Ishee v. Federal National Mortgage Association et al
Filing
374
MEMORANDUM OPINION AND ORDER finding as moot 358 Motion in Limine; finding as moot 360 Motion in Limine; finding as moot 362 Motion in Limine; granting 212 Motion for Summary Judgment; denying 214 Motion for Summary Judgment; granting 217 Motion for Summary Judgment; finding as moot 219 Motion to Exclude; denying 223 Motion for Summary Judgment; denying 225 Motion for Summary Judgment; denying 226 Motion for Summary Judgment; denying 228 Motion for Summary Judgment; denying 231 Motion for Summary Judgment. The Court will enter a separate Judgment consistent with this opinion. Signed by District Judge Keith Starrett on 2/6/2015 (scp)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
PORTIA B. ISHEE
V.
PLAINTIFF
CIVIL ACTION NO. 2:13-CV-234-KS-MTP
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, et al.
DEFENDANTS
MEMORANDUM OPINION AND ORDER
For the reasons stated below, the Court grants the Motion for Summary
Judgment [212] filed by Defendant Federal National Mortgage Association, grants the
Motion for Summary Judgment filed by Defendant Green Tree Servicing, LLC, and
denies the Motions for Partial Summary Judgment [214, 223, 225, 226, 228, 231] filed
by Plaintiff.
I. BACKGROUND
This dispute arises from the servicing of a mortgage loan. Plaintiff signed a
promissory note in November 2006, in favor of GMAC Mortgage, LLC (“GMAC”), and
in the principal amount of $100,000. The note was secured by a deed of trust
encumbering Plaintiff’s property. Defendant Federal National Mortgage Association
(“Fannie Mae”) bought the note in December 2006, but GMAC continued to service the
loan.
On September 23, 2010, Plaintiff’s home was destroyed by a fire. At the time of
the fire, it was insured under a policy issued by Alfa Insurance Corporation (“Alfa”).
On November 4, 2010, Alfa issued a check to GMAC in the amount of $99,623.48 – the
payoff amount provided by GMAC to Alfa’s adjuster. GMAC received the check, but
instead of applying the funds to the note, it deposited them to escrow.
Throughout this time period, GMAC continued to charge Plaintiff for payoff
requests and site inspections, despite the property having been destroyed and the
insurer having paid an amount in excess of the payoff amount. GMAC also force-placed
insurance on the property, even though it was vacant and destroyed. As a result of the
force-placed insurance and various other charges, the principal on the note ballooned
past what it was when Plaintiff’s insurer provided the payment. Plaintiff made
multiple requests for GMAC to apply the insurance funds as they should have been
applied in November 2010, but it failed to do so. GMAC went bankrupt in May 2012.
In November 2012, Defendant Green Tree Servicing, LLC (“Green Tree”)
acquired GMAC’s right to service Plaintiff’s note, effective February 1, 2013. Fannie
Mae consented to the transfer of rights. After receiving the loan information from
GMAC, Green Tree tried to contact Plaintiff, but she failed to respond. In late August
2013, she finally contacted Green Tree and asked them to apply the insurance funds
to the loan as they should have been applied in November 2010. After a brief
investigation, Green Tree applied the funds to the loan, canceled the deed of trust,
refunded the excess funds to Plaintiff, and otherwise fixed the mess that GMAC had
created – almost three years after the insurance funds had first been paid. At present,
Plaintiff’s note is paid in full, her property is released from the deed of trust, and she
was refunded $1,474.56.
Plaintiff brought this lawsuit against Fannie Mae and Green Tree, asserting the
following claims: breach of contract, willful breach of contract, conversion, fraud,
2
breach of the duty of good faith and fair dealing, intentional infliction of emotional
distress, defamation, violations of the Fair Debt Collection Practices Act (“FDCPA”),1
and violations of the Mississippi S.A.F.E. Mortgage Act (“SAFE Act”).2 Plaintiff also
alleged that Fannie Mae is liable for the actions of its loan servicers, GMAC and Green
Tree, under theories of respondeat superior and ratification, and that Green Tree is
liable for GMAC’s actions as a successor in interest. She demanded actual damages,
emotional damages, punitive damages, interest, and attorney’s fees.
The parties filed a variety of dispositive motions. Each Defendant filed its own
Motion for Summary Judgment [212, 217]. Plaintiff filed several Motions for Partial
Summary Judgment [214, 22, 225, 226, 228, 231]. The Court will now address each
issue raised in the parties’ motions.
II. STANDARD OF REVIEW
Rule 56 provides that “[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a); see also Sierra Club, Inc.
v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010). “An issue is
material if its resolution could affect the outcome of the action.” Sierra Club, Inc., 627
F.3d at 138. “An issue is ‘genuine’ if the evidence is sufficient for a reasonable jury to
return a verdict for the nonmoving party.” Cuadra v. Houston Indep. Sch. Dist., 626
F.3d 808, 812 (5th Cir. 2010).
1
15 U.S.C. § 1692, et seq.
2
MISS. CODE ANN. § 81-18-3, et seq.
3
The Court is not permitted to make credibility determinations or weigh the
evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009). When deciding
whether a genuine fact issue exists, “the court must view the facts and the inference
to be drawn therefrom in the light most favorable to the nonmoving party.” Sierra
Club, Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials,
speculation, improbable inferences, unsubstantiated assertions, and legalistic
argumentation do not adequately substitute for specific facts showing a genuine issue
for trial.” Oliver v. Scott, 276 F.3d 736, 744 (5th Cir. 2002).
III. FANNIE MAE’S LIABILITY FOR ITS SERVICERS’ ACTIONS [212, 228]
The first issue presented by the parties’ motions is the extent of Fannie Mae’s
liability for the actions of its loan servicers. Plaintiff argues that Fannie Mae is liable
under theories of respondeat superior and ratification. She further argues that Fannie
Mae had a non-delegable duty to properly service the loan, and that it is judicially
estopped from denying liability for its loan servicers’ actions.
A.
Judicial Estoppel
Plaintiff contends that Fannie Mae is judicially estopped from arguing that it
can not be liable for the acts of its loan servicers because it took a directly contradictory
position in GMAC’s bankruptcy proceeding. She claims that Fannie Mae executed a
stipulation in which it accepted payment from GMAC in exchange for taking on its
liabilities.
“The doctrine of judicial estoppel prevents a party from asserting a claim in a
legal proceeding that is inconsistent with a claim taken by that party in a previous
4
proceeding.” Reed v. City of Arlington, 650 F.3d 571, 573-74 (5th Cir. 2011). The
doctrine has three elements: “(1) the party against whom the judicial estoppel is sought
has asserted a legal position which is plainly inconsistent with a prior position; (2) a
court accepted the prior position; and (3) the party did not act inadvertently.” Id. at
574.
Plaintiff’s judicial estoppel argument rests upon a false premise. Fannie Mae
and GMAC executed a stipulation [230-5] in which Fannie Mae accepted
$297,600,000.00 to cure GMAC’s own defaults under its servicing agreements with
Fannie Mae. The stipulation says nothing about GMAC’s liabilities or obligations to
third parties. Furthermore, Plaintiff provided no evidence that “a court accepted the
prior position.” Id. For these reasons, her judicial estoppel argument has no merit.
B.
Respondeat Superior
Plaintiff argues that Fannie Mae is responsible for the actions of GMAC and
Green Tree – its loan servicers – under a theory of respondeat superior. This Court
previously discussed the same issue in a different case. See Neel v. Fannie Mae, No.
1:12-CV-311-HSO-RHW, 2014 U.S. Dist. LEXIS 28891, at *15-*23 (S.D. Miss. Mar. 6,
2014). The question hinges on whether GMAC and Green Tree were Fannie Mae’s
employees or independent contractors.
“Generally, an employer is liable for the negligent acts of its employees done in
the course and scope of his employment under the doctrine of respondeat superior, but
an employer is not liable for the negligence of an independent contractor.” McKee v.
Brimmer, 39 F.3d 94, 96 (5th Cir. 1994). Fannie Mae’s 2012 Servicing Guide [212-7]
5
provides that its loan servicers are “independent contractors and not . . . agents,
assignees, or representatives of Fannie Mae . . . .” However, “an employer [can not]
escape liability by drafting a contract which labels its employee an independent
contractor, but retains employer-like control over him.” Id. at 98.
The Mississippi Supreme Court provided a non-exhaustive list of factors to
consider:
[1] Whether the principal master has the power to terminate the contract
at will; [2] whether he has the power to fix the price in payment for the
work, or vitally controls the manner and time of payment; [3] whether he
furnishes the means and appliance for the work; [4] whether he has
control of the premises; [5] whether he furnishes the materials upon
which the work is done and receives the output thereof, the contractor
dealing with no other person in respect to the output; [6] whether he has
the right to prescribe and furnish the details of the kind and character of
work to be done; [7] whether he has the right to supervise and inspect the
work during the course of employment; [8] whether he has the right to
direct the details of the manner in which the work is to be done; [9]
whether he has the right to employ and discharge the subemployees and
to fix their compensation; [10] and whether he is obliged to pay the wages
of said employees.
Richardson v. APAC-Mississippi, 631 So. 2d 143, 148-49 (Miss. 1994) (quoting Kisner
v. Jackson, 132 So. 90, 90 (Miss. 1931)); see also Woodring v. Robinson, 892 F. Supp.
2d 769, 776 (S.D. Miss. 2012). “The overarching inquiry in the factoring analysis is
whether the employer exhibited the requisite amount of control over the engaged party
to categorize the party as an employee.” Woodring, 892 F. Supp. 2d at 776. “When the
facts are undisputed, determining the type of relationship is a legal question.” Id.
The evidence regarding Fannie Mae’s relationships with the two loan servicers
is virtually identical. Therefore, the Court will address both GMAC and Green Tree at
the same time, as the parties did in briefing.
6
1.
Whether Fannie Mae Could Terminate Its Servicers’ Contracts at Will
Fannie Mae’s contract with GMAC [230-4] provided that GMAC could
“terminate the provisions of [the] Contract covering the servicing of mortgages . . . by
giving us notice at any time.” Likewise, Fannie Mae could terminate the contract’s
servicing provisions “for any reason, by giving [GMAC] notice of the termination.”
The 2012 Servicing Guide [212-7] – which pertains to both GMAC and Green
Tree – provided that either the servicer or Fannie Mae “may terminate the servicing
arrangement without cause.” However, the Guide also provides that a “servicer may
not terminate its servicing rights for less than all of the mortgage loans . . . it is
servicing for Fannie Mae,” without Fannie Mae’s written consent. Likewise, the 2012
Guide provides certain procedures that Fannie Mae must follow in order to terminate
the servicing relationship without cause, potentially including the payment of a
termination fee.
The evidence discussed above demonstrates that either Fannie Mae or its loan
servicer may terminate the relationship for any reason. The 2012 Servicing Guide
places procedural requirements on both parties before termination. Therefore, this
factor weighs in favor of finding that GMAC and Green Tree were independent
contractors. See Neel, 2014 U.S. Dist. LEXIS 28891 at *16-*17 (citing Walker v.
McClendon Carpet Serv., 952 So. 2d 1008, 1010 (Miss. Ct. App. 2006)).
2.
Whether Fannie Mae Had Power to Fix the Price or Control the Manner
or Time of Its Servicers’ Payment
The 2012 Servicing Guide [212-7] provides: “As compensation for servicing
7
mortgage loans for Fannie Mae, Fannie Mae pays the servicer servicing fees and allows
it to retain late charges, fees charged for special services, yield differential
adjustments, and, in some cases, either a share or all of any applicable prepayment
premiums . . . .” Fannie Mae’s 30(b)(6) representative [215-7] clarified that it pays its
servicers a servicing fee whenever they collect a payment. Therefore, if a borrower does
not make any payments, the servicer would not receive any fees for servicing that loan
– creating an incentive for the servicer to keep its loans current. The servicer has the
freedom, however, to propose and execute modifications and workouts under certain
circumstances, for which they can receive fees. The servicer likewise has the freedom
to impose late charges and other special fees on the borrower, for which it also receives
a servicing fee.
As this Court has previously observed, Fannie Mae’s servicers possess
substantial control over the conditions of their payment, as they are “paid based on the
loans [they are] able to keep current and the delinquent loans [they are] able to
salvage.” Id. at *17. If they elect to impose a late charge or other special charge on a
borrower, they receive a servicing fee. Therefore, because they have “as much, if not
more, control over these conditions [of payment] as Fannie Mae,” this factor weighs in
favor of finding that GMAC and Green Tree were independent contractors. Id.
3.
Whether Fannie Mae Furnished Means or Appliances for its Servicers’
Work
Fannie Mae’s 30(b)(6) representative testified [215-7] that its loan servicers
provide their own facilities, buildings, equipment, printers, office furniture, fax
8
machines, and printers. However, Fannie Mae provided its loan servicers with
proprietary software for managing loan portfolios. This factor weighs in favor of finding
that GMAC and Green Tree were independent contractors. Id. at *18 (citing Walker,
952 So. 2d at 1010 (where carpet cleaner used chemicals provided by alleged employer
but used its own van and equipment, the factor weighed in favor of independent
contractor status)).
4.
Whether Fannie Mae Controlled Its Servicers’ Premises
Fannie Mae’s 30(b)(6) representative provided undisputed testimony [215-7] that
Fannie Mae does not control its loan servicers’ premises, and that it must receive
permission from its servicers before visiting their facilities. Fannie Mae’s 2011
Servicing Guide [348] requires servicers to maintain records according to “sound and
generally accepted accounting principles,” and Fannie Mae retains the right to conduct
“periodic procedural reviews during visits to the servicer’s office or the document
custodian’s place of business . . . .” The 2012 Servicing Guide [309-3] imposes the same
requirements.
The right to review records, however, does not necessarily imply control of the
premises upon which the records are stored. The Court concludes that this factor
weighs in favor of finding that GMAC and Green Tree were independent contractors.
Woodring, 892 F. Supp. 2d at 777 (job sites controlled by the independent contractor);
Neel, 2014 U.S. Dist. LEXIS 28891 at *18-*19; Hill v. City of Horn Lake, No. 2012-CA01748-SCT, 2015 Miss. LEXIS 15, at *11 (Miss. Jan. 15, 2015) (“[T]he right to inspect,
in itself, is not sufficient to trigger a master-servant relationship.”).
9
5.
Whether Fannie Mae Furnished Materials to Its Servicers for Work or
Received Output Thereof
The Court doubts that this factor is applicable here, as this case does not involve
the provision of raw materials and output of a finished product. However, according to
Fannie Mae’s 30(b)(6) representative [215-7], its loan servicers report to credit
agencies, force place insurance, refer loans for foreclosure, hire and fire legal counsel
for foreclosure, apply hazard loss proceeds, assign deeds of trust, and release deeds of
trust at their own discretion. These are arguably forms of “output.” See Neel, 2014 U.S.
Dist. LEXIS 28891 at *19. However, Fannie Mae also imposes certain reporting
requirements on its servicers [309-4], another form of “output.” The Court concludes
that this factor is either inapplicable or neutral.
6.
Whether Fannie Mae Had the Right to Proscribe and Furnish the Details
of the Kind and Character of Work to Be Done
Fannie Mae provides Servicing Guides [212-7], which “set forth broad
parameters under which servicers should use their sound professional judgment as
mortgage servicers in the performance of their duties.” Fannie Mae specifically
prescribes that its servicers “maintain the discretion to apply appropriate judgment in
dealing with borrowers and mortgage loans on a case-by-case basis, consistent” with
its broad servicing policies. While it requires loan servicers to maintain “established
written procedures that are consistent with [its] servicing policies,” it does not specify
the contents of those procedures or the manner in which servicers are required to
implement them. Fannie Mae’s loan servicers may collect late charges and other fees
10
as they wish, consistent with the loan documents and applicable law [212-7]. Servicers
may also propose loan modifications under certain circumstances [212-6].
Plaintiff argues that Fannie Mae exercises “just short of absolute” control over
its servicers’ work, citing the table of contents from the Servicing Guides. However,
this factor concerns “details.” Although the Servicing Guides address a wide variety of
subject matter, they only provide general goals and parameters, rather than specific
details regarding the servicing of each loan. Accordingly, this factor weighs in favor of
independent contractor status. Id. at *20 (citing Kossuth Trucking, Inc. v. Caterpillar,
Inc., 941 So. 2d 903, 910 (Miss. Ct. App. 2006) (where manufacturer provided shop with
service manuals and guides, that did not constitute control over the details of the
work)); Chisolm v. MDOT, 942 So. 2d 136, 141-42 (Miss. 2006) (while MDOT provided
specifications for work, the construction company retained control over performance
of specific aspects of the work).
7.
Whether Fannie Mae Had the Right to Supervise and Inspect the Work
Fannie Mae has the right to examine and audit its loan servicers’ records at any
time [309-3]. Specifically, it may monitor monthly accounting reports, conduct periodic
procedural reviews, audit internal records and operating procedures, and perform
underwriting reviews of loans on a random sample basis. Fannie Mae’s 30(b)(6)
representative testified [215-7] that Fannie Mae had an “audit group,” but he denied
that Fannie Mae supervises its servicers’ operations. He also testified that Fannie Mae
has limited access to some servicers’ electronic data systems.
The Court finds that, on the whole, Fannie Mae does not supervise its servicers’
11
work, but it does inspect their work. This factor is neutral. Cf. Neel, 2014 U.S. Dist.
LEXIS 28891 at*20-*21; Hill, 2015 Miss. LEXIS 15 at *11 (“[T]he right to inspect, in
itself, is not sufficient to trigger a master-servant relationship.”).
8.
Whether Fannie Mae Had the Right to Direct the Details of the Manner in
Which Its Servicers Worked
The Court discussed the evidence relevant to this factor in subsection 6, above.
The record demonstrates that Fannie Mae provides broad guidelines which its loan
servicers must follow, but it does not dictate the details of their day-to-day work. The
Servicing Guides only provide general parameters, rather than specific details
regarding the servicing of each loan. Accordingly, this factor weighs in favor of
independent contractor status. Neel, 2014 U.S. Dist. LEXIS 28891 at *21-*22; Kossuth
Trucking, 941 So. 2d at 910 (where manufacturer provided shop with service manuals
and guides, that did not constitute control over the details of the work); Chisolm, 942
So. 2d at 141-42 (while MDOT provided specifications for work, the construction
company retained control over performance of specific aspects of the work).
9.
Whether Fannie Mae Had the Right to Employ, Discharge, or Fix
Compensation for Its Servicers’ Employees
Fannie Mae’s 30(b)(6) representative provided undisputed testimony [215-7] that
Fannie Mae does not have the right to employ, discharge, or fix compensation for its
loan servicers’ employees. Therefore, this factor weighs in favor of independent
contractor status. Neel, 2014 U.S. Dist. LEXIS 28891 at *22.
10.
Whether Fannie Mae Was Obligated to Pay Its Servicers’ Employees
12
Fannie Mae’s 30(b)(6) representative provided undisputed testimony [215-7] that
Fannie Mae does not pay its loan servicers’ employees. Therefore, this factor weighs
in favor of independent contractor status. Neel, 2014 U.S. Dist. LEXIS 28891 at *22.
11.
Conclusion
After consideration of the factors outlined in Richardson v. APAC-Mississippi,
631 So. 2d 143, 148-49 (Miss. 1994), the Court concludes that GMAC and Green Tree
were independent contractors of Fannie Mae. Most of the factors weigh in favor of
independent contractor status. On the whole, the record does not demonstrate that
Fannie Mae exercised the sort of detail-oriented, day-to-day control over the loan
servicers’ work that is required for employee status. At best, Fannie Mae provided
broad guidelines under which GMAC and Green Tree were required to function – not
the sort of substantial control exercised in an employer-employee relationship.
Therefore, the Court finds that GMAC and Green Tree were Fannie Mae’s independent
contractors, rather than its employees or agents. Neel, 2014 U.S. Dist. LEXIS 28891
at *23.
C.
Ratification
Plaintiff also argues that Fannie Mae is liable for the actions of its loan
servicers, GMAC and Green Tree, because it ratified their actions. Mississippi law
defines ratification as “the affirmance by a person of a prior act which did not bind him
but which was done or proffesedly done on his account, whereby the act, as to some or
all persons is given effect as if originally authorized by him.” Barnes, Broom, Dallas
& McLeod, PLLC v. Cappaert, 991 So. 2d 1209, 1212 (Miss. 2008).
13
Ratification does not arise by operation of law; rather, a person ratifies
an act by (a) manifesting assent that the act shall affect that person’s
legal relations, or (b) conduct that justifies a reasonable assumption that
the person so consents. It is true that, under some circumstances, a
principal’s inaction can result in ratification, but only where the principal
has notice that others will infer from his silence that he intends to
manifest his assent to the act.
Kinwood Capital Group, LLC v. BankPlus, 60 So. 3d 792, 797 (Miss. 2011).
“[I]n order that there be a ratification there must be a voluntary assumption of
the unauthorized act either on full information or on less than full information if
undertaken deliberately in disregard of the fact that all knowledge of the transaction
available has not been obtained.” Green Acres Farms v. Brantley, 651 So. 2d 525, 52829 (Miss. 1995). Unless the purported principal deliberately disregards his own
ignorance of relevant facts, his lack of knowledge renders any alleged ratification
invalid. Id. at 530. As the Mississippi Supreme Court has stated:
The principal, before a ratification becomes effectual against him, must
be shown to have had previous knowledge of all the facts and
circumstances in the case, and if he assented to or confirmed the act of
his agent while in ignorance of all the circumstances, he can afterwards,
when informed thereof, disaffirm it. And the principal’s want of such
knowledge, even if it arises from his own carelessness in inquiring or
neglect in ascertaining facts, or from other causes, will render ratification
invalid. His knowledge is an essential element.
Id.
Plaintiff’s argument focuses on three specific interactions between Fannie Mae
and the loan servicers, all of which concern the submission of “Form 176,” a form by
which the loan servicers make recommendations to Fannie Mae regarding the
14
application of insurance proceeds.3 The loan servicer receives the insurance proceeds
and makes a recommendation to Fannie Mae. Fannie Mae then approves or
disapproves the recommendation based on the information provided in the form. At all
relevant times, the loan servicer manages and applies the insurance proceeds.
Ultimately, the decision is driven by the homeowner, who communicates with the loan
servicer, and Fannie Mae would only know of the homeowner’s instructions if the loan
servicer provided the information to Fannie Mae.
In December 2011, GMAC submitted a Form 176 to Fannie Mae, in which
GMAC told Fannie Mae that the total outstanding balance on the loan was
$114,040.65. GMAC recommended that Fannie Mae apply the Alfa Insurance proceeds
of $99,623.48, and take a loss on the loan of $14,417.17. GMAC did not inform Fannie
Mae that Plaintiff had made any request concerning the insurance proceeds. Fannie
Mae responded by asking GMAC to resubmit the Form 176 with an opinion as to the
property’s current value, so that Fannie Mae could determine whether there was any
value in the property to be recovered through foreclosure. In the meantime, Fannie
Mae recommended that GMAC proceed with foreclosure. Fannie Mae’s corporate
representative explained that accepting insurance proceeds of $99,623.48 as a complete
payment for a note of $114,040.65 would result in a loss of $14,417.17.4 Therefore,
3
Most of the pertinent facts concerning this issue are contained in the
exhibits at Docket Nos. [215-7], [212-11], [309-12], [230-2], and [230-3], among
others.
4
Although their figures are different, Plaintiff’s counsel at the time agreed
[136-18] with GMAC that application of the insurance proceeds would leave a
deficiency.
15
absent an opinion that there was no value to recover in the property, Fannie Mae
recommended that GMAC continue with foreclosure, in an effort to minimize the loss.
GMAC, however, never resubmitted the Form 176 with additional information.
In August 2012, Fannie Mae received another Form 176 from GMAC,
recommending a short payoff. As more time had passed, more interest would have
accrued on the debt, increasing the deficiency. GMAC provided a valuation report
showing that the property’s as-is value was $90,000, and it did not inform Fannie Mae
that Plaintiff had made any request concerning the insurance proceeds. Accordingly,
Fannie Mae again recommended that GMAC proceed with a foreclosure sale to
minimize the loss.
Finally, in May 2013, Green Tree submitted a Form 176 in which it
recommended that it apply the insurance proceeds to the mortgage, as the repair or
restoration of the property was not economically feasible. However, a Green Tree
representative’s email accompanying the form asked to “hold the claim funds until the
foreclosure has been completed.” Additionally, the form represented that the property’s
value “as repaired” was $100,000, that the estimated cost of repair was $99,623.48, and
that the property’s value “as is” was $100,000. The form also included a property
inspection report showing that there was an occupied mobile home on the property.
Green Tree did not inform Fannie Mae that Plaintiff had made any request concerning
the insurance proceeds. Therefore, based on the information provided by Green Tree,
Fannie Mae concluded that repair was actually economically feasible, as the cost to
repair did not exceed the estimated value as repaired. It told Green Tree to continue
16
with the foreclosure sale and reduce the bid by the insurance proceeds.
Plaintiff argues that Fannie Mae’s responses to GMAC’s and Green Tree’s Form
176 recommendations constituted ratification of the loan servicers’ actions – their
failure to correctly apply the insurance proceeds to the loan. In response, Fannie Mae
argues that its recommendations were based on the incomplete and/or incorrect
information provided to it by GMAC and Green Tree.
It appears to be undisputed that Fannie Mae’s decisions were based on faulty
information. All three forms indicated that the deficiency would be greater than it
would have been if the insurance proceeds had been correctly applied in November
2010. Fannie Mae’s representative provided undisputed testimony that its responses
to Form 176 requests are based on the information provided in the form, that its loan
servicers manage and apply insurance proceeds, and that Fannie Mae has no
knowledge of homeowners’ requests unless notified by the servicer.
Plaintiff has not cited to any evidence in the record tending to show that Fannie
Mae knew its servicers provided it with incorrect and/or incomplete information.
Likewise, Plaintiff has not cited to any evidence that Fannie Mae deliberately
disregarded its own ignorance. Id. At best, the facts demonstrate that Fannie Mae
negligently failed to investigate the facts provided by GMAC and Green Tree, and that
is not sufficient to create a ratification. As noted above:
The principal, before a ratification becomes effectual against him, must be
shown to have had previous knowledge of all the facts and circumstances in the
case, and if he assented to or confirmed the act of his agent while in ignorance
of all the circumstances, he can afterwards, when informed thereof, disaffirm it.
And the principal’s want of such knowledge, even if it arises from his own
carelessness in inquiring or neglect in ascertaining facts, or from other causes,
17
will render ratification invalid. His knowledge is an essential element.
Id. “A principal’s mere carelessness or simple neglect is generally not enough to
support a finding that he deliberately disregarded the information available to him.”
Myatt v. Sun Life Assur. Co., No. 3:10-CV-701-CWR-FKB, 2012 U.S. Dist. LEXIS
157648, at *7-*8 (S.D. Miss. Nov. 2, 2012).
Plaintiff failed to provide any evidence that Fannie Mae had all of the
information relevant to its handling of the Form 176 requests, or that it deliberately
disregarded its own ignorance. Her argument on this issue is based on nothing but
conjecture and speculation about what Fannie Mae could or purportedly should have
done, rather than what it actually did or knew at the time. Therefore, the Court finds
that Fannie Mae did not ratify the actions of GMAC or Green Tree. See First Trinity
Capital Corp. v. W. World Ins. Group, Inc., No. 2:12-CV-156-SA-SAA, 2014 U.S. Dist.
LEXIS 14503, at *22-*25 (N.D. Miss. Feb. 5, 2014); First Trinity Capital Corp. v. Canal
Indem. Ins. Co., No. 2:12-CV-157-SA-SAA, 2014 U.S. Dist. LEXIS 14502, at *22-*24
(N.D. Miss. Feb. 4, 2014).
D.
Nondelegable Duty
Plaintiff also argues that Fannie Mae is liable for the actions of its loan
servicers, GMAC and Green Tree, because servicing of loans is a non-delegable duty.
Plaintiff has not cited – and the Court was unable to find – any Mississippi law
providing that the servicing of mortgage loans is a non-delegable duty. In the absence
of such authority, it would be inappropriate for a federal court exercising diversity
jurisdiction to extend state law by creating a new non-delegable duty. See Morris v.
18
Homco Int’l, Inc., 853 F.2d 337, 343 (5th Cir. 1988) (“As a federal court sitting in
diversity jurisdiction, the district court should have hesitated, as we would, to extend
[state] law beyond the boundaries currently established in the state’s own courts.”);
Horton Archery, LLC v. Farris Bros., Inc., 2014 U.S. Dist. LEXIS 160223, at *5-*6 (S.D.
Miss. Nov. 22, 2014). The Court further notes that the act of servicing a mortgage loan
does not implicate the sort of obvious physical safety issues typically at stake in cases
involving non-delegable duties. See Neel, 2014 U.S. Dist. LEXIS 28891 at *25-*26
(citing multiple cases).
E.
Prospectus
Finally, Plaintiff argues that Fannie Mae should be held to certain
representations made in a Prospectus [230-6] sent to its investors. Plaintiff has not
demonstrated, however, that Fannie Mae’s representations to its shareholders have
any bearing on its relationships with loan servicers. The Prospectus is wholly
irrelevant to this issue.
F.
Conclusion
For the reasons provided above, the Court concludes that Fannie Mae is not
liable for the actions of its loan servicers. The Court grants Fannie Mae’s Motion for
Summary Judgment [212] and denies Plaintiff’s Motion for Partial Summary
Judgment [228] as to this issue.
IV. GREEN TREE’S LIABILITY FOR GMAC’S ACTIONS [217]
The next issue presented by the parties’ motions is the extent of Green Tree’s
liability for GMAC’s actions. Plaintiff argues that Green Tree is liable under theories
19
of successor liability and ratification.
A.
Successor Liability
The general rule in Mississippi is “that a corporation which acquires all of the
assets, but no stock, of another corporation does not also acquire the debts and
liabilities of the original.” Huff v. Shopsmith, 786 So. 2d 383, 387 (Miss. 2001). There
are only four exceptions to the general rule: “(1) When the successor expressly or
impliedly agrees to assume the liabilities of the predecessor; (2) When the transaction
may be considered a de factor merger; (3) When the successor may be considered a
mere continuation of the predecessor; or (4) When the transaction was fraudulent.” Id.
at 388. Plaintiff argues that Green Tree is liable under the first option – that it
expressly or impliedly agreed to assume GMAC’s liabilities. The record tells a different
story.
Ocwen Loan Servicing, LLC (“Ocwen”) purchased certain servicing rights from
GMAC pursuant to its Chapter 11 bankruptcy, including the right to service Plaintiff’s
loan. The United States Bankruptcy Court for the Southern District of New York
entered an Order [217-9] approving and setting forth the conditions of the sale. That
Order provided:
23. No Successor Liability. Neither the Purchaser, nor any of its
successors or assigns, or any of their respective affiliates shall have any
liability for an Interest that arose or occurred prior to the Closing, or
otherwise is assertable against the Debtors or is related to the Purchased
Assets prior to the Closing. The Purchaser shall not be deemed, as a
result of any action taken in connection with the Ocwen APA or any of
the transactions or documents ancillary thereto or contemplated thereby
or in connection with the acquisition of the Purchased Assets, to: (i) be
legal successors, or otherwise be deemed successors to the Debtors; (ii)
have, de facto or otherwise, merged with or into the Debtors; or (iii) be a
20
mere continuation or substantial continuation of the Debtors or the
enterprise of the Debtors. Without limiting the foregoing, the Purchaser
shall not have any successor, transferee, derivative, or vicarious liabilities
of any kind or character for an Interests, including under any theory of
successor or transferee liability, de facto merger or continuity,
environmental, labor and employment, and products or antitrust liability,
whether known or unknown as of the Closing, no existing or hereafter
arising, whether fixed or contingent, asserted or unasserted, liquidated
or unliquidated.
An Asset Purchase Agreement (“APA”) was attached as an exhibit to the Order.
The APA provided that the “Purchaser shall assume and be responsible for all of the
Assumed Liabilities,” but that “[o]ther than the Assumed Liabilities, Purchaser shall
not assume any Liability of any nature or kind whatsoever.” The APA defined
“Assumed Liabilities” as “the Liabilities arising under any Assumed Contract to the
extent such Liabilities arose on and after the Closing,” and “all Liabilities of the
Business or Purchased Assets to the extent arising from the conduct of the Business
on or after the Closing, other than any Retained Liabilities.” The definition of
“Retained Liabilities” includes “any action, inaction, event, state of facts, circumstance
or condition occurring or failing to occur, or existing or failing to exist, on or prior to the
Closing Date and any third-party Claim or defense related thereto, regardless of when
asserted . . . .”
The APA also granted Ocwen the right to assign any rights acquired from GMAC
to an entity owned by Walter Investment Management Corporation (“Walter”), Green
Tree’s parent corporation. The APA specifically provided that “[u]pon any such
permitted Walter assignment, the references in this Agreement to Purchaser shall also
apply to any such Walter Entity to the extent such references pertain to the” assets
21
assigned to the Walter subsidiary by Ocwen. Walter agreed [243-7] to be bound by the
APA with respect to the assets assigned to it.
The parties apparently required Fannie Mae’s approval of the transaction.
Therefore, Green Tree and Fannie Mae entered into an “Agreement with Respect to
Servicing Transfer.” Therein, the parties represented that Green Tree was “not willing
to assume” GMAC’s warranties and obligations predating the transfer of servicing
rights, and that GMAC would “retain its liability and responsibility” for all warranties
and obligations predating the transfer, as provided by the APA. GMAC executed an
“Assignment and Assumption Agreement” [243-7] with Green Tree, in which it “agreed
to assign to [Green Tree] all of its rights and obligations” as identified in the APA,
which was attached as an exhibit.
It is clear, therefore, that GMAC and Ocwen intended to execute a sale of
GMAC’s servicing rights without any their accompanying encumbrances, claims, or
liabilities. The Bankruptcy Court approved the sale, and its Order [217-9] declared
that the servicing rights were purchased “free and clear of all Claims, Liens,
encumbrances, or other interests . . . .” Green Tree did not “expressly or impliedly
agree[] to assume the liabilities of” GMAC, id. at 388, and Plaintiff’s successor liability
argument has no merit.
B.
Judicial Estoppel
Plaintiff argues that Green Tree is judicially estopped from arguing that it can
not be liable for GMAC’s actions because Fannie Mae initially objected to the transfer
of servicing rights in GMAC’s bankruptcy. “The doctrine of judicial estoppel prevents
22
a party from asserting a claim in a legal proceeding that is inconsistent with a claim
taken by that party in a previous proceeding.” Reed, 650 F.3d at 573-74. The doctrine
has three elements: “(1) the party against whom the judicial estoppel is sought has
asserted a legal position which is plainly inconsistent with a prior position; (2) a court
accepted the prior position; and (3) the party did not act inadvertently.” Id. at 574.
Green Tree did not oppose the transfer of servicing rights free and clear of
liabilities. Therefore, Plaintiff’s judicial estoppel argument has no merit.
C.
Production/Disclosure
Plaintiff argues that the Court should not consider the Bankruptcy Court’s
Order and APA [217-9] because they were not produced during discovery, but Green
Tree provided undisputed evidence [315-1] that the Order and APA were, in fact,
produced on July 31, 2014.
Plaintiff also argues that the Court should not consider the “Agreement with
Respect to Servicing Transfer” between Fannie Mae and Green Tree [222-1]. The Court
already addressed this issue in its Orders of [351, 354] of December 2 and 11, 2014.
The Court offered Plaintiff a chance to cure whatever prejudice might have accrued to
her by Defendants’ failure to timely produce the contract, but she declined the
opportunity.
D.
Hearsay/Authentication
Plaintiff also argues that the “Agreement with Respect to Servicing Transfer”
between Fannie Mae and Green Tree [222-1] is hearsay. However, “[s]igned
instruments such as . . . contracts . . . are writings that have independent legal
23
significance, and are nonhearsay.” Kepner-Tregoe, Inc. v. Leadership Software, 12 F.3d
527, 540 (5th Cir. 1994); see also FED. R. EVID. 803(15). “To introduce a contract, a
party need only authenticate it.” Kepner-Tregoe, 12 F.3d at 540. Green Tree
authenticated the contract with the declaration of its 30(b)(6) representative and
Regional Manager, Brad Hardwick [217-4]. Hardwick’s declaration demonstrates that
he is a proper declarant and that he has sufficient knowledge to confirm that the
contract is what it purports to be. FED. R. EVID. 901(b)(1).5
E.
Ratification
Finally, Plaintiff argues that Green Tree is liable for GMAC’s actions under a
theory of ratification. However, ratification is “the affirmance by a person of a prior act
which did not bind him but which was done or proffesedly done on his account,
whereby the act, as to some or all persons is given effect as if originally authorized by
him.” Cappaert, 991 So. 2d at 1212 (emphasis added). None of GMAC’s actions were
“done or professedly done on [Green Tree’s] account . . . .” Id. Green Tree did not
contract with GMAC or otherwise engage it to perform any services whatsoever. There
is no principal/agent, independent contractor, or employer/employee relationship
between them. The theory of ratification is inapplicable.
F.
Conclusion
5
Of course, Plaintiff also objects to Hardwick’s declaration. The Court
declines to address Plaintiff’s counter-motion to strike Hardwick’s declaration, as it
was not separately filed. See L.U.Civ.R. 7(b)(3)(C). The Court further notes that
Plaintiff’s objections concerning legal conclusions and conclusory allegations in
Hardwick’s declaration are irrelevant to the bare facts concerning the authenticity
of the document.
24
For the reasons provided above, the Court concludes that Green Tree is not
liable for GMAC’s actions. The Court grants Green Tree’s Motion for Summary
Judgment [217] and denies Plaintiff’s Motion for Partial Summary Judgment [228]6 as
to this issue.
V. BREACH OF CONTRACT [212, 214, 217]
In Mississippi, a party asserting a breach of contract must prove 1) the existence
of a valid and binding contract, and 2) that the opposing party has broken, or breached
it. Business Communs., Inc. v. Banks, 90 So. 3d 1221, 1224-25 (Miss. 2012). If a party
seeks monetary damages as a remedy for breach of contract, they “must also put into
evidence, with as much accuracy as possible, proof of the damages being sought.” Id.
at 1225. Plaintiff claims that Defendants breached Fannie Mae’s servicing guides and
the deed of trust/promissory note.
A.
Servicing Guides
Plaintiff first argues that Defendants breached Fannie Mae’s Servicing Guides,
of which she is a third-party beneficiary. “The right of a third party beneficiary to
maintain an action on the contract must ‘spring’ from the contract terms.” Trammell
v. State, 622 So. 2d 1257, 1260 (Miss. 1993). “A person or entity may be deemed a thirdparty beneficiary if: (1) the contract between the original parties was entered for that
person’s or entity’s benefit, or the original parties at least contemplated such benefit
6
Although Plaintiff titled her motion “Partial Motion for Summary Judgment
as to Defendants’ Liability for the Acts of Its Servicing Agents,” she only addressed
Fannie Mae’s liability for GMAC’s actions. Nevertheless, it is denied to the extent
she intended it to address Green Tree’s liability for GMAC’s actions.
25
as a direct result of performance; (2) the promisee owed a legal obligation or duty to
that person or entity; and (3) the legal obligation or duty connects that person or entity
with the contract.” Simmons Hous., Inc. v. Shelton, 36 So. 3d 1283, 1286 (Miss. 2010).
“A third-party beneficiary also must benefit directly from the contract. A mere
incidental or consequential benefit is insufficient.” Id.; see also Trammell, 622 So. 2d
at 1260.
This Court has previously ruled that “borrowers are not third-party beneficiaries
of mortgage servicing guidelines.” Pennell v. Wells Fargo Bank, N.A., No. 1:10-CV-582HSO-JMR, 2012 U.S. Dist. LEXIS 96426, at *23-*25 (S.D. Miss. July 12, 2012) (citing
multiple authorities), aff’d, 507 F. App’x 335 (5th Cir. 2013); Neel, 2014 U.S. Dist.
LEXIS 28891 at *10-*11. In fact, the Court specifically addressed Fannie Mae’s
servicing guidelines and reached the same conclusion. Neel, 2014 U.S. Dist. LEXIS
28891, at *10; see also Hinton v. Fed. Nat’l Mortgage Assoc., 945 F. Supp. 1052, 1057
(S.D. Tex. 1996) (borrower was not a third-party beneficiary of Fannie Mae servicing
guidelines).
Plaintiff has provided no evidence or argument to persuade the Court to revisit
this issue. She failed to identify any provision in the servicing guides that expresses
an intention to make mortgagors third party beneficiaries. Pennell, 2012 U.S. Dist.
LEXIS 96426 at *25. Rather, the servicing guides are “set[s] of instructions from a
lender-principal to a servicer-agent . . . ,” with no mention or contemplation of
mortgagors. Hinton, 945 F. Supp. at 1057. Therefore, pursuant to the Court’s previous
decisions and the abundant authorities cited therein, the Court finds that Plaintiff is
26
not a third-party beneficiary of Fannie Mae’s servicing guides and has no standing to
enforce them. See Roberts v. Cameron-Brown Co., 556 F.2d 356, 357 (5th Cir. 1977)
(plaintiff was incidental beneficiary of mortgage guideline handbook, rather than an
intended beneficiary); Deerman v. Fed. Home Loan Mortg. Corp., 955 F. Supp. 1393,
1404-05 (N.D. Ala. 1997); Hinton, 945 F. Supp. at 1057-58; Neel, 2014 U.S. Dist.
LEXIS 28891 at *11; Pennell, 2012 U.S. Dist. LEXIS 96426 at *25 (citing multiple
cases).
B.
Promissory Note/Deed of Trust
Plaintiff also argues that Defendants breached the promissory note and deed of
trust. She alleges that they 1) failed to apply the insurance funds to her loan, 2) failed
to release the deed of trust, 3) improperly force-placed insurance on the property, and
4) sent inspectors to the property.
1.
Fannie Mae
First, the Court notes that each of these alleged breaches involves a loan
servicer’s duty, rather than a duty accruing to Fannie Mae. It is undisputed that
Fannie Mae did not receive any insurance payments. It is likewise undisputed that
Fannie Mae did not force-place insurance or send inspectors to the property. The
alleged breaches argued by Plaintiff involve actions and duties of the loan servicers,
rather than Fannie Mae. As the Court held above, Fannie Mae is not liable for the
actions of its loan servicers. Therefore, these breach of contract claims do not lie
against Fannie Mae.
2.
Failure to Apply Alfa Insurance Payment
27
Plaintiff argues that Green Tree breached the promissory note and deed of trust
by failing to apply the Alfa Insurance payment to her loan balance. It is undisputed,
however, that immediately after Plaintiff contacted Green Tree and requested that it
apply the insurance funds to her loan, Green Tree investigated the matter, reversed
the interest and charges that GMAC had charged to Plaintiff’s account, applied the
insurance funds to the loan, and issued a refund to Plaintiff for the balance. Therefore,
Green Tree did not fail to apply the insurance proceeds, and, as the Court held above,
it can not be held liable for GMAC’s actions.
3.
Failure to Release the Deed of Trust
Next, Plaintiff argues that Green Tree failed to release the deed of trust. This
allegation is simply not true. On November 25, 2013 – after Green Tree applied the
funds to the loan, reversed GMAC’s charges, and issued a refund to Plaintiff for the
balance – it filed an “Authorization to Cancel” [217-10] in the Perry County Chancery
Clerk’s Records of Deeds. Therein, it asked the Clerk “to enter satisfaction of and
cancel” the Deed of Trust. Green Tree even went a step further and later filed an
“Amended and Restated Limited Power of Attorney” between it and GMAC [269-2] and
a “Corrected Authorization to Cancel” after Plaintiff’s counsel complained that Green
Tree “had no authority” to release the deed of trust – despite the fact that Fannie Mae
owned the loan and contracted Green Tree to service it. Therefore, the Court finds that
Green Tree did, in fact, release the deed of trust, and, as the Court held above, it can
not be held liable for GMAC’s actions.
4.
Force-Placing Insurance
28
Plaintiff also argues that Green Tree breached the deed of trust by force-placing
insurance on the property after the house had burned down. The Deed of Trust [216-5]
provides, in pertinent part:
Borrower shall keep the improvements now existing or hereafter
erected on the Property insured against loss by fire, hazards included
within the term “extended coverage,” and any other hazards including,
but not limited to, earthquakes and floods, for which Lender requires
insurance. This insurance shall be maintained in the amounts (including
deductible levels) and for the periods that Lender requires. What Lender
requires pursuant to the preceding sentences can change during the term
of the Loan. . . .
If Borrower fails to maintain any of the coverages described above,
Lender may obtain insurance coverage, at Lender’s option and Borrower’s
expense. Lender is under no obligation to purchase any particular type
or amount of coverage. . . . Borrower acknowledges that the cost of the
insurance coverage so obtained might significantly exceed the cost of
insurance that Borrower could have obtained.
Therefore, the Deed of Trust specifically provided that the Borrower must maintain
whatever insurance coverage the Lender requires on any current or future
improvements. If the Borrower fails to maintain such coverage, the Lender may obtain
it at the Borrower’s expense.
After Green Tree started servicing Plaintiff’s loan, it did not know that her
house had burned down. All it knew was that the loan was in foreclosure status; that
a certain amount was purportedly owed in principal, interest, and fees; and that a
lesser amount of unapplied funds was in escrow. Green Tree sent Plaintiff four letters
[217-21, 217-22, 217-23, 217-24] advising of the servicing transfer. She failed to
respond to any of them.
Green Tree then sent Plaintiff a letter [217-25] asking for her to provide proof
29
of insurance. She failed to respond. As, the property was in foreclosure status and was
not insured, Green Tree obtained an inspection report, which showed that an occupied
single family dwelling with a market value of $100,000 existed on the property.
Accordingly, Green Tree sent another letter asking Plaintiff to provide proof of
insurance [217-26]. She again failed to respond. Therefore, Green Tree acquired
insurance coverage on the property. After Plaintiff eventually contacted Green Tree,
explained what had occurred with GMAC, and asked that the insurance funds be
applied to the loan amount from November 2010, Green Tree cancelled the insurance
and reversed all charges to Plaintiff’s account.
The Court concludes that Green Tree did not breach the Deed of Trust. The
contract specifically provided that the Lender could require the Borrower to maintain
whatever amount and type of insurance the Lender desired on the property – including
any future improvements. It further provided that the Lender could obtain such
coverage if the Borrower failed to do so. Therefore, Green Tree was entitled to forceplace insurance on the property.
4.
Inspections
Finally, Plaintiff argues that Green Tree breached the deed of trust by sending
inspectors to the property nine times between October 8, 2010, and September 11,
2011. It is undisputed that Green Tree did not begin servicing the loan until February
2013, and the Court previously held that it is not liable for GMAC’s actions.
To the extent Plaintiff complains of the April 2013 inspection, the Deed of Trust
specifically provides: “Lender or its agent may make reasonable entries upon and
30
inspections of the Property.” When Green Tree started servicing the loan, it did not
know that her house had burned down, but it did know that the loan was in foreclosure
status. Plaintiff then failed to respond to four letters [217-21, 217-22, 217-23, 217-24]
from Green Tree advising of the servicing transfer, and one letter [217-25] asking for
proof of insurance. Accordingly, it was well within its rights to obtain the April 2013
inspection report.
C.
Conclusion
For all of the reasons provided above, the Court finds that Plaintiff has failed
establish or to even create a genuine dispute of material fact as to any claim for breach
of contract. Accordingly, the Court denies Plaintiff’s Motion for Partial Summary
Judgment [214] and grants Defendants’ Motions for Summary Judgment [212, 217] as
to this issue.
VI. IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING [212, 217]
Plaintiff argues that Defendants breached the implied covenant of good faith and
fair dealing. “All contracts contain an implied covenant of good faith and fair dealing
in performance and enforcement.” Limbert v. Miss. Univ. for Women Alumnae Ass’n,
Inc., 998 So. 2d 993, 998 (Miss. 2008). Good faith has been described as “faithfulness
of an agreed purpose between two parties, a purpose which is consistent with justified
expectations of the other party.” Harris v. Miss. Valley State Univ., 873 So. 2d 970, 987
(Miss. 2004). “The breach of good faith is bad faith characterized by some conduct
which violates standards of decency, fairness or reasonableness.” Id. Bad judgment or
negligence does not constitute bad faith. Id. Instead, “bad faith implies some conscious
31
wrongdoing because of dishonest purpose of moral obliquity.” Lippincott v. Miss.
Bureau of Narcotics, 856 So. 2d 465, 468 (Miss. Ct. App. 2003).
Plaintiff offered no evidence whatsoever that the named Defendants – Fannie
Mae and Green Tree – engaged in “conscious wrongdoing because of dishonest purpose
or moral obliquity.” Id. Likewise, she provided no evidence of “conduct which violates
standards of decency, fairness or reasonableness.” Harris, 873 So. 2d at 987. She
apparently conflates Defendants’ actions with those of GMAC, and the Court already
ruled that neither Fannie Mae nor Green Tree may be held liable for GMAC’s actions.
The Court further notes that there can be no breach of the duty of good faith and fair
dealing without a breach of contract, Frye v. S. Farm Bureau Cas. Ins. Co., 915 So. 2d
486, 492 (Miss. Ct. App. 2005), and Plaintiff has no valid claim for breach of contract.
Threefore, the Court grants Defendants’ Motions for Summary Judgment [212, 217]
on this issue.
VII. SAFE ACT [212, 217]
Plaintiff argues that Defendants violated Mississippi’s SAFE Act, MISS. CODE
ANN. § 81-18-3, et seq. In response, Defendants argue that the SAFE Act does not
provide a private cause of action.
The SAFE Act regulates the activities of “mortgage brokers,” “mortgage lenders,”
and “mortgage loan originators.” See MISS. CODE ANN. §§ 81-18-3, 81-18-27. Among
other things, it provides a licensing process,7 imposes record-keeping requirements,8
7
See, e.g. MISS. CODE ANN. § 81-18-9.
8
See, e.g. MISS. CODE ANN. § 81-18-21.
32
prohibits certain activities,9 regulates the fees charged to borrowers,10 and authorizes
the Commissioner of the Mississippi Department of Banking and Consumer Finance
(“the Commissioner”) to promulgate rules and regulations.11 Enforcement of the SAFE
Act was vested in the Commissioner, through cease-and-desist orders and civil
penalties. MISS. CODE ANN. § 81-18-39.
“[A] mere violation of a statute or regulation will not support a claim where no
private cause of action exists. The general rule for the existence of a private right of
action under a statute is that the party claiming the right of action must establish a
legislative intent, express or implied, to impose liability for violations of that statute.”
Tunica County v. Gray, 13 So. 3d 826, 829 (Miss. 2009). The Mississippi Supreme
Court “has declined to find a private right of action for violations of various statutes
and regulations in the absence of legislative intent.” Id.; see also Hill, 2015 Miss.
LEXIS 15 at *20.
“As the party asserting a right of action, [Plaintiff has] the burden of
establishing the required legislative intent.” Hill, 2015 Miss. LEXIS 15 at *20 (citing
Tunica County, 13 So. 3d at 829). But Plaintiff cited no legislative history, regulations,
or other authorities indicating that the Mississippi legislature intended to create a
private right of action for violations of the SAFE Act. The structure and language of
the Act indicate that the legislature intended its provisions to be “conditions attached
9
See, e.g. Miss. Code Ann. §§ 81-18-27, 81-18-55.
10
See, e.g. MISS. CODE ANN. § 81-18-28.
11
See MISS. CODE ANN. § 81-18-29.
33
to the exercise of a legislative privilege to be enforced by the” Mississippi Department
of Banking and Consumer Finance, “not a source of tort law to be invoked by private
litigants . . . .” Major Mart, Inc. v. Mitchell Distributing Co., Inc., No. 3:13-CV-942HTW-LRA, 2014 WL 4723599, at *10 (S.D. Miss. Aug. 14, 2014) (quoting Stone v.
Farish, 23 So. 2d 911, 913 (Miss. 1945)). The Court further notes that the United
States District Court for the Northern District of Mississippi previously found that
there was no private remedy for violations of the Mississippi Mortgage Consumer
Protection Law, the predecessor to the SAFE Act. See Hambrick v. Bear Stearns
Residential Mortg., 2008 U.S. Dist. LEXIS 98659, at *5-*6 (N.D. Miss. Dec. 5, 2008).
Accordingly, the Court finds that Plaintiff has not demonstrated that the
Mississippi legislature intended to create an implied private remedy for violations of
the SAFE Act. This Court declines to create a private right of action where none
previously existed. Defendants’ Motions for Summary Judgment [212, 217] are granted
as to this issue.
VIII. RESPA [223]
Plaintiff argues that Defendants’ violated certain provisions of the Real Estate
Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq. In response,
Defendants argue that Plaintiff did not plead a claim for relief under RESPA, and,
therefore, no such claim is properly before the Court.
On October 21, 2013, Plaintiff filed her initial Complaint [1]. Therein, she
asserted claims of breach of contract, willful breach of contract, conversion, fraud,
breach of duty of good faith and fair dealing, intentional infliction of emotional distress,
34
defamation, and violation of the Fair Debt Collection Practices Act. The Complaint [1]
contained no mention of RESPA, and Plaintiff alleged no facts indicating that
Defendants had violated RESPA.
On June 12, 2014, Plaintiff filed a Motion to Amend [68] her Complaint to assert
legal theories of respondeat superior and ratification. The proposed Amended
Complaint [68-6] contained no mention of RESPA, and Plaintiff alleged no facts
indicating that Defendants had violated RESPA.
On June 18, 2014, Plaintiff filed a Revised Motion to Amend [80] her Complaint.
She sought permission to assert legal theories of respondeat superior and ratification,
and to assert violations of Mississippi’s SAFE Act. Accordingly, the proposed Amended
Complaint [80-5] contained new theories of respondeat superior and ratification, as
well as a claim that Defendants had violated the SAFE Act. Plaintiff block-quoted
several sections of the SAFE Act, and one of the sections referred to RESPA. See MISS.
CODE ANN. § 81-18-55(1). Plaintiff also alleged that Defendants violated the SAFE Act
by failing “to comply with . . . requirements imposed by Sections 6 and 10 of” RESPA.
On July 8, 2014, the Court granted [131] Plaintiff’s Revised Motion to Amend
[80] and denied her initial Motion to Amend [68] as moot. On the same day, Plaintiff
filed an Amended Complaint [136] as previously proposed [80-5].
Plaintiff sought leave to amend her Complaint and add three new claims:
respondeat superior, ratification, and the SAFE Act. She did not seek leave to add a
RESPA claim, nor was she granted such leave. As the SAFE Act incorporates certain
requirements of RESPA, see MISS. CODE ANN. § 81-18-55(1), Plaintiff’s bare mention
35
of RESPA in her SAFE Act claim did not provide sufficient notice to Defendants that
she sought relief under both statutes. Defendants would have had to essentially guess
that Plaintiff sought relief under RESPA in addition to the SAFE Act – a result far
from the goal of “notice pleading.” Accordingly, Plaintiff did not assert a RESPA claim,
and no such claim is properly before the Court. Cutrera v. Bd. of Supervisors, 429 F.3d
108, 113 (5th Cir. 2005).12 The Court denies Plaintiff’s Motion for Partial Summary
Judgment [223] as to this issue.
IX. FDCPA [212, 217]
Both Defendants seek summary judgment [212, 217] as to Plaintiff’s claims
under the FDCPA.
A.
Fannie Mae
According to the Amended Complaint [136], Plaintiff asserted no FDCPA claim
against Fannie Mae. Therefore, no such claim is currently before the Court. Cutrera,
429 F.3d at 113. To the extent Plaintiff argues that Fannie Mae is vicariously liable for
the actions of its loan servicers, the Court rejects that argument for the reasons stated
above.
B.
Green Tree
In the Amended Complaint [136], Plaintiff alleged that Green Tree violated
several sections of the FDCPA – 15 U.S.C. §§ 1692c(a)(2), (b); 1692e(2)(A)(B), (5), (8);
12
Johnson v. City of Shelby, 135 S. Ct. 346, 190 L. Ed. 2d 309 (2014), cited by
Plaintiff in a supplement which she did not seek or receive leave to file, is
inapposite. Johnson merely provides that parties seeking money damages for the
violation of constitutional rights do not have to specifically invoke 42 U.S.C. § 1983
in their complaint. 135 S. Ct. at 347.
36
and 1692f(1) – but she failed to allege any specific facts in support of the claim.
Likewise, in her response [294] to Green Tree’s Motion for Summary Judgment [217],
she failed to identify the specific actions by Green Tree which she believes violated the
FDCPA or cite to any evidence of such actions.
The Court declines to search the record for evidence in support of Plaintiff’s
claims. “Where the burden of production at trial ultimately rests on the nonmovant,
the movant must merely demonstrate the absence of evidentiary support in the record
for the nonmovant’s case.” Cuadra, 626 F.3d at 812 (citation and punctuation omitted).
The nonmovant must then “come forward with specific facts showing that there is a
genuine issue for trial.” Id. Green Tree demonstrated the absence of support in the
record for Plaintiff’s claims, and Plaintiff failed to respond with specific facts showing
that there was a genuine issue for trial.
C.
Conclusion
For these reasons, the Court grants Defendants’ Motions for Summary
Judgment [212, 217] as to Plaintiff’s FDCPA claims.
X. DEFAMATION [212, 217, 226]
Plaintiff asserted defamation claims against each Defendant. To establish a
defamation claim, she must prove these elements: “(1) a false and defamatory
statement concerning plaintiff; (2) unprivileged publication to a third party; (3) fault
amounting at least to negligence on part of publisher; (4) and either actionability of
statement irrespective of special harm or existence of special harm caused by
publication.” Armistead v. Minor, 815 So. 2d 1189, 1193 (Miss. 2002). Plaintiff admitted
37
in
briefing
that
the
alleged
defamatory
statements
at
issue
are
“Repossession/Foreclosure” codes on reports submitted to credit reporting agencies
from March 2011 to January 2013 – while GMAC was servicing the loan.13
Fannie Mae’s 30(b)(6) representative provided undisputed testimony [212-4] that
Fannie Mae does not make reports to credit agencies. Rather, Fannie Mae’s loan
servicers do so at their own discretion. Therefore, Fannie Mae did not make the alleged
statements, and the Court previously held that it is not liable for the actions of its loan
servicers.
Green Tree’s 30(b)(6) representative provided undisputed testimony [217-5] that
Green Tree never made any negative reports to credit agencies about Plaintiff.
Furthermore, it is undisputed that Green Tree did not begin servicing Plaintiff’s loan
until February 2013 – after the alleged statements had already been made. In fact,
Green Tree asked the credit agencies to delete GMAC’s negative report from Plaintiff’s
record after it applied the insurance funds to her loan and cleaned up GMAC’s mess
[269-1], and the Court previously ruled that Green Tree is not liable for GMAC’s
actions. The Court further notes that Plaintiff failed to provide any evidence that
Green Tree republished GMAC’s negative credit reports. See Fairley v. ESPN, Inc., 879
13
Plaintiff also complains of Defendants’ alleged statements to counsel – both
their own and hers. “Statements made in connection with judicial proceedings,
including pleadings, are, if in any way relevant to the subject matter of the action,
absolutely privileged and immune from attack as defamation, even if such
statements are made maliciously and with knowledge of their falsehood.” McCorkle
v. McCorkle, 811 So. 2d 258, 266 (Miss. Ct. App. 2001). Therefore, Defendant’s
alleged statements to their own counsel (whether retained for purposes of a
foreclosure proceeding or for this case) or Plaintiff’s counsel can not be the subject of
a defamation claim.
38
F. Supp. 2d 552, 555 (S.D. Miss. 2012) (explaining that one can be liable for
republication of a previous defamatory statement) (citing Mitchell v. Random House,
Inc., 703 F. Supp. 1250, 1252-53 (S.D. Miss. 1988)).
The Court finds that Plaintiff failed to provide any evidence that either of the
two Defendants in this case made any defamatory statements. The Court grants their
Motions for Summary Judgment [212, 217] and denies Plaintiff’s Motion for Partial
Summary Judgment [226] as to her defamation claims.
XI. SLANDER OF TITLE [226]
Plaintiff did not assert any claim for slander of title in the Amended Complaint
[136]. The Amended Complaint [136] contains no reference to a claim for slander of
title, or to any alleged clouds on Plaintiff’s title. Therefore, no such claim is properly
before the Court. Cutrera, 429 F.3d at 113. The Court denies Plaintiff’s Motion for
Partial Summary Judgment [226] as to this issue.
XII. FRAUD [212, 217]
Both Defendants seek summary judgment [212, 217] as to Plaintiff’s fraud
claims. The elements of fraud are: “(1) a representation, (2) its falsity, (3) its
materiality, (4) the speaker’s knowledge of its falsity or ignorance of its truth, (5) his
intent that it should be acted on by the hearer and in the manner reasonably
contemplated, (6) the hearer’s ignorance of its falsity, (7) his reliance on its truth, (8)
his right to rely thereon, and (9) his consequent and proximate injury.” Trim v. Trim,
33 So. 3d 471, 478 (Miss. 2010).
A.
Fannie Mae
39
In her response [296] to Fannie Mae’s Motion for Summary Judgment [212],
Plaintiff failed to identify or provide evidence of any specific false representation by
Fannie Mae. Id. (requiring evidence of a representation and its falsity). Instead,
Plaintiff’s fraud claims appear to arise from the actions of Fannie Mae’s loan servicers.
As explained above, Fannie Mae is not liable for those actions. Therefore, the Court
grants Fannie Mae’s Motion for Summary Judgment [212] as to Plaintiff’s fraud claim.
B.
Green Tree
Plaintiff failed to cite any specific statement or representation by Green Tree
which forms the basis of a fraud claim. She broadly argues that any statement by
Green Tree that the amount owed on the loan was more than what it was in November
2010 – before GMAC wrongfully charged Plaintiff additional interest, fees, and other
charges – constitutes a fraudulent statement. However, she has not provided any
evidence that Green Tree knew that the information provided to it by GMAC was
wrong. In fact, Green Tree’s representative provided undisputed testimony [217-5] that
Green Tree did not know about the fire, insurance proceeds, and GMAC’s failure to
apply the funds until it researched the matter in response to Plaintiff’s inquiry.
Plaintiff also failed to demonstrate that she relied upon Green Tree’s alleged
misrepresentation, as she consistently testified that she never believed she owed more
than the principal amount owing in November 2010. Furthermore, she eventually
contacted Green Tree and asked that they fix GMAC’s error – an action she would not
have taken had she relied upon any alleged misrepresentations concerning the amount
owed on the loan.
40
Plaintiff also apparently argues that Green Tree’s force-placement of insurance
in April 2013 constitutes a fraudulent misrepresentation. Assuming that the forceplacement of insurance can even be considered a “representation” or “statement,”
Plaintiff failed to demonstrate that she relied upon Green Tree’s actions in any way.
Finally, Plaintiff also contends that Green Tree fraudulently threatened her
with foreclosure in a letter [217-30] dated October 22, 2013. Assuming that Plaintiff’s
description of the letter is accurate, she failed to provide any evidence that she relied
upon the letter, or that she was injured because of her reliance on it. Green Tree’s
investigation in response to Plaintiff’s written inquiry was well under way by October
22, 2013, and her loan was paid in full [217-31] approximately two weeks after the
letter was sent.
C.
Conclusion
Plaintiff failed to provide sufficient evidence to create a genuine dispute of
material fact as to a fraud claim against either Defendant. The Court grants their
Motions for Summary Judgment [212, 217] as to those claims.
XIII. CONVERSION [212, 217, 225]
Plaintiff contends that Defendants converted the Alfa Insurance funds by failing
to apply them to her loan. “[T]o make out a conversion, there must be proof of a
wrongful possession, or the exercise of a dominion in exclusion or defiance of the
owner’s right, or of an unauthorized and injurious use, or of a wrongful detention after
demand.” Wilson v. GMAC, 883 So. 2d 56, 68 (Miss. 2004). “There is no conversion until
the title of the lawful owner is made known and resisted or the purchaser exercises
41
dominion over the property by use, sale, or otherwise.” Id. A conversion claim “cannot
be maintained without proof that the defendant either did some positive wrongful act
with the intention to appropriate the property to himself, or to deprive the rightful
owner of it, or destroyed the property.” Id.
It is undisputed that Fannie Mae has never possessed, used, detained, or
otherwise exercised dominion over the funds at issue. Therefore, Fannie Mae can not
have committed the tort of conversion. See id. (requiring that the defendant wrongfully
possessed, exercised dominion over, or wrongfully detained the allegedly converted
property). Additionally, the Court already ruled that Fannie Mae is not liable for the
actions of its loan servicers.
The record does not indicate that Green Tree committed any “positive wrongful
act[s]” with the intention of appropriating the money, exercising dominion over it,
depriving Plaintiff of it, or destroying it. Green Tree began servicing Plaintiff’s loan on
February 1, 2013, and it only knew what GMAC’s limited records showed – that the
loan was already in foreclosure status, that $99,623.48 of unidentified funds had not
been applied to the loan, and that Plaintiff purportedly owed $114,503.29 in principal,
interest, and fees. Green Tree did not even know that the property had been destroyed
by a fire. It attempted to contact Plaintiff for months, but she failed to respond to
several letters. Plaintiff finally contacted Green Tree and submitted a written request
to apply the insurance funds in late August 2013. After Plaintiff explained the
situation and provided the necessary authorization, Green Tree applied the funds to
the loan. By late October 2013, Green Tree had applied the funds to the loan as GMAC
42
should have done in November 2010.
No reasonable person could infer from these facts that Green Tree intentionally
misappropriated Plaintiff’s insurance funds or deprived her of their benefit. Once
Green Tree had the necessary facts, it fixed the mess that GMAC had created. It did
not convert Plaintiff’s funds. Additionally, the Court already ruled that Green Tree is
not liable for GMAC’s actions.
The Court grants both Defendants’ Motions for Summary Judgment [212, 217]
and denies Plaintiff’s Motion for Partial Summary Judgment [225] as to her conversion
claims.
XIV. PUNITIVE DAMAGES [212, 217]
Punitive damages are available where “the claimant . . . prove[s] by clear and
convincing evidence that the defendant against whom punitive damages are sought
acted with actual malice, gross negligence which evidences a willful, wanton or reckless
disregard for the safety of others, or committed actual fraud.” MISS. CODE ANN. § 11-165(1)(a). “The totality of the circumstances and the aggregated conduct of the
defendant must be examined before punitive damages are appropriate.” Wise v. Valley
Bank, 861 So. 2d 1029, 1034 (Miss. 2003). Punitive damages are generally allowed only
“where the facts are highly unusual and cases extreme.” Id. at 1035.
None of the evidence indicates that the named Defendants – Fannie Mae and
Green Tree – “acted with actual malice, gross negligence which evidences a willful,
wanton or reckless disregard for the safety of others, or committed actual fraud.” MISS.
CODE ANN. § 11-1-65(1)(a). Furthermore, as the Court has stated numerous times,
43
Fannie Mae and Green Tree are not liable for GMAC’s actions. The Court grants
Defendants’ Motions for Summary Judgment [212, 217] as to any claim for punitive
damages.
XV. IIED [212, 217, 231]
A plaintiff may recover on a claim for intentional infliction of emotional distress
“[w]here there is something about the defendant’s conduct which evokes outrage or
revulsion, done intentionally . . . even though there has been no physical injury.”
Bowden v. Young, 120 So. 3d 971, 980 (Miss. 2013). The defendant’s conduct “must be
so outrageous in character, and so extreme in degree, as to go beyond all possible
bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized
community.” Id. Liability will not attach for mere insults, threats, indignities, petty
oppression, annoyances, or other trivialities. Funderburk v. Johnson, 935 So. 2d 084,
1100 (Miss. Ct. App. 2006).
None of the evidence indicates that the named Defendants – Fannie Mae and
Green Tree committed intentional acts “so outrageous in character, and so extreme in
degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious,
and utterly intolerable in a civilized community.” Bowden, 120 So. 3d at 980.
Furthermore, Fannie Mae and Green Tree are not liable for GMAC’s actions. The
Court denies Plaintiff’s Motion for Partial Summary Judgment [231] as to her claims
for emotional damages and intentional infliction of emotional distress, and the Court
grants Defendants’ Motions for Summary Judgment [212, 217] as to the same.
44
XVI. INJUNCTIVE RELIEF [212, 217]
As the Court has granted summary judgment in Defendants’ favor as to each of
Plaintiff’s causes of action, she has no valid claim for injunctive relief. Regardless, her
claims for injunctive relief are moot; the note was paid in full, the excess funds were
remitted to Plaintiff, and the Deed of Trust was released.
XVII. CONCLUSION
Plaintiff provided ample evidence to support potential claims against GMAC.
Unfortunately, GMAC is not a party to this lawsuit. Instead, Plaintiff blamed GMAC’s
errors on two other parties – Fannie Mae and Green Tree. For the reasons stated
above, the Court grants Defendants’ Motions for Summary Judgment [212, 217] in all
respects, and it denies Plaintiff’s Motions for Partial Summary Judgment [214, 223,
225, 226, 228, 231].
As all Plaintiffs’ claims have been resolved, the parties’ remaining motions [219,
358, 360, 362] are denied as moot. The Court will enter a separate judgment
consistent with this opinion.
SO ORDERED AND ADJUDGED this 6th day of February, 2015.
s/ Keith Starrett
UNITED STATES DISTRICT JUDGE
45
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