Hammond et al v. First Magnus Financial Corporation An Arizona Corporation et al
Filing
90
ORDER AND OPINION (1) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS AND (2) GRANTING MOTION TO COMPEL AND DIRECTING BOTH PARTIES TO PRODUCE DOCUMENTS. 70 , 88 . Signed on 11/20/14 by District Judge Ortrie D. Smith. (Order mailed to Danny Hammond.) (Matthes, Renea)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
DANNY HAMMOND,
Plaintiff,
vs.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
Defendant.
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Case No. 14-0032-CV-W-ODS
ORDER AND OPINION (1) GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION TO DISMISS AND (2) GRANTING MOTION TO
COMPEL AND DIRECTING BOTH PARTIES TO PRODUCE DOCUMENTS
Pending are two motions filed by Defendant (Federal National Mortgage
Association, or “FNMA”): a Motion to Dismiss and a Motion to Compel. The Motion to
Dismiss (Doc. # 70) is granted in part and denied in part and the Motion to Compel
(Doc. # 88) is granted.
I. BACKGROUND
This case started in state court on November 22, 2013 but was removed to
federal court on January 10, 2014. The Corrected Second Amended Complaint (“SAC”)
was filed on June 23, 2014 (Doc. # 61) and is the operative pleading in this case. The
Court is required to liberally construe the SAC, and Plaintiff is held to a less exacting
pleading standard than a represented party would be. E.g., Topchian v. JPMorgan
Chase Bank, N.A., 760 F.3d 843, 849 (8th Cir. 2014). In addition, the Court should not
focus on the legal theories identified by a pro se plaintiff and instead should examine
the factual allegations to determine whether they could support relief under any possible
theory. Id. at 848-49. When viewed in this light (and not the standard FNMA espouses,
which does not account for Plaintiff’s pro se status), the Court interprets the SAC in the
following manner.
As stated, this suit was originally filed in state court, apparently in anticipation of
a nonjudicial foreclosure sale on real property that occurred on November 25, 2013.
Back in July 2002, the owners of the property – Claudia Bill-Copping and Frederick
Copping (“the Coppings”) – took out a mortgage on the property; the loan was financed
by First Magnus Financial Corporation. First Magnus conveyed its interest to Bank of
America, and then Bank of America conveyed its interest to FNMA.
Plaintiff was not a party to these transactions. However, he alleges he has an
interest in the property. He alleges that he had a Promissory Note in the amount of
$81,526.36 and the Note was secured by a Deed of Trust. He further claims that he
foreclosed on the property in August 2013. SAC, p. 24.
The FNMA foreclosure occurred on November 25 as planned and FNMA was the
successful bidder. The SAC lodges many general complaints about this sequence of
events, some of which are repeated on numerous occasions over the span of the SAC’s
thirty-three pages. For instance, the SAC
Complains the Promissory Note was not presented to the mortgagees or Plaintiff
at the sale or at any other time,
Asserts documents were not properly recorded with the Recorder of Deeds,
Complains that the original transaction between First Magnus and the Coppings
lacked consideration,
Utilizes the phrase “holder in due course” in a variety of contexts that do not
make any jurisprudential sense,
Chronicles FNMA’s history and status as an entity without any connection to this
particular transaction, and
Casts aspersions on the banking and mortgage industries generally without any
connection to this particular transaction.
II. DISCUSSION
To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible
on its face. A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the
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defendant is liable for the misconduct alleged. The plausibility standard is
not akin to a probability requirement, but it asks for more than a sheer
possibility that a defendant has acted unlawfully. Where a complaint
pleads facts that are merely consistent with a defendant's liability, it stops
short of the line between possibility and plausibility of entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In keeping with these principles a court considering a motion to dismiss
can choose to begin by identifying pleadings that, because they are no
more than conclusions, are not entitled to the assumption of truth. While
legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations. When there are well-pleaded factual
allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief.
Id. at 679. A claim is facially plausible if it allows the reasonable inference that the
defendant is liable for the conduct alleged. E.g., Horras v. American Capital Strategies,
Ltd., 729 F.3d 798, 801 (8th Cir. 2013).
Additionally, A[a] document filed pro se is to be liberally construed and a
pro se complaint, however inartfully pleaded, must be held to less stringent
standards than formal pleadings drafted by lawyers.@ Erickson, 551 U.S. at 94
(internal quotation marks and citations omitted); see also Stringer v. St. James R1 School Dist., 446 F.3d 799, 802 (8th Cir. 2006).
A.
The vast majority of the SAC’s allegations fail to set forth any legal claim. The
general allegations about the banking and mortgage industries do not present a legal
theory entitling Plaintiff to relief, nor do his allegations about FNMA’s history and legal
status. Plaintiff’s use of the legal term “holder in due course” does not present any
theories, and the factual recitations do not lead to any cause of action.
The contention that the transaction between the Coppings and First Magnus
lacked consideration is not something Plaintiff can assert because he was not a party to
that transaction. Moreover, his allegations do not substantiate any viable claim. He
avers that the Promissory Note was not a contract but rather “was an offer to borrow by
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[the Coppings] to First Magnus which did not fulfill the necessary element of
consideration in the negotiation and transaction by providing the funding,” and that the
Coppings’ “offer to pay back a loan to First Magnus if First Magnus actually funded the
loan was just ‘an offer unaccepted’.” SAC, p. 6. It may be that these facts are intended
to support Plaintiff’s claim that FNMA bears liability for its (or another’s) failure to show
the Promissory Note to Plaintiff or the Coppings at the time of foreclosure – but this
claim is not viable and must be dismissed. E.g., Lackey v. Wells Fargo Bank, N.A., 747
F.3d 1033, 1038-39 (8th Cir. 2014). Plaintiff’s allegations decrying the use of MERS to
record property records and transactions also fails to support a viable legal theory.
Finally, Plaintiff’s claim under the Missouri Merchandising Practices Act fails as a matter
of law because Plaintiff did not enter a transaction or have a relationship as an actual or
would-be customer with FNMA. Conway v. CitiMortgage, Inc., 438 S.W.3d 410, 415 n.3
(Mo. 2014) (en banc).
B.
The Court interprets the SAC as presenting a viable claim seeking to quiet title to
the property. Plaintiff alleges that he had an interest in the property and he foreclosed
on the property before the November 2013 nonjudicial foreclosure. FNMA recognizes
the potential legal viability of this claim, but asks the Court to reject it because Plaintiff
has not provided documentation to support it. However, this is a Motion to Dismiss:
Plaintiff is not obligated to prove his allegations to the Court at this juncture. The facts
alleged may also support a claim for damages for wrongful foreclosure, particularly if
one credits (as the Court must, given the procedural posture) Plaintiff’s claims that
documents supporting FNMA’s entitlement to foreclose were not properly recorded or
that there were other defects in the foreclosure process.
Before the Court is a motion to dismiss for failure to state a claim. The Court
cannot evaluate Plaintiff’s allegations that he had a security interest in the property that
was superior to FNMA’s, nor can it reject them. The Court cannot evaluate Plaintiff’s
allegations that he has an ownership interest that survives the November 2013
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foreclosure. These issues may be resolvable on summary judgment, but they cannot
be resolved at this time.
C.
In December 2013, FNMA filed an unlawful detainer action in the Circuit Court of
Cass County, Missouri, where the case was assigned to that Court’s Associate Circuit
Division. Plaintiff was among the defendants in that case. In June 2014, the Associate
Circuit Court issued a Journal Entry of Judgment in FNMA’s favor. Plaintiff sought a
trial de novo in the Circuit Court. On September 30, the Circuit Court granted FNMA’s
Motion for Summary Judgment. Plaintiff did not appeal so the Circuit Court’s judgment
is final.
Upon learning of the unlawful detainer action, this Court became interested in the
possible preclusive effect of the state court’s decision. On the surface, it seemed that a
decision awarding possession of the property to FNMA would necessarily include a
determination that FNMA had valid title to the property. To that end, on August 26 –
after the Associate Circuit Court ruled – this Court sought guidance from Defendant and
to that end issued an Order directing Defendant “to file a Motion addressing the
preclusive effect of that Judgment.” FNMA complied; however, FNMA invites the Court
to issue a ruling that conflicts with governing law.
FNMA contends the Plaintiff could have asserted his claims of superior title and
wrongful foreclosure in the unlawful detainer suit, so the res judicata effect of that case’s
judgment bars this case. FNMA specifically equates the state court’s determination of
who should have possession with a determination of proper title. Doc. # 83 at 8. This is
simply not a correct statement of law. In 2013, the Missouri Supreme Court conducted
a detailed discussion of the history and nature of unlawful detainer actions. “From the
outset . . . such actions were confined to the question of possession and did not purport
to address questions of ownership or validity of title.” Wells Fargo Bank, N.A. v. Smith,
392 S.W.3d 446, 453 (Mo. 2013) (en banc). As originally constituted (before Missouri
was even a state), the action was not “a bar to any other action at law, brought by either
party, either to try the right of the property or for intermediate damages.” Id. These
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understandings were incorporated in – and remain a part of – the statute as it exists
today. Thus, “[i]n light of the statutory limitations on the substantive scope of unlawful
detainer actions, Missouri courts have repeatedly stated that equitable defenses and
counterclaims are not permitted in response to such claims.” Id. at 454. More to the
point: FNMA is simply wrong to suggest Plaintiff could have raised asked the Associate
Circuit Court to quiet title during the unlawful detainer action, or assert a claim for
wrongful disclosure. “[S]tatutory unlawful detainer actions do not, cannot, and never
were intended to resolve questions of ownership or the validity of title.” Id. at 456.
The Missouri Supreme Court counsels that a defendant in an unlawful detainer
action may contest title in a separate action. E.g., id. (“The Smiths are not barred from
raising equitable theories, claims of wrongful foreclosure, or other challenges to Wells
Fargo’s title. However, they are barred from trying to litigate such issues in response to
Wells Fargo’s limited action for possession under chapter 534. The Smiths must litigate
these claims in a separate proceeding . . . .”).
When Plaintiff presented Smith to support his contention that he could not have
contested title in the unlawful detainer action, FNMA relied on a passage from that case
for the proposition that title is relevant to show who deserves possession.
Disappointingly, FNMA did not provide the entire context for the quote, which appears
below:
However, in such cases, the foreclosure purchaser's right to possession is
based upon the fact of the sale as demonstrated by the deed, not on the
ultimate validity of the title that the deed reflects. Such use of title is
merely an application of the long-standing principle that, even though a
challenge to title may not be asserted in defense of an unlawful detainer
action, title remains relevant and admissible “in so far as it may be
necessary to show who is entitled to possession, as the right to
possession is the question at issue.” Suedmeyer v. Meyer, 237 S.W. 882,
883 (Mo.App.1922). See also Hafner Mfg. Co. v. City of St. Louis, 262 Mo.
621, 172 S.W. 28, 31 (Mo. banc 1914) (“title is not tried out as a
determinative factor” but may be introduced where relevant to show the
right of possession).
Smith, 392 S.W.3d at 462 (first emphasis in original; subsequent emphases added).
This paragraph does not suggest Plaintiff could have contested FNMA’s title in the
unlawful detainer action. To the contrary, it confirms that he could not.
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FNMA also invokes the Rooker/Feldman doctrine to argue that this Court lacks
jurisdiction over Plaintiff’s case because to rule in his favor would undermine the state
court’s decision. The Court rejects this argument for two reasons. First, as set forth
above, a ruling in Plaintiff’s favor would not undermine the state court’s decision
because the state court did not (and could not) consider issues of title. Indeed, this
separate action is exactly what the Missouri Supreme Court directs must occur, so it
cannot be understood as undermining the state court’s decision. Second, as a purely
technical matter even if the issues were the same the problem would not be one of
jurisdiction. FNMA overstates the reach of the Rooker/Feldman. Despite citing the
Supreme Court’s 2005 decision in Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
FNMA fails to note that decision’s directive that the doctrine does not apply when there
are parallel cases and the state court reaches a decision first. 544 U.S. 280, 292
(2005). “Disposition of the federal action, once the state-court adjudication is complete,
would be governed by preclusion law. . . . Preclusion, of course, is not a jurisdictional
matter. In parallel litigation, a federal court may be bound to recognize the claim- and
issue- preclusive effects of a state-court judgment, but federal jurisdiction over an action
does not terminate automatically on the entry of judgment in the state court.” Id. at 293.
Even if a federal plaintiff asserts a claim that suggests a state court decision is wrong,
“there is jurisdiction and state law determines whether the defendant prevails under
principles of preclusion.” Id. (quotation omitted).
D.
Pending is FNMA’s Motion to Compel, which asks the Court to require Plaintiff
provide his Rule 26 disclosures. Specifically, FNMA seeks an order requiring Plaintiff to
provide
1. names of individuals likely to have discoverable information, along with the
subjects of that information to support its claims or defenses;
2. a copy or description and location of all documents and electronically stored
information in his possession, custody or control to support its claims or
defenses;
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3. a computation of damages claimed by the disclosing party, and;
4. any applicable insurance agreement.
Although FNMA does not indicate it has supplied its Rule 26 disclosures, the Court
presumes it has done so.1 Regardless, in an abundance of caution, the Court directs
both sides to provide the information described above. Included in this information shall
be all documentation reflecting both parties’ ownership interest in the property. Both
sides shall produce this documentation to the other side on or before December 15,
2014.
III. CONCLUSION
The Motion to Dismiss for Failure to State a Claim is granted in part and denied
in part. The only remaining parties are Danny Hammond and FNMA, and the only
claims remaining are Hammond’s claims seeking to quiet title to the property and
damages for the wrongful foreclosure of his interest. The Motion to Dismiss is granted
to the extent Plaintiff’s Corrected Second Amended Complaint asserts any other claims.
The parties shall provide their Rule 26 disclosures on or before December 15,
2014. The disclosures shall, at a minimum, include all documentation reflecting the
parties’ ownership interest in the property.
IT IS SO ORDERED.
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT
DATE: November 20, 2014
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The Court does not know why it has taken FNMA nearly three months to
seek the Rule 26 disclosures, particularly given that discovery closes on
December 22 of this year. There is no present need to delve into this matter
further.
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