Wyatt et al v. Liberty Mortgage Corporation d/b/a Liberty Mortgage Corporation (Georgia) et al
Filing
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ORDER granting 21 Defendants Liberty and BB&T's motion for summary judgment. All claims asserted against Defendant Millsap are dismissed without prejudice. Signed on 1/21/15 by Chief District Judge Greg Kays. (Francis, Alexandra) Modified on 1/21/2015 - mailed to plaintiffs (Francis, Alexandra).
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
RICHARD WYATT and
BILLIE WYATT,
Plaintiffs,
v.
LIBERTY MORTGAGE CORPORATION,
et al.,
Defendants.
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No. 4:13-cv-00317-DGK
ORDER DISMISSING FRAUDULENTLY JOINED DEFENDANT AND GRANTING
SUMMARY JUDGMENT FOR REMAINING DEFENDANTS
This case arises from the non-judicial foreclosure sale of Plaintiffs Richard and Billie
Wyatt’s residence in Blue Springs, Missouri. Prior to the foreclosure sale, Plaintiffs filed a pro
se petition in the Circuit Court of Jackson County, Missouri against Defendants Liberty
Mortgage Corporation (“Liberty”), Branch Banking and Trust Company (“BB&T”), and Millsap
& Singer, P.C. (“Millsap”) (collectively the “Defendants”). BB&T and Liberty removed here,
and the Court denied Plaintiffs’ motion to remand, finding that Millsap was fraudulently joined
to defeat diversity jurisdiction (Doc. 17).
Plaintiffs then filed a three-count amended complaint (the “Amended Complaint”)
against Liberty, BB&T, and Millsap, alleging claims for quiet title (Count I), wrongful
foreclosure (Count II), and conversion, unjust enrichment, and breach of a fiduciary duty (Count
III). Now before the Court is Defendants’ motion for summary judgment (Doc. 21).
Because Plaintiffs once again fraudulently joined Millsap in an attempt to defeat diversity
jurisdiction, the claims against it are DISMISSED WITHOUT PREJUDICE. Having jurisdiction
to entertain the summary judgment motion and finding that there is no dispute of material fact
and that Liberty and BB&T are entitled to judgment as a matter of law, the Court GRANTS
summary judgment in their favor.
Undisputed Material Facts
The Court treats the following facts as undisputed.1
On May 22, 2009, Plaintiffs
borrowed $160,459.00 from Liberty to finance the purchase of a home in Blue Springs, Missouri
(the “Property”). On this same day, Plaintiffs executed a promissory note (the “Note”) in this
amount, and secured the loan with a deed of trust (the “Deed of Trust”), which was later
recorded with the Jackson County Recorder’s Office. The Deed of Trust: named Liberty as the
lender; Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for Liberty, its
successors, and its assigns; and Charterland Title, LLC (“Charterland”) as trustee.
It also
contained several provisions governing foreclosure. Under the agreement, the lender or its
nominee possessed the power to foreclose upon the Property in the event that Plaintiffs defaulted
on the loan. Prior to any such sale, the trustee was required to give notice to Plaintiffs and the
public, but no provision required the trustee or the lender to produce the Note prior to
foreclosing. At the sale, the trustee was required to sell the Property to the highest bidder, and
the lender was allowed to purchase it.
Shortly after the May 2009 loan origination, Liberty assigned the Note to its then-parent
company BB&T via a specific endorsement. Around that same time, BB&T endorsed the Note
in blank, but BB&T has retained it ever since. In 2011, Liberty was dissolved.
After routinely satisfying their payment obligations for several years, Plaintiffs missed
several monthly installments in 2012. The loan eventually settled into default. This default was
1
To support its statement of facts, Defendants presented an affidavit from BB&T Vice President Richard Miller and
other documents. Plaintiffs not only failed to respond to Defendants’ statement of the facts, but they also failed to
present any evidentiary materials to counter Defendants’. Thus, pursuant to Local Rule 56.1 and Federal Rule of
Civil Procedure 56(e), the Court treats Defendants’ version of the facts as undisputed.
2
followed by BB&T initiating several transfers that culminated in foreclosure. On January 7,
2013, MERS assigned the Deed of Trust to BB&T, which was recorded three days later. BB&T
then appointed Millsap as the successor trustee, which was recorded on January 22, 2013.
BB&T subsequently ordered Millsap to foreclose. Millsap then scheduled the foreclosure sale
for February 20, 2013, and disseminated notice of such to Plaintiffs and the public. At the
foreclosure sale, Millsap sold the Property to BB&T via a credit bid in the amount of
$172,846.18. Millsap finalized the sale by recording a trustee’s deed with the Jackson County
Recorder’s Office on February 27, 2013.
Prior to the foreclosure sale, Plaintiffs filed a three-count lawsuit in the Circuit Court of
Jackson County, Missouri, alleging a variety of wrongs. After removal and remand denial,
Plaintiffs filed the Amended Complaint. Defendants now seek summary judgment on all counts.
Discussion
I. The Court has subject-matter jurisdiction over this dispute.
Although not raised by the parties, the Court must first determine whether it possesses
subject-matter jurisdiction to entertain the summary judgment motion. See Fed. R. Civ. P.
12(h)(3). In particular, the Court has concerns that Millsap’s continued presence in this lawsuit
deprives it of jurisdiction.
Previously, the Court found that it possessed subject-matter
jurisdiction notwithstanding the fact that Millsap and Plaintiffs were all citizens of Missouri,
because it determined that Plaintiffs fraudulently joined Millsap to defeat jurisdiction. See Wyatt
v. Liberty Mortg. Corp., No. 4:13-CV-00317, 2013 WL 6730298, at *3-6 (W.D. Mo. Dec. 19,
2013). Because Plaintiffs once again joined Millsap under the Amended Complaint with similar
allegations to the initial complaint, the Court again questions whether Millsap is fraudulently
joined.
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When a district court determines that a defendant is fraudulently joined, it should dismiss
the claims against it for lack of subject-matter jurisdiction. Wivell v. Wells Fargo Bank, N.A.,
No. 13-2763, 2014 WL 6463030, at *5 (8th Cir. Nov. 19, 2014). A defendant is fraudulently
joined “if it is clear under governing state law that the complaint does not state a cause of action
against the non-diverse defendant,” here Millsap. Filla v. Norfolk & S. Ry., 336 F.3d 806, 810
(8th Cir. 2003) (internal quotations omitted). However, the joinder is not fraudulent “if there is a
reasonable basis in fact and law supporting the claim,” even if that reasonable basis is
speculative. Id. at 810 & n.10. In making this determination, the court typically confines its
analysis to the facts alleged in the complaint, unless other record evidence clearly shows those
allegations lack factual support. See Block v. Toyota Motor Corp., 665 F.3d 944, 945 (8th Cir.
2011) (noting that courts may look beyond the pleadings to determine whether there is factual
support for a claim).
With this standard in mind, the Court now reviews the claims against Millsap. Liberally
construing the Amended Complaint, Plaintiffs raise three distinct causes of action against
Millsap: (1) a quiet title claim (Count I); (2) a wrongful foreclosure claim (Count II); and (3) a
breach of fiduciary duty claim (Count III).2 The Court briefly addresses each in turn.
A. Plaintiffs’ quiet title claim against Millsap has no reasonable basis in law or fact.
Plaintiffs’ quiet title claim generally asserts that Defendants do not have a valid claim to
the Property, but there are no specific allegations regarding Millsap. To be entitled to quiet title
relief, the plaintiffs must establish, among other elements, that the defendant is claiming title to
the property. See Wyatt, 2013 WL 6730298, at *3 (citing Howard v. Radmanesh, 586 S.W.2d
2
The heading for Count III also asserts two other claims: conversion of a negotiable instrument and unjust
enrichment. To the extent that allegations exist supporting these theories, they are strictly aimed at the actions of
Liberty and BB&T. Therefore, the Court does not address these claims in determining whether Millsap was
fraudulently joined.
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67, 68 (Mo. Ct. App. 1979)). Much like Plaintiffs’ initial complaint (Doc. 1-1), the Amended
Complaint generally alleges that Millsap’s only interest in the Property derived from its trustee
duties under the Deed of Trust. This limited interest in the Property was extinguished upon
foreclosure. See id. Thus, there is no basis to conclude that Millsap is currently claiming any
interest in the Property. Since there is no reasonable basis in fact to impose quiet title relief
against Millsap, the Court finds it was fraudulently joined to Count I.
B. Plaintiffs’ wrongful foreclosure claim against Millsap has no reasonable basis in
law or fact.
The Amended Complaint also asserts a wrongful foreclosure claim against Millsap.
Aggrieved homeowners may seek either equitable or legal relief for an alleged wrongful
foreclosure. Lackey v. Wells Fargo Bank, N.A., 747 F.3d 1033, 1037 (8th Cir. 2014). An
equitable claim requires the plaintiffs to allege “wrongful acts that are sufficient to render the
sale void.” See id. (citing Fields v. Millsap & Singer, P.C., 295 S.W.3d 567, 571-72 (Mo. Ct.
App. 2009)). A claim for damages, however, requires the plaintiffs to plead, among other
elements, that their loan was not in default at the time of foreclosure. Id.
Here, the Amended Complaint does not allege a lack of default by Plaintiffs. Thus, if any
claim exists against Millsap, it is one for equitable relief. Count II only contains two allegations
of “wrongful acts” allegedly committed by Millsap: (1) that it proceeded with the foreclosure
sale despite knowing that BB&T neither possessed the Note nor had the right to enforce it; and
(2) that it impermissibly accepted a credit bid from BB&T. Neither allegation contains a
reasonable basis in law or fact.
The allegations concerning possession and right to enforce supply no basis for liability.
Although a lender need not physically possess a promissory note in order to foreclose, Barnes v.
Fed. Home Loan Mortg. Corp., No. 12-CV-06062, 2013 WL 1314200 (W.D. Mo. Mar. 28,
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2013), aff’d, 550 F. App’x 340, 341 (8th Cir. 2014), it must have the legal right to enforce it. See
Lackey, 747 F.3d at 1037. The Amended Complaint cursorily alleges that Millsap knew BB&T
neither physically possessed nor had a right to enforce the Note. However, an affidavit from
BB&T Assistant Vice President Richard Miller and a copy of the Note, which are attached to the
summary judgment motion, demonstrate that BB&T has been the legal owner and sole possessor
of the Note since 2009. See (Docs. 22 at 28, 22-1 at 3); Block, 665 F.3d at 945 (noting courts
may look beyond the pleadings to determine the factual basis of claims). Since BB&T had the
right to enforce the Note, Millsap did not wrongfully foreclose when ordered to do so. Thus,
there is no factual support underlying these conclusory allegations.
Similarly unavailing is the theory that acceptance of a credit bid nullifies an otherwise
valid foreclosure sale. A trustee may accept a credit bid at foreclosure even if a deed of trust
contains a cash-only provision. See Hallquist v. United Home Loans, Inc., 715 F.3d 1040, 1047
(8th Cir. 2013) (interpreting Missouri law). Therefore, Millsap’s acceptance of BB&T’s credit
bid did not invalidate the foreclosure.
With no legal or factual basis for the wrongful foreclosure claims asserted against
Millsap, the Court finds it was fraudulently joined to Count II.
C. Plaintiffs’ fiduciary duty claim against Millsap has no reasonable basis in law or
fact.
The only allegations in Count III about Millsap concern whether it breached its fiduciary
duties during the foreclosure process. In particular, Plaintiffs allege that they did so by accepting
a credit bid in lieu of cash and by failing to make an investigation into whether BB&T or Liberty
had the right to enforce the Note.
Neither allegation would legally entitle Plaintiffs to relief. As established earlier, a
trustee may accept a credit bid, so no breach exists for this permissible conduct. See Hallquist,
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715 F.3d at 1047. Second, although a trustee must impartially conduct the foreclosure sale, this
duty does not require it to investigate prior to foreclosure, absent unusual circumstances. Id. at
1047-48 (citing Spires v. Edgar, 513 S.W.2d 372, 378 (Mo. 1974)). Here, Plaintiffs do not
suggest unusual circumstances existed. As discussed above, although Plaintiffs cursorily allege
that Millsap knew BB&T was not legally entitled to enforce the Note, the record plainly
contradicts this assertion. Thus, Millsap was not obligated to investigate prior to foreclosing.
Since the Court once again finds that Millsap has been fraudulently joined to this
litigation, all claims against it are DISMISSED WITHOUT PREJUDICE for lack of subjectmatter jurisdiction. See Wivell, 2014 WL 6463030, at *5.
II. Liberty and BB&T are entitled to summary judgment.
With the only non-diverse defendant now dismissed, the Court turns to Liberty and
BB&T’s motion for summary judgment. They move on all three counts and support their
arguments with citation to legal authority and attached materials. Plaintiffs’ three-page response
contains neither, but the Court must nevertheless determine whether movants have demonstrated
their entitlement to summary judgment on each count.
A moving party is entitled to 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). A party who moves for summary judgment bears the burden of
showing that there is no genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 256 (1986).
Once the moving party has satisfied his or her initial burden, the
nonmoving party “must do more than simply show that there is some metaphysical doubt as to
the material facts” in order to establish a genuine issue of fact sufficient to warrant trial.
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The
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nonmoving party must set forth specific facts showing there is a genuine issue for trial,
Anderson, 477 U.S. at 248, but the nonmoving party “cannot create sham issues of fact in an
effort to defeat summary judgment.” RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d
399, 402 (8th Cir. 1995) (citation omitted).
When considering a motion for summary judgment, a court must scrutinize the evidence
in the light most favorable to the nonmoving party. Torgerson v. City of Rochester, 643 F.3d
1031, 1042 (8th Cir. 2011). But when “the record taken as a whole could not lead a rational trier
of fact to find for the nonmoving party, there is no genuine issue for trial.” Id. (quoting Ricci v.
DeStefano, 557 U.S. 557, 585 (2009)).
Because Plaintiffs’ quiet title claim (Count I) essentially depends upon whether a
wrongful foreclosure (Count II) occurred, the Court addresses Count II first.
A. Liberty and BB&T are entitled to summary judgment on Count II.
Although the Amended Complaint’s failure to plead lack of default precludes a damages
claim for wrongful foreclosure, Plaintiffs may still succeed on an equitable claim if they
demonstrate that Liberty or BB&T committed acts sufficient to invalidate the sale. See Lackey,
747 F.3d at 1037. Plaintiffs appear to contend that the foreclosure sale was rendered invalid
because the Note was impermissibly separated from the Deed of Trust and because BB&T
neither physically possessed nor had the legal right to enforce the Note when it appointed
Millsap and foreclosed on the Property.3 The undisputed material facts, however, contradict
these contentions.
3
The Amended Complaint contains a litany of other allegations regarding alleged wrongful acts. The Court does
not address these allegations as they are conclusory, implausible, and wholly legally unfounded. See, e.g., Weger v.
City of Ladue, 500 F.3d 710, 728 (8th Cir. 2007) (noting that a plaintiff cannot rely upon unsupported, conclusory
allegations from the complaint to avoid summary judgment). The allegations addressed in this subsection are the
only ones that enjoy some tangential record support.
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First, the Note was not impermissibly separated from the Deed of Trust. Under Missouri
law, “if a promissory note and the accompanying deed of trust are split, then the note becomes
unsecured and the holder of the note may not foreclose on the secured property to recover for the
debt.” Timber Point Props. III, LLC v. Bank of Am., N.A., No. 13-3449-CV-S-DGK, 2014 WL
7005195, at *4 (W.D. Mo. Dec. 10, 2014) (citing Bellistri v. Ocwen Loan Servicing, LLC, 284
S.W.3d 619, 623 (Mo. Ct. App. 2009)). However, when a promissory note is transferred, the
deed of trust automatically follows it. Id.
The undisputed material facts show that shortly after the May 2009 loan origination
Liberty endorsed the Note to BB&T. Upon this assignment, the Deed of Trust also transferred to
BB&T, even though no recordation occurred. See In re Box, No. 10-20086, 2010 WL 2228289,
at *5 (Bankr. W.D. Mo. June 3, 2010). The Note has remained in BB&T’s possession ever since
this initial assignment, and there is no support, beyond pure conjecture, for Plaintiffs’ theory that
a securitization scheme caused a split. See RSBI Aerospace, Inc., 49 F.3d at 402.
Nor can the Court conclude that MERS’s later official transfer of the Deed of Trust to
BB&T rendered the Note unsecured. On January 7, 2013, MERS, on behalf of Liberty, executed
an official transfer of the Deed of Trust to BB&T. This assignment and recording were merely
ceremonial as the Deed of Trust had previously been transferred through the 2009 Note
assignment. Thus, the Court cannot conclude that any split between the Note and Deed of Trust
occurred, let alone that any such split invalidated the foreclosure sale. See Lackey, 747 F.3d at
1038 (finding no wrongful foreclosure where the deed of trust was officially transferred to the
foreclosing party long after the promissory note had been transferred to that same party).
Second, BB&T had the legal authority to appoint Millsap and foreclose. Liberty and
Plaintiffs officially executed the Note and Deed of Trust in May 2009. Liberty assigned the Note
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to BB&T shortly thereafter. This vested BB&T with the authority to enforce the Note and the
Deed of Trust. After Plaintiffs’ default in 2012, BB&T initiated a chain of transfers to facilitate
the foreclosure process, which began with MERS officially assigning the Deed of Trust to
BB&T. At this point, BB&T invoked its appointment powers under the Deed of Trust by
replacing Charterland with Millsap.
Once installed as successor trustee, Millsap exercised
BB&T’s foreclosure powers by giving notice, holding a foreclosure sale, and selling to the
highest bidder. Throughout this process, BB&T not only physically possessed the Note but also
enjoyed the legal authority to enforce it. And nothing from the above sequence suggests Liberty
or BB&T committed other wrongful acts sufficient to set aside the foreclosure sale. See Lackey,
747 F.3d at 1038 (finding that affidavits and copies of the promissory note and deed of trust
entitled defendants to summary judgment on plaintiff’s claims of wrongful foreclosure premised
on unsupported claims that the lender did not hold the note). Nor did BB&T’s failure to produce
the Note taint the foreclosure, because no such requirement existed. See id. (noting that Missouri
law does not require production of the note prior to foreclosure); Doc. 22-2 (containing no such
requirement).
Because no wrongful acts occurred during the foreclosure process, BB&T and Liberty are
entitled to summary judgment on Count II.
B. Liberty and BB&T are entitled to summary judgment on Count I.
Plaintiffs’ quiet title theory appears to be predicated on the notion that BB&T and Liberty
wrongfully foreclosed upon the Property. As determined above, however, neither defendant
committed a wrongful act sufficient to invalidate the foreclosure sale. Plaintiffs therefore cannot
show that they have superior title to the Property, which entitles BB&T and Liberty to summary
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judgment. See Lackey, 747 F.3d at 1040 (citing Ollison v. Vill. of Climax Springs, 916 S.W.2d
198, 203 (Mo. 1996)).
C. Liberty and BB&T are entitled to summary judgment on Count III.
Count III purports to raise three separate claims for relief: unjust enrichment, breach of
fiduciary duty, and conversion of a negotiable instrument. None of these theories are sustainable
given the undisputed facts.
Under Missouri law, a claim for unjust enrichment only lies when no express contract
exists. Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 854 (8th Cir. 2014). Here, the
Note and Deed of Trust governed the lender/lendee relationship between the parties, thereby
precluding any unjust enrichment claims.
Even in absence of these contracts, neither the
Amended Complaint nor the undisputed facts show that Plaintiffs conferred a benefit upon
BB&T or Liberty or that they inequitably retained that benefit, both of which are required for a
submissible case of unjust enrichment. See id. Thus, Plaintiffs’ unjust enrichment claim fails.
Similarly unavailing is Plaintiffs’ allegation that BB&T or Liberty breached the fiduciary
duties owed to them. In absence of special circumstances, there is no fiduciary relationship
between a debtor and creditor. See Neal v. Sparks, 773 S.W.2d 481, 486-87 (Mo. Ct. App. 1989)
(citing Centerre Bank of Kansas City v. Distribs., Inc., 705 S.W.2d 42, 53 (Mo. Ct. App. 1985)).
And Plaintiffs fail to identify any fiduciary duties imposed by the Deed of Trust, or explain how
Liberty or BB&T breached any such duties. On the contrary, BB&T conducted the foreclosure
process in conformance with the Deed of Trust. Accordingly, BB&T and Liberty are entitled to
judgment as a matter of law on Plaintiffs’ fiduciary duty claim.
Plaintiffs’ conversion claim also fails as a matter of law. This claim comprises three
allegations: (1) BB&T converted their money by accepting monthly payments without the
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authority to do so; (2) BB&T converted the Note; and (3) BB&T converted their home by
purchasing it with a credit bid at the foreclosure sale. The first allegation is both legally and
factually unfounded. Under Missouri law, a conversion claim generally does not lie for the
alleged wrongful taking of money. In re Estate of Boatright, 88 S.W.3d 500, 506 (Mo. Ct. App.
2002). But assuming it did exist here, BB&T as the possessor and lawful holder of the Note had
every right to accept mortgage payments from Plaintiffs. See Lafayette v. Courtney, 189 S.W.3d
207, 210 (Mo. Ct. App. 2006) (noting that plaintiff must establish that defendant’s exercise of
control over property was unauthorized).
As for the Note conversion allegation, although
conversion is a viable cause of action for the unlawful taking of a promissory note, see Pollock v.
Berlin-Wheeler, Inc., 112 S.W.3d 73, 77 (Mo. Ct. App. 2003), any such wrong would have been
felt by Liberty as the original holder of the Note. Therefore, any cause of action for conversion
would lie with Liberty, not Plaintiffs. Finally, putting aside whether conversion exists for the
alleged wrongful taking of real property, BB&T’s purchase of the Property via a credit bid was
not improper. See Hallquist, 715 F.3d at 1047.
Conclusion
Because Plaintiffs fraudulently joined Millsap to this litigation, all claims asserted against
it are DISMISSED WITHOUT PREJUDICE for lack of subject-matter jurisdiction. Finding no
dispute of material fact and that judgment as a matter of law is proper on all counts, the Court
GRANTS Liberty and BB&T’s motion for summary judgment (Doc. 21).
IT IS SO ORDERED.
Date: January 21, 2015
/s/ Greg Kays
GREG KAYS, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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