Engvoldsen et al v. The Bank of New York Mellon et al
Filing
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ORDER granting Bayview's 13 Motion to Dismiss; and dismissing as moot the Government's 19 Motion for Judgment on the Pleadings. Plaintiffs' claims against the IRS must be DISMISSED. The Clerk of Court is DIRECTED to enter the appropriate judgment of dismissal and to close this case. Signed by Chief Judge Lisa G. Wood on 12/11/2015. (csr)
3 the Uniteb Statto 1Dttritt Court
for the boutbern flitrict of 4eorta
uuta 1Dibtton
RONALD T. ENGVOLDSEN and
PATRICIA ENGVOLDSEN,
Plaintiffs,
V.
THE BANK OF NEW YORK MELLON,
as Trustee for the
Certificateholders of CWABS
INC., Asset-Backed
Certificates, Series 2007SEA1, Acting Through Its
Servicing Agent, Bayview Loan
Servicing, LLC; BAYVIEW LOAN
SERVICING, LLC; and THE
INTERNAL REVENUE SERVICE,
Defendants.
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CV 115-069
Presently before the Court is a Motion to Dismiss filed by
Defendant Bayview Loan Servicing, LLC ("Bayview"), as servicing
agent for Defendant The Bank of New York Mellon (the "Bank"),
which the parties have fully briefed. See Dkt. Nos. 13, 15, 18.
Also before the Court is a fully briefed Motion for Judgment on
the Pleadings by the United States of America (the
"Government"), on behalf of Defendant The Internal Revenue
Service (the "IRS") . See Dkt. Nos. 19, 24, 27. The Court held
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a hearing on these motions on November 9, 2015. See Dkt. No.
For the reasons that follow, Bayview's Motion to Dismiss
(dkt. no. 13) is GRANTED, and all claims against Bayview and the
Bank are hereby DISMISSED.
Because the related claims against
the IRS must also be DISMISSED, the Motion for Judgment on the
Pleadings (dkt. no. 19) filed on behalf of this Defendant is
DISMISSED as moot.
FACTUAL BACKGROUND
Plaintiffs Ronald T. Engvoldsen and his wife, Patricia
Engvoldsen (collectively, "Plaintiffs"), owned a home in
Augusta, Georgia (the "Property"), which they rented out each
year during the Masters Golf Tournament. Dkt. No. 1, ¶ 8.
While Plaintiffs maintain that the income they received for the
short-term rental was not taxable, they acknowledge that they
never properly informed the IRS of the existence and nature of
this income. Id. at ¶ 9. In early March 2007, the IRS filed a
tax lien against the Property due to Plaintiffs' nonpayment of
certain past due taxes, including those owing to the unreported
rental income. Id. at ¶ 10, Ex. C.
In late March 2007, Plaintiffs took out a loan and executed
a security deed granting the lender an interest in the Property.
Id. at 191 5-6, Ex. A. The lender subsequently assigned the note
and security deed to the Bank, with Bayview as the loan
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servicer, in February 2013. Id. at ¶ 7, Ex. B. Plaintiffs
state that they soon became unable to make the required payments
on the loan, and, in November 2014, contacted Bayview and
submitted an application to refinance the Property, so as to
avoid foreclosure. Id. at ¶ 11, Ex. D.
According to Plaintiffs, they received assurance from
Bayview's representative that Bayview had not scheduled
foreclosure for the first Tuesday in December 2014, and, relying
on this information, they did not file bankruptcy or take any
other action to forego foreclosure. Id. at ¶I 13-14.
Nevertheless, Plaintiffs assert that the Bank had notified the
IRS in October 2014 that it intended to foreclose on the
Property. Id. at ¶ 16, Ex. F. On December 2, 2014, Bayview,
acting for the Bank, proceeded with the foreclosure sale and,
ultimately, deeded the Property to the Bank. Id. at ¶ 17, Ex.
F.
Based on these alleged events, Plaintiffs filed this action
against the Bank, Bayview, and the IRS on May 14, 2015. Id. at
p. 6. As to this Court's jurisdiction to hear their claims,
Plaintiffs rely on diversity of citizenship for the Bank, acting
through Bayview, and a federal question arising under 28 U.S.C.
§ 1340 with respect to the IRS's tax lien. Id. at ¶ 1.
Plaintiffs claim that the Bank and Bayview's foreclosure sale
was contrary to the assurances given by Bayview's representative
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and thus should be set aside as improper or inequitable. Id. at
9191 19, 21, 22(b)-(c). Plaintiffs also ask that the Court
declare the interests of the parties in the Property, and
protect the interests of Plaintiffs and the IRS. Id. at ¶91 22,
22(d). Finally, Plaintiffs request "[t]hat the Court determine
the true amount of the lien of [the] IRS," and "decrease[] [the
lien] so that it only reflects income owed—not unreported
rental money." Id. at IT 20, 22(d).
LEGAL STANDARDS
Federal Rule of Civil Procedure 8(a) requires that a
plaintiff's complaint contain both "a short and plain statement
of the grounds for the court's jurisdiction" and "a short and
plain statement of the claim showing that the pleader is
entitled to relief." Fed. R. Civ. P. 8(a) (1)-(2) . Accordingly,
a responding party may move to dismiss the complaint based On a
"lack of subject-matter jurisdiction" or a "failure to state a
claim upon which relief can be granted." Fed. R. Civ. P.
12(b) (1), (6) ("Rule 12(b) (1)" and "Rule 12(b) (6),"
respectively) . A responding party may raise similar arguments
in a motion for judgment on the pleadings filed "[a]fter the
pleadings are closed—but early enough not to delay trial." Fed.
R. Civ. P. 12(c) ("Rule 12(c)").
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I. Motions to Dismiss
Motions to dismiss under Rule 12(b) (1) and Rule 12(b) (6)
challenge the legal sufficiency of the complaint. See Fed. R.
Civ. P. 12(b) (1), (6) . A court applies the same standards of
review in evaluating dismissal based on a lack of subject-matter
jurisdiction and a failure to state a claim. See Carmichael v.
Kellogg, Brown& Root Servs., Inc., 572 F.3d 1271, 1279 (11th
Cir. 2009) . While a complaint need not contain detailed factual
allegations, it "must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible
on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007))
(interpreting Fed. R. Civ. P. 8(a) (2)) . To be plausible on its
face, a complaint must set forth enough facts to "allow[] the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Id.
In evaluating a motion filed pursuant to Rule 12(b) (1) or
Rule 12(b) (6), a court must "accept as true the facts as set
forth in the complaint and draw all reasonable inferences in the
plaintiff's favor." Randall v. Scott, 610 F.3d 701, 705 (11th
Cir. 2010) . Ordinarily, a court's review on dismissal is
limited to the factual allegations on the face of the complaint.
See Iqbal, 556 U.S. at 678. If a court is presented with
matters outside the pleadings on a motion to dismiss, the motion
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is converted into one for summary judgment. Fed. R. Civ. P.
12 (d) . However, there are certain instances in which a court
may consider matters outside the pleadings without transforming
a motion to dismiss into a summary judgment motion, see Davis v.
Self, 547 F. App'x 927, 929 (11th Cir. 2013), including, for
example, that a court may consider copies of documents that a
plaintiff has attached to the complaint, see Brooks v. Blue
Cross & Blue Shield of Fla., 116 F.3d 1364, 1368 (11th Cir.
1997) (a court may examine "the face of the complaint and
attachments thereto")
II. Motion for Judgment on the Pleadings
Judgment on the pleadings "is appropriate when there are no
material facts in dispute, and judgment may be rendered by
considering the substance of the pleadings and any judicially
noticed facts." Horsley v. Rivera, 292 F.3d 695, 700 (11th Cir.
2002) (citing Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367,
1370 (11th Cir. 1998)); see also Fed. R. Civ. P. 12(c). A court
reviewing amotion for judgment on the pleadings under Rule
12(c) thus applies the same standard applicable to a Rule
12(b) (6) motion to dismiss,
"accept[ing] the facts alleged in
the complaint as true and draw[ing] all inferences that favor
the nonmovant." See Bankers Ins. Co. v. Fla. Residential Proo.
& Cas. Joint Underwriting Ass'n, 137 F.3d 1293, 1295 (11th Cir.
1998) (citing Slagle v. ITT Hartford, 102 F.3d 494, 497 (11th
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Cir. 1996)) . If, upon reviewing the pleadings, it appears that a
plaintiff "would not be entitled to relief under any set of
facts that could be proved consistent with the allegations, the
court should dismiss the complaint." See Horsley, 292 E. 3d at
700 (citing White v. Lemacks, 183 F.3d 1253, 1255 (11th Cir.
1999)
DISCUSSION
Bayview, acting as servicing agent of the Sank, moves to
dismiss Plaintiffs' Complaint under Rule 12(b) (6) for failure to
state a claim. Dkt. No. 13-1. The Government, on behalf of the
IRS, filed an Answer to Plaintiffs' Complaint (dkt. no. 17), and
now moves for judgment on the pleadings pursuant to Rule 12(c).
Dkt. No. 19. Applying the above-described standards, the Court
addresses the issues raised in these submissions in turn.
I.
Bayview's Motion to Dismiss (Dkt. No. 13)
Bayview, acting as servicing agent of the Bank, argues that
Plaintiffs fail to state a claim upon which relief may be
granted, because Plaintiffs do not allege to have tendered the
full amount due on their loan. See Dkt. No. 13-1, pp. 4-5.
According to Bayview, a debtor must pay his creditor the full
amount of principal and interest owing on his debt prior to
seeking to set aside a foreclosure in equity. Id. (citing
Ceasar v. Wells Fargo Bank, N.A., 744 S.E.2d 369, 373 (Ga. Ct.
App. 2013), and Chen v. Wells Fargo Bank, N.A., No. 1:13-CVAU 72A
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3037-TWT, 2014 WL 806916, at *3 (N.D. Ga. Feb. 27, 2014)). As
Plaintiffs have not satisfied, and do not allege to have
satisfied, this precondition to suit, Bayview concludes that
Plaintiffs' wrongful foreclosure claims must be dismissed on
this basis, and that the underlying merits of those claims are
irrelevant. Dkt. No. 18, PP. 3-4.
Under Georgia law, a foreclosing creditor has a statutory
duty to provide prior notice of the foreclosure sale to the
debtor in accordance with O.C.G.A. § 44-14-162.2(a), and a
failure to do so may resultin the debtor filing suit either to
set aside the foreclosure or to recover damages for wrongful
foreclosure. Roylston v. Bank of Am., N.A., 660 S.E.2d 412,
416-17 (Ga. Ct. App. 2008) . However, "Georgia courts routinely
require plaintiffs to make sufficient tender before they may
have a foreclosure sale set aside due to an alleged defect in
the foreclosure process." Chen, 2014 WL 806916, at *3
Indeed,
"to set aside the sale on any ground asserted by its pleadings
other than the lack of authority to make the deed, or the
foreclosure of the deed prior to its due date, it [is] incumbent
on the [debtor] to . . . tender . . . the amount of the debt
due." Massey v. Nat'l Homeowners Sales Serv. Corp. of Atlanta,
165 S.E.2d 854, 859 (Ga. 1969); see also Hill v. Filsoof, 618
S.E.2d 12, 14 (Ga. Ct. App. 2005) (stating that full tender is
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equal to the amount of principal and interest due (quoting Coile
v. Fin. Co. of Am., 146 S.E.2d 304, 304 (Ga. 1965))).
Plaintiffs seek to have the foreclosure sale carried out by
Bayview, on behalf of the Bank, set aside in equity on the basis
of an alleged lack of notice. Dkt. No. 1, 191 19, 21, 22(b)-(c).
Notably, and as Plaintiffs' counsel acknowledged at the November
9, 2015, motions hearing, Plaintiffs do not allege that the Bank
lacked authority to enter into or receive an assignment of the
security deed, or that Bayview foreclosed before the debt became
due. As such, this case does not present any exception to the
general rule that the full amount of the debt be tendered as a
precondition to suit.
While Plaintiffs stress the public policy implications of
requiring full payment where there is a lack of statutory
notice, dkt. no. 15, pp. 5-6, this type of defect is not a
recognized exception to the rule in Georgia, see Massey, 165
S.E.2d at 859 (requiring full tender "to set aside the sale on
any ground . . . other than" lack of authority and premature
foreclosure) . To the extent that Plaintiffs' policy argument
relates to the insufficiency of funds, dkt. no. 15, Pp. 5-6,
Georgia courts have expressly rejected this circumstance as
excusing the tender requirement, see Hill, 618 S.E.2d at 14
("Neither fraud nor poverty constitute an equitable excuse for
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failure to tender." (citing Sapp v. ABC Credit & Inv. Co., 253
S.E.2d 82, 82 (Ga. 1979))).
Rather, Plaintiffs were required to tender the full amount
owing on their loan with the Bank and Bayview prior to
initiating this action. Significantly, nothing in their
Complaint suggests that they have paid, or otherwise attempted
to pay, at any time, the full amount of the debt secured by the
Property. In failing to allege this essential prerequisite to
their claims, Plaintiffs' Complaint falls short of plausibly
demonstrating that they are entitled to an order setting aside
the foreclosure on the Property. See Chen, 2014 WL 806916, at
*3 (dismissing the debtor's claim for equitable relief, in part
because "she [did] not allege that she tendered the amount due
on her loan"); Ceasar, 744 S.E.2d at 373 (upholding the trial
court's determination that the debtors did not state a claim to
set aside the foreclosure sale where they had failed to tender
the balance due on their loan). Thus, Bayview's Motion to
Dismiss for failure to state a claim must be GRANTED, and
Plaintiffs' claims against the Bank and Bayview must be
DISMISSED.
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II. The Government's Motion for Judgment on the Pleadings (Dkt.
No. 19)
In its Motion, the Government initially notes that the
Court should dismiss the IRS as a party-Defendant, because it is
not subject to suit in its own name. Dkt. No. 19, pp. 2-3)
(citing Purk v. United States, 747 F. Supp. 1243, 1247 (S.D.
Ohio 1989)). The crux of the Government's argument, however, is
that the Court lacks jurisdiction to hear Plaintiffs' claims
against the IRS, because Plaintiffs fail to show a waiver of
sovereign immunity, as is required to proceed in an action
against the Government. Id. at pp. 1, 6 (citing Arbaugh v. Y&H
Corp., 546 U.S. 500, 507 (2006) (entry of judgment on the
pleadings under Rule 12(c) is proper when subject-matter
jurisdiction is lacking)) . The Government argues, in relevant
part, that 28 U.S.C. §§ 1340 and 2410—on which Plaintiffs rely
in their Complaint and Response, see dkt. no. 1, ¶ 1; dkt. no.
24, p. 3—do not apply here, because the IRS's tax lien has been
discharged. Dkt. No. 19, pp. 4, 6; Dkt. No. 27, p. 2 (citing 26
U.S.C. § 7425(d)). Additionally, the Government contends that
Plaintiffs improperly seek to challenge the merits of their tax
liability that resulted in the federal tax lien. Dkt. No. 19,
p. 6; Dkt. No. 27, p. 2 (citing Stoecklin v. United States, 943
F.2d 42, 43 (11th Cir. 1991)).
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As an initial matter, the Government's Motion for Judgment
on the Pleadings is better characterized as a motion to dismiss
for lack of subject-matter jurisdiction. A motion for judgment
on the pleadings is to be filed "[a]fter the pleadings are
closed," Fed. R. Civ. P. 12(c), and "[p]leadings are considered
'closed' when all defendants have filed answers to the
complaint," Jordan v. Def. Fin. & Accounting Servs., No. 8:14CV-958-T-33TGW, 2014 WL 3887748, at *1 (M.D. Fla. Aug. 7, 2014)
(alteration in original) (quoting Gelsomino v. Horizon
Unlimited, Inc., No. 07-80697, 2008 U.S. Dist. LEXIS 68907, at
*6 n.3, 2008 WL 4194842 (S.D. Fla. Sept. 9, 2008)). As the
Government filed its Motion at a time when the Bank and Bayview
had not yet filed an answer to the Complaint, and instead had
submitted a Motion to Dismiss that remained pending, the
Government's Motion was premature.
Nevertheless, given the Court's ruling on Bayview's Motion
to Dismiss in Part I, it would serve no useful purpose to
require the Government to refile its Motion following the
dismissal of those Defendants. Instead, the Court will construe
the Government's Motion as a motion to dismiss for lack of
subject-matter jurisdiction under Rule 12(b) (1) . See Signature
Combs, Inc. v. United States, 253 F. Supp. 2d 1028, 1030 (W.D.
Tenn. 2003) (construing a prematurely filed motion for judgment
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on the pleadings as a motion to dismiss for failure to state a
claim under Rule 12(b)(6)).
However, under either characterization of this Motion, the
Court's disposition on Bayview's Motion to Dismiss herein
renders the Government's Motion moot. That is, in their
Complaint, and as confirmed by their counsel at the hearing,
Plaintiffs joined the IRS as a named party, because they seek to
have the Court set aside the foreclosure in equity and, upon
doing so, declare the interests in the Property, protect the
interests of Plaintiffs and the IRS, and reduce the amount of
the IRS's lien.
See Dkt. No. 1, 191 19, 21, 22(b)-(d). Because
the Court has dismissed Plaintiffs' claims to set aside the
foreclosure, their reasons for instituting this action against
the IRS cease to exist—a result contemplated, and even agreed
upon, by Plaintiffs in their Response, see dkt. no. 24,
("If this Court [was] to grant the
pp. 2-3
[M]otion of [t]he
Bank . . . , then Plaintiffs would agree that the Court would
not have jurisdiction over the [IRS] and that the entire case
should be dismissed.") . Thus, Plaintiffs' claims against the
IRS are to be DISMISSED on this basis, and the Government's
Motion seeking to dispose of those claims on the merits is
DISMISSED as moot.
The Court further notes that even if it were to reach the
substance of the Government's Motion, the Motion would be due to
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be granted, and Plaintiffs' claims dismissed, on jurisdictional
grounds. In support of subject-matter jurisdiction, Plaintiffs
rely on 28 U.S.C. § 1340, which grants federal courts
jurisdiction over civil actions arising under congressional acts
providing for internal revenue, in conjunction with 28 U.S.C. §
2410(a), which provides a waiver of immunity with respect to
actions to quiet title real property on which the Government
claims a lien, see Dkt. No. 1, ¶ 1; Dkt. No. 24, p. 3.
However, 28 U.S.C. § 2410(a) does not apply here, because,
according to Plaintiffs' own factual allegations, the IRS
received notice of the foreclosure sale in October 2014. Dkt.
No. 1, ¶ 16, Ex. E. By virtue of this prior notice, the IRS's
lien has been discharged and, therefore, cannot serve as the
basis for jurisdiction under this section. see 26 U.S.C.
7425(b) (2) (C) (stating that a nonjudicial sale will result in
the "discharge or divestment" of a lien held by the Government
if "notice of such sale is given")
Moreover, even if the IRS's tax lien had not been
discharged, any action brought pursuant to 28 U.S.C. § 2410(a)
on the basis of that lien could contest only the procedural
validity, not the merits, of the underlying tax assessment. See
Stoecklin, 943 F.2d at 42. Plaintiffs assert that the IRS's tax
assessment was inaccurate, in that the 1R5 should not have
included the sums received from the short-term rentals during
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the Masters Golf Tournament. See Dkt. No. 1,
191 20, 22(d). In
doing so, Plaintiffs improperly seek to challenge the merits of
the underlying federal tax assessment, which cannot be the
subject of an action under 28 U.S.C. § 2410(a). 1
CONCLUSION
Based on the foregoing, Bayview's Motion to Dismiss (dkt.
no. 13) is GRANTED, and Plaintiffs' claims against Bayview and
the Bank are DISMISSED.
As a result, Plaintiffs' claims against
the IRS must be DISMISSED, and the Government's Motion for
Judgment on the Pleadings (dkt. no. 19) filed on behalf of this
Defendant is, therefore, DISMISSED as moot.
The Clerk of Court is DIRECTED to enter the appropriate
judgment of dismissal and to close this case.
SO ORDERED, this llT} day of December, 2015.
LISA GODHEY WOOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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The court also notes the Government's argument regarding the IRS being
incorrectly named as a party-Defendant. See Dkt. No. 19, pp. 2-3. Given
that Plaintiffs' claims against the IRS must be dismissed for the reasons
discussed herein, the Court need not resolve this issue.
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