Graveling v. Bank United N.A., et al

Filing 62

MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 8/27/2013. (JLC)

FILED
2013 Aug-27 AM 11:10
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
JAMES GRAVELING AND LORI
GRAVELING,
Plaintiffs,
v.
BANKUNITED N.A., et al.,
Defendants.

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) Case No.: 2:13-cv-120-VEH
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MEMORANDUM OPINION
Before the court are Motions To Dismiss filed by Defendants BankUnited,
N.A. (“BankUnited”), Castle Mortgage Company (“Castle”), Sirote & Permutt
(“Sirote”), Ryan Daugherty (“Mr. Daugherty”), Ginny Rutledge (“Ms. Rutledge”),
and Andrew P. Benefield (“Mr. Benefield”) (collectively, “Defendants”). (Docs. 33,
35, 37). Also before the court is Defendants’ joint Motion To Strike (Docs. 49, 52,
53) various exhibits attached to the Gravelings’ Responses (Docs. 43, 46, 47) to their
Motions to Dismiss. For the following reasons, the Defendants’ Motion to Strike is
GRANTED, and their Motions to Dismiss are GRANTED in part and DENIED in
part.
I.

Procedural History

The Plaintiffs, James and Lori Graveling (the “Gravelings”), initiated this
action on January 18, 2013. (Doc. 1). They are proceeding pro se. On January 24,
2013, the court sua sponte ordered repleader. (Doc. 2). On February 27, 2013, the
Gravelings filed their first Amended Complaint (Doc. 6) (“FAC”), which they
“supplemented” on February 28, 2013. (Doc. 8). The Defendants filed Motions To
Dismiss on March 22, March 25, and April 8, 2013. (Docs. 12, 13, 18). On April 30,
2013, the Gravelings filed their second Amended Complaint (“SAC”). (Doc. 28). On
May 7, 2013, the court termed as moot, in light of the SAC, the then-pending Motions
to Dismiss. (Doc. 34).
On May 3, 13, and 14, 2013, the Defendants timely filed new Motions To
Dismiss. (Docs. 33, 35, 37). The Gravelings filed responsive oppositions on May 28
and June 4, 2013. (Docs. 43, 46, 47). Defendants replied on June 10 and June 14.
(Docs. 50, 51, 54, 55).
II.

Standards of Review
A.

Motions to Dismiss

Generally, the Federal Rules of Civil Procedure require only that the complaint
provide “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a). However, to survive a motion to dismiss brought under
Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.”
2

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (“Twombly”). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556)
(“Iqbal”). That is, the complaint must include enough facts “to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555 (citation and footnote
omitted). Pleadings that contain nothing more than “a formulaic recitation of the
elements of a cause of action” do not meet Rule 8 standards, nor do pleadings suffice
that are based merely upon “labels or conclusions” or “naked assertion[s]” without
supporting factual allegations. Id. at 555, 557 (citation omitted). “[O]nce a claim has
been stated adequately, it may be supported by showing any set of facts consistent
with the allegations in the complaint.” Id. at 563 (citation omitted). When ruling on
a motion to dismiss, a court must “take the factual allegations in the complaint as true
and construe them in the light most favorable to the plaintiff.” Pielage v. McConnell,
516 F.3d 1282, 1284 (11th Cir. 2008) (citing Glover v. Liggett Group, Inc., 459 F.3d
1304, 1308 (11th Cir. 2006)).
B.

Pro Se Plaintiffs

As noted, the Gravelings are proceeding pro se in this action. “[A] document
filed pro se is to be liberally construed . . . and a pro se complaint, however inartfully
3

pleaded, must be held to less stringent standards than formal pleadings drafted by
lawyers.” Williams v. Quality Filters, Inc., Civil Action No. 07-0015-WS-B, 2007
WL 4219201, at *2 (S.D. Ala. Nov. 27, 2007) (quoting Erickson v. Pardus, 551 U.S.
89, 94 (2007)). Even so, “a pro se complaint still must state a claim upon which the
Court can grant relief.” Farkas v. Suntrust Mortgage Inc., Civil Action No.
10–0512–CG–M, 2010 WL 5525359, at *4 (S.D. Ala. Dec. 15, 2010) (citation
omitted), report and recommendation adopted by 2011 WL 39048 (S.D. Ala. Jan. 5,
2011), aff'd, 447 F. App'x 972 (11th Cir. 2011) (unpublished).
III.

Motion To Strike
The Defendants jointly move to strike the following documents:
From the “Evidentiary Material in Support of Response to Castle’s Motion to
Dismiss” (Doc. 44)
•

Exhibit A – the text of Public Law 97-280

•

Exhibit B – “A List of Maxims of Equity”

•

Exhibit C – “Offer Towards Settlement Agreement”

•

Exhibit D – Affidavit of William McCaffrey

•

Exhibit G – Affidavit of Franky Rodgers

•

Exhibit H – an entry from The World Book Encyclopedia

•

Exhibit I – an article titled “Banking Secrets That Banks Don’t Want
Published”
4

•

Exhibit K – an article titled “Banking Systems”

From the Gravelings’ Response (Doc. 46) to BankUnited’s Motion to Dismiss
•

Exhibit 1 – an article titled “Merscorp Lacks Right to Transfer
Mortgages, Judge Says”

•

Exhibit 2 – a printout from a website titled “MERS 101"

•

Exhibit 3 – an article from Wisconsin Lawyer

The Defendants variably argue why, under the Federal Rules of Evidence, the above
materials are irrelevant, unauthenticated, hearsay, or otherwise inadmissible. Without
addressing these arguments, the court concludes that it will exercise its discretion
under Rule 12(f) of the Federal Rules of Civil Procedure to strike these documents
from its consideration at this stage of the litigation. When considering a Motion to
Dismiss, a district court is generally “constrained to review the allegations as
contained within the four corners of the complaint and may not consider matters
outside the pleading without converting the defendant's motion into one for summary
judgment.” Crowell v. Morgan, Stanley, Dean Witter Servs. Co., Inc., 87 F. Supp. 2d
1287, 1290 (S.D. Fla. 2000) (citations omitted). Rule 12(f) states that the court may
“on its own” decide to “strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).
Accordingly, the court finds the attachments submitted by the Gravelings above to
5

be “immaterial” to its disposition of Defendants’ Motions To Dismiss here. The court
will therefore GRANT Defendants’ Motion To Strike these documents.
The court will note the following point, however. The Eleventh Circuit “has
recognized an important qualification to [the “four corners” rule] where certain
documents and their contents are undisputed: ‘In ruling upon a motion to dismiss, the
district court may consider an extrinsic document if it is (1) central to the plaintiff's
claim, and (2) its authenticity is not challenged.’” Speaker v. U.S. Dep't of Health &
Human Servs. Ctrs. for Disease Control & Prev., 623 F.3d 1371, 1379 (11th Cir.
2010) (quoting SFM Holdings, Ltd. v. Banc of Am. Secs., LLC, 600 F.3d 1334, 1337
(11th Cir. 2010)). In this case, the Gravelings attached various documents as exhibits
to their original Complaint and their FAC – the authenticity of which Defendants do
not dispute. Unlike the attachments struck above, these documents are evidently
central to the Gravelings’ claims, as the Gravelings frequently refer to them in the
various iterations of their Complaint. The court thus will treat these documents as part
of their SAC for Rule 12(b)(6) purposes. See Brooks v. Blue Cross & Blue Shield of
Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997) (citation omitted).
IV.

Motions To Dismiss
A.

Introduction

The Gravelings have filed six counts in this action:
6

•

Fraud (against Castle)

•

Fraud (against Coastal)

•

Wrongful Foreclosure (against BankUnited)

•

Illegal Foreclosure Sale Auction (against Mr. Benefield)

•

Refusal to Cease Debt Collecting, in violation of the Fair Debt
Collection Practices Act (“FDCPA”) (against Coastal)

•

Refusal to Cease Debt Collecting, in violation of the FDCPA (against
Sirote, Ms. Rutledge, and Mr. Daugherty)

Doc. 28 ¶¶ 181-260.1 Coastal has not filed a Motion To Dismiss, so the court will
only examine the legal sufficiency of those counts against Castle, BankUnited, Mr.
Benefield, Sirote, Ms. Rutledge, and Mr. Daugherty.
B.

The Gravelings’ fraud claim against Castle must be dismissed
because it is impermissibly vague and implausible.

The Gravelings have not plausibly claimed fraud against Castle. Under
Alabama law, a plaintiff must prove the following elements to establish fraud: (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. Mantiply v. Mantiply, 951 So. 2d 638, 653 (Ala. 2006) (citation

1

The court has grouped the Gravelings’ counts thematically – rather than in the sequential
order they appear in the Complaint – so as to streamline the analytical discussion that takes place
below.
7

omitted); see also Drummond Co. v. Walter Indus., Inc., 962 So. 2d 753, 788 (Ala.
2006) (similar) (citation omitted) ; LaBauve v. Olin Corp., 231 F.R.D. 632, 673 (S.D.
Ala. 2005) (“[P]laintiffs' fraud claims generally require a showing that defendants
made a false representation concerning a material fact, that defendants knew the
statement was false or made it in reckless disregard for its truth or falsity, that the
plaintiff reasonably relied upon such statement, and that the plaintiff was damaged
by virtue of such reliance.”) (citation omitted).
In Count #1 of their SAC, the Gravelings claim that Castle falsely represented
that “they were a lender who would give us borrowers a ‘loan.’” Doc. 28 ¶ 183.
According to the Gravelings, Castle did so knowingly and intended that the
Gravelings “should act upon Castle’s statements regarding said loan.” Id. ¶¶ 186-87.
The Gravelings further assert that they reasonably relied on these false
representations to their great detriment. Id. ¶¶ 189-192. They claim that they “would
never [have] consented to said contract loan had Castle given full disclosure.” Id. ¶
194.
This rote recitation of the fraud elements is impermissible under Iqbal and
Twombly. The Gravelings do not specify how Castle’s loan representations were false
or how Castle failed to give them full disclosure. Instead, they refer the court back to
their “general factual allegations.” Doc. 28 ¶ 181. These assertions also fail to sustain
8

their fraud claim. The Gravelings maintain the following:
•

Castle did not put any of their own money at risk in the alleged loan. Id.
¶ 22.

•

Castle did not loan gold or silver to the Gravelings. Id. ¶ 23.

•

Castle did not loan its own money to the Gravelings. Id. ¶ 24.

•

Castle did not loan its depositors’ money to the Gravelings. Id. ¶ 25.

•

Castle did not loan Federal Reserve notes to the Gravelings. Id. ¶ 26.

•

Castle did not disclose to the the Gravelings that Castle was not in fact
going to loan anything to the Gravelings. Id. ¶ 28.

•

Castle did not “uphold their end of [the loan contract] as they presented
that they would.” Id. ¶ 34.

•

Castle “switched currency” on the Gravelings. Id. ¶ 38.

•

Castle obtained the Gravelings’ mortgage note without investing the
money allegedly loaned to the Gravelings. Id. ¶ 42.

•

Castle made the Gravelings “depositors rather than borrowers.” Id. ¶ 43.

Thus, according to the Gravelings, “Castle through fraud in the inducement misled
[them]” into accepting the supposed loan terms. Id. ¶ 49.
These allegations do not cure the impermissible vagueness of the Gravelings’
accusations. Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n
alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a
9

person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). “Rule 9(b) is satisfied
if the complaint sets forth (1) precisely what statements were made in what
documents or oral representations or what omissions were made, and (2) the time and
place of each such statement and the person responsible for making (or, in the case
of omissions, not making) same, and (3) the content of such statements and the
manner in which they misled the plaintiff, and (4) what the defendants obtained as a
consequence of the fraud.” Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th
Cir. 2001) (citing Brooks, 116 F.3d at 1371). The Gravelings’ Complaint falls short
of this standard. See Cooper v. Blue Cross & Blue Shield of Fla., 19 F.3d 562, 567
(11th Cir. 1994) (“[Fraud] pleading must include facts as to time, place, and
substance of the defendant’s alleged fraud.”) (citation omitted). They state that they
“will show further evidence of Castle’s defrauding [them] through discovery” and
that “by Discovery [they] will seek to uncover the truth.” Doc. 28 ¶¶ 36, 39. Such
promises are inadequate to salvage this claim. See Kaylor v. Fields, 661 F.2d 1177,
1184 (8th Cir.1991) (“Discovery should follow the filing of a well-pleaded complaint.
It is not a device to enable a plaintiff to make a case when his complaint has failed to
state a claim.”).
Even if the allegations were not impermissibly vague, the court would still
dismiss them. The Gravelings have serious objections to the way in which
10

commercial institutions like Castle operate in this country. This is clear from their
SAC and from their prior filings with the court. But, they simply have not articulated
a plausible fraud claim against Castle in this case. They do not dispute that Castle
loaned them the funds necessary to purchase the home upon which BankUnited
eventually foreclosed. In return, the Gravelings executed a mortgage on that home to
secure the loan. All of this is true even if they accurately question the mechanics of
how Castle originated, processed, and recorded that loan internally. Their SAC thus
does not credibly show that they were fraudulently induced into accepting Castle’s
loan. The court would therefore dismiss the fraud claim against Castle on this
alternative ground.
C.

The Gravelings’ unlawful foreclosure claim must be dismissed
because it incorrectly reads Alabama law.

In Count #5, the Gravelings allege that BankUnited unlawfully foreclosed on
their home for the following reasons:
•

BankUnited “failed or refused to provide validation of a valid loan from
inception, to provide ledger accounts and books, to provide wet ink
signature original note and mortgage, to provide evidence of being
holder in due course.” Doc. 28 ¶ 239.

•

It does “not fall within any of the classifications of holders in due course
on the subject loan.” Id. ¶ 240.

•

It has “not suffered any financial loss relating to the loan.” Id. ¶ 241.

11

•

It did not have legal standing to initiate the foreclosure. Id. ¶ 242.

•

It foreclosed despite “knowing said foreclosure was unlawful and
wrongful and despite Plaintiffs disputes with them.” Id. ¶ 243.

•

It used an unlicensed auctioneer to perform the foreclosure auction. Id.
¶ 244.

“Alabama has long recognized a cause of action for ‘wrongful foreclosure’
arising out of the exercise of a power-of-sale provision in a mortgage.”Jackson v.
Wells Fargo Bank, N.A., 90 So. 3d 168, 171 (Ala. 2012). “A mortgagor has a
wrongful foreclosure action whenever a mortgagee uses the power of sale given under
a mortgage for a purpose other than to secure the debt owed by the mortgagor.”
Reeves Cedarhurst Dev. Corp. v. First Am. Fed. Savings and Loan Assoc., 607 So.
2d 180, 182 (Ala. 1992) (citations omitted). In In re Sharpe, 391 B.R. 117 (Bankr. N.
D. Ala. 2008), the federal bankruptcy court proposed the following as factors to
consider as elements of a wrongful foreclosure claim under Alabama law: whether (1)
the actions of the mortgagee were either outside the boundaries of the foreclosure or
taken for some purpose other than to secure the debt owed by the mortgagor; (2) the
actions of the mortgagee were for some ulterior motive; (3) the power of sale was
perverted or used for the mortgagee's or someone else's purpose; or (4) the mortgagee
had an ill motive. 391 B.R. at 152–153.
These elements are not necessary to state an unlawful foreclosure claim, nor
12

are they exhaustive of what facts a plaintiff might invoke in such a suit. The court
instead characterized them as guidelines based on actions that Alabama courts have
considered wrongful foreclosure. Id. at 153 n.40. Nevertheless, “[u]nder Alabama
law, if an action by a mortgagee was for the purpose of securing the debt owed by the
mortgagor, while it may be wrong for other reasons, it cannot, unless some other
malady exists, be wrongful foreclosure.” Id. (emphasis in original).
The Gravelings do not dispute that BankUnited foreclosed on their home so as
to secure the debt they believed was owed to them. Rather, the Gravelings contest the
predicate requirement that BankUnited be a valid “mortgagee.” The court will thus
examine the legal theories underlying this argument so as to show why it considers
them misinterpretations of Alabama law.
1.

Validation

The Gravelings heavily emphasize that BankUnited disregarded its legal
obligation to “validate” their supposed debt by providing them with the “wet-ink,”
original copies of their signed Note and Mortgage. See, e.g., Doc. 28 ¶ 165. In prior
filings, they cited Uniform Commercial Code (“U.C.C.”) Sections 3-309 and 3-501
in favor of their argument. See Doc. 6 at 11. Section 3-309 dictates that “a person
seeking enforcement of an instrument . . . must prove the terms of the instrument and
the person's right to enforce the instrument.” U.C.C. § 3-309(b). Section 3-501
13

addresses “presentment,” which it defines as “a demand made by or on behalf of a
person entitled to enforce an instrument (i) to pay the instrument made to the drawee
or a party obliged to pay the instrument or, in the case of a note or accepted draft
payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.” U.C.C.
§ 3-501(a). The section further states, “[u]pon demand of the person to whom
presentment is made, the person making presentment must (i) exhibit the instrument,
(ii) give reasonable identification and, if presentment is made on behalf of another
person, reasonable evidence of authority to do so, and (iii) sign a receipt on the
instrument for any payment made or surrender the instrument if full payment is
made.” U.C.C. § 3-501(b)(2). The comparable Alabama Code provisions model this
language. See Ala. Code §§ 7-3-309(b), 7-3-501.
The Gravelings argue that BankUnited’s disclosure to them of photocopies of
the signed Note and Mortgage was legally insufficient under this language. See Doc.
28 ¶¶ 145-146. But, they do not marshal any Alabama authority that specifically
concludes that photocopies are legally insufficient. And they do not adequately rebut
the considerable case law suggesting that Alabama does not require production of the
original instrument in order to institute foreclosure. See, e.g., Douglas v. Troy Bank
& Trust Co., No. 2110053, 2012 WL 3631148, at *3 (Ala. Civ. App. Aug. 24, 2012)
(deeming the plaintiff’s “show me the note” theory “suspect” and finding “no
14

authority in which a nonjudicial foreclosure has been held invalid for failure to
produce or present original documentation evidencing the underlying debt and
security for repayment thereof”) (footnote omitted). Further, the Eleventh Circuit has
stated the following on the subject:
A foreclosure is an action on a mortgage and, as such, is not governed by the
[U.C.C.] . . . Alabama's foreclosure statute sets forth the requirements for
conducting a non-judicial foreclosure under the ‘power of sale’ contained in
the mortgage, but the statute does not provide a cause of action for a
mortgagor to require the mortgagee to establish proof of claim prior to
initiating the foreclosure.”
Farkas v. SunTrust Mortgage, Inc., 447 F. App’x 972, 973 (11th Cir. 2011)
(unpublished) (emphasis added) (citations omitted).
The Gravelings’ response to this argument fails. They cite various judicial
decisions and statutory provisions from jurisdictions outside Alabama. See Doc. 47
at 34-37. These citations simply do not reveal a “wet-ink” validation requirement
under Alabama law. Thus, even though BankUnited never produced the original Note
and Mortgage for the Gravelings, the Gravelings cannot attack their home’s
foreclosure on this ground.
2.

Standing

The Gravelings deny BankUnited’s standing to foreclose on their home on a
related basis. They claim that BankUnited was not a “holder in due course” of the

15

Note and Mortgage they originally signed with Castle. See, e.g, Doc. 28 ¶ 240. Under
Alabama law, a “holder in due course” generally denotes the holder of any instrument
so long as:
1.

The instrument when issued or negotiated to the holder does not bear
such apparent evidence of forgery or alteration or is not otherwise so
irregular or incomplete as to call into question its authenticity; and

2.

The holder took the instrument (I) for value, (ii) in good faith, (iii)
without notice that the instrument is overdue or has been dishonored or
that there is an uncured default with respect to payment of another
instrument issued as part of the same series, (iv) without notice that the
instrument contains an unauthorized signature or has been altered, (v)
without notice of any claim to the instrument described in Section 7-3306, and (vi) without notice that any party has a defense or claim in
recoupment described in Section 7-3-305(a).

Ala. Code § 7-3-302. The Gravelings do not challenge BankUnited’s standing on any
of these grounds. Rather, they suggest that BankUnited never possessed the original,
“wet-ink” Note and Mortgage. Id. ¶¶ 147-148. They further maintain that “an original
is required to be able to establish a valid claim for being holder in due course.” Id.
¶ 101.
The court does not need to settle this issue. Even were the Gravelings’
assertions correct, BankUnited would still have been qualified to foreclose on their
home. Alabama law defines a “person entitled to enforce” an instrument as either: (1)
the holder of the instrument, (2) a nonholder in possession of the instrument who has
the rights of a holder, or (3) a person not in possession of the instrument who is
16

entitled to enforce the instrument pursuant to Section 7-3-309 or 7-3-418(d). Ala.
Code § 7-3-301. Thus, “a person may be a person entitled to enforce the instrument
even though the person is not the owner of the instrument or is in wrongful
possession of the instrument.” Id. (emphasis added).
A “holder” includes a person possessing a negotiable instrument if that
instrument is payable to bearer. Ala. Code § 7–1–201(21)(A). If a negotiable
instrument has been endorsed in blank – as the Gravelings' Note had been, see Doc.
13, Ex. A, at 4 – the instrument “becomes payable to ‘bearer’ and may be negotiated
by transfer of possession alone . . .” Ala. Code § 7–3–205(b). Possession of a note
payable to order and endorsed in blank is prima facie evidence of ownership. See
Berney v. Steiner, 108 Ala. 111, 116 (1896). Because it possessed the Gravelings'
Note endorsed in blank, BankUnited could therefore initiate foreclosure proceedings
on the Gravelings’ home. Any defects in the chain of title would not provide the
Gravelings with a lawful defense under Alabama law. See Thomas v. Wells Fargo
Bank, N.A., 116 So. 3d 226, 233-34 (Ala. Civ. App. 2012) (dismissing the fact that
the plaintiffs’ note and mortgage failed to contain complete chains of indorsements
or assignments as a defense to the defendant’s ejectment action), cert. denied, (Ala.
Jan. 4, 2013) (No. 1120197).
3.

Conclusion
17

The Gravelings have not articulated a plausible unlawful foreclosure claim
against BankUnited. None of their factual assertions, even if true, suffice to
undermine BankUnited’s foreclosure authority under Alabama law. The court must
therefore dismiss the claim
D.

The Gravelings’ claim against Mr. Benefield must be dismissed
because it is unsupported by Alabama law.

In Count #4, the Gravelings allege that Mr. Benefield, as BankUnited’s agent,
unlawfully performed the foreclosure sale auction on their home. They point
primarily to the fact that he was unlicensed and that the Alabama Code requires a
State-issued license to “act as an auctioneer” or to “engage or assume to engage in the
auction business.” Id. ¶¶ 227-231 (citing Ala. Code § 34-4-20). Putting aside whether
this provision provides the Gravelings with a private right of action against Mr.
Benefield, BankUnited rightfully responds by referencing a specific Code provision
that exempts those acting as auctioneers “in sales at public outcry” for “sales of
property conveyed by . . . mortgage.” Doc. 35 ¶ 25 (citing Ala. Code § 34-4-27(2)).
In reply, the Gravelings state the following:
Even were it true that Andrew P. Benefield was not required to have an
Alabama license to perform said foreclosure sale at auction, the fact of his
being warned that it was an unlawful foreclosure, that it was under a federal
land patent, and that the matter had been filed into a federal court was more
than enough warning for him to rightly refuse to continue with the foreclosure
sale.
18

Doc. 46 at 27. While the Gravelings might be correct that Mr. Benefield’s forbearance
would have been warranted as a matter of personal courtesy, they have not stated a
legal basis for relief. The court must therefore dismiss the claim.
E.

The Gravelings have stated plausible FDCPA claims against Sirote
and Ms. Rutledge but not Mr. Daugherty.

In Count #6, the Gravelings allege that Sirote, Ms. Rutledge, and Mr.
Daugherty violated the FDCPA by continuing their debt collection efforts after the
Gravelings separately notified them that they were disputing the debt. The court finds
that this claim is plausible only against Sirote and Ms. Rutledge.
1.

FDCPA Generally

Congress enacted the FDCPA to “eliminate abusive debt collection practices
by debt collectors . . .”15 U.S.C. § 1692(e). The FDCPA both requires and forbids
specific conduct by debt collectors. For example, under the FDCPA every initial debt
communication must be accompanied within five days by a written debt validation
notice that provides the debtor with thirty days to dispute the debt. 15 U.S.C. §
1692g(a). The FDCPA also prohibits the use of any “false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C. §
1692e. Importantly, the Act “does not ordinarily require proof of intentional violation
and, as a result, is described by some as a strict liability statute.” LeBlanc v. Unifund

19

CCR Partners, 601 F.3d 1185, 1190 (11th Cir. 2010) (per curiam) (citations omitted).
Further, a single violation of the statute is sufficient to establish civil liability. Bentley
v. Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d Cir. 1993) (citing 15 U.S.C. §
1692k).
In order to prevail on an FDCPA claim, a plaintiff must prove that: “(1) the
plaintiff has been the object of collection activity arising from consumer debt, (2) the
defendant is a debt collector as defined by the FDCPA, and (3) the defendant has
engaged in an act or omission prohibited by the FDCPA.” Kaplan v. Assetcare, Inc.,
88 F. Supp. 2d 1355, 1360-61 (S.D. Fla. 2000) (quoting Sibley v. Firstcollect, Inc.,
913 F. Supp. 469, 470 (M.D. La.1995)).
2.

“Consumer Debt” & “Collection Activity”

The Gravelings have stated sufficient facts revealing that they were “the object
of collection activity arising from consumer debt.” Id. The FDCPA broadly defines
the word “debt”:
The term “debt” means any obligation or alleged obligation of a consumer to
pay money arising out of a transaction in which the money, property,
insurance, or services which are the subject of the transaction are primarily for
personal, family, or household purposes, whether or not such obligation has
been reduced to judgment.
15 U.S.C. § 1692a(5). This definition clearly covers the Gravelings’ payment
obligations arising from the promissory note at issue here. See Reese v. Ellis, Painter,
20

Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th Cir. 2012) (“The promissory
note is a ‘debt’ within the plain language of § 1692a(5)) (citations omitted).
The Gravelings were also the object of collection activity. According to their
SAC, Castle “allegedly transferred the ‘servicing of . . . mortgage loan’ to [Coastal]
on or near October 15, 2007.” Doc. 28 ¶ 50. The Gravelings originally paid Coastal
$49,820.50 “because they believed themselves obligated” to do so. Id. ¶ 51. Once
they “learned some of the fraudulent nature of Castle’s alleged loan,” however, they
discontinued payments. Id. ¶¶ 52-56. They instead sent Coastal a “Notice of Dispute
of Alleged Debt” on September 16, 2011, demanding “validation” of their supposed
debt under the FDCPA. Id. ¶ 57.
Coastal at first addressed the Gravelings with debt collection letters on their
own stationery. See, e.g., Doc. 1, Ex. A. At some point, though, Coastal engaged
Sirote, a law firm located in Birmingham, Alabama, to assume this duty. According
to the Gravelings, “Ginny Rutledge, attorney at Sirote, acted for [Coastal] in
continuing debt collection actions begun by [Coastal] against [them].” Doc. 28 ¶ 66.
Ms. Rutledge, on behalf of Sirote, wrote the Gravelings letters informing them that
they had defaulted. Id. ¶ 72. Specifically, Ms. Rutledge sent a letter titled “Notice of
Acceleration of Promissory Note and Mortgage,” dated March 12, 2012, on Sirote
letterhead to the Gravelings. Doc. 6, Ex. L. The letter notified them that Sirote was
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accelerating the Gravelings’ alleged debt to Coastal and that it was commencing
foreclosure. Id. Importantly, the letter also stated, “This letter is an attempt to collect
a debt, and any information obtained will be used for that purpose.” Id. These actions
plausibly qualify as “debt collection activity.”See Reese, 678 F.3d at 1218 (“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.”);
Bourff v. Rubin Lublin, LLC, 674 F.3d 1238, 1241 (11th Cir. 2012) (treating a letter
seeking payment on a promissory note secured by a mortgage as “an attempt at debt
collection” within the meaning of the FDCPA).
The Gravelings’ SAC is not convincing, however, that Mr. Daugherty
subjected them to collection activity. He does not appear in the document until after
the Gravelings filed a “Petition for Declaratory and Injunctive Relief” in Saint Clair
County Circuit Court to enjoin Coastal’s scheduled foreclosure on their home. See
Doc. 28 ¶ 110. On June 12, 2012, the Gravelings claim that Mr. Daugherty, an
attorney at Sirote, appeared in said court on behalf of Coastal to file a Motion to
Dismiss the Gravelings’ Petition. Id. ¶ 114. Mr. Daugherty also appeared at another
hearing on July 10, 2012, where he “represented [Coastal] as being alleged holder in
due course and insisted that [Coastal] would proceed forward with foreclosure
sale.”Id. ¶¶ 122-23. He further argued against the Gravelings’ injunction by
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contesting their legal theory of validation. Id. ¶¶ 130-31. The court does not believe
this conduct qualifies as “debt collection activity.” According to the Gravelings, Mr.
Daugherty merely appeared in court to defend his client from a legal action filed
against it. That the legal action concerned an upcoming home foreclosure related to
a mortgage does not suffice to classify his actions as debt collection activity. See
Warren v. Countrywide Home Loans, Inc., 342 F. App’x 458, 460 (11th Cir. 2009)
(unpublished) (determining that “foreclosing on a security interest is not debt
collection activity for the purposes of” the FDCPA”).2
3.

Debt Collectors

The Gravelings have also sufficiently alleged that Sirote and Ms. Rutledge
acted as “debt collectors” under the FDCPA. The Act defines a “debt collector” as:
any person who uses any instrumentality of interstate commerce or the mails
in any business the principal purpose of which is the collection of any debts,
or who regularly collects or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another . . .
15 U.S.C. § 1692a(6) (emphasis added). “So a party can qualify as a ‘debt collector’

2

But see Reese, 678 F.3d at 1218 n.3 (“[W]e do not reach the question of whether
enforcing a security interest is itself debt-collection activity.”). The Eleventh Circuit in Reese
reserved the question stated above in a narrow factual scenario: that is, one in which a debt
collector sends a letter to the debtor that only addresses the enforcement of a security interest. See
id. (“That is, we do not decide whether a party enforcing a security interest without demanding
payment on the underlying debt is attempting to collect a debt . . .”) (emphasis added). The
opinion does not suggest that non-communicative legal conduct related solely to the enforcement
of a security interest – such as appearing in court – constitutes debt-collection activity. This court
is persuaded by Warren that such actions, including Mr. Daugherty’s here, do not qualify.
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either by using an ‘instrumentality of interstate commerce or the mails’ in operating
a business that has the principal purpose of collecting debts or by ‘regularly’
attempting to collect debts.” Reese, 678 F.3d at 1218 (quoting 15 U.S.C. §
1692(a)(6)).
The Gravelings claim that Sirote is “a corporation doing law work in the
STATE OF ALABAMA” and that it “is a third party debt collector.” Doc. 28 ¶ 7.
They further claim that Ms. Rutledge is an attorney with Sirote and “served as alleged
counsel acting in her individual capacity and in behalf of Sirote for alleged clients”
– in this case, Coastal and BankUnited. Id. ¶ 9. As noted above, Coastal first engaged
Sirote for the purpose of collecting on the loan it was sold by Castle. Doc. 12 ¶ 8.
Coastal then sent the Gravelings a “Notice of Servicing Transfer” on June 21, 2012,
“stating that they had transferred the servicing of alleged mortgage loan to”
BankUnited. Doc. 28 ¶ 118. Although it is unclear whether this letter was sent by Ms.
Rutledge on Sirote letterhead, the facts later reveal that BankUnited retained Sirote
to continue debt collection activities and to initiate foreclosure proceedings on its
behalf. Doc. 12 ¶¶ 12-13. These asserted facts, if true, safely qualify Sirote and Ms.
Rutledge as “debt collectors” under the statutory definition outlined above. Moreover,
in their Motion To Dismiss, Sirote and Ms. Rutledge do not deny this designation.
The court will thus move onto the final stage of its analysis, which is highly disputed.
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4.

Duty to Cease Communication

The Gravelings have plausibly alleged that Sirote and Ms. Rutledge violated
the FDCPA by continuing their communications with the Gravelings after the latter
had contested their debt. The relevant provision of the FDCPA reads, in relevant part:
If a consumer notifies a debt collector in writing that the consumer refuses to
pay a debt or that the consumer wishes the debt collector to cease further
communication with the consumer, the debt collector shall not communicate
further with the consumer with respect to such debt, except-(1) to advise the consumer that the debt collector's further efforts are
being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke
specified remedies which are ordinarily invoked by such debt collector
or creditor; or
(3) where applicable, to notify the consumer that the debt collector or
creditor intends to invoke a specified remedy.
15 U.S.C. § 1692c(c). As noted, when they concluded that Castle had fraudulently
induced them into signing the original loan, the Gravelings stopped paying Coastal
the designated payments. Doc. 28 ¶¶ 52-56. They sent Coastal a formal dispute notice
on September 16, 2011, which demanded that Coastal validate the debt. Id. ¶ 57.
According to their SAC, Coastal still sent them a letter warning of default. Id. ¶ 62.
It further “continued debt collection activities . . . despite Plaintiffs dispute affidavits
and citations of FDCPA prohibitions.” Id. ¶ 64. Once Coastal had engaged Sirote, Ms.
Rutledge, “acted for [Coastal] in continuing debt collection actions begun by
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[Coastal]” against the Gravelings. Id. ¶ 66. She sent them the above-referenced letter
on March 12, 2012, notifying them of the acceleration of their debt and attempting
to collect on it. Doc. 6, Ex. L. Ultimately, according to the Gravelings, “Sirote and
[Ms. Rutledge] did not discontinue debt collection actions despite [the Gravelings’]
dispute demanding validation via FDCPA.” Id. ¶ 71. Only after the Gravelings’ last
letter/affidavit did Sirote and Ms. Rutledge cancel the foreclosure sale and say they
would provide validation. Id. ¶¶ 77-78. The Gravelings emphasize that, before this
occurred, “both [Coastal] and its counsel in Sirote and [Ms. Rutledge] had been
involved in debt collection activities despite better knowledge via Plaintiffs repeated
dispute affidavits.” Id. ¶ 80.
These facts, if true, plausibly suggest that Sirote and Ms. Rutledge violated §
1492c. The Gravelings repeatedly notified Coastal that they were refusing to pay their
purported debt. When Sirote agreed to represent Coastal in the latter’s debt collection
efforts respecting the Gravelings, it should have apprised itself of its client’s past
history with the Gravelings. As debt collectors on behalf of Coastal, Sirote and Ms.
Rutledge should have known their legal responsibilities in that role concerning
debtors like the Gravelings who dispute their debt. Apart from this, the Gravelings
assert that they reminded Sirote and Ms. Rutledge of their duty to cease
communicating with them. And yet Sirote and Ms. Rutledge continued doing so,
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according to the Gravelings.
In their Motion To Dismiss, Sirote and Ms. Rutledge do not challenge this
factual rendition. Rather, they argue that their conduct qualified under one of the
exceptions listed in § 1492c. Doc. 37 ¶ 17. They specifically cite those provisions that
permit a debt collector to continue communicating with an objecting debtor only so
as (1) “to notify the consumer that the debt collector or creditor may invoke specified
remedies which are ordinarily invoked by such debt collector or creditor” and (2) “to
notify the consumer that the debt collector or creditor intends to invoke a specified
remedy.” Id. (citing 15 U.S.C. § 1692c(c)(2)-(3)). Sirote and Ms. Rutledge claim that
“Sirote’s communications with the Plaintiffs were designed to alert the borrowers that
the mortgagee may invoke and in fact was invoking the right to foreclose as spelled
out in the Mortgage.” Id.
After reviewing Ms. Rutledge’s March 12, 2012, letter, the court finds this
argument unpersuasive. One purpose of the letter was certainly to warn the
Gravelings of the scheduled foreclosure on their home. But, as noted above, another
clear purpose was to collect on the debt. The letter’s final paragraph read in full:
We will assume this debt to be valid unless it is disputed within thirty days
after you receive this letter. If you do dispute this debt or any portion thereof,
we will obtain and mail you a verification of the debt or a copy of any
judgment if you send us a written request within this thirty-day period. Also,
upon written request within this thirty-day period, we will provide you with the
name and address of the original creditor, if different from the current creditor.
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This letter is an attempt to collect on a debt, and any information obtained will
be used for that purpose.
Doc. 6, Ex. L (emphasis added). The letter also suggests earlier that the Gravelings
can avoid foreclosure by contacting Sirote (presumably in order to pay off the debt).
Id. When considered altogether, this letter shows that Sirote and Ms. Rutledge wished
to “communicate further with the [the Gravelings] with respect to [their] debt” in
order to collect on it. 18 U.S.C. § 1492c. As the letter followed repeated injunctions
by the Gravelings to cease such communications, it plausibly reveals a violation of
§ 1492c. For these reasons, the court will dismiss the Gravelings’ FDCPA claim
against Mr. Daugherty but will not dismiss such claims against Sirote and Ms.
Rutledge.
V.

Conclusion
The court will thus grant Defendants’ Motions to Dismiss in this action on all

counts except the Gravelings’ FDCPA claims against Sirote and Ms. Rutledge. The
Gravelings have stated a convoluted and vague fraud claim against Castle. Even were
the claim permissible under Rule 9, its assertions are not sufficiently plausible to
allow this court to infer that Castle might be liable for fraud. The Gravelings’
unlawful foreclosure claim against BankUnited, on the other hand, wholly misreads
Alabama law on debt validation and standing. They similarly misunderstand Alabama
law in their claim against Mr. Benefield. Because neither of these claims state facts
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upon which legal relief may be granted, the court must dismiss them both as well.
Finally, the Gravelings plausibly allege that Sirote and Ms. Rutledge violated the
FDCPA in acting as Coastal’s debt collector, so the court will not dismiss these
claims. As Mr. Daugherty’s conduct does not qualify as debt collection activity,
however, the Gravelings’ claim against him will be dismissed. The court will enter
a separate order consistent with this opinion.
DONE this the 27th day of August, 2013.

VIRGINIA EMERSON HOPKINS
United States District Judge

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