Watkins v. Regions Mortgage Inc et al
MEMORANDUM OPINION AND ORDER: 11 and 12 , Defendants' Motions to Dismiss, are GRANTED with respect to the FDCPA claims, but DENIED in all other respects, as further set out in order. Plaintiff's FDCPA claims against Regions and Sirote are DISMISSED. Signed by Judge Abdul K Kallon on 01/07/13. (CVA)
2013 Jan-07 AM 11:57
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
TRINAE D WATKINS,
REGIONS MORTGAGE INC,
FEDERAL HOME LOAN
MORTGAGE CORP, and
SIROTE & PERMUTT PC,
Civil Action Number
MEMORANDUM OPINION AND ORDER
Plaintiff Trinae D. Watkins brings this action against Regions Mortgage Inc.
(“Regions”), Federal Home Loan Mortgage Corp. (“Freddie Mac”), and Sirote &
Permutt PC (“Sirote”), alleging violations of the Fair Debt Collection Practices
Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and the Truth in Lending Act (“TILA”),
15 U.S.C. § 1641(g), and seeking to prevent foreclosure on her home. See doc. 1.
Defendants Regions and Sirote seek dismissal of the complaint for failure to state
a claim upon which relief can be granted, docs. 11 and 12, and the motion is fully
briefed and ripe for resolution, docs. 18-20. For the reasons stated below, the
court GRANTS the motions with respect to the FDCPA claims, but DENIES
Regions’s motion in all other respects.
I. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a
short and plain statement of the claim showing that the pleader is entitled to
relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed
factual allegations,’ but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere “labels and
conclusions” or “a formulaic recitation of the elements of a cause of action” are
insufficient. Iqbal, 556 U.S. at 678 (citations and internal quotation marks
omitted). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of
‘further factual enhancement.’” Id. (citing Bell Atl. Corp., 550 U.S. at 557).
Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a
complaint fails to state a claim upon which relief can be granted. “To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.” Iqbal,556 U.S. at 678
(citations and internal quotation marks omitted). A complaint states a facially
plausible claim for relief “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citation omitted). The complaint must establish “more
than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Bell
Atl. Corp., 550 U.S. at 555 (“Factual allegations must be enough to raise a right to
relief above the speculative level.”). Ultimately, this inquiry is a “context-specific
task that requires the reviewing court to draw on its judicial experience and
common sense.” Iqbal, 556 U.S. at 679.
II. PROCEDURAL AND FACTUAL BACKGROUND1
Watkins executed a mortgage loan with Regions in 1997 and began
investigating refinancing options in 2011. Doc. 1 at ¶8, 10. By September 2011,
First Commonwealth Mortgage pre-approved Watkins and scheduled to close on
the loan. Id. at ¶ 11. Watkins alleges that during her search, she became wary
about the identity of the rightful owner of her original mortgage loan and to whom
she should submit her monthly payments. Id. at ¶ 12-13. Apparently, this
wariness led Watkins to cancel the closing even though it seems Commonwealth
Mortgage may not have shared Watkins’ concerns. In any event, in an attempt to
clarify her confusion, Watkins asked Regions to “validate their legal standing on
“When considering a motion to dismiss, all facts set forth in the plaintiff’s complaint
‘are to be accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto.’” Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000)
(quoting GSW, Inc. v. Long Cnty., 999 F.2d 1508, 1510 (11th Cir. 1993)). However, legal
conclusions unsupported by factual allegations are not entitled to that assumption of truth. See
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1950 (2009).
her mortgage loan.” Id. at ¶ 15. Although Watkins alleges she “was not and is not
in default on her mortgage obligation,” she began withholding the mortgage
payments to Regions. Id. at ¶ 13-14. Put differently, Watkins stopped making her
monthly mortgage payments. To no surprise, this caused Sirote to send Watkins
two foreclosure notices on behalf of Regions in November and December 2011.
Id. at ¶ 16. In response, in January 2012, Watkins “filed Bankruptcy seeking
protection of the automatic stay to stop what she believes was a fraudulent
foreclosure action and to continue to get the Defendants to validate their
standing.” Id. at ¶ 17. The bankruptcy court disagreed and dismissed Watkins’s
In March 2012, Watkins began corresponding with “Defendants”2 to
ascertain “their standing as secured creditor, servicers, agent, attorney, debt
collectors, investor, trustee, attorney-in-fact or otherwise relative to the subject
property.” Id. at ¶ 18. Watkins alleges that “Defendants” never answered her
queries regarding the original note holder, but that Sirote mailed her a letter stating
that the mortgage servicer referred her loan to Sirote for foreclosure. Id. at ¶ 20.
Sirote’s letter also identified Regions as the servicer and stated that “the original
The complaint does not indicate which of the three defendants Watkins corresponded
with at this time. See e.g., doc. 1 at ¶ 18. Therefore, the court simply denotes “Defendants” as
Watkins does in the complaint.
creditor was only available by written request.” Id. Sometime thereafter, Sirote
sent Watkins a Notice of Acceleration of Promissory Note and Mortgage, showing
Regions as the party accelerating the debt. Id. at ¶ 21. The three ensuing
foreclosure sale advertisements appearing in the HUNTSVILLE TIMES newspaper
stated that the sale was by Regions, the mortgagee. Id. In response to the pending
foreclosure sale, Watkins filed for Chapter 7 bankruptcy on April 2, 2012, seeking
an adversarial proceeding against Defendants. Id. at ¶ 22. Ultimately the
bankruptcy court again dismissed Watkins’s case. Id. at ¶ 23.
On October 4, 2012, Sirote again sent Watkins a letter stating that Regions
had referred her loan to them for foreclosure. Id. at ¶ 24. Sirote also sent another
Notice of Acceleration of Promissory Note and Mortgage identifying Regions as
the accelerating party and instructing Watkins to indicate whether the debt was
valid within thirty days. Id. at ¶ 25. A few days later, Watkins disputed the debt
through a letter to Sirote requesting that they identify the secured creditor. Id. at
¶ 26. In response to this request, Sirote sent Watkins a copy of the mortgage,
breach letter, and letter of acceleration. Id. at ¶ 27. Sirote also notified Watkins of
the scheduled sale date of November 29, 2012, and the dates it planned to
advertise the foreclosure sale in the HUNTSVILLE TIMES. Id. In response, Watkins
requested that Sirote send her the name and address of the lender foreclosing on
her home and the complete chain of assignments of the mortgage. Id. at ¶ 28.
Sirote responded on behalf of Regions and Freddie Mac through a letter stating
“Your loan originated to Regions Mortgage, Inc. was sold to  Freddie Mac.
The loan is being serviced by Regions Mortgage, Inc. Therefore, no assignment is
necessary.” Id. at ¶ 29. However, Watkins alleges that Freddie Mac cannot claim
ownership of her mortgage loan without an assignment from Regions. Id. at ¶ 36.
Watkins seeks relief against Defendants for violations of the FDCPA and
TILA, and for wrongful foreclosure under Alabama law. The primary basis for
these claims is that Regions and Freddie Mac failed to properly assign Watkins’s
mortgage and thus do not have a right to receive mortgage payments or foreclose
on the property. See doc. 1. Regions raises two challenges to the complaint: (1)
that the wrongful foreclosure claim is flawed because the actual foreclosure sale
has not yet taken place, and (2) that Regions cannot be liable under the FDCPA
because it is not a “debt collector.” See doc.11. Sirote also challenges the
complaint on the basis that Watkins failed to state a cognizable FDCPA claim
against it. See doc. 12. Each contention is discussed below with respect to the
In count I of her complaint, Watkins alleges that Regions and Freddie Mac
“have misrepresented themselves, lack standing because of improper assignments,
a broken chain of title, and as such wrongfully commenced to foreclose” on
Watkins’s property. Doc. 1 at ¶ 66. Generally, “[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 Amer. Fed. Sav. and Loan Ass’n, 607 So.
2d 180, 182 (Ala. 1992), citing Johnson v. Shirley, 539 So. 2d 165, 168 (Ala.
1989). “If in any case [foreclosure] is attempted to pervert the power [of sale]
from its legitimate purpose and to use it for the purpose of oppressing the debtor
or of enabling the creditor to acquire the property himself, a court of equity will
enjoin a sale or will set it aside if made.” Jackson v. Wells Fargo Bank, N.A., 90
So. 3d 168, 171 (Ala. 2012) (emphasis added) (quoting Paint Rock Props v.
Shewmake, 393 So. 2d 982, 983-84 (Ala. 1981). Accordingly, a plaintiff does not
need to show that a foreclosure sale transpired; rather, the plaintiff must show only
that the defendant instituted foreclosure proceedings for a wrongful purpose or
through wrongful means.
In the instant case, Watkins alleges that Sirote sent her foreclosure notices
on behalf of Regions to collect a debt after she withheld her mortgage payments.
See doc. 1 at ¶ 13, 25. In other words, Watkins does not allege that Defendants
had a wrongful purpose for instituting foreclosure. Rather, she alleges that
Regions and Freddie Mac did not have the right to institute foreclosure
proceedings.3 Based on Watkins’s allegations that Regions had no right to
foreclose since it purportedly did not hold the promissory note, which the court
must accept as true, see Grossman, 225 F.3d at 1231, Watkins sufficiently pled a
claim for wrongful foreclosure.4 Accordingly, the court DENIES Regions’s
Count II - Fair Debt Collection Practices Act 5
Watkins alleges that Defendants violated the FDCPA by threatening
foreclosure and sending foreclosure notices that contained false information
Regions correctly notes that Watkins, at least in part, relies on a “splitting the note
theory” to support her allegation that Defendants did not have the right to foreclose and that such
splitting is allowed under Alabama law. However, “the mortgage becomes useless in the hands
of one who does not also hold the obligation[, the promissory note,] because only the holder of
the obligation can foreclose.” Coleman v. BAC Servicing, 2012 WL 2362617 at *8 (Ala. Civ.
App. June 22, 2012). Therefore, Watkins’s reliance on this theory does not alone warrant
dismissal of her wrongful foreclosure claim in light of her allegation that Regions is not the
beneficial holder of her note.
In making this finding, the court notes the circular nature of Watkins’s contention.
Watkins alleges that Regions did not have the right to foreclose because it sold her mortgage to
Freddie Mac. However, Watkins alleges also that Freddie Mac did not have the right to foreclose
because Regions did not validly assign her mortgage and thus Freddie Mac also did not own the
mortgage. Both allegations cannot be true. For example, if Regions’s sale of Watkins’s
mortgage to Freddie Mac is void, Regions retained its ownership rights of Watkins’s mortgage
and, with those rights, the ability to receive payments and foreclose. On the other hand, if the
sale is valid and Watkins correctly asserts that Regions no longer had any rights under the
mortgage, Freddie Mac had the right to receive payments and foreclose. Freddie Mac, however,
essentially designated Regions as its agent in those tasks by selecting Regions to service the loan
after the sale.
In count II, Watkins also alleges a claim under the TILA, 15 U.S.C. § 1641(g).
Although addressed by Regions in its motion to dismiss, the complaint does not allege a TILA
claim against Regions, only Freddie Mac. Therefore, the court declines to discuss this issue. To
the extent Watkins does allege a TILA claim against Regions, it is due to be dismissed for the
reasons stated by Regions in its motion.
regarding the true owner of her mortgage. See doc. 1.
The FDCPA is intended “to eliminate abusive debt collection practices by
debt collectors” by prohibiting use of “any false, deceptive, or misleading
representation or means in connection with the collection of any debt” or the use
of “unfair or unconscionable” collection means. 15 U.S.C. §§ 1692(e), 1692e,
1692f. To establish liability under the FDCPA, a plaintiff must first demonstrate
that the defendant is a “debt collector.” Birster v. American Home Mortgage
Servicing, Inc., No. 11-13574, 2012 WL 2913786 at *3 (11th Cir. July 18, 2012).
A “debt collector” is
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.
Notwithstanding the exceptions provided by clause (F) of the last
sentence of this paragraph, the term includes any creditor who, in the
process of collecting his own debts uses any name other than his own
which would indicate a third person is collecting or attempting to collect
such debts. . . . The term does not include –
(F) any person collecting or attempting to collect any debt owed or due
or asserted to be owed or due another to the extent such activity (i) is
incidental to a bona fide fiduciary obligation or a bona fide escrow
arrangement; (ii) concerns a debt which was originated by such person;
(iii) concerns a debt which was not in default at the time it was obtained
by such person; or (iv) concerns a debt obtained by such person as a
secured party in a commercial credit transaction involving the creditor.
15 U.S.C. § 1692a(6) (emphasis added).
Watkins alleges that Regions originated the loan and admits that Regions
serviced the loan at all relevant times. Doc. 1 at ¶¶ 8, 16, 20-21, 24-25, 27, 29. As
such, Regions’s attempts at foreclosure were attempts to collect a debt, id. at ¶ 13
and 25, from a loan it originated. Therefore, based on the plain language of the
statute, Regions is not a “debt collector.” Additionally, the legislative history of
the FDCPA demonstrates that the term “debt collector” does not include
“mortgage service companies and others who service outstanding debts for others,
so long as the debts were not in default when taken for servicing.” S. Rep. No. 95382 (1977). As a result, since Regions also acted as the mortgage servicer after it
apparently sold the mortgage to Freddie Mac, Regions still is not a “debt
collector” under the FDCPA even if Freddie Mac owns the mortgage. Therefore,
the court GRANTS Regions’s motion on the FDCPA claims.
Watkins alleges that Sirote violated §§ 1692e(10) and 1692f(6)(A) of the
FDCPA by (1) using a “false representation or deceptive means to collect or
attempt to collect a debt,” 15 U.S.C. § 1692e(10), when it sent a letter stating
that Regions and Freddie Mac had the right to collect from Watkins and (2)
“threatening to take a nonjudicial action to effect dispossession. . . of property
[where] there is no right to possession of the property,” 15 U.S.C. § 1692f(6), by
sending foreclosure notices when Regions and Freddie Mac did not have the right
to foreclose on Watkins’s property. See doc. 1 ¶¶ 71, 74. These claims are based
on Watkins’s assertions that neither Regions nor Freddie Mac are the beneficial
holder of her mortgage and that neither can foreclose on her property. While the
court must accept Watkins’s contention that Freddie Mac and Regions are not the
beneficial owners of her mortgage, her claim against Sirote fails because she failed
to allege facts that established that Sirote knew or had reason to know that
Regions – the entity for whom Sirote instituted foreclosure proceedings – had no
interest in her home. Instead, Watkins admits that she took out a loan from
Regions, that she paid this loan for years and then stopped making these payments,
and that Regions instituted foreclosure proceedings through Sirote as a result. In
other words, by her own admission, Sirote had a reasonable basis to believe that
Regions had a right to go after her when she stopped paying her mortgage. There
is simply nothing in Watkins’s complaint that establishes or suggests that Sirote
used any “false representations or deceptive means” or that it knew it was
“threatening to take a nonjudicial action . . . [where] there [was] no right to
possession of the property[.]” 15 U.S.C. §§ 1692e(10), 1692f(6). Therefore,
based on these alleged facts, the court GRANTS Sirote’s motion.
Based on the foregoing, the court GRANTS the motions on the FDCPA
claims, but DENIES Regions’s motions on the wrongful foreclosure claim.
Accordingly, Watkins’s FDCPA claims against Regions and Sirote are
DONE this 7th day of January, 2013.
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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