Selman et al v. CitiMortgage, Inc.

Filing 57

Order granting in part denying in part the 16 , 37 , 49 Motions to Dismiss. The 39 MOTION Deem Incorporated is granted. Plaintiffs no longer have any pending claims against defendant American Security Insurance Company. (American Securi ty Insurance Company terminated as defendant.) Federal National Mortgage Association answer to Second Amended Complaint due 3/19/2013; CitiMortgage, Inc. answer to Second Amended Complaint due 3/19/2013. Rule 26 Meeting Report due by 3/12/2013. Signed by Chief Judge William H. Steele on 3/5/2013. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SHERRY SELMAN, et al.,
Plaintiffs,
v.
CITIMORTGAGE, INC., et al.,
Defendants.

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CIVIL ACTION 12-0441-WS-B

ORDER
This matter comes before the Court on CitiMortgage, Inc.’s Partial Motion to Dismiss
(doc. 16), Federal National Mortgage Association’s Motion to Dismiss (doc. 37), and Motion of
American Security Insurance Company to Dismiss (doc. 49). All three motions have been
briefed, and are now ripe for disposition.
I.

Background.
Plaintiffs, Sherry and Robert Selman, brought this action to air grievances concerning the

servicing of the mortgage loan for their home in Daphne, Alabama. Named defendants are
CitiMortgage, Inc. (servicer of the Selmans’ loan), Federal National Mortgage Association
(“Fannie Mae,” owner of the beneficial interest in the Selmans’ loan), and American Security
Insurance Company (“ASIC,” the insurer with which CitiMortgage force-placed insurance
coverage on the Selmans’ residence for a five-month period commencing in September 2010).
Because all three Motions to Dismiss are properly classified as being brought pursuant to
Rule 12(b)(6), Fed.R.Civ.P., the well-pleaded factual allegations of the Second Amended
Complaint will be accepted as true for purposes of this Order, and the Court’s review of the facts
will generally be confined to the four corners of plaintiffs’ pleading.1 Those allegations include

1

See, e.g., Keating v. City of Miami, 598 F.3d 753, 762 (11th Cir. 2010) (on a
motion to dismiss, federal court “accept[s] the facts alleged in the complaint as true, draw[s] all
reasonable inferences in the plaintiff’s favor, and limit[s] our review to the four corners of the
complaint”); Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 959 (11th Cir. 2009) (“A court’s
(Continued)

the following: The Selmans obtained a mortgage loan (the “Mortgage”) in the amount of
$159,000 for their principal residence in Daphne, Alabama on March 20, 2009. (Doc. 45, ¶ 7.)
The originating lender is not a party to this dispute. After the closing, beneficial interest in the
loan was transferred to Fannie Mae, and servicing duties were transferred to CitiMortgage. (Id.,
¶ 9.) CitiMortgage’s obligations under the Mortgage included the responsibility to disburse
periodic payments from the Selmans’ escrow account for hazard insurance and property taxes
when due. (Id., ¶ 20.)
In January 2010, the Selmans learned that CitiMortgage had failed to make their home
insurance premium payment out of escrowed funds as required. (Id., ¶ 21.) This omission
occurred even though the Selmans had made all payments due under the Mortgage, including all
escrow account funds for taxes and insurance. (Id., ¶ 22.)2 A short time later, the Selmans’
homeowners’ insurance policy lapsed because CitiMortgage had failed to remit the applicable
premium out of available escrowed funds. (Id., ¶¶ 21-23.) The Selmans’ insurer (which is also
not a party to this action) refused to reissue the lapsed policy without first evaluating the risk
anew under its underwriting process, after which the insurer fixed much higher premiums and
demanded expensive modifications and repairs. (Id., ¶ 24.) On June 24, 2010, the carrier
canceled the policy, leaving the Selmans to hunt for insurance coverage elsewhere. (Id.)
Exercising its rights under Section 5 of the Mortgage, CitiMortgage force-placed hazard
insurance on the Selmans’ home from ASIC on September 1, 2010, via a policy that fixed
coverage limits at $253,600 and bore an annual premium of $5,049.00. (Id., ¶¶ 27, 37.) These

review on a motion to dismiss is limited to the four corners of the complaint.”) (citation and
internal quotation marks omitted); American United Life Ins. Co. v. Martinez, 480 F.3d 1043,
1066 (11th Cir. 2007) (“a court must view a complaint in the light most favorable to the plaintiff
and accept all of the plaintiff’s well-pleaded facts as true when it considers a motion to dismiss a
complaint under Rule 12(b)(6)”).
2

Of potential significance, plaintiffs allege only that they had timely made all
payments due under the Mortgage as of January 26, 2010. (Id., ¶¶ 21-22.) Conspicuously
missing from their Second Amended Complaint is an allegation that the Selmans timely made all
payments due under the Mortgage at all times through the commencement of foreclosure
proceedings in March 2012. In other words, the pleading does not reflect whether plaintiffs did
or did not timely make all required payments under the Mortgage between January 2010 and
March 2012.

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policy limits were obtained by CitiMortgage, even though the amount of the Mortgage was just
$159,000 and the tax-assessed value of the Selmans’ home and lot combined was just $207,600.
(Id., ¶ 40.) The Selmans impute a nefarious motive to this discrepancy. In particular, plaintiffs
allege that “a substantial portion of the premium” for the force-placed insurance “was retained or
refunded to CitiMortgage in the form of kickbacks and/or ‘commissions’ paid to CitiMortgage
by ASIC.” (Id., ¶ 27.) Plaintiffs theorize that CitiMortgage intentionally obtained excessive
force-placed coverage from ASIC for the Selmans’ home, so as to maximize its own “kickbacks
and/or commissions” out of the resulting premiums charged against the Selmans. In any event,
on February 2, 2011 (five months after the ASIC policy went into effect), the Selmans obtained
new insurance coverage for the property, and CitiMortgage credited a portion of the force-placed
insurance charge back to their account. (Id., ¶ 32.)
The Selmans’ dissatisfactions with CitiMortgage and Fannie Mae extend well beyond the
insurance issue. Specifically, the Selmans contend that CitiMortgage failed to credit their
regular mortgage payments properly, holding such payments in “suspense” rather than applying
them to the Mortgage. (Id., ¶ 34.) None of the Selmans’ payments in the year 2012 were
credited to their loan. (Id., ¶ 36.) The problem came to a head on March 8, 2012, when
“CitiMortgage commenced foreclosure on the Selmans’ home.” (Id., ¶ 11.) “In furtherance of
the foreclosure process, CitiMortgage recorded an assignment from the originator of the
Selmans’ loan to itself on March 29, 2012.” (Id., ¶ 12.) The Second Amended Complaint lacks
any allegations, however, that CitiMortgage completed foreclosure proceedings on the Selmans’
home, or that a foreclosure sale ever occurred. There is no indication in the pleadings as to what,
if anything, CitiMortgage did to “commence foreclosure” on plaintiffs’ residence, nor is there
any allegation that such process ever reached substantial completion.
After March 8, 2012, the Selmans made a series of demands and inquiries of
CitiMortgage, all of which partially underlie certain claims in this litigation. In particular, on
March 19, 2012, the Selmans sent a notice of cancelation to CitiMortgage, purporting to rescind
the Mortgage based on the original lender’s failure to furnish the correct number of copies of
certain TILA disclosures to the Selmans at the March 20, 2009 closing, and its alleged
understatement of the finance charge by more than $35.00. (Id., ¶¶ 13-15.) CitiMortgage failed
and refused to recognize the rescission or cancel the Mortgage. (Id., ¶ 13.) Also on March 19,
2012, the Selmans mailed a qualified written request (“QWR”) to CitiMortgage, requesting

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payoff and payment history data; however, CitiMortgage did not respond until June 21, 2012.
(Id., ¶¶ 50-51.) On June 5, 2012, the Selmans made a second QWR to CitiMortgage concerning
the escrow account balance; however, CitiMortgage did not respond. (Id., ¶ 52.) The pleading
alleges that CitiMortgage “failed to conduct any reasonable investigation or take any reasonable
corrective actions in response to the Plaintiffs’ [QWRs].” (Id., ¶ 53.)
On July 12, 2012, this dispute came to a head when the Selmans filed suit in this District
Court. The current iteration of the Complaint levels claims against CitiMortgage, Fannie Mae
and ASIC, and asserts some 14 causes of action, to-wit: (i) negligence (Fannie Mae and
CitiMortgage); (ii) wantonness (Fannie Mae and CitiMortgage); (iii) breach of mortgage
agreement (CitiMortgage); (iv) wrongful foreclosure (CitiMortgage); (v) injunctive and
declaratory relief (CitiMortgage); (vi) RESPA violations (CitiMortgage); (vii) breach of
fiduciary duty (CitiMortgage); (viii) libel and slander (CitiMortgage); (ix) TILA rescission
(CitiMortgage and Fannie Mae); (x) unjust enrichment (CitiMortgage and ASIC); (xi)
conversion (CitiMortgage); (xii) fraud and conspiracy (all defendants); (xiii) violation of TILA §
1639f (CitiMortgage and Fannie Mae); and (xiv) FDCPA violations (CitiMortgage).
All three defendants have now moved to dismiss the Second Amended Complaint, in
whole or in part. In response to these Rule 12(b) Motions, the Selmans acknowledge that
dismissal of their libel and slander (Count Eight) and fraud and conspiracy (Count Twelve)
causes of action is appropriate under Rule 12(b)(6).3 Pursuant to this concession, then, the
Motions to Dismiss are granted as to Counts Eight and Twelve, and those claims are dismissed.
Moreover, review of the Rule 12(b) Motions confirms that no defendant seeks dismissal of the
FDCPA claim (Count Fourteen), the portions of the breach of mortgage agreement (Count
Three) or injunctive/declaratory relief (Count Five) claims that do not concern force-placed
insurance, or the portion of the RESPA claim (Count Six) alleging violation of 12 U.S.C. §
2605(g). Accordingly, this action will proceed against CitiMortgage with respect to those four
causes of action, irrespective of how the Motions to Dismiss are adjudicated. As to all remaining
causes of action, however, the parties sharply dispute whether such claims are legally cognizable
as pleaded in the Second Amended Complaint.
3

See doc. 53, at 3 (“Plaintiffs concede that, at this time, counts eight and twelve of
the SAC do not state a claim as presently pled.”).

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II.

Analysis.
A.

Plaintiffs’ Claims Relating to Force-Placed Insurance.

As an initial matter, both CitiMortgage and Fannie Mae move for dismissal of all of the
Selmans’ causes of action insofar as they relate to the force-placing of hazard insurance by
CitiMortgage.4 According to CitiMortgage and Fannie Mae, these claims are preempted by
operation of the National Banking Act. Authorities cited in movants’ briefs lend credence to this
proposition.
The Supreme Court has explained that “[b]usiness activities of national banks are
controlled by the National Bank Act (NBA or Act), 12 U.S.C. § 1 et seq., and regulations
promulgated thereunder.” Watters v. Wachovia Bank, N.A., 550 U.S. 1, 6, 127 S.Ct. 1559, 167
L.Ed.2d 389 (2007). The NBA “specifically authorizes federally chartered banks to engage in
real estate lending” and empowers them “to exercise … all such incidental powers as shall be
necessary to carry on the business of banking.” Id. Regulations accompanying the Act specify
that “[a] national bank may charge its customers non-interest charges and fees,” and that “[t]he
establishment of non-interest charges and fees, their amounts, and the method of calculating
them are business decisions to be made by each bank, in its discretion, according to sound
banking judgment and safe and sound banking principles ….” 12 C.F.R. § 7.4002(a), (b)(2).
Given the Act’s broad regulation of national banks, the NBA preempts state laws that
“prevent or significantly interfere with the national bank’s or the national bank regulator’s
exercise of its powers.” Watters, 550 U.S. at 12. Such preemption applies even to state laws of
general application that were not designed to regulate the preempted areas. See Gutierrez v.
Wells Fargo Bank, NA, 704 F.3d 712 (9th Cir. 2012) (in analyzing preemption, courts apply state
laws of general application to national banks only when “doing so does not prevent or
4

This issue is not confined in a single claim or cause of action, but is instead a
recurring theme throughout the Second Amended Complaint. Indeed, plaintiffs’ assertion that
defendants engaged in wrongdoing by force-placing hazard insurance in excessive coverage
amounts for plaintiffs’ home is sprinkled throughout many of the Selmans’ 14 asserted causes of
action as part (but not all) of the legal and factual basis for each of those claims. Specifically,
the force-placed insurance issue seeps into Count One (negligence), Count Two (wantonness /
willfulness), Count Three (breach of the mortgage agreement), Count Four (wrongful
foreclosure), Count Five (injunctive/declaratory relief), Count Ten (unjust enrichment), and
Count Twelve (fraud/conspiracy).

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significantly interfere with the national bank’s exercise of its powers”) (citations omitted). In
addition to authorizing national banks to establish non-interest fees and charges as business
decisions in their discretion, the NBA creates preemption for state-law restrictions on “[t]he
ability of a creditor to require or obtain private mortgage insurance, insurance for other
collateral, or other credit enhancements or risk mitigants, in furtherance of safe and sound
banking practices” or “[t]he terms of credit.” 12 C.F.R. § 34.4(a)(2), (4) (emphasis added).
CitiMortgage and Fannie Mae maintain that the Selmans’ state-law claims directed at the
force-placement of hazard insurance on the Selmans’ home constitute improper interference with
CitiMortgage’s authority under the NBA to require or obtain insurance for its collateral and fix
the terms of credit in its discretion, according to sound banking judgment. The crux of this
argument is that the Selmans’ state-law claims are preempted because they seek to constrain or
undermine CitiMortgage’s right pursuant to the NBA to establish the type and amount of noninterest charges and fees under § 7.4002. In this regard, defendants liken the Selmans’
insurance-related claims to those at issue in Martinez v. Wells Fargo Home Mortg., Inc., 598
F.3d 549 (9th Cir. 2010), in which the plaintiffs argued that certain fees charged by the lender
“are too high, and ask[ed] the court to decide how much an appropriate fee would be.” Id. at
556. Because regulations under the NRA provide that the amounts of such fees “are business
decisions to be made by each bank,” the plaintiffs’ claims were “preempted by the Act.” Id.
According to CitiMortgage, this case is akin to Martinez, in that the Selmans’ insurance-related
claims essentially posit that CitiMortgage required too much insurance on the Selmans’ collateral
at too high a price, thereby running directly into the NRA preemption just as occurred in
Martinez. To bolster their preemption argument further, CitiMortgage and Fannie Mae point to
case law and regulations under the Home Owners’ Loan Act, which they contend to be similar
and to have reached the same conclusion about preemption in the force-placed insurance context.
In response, plaintiffs do not challenge CitiMortgage’s and Fannie Mae’s interpretation
of the breadth, scope and effect of NBA preemption. They do not dispute that their insurancerelated claims under state law would indeed be preempted by the Act if they were brought
against a national bank. Rather, the Selmans’ sole rejoinder to movants’ preemption argument is
that CitiMortgage is a subsidiary of a national bank, not a national bank itself. The distinction
matters, according to the Selmans, because the Dodd-Frank Act amended the NBA to
“eliminate[] preemption of state law for national bank subsidiaries, agents and affiliates.” (Doc.

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53, at 7 (citation omitted).) Simply put, plaintiffs’ position is that “[s]ince CitiMortgage is not a
bank it is not entitled to preemption” (id. at 8) in the wake of the Dodd-Frank Act.
The Selmans’ argument fails for the straightforward reason that (i) it hinges exclusively
on the terms of the Dodd-Frank Act, but (ii) the Dodd-Frank Act’s preemption clarifications
relating to national bank subsidiaries such as CitiMortgage postdate relevant events in this
litigation and are not retroactive. See, e.g., Molosky v. Washington Mut., Inc., 664 F.3d 109, 113
n.1 (6th Cir. 2011) (“The Dodd-Frank Act itself declares that its contents should not be construed
as retroactive.”); Davis v. World Savings Bank, FSB, 806 F. Supp.2d 159, 166 n.5 (D.D.C. 2011)
(“Congress did not direct retroactive application of the new regulation, and the Dodd-Frank Act
provided that section 1465 of Title 12 was enacted and amended effective on the transfer date,
i.e. July 21, 2011.”). The Supreme Court has directed that “congressional enactments and
administrative rules will not be construed to have retroactive effect unless their language requires
this result.” Bowen v. Georgetown University Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 102
L.Ed.2d 493 (1988). Here the relevant administrative interpretation states the opposite, by
plaintiffs’ own reckoning. Indeed, the Comptroller of the Currency Interpretive Letter #1132
dated May 12, 2011, on which the Selmans rely and which they append to their brief, specifies
that the Dodd-Frank Act “eliminates preemption of state law for national bank subsidiaries” with
such change becoming “effective as of the ‘transfer date’ (July 21, 2011).” (Doc. 53, Exh. 2, at
1.)
In sum, then, the Dodd-Frank Act did modify CitiMortgage’s status with respect to NBA
preemption, but that change took effect on July 21, 2011, and was not retroactive. These truths
are fatal to the Selmans’ argument that the Dodd-Frank Act renders NBA preemption
unavailable to CitiMortgage in this case. After all, the Selmans’ insurance-related claims relate
to CitiMortgage’s force-placement of insurance on the Selmans’ home from September 1, 2010
through February 2, 2011, well before the Dodd-Frank Act’s July 2011 “transfer date.” (See doc.
53, ¶¶ 27-32.) As such, CitiMortgage’s subsidiary status in no way deprives of it of the benefit
of NBA preemption in this action.5 Plaintiffs identify no other reasons or grounds why this
5

Indeed, the applicable regulation during the time period at issue in this case
provided as follows: “Unless otherwise provided by Federal law or OCC regulation, State laws
apply to national bank subsidiaries to the same extent that those laws apply to the parent national
bank.” 12 C.F.R. § 7.4006 (removed and reserved July 21, 2011).

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Court should not deem the Selmans’ state-law claims related to force-placement of insurance to
be preempted under the National Bank Act.
In light of the foregoing analysis, the Motions to Dismiss are granted, and plaintiffs’
claims are dismissed, insofar as the Selmans seek to bring state-law claims challenging
CitiMortgage’s conduct of obtaining force-placed insurance for the Selmans’ residence in an
amount that plaintiffs contend was excessive or in some way motivated by a desire to maximize
kickbacks or commissions. Those claims are preempted by the National Bank Act and cannot
be pursued herein.
B.

Plaintiffs’ Negligence/Wantonness Claims (Counts I and II).

In Counts One and Two of the Second Amended Complaint, the Selmans bring Alabama
common-law negligence and wantonness claims, reasoning that CitiMortgage has been negligent
and wanton “in the managing and servicing of Plaintiffs’ mortgage account.” (Doc. 45, ¶¶ 56,
61.) Plaintiffs allege that Fannie Mae is also liable for these claims because CitiMortgage was
acting as its agent. (Id., ¶¶ 59, 62.)
These claims fail as a matter of law. Recent federal precedent interpreting Alabama law
has uniformly found that no cause of action for negligent or wanton servicing of a mortgage
account exists under Alabama law, at least in the absence of personal injury or property damage
(neither of which are alleged by the Selmans).6 See, e.g., Blake v. Bank of America, N.A., 845 F.
Supp.2d 1206, 1210-11 (M.D. Ala. 2012) (“Alabama law does not recognize a cause of action
for negligent or wanton mortgage servicing”); Webb v. Ocwen Loan Servicing, LLC, 2012 WL
5906729, *7 (S.D. Ala. Nov. 26, 2012) (“under Alabama law a cause of action for negligent
servicing of a mortgage against Ocwen cannot be maintained where the damages are economic,
i.e., lost commissions”); Forester v. Bank of America, N.A., 2012 WL 3206471, *5 (S.D. Ala.
Aug. 7, 2012) (“Under Alabama law, an agent, like BAC, could only incur tort liability while
servicing a mortgage by causing personal injury or property damage as a result of a breach of the
6

To be sure, the Selmans do claim to have suffered mental anguish and emotional
distress as a result of CitiMortgage’s negligence. But Alabama law forbids “[d]amages for
mental anguish … for negligence except when the plaintiff has suffered a physical injury as a
result of the negligent conduct or was placed in an immediate risk of physical injury by that
conduct.” Brown v. First Federal Bank, 95 So.3d 803, 818 (Ala.Civ.App. 2012). Plaintiffs’
allegations do not satisfy this threshold.

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duty of reasonable care. Pure economic loss – which is what [Forester] claims – does not
suffice.”) (citations omitted); Fassina v. CitiMortgage, Inc., 2012 WL 2577608, *7 (N.D. Ala.
July 2, 2012) (“Plaintiff’s claim alleging negligent, reckless, and/or wanton mortgage servicing
is not valid under Alabama law.”); McClung v. Mortgage Electronic Registration Systems, Inc.,
2012 WL 1642209, *8 (N.D. Ala. May 7, 2012) (“the court similarly concludes that there is no
cause of action for negligent or wanton mortgage servicing under Alabama law”).7 All of these
cases reject the availability of negligence or wantonness claims under Alabama law under
comparable circumstances to those identified by the Selmans.
The Court agrees with these decisions’ construction of Alabama law, and particularly
their emphasis that the mortgage servicing obligations at issue here are a creature of contract, not
of tort, and stem from the underlying mortgage and promissory note executed by the parties,
rather than a duty of reasonable care generally owed to the public. See generally Barber v.
Business Products Center, Inc., 677 So.2d 223, 228 (Ala. 1996) (“a mere failure to perform a
contractual obligation is not a tort”), overruled on other grounds by White Sands Group, LLC v.
PRS II, LLC, 32 So.3d 5 (Ala. 2009); Temploy, Inc. v. National Council on Compensation Ins.,
650 F. Supp.2d 1145, 1153 (S.D. Ala. 2009) (“The general rule in Alabama is that the mere
failure to perform a contractual obligation will not sustain an action sounding in tort.”). To the
7

Plaintiffs’ argument to the contrary relies on Marks v. Quicken Loans, Inc., 561 F.
Supp.2d 1259 (S.D. Ala. 2008), in which this Court concluded that a loan servicer did owe a duty
of care to a borrower. Marks is distinguishable because the servicer in that case did not argue
that Alabama law imposes no general duty of care on loan servicers, but instead argued “that it
could not have owed a duty to the Markses to pay the insurance premiums out of their escrow
account by the March 31, 2007 deadline … because it had surrendered all control and custody
over their escrowed funds well before that time.” Id. at 1267. Federal district courts generally
do not volunteer arguments on parties’ behalf, but instead decide the questions presented to them
in the manner the parties choose to frame them. Thus, in Marks, this Court had no occasion to
make a definitive determination about whether, as a general matter, Alabama law recognizes a
duty of care running from loan servicers to borrowers because no argument was presented in that
case disclaiming such a general duty of care. What’s more, Marks is distinguishable by virtue of
its unusual fact pattern. The servicer in Marks allegedly received an insurer’s bill for the
borrower’s hazard insurance premium, failed to pay that bill, transferred its interest in the loan to
another entity, and neglected to inform either the new servicer of the unpaid bill or the insurer of
the existence of a new servicer. See id. at 1267. That specialized scenario is a far cry from the
generic servicer-to-borrower duty of care at issue in this case; therefore, the highly fact-bound
rule in Marks has no application here.

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extent, then, that the Selmans seek to derive tort claims of negligence and wantonness to recover
economic loss (no physical injuries) stemming from CitiMortgage’s purported failure to perform
contractual duties vis a vis the servicing of their mortgage, the Court agrees with defendants that
Counts One and Two do not state claims upon which relief can be granted.
Embedded in Count One is a subclaim that CitiMortgage “failed to properly train and
supervise its agents and employees and this failure has caused or contributed to the plaintiffs’
damages herein.” (Doc. 45, ¶ 57.) In Rule 12(b) briefing, the Selmans suggest that they have
stated an actionable claim for negligent training and supervision. Under Alabama law, such a
claim requires a showing that “(1) the employee committed a tort recognized under Alabama
law; (2) the employer had actual notice of this conduct or would have gained such notice if it
exercised due and proper diligence; and (3) the employer failed to respond to this notice
adequately.” Lawrence v. Christian Mission Center Inc. of Enterprise, 780 F. Supp.2d 1209,
1218 (M.D. Ala. 2011); see also Crutcher v. Vickers, 2012 WL 3860557, *13 (N.D. Ala. Sept. 5,
2012) (explaining that a critical element of either negligent supervision or negligent training
under Alabama law is “proof of the employer’s actual or constructive awareness of the
employee’s incompetency”). The Selmans have alleged facts that would support none of these
elements (especially with regard to the elements of notice and failure to respond); rather, Count
One of their Second Amended Complaint simply makes a conclusory, unsubstantiated allegation
of negligent training and supervision. That is not good enough to withstand Rule 12(b)(6)
scrutiny. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007) (plaintiffs must plead “enough facts to state a claim to relief that is plausible on its
face,” so as to “nudge[ ] their claims across the line from conceivable to plausible”);
GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1254 (11th Cir. 2012) (Twombly / Iqbal
pleading standard “necessarily requires that a plaintiff include factual allegations for each
essential element of his or her claim”).
As presently constituted, then, Counts I and II (including both the claims of negligent/
wanton servicing of plaintiffs’ mortgage account and the subsidiary claims of negligent/ wanton
training or supervision) fail to state a claim upon which relief can be granted and are properly
dismissed.

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C.

Plaintiffs’ Wrongful Foreclosure Claim (Count IV).

Count Four of the Second Amended Complaint is the Selmans’ claim against
CitiMortgage for wrongful foreclosure. In support of this cause of action, plaintiffs allege that
“CitiMortgage has breached the mortgage and note by … instituting foreclosure proceedings in
the absence of a default by Plaintiffs.” (Doc. 45, ¶ 67.) Plaintiffs do not allege, however, that
CitiMortgage foreclosed on their residence, or that CitiMortgage actually exercised its power of
sale. Instead, the pleading is couched in terms that “CitiMortgage commenced foreclosure on the
Selmans’ home” in March 2012 and that plaintiffs are “subjected to … possible foreclosure”
today. (Id., ¶¶ 11, 73.) By the plain terms of the Complaint, then, foreclosure has not happened.
CitiMortgage now seeks dismissal of this claim on the ground that no cause of action for
wrongful foreclosure is cognizable without a foreclosure. “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) (claim for
wrongful disclosure is defined as one in which “a mortgagee uses the power of sale given under
a mortgage for a purpose other than to secure the debt owed by the mortgagor”) (citation
omitted); see also Reeves Cedarhurst Development Corp. v. First American Federal Sav. and
Loan Ass’n, 607 So.2d 180, 182 (Ala. 1992) (“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.”). The touchstone of such a claim is that the mortgagee
must “use[] the power of sale.” Reeves, 607 So.2d at 182. This requirement implies that a
foreclosure sale must have occurred in order for a wrongful foreclosure claim to lie under
Alabama law. Courts applying Alabama law have routinely so found. See, e.g., Hardy v. Jim
Walter Homes, Inc., 2007 WL 174391, *6 (S.D. Ala. Jan. 18, 2007) (under Alabama law, “the
power of sale is exercised by selling, not merely by running a newspaper advertisement
preparatory to selling,” and “the clear weight of authority from other jurisdictions is that
wrongful foreclosure actions are not recognized unless a foreclosure actually takes place”).8

8

See also Webb, 2012 WL 5906729, at *5 (“since no foreclosure sale occurred,
defendants did not use the power of sale and Webb cannot meet this threshold requirement,”
such that wrongful foreclosure claim was dismissed); Forester, 2012 WL 3206471, at *4 (“As
Forester has merely alleged that foreclosure proceedings have been initiated, but … no sale has
taken place, Forester’s wrongful foreclosure claim (Count One) falls shy of the Reeves
(Continued)
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To counter these persuasive authorities, plaintiffs point to Sturdivant v. BAC Home Loans
Servicing, LP, --- So.3d ----, 2011 WL 6275697 (Ala.Civ.App. Dec. 16, 2011). But Sturdivant
was an ejectment action, in which no claim for wrongful foreclosure was asserted by anyone.
The Alabama appellate court in Sturdivant had no occasion to delineate the extent to which a
mortgagee must exercise the power of sale in order for a wrongful foreclosure claim to be
cognizable. Although Sturdivant is instructive as to whether a deed obtained by foreclosure sale
is valid when the mortgagee lacked authority to foreclose, it says nothing about the scope and
parameters of a cause of action for wrongful foreclosure under Alabama law.9
Separate and apart from the non-occurrence of a foreclosure sale, CitiMortgage argues
that Count Four is legally deficient because it does not allege that CitiMortgage initiated
foreclosure proceedings for any purpose other than to secure the Selmans’ debt. Alabama law is
crystal clear that a wrongful foreclosure action lies only where the power of sale is exercised for
an improper purpose. See Jackson, 90 So.3d at 172 (upholding dismissal of plaintiffs’ wrongfulforeclosure claim where plaintiffs did not allege that power of sale was exercised for any purpose
other than to secure their debt); In re Sharpe, 391 B.R. 117, 153 (Bankr. N.D. Ala. 2008)
(“Under 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.”); Ford v. Central Loan Admin., 2011 WL 4702912, *5 (S.D.
Ala. Oct. 5, 2011) (dismissing wrongful foreclosure cause of action where complaint established
that “plaintiff does not know whether a foreclosure sale has taken place” and “says nothing about

threshold.”) (footnote omitted); McClung, 2012 WL 1642209, at *4 (“To state a claim for
wrongful foreclosure, a foreclosure sale must have actually taken place; merely scheduling a
foreclosure sale is not sufficient.”).
9

The other case on which plaintiffs rely, Matthews v. Alaska Seaboard Partners
Ltd, Partnership, 2006 WL 2686932, *6 (S.D. Ala. Sept. 19, 2006), is unavailing because (i) the
quoted excerpt is pure dicta; (ii) Matthews did not purport to make a definitive statement about
the elements of wrongful foreclosure under Alabama law, but instead offered an off-the-cuff
observation about what “the law in Alabama appears” to be; (iii) the movant in Matthews cited
no authority for the proposition that completion of foreclosure is necessary to sustain a cause of
action for wrongful foreclosure; and (iv) the argument that no foreclosure sale had occurred was
presented in a reply brief and therefore deemed improper on that basis. In short, Matthews is far
too slender a reed to support plaintiffs’ position here.

-12-

any improper purpose, ill motive, or action outside the boundaries of the applicable contract”).
Both plaintiffs’ brief and their Second Amended Complaint are silent on this point.
In short, because plaintiffs’ pleading reveals that no foreclosure sale occurred and
imputes no improper motive to CitiMortgage for conducting any such foreclosure (had a sale
taken place), Count Four does not state a cognizable claim for wrongful foreclosure under
Alabama law. CitiMortgage’s Motion to Dismiss is granted as to that claim.
D.

Plaintiffs’ RESPA Claim (Count VI).

In Count Six of the Second Amended Complaint, the Selmans allege that CitiMortgage
ran afoul of the Real Estate Settlement Procedures Act (“RESPA”) in two respects. First,
plaintiffs contend that CitiMortgage violated 12 U.S.C. § 2605(g) by failing properly to manage
their escrow account. Second, they allege that CitiMortgage violated 12 U.S.C. § 2605(e) by
failing timely to respond to plaintiffs’ qualified written requests (“QWRs”). CitiMortgage has
moved for dismissal of the § 2605(e) claim, but not the § 2605(g) claim.
Section 2605(e) requires a servicer of a federally related mortgage loan to provide a
written response to a borrower’s QWR, acknowledging receipt of the request, within 20 days,
and to take further action or provide explanation or clarification within 60 days. 12 U.S.C. §
2605(e)(1)(A), (2). “A borrower may recover ‘actual damages’ if the loan servicer fails to
comply with these provisions.” Sellers v. GMAC Mortg. Group, Inc., 2008 WL 4768867, *2
(11th Cir. Nov. 3, 2008). A borrower’s recovery is not limited to actual damages; rather, the
statute provides for award of “an amount equal to the sum of … any actual damages to the
borrower as a result of the failure; and … any additional damages, as the court may allow, in the
case of a pattern or practice of noncompliance with the requirements of this section, in an
amount not to exceed $1,000.” 12 U.S.C. § 2605(f)(1)(A)-(B).
As CitiMortgage correctly points out, the trouble with the Selmans’ § 2605(e) claim is
that it adequately alleges neither actual damages nor a “pattern or practice of noncompliance”
sufficient to support eligibility for statutory damages under § 2605(f).10 The Selmans contend,

10

The Court recognizes the existence of authority bolstering CitiMortgage’s
contention that proof of actual damages is mandatory to recover on a § 2605(e) violation, and
that a § 2605(e) claim cannot stand on statutory damages alone. See, e.g., Ford v. New Century
Mortg. Corp., 797 F. Supp.2d 862, 870 (N.D. Ohio 2011) (“remedies for violations of § 2605(e)
are conditioned upon actual damages to the borrower,” such that “to state a plausible claim the
(Continued)
-13-

without explanation or elaboration, that they have alleged actual damages related to the RESPA
violations in paragraphs 35 and 54 of the Second Amended Complaint. (Doc. 53, at 13.)
Inspection of those allegations reveals otherwise. Paragraph 35 states only that CitiMortgage is
holding payments and “has continued to report negative information to credit bureaus about the
account,” without linking these facts to either (i) actual damages suffered by the Selmans, or (ii)
CitiMortgage’s failure to respond to QWRs made in March 2012 and June 2012. (Doc. 45, ¶
35.) Meanwhile, paragraph 54 states in generic terms that “[a]s a result of CitiMortgage’s
actions and inactions as alleged herein plaintiffs have been caused to pay more for homeowners
insurance, incurred the cost of the insurance forced placed by CitiMortgage, suffered damage to
their credit rating, mental anguish and mental distress.” (Id., ¶ 54.) The Second Amended
Complaint does not connect any of these broad allegations (several of which predate the QWRs)
to the alleged § 2605(e) violation, or in any way identify or suggest a direct relationship between
the two.
These allegations are insufficient to state a claim under RESPA. After all, § 2605(f)(1)
authorizes only “actual damages to the borrower as a result of the failure” to respond to the
QWR; therefore, the borrower’s actual damages must flow directly from the servicer’s lack of
timely response in order to be cognizable. See Lal v. American Home Servicing, Inc., 680 F.
Supp.2d 1218, 1223 (E.D. Cal. 2010) (“allegations made under a separate cause of action are
insufficient to sustain a RESPA claim for actual damages as they are not a direct result of the
failure to comply”).11 The Selmans have alleged no actual damages that are directly related to

plaintiff must allege actual damages arising from the violation”); but see Echeverria v. BAC
Home Loans Servicing, LP, --- F. Supp.2d ----, 2012 WL 5227015, *6 (M.D. Fla. Oct. 22, 2012)
(considering on the merits a RESPA claim that “Plaintiffs have limited … to one for statutory
damages”). This issue need not be decided here, however, because the Second Amended
Complaint does not state an adequate factual predicate to support even a claim for statutory
damages.
11

See also Marais v. Chase Home Finance, LLC, 2012 WL 4475766, *6 (S.D. Ohio
Sept. 26, 2012) (“actual damages must be pled as part of any RESPA claim,” and “any alleged
loss must clearly be related to the RESPA violation itself”); Dietz v. Beneficial Loan and Thrift
Co., 2011 WL 2412738, *5 (D. Minn. June 10, 2011) (dismissing RESPA claim where “the
Second Amended Complaint fails to state facts that would show that any damage to Plaintiffs
was attributable to Defendants’ lack of response”); Claxton v. Orlans Associates, P.C., 2010 WL
3385530, *5 (E.D. Mich. Aug. 26, 2010) (dismissing § 2605(e) claim where complaint did not
(Continued)
-14-

CitiMortgage’s alleged untimely and/or inadequate response to their QWRs. Accordingly, they
have not made a sufficient showing to state a plausible claim for relief under § 2605(e).
Nor do the Selmans save their § 2605(e) claim by obliquely stating that CitiMortgage has
a “pattern and practice of improperly supervising and training its employees,” which has caused
or allowed them to “mak[e] delinquent responses to qualified written requests from consumers.”
(Doc. 45, ¶ 81.) “To seek statutory damages under § 2605, Plaintiff must allege facts showing
that there is a pattern or practice of noncompliance with the requirements of the section.”
Correa v. BAC Home Loans Servicing LP, 2012 WL 1176701, *8 (M.D. Fla. Apr. 9, 2012).
Merely mouthing the buzzwords “pattern and practice” in a complaint does not satisfy minimum
pleading requirements because it represents a legal conclusion, and such conclusory labels are
not credited for Rule 12(b)(6) purposes. See, e.g., Chaparro v. Carnival Corp., 693 F.3d 1333,
1337 (11th Cir. 2012) (“if allegations are indeed more conclusory than factual, then the court
does not have to assume their truth”); Mamani v. Berzain, 654 F.3d 1148, 1153 (11th Cir. 2011)
(“Legal conclusions without adequate factual support are entitled to no assumption of truth.”). A
conclusory statement of a pattern or practice is just the kind of legal conclusion that fails to pass
muster under Twombly / Iqbal principles.12
Finally, plaintiffs’ suggestion that the Second Amended Complaint adequately alleges a
pattern and practice by referring to two instances in which CitiMortgage failed timely to respond
to QWRs is legally infirm. “Though there is no magic number of violations that create a ‘pattern

allege “that Plaintiffs incurred any actual damages as a result of Bank of America’s alleged
failure to timely or adequately respond to their QWR”).
12

See Lal, 680 F. Supp.2d at 1223 (E.D. Cal. 2010) (rejecting as a “stock legal
conclusion” the plaintiffs’ § 2605(e) claim where they “flatly claim a pattern of noncompliance
but state no facts” in support of same); Gilmore v. American Mortg. Network, 2012 WL
6193843, *6 (C.D. Cal. Dec. 10, 2012) (dismissing plaintiff’s RESPA claim where “plaintiff
fails to allege any facts, beyond his legal conclusion” of a pattern or practice of noncompliance);
Davis v. Greenpoint Mortg. Funding, Inc., 2011 WL 7070222, *5 (N.D. Ga. Sept. 19, 2011)
(conclusory allegations that defendant “has made it a practice” not to comply with QWRs,
coupled with a single failure to respond, “are conclusory and are insufficient to permit the
‘pattern or practice’ claim for statutory damages to survive the motion to dismiss”); Dietz, 2011
WL 2412738, at *5 n.4 (plaintiffs’ RESPA claim was not bolstered by “pattern or practice”
allegations where “Plaintiffs’ allegations regarding a pattern or practice are wholly conclusory
and insufficient to state a cause of action”).

-15-

or practice of noncompliance,’ courts have held that two violations of RESPA are insufficient to
support a claim for statutory damages.” Kapsis v. American Home Mortg. Servicing Inc., --- F.
Supp.2d ----, 2013 WL 544010, *13 (E.D.N.Y. Feb. 14, 2013); see also McLean v. GMAC
Mortg. Corp., 595 F. Supp.2d 1360, 1365-66 (S.D. Fla. 2009) (two violations of RESPA’s QWR
requirements are insufficient to support a pattern a pattern or practice of noncompliance under §
2605(f)).
For all of the foregoing reasons, the Court agrees with CitiMortgage that the § 2605(e)
portion of Count Six fails to state a claim on which relief can be granted and is therefore properly
dismissed. That said, plaintiffs will be permitted to proceed as to the portion of Count Six
alleging a violation of 12 U.S.C. § 2605(g).
E.

Plaintiffs’ Breach of Fiduciary Duty Claim (Count VII).

The Selmans’ seventh claim for relief sounds in a common-law theory of breach of
fiduciary duty. The Second Amended Complaint alleges that “CitiMortgage owes Plaintiffs an
implied fiduciary duty of fairness and good faith as to all aspects [of] handling the plaintiffs’
monies and the servicing of the mortgage agreement,” and that CitiMortgage breached this duty
by mismanaging the Selmans’ account and instituting foreclosure proceedings. (Doc. 45, ¶¶ 8384). CitiMortgage now moves for dismissal of Count Seven on the ground that it owes no
fiduciary duty to the Selmans under Alabama law.
CitiMortgage’s position relies on a substantial, unbroken line of authority supporting the
proposition that Alabama law does not recognize a general fiduciary duty running from a
mortgagee to a mortgagor. See, e.g., Forester v. Bank of America, N.A., 2012 WL 3206471, *8
(S.D. Ala. Aug. 7, 2012) (“Alabama law does not recognize a general fiduciary duty owed by a
mortgagee, like BAC, to a mortgagor, like Forester, by virtue of the mortgagee extending a
mortgage loan”).13 Plaintiffs identify no Alabama authorities deviating from this rule. More

13

See also Brabham v. American Nat’l Bank of Union Springs, 689 So.2d 82, 88
(Ala.Civ.App. 1996) (“The gist of the Brabhams’ argument is that the supreme court has tacitly
recognized that a mortgagee owes a fiduciary duty to a mortgagor. We do not agree.”); Hundley
v. Green Tree Servicing, LLC, 2013 WL 365600, *6 (N.D. Ala. Jan. 24, 2013) (“Under Alabama
law, no fiduciary relationship exists between a mortgagee and mortgagor.”); Shewmake v.
Anderson, 2012 WL 5378942, *5 (N.D. Ala. Oct. 30, 2012) (“Under Alabama law, the
relationship of a lender to a borrower generally does not impose a fiduciary duty on the lender.
… This general rule also applies to the relationship between a mortgagee and mortgagor”)
(Continued)
-16-

importantly, they offer no rationale why Alabama law would treat mortgage servicers differently
than mortgagees for purposes of this principle. The Selmans advance no facts showing any kind
of special relationship between them and CitiMortgage, much less any legal authority or
persuasive reason to believe that Alabama law would impute a fiduciary duty to a loan servicer
such as CitiMortgage even as it steadfastly refuses to impose such a duty on a mortgagee.
Abundant authority from across the country is to the contrary.14
In arguing otherwise, plaintiffs assemble a hodgepodge of cases in which courts in
specific circumstances have found that an escrow agent may have a fiduciary duty to parties to
an escrow account. None of those authorities appear to have arisen in a mortgage loan servicer
context. That special relationships yielding a fiduciary duty may arise in conjunction with
particular arrangements in which an entity holds funds for the benefit of another in no way
supports a general rule (contradicted by the numerous authorities set forth supra) that mortgage
servicers owe fiduciary duties to mortgagors as a matter of course. For example, plaintiffs point

(citations omitted); In re Small, 2012 WL 2132386, *6 (Bankr. S.D. Ala. June 12, 2012)
(“Alabama law does not recognize a general fiduciary duty owed by a mortgagee to a
mortgagor.”).
14

See, e.g., Leal v. Bank of New York Mellon, 2012 WL 5465978, *14 (S.D. Tex.
Oct. 22, 2012) (“a mortgage servicer owes no fiduciary duty to its clients”); Menlove v. Bank of
America N.A., 2012 WL 4356367, *3 (D. Utah Sept. 24, 2012) (“To the extent Plaintiffs allege
Defendants owed them a fiduciary duty merely because of their status as a loan servicer or
lender, such claim fails as a matter of law.”); Goyal v. Capital One, N.A., 2012 WL 3878114, *2
(N.D. Cal. Sept. 6, 2012) (“courts have held that loan services [sic] have no fiduciary duty when
their involvement does not exceed their conventional role as a loan servicer”); Aguilar v.
Investaid Corp., 2012 WL 2590356, *6 (D. Nev. July 3, 2012) (“this claim fails on its face
because it is well-settled that lenders and servicers owe no fiduciary duties to mortgage
borrowers”); Jean v. American Home Mortg. Servicing, Inc., 2012 WL 1110090, *4 (N.D. Ga.
Mar. 30, 2012) (“No rational trier of fact could find that Defendant, as a loan servicer and agent
for the owner of the Loan, owed Plaintiff any fiduciary duty and it did not owe her a fiduciary
duty as a matter of law.”); Breedlove v. Wells Fargo Bank, N.A., 2010 WL 3000012, *2 (D. Ariz.
July 28, 2010) (“It is well-settled in Arizona that neither a mortgage lender nor its servicer owes
a fiduciary duty to borrowers.”); Corcoran v. Saxon Mortg. Services, Inc., 2010 WL 2106179, *4
(D. Mass. May 24, 2010) (“under Massachusetts law, neither a mortgage holder nor its servicer
owes a fiduciary duty to a borrower”); Physicians Mut. Ins. Co. v. Greystone Servicing Corp.,
2009 WL 855648, *10 (S.D.N.Y. Mar. 25, 2009) (defendant’s “role as servicer and holder of the
mortgage notes did not create fiduciary duties to plaintiffs for it”).

-17-

to Green Tree Acceptance, Inc. v. Tunstall, 645 So.2d 1384 (Ala. 1994), but that case is
obviously distinguishable on its facts. In Tunstall, a mobile home lender received and set aside
specific funds in the amount of $1,200 earmarked for installation of a heater and air conditioner
for the mobile home; however, the lender never told the purchaser that it had the funds, never
delivered the funds to him, and never purchased or installed the air conditioning unit. Under
those specific, unusual circumstances, the Alabama Supreme Court opined that “[a] jury could
find that, by withholding the $1200 to ensure that the heating and air conditioning system was
installed, Green Tree created a trust in that amount and imposed on itself a duty to act for
Tunstall’s benefit.” Id. at 1387. Nothing in Tunstall suggests that its holding is generally
transferable to the run-of-the-mill mortgage loan servicer context, or that the court intended to
create broad fiduciary duties in the loan context extending beyond the narrowly circumscribed
factual circumstances before it.
For all of the foregoing reasons, the Court agrees with CitiMortgage that Count Seven
fails to state a cognizable claim for breach of fiduciary duty under Alabama law, inasmuch as no
fiduciary relationship exists between mortgagees and mortgagors under Alabama law, numerous
courts around the country have extended this principle to embrace mortgage servicers, and
plaintiffs identify no circumstances here that might give rise to a special relationship of trust and
confidence, rather than a conventional loan servicer / borrower relationship, between themselves
and CitiMortgage. Count Seven does not state a claim and will be dismissed.
F.

Plaintiffs’ TILA Rescission Claim (Count IX).

Count Nine of the Second Amended Complaint is a statutory claim for rescission of the
Mortgage. The Truth in Lending Act (“TILA”) provides that, in any consumer credit transaction
in which the borrower provides a security interest in his principal dwelling, “the obligor shall
have the right to rescind the transaction until midnight of the third business day following the
consummation of the transaction or the delivery of the information and rescission forms required
under this section together with a statement containing the material disclosures required under
this subchapter, whichever is later.” 15 U.S.C. § 1635(a). The Selmans’ pleading alleges that,
when the original loan transaction closed on March 20, 2009, the lender failed to deliver to them

-18-

the correct number of copies of TILA disclosures and notices of cancellation rights.15 The
Second Amended Complaint further alleges that the lender understated the finance charge
because certain loan-related fees “were padded and not bona fide or reasonable.” (Doc. 45, ¶
15.) On the basis of these purported technical infirmities, the pleading alleges, on March 19,
2012, the Selmans “served a notice of cancelation of their mortgage and CitiMortgage has failed
and refused to take the steps necessary to recognize their rescission.” (Doc. 45, ¶ 19.)
Plaintiffs endeavor to parlay these factual allegations into the TILA rescission cause of
action found at Count Nine. In that regard, they request an award from CitiMortgage and Fannie
Mae that includes the following: (i) statutory and actual damages; (ii) rescission of the loan; and
(iii) return of all money paid by the Selmans in connection with the mortgage transaction. (Doc.
45, at 19.)
Both defendants named in Count Nine argue that dismissal of that cause of action is
warranted on limitations grounds.16 The text of TILA is clear that “[a]n obligor’s right of
rescission shall expire three years after the date of consummation of the transaction …
notwithstanding the fact that the information and forms required under this section or any other
disclosures required under this part have not been delivered to the obligor.” 15 U.S.C. § 1635(f).
Case law has construed this three-year period as a binding statute of repose that cannot be
15

According to the Second Amended Complaint, “[u]nder Regulation Z
§1026.17(d) each of the Selmans was entitled to their own copy of the Truth-in-Lending
disclosure and at the loan closing only one copy was provided. Furthermore, they were each
entitled to 2 copies of their Notice of Right-to-Cancel the transaction (a total of 4 copies),
however, at the loan closing, they only received 2 copies.” (Doc. 45, ¶ 14.)
16

In point of fact, CitiMortgage’s Rule 12(b)(6) Motion and brief were silent as to
Count Nine; however, Fannie Mae’s Motion and brief squarely advanced the limitations defense
as a basis for dismissal of that claim. (Doc. 38, at 8-11.) Moreover, contemporaneously with
Fannie Mae’s filing, CitiMortgage (which is represented by the same counsel as Fannie Mae)
filed a “Motion to Deem Incorporated in its Partial Motion to Dismiss Amended Complaint the
Rescission Argument Advanced by Federal National Mortgage Association” (doc. 39). Because
of the court-authorized delay to accommodate consolidated briefing of all Rule 12(b) motions,
plaintiffs were not prejudiced or disadvantaged by CitiMortgage’s after-the-fact adoption of
Fannie Mae’s assertion that Count Nine is time-barred. All parties had a full and fair opportunity
to be heard on this limitations issue. Accordingly, the Court in its discretion grants
CitiMortgage’s Motion to Deem Incorporated the Rescission Argument (doc. 39), and will
consider the timeliness of Count Nine with respect to both defendants.

-19-

equitably tolled, and has barred plaintiffs from rescinding a loan transaction under § 1635 where
suit is not filed within the three-year period. See, e.g., Beach v. Ocwen Federal Bank, 523 U.S.
410, 419, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998) (TILA “permits no federal right to rescind,
defensively or otherwise, after the 3-year period of § 1635(f) has run”).17
Defendants’ point is simple: The express allegations of the Second Amended Complaint
show that the challenged mortgage loan transaction closed on March 20, 2009. As such, the
Selmans’ three-year TILA rescission period under § 1635(f) expired on or about March 19,
2012; however, they did not file their Complaint until July 12, 2012, several months after the
right to rescind had been extinguished as a matter of law.
The Selmans’ response effectively rebuts none of these points. Instead, plaintiffs’ brief
takes up a different matter, to-wit: That plaintiffs had one year from the March 2012 exercise of
rescission rights to file a TILA cause of action for damages based on defendants’ inadequate
response to their notice of rescission. (Doc. 53, at 20-21.) But a claim for TILA rescission of a
mortgage loan and a claim for TILA damages arising from a lender’s refusal to rescind a loan are
conceptually distinct. See, e.g., Frazile v. EMC Mortg. Corp., 2010 WL 2331429, *4 (11th Cir.
17

See also Boone v. JP Morgan Chase Bank, 2011 WL 5965788, *3 (11th Cir. Nov.
30, 2011) (affirming Rule 12(b)(6) dismissal of TILA rescission claim where plaintiff filed
lawsuit almost four years after loan modification, where TILA borrower’s “right of rescission
expires three years after the consummation of the transaction”); Sampson v. Washington Mut.
Bank, 2011 WL 4584780, *1 n.3 (11th Cir. Oct. 5, 2011) (TILA’s “three-year statute of repose
cannot be equitably tolled … and thus bars Sampson’s [rescission] claim, which was brought
nearly five years after the alleged TILA violation occurred”); Williams v. Wells Fargo Home
Mortg., Inc., 2011 WL 395978, *3 (3rd Cir. Feb. 8, 2011) (“consistent with § 1635(f), a legal
action to enforce the right must be filed within the three-year period or the right will be
completely extinguished”) (citation and internal marks omitted); Miguel v. Country Funding
Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) (“section 1635(f) represents an ‘absolute limitation on
rescission actions’ which bars any claims filed more than three years after the consummation of
the transaction”); Bialek v. Vanguard Funding, LLC, 2010 WL 4342066, *3 (M.D. Fla. Oct. 27,
2010) (“Because Bialek’s right to rescind terminated before she filed this suit, these counts are
clearly barred.”); Chevy Chase Bank, F.S.B. v. Carrington, 2010 WL 745771, *2 (M.D. Fla. Mar.
1, 2010) (“TILA plaintiffs must bring their rescission action within the three-year period set forth
in” § 1635(f)); McMillian v. AMC Mortg. Services, Inc., 560 F. Supp.2d 1210, 1215 n.8 (S.D.
Ala. 2008) (“In the wake of Beach, a formidable line of federal decisions has reiterated that
rescission claims under § 1635(f) are not subject to equitable tolling.”); Wilson v. JPMorgan
Chase Bank, NA, 2010 WL 2574032, *7 (E.D. Cal. June 25, 2010) (“if the borrower files his or
her suit over three years from the date of a loan’s consummation, a court is powerless to grant
rescission”).

-20-

June 11, 2010) (when a creditor refuses to act on a borrower’s timely exercise of a valid right to
rescission, such omission “constitutes a separate violation of TILA, actionable under § 1640”
and subject to its own one-year limitations period); Bialek v. Vanguard Funding, LLC, 2010 WL
4342066, *3 (M.D. Fla. Oct. 27, 2010) (recognizing and explaining distinction). The net result is
that the parties effectively talk past each other in their respective briefs. Defendants do not
appear to be contending in their Rule 12(b) motions that the Selmans’ TILA claim for damages
arising from CitiMortgage’s and Fannie Mae’s refusal to honor plaintiffs’ timely notice of
rescission is time-barred and should be dismissed. (To the extent that defendants are so
contending, they are mistaken.) Rather, defendants’ position is that the Selmans’ claim for TILA
rescission is barred by the three-year statute of repose. Meanwhile, plaintiffs have advanced no
argument and cited no authority that a claim for rescission itself may survive if filed outside the
three-year § 1635(f) period, but have instead focused their argument on the timeliness of their
damages claim arising from defendants’ refusal to rescind the loan.
A great deal of the confusion in the briefing on this point appears to stem from Count
Nine’s “hybrid” status. Under a fair reading of the Second Amended Complaint, Count Nine
requests both actual and statutory damages under 15 U.S.C. § 1640(a) (i.e., damages arising from
defendants’ failure and refusal to rescind the transaction in March 2012 upon request from
plaintiffs) and rescission itself. The latter portion of the claim is time-barred pursuant to the
foregoing authorities, but the former is not. Accordingly, CitiMortgage’s and Fannie Mae’s Rule
12(b) motions will be granted in part, and denied in part concerning Count Nine. The portion
of Count Nine seeking rescission of the loan is dismissed as untimely under TILA’s three-year
statute of repose, but the Selmans may proceed as to the portion of Count Nine seeking money
damages for defendants’ refusal to rescind the loan in March 2012 upon timely notice of same by
the Selmans.
G.

Plaintiffs’ Unjust Enrichment Claim (Count X).

The Second Amended Complaint purports to articulate a claim under Alabama law for
unjust enrichment against defendants CitiMortgage and ASIC. In particular, Count Ten alleges
that these defendants’ actions “in over-insuring Plaintiffs’ property enable these defendants to
reap extra profits, in the form of premiums, kickbacks and commissions, for their own benefit to
which they not [sic] entitled,” with the result being that “the plaintiffs have been injured and
damaged and these defendants have been unjustly enriched.” (Doc. 45, ¶ 93.)

-21-

Defendants seek dismissal of Count Ten on a variety of legal grounds. It is sufficient for
purposes of the pending Rule 12(b)(6) Motions to consider their contention that no cause of
action for unjust enrichment is cognizable where, as here, there is an express contract between
the parties. Considerable Alabama decisional authority supports this principle.18 Movants
correctly point out that the Second Amended Complaint alleges (and indeed, relies on) the
existence of (i) an express written mortgage agreement delineating the rights and obligations of
CitiMortgage and the Selmans, and (ii) an express written insurance contract delineating the
rights and obligations of ASIC and the Selmans. Thus, both CitiMortgage and ASIC have a
compelling argument under Alabama law that express written agreements concerning the same
subject matter as the implicit contract underlying the Selmans’ unjust enrichment cause of action
are fatal to that cause of action, as a matter of law.
Plaintiffs do not respond to this facially meritorious objection. They offer no basis for
turning aside CitiMortgage’s and ASIC’s well-grounded legal argument that claims for unjust
enrichment cannot lie in the presence of express agreements covering the same subject matter.
Accordingly, the Motions to Dismiss will be granted as to Count Ten.19
18

See, e.g., Kennedy v. Polar-BEK & Baker Wildwood Partnership, 682 So.2d
443, 447 (Ala. 1996) (“This Court has recognized that where an express contract exists between
two parties, the law generally will not recognize an implied contract regarding the same subject
matter.”); Patans Ventures, Inc. v. Williams, 959 So.2d 115, 117 n.1 (Ala.Civ.App. 2006) (citing
learned treatise for proposition that “an action for unjust enrichment cannot lie in the face of an
express contract”); Joiner v. USAA Cas. Ins. Co., 2013 WL 84935, *1 n.1 (M.D. Ala. Jan. 8,
2013) (“the unjust enrichment claim is due to be dismissed for failure to state a claim, as there is
no dispute that an insurance contract existed and a claim based on an implied contract will not lie
where there is an express contract”); Gould v. Transamerica Life Ins. Co., 2012 WL 512667, *3
(S.D. Ala. Feb. 15, 2012) (“it is not possible to have a viable unjust enrichment claim when there
is an express contract as to the same subject matter”); White v. Microsoft Corp., 454 F. Supp.2d
1118, 1132-33 (S.D. Ala. 2006) (exploring nature and status of unjust enrichment claims under
Alabama law and explaining why they are incompatible with an express contract addressing the
same subject matter).
19

In so deciding, the Court does not turn a blind eye to the accepted practice of
pleading in the alternative, nor does the Court ignore authorities finding that express-contract and
unjust-enrichment claims can coexist at the Rule 12(b) stage under certain circumstances. That
reasoning does not save Count Ten because this is not a case in which the existence of an express
contract is a disputed question of fact, such that alternative pleading of express- and impliedcontract theories of liability would be permissible. Cf. Kennedy, 682 So.2d at 447 (“the law may
recognize an implied contract where the existence of an express contract on the same subject
(Continued)
-22-

H.

Plaintiffs’ Conversion Claim (Count XI).

In Count Eleven of the Second Amended Complaint, the Selmans bring an Alabama
claim of conversion against CitiMortgage. Undergirding that claim is plaintiffs’ allegation that
“CitiMortgage received funds belonging to Plaintiffs in the amount of at least the monthly
payments made in 2012 and, instead of applying them to Plaintiffs’ mortgage, converted them to
its own use.” (Doc. 34, ¶ 97.)
Alabama law sharply curtails the use of a conversion theory where the item being
converted is money. Indeed, “[t]he Alabama Supreme Court has repeatedly held that an action
for the conversion of money is improper unless there is earmarked money or specific money
capable of identification.” Edwards v. Prime, Inc., 602 F.3d 1276, 1303 (11th Cir. 2010);
Hensley v. Poole, 910 So.2d 96, 101 (Ala. 2005) (“This Court has held repeatedly that generally,
an action will not lie for the conversion of money unless the money at issue is capable of
identification.”) (citations and internal marks omitted). “Money is specific and capable of
identification where, for example, it is money in a bag, coins or notes that have been entrusted to
the defendant’s care, or funds that have otherwise been sequestered, and where there is an
obligation to keep intact and deliver this specific money rather than to merely deliver a certain
sum.” Edwards, 602 F.3d at 1303 (citations and internal quotation marks omitted); see also
Hensley, 910 So.2d at 101 (“Only when money is ‘earmarked’ or otherwise identifiable, such as
enclosed in a container like a bag or chest, does an action lie for conversion of money.”).
“Identifiable amounts of money are one thing, specific money capable of identification is
another. … [A]n action for the conversion of money requires the money itself, not just the

matter is not proven”); Sirmon v. Wyndham Vacation Resorts, Inc., 2012 WL 4341819, *6 (N.D.
Ala. Sept. 18, 2012) (“Although Plaintiffs may ultimately be incapable of recovering quasicontractual damages on an unjust enrichment theory, this Court will not prevent them from
developing the claim through the discovery process.”). Here, the Selmans’ pleading specifically
alleges the existence of express contracts with CitiMortgage and ASIC covering the same subject
matter as the alleged implied contract underlying Count Ten. More importantly, CitiMortgage
and ASIC do not dispute the existence or validity of those agreements; thus, there appears to be
no question that these express contracts govern the relevant relationships, thereby obviating the
need to invoke the old equitable remedy of unjust enrichment to fill in gaps in the name of
equity. At any rate, the Selmans have never suggested that Count Ten would pass muster under
a pleading-in-the-alternative rationale anyway, so this question is not even on the table.

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amount of it, to be specific and capable of identification.” Edwards, 602 F.3d at 1303 (citations
omitted).20
As CitiMortgage correctly observes, the Second Amended Complaint does not allege
facts showing that the converted money was specific and capable of identification, under
Alabama law. By the plain allegations of the pleading, “[c]learly, there is no identifiable coin or
bill, and nothing that has been sealed up in a particular letter, ‘wrapped up to itself,’ or placed in
a bag or chest. There is no evidence that this money was placed in a special account. It is
merely money which was not paid ….” Lewis v. Fowler, 479 So.2d 725, 727 (Ala. 1985). That
is simply not good enough to state an Alabama claim for conversion. Absent factual allegations
that the money in question was segregated, sequestered or identifiable in some specific way, the
Selmans cannot maintain a conversion claim against CitiMortgage based simply on that
defendant’s failure to deliver a certain sum that plaintiffs contend should have been delivered.
See, e.g., Johnson v. Life Ins. Co. of Alabama, 581 So.2d 438, 443 (Ala. 1991) (“an action
alleging conversion of money lies only where there is an obligation to deliver the specific pieces
of money in question or money that has been specifically sequestered, rather than a mere
obligation to deliver a certain sum”); Lewis, 479 So.2d at 727 (“When there is no obligation to
return the identical money, but only a relationship of debtor or creditor, an action for conversion
of funds representing the indebtedness will not lie against the debtor.”).
Count Eleven fails to allege facts showing that CitiMortgage converted “specific pieces
of money” that it was obligated to pay for the Selmans’ benefit; therefore, that cause of action is
properly dismissed for failure to state a claim under Alabama law.21
20

To put it in concrete terms, Alabama law recognizes a conversion claim for
money only in circumstances like the following: A gives B a $100 bill marked with a red “x”
and instructs B to give that particular bill to C. B pockets the $100 bill and never gives it to C.
A may properly sustain a conversion claim against B under Alabama law. If, however, A gives
B a check for $100 and tells B to give that amount to C, but B never does so, no conversion
claim will lie because that claim would relate only to identifiable amounts of money, rather than
specific money capable of identification. Our case is far closer to the latter scenario than to the
former.
21

Plaintiffs’ counterargument is that “the funds were earmarked to be paid either
against the outstanding balance of the loan or for their taxes and insurance.” (Doc. 53, at 16.)
But there are no allegations that plaintiffs’ funds were sealed in a bag or chest or stored in a
special account, much less that the bills were physically marked in some way. Stated differently,
(Continued)
-24-

I.

Plaintiffs’ TILA Section 1639f Claim (Count XIII).

In Count Thirteen, the Selmans assert that CitiMortgage and Fannie Mae breached TILA
obligations under 15 U.S.C. § 1639f to credit their account with monthly payments in a prompt
fashion.22 According to the Second Amended Complaint, Fannie Mae “is liable for damages for
each payment that CitiMortgage did not properly apply” prior to the March 29, 2012 assignment
of the loan from Fannie Mae to CitiMortgage. (Doc. 45, ¶ 113.) Plaintiffs likewise contend that
“CitiMortgage is liable for not applying payments made after the assignment.” (Id.)
Defendants allege, and plaintiffs do not contest, that any civil action the Selmans might
bring for violations of § 1639f must proceed under 15 U.S.C. § 1640(a), which is TILA’s civil
liability provision. That section reads, in pertinent part, as follows: “[A]ny creditor who fails to
comply with any requirement imposed under this part … with respect to any person is liable to
such person.” 15 U.S.C. § 1640(a) (emphasis added). “Creditor” is a defined term in TILA, as
follows: “The term ‘creditor’ refers only to a person who both (1) regularly extends …
consumer credit …, and (2) is the person to whom the debt arising from the consumer credit
transaction is initially payable on the face of the evidence of indebtedness.” 15 U.S.C. §
1602(g). Fannie Mae and CitiMortgage both argue that they do not meet the statutory definition
of “creditor” because they are not “the person to whom the debt arising from the consumer credit

the Selmans’ claim is not that CitiMortgage failed to deliver particular bills or pieces of currency
to their hazard insurer, but that CitiMortgage failed to pay an identifiable sum on the Selmans’
behalf. CitiMortgage was supposed to pay a specific sum to the Selmans’ insurer, not specific
bills or monies. For all the plaintiffs and the hazard insurer cared, CitiMortgage could have paid
over any bills to the insurer, as long as it paid the proper amount. Nothing about this claim
relates to segregated, sequestered bills or currency in CitiMortgage’s custody; therefore, it does
not satisfy the legal prerequisites for a viable conversion claim under the idiosyncrasies of
Alabama law.
22

That section reads, in part, as follows: “In connection with a consumer credit
transaction secured by a consumer’s principal dwelling, no servicer shall fail to credit a payment
to the consumer’s loan account as of the date of receipt, except when a delay in crediting does
not result in any charge to the consumer or in the reporting of negative information to a
consumer reporting agency.” 15 U.S.C. § 1639f(a).

-25-

transaction is initially payable on the face of the evidence of indebtedness.” That “person” is
RBC Bank (USA), which is not a party to this action.23
Defendants’ position with respect to Count Thirteen is straightforward: Section 1640(a)
of TILA authorizes civil actions to be filed only against “creditors,” which are defined as the
person to whom the debt arising from the Selmans’ mortgage loan was initially payable on the
face of the Mortgage. Neither Fannie Mae nor CitiMortgage is that person; therefore, they
reason, they cannot be “creditors” within the meaning of § 1640(a) and cannot be liable under
TILA for a violation of § 1639f. In response, plaintiffs do not rebut these arguments. They do
not show that § 1640(a) can reasonably be construed as providing for servicer liability. They do
not show that CitiMortgage or Fannie Mae reasonably fall within the statutory definition of
“creditor” for purposes of § 1640(a). And they do not identify any other provision of TILA that
might reasonably be viewed as giving rise to a private right of action for violations of § 1639f.24
Under the circumstances, the Motions to Dismiss of CitiMortgage and Fannie Mae will be
granted with respect to Count Thirteen, and that cause of action will be dismissed.

23

The Second Amended Complaint does not name the person to whom the debt
arising from the consumer credit transaction is initially payable on the face of the Mortgage, nor
is a copy of the Mortgage appended thereto. Nonetheless, applicable law provides that federal
courts evaluating Rule 12(b)(6) motions may consider an exhibit “in cases in which a plaintiff
refers to a document in its complaint, the document is central to its claim, its contents are not in
dispute, and the defendant attaches the document to its motion to dismiss.” Financial Sec.
Assur., Inc. v. Stephens, Inc., 500 F.3d 1276, 1284 (11th Cir. 2007). All of these requirements are
satisfied here; therefore, the Court properly notes that the initial payee of the Mortgage was RBC
Bank (USA), not Fannie Mae and not CitiMortgage. (See doc. 17, Exh. A, at 1 & ¶ 1.)
24

At best, plaintiffs have offered a vague, shadowy allegation that liability for the §
1639f violation can be pinned on CitiMortgage and Fannie Mae by operation of § 1641. See
Doc. 53, at 20 (“Since CitiMortgage and Fannie Mae were the creditor –assignee during those
time periods they are both libel [sic] for TILA damages pursuant to TILA section 1641.”) But
plaintiffs have not explained, and the Court does not perceive, how the statutory prerequisites for
assignee liability under § 1641(a) are or might be satisfied here. This Court cannot and will not
fill in the blanks for an argument that plaintiffs have not developed. See, e.g., M.R. v. Board of
School Com’rs of Mobile County, 2012 WL 3778283, *4 n.5 (S.D. Ala. Aug. 30, 2012) (“Federal
courts do not develop parties’ legal arguments for them.”); York v. Day Transfer Co., 525 F.
Supp.2d 289, 301 n.10 (D.R.I. 2007) (“It is not enough merely to mention a possible argument in
the most skeletal way, leaving the court to do counsel’s work, create the ossature for the
argument, and put flesh on its bones.”) (citation omitted).

-26-

III.

Conclusion.
For all of the foregoing reasons, it is ordered as follows:
1.

The Motions to Dismiss (docs. 16, 37, 49) are granted in part, and denied in
part;

2.

The following claims and causes of action set forth in the Second Amended
Complaint are dismissed without prejudice: (i) all claims seeking relief for the
force-placement of hazard insurance on the Selmans’ residence, or for alleged
excessive coverage amounts, commissions or kickbacks in connection with same;
(ii) Count One (negligence); (iii) Count Two (wantonness); (iv) Count Four
(wrongful foreclosure); (v) the portion of Count Six (RESPA) alleging a violation
of 12 US.C. § 2605(e); (vi) Count Seven (breach of fiduciary duty); (vii) Count
Eight (libel/slander); (viii) the portion of Count Nine (TILA rescission) seeking
rescission of the mortgage loan; (ix) Count Ten (unjust enrichment); (x) Count
Eleven (conversion); (xi) Count Twelve (fraud/conspiracy); and (xii) Count
Thirteen (TILA § 1639f);25

3.

CitiMortgage’s Motion to Deem Incorporated (doc. 39) is granted;

4.

As a result of these rulings, plaintiffs no longer have any pending claims or causes
of action against defendant American Security Insurance Company. The Clerk of
Court is directed to terminate ASIC as a party defendant in this matter;

5.

This action will proceed with respect to the following claims asserted by the
Selmans against defendant CitiMortgage, Inc.: (i) Count Three (breach of
mortgage agreement), except for allegations relating to force-placed insurance;
(ii) Count Five (declaratory/injunctive relief), except for allegations relating to
force-placed insurance; (iii) the portion of Count Six (RESPA) alleging a
violation of 12 U.S.C. § 2605(g); (iv) the portion of Count Nine (TILA rescission)
seeking damages for CitiMortgage’s failure and refusal to rescind the mortgage

25

Defendants have asked that these claims be dismissed with prejudice; however,
the Court cannot at this time definitively foreclose the possibility that the Selmans may be able to
replead certain of these causes of action in a manner that does state an actionable claim. For that
reason, dismissal is without prejudice.

-27-

loan; and (v) Count Fourteen (FDCPA). The above-described portion of Count
Nine also remains active as to defendant Federal National Mortgage Association;
6.

The remaining defendants must file answers to the Second Amended Complaint
on or before March 19, 2013; and

7.

Pursuant to Magistrate Judge Bivins’ Endorsed Order (doc. 42) entered on
October 11, 2012, the parties must meet and file their joint Rule 26(f) report
within seven days of this Order, or on or before March 12, 2013.

DONE and ORDERED this 5th day of March, 2013.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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