Pieter Teeuwissen et al v. JP Morgan Chase Bank, N.A. et al
Filing
182
Memorandum Opinion and Order denying plaintiff's 121 MOTION for Partial Summary Judgment as to Liability against Nationwide Trustee Services and Johnson & Freedman, granting 132 cross-motion/joinder of defendants Nationwide and Johnson & Freeman (joinder to 124 motion for summary judgment filed by JP Morgan Chase Bank). A separate judgment will be entered as set out herein. Signed by District Judge Tom S. Lee on 9/6/12 (LWE)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
PIETER TEEUWISSEN AND
LISA M. TEEUWISSEN
VS.
PLAINTIFFS
CIVIL ACTION NO. 3:11CV46TSL-FKB
JP MORGAN CHASE BANK, N.A.
A/K/A CHASE HOME FINANCE, LLC,
NATIONWIDE TRUSTEE SERVICES, INC.,
MORRIS SCHNEIDER AND PRIOR A/K/A
JOHNSON & FREEDMAN, LLC
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of plaintiffs
Pieter and Lisa Teeuwissen for partial summary judgment as to
liability against Nationwide Trustee Services, Inc. (Nationwide)
and Johnson & Freedman, LLC, and on the cross-motion of defendants
Nationwide and Johnson & Freedman for summary judgment.
These
motions have been fully briefed and the court, having considered
the memoranda of authorities, together with attachments, submitted
by the parties, concludes that defendants’ motion for summary
judgment should be granted and plaintiffs’ motion denied.
On December 7, 2010, after learning that a foreclosure sale
of their home was scheduled for December 21, 2010, the
Teeuwissens, husband and wife, commenced the present action in the
Chancery Court of Hinds County, Mississippi against their
mortgagee, JP Morgan Chase Bank, N.A. a/k/a Chase Home Finance,
LLC (Chase), and Nationwide Trustee Services, Inc. (Nationwide),
the Substitute Trustee for foreclosure, seeking to enjoin the
foreclosure and additionally asserting claims for affirmative
relief against Chase relating to its alleged improper handling of
their mortgage loan.
Although the foreclosure sale went forward
as scheduled on December 21, 2010, the chancery court held a
hearing on December 22, 2010 on plaintiffs’ request for injunctive
relief, and on December 23, 2010, the chancellor entered an order
purporting to grant “a limited preliminary (temporary) injunction”
enjoining Chase “from any action against the Plaintiffs related to
or in any way connected with foreclosure of the Plaintiffs’ real
property.”
The chancellor set a hearing on the merits for January
10, 2011; but prior to the date of the scheduled hearing, Chase
removed the case to this court on the basis of diversity
jurisdiction under 28 U.S.C. § 1332, and federal question
jurisdiction under 28 U.S.C. § 1331.
In the meantime, plaintiffs amended their complaint to allege
claims against Chase and Nationwide for wrongful foreclosure and
seeking to set aside the foreclosure; and following removal,
plaintiffs sought and were granted leave to amend to add as a
defendant the law firm of Johnson & Freedman, LLC, which they
allege was involved in the mishandling of their mortgage and the
wrongful foreclosure of their home.
2
In a November 17, 2011 memorandum opinion and order granting
in part and denying in part Chase’s motion to dismiss,1 this court
rejected plaintiffs’ challenge to Chase’s right to foreclose on
their residence.2
Specifically, the court found that, contrary to
plaintiffs’ contention, Chase had the right to establish an escrow
account for taxes and/or property insurance on their mortgage and
that plaintiffs, as a result of their failure and refusal to pay
sufficient amounts to cover these escrow items, had become
delinquent on their mortgage payments, entitling Chase to exercise
its right to foreclose.
However, the court concluded that
plaintiffs had stated a claim for wrongful foreclosure based on
allegations that Chase and its agents, Nationwide and Johnson &
Freedman, failed to provide plaintiffs with proper notice of
foreclosure and a proper accounting prior to proceeding with the
foreclosure, and for breach of contract for failure to provide
notice required by the deed of trust.
Additionally, the court
denied Chase’s motion to dismiss plaintiffs’ claims relating to
defendants’ alleged violation of the chancery court’s injunction
by taking certain actions following the foreclosure intended to
dispossess plaintiffs of their home.
1
Chase has since settled with plaintiffs and been
dismissed from the case.
2
See Teeuwissen v. JP Morgan Chase Bank, N.A.,
3:11CV46TSL-FKB, 2011 WL 5593164, 4 (S.D. Miss. Nov. 17, 2011).
3
Plaintiffs have now moved for partial summary judgment on
liability on their claims.
Defendants Chase and Johnson &
Freedman oppose this motion, and seek summary judgment on all
plaintiffs’ claims against them.3
WRONGFUL FORECLOSURE
As the court wrote in its previous opinion, a wrongful
foreclosure occurs under Mississippi law “when a foreclosure is
attempted solely for a malicious desire to injure the mortgagor,
or the foreclosure is conducted negligently or in bad faith to the
mortgagor's detriment.”
Teeuwissen, 2011 WL 5593164, at 4 (citing
West v. Nationwide Trustee Servs., Inc., No. 1:09CV295LG–RHW, 2009
WL 4738171, 3 (S.D. Miss. Dec. 4, 2009)).
Here, plaintiffs allege
that defendants conducted the foreclosure negligently or in bad
faith in that they failed to provide (1) the notice of foreclosure
required under the deed of trust, and also as required by the
applicable Mississippi statutes controlling power of sale
3
Nationwide and Johnson & Freedman did not file their own
motion for summary judgment but rather joined in a summary
judgment motion filed by Chase. Plaintiffs argue that these
defendants cannot merely join in another defendant’s summary
judgment motion but must file their own motion and make their own
arguments; and plaintiffs argue that these defendants have waived
their right to seek summary judgment by failing to timely file
their own summary judgment motion. However, the court is aware of
nothing in the rules that would prevent a defendant from seeking
summary judgment by joinder in another defendant’s motion.
Accordingly, plaintiffs’ objection to these defendants’ motion is
not well taken.
4
foreclosure; and (2) an accounting of the mortgage loan prior to
the foreclosure sale of December 21, 2010.
Notice of Foreclosure
Plaintiffs assert that defendants failed to provide them
notice of foreclosure as required under the deed of trust and
notice as required by the applicable Mississippi statutes
controlling power of sale foreclosure.
Plaintiffs note that under
the terms of the deed of trust, “if Lender invokes the power of
sale, Lender shall give Borrower, in the manner provided in
Section 15, notice of Lender’s election to sell the Property.
Trustee shall give notice of sale by public advertisement for the
time and in the manner prescribed by applicable law.”
Mississippi
Code Annotated § 89-1-55 provides that the sale of lands sold
under mortgages and deeds of trust
shall be advertised for three consecutive weeks
preceding such sale, in a newspaper published in the
county, or, if none is so published, in some paper
having a general circulation therein, and by posting one
notice at the courthouse of the county where the land is
situated, for said time, and such notice and
advertisement shall disclose the name of the original
mortgagor or mortgagors in said deed of trust or other
contract. No sale of lands under a deed of trust or
mortgage, shall be valid unless such sale shall have
been advertised as herein provided for, regardless of
any contract to the contrary. An error in the mode of
sale such as makes the sale void will not be cured by
any statute of limitations, except as to the ten-year
statute of adverse possession.
In response to defendants’ summary judgment motion, and in
support of their own motion, plaintiffs challenged the competency
5
of defendants’ putative proof of posting at the courthouse, noting
that the “Certificate of Posting” offered by defendants, which is
signed by Matthew Lindsay and recites that he posted a Substitute
Trustee’s Notice of Sale on the Hinds County Courthouse bulletin
board on November 30, 2010, is unsworn.
Plaintiffs argued that
defendants could not possibly prevail on their motion in the
absence of sworn proof that a notice of sale was properly posted
at the courthouse.
They also contended that irrespective of the
competency of defendants’ proof, their own sworn evidence tends to
show that notice was not properly posted so that at the very
least, defendants are not entitled to summary judgment.
Specifically, plaintiffs presented an affidavit from a witness
attesting that she checked the bulletin board at the Hinds County
Courthouse on December 7, 2010, i.e., a date within twenty-one
days of the December 21 foreclosure date, and found no notice of
sale relating to the Teeuwissen residence.4
In addition, Peter
Teeuwissen testified that he checked the bulletin board sometime
between December 7 and December 21, and found no notice posted.
In rebuttal, defendants submitted a sworn affidavit from
Matthew Lindsay in which he reiterated, under oath, that on
November 30, 2010, he posted the Substitute Trustee’s Notice of
4
Plaintiffs do not dispute that Chase published notice of
foreclosure sale in the Clarion Ledger, a newspaper in Hinds
County, Mississippi, on November 30, 2010, December 7, 2010, and
December 14, 2010, as required by statute.
6
Sale on the notice board at the Hinds County Courthouse.
Lindsay’s affidavit affirmatively establishes that the notice was
properly posted three weeks in advance of the foreclosure, as
required by the statute.5
In the court’s opinion, in the absence
of evidence tending to show that defendants removed the notice
prior to the sale, the fact that the notice was not present on the
board at some point after its posting does not affect the validity
of the sale.
See 59 C.J.S. Mortgages § 784 (Supp. 2012) (“If the
notices are actually put up the required number of days before the
sale, it is not essential that they shall remain intact and
visible during every one of the intervening days .... Since the
purpose is to attract bidders, notice is not posted within the
meaning of the law when it is taken down soon after being properly
affixed to the spot designated.
The person making the sale,
however, is not held responsible for keeping the notice posted,
and its subsequent removal by a stranger will not affect the
validity of the sale, nor does a requirement of advertising by
posting for at least a certain number of days before the sale mean
that on each successive day a notice must be posted.”).
5
Plaintiffs have objected to Lindsay’s affidavit, as well
as other evidence presented by defendants, contending that this
amounts to “ambush” evidence. The court rejects plaintiffs’
objections.
7
Plaintiffs alleged in their second amended complaint that
defendants failed to provide notice of foreclosure as required by
their deed of trust, stating:
The Plaintiffs were not provided any notice from Chase,
Nationwide and/or JF, of the foreclosure sale as
required by law. (Fn. 11)
(Fn. 11) Pursuant to the terms of the subject Deed of
Trust “if Lender invokes the power of sale, Lender shall
give Borrower, in the manner provided in Section 15,
notice of Lender’s election to sell the Property.
Trustee shall give notice of sale by public
advertisement for the time and in the manner prescribed
by applicable law.”
To refute this allegation, defendants have presented sworn proof
that in addition to publishing notice in the Clarion Ledger and
posting notice on the courthouse bulletin board, a copy of the
Substitute Trustee’s Notice of Sale was mailed to plaintiffs on
November 15, 2010 via first class mail postage prepaid at the
residence address, consistent with Section 15 of the deed of
trust, which states that notice required under the deed of trust
“shall be deemed to have been given to Borrower when mailed by
first class mail.”
Plaintiffs apparently no longer dispute that
such notice was, in fact, mailed to them, or at least they have
offered no proof to contradict that offered by defendants.
However, they argue in their motion and in response to defendants’
motion that defendants failed to provide notice in accordance with
the first paragraph of paragraph 22 of the deed of trust, which
states, in pertinent part,
8
[T]he Lender ... shall give notice to Borrower, prior to
acceleration following Borrower’s breach of any covenant
or agreement in this Security Instrument (but not prior
to acceleration under Section 18 unless applicable law
provides otherwise). The notice shall specify: (a) the
default; (b) the action required to cure the default;
(c) a date, not less than 30 days from the date notice
is given to Borrower, by which default must be cured;
and (d) that failure to cure the default on or before
the date specified in the notice may result in
acceleration of the sums secured by the Security
Instrument and the sale of the Property. The notice
shall further inform Borrower of the right to reinstate
after acceleration and the right to bring a court action
to assert the nonexistence of default or any other
defense of Borrower to acceleration and sale. If the
default is not cured on or before the date specified in
the notice, Lender at its option may require immediate
payment in full of all sums secured by this Security
Instrument without further demand and may invoke the
power of sale...
Plaintiffs evidently now take the position that their mortgage
loan was not properly accelerated before foreclosure because
defendants failed to provide notice of acceleration as required by
the deed of trust, and that Chase therefore could not have
lawfully invoked its putative right of foreclosure by power of
sale so that the ensuing foreclosure was invalid.
However,
plaintiffs did not plead (or even vaguely allude to) such a claim
in their complaint, and therefore, their argument on this point is
properly disregarded.
Plaintiffs further suggest that defendants failed to comply
with the notice requirements of the deed of trust because
defendants did not mail plaintiffs a copy of the Certificate of
9
Posting.
In this regard, plaintiffs note that the deed of trust
states:
[I]f Lender invokes the power of sale, Lender shall give
Borrower, in the manner provided in Section 15, notice
of Lender’s election to sell the Property. Trustee
shall give notice of sale by public advertisement for
the time and in the manner prescribed by applicable law.
Section 15, in turn, states that “all notices given... in
connection with the Security Instrument must be in writing,” and
that “[a]ny notice to Borrower in connection with this Security
Instrument shall be deemed to have been given to Borrower when
mailed by first class mail.”
Plaintiffs submit that because the
Certificate of Posting is a notice “in connection with the subject
security instrument,” then the deed of trust required that
defendants mail them a copy of such notice.
In the court’s
opinion, however, the Certificate of Posting is not “a notice to
Borrower in connection with [the] Deed of Trust” but is instead
merely a document verifying that the actual Notice of Sale (a copy
of which was provided to plaintiffs by mail) was posted properly.
Accounting
This court previously concluded that a mortgagee such as
Chase has a duty to account to the mortgagors for all sums due to
bring the mortgage current prior to foreclosure, and that
plaintiffs had stated a claim for wrongful foreclosure based on
defendants’ alleged failure to provide plaintiffs an accounting
prior to foreclosure.
In their motion for summary judgment,
10
defendants argue that there is no requirement under Mississippi
law or the terms of the deed of trust that required Chase or any
of the defendants to provide plaintiffs with an accounting at any
time prior to foreclosure, and that this court’s contrary
conclusion was in error.6
They contend, though, that although no
accounting was required, plaintiffs were in fact timely provided
6
In its November 17, 2011 opinion, the court dismissed
plaintiffs’ claim for “failure to provide an accounting,” but it
held that plaintiffs had stated a claim for wrongful foreclosure
based on the failure to provide an accounting, observing as
follows:
In West v. Nationwide Trustee Services, Inc., No.
1:09cv295-LG-RHW, 2009 WL 4738171 (S.D. Miss. Dec. 4,
2009), the court, also citing [National Mortgage Co. v.
Williams, 357 So. 2d 934, 937 (Miss. 1978)], recognized
that “[a] mortgagee such as Chase has a duty to account
to the mortgage … for the amount it would take to bring
the loan current before Chase can foreclose on the
property[,]” and that the “[f]ailure to do so will
constitute a wrongful foreclosure.” [2009] WL 4738171,
at 3.
Teeuwissen, 2011 WL 5593164, at 5. Defendants argue that this
court’s reliance on West was improper since the West court’s
conclusion on this issue was reached in error. Defendants
maintain that West’s reliance on Williams was misplaced, as was
its reliance on Johnson v. Gore, 80 So. 2d 731 (Miss. 1955), since
both cases were patently distinguishable. They point out that in
Williams, in contrast to the present case, there was an issue both
as to whether the borrowers were actually delinquent and as to the
extent of any delinquency. And they argue that in Johnson, the
court found a duty to render a substantially correct account of
the indebtedness based on a fiduciary or trust relationship that
arose because the borrower was imprisoned and the mortgagee took
over duties related to the leasing of the subject property.
Defendants note there is no basis in this case for finding a
fiduciary or trust relationship.
While the court at present is not persuaded that its earlier
conclusion was in error, the court need not linger on this issue
since it is clear from the evidence that an accurate accounting
was provided to plaintiffs.
11
documents that went above and beyond what would be required in an
“accounting,” – which is defined under Mississippi law as a
“statement in writing of debits and credits or of receipts and
payments,” see Ward v. Life Investors Ins. Co. of America, 383 F.
Supp. 2d 882, 885 (S.D. Miss. 2005) (quoting State ex rel. King v.
Harvey, 24 So. 2d 817, 819 (Miss. 1968)).
Indeed, defendants have
presented uncontroverted proof that on February 8, 2010, Johnson &
Freedman sent correspondence to Pieter Teeuwissen, at his home
address, and also forwarded copies of same to plaintiffs’
attorney, which included, in addition to copies of the note and
deed of trust, (1) a current payment history, which set forth all
debits, credits and payments applied to the mortgage loan; (2) a
current reinstatement quote, which informed plaintiffs of the
amount required to reinstate the loan and the manner in which to
do so; and (3) a current payoff statement, which informed
plaintiffs of the necessary amount to pay off the loan in full, as
well as the proper manner in which to do so.7
Plaintiffs assert a variety of reasons for concluding that
the documents identified by defendants did not satisfy defendants’
7
It is unclear which defendant sent the correspondence,
which consisted of two separate letters on Nationwide letterhead,
one setting out the reinstatement figure and the other a payoff
figure. Defendants state that the letters were sent to plaintiffs
by Johnson & Freedman. Ultimately, it makes no difference which
defendant provided the documents to plaintiffs; it matters only
that it was done.
12
alleged obligation to provide an accounting.
In the court’s
opinion, none of their positions has merit.
Plaintiffs first contend that Nationwide cannot rely on the
documents sent to plaintiffs on February 8, 2010 as fulfilling its
obligation to furnish plaintiffs an accounting, since records of
the Tennessee Secretary of State reflect that Nationwide had been
administratively dissolved on November 4, 2009, and that it was
only restored its corporate status on February 10, 2010, two days
after the putative accounting documents were sent to plaintiffs.
Plaintiffs’ suggestion that actions taken by Nationwide during the
period of its dissolution are a nullity is without merit.
See
T.C.A. § 48-24-203(c) (providing that “[w]hen the reinstatement is
effective, it relates back to and takes effect as of the effective
date of the administrative dissolution, and the corporation
resumes carrying on its business as if the administrative
dissolution had never occurred”); Grand Valley Lakes Prop. Owners
Assoc., Inc. v. Cary, 897 S.W.2d 262, 269 (Tenn. Ct. App. 1994)
(explaining that “reinstatement of the charter validates the
corporation’s existence and privileges from the date of
revocation”).8
8
Plaintiffs suggest under “controlling [Mississippi]
law,” Nationwide’s actions during the period it was
administratively dissolved are invalid. See 4H Constr. Corp. v.
Superior Boat Works, 659 F. Supp. 2d 774, 778-79 (N.D. Miss.
2009). However, in the court’s opinion, Tennessee law applies to
the issue since Nationwide is a Tennessee corporation whose
administrative dissolution occurred under the auspices of the
13
Plaintiffs next argue that no action taken by Nationwide
and/or Johnson & Freedman prior to May 6, 2010 could have possibly
satisfied their duty (on behalf of Chase) to provide plaintiffs an
accounting because the substitution of trustee naming Nationwide
as trustee was not actually recorded until May 6, 2010, so that
prior to May 6, 2010, Nationwide was not the trustee and had no
right or interest in the Teeuwissens’ loan.
However, the evidence
of record plainly shows that the Teeuwissens’ mortgage was
referred to Nationwide for foreclosure in January 2010, and that
Nationwide acted on behalf of Chase when it sent the reinstatement
and payoff figures to plaintiffs in February 2010.
Plaintiffs finally argue that defendants’ putative accounting
was deficient because defendants did not properly calculate the
amounts owed and did not provide plaintiffs an explanation of all
sums due and purportedly owed prior to the foreclosure sale of
their home.
In this regard, plaintiffs submit that the accounting
figures they were provided by defendants were “unequivocally
erroneous and unreliable” because each defendant did not
independently verify the information in the documents and instead
simply relied on information provided by Chase, which according to
plaintiffs, was inaccurate.
However, plaintiffs have offered no
evidence, but instead only unsupported allegations, to support
their contention that the figures they were provided were
Tennessee Secretary of State.
14
inaccurate.
Defendants, on the other hand, have provided to the
court a detailed explanation of the source and accuracy of the
figures.
The court readily concludes that plaintiffs were
provided with a proper and accurate payment history, as well as
payoff and reinstatement quotes prior to the foreclosure sale.9
Therefore, plaintiffs’ claim for wrongful foreclosure premised on
defendants’ alleged failure to provide an accounting fails as a
matter of law.
Violation of Chancery Court Injunction
On December 7, 2010, plaintiffs filed in the Hinds County
Chancery Court a “Complaint for Wrongful Foreclosure, to Set Aside
Foreclosure Sale, for Preliminary Injunction (Temporary)
Injunction, Permanent Injunction, Accounting and Other Relief.”
Plaintiffs allege that by proceeding with the foreclosure, and
thereafter attempting to evict plaintiffs from their home,
9
Plaintiffs argue that the reinstatement letter and
payoff letter do not reflect the correct, or even the same sum
required to reinstate or pay off the mortgage loan prior to the
foreclosure sale. They note that “[t]he amounts that the
Teeuwissens supposedly owe are different with each letter, even
though the pay off and reinstatement letters were sent on the same
date,” and they point out that “[t]he escrow advance amounts, the
property inspection fee amounts, the ‘other’ fees and the
appraisal/BPO fees are different amounts, although prepared and
sent on the same date.”
In his declaration, Chase Vice-President Thomas Reardon
attested to the accuracy of the payoff and reinstatement figures
and explained in detail the basis for the calculations behind
those figures. While plaintiffs obviously question the figures,
they have presented no evidence to show the figures are
inaccurate.
15
defendants violated the December 23, 2010 order of the Hinds
County Chancery Court which purported to enjoin Chase, and its
agents and representatives,
from any action against the Plaintiffs related to or in
any way connected with foreclosure of the Plaintiffs’
real property and likewise prohibited from instituting
any and all collection efforts against the Plaintiffs
until further order of this Court and pending further
hearing on this matter on the merits.
Plaintiffs allege that defendants violated the terms of the
injunction on March 10, 2011, when Chase wrote to plaintiffs
demanding that they vacate the premises and threatening to take
action to have them removed from the home if they failed to do
so.10
Defendants, however, maintain that as a matter of law, the
chancery court’s order expired on January 3, 2011, so that no
actions thereafter taken by them could have violated the order.
Plaintiffs’ complaint in the chancery court requested a
“preliminary (temporary) injunction.”
There is no provision in
the Mississippi Rules of Civil Procedure for a “preliminary
(temporary) injunction.”
Rather, Rule 65(a) provides for issuance
of a “preliminary injunction” and Rule 65(b) provides for issuance
10
Although plaintiffs also appear to insinuate that
defendants violated the chancery court’s order by going forward
with the foreclosure sale, it is undisputed that the foreclosure
sale occurred December 21, two days before the order was entered.
Plaintiffs additionally point to a December 23, 2010 notice
from a local realtor posted on the Teewissens’ door indicating
that he had been retained to sell the property as a violation of
the injunction. However, this notice indicates it was generated
at 1:00 a.m. on December 23, 2010, before the injunction was
issued.
16
of a “temporary restraining order.”
Unlike a temporary
restraining order (TRO), which may be issued without notice to the
adverse party in specified circumstances,11 Rule 65(a) mandates
that “[n]o preliminary injunction shall be issued without notice
to the adverse party,” Miss. R. Civ. P. 65(a).
Further, a TRO
granted without notice “shall expire by its terms within such time
after entry, not to exceed ten days, as the court fixes ...,
unless within the time so fixed the order for good cause shown is
extended for a like period or unless the party against whom the
order is directed consents that it may be extended for a longer
period.”
The record reflects that what plaintiffs initially sought
from the chancery court was a TRO, as evidenced by the fact that
on December 21, 2010, their attorney, Lara Gill, filed with the
chancery court a “Certificate of Compliance with Rule 65(b)(2),”
in which she described her efforts to notify the defendants
“regarding [plaintiff’s complaint],” recited that her efforts had
not been successful, and asserted that “notice in this matter
11
See Miss. R. Civ. P. 65(b) (“A temporary restraining
order may be granted, without notice to the adverse party or his
attorney if (1) it clearly appears from specific facts shown by
affidavit or by the verified complaint that immediate and
irreparable injury, loss, or damage will result to the applicant
before the adverse party or his attorney can be heard in
opposition, and (2) the applicant's attorney certifies to the
court in writing the efforts, if any, which have been made to give
the notice and reasons supporting his claim that notice should not
be required.”).
17
should not be required.”
However, at the hearing on December 23,
2010, Ms. Gill represented to the court that she had provided
notice to Chase and Nationwide on December 22, 2010, via facsimile
and e-mail to Charity Bridgewater, an attorney with Johnson &
Freedman.
Based on Ms. Gill’s representations, the court
specifically found that “[t]he notice requirements of Rule
65(a)(1) have been met[,]” and the court entered a preliminary
injunction enjoining defendants “from any action against the
Plaintiffs related to or in any way connected with foreclosure of
the Plaintiffs’ real property” and prohibiting them “from
instituting any and all collection efforts against the Plaintiffs
until further order of this Court and pending further hearing on
this matter on the merits.”
There has been no further order of
the court nor further hearing on the matter on the merits.
Notwithstanding the court’s order, on March 10, 2011, Nationwide
sent to plaintiffs a letter referencing the December foreclosure
and advising that “[l]ender may have no alternative other than to
file an appropriate State Court action if you fail to deliver
possession.”
Defendants’ only argument in opposition to plaintiffs’
allegations regarding defendants’ violation of the chancery
court’s order is that “because inadequate notice was given” and
because “counsel for Plaintiffs filed a Certificate of Compliance
with M.R.C.P. 65(b)(2),” then plaintiffs could only have been
18
granted a TRO, which expired after ten days.
They thus conclude
that “the TRO was no longer in effect as of January 3, 2010,” so
that any actions they may have taken thereafter could not have
violated the TRO.
In fact, however, the court issued a
preliminary injunction, from which no relief has been sought or
granted.
Accordingly, the court cannot conclude that defendants
have not violated the injunction order.
However, the only act on the part of defendants which
plaintiffs have identified as violating the injunction is the
March 10, 2011 letter advising them that “[l]ender may have no
alternative other than to file an appropriate State Court action
if you fail to deliver possession.”
There is no evidence that
defendants actually commenced eviction proceedings or otherwise
undertook to have plaintiffs removed from the residence.
To the
contrary, the evidence reflects that upon plaintiffs’ receipt of
this letter, their attorney promptly complained that the letter
violated the injunction; and plaintiffs have identified nothing
since that time that defendants have done to violate the
injunction.
In their complaint, plaintiffs allege that “[t]he violations
of said Injunction by the Defendants have caused the Plaintiffs’
damages[,]” and as relief for defendants’ violation of the
injunction, they “request that this Court enter its judgment
awarding the Plaintiffs damages in amount to be proven at trial
19
for their continuous and persistent harassment of Plaintiffs and
their willful violations of the Injunction entered herein.”
Defendants argue in their motion that plaintiffs have sustained no
compensable damages relative to any of the claims they have
alleged.
Plaintiffs respond generally that they “have been
damaged by the Defendants’ wrongful foreclosure,” and that their
evidence shows “the resulting injury to them as a result of the
wrongful foreclosure.”
Yet they do not argue that they have
suffered any compensable harm as a result of the March 10, 2011
letter; and they certainly have not pointed to any evidence to
show that they suffered any compensable harm as a result of this
letter.
For this reason, the court concludes that plaintiffs’
claim for violation of the injunction is due to be dismissed.
Violation of Fair Debt Collection Practices Act
Plaintiffs allege in their complaint, and in their
motion for partial summary judgment, that defendants have violated
the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
(FDCPA), and in particular, 15 U.S.C. § 1692g(a)&(b), which
require that a “debt collector” must provide notice to the debtor
as to the particulars of the debt which is sought to be collected,
and to cease debt collection efforts and provide certain
additional information in the event the debtor timely disputes the
20
debt, or any portion thereof.12
Defendants insist they cannot be
liable for violation of these provisions, however, since they are
not “debt collectors” within the meaning of the FDCPA.
For
reasons fully explained by this court in Fouche’ v. Shapiro &
Massey L.L.P., 575 F. Supp. 2d 776 (S.D. Miss. 2008), the court
agrees, and concludes that this claim must be dismissed.
The FDCPA defines “debt collector” as
any person who uses any instrumentality of interstate
commerce or the mails in any business the principal
purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or
due another.... For the purpose of section 808(6) [15
U.S.C. § 1692f(6)], such term also includes any person
who uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of which
is the enforcement of security interests.
15 U.S.C. § 1692a(6).
As the court explained in Fouche’,
12
See 15 U.S.C. § 1692g(a) (debt collector must give notice
of the amount of the debt; the name of the creditor; a statement
that the debt will be assumed to be valid unless the consumer
disputes the debt within thirty days after receipt of the notice;
a statement the debt collector will obtain and mail verification
of the debt to the debtor if the consumer notifies the debt
collector in writing within thirty days that the debt is disputed;
and a statement that the debt collector will provide the consumer
the identity of the original creditor, if different from the
current, if requested in writing within thirty days); § 1692g(b)
(if the consumer notifies the debt collector in writing within the
thirty days that the debt is disputed, or requests the name and
address of the original creditor, “the debt collector shall cease
collection of the debt, or any disputed portion thereof, until the
debt collector obtains verification of the debt or a copy of a
judgment, or the name and address of the original creditor, and a
copy of such verification or judgment, or name and address of the
original creditor, is mailed to the consumer by the debt
collector”).
21
Section 1692f(6), referenced in this definition,
prohibits a debt collector from taking or threatening to
take “nonjudicial action to effect dispossession or
disablement of property” if there is no present right to
possession of the property claimed as collateral through
an enforceable security interest, if there is no present
intention to take possession of the property, or if the
property is exempt by law from such dispossession or
disablement.
Under the cited definition, a person whose principal
purpose is the enforcement of security interests is a
“debt collector” for the purpose of § 1692f(6), but is
not subject to the rest of the FDCPA unless he also fits
§ 1692a(6)'s general definition of a debt collector. See
Kaltenbach v. Richards, 464 F.3d 524, 527, 527 n.3 (5th
Cir. 2006) (recognizing “distinction between general
debt collection and enforcement of a security interest,”
and observing that “[b]y the plain language of [§
1692(a)(6) ], ... a person whose business has the
principal purpose of enforcing security interests but
who does not otherwise satisfy the definition of a debt
collector is subject only to § 1692f(6)”) (citing
Montgomery v. Huntington Bank, 346 F.3d 693, 699-700
(6th Cir. 2003)) (repossession agency that was not
otherwise a debt collector was subject only to §
1692f(6)).
Fouche’, 575 F. Supp. 2d at 783-84.
The court recognized that
“most federal courts have held that the provisions of the FDCPA
(with the exception of § 1692f(6) and § 1692i(a), which are
expressly applicable to the enforcement of security interests), to
be inapplicable to the enforcement of security interests, such as
in the context of the typical non-judicial home foreclosure.”
22
Id.
at 785.13
The court concluded that the attorney at issue in
Fouche’ was not a general debt collector, stating,
In Kaltenbach, the defendant attorney initiated an
executory-process, i.e., non-judicial foreclosure, on
the plaintiff's home. The Fifth Circuit framed the
issue presented as “whether [the defendant] is subject
to § 1692g if he satisfies the general definition of a
debt collector, even though he was merely enforcing a
security interest in his dealings with [plaintiff].”
13
See, e.g., Maynard v. Cannon, No. 2:05CV335DAK, 2008 WL
2465466, at *4 (D. Utah June 16, 2008) (where evidence showed that
defendant attorney was hired for limited purpose of non-judicially
foreclosing deed of trust, and plaintiff offered no evidence as to
the frequency of defendant's security enforcement or debt
collection practices, defendant's activities fall outside the
FDCPA's general provisions); Overton v. Foutty & Foutty, LLP, No.
1:07-cv-0274-DFHTAB, 2007 WL 2413026, at *4 (S.D. Ind. Aug. 21,
2007) (recognizing majority position that party whose activities
are limited to enforcement of security interests is not subject to
all FDCPA requirements, and stating, “[i]f a person invokes
judicial remedies only to enforce the security interest in
property, then the effort is not subject to the FDCPA (other than
§ 1692f(6) and § 1692i(a)) [,][b]ut if the person is also seeking
additional relief, such as a personal judgment against the
borrower, then the FDCPA applies.”) (collecting cases); Chomilo v.
Shapiro, Nordmeyer & Zielke, LLP, Civ. No. 06-3103 (RHK/AJB), 2007
WL 2695795, at *6 (D. Minn. Sept.12, 2007) (holding that law firm
executing nonjudicial foreclosure proceeding was enforcing a
security interest rather than collecting a debt and hence fell
outside the ambit of the FDCPA except for the provisions of
section 1692f(6)); Acosta v. Campbell, No. 6:04CV761 ORL28DAB,
2006 WL 3804729, at *4 (M.D. Fla. Dec. 22, 2006) (“Nearly every
court that has addressed the question has held that foreclosing on
a mortgage is not a debt collection activity for the purposes of
the FDCPA”); Beadle v. Haughey, No. Civ. 04-272-SM, 2005 WL
300060, at *3 (D.N.H. Feb. 9, 2005) (“[I]t seems very well
established that foreclosing on a mortgage does not constitute
debt-collecting activity under the FDCPA.”); Rosado v. Taylor, 324
F. Supp. 2d 917, 924 (N.D. Ind. 2004) (“Security enforcement
activities fall outside the scope of the FDCPA because they aren't
debt collection practices”); Hulse v. Ocwen Federal Bank, FSB, 195
F. Supp. 2d 1188, 1210 (D. Or. 2002) (actions taken by attorneys
as part of foreclosure of trust deed “may not be challenged as
FDCPA violations”).
23
464 F.3d at 527. Subsequently, the court concluded in
Brown v. Morris, that an attorney who undertook nonjudicial foreclosure was “not per se an FDCPA debt
collector.” 243 Fed. Appx. 31, 35, 2007 WL 1879392, at
*3. The court further found no error in the district
court's having instructed the jury that “[o]rdinarily,
the mere activity of foreclosing on a person's property
under a deed of trust is not the collection of a debt
within the meaning of the FDCPA unless other actions,
beyond those necessary to foreclose under the deed of
trust, were taken in an effort to collect a debt.'” Id.
Thus, although the Massey defendants' practice involved
their regularly conducting non-judicial foreclosures to
enforce their clients' security interest in mortgaged
property, defendants were not acting as general “debt
collectors,” unless they also took other actions, beyond
those necessary to foreclose under the deed of trust,
were regularly taken in an effort to collect a debt.
Fouche', 575 F. Supp. 2d at 786.
Plaintiffs have offered no
evidence that defendants engage in debt collection other than nonjudicial foreclosures, or that they regularly take actions beyond
those necessary to foreclose under deeds of trust.
Thus, as
plaintiffs have failed to present evidence tending to show that
defendants are general “debt collectors,” their claim against
defendants under the FDCPA fails as a matter of law.
Negligence/Gross Negligence
In their complaint, plaintiffs assert a count for negligence
against defendants based on the following allegations:
The Defendants, jointly and severally, negligently
mishandled the Plaintiffs’ mortgage, misrepresented the
status of Plaintiffs’ mortgage and failed to provide an
accounting. The Defendants refused to accept
Plaintiffs’ proof of payment of taxes and insurance,
impermissibly imposed an escrow account, and by failing
to accept Plaintiffs’ payments under the mortgage
documents, misapplied Plaintiffs’ payments thereby
24
allowing the Plaintiffs’ loan to fall into arrears,
foreclosed on the subject real property, placed a cloud
on the Plaintiffs’ title to the real property, continued
to demand payments from the Plaintiffs despite entry of
an injunction and refused to account for and/or return
Plaintiffs’ prior payments. During the time period set
forth hereinabove, Plaintiffs continued to make payments
under the Deed of Trust and promissory note, and
attempted to work with the Defendants to resolve the
dispute.
The court has concluded that Chase had the right to impose an
escrow account; that plaintiffs fell into arrears because of their
refusal to acknowledge Chase’s right in this regard; that
plaintiffs were provided an accurate accounting; and that
defendants provided proper notice of foreclosure.
Defendants did
not breach the contract or violate any provision of the law
regarding the foreclosure.
Thus, the only potentially viable
allegation of negligence remaining is that defendants “continued
to demand payments from the Plaintiffs despite entry of an
injunction.”
However, as the court observed supra, the only
violation of the injunction of which there is any proof is the
letter of March 10, 2011; and the court has concluded that
plaintiffs have failed to present evidence to show they suffered
compensable damages as a result of this violation.
Accordingly,
plaintiffs can have no cognizable claim for negligence.14
14
It follows that there is no potential basis for the
recovery of punitive damages. See Horace Mann Life Ins. Co. v.
Nunaley, 960 So. 2d 455, 462 (Miss. 2007) (finding that since the
plaintiff “has suffered no compensatory damages, it necessarily
follows that she is not entitled to an award of punitive
damages.”)(citing Bradfield v. Schwartz, 936 So. 2d 931, 938
25
Conclusion
Based on all of the foregoing, it is ordered that defendants’
motion for summary judgment is granted and plaintiffs’ motion for
partial summary judgment is denied.
A separate judgment will be entered in accordance with Rule
58 of the Federal Rules of Civil Procedure.
SO ORDERED this 6th day of September, 2012.
/s/ Tom S. Lee
UNITED STATES DISTRICT JUDGE
(Miss. 2006), and Miss. Code Ann. § 11-1-65(c) (Supp. 2006)).
26
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