OCWEN LOAN SERVICING LLC v. PHARIS et al

Filing 45

ORDER denying 24 Motion to Dismiss for Failure to State a Claim; denying 25 Motion to Dismiss; denying 9 Motion to Dismiss Complaint; denying 9 Motion to Dismiss for Lack of Jurisdiction; denying 17 Motion to Dismiss Complaint. Ordered by US DISTRICT JUDGE W LOUIS SANDS on 9/29/2015. (bcl)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ALBANY DIVISION
OCWEN LOAN SERVICING, LLC,
Plaintiff,
v.
MONROE PHARIS and
FIRST NATIONAL BANK OF
DECATUR COUNTY,
Defendants.

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CASE NO.: 1:14-CV-158 (WLS)
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ORDER

Presently before the Court is Defendant First National Bank of Decatur County’s
Motion to Dismiss for lack of subject matter jurisdiction (Doc. 9), Defendant Monroe
Pharis’s first Motion to Dismiss (Doc. 17), Defendant Pharis’s Motion to Dismiss for failure
to state a claim (Doc. 24), and Defendant First National Bank of Decatur County’s Motion
to Dismiss for failure to state a claim (Doc. 25). The Court will consider all of the pending
motions at this time.
FACTUAL & PROCEDURAL BACKGROUND
On April 9, 2007, Rhonda Hall owned real property located at 1407 Woodland Drive
(“property”), Bainbridge, Georgia and secured a loan from JP Morgan Chase Bank, N.A
(“Chase”) in the original principal amount of $61,610 in exchange for a secured interest in
the property. (Doc. 1 at ¶ 7.) On May 23, 2008, Ronnie Hall acting as attorney for Rhonda
Hall secured a loan from First National Bank of Decatur County. (Id. at ¶ 12.) In exchange
for First National Bank of Decatur County’s loan, they were to be “secured by [a] second
lien security deed” on the property. (Id. at ¶¶ 12-14.) On May 21, 2008, First National Bank
of Decatur County filed their security deed. On June 9, 2008, Rhonda Hall obtained a
security deed from GMAC Loan for $100,000 in exchanged for a security deed on the
property. (Id. at ¶ 19.) The GMAC Loan was intended to satisfy the Chase loan and it was

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the understanding and expectation of GMAC that they would obtain a first priority security
interest. (Id. at ¶ 20.) Because First National Bank of Decatur County filed their security
interest only fourteen days prior to GMAC obtaining their security interest, Plaintiff claims
that a previous title search did not reveal First National Bank of Decatur County’s security
interest and GMAC was not put on notice of First National Bank of Decatur County’s
interest in the property from Rhonda Hall. (Id. at ¶ 23.) Plaintiff acknowledges that since
First National Bank of Decatur County recorded their security deed prior to GMAC’s
security deed the “real estate records of Decatur County, Georgia do not accurately reflect
the intended first priority position of the GMAC Security Deed.” (Id. at ¶ 28.)
On December 8, 2010, First National Bank of Decatur County foreclosed on the
property owned by Rhonda Hall. (Id. at ¶ 30.) The property was purchased by Monroe
Pharis, the father of Rhonda Hall, for $57,462.78. (Id. at ¶¶ 32, 36.) Plaintiff claims Pharis
purchased the property for his daughter, Rhonda Hall. During the foreclosure sale, both
Pharis and First National Bank of Decatur County had “constructive notice of all
encumbrances of record against the [p]roperty, including the GMAC Security Deed.” (Id. at
¶ 39.) 1 On July 20, 2011, Plaintiff became the holder of the GMAC loan and security deed
by assignment. (Id. at ¶ 45; Doc. 1-11.) Plaintiff claims that it is their belief that Rhonda Hall
filed for bankruptcy, thus discharging her indebtedness with the property thereafter. (Doc. 1
at ¶ 46.)
On October 20, 2014, Plaintiff Ocwen Loan Servicing, LLC initiated the abovecaptioned action by filing a complaint against Defendants Monroe Pharis and First National
Bank of Decatur County. (Doc. 1.) Plaintiff contends that they are entitled to a declaratory
judgment against Defendants, that pursuant to the doctrine of equitable subrogation Plaintiff
took a priority interest in the property at issue, and that Defendants were unjustly enriched.
(Id.) On November 18, 2014, Defendant First National Bank of Decatur County filed a
Motion to Dismiss Plaintiff’s Complaint for lack of subject matter jurisdiction. (Doc. 9.) On
The Court notes for the record, as noted by Plaintiff, that GMAC initiated state court proceedings
addressing similar issues in this case but those issues were not resolved. According to Plaintiff, and as
supported by the record, the Georgia Court of Appeals found that fact issues remain as to whether GMAC
could rely on equitable subrogation and unjust enrichment as available remedies. GMAC Mortgage, LLC. v.
Pharis. 781 S.E.2d 480 (Ga. Ct. App. 2014). After the Georgia Court of Appeals decision, GMAC dismissed
all claims brought in state court with prejudice. (Doc. 1 at 16, fn 1.)
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November 19, 2014, Defendant First National Bank of Decatur County answered Plaintiff’s
Complaint. (Doc. 10.) On December 2, 2014, Defendant Monroe Pharis answered Plaintiff’s
Complaint and filed a crossclaim against First National Bank of Decatur County. (Doc. 13.)
On December 22, 2014, Defendant Monroe Pharis filed his first Motion to Dismiss
Plaintiff’s Complaint. (Doc. 22.) On February 12, 2015, Defendant Monroe Pharis filed a
Motion to Dismiss for failure to state a claim against Plaintiff. (Doc. 24.) On February 16,
2015, Defendant First National Bank of Decatur County filed a Motion to Dismiss for
failure to state a claim as well. (Doc. 25.)
DISCUSSION
Defendants have both brought several motions to dismiss. The Court will address the
first motion to dismiss (Docs. 9, 17) filed by each Defendant separately and then consider
both of Defendants’ motions to dismiss for failure to state a claim together. (Docs. 24, 26.)
I. First National Bank of Decatur County’s First Motion to Dismiss (Doc. 9)
Defendant First National Bank of Decatur County (“First National Bank”) contends
Plaintiff’s Complaint should be dismissed pursuant to Federal Rule of Civil Procedure
12(b)1. Specifically, First National Bank argues the amount in controversy in this case does
not exceed $75,000 and as a result, this Court does not have subject matter jurisdiction.
Federal courts are courts of limited jurisdiction. A plaintiff must affirmatively allege in his
complaint the existence of jurisdiction and facts demonstrating its existence. Beavers v. A.O.
Smith Elec. Prods. Co., 265 F. App’x 772, 777 (11th Cir. 2008) (citing Morrison v. Allstate
Indemnity Co., 228 F.3d 1255 (11th Cir. 2000)); see also Fed. R. Civ. P 8(a)(1) (“A pleading that
states a claim for relief must include . . . a short and plain statement of the grounds for the
court’s jurisdiction . . . .”). A plaintiff may do so by alleging one of two types of jurisdiction:
(1) federal question jurisdiction, or (2) diversity of citizenship jurisdiction. 28 U.S.C. §§
1331-32. Plaintiff’s complaint asserts that this Court has jurisdiction through diversity of
citizenship.
Once a complaint is filed, “[a] defendant can move to dismiss a complaint under Rule
12(b)(1) for lack of subject matter jurisdiction by either facial or factual attack.” Stalley v.

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Orlando Reg’l Healthcare Sys., Inc., 524 F.3d 1229, 1232 (11th Cir. 2008). “A ‘facial attack’ on
the complaint ‘require[s] the court merely to look and see if [the] plaintiff has sufficiently
alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as
true for the purposes of the motion.’” McElmurray v. Consol. Gov’t of Augusta-Richmond Cty,
501 F.3d 1244, 1251 (11th Cir. 2007) (quoting Lawrence v. Dunbar, 919 F.3d 1525, 1529 (11th
Cir. 1990)); see also Carmichael v. Kellogg, Brown & Root Servs., Inc., 572 F.3d 1271, 1279 (11th
Cir. 2009) (citing Morrison v. Amway Corp., 323 F.3d 920, 925 n.5 (11th Cir. 2003)) (“[T]he
court must, as with a Rule 12(b)(6) motion, take the complaint’s allegations as true.”).
“Factual attacks,” on the other hand, serve to “challenge ‘the existence of subject matter
jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as
testimony and affidavits are considered.’” McElmurray, 501 F.3d at 1251. Therefore, as the
Eleventh Circuit has acknowledged in distinguishing between the two types of attacks, a
district court’s treatment of a motion to dismiss as a facial attack, rather than factual one,
“consider[s] only the complaint and the attached exhibits.” Id. Defendant levies a facial
challenge against Plaintiff’s Complaint and as a result, the Court will conduct its analysis
accordingly. Specifically, Defendant argues that diversity of citizenship does not exist.
To establish diversity of citizenship all plaintiffs must be citizens of a different state than
the defendants and the amount in controversy must exceed $75,000. 28 U.S.C. § 1332; Sweet
Pea Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th Cir. 2005). For the purposes of
diversity, a corporation is a citizen of any State in which it has been incorporated and where
its principal place of business is located. Id. A person is a citizen of the place where his
permanent home is and where he intends to return when absent. McCormick v. Aderholt, 239
F.3d 1254, 1257-1258 (11th Cir. 2002.) The burden of establishing federal subject matter
jurisdiction rests with the party bringing the claim. Id.
First National Bank’s motion to dismiss asserts that the alleged value of the property at
issue is not relevant to the Court’s consideration of Plaintiff’s Complaint. (Doc. 9-1 at 6-7.)
Under either a declaratory judgment, equitable subordination, or unjust enrichment theory
Plaintiff is unable to surpass the $75,000 threshold First National Bank argues. The Court
does not agree with First National Bank’s contention.

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“In actions seeking declaratory or injunctive relief, it is well established that the amount in
controversy is measured by the value of the object of the litigation.” Hunt v. Wash. State Apple
Advert. Commc’n., 432 U.S. 333, 347 (1977); Occidental Chem. Corp. v. Bullard, 995 F.2d 1046,
1047 (11th Cir. 1993). Plaintiff’s complaint moves the Court to enter a declaratory judgment
in their favor because the property remains subject to the security deed assigned to Plaintiff
in the amount of $100,000 and moves the Court to find that Plaintiff has a superior interest
in the property held by Pharis that has an appraised value of $134,500. (See Doc 1 at ¶¶ 17,
33.) In the view of the Court, the allegations made in Plaintiff’s complaint support a finding
that the relief sought by Plaintiff and objects in dispute in this case well surpass the $75,000
threshold required. As a consequence, First National Bank’s Motion to Dismiss for lack of
subject matter jurisdiction is denied.
First National Bank also briefly argues this Court does not have subject matter over this
case based on the Rooker-Feldman doctrine. Specifically, First National Bank argues that
Plaintiff is attempting to “inextricably intertwine” this federal case with litigation currently
before the Superior Court of Decatur County. (Doc. 9-1 at 8.) The Rooker-Feldman doctrine
applies both to federal claims which are brought in state court and those “inextricably
intertwined” with a state court’s judgment. Franklin v. Arbor Station, LLC., 549 Fed. App’x
831, 833 (11th Cir. 2013)(citing Casale v. Tillman, 558 F.3d 1258, 1260 (11th Cir. 2009)). Claims
brought in state court are “inextricably intertwined” with a state court’s judgment if a district
court’s granting of that claim would essentially nullify the state court’s judgment or succeed
“to the extent the state court wrongly decided the issue.” Id.
Based on the record before the Court, consideration of this case would not nullify or
affect any state court judgment. As acknowledged by Plaintiff in their complaint, the Georgia
Court of Appeals noted that “[e]ven if [GMAC] erred in overlooking the [security] deed in a
title examination, such error would not be egregious enough to defeat a claim for equitable
subrogation.” GMAC Mortg., LLC. v. Pharis, 761 S.E.2d 480, 485 (Ga. Ct. App. 2014). After
the Georgia Court of Appeals decision reversing the Decatur County, Georgia Superior
Court decision, all of Plaintiff’s claims in the above-captioned case remained unresolved. Id.
GMAC thereafter dismissed all of their claims brought in state court without prejudice.
(Doc. 1 at 16, fn. 1.) This Court would not in any way be reconsidering a determination or
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judgment made previously by a state court on the issues in dispute because no final
determination or judgment in state court exits. As a consequence, for the reasons
aforementioned, First National Bank’s Motion to Dismiss for lack of subject matter
jurisdiction is DENIED. (Doc. 9.)
II. Monroe Pharis’ First Motion to Dismiss (Doc. 19)
Defendant Monroe Pharis argues that Plaintiff’s complaint should be dismissed based
on the “concurrent jurisdiction” doctrine. As a result, relying heavily on Colorado River Water
Conservation District v. United States, 424 U.S. 800, 817 (1976), Defendant moves the Court to
abstain from adjudicating this case. As a preliminary matter, this Court has an obligation to
exercise its jurisdiction when appropriate. Colo. River Water Conservation Dist. v. United States,
424 U.S. 800, 817 (1976). Courts should only decline to adjudicate cases properly before it
under the doctrine of abstention in extraordinary situations. Ambrosia Coal & Constr. Co. v.
Pages Morales, 368 F.3d 1329, 1331 (11th Cir. 2004). Abstention under Colorado River “is
permissible in fewer circumstances than are the other abstention doctrines….” Id. For a
court to conduct an analysis under Colorado River that court must ensure that the “federal and
state proceedings involve substantially the same parties and substantially the same issues.” Id.
The requisite circumstances when considering whether abstention is appropriate under
Colorado River do not exist in the present case. As aforementioned and correctly argued by
Plaintiff in their response, there is no existing state proceeding involving the same parties or
issue. As a consequence, Monroe Pharis’s Motion to Dismiss is also DENIED. (Doc. 19.)
III. Defendants’ Rule 12(b)6 Motions to Dismiss (Docs. 24, 25) 2
Defendants Monroe Pharis and First National Bank of Decatur County have both filed
Rule 12(b)6 Motions to Dismiss on similar grounds. (Docs 24, 25.) Plaintiff responded in
opposition to both Defendants’ motions. (Doc. 29.) Given similar arguments made by both
Defendants, the Court will consider both Motions in tandem.

The Court notes that Plaintiff’s suggestion in their response in opposition to Defendants’ Motion to
Dismiss is incorrect in its characterization of Rule 12(g)2 to the extent Plaintiff argues Defendants are unable
to raise their 12(b)6 Motion. The Court will proceed with its consideration of both Defendants’ Motion.

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Federal Rule of Civil Procedure 12(b)(6) permits a party to assert by motion the
defense of failure to state a claim upon which relief can be granted. A motion to dismiss a
plaintiff’s complaint under Rule 12(b)(6) should not be granted unless the plaintiff fails to
plead enough facts to state a claim to relief that is plausible, and not merely just conceivable,
on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Dismissal for failure to state
a claim is proper if the factual allegations are not ‘enough to raise a right to relief above the
speculative level.’” Edwards v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir. 2010) (quoting Rivell
v. Private Health Care Sys., Inc., 520 F.3d 1308, 1309 (11th Cir. 2008)). “Stated differently, the
factual allegations in the complaint must ‘possess enough heft’ to set forth ‘a plausible
entitlement to relief.’” Edwards, 602 F.3d at 1291 (quoting Fin. Sec. Assurance, Inc. v. Stephens,
Inc., 500 F.3d 1276, 1282 (11th Cir. 2007)).
The Court must conduct its analysis “accepting the allegations in the complaint as
true and construing them in the light most favorable to the Plaintiff.” Hill v. White, 321 F.3d
1334, 1335 (11th Cir. 2003). In evaluating the sufficiency of a plaintiff’s pleadings the Court
must “make reasonable inferences in [p]laintiff’s favor, ‘but [is] not required to draw
Plaintiff’s inference.’” Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009)
(quoting Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005)),
abrogated on other grounds by Mohamad v. Palestinian Auth., 132 S. Ct. 1702 (2012). The Supreme
Court instructs that while on a Motion to Dismiss “a court must accept as true all of the
allegations contained in a complaint,” this principle “is inapplicable to legal conclusions,”
which “must be supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)
(citing Twombly, 550 U.S. at 555, for the proposition that courts “are not bound to accept as
true a legal conclusion couched as a factual allegation” in a complaint). In addition to
considering the four corners of a complaint, a district court may also consider an extrinsic
document only if it is central to a plaintiff’s claim and its authenticity has not been
challenged. SFM Holdings, Ltd. v. Banc of Am. Sec., LLC., 600 F.3d 1334, 1337 (11th Cir.
2010).
Both Defendants’ argument hinges on the notion Plaintiff acquired no rights to the
property superior to either Monroe Pharis or First National Bank of Decatur County by
virtue of being assigned GMAC’s interest by equitable subordination. Defendants primarily
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rely on a Georgia Supreme Court case, Chase Manhattan Corporation v. Shelton, 722 S.E.2d 744
(Ga. 2012) to argue rights acquired through equitable subrogation by GMAC cannot be
enforced by Plaintiff. The Court finds that Defendants mischaracterize the Georgia Supreme
Court’s reasoning in Chase Manhattan Corporation and rely on language taken out of context.
In Chase Manhattan Corporation Marcus Shelton, a husband and father to two children
sought an opportunity to refinance his loan on property he previously quitclaimed to his
wife and two children with Choice Capital. Chase Manhattan Corp., 722 S.E.2d at 745. Before
agreeing to refinance his property and pay off his existing loan, Choice Capital required the
husband to remove his children from the chain of title. Id. Although the family’s attorney
filed petitions in accordance with Choice Capital’s request, making Shelton’s wife guardian
of her children’s interest in the property, the petition was never processed. Id. Nevertheless,
Shelton’s wife quitclaimed all her interest and what she believed to be all her children’s
interest back to Shelton. Id. Thereafter, Shelton signed an affidavit stating that he fully
owned the property and thereafter Choice Capital agreed to execute a new security deed that
paid for his prior security deed. Id. Choice Capital assigned its security deed to Mortgage
Electronic Registration, Inc. (“MERS”), which was then transferred to HFC. Id. Three
months later, Shelton went bankrupt and HFC foreclosed on the property. The property was
sold to homebuyers through a foreclosure sale. Id.. The homebuyers financed their purchase
in exchange for a security deed in the property to Chase Manhattan Mortgage Corporation
(“Chase”). Id. Thereafter, attorneys for Shelton’s two children learned they still had an
interest in the property and moved to quiet title as it related to the children’s interest. Id. at
746. The question before the Georgia Supreme Court that was decided, contrary to
Defendants’ argument, was whether or not Chase had full interest in the property through
equitable subrogation although Choice Capital failed to confirm Shelton’s actual and full
ownership of the property being transferred? The answer to the narrow question addressed
by the Georgia Supreme Court was “no”. Id. at 748. The Court found that Choice Capital’s
failure to confirm that Shelton’s wife had the power to convey the property in its entirety
was “inexcusable neglect” affecting equitable subrogation. Id. (“Indeed, even if Appellants
[Chase] could step into the shoes of Choice Capital, their claim for equitable subrogation
would still fail due to Choice Capital’s inexcusable neglect in failing to confirm that the
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children’s mother had the legal authority to convey their interest in the property back to
Shelton.”) Chase Manhattan Corporation does not alter the longstanding principal that if a
lender is entitled to benefit from equitable subrogation so are their assignees under Georgia
law. See, e.g., Indian Trial, LLC v. State Bank & Tr. Co., 759 S.E.2d 654, 659 (Ga. Ct. App.
2014). Georgia courts have established, consistent with the holding in Chase Manhattan
Corporation, the clear proposition that absent a showing of inexcusable neglect by the party
entering into the senior lien status through equitable subrogation, an assignee can exert their
ownership rights. Id.
At this juncture, relying largely on the four corners of the complaint, the Court
cannot find that there was inexcusable neglect on that part of GMAC that would in some
way undermine Plaintiff’s interest. Furthermore, both Defendants’ Motions rely on the
argument that Plaintiff as an assignee cannot, as a matter of law, have rights to the property
obtained by GMAC initially through equitable subrogation. As aforementioned, absent a
showing of inexcusable neglect like that in Chase Manhattan Corporation, Defendants’
proposition of law is incorrect. For the reasons aforementioned, Defendants assertion is
incorrect and as a result, the Court hereby DENIES both Defendants’ Motions. (Docs 24,
25.)
CONCLUSION
For the foregoing reasons, Defendant First National Bank of Decatur County’s
Motion to Dismiss for lack of subject matter jurisdiction (Doc. 9), Defendant Monroe
Pharis’ first Motion to Dismiss (Doc. 17), Defendant Monroe Pharis’ Motion to Dismiss for
failure to state a claim (Doc. 24), and Defendant First National Bank of Decatur County’s
Motion to Dismiss for failure to state a claim (Doc. 25) are DENIED.
SO ORDERED, this 29th day of September, 2015.
/s/ W. Louis Sands
W. LOUIS SANDS, SR. JUDGE
UNITED STATES DISTRICT COURT

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