 108 (6th Cir.
The parties’ only disagreement, then, is over how the
rule should be applied in deciding whether Deutsche itself meets
the definition of “debt collector.”
This court concludes that Deutsche meets the definition of
debt collector, just as does GMAC.
The FDCPA applies only to
those who undertake to collect a debt on a creditor’s behalf.
See 15 U.S.C. § 1692a(6).
This proposition would lose its
meaning altogether if the original creditor were always subject
to vicarious or respondeat superior liability when his or its
servicer undertook to collect.
In this case, however, Deutsche
was not the original creditor.
It only became a debt collector
when it acquired a loan that was already in default.
undertook, in a real sense, to collect that debt on behalf of the
microdot in the sky represented by MERS, and/or on behalf of RALI
2005QS10, the cestui que trust to whom it owed a fiduciary duty
to collect the debt, and/or on behalf of HFN, which for aught
appearing to Garst was still the owner of the Note.
thus subject to the mandates of the FDCPA, whether it acted
directly or through GMAC, its agent.
Has Garst Produced Evidence of Violations?
The fact that Deutsche is a “debt collector” subject to the
FDCPA does not end the inquiry.
In order to avoid summary
judgment, Garst must also present evidence that Deutsche actually
violated the FDCPA.
Deutsche argues that it has not violated the
statute, not only because GMAC’s actions cannot be attributed to
it (an argument already rejected), but because “all evidence
before [the] Court proves that Deutsche Bank acted properly and
within its legal rights in accelerating and foreclosing on
Pl.’s Mot. at 27.
More specifically, it
argues that “Garst has admitted that he was in default”; that he
“received notice of his default, acceleration of the
indebtedness, and the foreclosure”; and that the foreclosure sale
was only held “after these notifications and proper publication
in the Alabama Messenger.”
Deutsche misunderstands the nature of the FDCPA.
statute dictates, for the most part, what a debt collector must
not do, not what it must do.
In other words, the fact that
Deutsche went through the routine steps for a foreclosure in
Alabama, even if taken as established, does not free it from
liability if it violated the FDCPA along the way.
It is the
means, not the end, that creates liability.
It nevertheless remains for Garst to carry his burden of
producing evidence upon which he can proceed to trial on one or
more of the four sections of the FDCPA that he claims were
See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)
(holding that, to survive a motion for summary judgment, a party
must make “a showing sufficient to establish the existence of an
element essential to that party's case, and on which that party
will bear the burden of proof at trial”).
This burden is not
Garst’s entire argument on the issue of whether the
FDCPA has been violated is limited to a remarkably unhelpful
See Def.’s Mem. at 28-29.
court, cobbling together the chart, the statement of facts that
it references, and the discovery documents mentioned in that
statement of facts, finds that some of Garst’s FDCPA claims
withstand summary judgment.
Garst’s first and best claim is under § 1692e, which
dictates that a “debt collector may not use any false, deceptive,
or misleading representation or means in connection with the
collection of any debt.”
Garst’s evidence of misleading
representations is not comprehensive, but it is significant and
He presents evidence that Deutsche encouraged him to
send supplement after supplement to his modification application,
despite its likely knowledge that it would ultimately find
modification hopeless, Def.’s Facts ¶¶ 51, 61; that it concealed
important deadlines from him in their correspondence, id. ¶ 54;
that it told him, contrary to fact, that his account would be
reviewed for modification, id. ¶ 66; that it told him, contrary
to fact, that his property would not be foreclosed on while his
application was being reviewed, id. ¶ 70; and that it told him,
contrary to fact, that the foreclosure sale date would be
postponed, id. ¶ 71.
Should a jury find Garst’s testimony and
corroborating evidence credible, and should it find that the
evidence demonstrates a “false, deceptive, or misleading
representation or means in connection with the collection of any
debt,” Deutsche will be liable under § 1692e.
A more difficult question arises under § 1692f, which
dictates that a debt collector “may not use unfair or
unconscionable means to collect or attempt to collect any debt.”
“Unfair or unconscionable means” include “[t]aking or threatening
to take any nonjudicial action to effect dispossession or
disablement of property if–-(A) there is no present right to
possession of the property claimed as collateral through an
enforceable security interest.”
Whether or not
Deutsche violated this subsection hinges on whether or not it had
a right to possession of the property at the time it brought this
As will hereinafter more clearly appear, the
court concludes that Garst has produced sufficient evidence to
proceed to trial on this question, but because the answer to the
question will implicate Deutsche’s ejectment claim, this
discussion is consolidated with Part III, infra.
The last two federal claims to be considered are (1) Garst’s
claim under § 1692d, which prohibits “any conduct the natural
consequence of which is to harass, oppress, or abuse any person
in connection with the collection of a debt,” and (2) his claim
under § 1692g, which requires debt collectors to send consumers a
written notice including a variety of information before
undertaking to collect a debt.
Because Garst does not address
either of these sections in his brief, even in his summary chart,
they are deemed abandoned and will not be analyzed.
for the Abolition of Marijuana Prohibition v. City of Atlanta,
219 F.3d 1301, 1326 (11th Cir. 2000) (“[F]ailure to brief and
argue [an] issue during the proceedings before the district court
is grounds for finding that the issue has been abandoned.”).
GARST’S STATE LAW CLAIMS
In addition to the FDCPA claims, Garst raises a host of
state law claims.
Garst’s fraud claim is his most complex, so
the court begins its analysis there.
Garst claims that Deutsche is liable for fraud stemming from
untrue and unfulfilled promises it made during loan modification
Am. Countercl. ¶¶ 87-121.
“The elements of fraud
are (1) a false representation (2) of a material existing fact
(3) reasonably relied upon by the plaintiff (4) who suffered
damage as a proximate consequence of the misrepresentation.”
Exxon Mobil Corp. v. Alabama Dep't of Conservation & Natural
Res., 986 So. 2d 1093, 1114 (Ala. 2007).
Intent is only required
in Alabama when punitive damages are sought.
glance, each element is met here: Garst has produced both direct
and circumstantial evidence that Deutsche promised that
foreclosure would not take place until review of his modification
request was complete, Def.’s Facts ¶¶ 66-71; that the promise was
material, id. ¶ 71; that he reasonably relied on the promise in
foregoing other opportunities to save his home, id.; and that he
suffered damages in having his home foreclosed on.
promissory fraud claim is viable, he has also produced
circumstantial evidence of intent sufficient to support punitive
See Am. Countercl. ¶¶ 100-01.
Deutsche does not deny that these elements are met, but
defends with the argument that any evidence of them will be
inadmissible at trial because of Alabama’s Statute of Frauds.
See Pl.’s Mot. at 22-23.
The Statute of Frauds provides, inter
In the following cases, every agreement is void unless
such agreement or some note or memorandum thereof
expressing the consideration is in writing and subscribed
by the party to be charged therewith or some other person
by him thereunto lawfully authorized in writing: . . .
(7) Every agreement or commitment to lend money, delay or
forebear repayment thereof or to modify the provisions of
such an agreement or commitment except for consumer loans
with a principal amount financed less than $25,000.
Ala. Code § 8-9-2 (1975).
The Alabama courts have given this
statute broad application, holding that it applies in tort cases,
including fraud cases.
See Bruce v. Cole, 854 So. 2d 47, 58
(Ala. 2003) (“[T]his Court now holds that an oral promise that is
void by operation of the Statute of Frauds will not support an
action against the promisor for promissory fraud.”).
The Alabama rule is contrary to the majority rule among the
The majority rule was explained by the Seventh
Circuit as follows: “the Statute of Frauds is a defense to a
claim for breach of contract, not a defense to a tort, and fraud
is a tort, and promissory fraud is a form of fraud and so a tort
and so not subject to the Statute of Frauds.”
Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131, 136 (7th
The Seventh Circuit correctly describes this as the
majority rule, id., but that court could not speak for Alabama.
Mindful that it is the prerogative of the courts of Alabama, and
not the courts of the United States, to declare Alabama law, this
court reaches the conclusion, contrary to its instincts, that
because the “agreement” Garst depends upon does not meet the
requirements set forth in Alabama’s Statute of Frauds, Garst
cannot proceed on his claim of promissory fraud.
Negligence and Wantonness
Garst also brings state law claims for negligence, Am.
Counterlc. ¶¶ 13-14, wantonness, id. ¶¶ 14-15, and negligent and
wanton hiring, supervision, and training, id. ¶¶ 22-23.
claims fail in light of the emerging consensus that “Alabama law
does not recognize a cause of action for negligent or wanton
Prickett v. BAC Home Loans,
2:12-CV-0826-LSC, 2013 WL 2248135, at *5 (N.D. Ala. May 21, 2013)
Courts have found two justifications for
First, “a negligent failure to perform a
contract . . . is but a breach of the contract.”
Accordingly, claims related to performance under a mortgage
agreement must be brought under contract law.
damages for mortgage servicing are typically economic, while tort
liability more appropriately seeks compensation for personal
injury and property damage.
See id. at *6.4
are strengthened by the plethora of alternative avenues for
relief in “negligent mortgage servicing” cases, including the
Slander of Title
Next, Garst claims that Deutsche has slandered the title to
Counterlc. ¶¶ 76-82.
Slander of title as a
cause of action in Alabama has six elements: “(1) [o]wnership of
the property by plaintiff; (2) falsity of the words published;
(3) malice of defendant in publishing the false statements; (4)
publication to some person other than the owner; (5) 
publication . . . in disparagement of plaintiff's property or the
title thereof; and (6)  special damages [that are] the
proximate result of such publication.”
Folmar v. Empire Fire &
Marine Ins. Co., 856 So. 2d 807, 809 (Ala. 2003) (citations
The third element, malice, “requires proof that [the
Garst’s answer to this rule is that this court has already
impliedly rejected it in its recent decision in Lindsey v. NCO
Fin. Sys., Inc., 2:11-CV-03183-WMA, 2012 WL 3999870, at *7-*9
(N.D. Ala. Sept. 12, 2012). But Lindsey was not a mortgage
servicing case, nor did it involve the same issues discussed
above: the plaintiff’s claim in that case was of wanton
disclosure of embarrassing information that happened to occur in
a debt collection context. To the extent Garst’s claim is about
embarrassment, rather than economic injury, it fails as
unsupported by the evidence.
defendant] intentionally disparaged [the] plaintiff's title to
the property slandered or recklessly disparaged [it] without
information sufficient to support a bona fide belief in the
veracity of the disparaging statement.”
Roden v. Wright, 646 So.
2d 605, 611 (Ala. 1994) (internal quotation marks and citations
“In other words, ‘if the defendant had probable cause
for believing the statement, there can in law be no malice.’”
Id. (quoting Merchants Nat. Bank of Mobile v. Steiner, 404 So. 2d
14, 21 (Ala. 1981)).
Garst argues that Deutsche slandered his title by publishing
a foreclosure deed falsely asserting its ownership of the
But to the extent he can prove that the foreclosure
deed is invalid, and thus that he, and not Deutsche, owns the
property, he can do so only after a trial that settles the
closely contested issues discussed elsewhere in this opinion.
Given the closeness of those issues, it is virtually impossible
for Garst to prove malice.
At the very least, Garst’s admitted
default and the methodical way in which Deutsche proceeded to the
foreclosure sale, including consulting legal counsel, gave
Deutsche “information sufficient to support a bona fide belief,”
id., in the validity of its foreclosure deed.
Without any direct
evidence that Deutsche did not in fact so believe, Garst cannot
carry his burden of producing evidence sufficient to support a
jury finding of slander of title.
Next is invasion of privacy.
Am. Countercl. ¶¶ 133-42.
“The tort of invasion of the right of privacy, insofar as it
applies to actions of a creditor in regard to his debtor, is the
wrongful intrusion into one's private activities in such manner
as to outrage or cause mental suffering, shame or humiliation to
a person of ordinary sensibilities.”
Liberty Loan Corp. of
Gadsden v. Mizell, 410 So. 2d 45, 47 (Ala. 1982) (quotation marks
and citations omitted).
While the question of whether particular
behavior is outrageous to a person of ordinary sensibilities
would normally be put to a jury, the evidence presented in this
case is simply too sparse to justify moving the claim beyond
Garst appears to confuse the issue of whether
there was an outrageous intrusion with whether there was a valid
See Def.’s Mem. at 31 (“[Deutsche] rejected
documents it should not have, began foreclosure proceedings in
violation of its own policies, attempted to foreclose on property
it does not own, and foreclosed on Garst in violation of its own
policies and when it told him it wouldn’t.”).
The court is
puzzled by Garst’s expectancy that an owner can foreclose on its
Past cases have only recognized intrusion cases in
the mortgage servicing context for “hounding the plaintiff,” Hope
v. BSI Fin., Inc., 5:12-CV-00736-AKK, 2012 WL 5379177, at *5
(N.D. Ala. Oct. 26, 2012), with “repeated conduct equating
deliberate harassment or systematic campaigns designed to
vilify the debtor or expose him to public ridicule,” Mizell, 410
So. 2d at 48.
In this case, the communications made to Garst
were made only to him, and were made in response to his requests
for loan modification.
In light of Garst’s admitted default, the
communications were not harassing threats so much as real
warnings that foreclosure was imminent.
Count Three of Garst’s counterclaim has deteriorated at an
It started as a classic claim for unjust
enrichment, apparently seeking to recover payments made under the
Am. Countercl. ¶¶ 66-69.
Deutsche, however, briefs
the claim entirely under the related, but separate, doctrine of
Pl.’s Mot. at 13-15.
Finally, in his
opposition to Deutsche’s motion, Garst briefs the claim with only
two sentences, mentioning neither the words “unjust enrichment”
nor the words “implied contract.”
Def.’s Mem. at 33.
is left wondering where to start.
Is Garst’s claim for
traditional unjust enrichment seeking his mortgage payments back
under the theory that there was never any contract between him
Certainly he could not be making such a frivolous
Is he simply re-labeling his spurious breach of
Is he arguing a breach of an implied contract
stemming from the communications regarding a modification
Whatever Garst means to contend, to the extent he has
not abandoned his unjust enrichment claim, he has failed to meet
his Celotex burden of producing evidence to support it.
Breach of Contract
Garst includes in his counterclaim the strange contention
that he is entitled to relief for breach of contract, Am.
Countercl. ¶¶ 83-86, but he produces neither legal authority nor
evidence in support of such a position, Def.’s Mem. at 29.
allegations make no mention of the attempted modification
agreement, as either a contract-in-fact or an implied contract.
Instead, he simply makes the conclusory allegation that Deutsche
“breached the contract (the Note and the Mortgage).”
Countercl. ¶ 84.
This bare legal conclusion is not legally
sufficient to present a claim that can survive summary judgment.
In fact, the overwhelming evidence shows that it was Garst, not
Deutsche, who breached the contract.
Finally, Garst counterclaims for what he calls “wrongful
Am. Countercl. ¶¶ 70-75.
To the extent this claim
alleges the tort of wrongful foreclosure, it is not briefed and
is deemed abandoned.
See Coal. for the Abolition of Marijuana
Prohibition, 219 F.3d at 1326.
To the extent it merely restates
in non-legal terms the defense to Deutsche’s ejectment action, it
is not a counterclaim at all, but will be treated nonetheless in
the section that follows.
DEUTSCHE’S EJECTMENT CLAIM
What remains is the claim that began all this: Deutsche’s
claim to possession of the Garst property.
Compl. ¶¶ 3-6.
essential elements for an ejectment action are that plaintiff
“has both legal title to the property when his complaint is filed
and a right to immediate possession.”
Muller v. Seeds, 919 So.
2d 1174, 1177 (Ala. 2005) (citations omitted), overruled on other
grounds by Steele v. Fed. Nat. Mortg. Ass'n, 69 So. 3d 89 (Ala.
“Further, if the mortgage and foreclosure deed . . . are
produced, as well as proof of both demand for and refusal to
deliver possession, then all the necessary elements of ejectment
Id. (omission in original) (citation omitted).
Deutsche has a foreclosure deed, made a demand for possession,
and Garst has refused to deliver possession.
It falls to Garst, then, to raise and support with evidence
a viable affirmative defense.
Garst’s separate affirmative
statutory claims, even if proven, are compensable by damages but
do not provide a defense to the ejectment action.
Ejectment, among the oldest and most traditionally austere
forms of action in the common law, has in modern times become
subject to those softer-hearted defenses provided by “equity.”
See Massey v. Jackson, 726 So. 2d 656, 659 (Ala. Civ. App. 1998)
(“We must conclude that the Rules of Civil Procedure, having
merged law and equity practice in this state, have empowered
trial courts to consider not only legal defenses to ejectment
claims, but equitable defenses as well.”).
Thus, courts have
found ejectment claims wanting, even after foreclosure sales
supported by proper foreclosure deeds, when enforcement of
delinquent mortgage payments was waived, id.; when “the price
realized at the foreclosure sale . . . was so low in relation to
the market value of the property as to shock the conscience,”
Berry v. Deutsche Bank Nat. Trust Co., 57 So. 3d 142, 148 (Ala.
Civ. App. 2010); and when foreclosure was blocked by the doctrine
of laches, see Williamson v. Shoults, 423 So. 2d 874, 877 (Ala.
Civ. App. 1982).
Why not other equitable defenses, such as those
of unclean hands or promissory estoppel?
Garst has an arguable estoppel defense to the ejectment
Estoppel has three elements: an actor communicates
something in a misleading way, another relies on that
communication, and the other is materially harmed if the actor is
later permitted to assert any claim inconsistent with his earlier
See Mazer v. Jackson Ins. Agency, 340 So. 2d 770,
773 (Ala. 1976) (quoting Dobbs, Law of Remedies, § 2.3 (1973));
see also Corvello v. Wells Fargo Bank, NA, 11-16234, 2013 WL
4017279, at *4-*6 (9th Cir. Aug. 8, 2013) (granting rescission of
foreclosure sale when mortgage servicer failed to offer loan
modification in violation of promise in “trial period plan” form
In this case, if Garst is believed, Deutsche
communicated to him that foreclosure would be delayed until it
reviewed his last presented modification application.
available to him various methods of defeating foreclosure up the
day of a valid foreclosure sale, Def.’s Facts ¶ 72, but forewent
those methods in reliance on Deutsche’s promises.
cannot now be heard to say that loan modification was never
possible and that it never intended to extend the foreclosure
It did, in fact, extend the foreclosure date, and it did,
in fact, continue to communicate with Garst past the deadlines it
Deutsche implicitly attacks Garst’s estoppel defense to the
foreclosure with the idea that the Statute of Frauds that served
to defeat Garst’s affirmative promissory fraud claim also defeats
his estoppel defense.
It relies on the Alabama Court of Civil
Appeals’ recent decision in Coleman v. BAC Servicing, 104 So. 3d
195, 207, which held that “to allow a defective-foreclosure
defense that is predicated upon an alleged agreement that is
unenforceable under the Statute of Frauds would also defeat the
purpose of the Statute of Frauds.”
While Deutsche relies
entirely upon this expression lifted from Coleman, which is only
a minor part of a lengthy opinion concerned primarily with
whether a complicated chain of mortgage ownership ended properly
with the company that finally foreclosed,5 it fails to recognize
the clear distinction between an affirmative promissory fraud
claim, which carries with it the requirement of a signed writing
discussed above, and the estoppel defense described here.
extent that this minor section of the Coleman opinion is
inconsistent with Alabama Supreme Court precedent, this court is
not bound by it.
The Alabama Court of Civil Appeals cannot
overrule the Supreme Court of Alabama.
Nor does the fact that
the Supreme Court denied certiorari in Coleman mean that the
Supreme Court was adopting the Coleman court’s opinion or its
rationale, especially if to do so would constitute an overruling
of its existing precedent.
This is exactly what Deutsche’s
reading of Coleman would do.
The Coleman court based its ruling on Holman v. Childersburg
Bancorporation, Inc., 852 So. 2d 691, 699-702 (Ala. 2002), in
which the Supreme Court held that “where . . . an element of a
tort claim turns on the existence of an alleged agreement that
cannot, consistent with the Statute of Frauds, be proved to
support a breach-of-contract claim, the Statute of Frauds also
bars proof of that agreement to support the tort claim,” id. at
701 (emphasis added).
Thus, while Garst’s promissory fraud claim
The specter of MERS haunts that case as thoroughly as it
does this one. For instance, if a rich friend of Garst had
wanted to bid at the subject foreclosure sale and had conducted a
title search in the probate records, he would not have found
Deutsche’s name as mortgagee.
is barred by the Statute of Frauds, the Supreme Court has never
denied the viability of the equitable defense of promissory
estoppel to an ejectment action.
This defense does not depend
upon a writing.
The court has already found that Garst cannot bring an
action for breach of contract.
Holman and related cases prevent
plaintiffs from avoiding the Statute of Frauds by dressing their
contract claims in tort costumes.
But Garst’s estoppel claim is
entirely outside the realm of both contracts and torts.
not seek to modify or to rescind his obligation to Deutsche.
Instead, he seeks to defend against a foreclosure sale that was
achieved, he says, by lulling him into a false sense of security
with blatantly untrue promises.
The Supreme Court of Alabama has
never found this type of equitable defense precluded by the
Statute of Frauds.
See, e.g., Bruce, at 58 (overruling tort
cases “to the extent, but only to the extent, that they” conflict
with the Court’s new heightened Statute of Frauds holding)
This court, like the Coleman court, is bound
to follow the Supreme Court’s traditional foreclosure rules that
have not been discarded.
Under those still existing rules, “[i]t
is a settled principle that the foreclosure of a mortgage on
lands, after default, is per se a matter of equitable
jurisdiction and presents a case of original independent equity.”
Wilson v. Crocker, 267 Ala. 26, 28 (1957).
It will take the
Supreme Court itself, and not the Court of Civil Appeals, to take
Bruce beyond its borders.
Sitting in diversity, this court will
follow the Alabama Supreme Court.6
Just three years ago, the Alabama Court of Civil Appeals
addressed a controversy involving the same ejectment plaintiff
(Deutsche), represented by the same law firm (Sirote & Permutt,
P.C.), in the same procedural posture (summary judgment), as
follows: “when a plaintiff in an ejectment action claims title to
the property by virtue of its having purchased the property at a
foreclosure sale, the existence of a genuine issue of material
fact regarding the validity of the foreclosure sale will preclude
the entry of a summary judgment in favor of the plaintiff.”
Berry, 57 So. 3d at 147 (Ala. Civ. App. 2010).
Thus, to prevail
on an ejectment claim at the summary judgment stage, Deutsche
must not only demonstrate with undisputed evidence the adequacy
of its foreclosure procedures, but must also explain away facts
This is not to say that Garst’s defense would surely fail
were the Statute of Frauds found to apply. To satisfy the
statute, Garst need only produce any written evidence that
substantiates his claim and protects Deutsche and the court from
false testimony. See Levy v. Allen, 257 Ala. 326, 331, 58 So. 2d
617, 622 (1951) (“[N]o formality is required; nor does it signify
at all what is the nature or character of the document containing
such written statement--whether it be a letter written by the
party to be charged to the person with whom he contracted, or to
any other person, or a deed, or other legal instrument, or an
answer to a bill, or an affidavit in chancery, in bankruptcy, or
in lunacy.”) (citation omitted). Here, Garst has produced both
letters GMAC wrote to him, Garst Ex. O, P, and internal records
of GMAC, Garst Ex. M, that substantiate his claim of a promise
not to foreclose.
that may, in law or equity, adversely affect the efficacy of the
For the foregoing reasons, Deutsche’s motion for summary
judgment will be denied as to Garst’s claims brought under 15
U.S.C. § 1692e and § 1692f and Deutsche’s ejectment claim, but will
contemporaneously issue an order consistent with this Memorandum
DONE this 11th day of September, 2013.
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE
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