Hanas v. Seterus, Inc.
Filing
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MEMORANDUM AND OPINION as set forth in following order. Signed by District Judge Pamela L Reeves on 2/19/15. (c/m)(ABF)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
GARRETT J. HANAS,
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Plaintiff,
v.
SETERUS, INC.,
Defendant.
No.: 3:14-CV-174-PLR-CCS
MEMORANDUM OPINION
Plaintiff, Garrett J. Hanas, has brought this action against Seterus, Inc., the
servicer of his residential mortgage, alleging that he is exempt from the payment of
property taxes pursuant to Tenn. Code Ann. § 67-5-704. Hanas challenges the payment
of property taxes, arguing that as a disabled veteran, he is exempt from paying property
taxes pursuant to Tenn. Code Ann. § 67-5-704 and, therefore, should not be held
accountable for making a monthly payment that includes an amount intended to cover his
real property taxes. Hanas has asserted claims against Seterus for breach of contract,
breach of the duty of good faith and fair dealing, defamation, and violation of the
Tennessee Consumer Protection Act.
Seterus responds that the Deed of Trust securing Hanas’ property contains an
escrow provision requiring Hanas to pay, in addition to the amount required to cover his
monthly principal, interest, and insurance payments, an amount for taxes, assessments,
and other items (referred to in the Deed of Trust as “Escrow Items”). Despite the Escrow
provision, Hanas has refused to include as part of his monthly mortgage payments the
amount necessary to cover the designated Escrow Items. Specifically, Hanas has refused
to include as part of his monthly payments the amount required to pay the annual
property taxes assessed against his residence by Knox County and the City of Knoxville.
II. Factual Background
On October 16, 2009, Hanas executed a Promissory Note in the amount of
$148,825.00. A Deed of Trust executed by Hanas that same day secured the Promissory
Note and covered the property at 2115 Karnswood Drive, Knoxville, Tennessee. The
Deed of Trust was filed and recorded on November 9, 2009, with the Knox County
Register of Deeds. As reflected in the Deed of Trust, Quicken Loans, Inc. was the
original lender. The Deed of Trust was subsequently transferred to Fannie Mae. Seterus
services the loan on behalf of Fannie Mae. The Deed of Trust securing the property
contains an Ecrow provision requiring Hanas to pay, in addition to the amount required to
cover his monthly principal, interest, and insurance payments, an amount for taxes,
assessments, and other items [R. 8-2, pp. 5-6].
This matter is before the court on defendant Seterus’ motion to dismiss Hanas’
Complaint in its entirety [R. 7]. As grounds for the motion, Seterus asserts (1) the breach
of contract claim should be dismissed because there is no privity of contract between
Seterus and Hanas; (2) alternatively, the breach of contract claim is barred by the Statute
of Frauds; (3) the claim for breach of the duty of good faith and fair dealing is derivative
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of the contract claim, and is not a stand-alone claim for which relief may be granted; (4)
the claim for defamation should be dismissed because Hanas has acknowledged the truth
of the information Seterus allegedly reported to the credit bureaus; and (5) the Tennessee
Consumer Protection Act claim should be dismissed because Seterus has not engaged in
any unfair or deceptive acts or practices.
In response to Seterus’ motion to dismiss, Hanas states that he has never missed a
monthly mortgage payment on his residence. Seterus has reported him as delinquent to
one or more national credit bureaus and threatened foreclosure on his residence. Hanas
argues he is not statutorily or contractually required to pay property taxes to defendant
due to his status as a disabled veteran, and that Quicken Loans did not require property
tax payments under the Deed of Trust.
For the reasons which follow, Seterus’ motion to dismiss will be granted and this
action dismissed in its entirety for failure to state a claim upon which relief can be
granted.
I. Standard for Motion to Dismiss
A motion to dismiss under Rule 12(b)(6), Federal Rules of Civil Procedure,
requires the court to construe the complaint in the light most favorable to the plaintiff,
accept all the complaint’s factual allegations as true, and determine whether the plaintiff
undoubtedly can prove no set of facts in support of the plaintiff’s claim that would entitle
plaintiff to relief. Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir.)
cert. denied, 498 U.S. 867 (1990). The court may not grant such a motion to dismiss
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based upon a disbelief of a complaint’s factual allegations. Lawler v. Marshall, 898 F.2d
1196, 1198 (6th Cir. 1990); Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995) (noting
that courts should not weigh evidence or evaluate the credibility of witnesses). The court
must liberally construe the complaint in favor of the party opposing the motion. Id.
However, the complaint must articulate more than a bare assertion of legal conclusions.
Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434 (6th Cir. 1988). “[The]
complaint must contain either direct or inferential allegations respecting all the material
elements to sustain a recovery under some viable legal theory.” Id. (citations omitted).
III. Tenn. Code Ann. § 67-5-704
Hanas contends he is exempt from the payment of property taxes pursuant to
Tenn. Code Ann. § 67-5-704, which provides:
There shall be paid from the general funds of the state to certain disabled
veterans the amount necessary to pay or reimburse such taxpayers for all or
part of the local property taxes paid for a given tax year on that property
that the disabled veteran owned and used as the disabled veteran’s
residence. . . .
Tenn. Code Ann. § 67-5-704(a)(1).
Information available on the Tennessee
Comptroller’s website, 1 expressly states that tax relief recipients are not exempt from
paying property taxes. The “tax relief is payment by the State of Tennessee to reimburse
certain homeowners who meet the legal requirements for a part or all of property taxes
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The documentation available from the Tennessee Comptroller’s website is a public record. Therefore, it does not
transform Seterus’s motion to dismiss into a motion for summary judgment. See Bassett v. NCAA, 528 F.3d 426,
429 (6th Cir. 2008) (“When a court is presented with a Rule 12(b)(6) motion, it may consider the complaint and any
exhibits attached thereto, public records, items appearing in the record of the case, and exhibits attached to
defendant’s motion to dismiss so long as they are referred to in the complaint and are central to the claims contained
therein”).
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paid, and is not an exemption. You will still receive your tax bill(s) and be responsible
for paying your property taxes each year.” [R. 8-3, p. 2]. The website goes on to state
that if taxes are paid by a homeowner’s mortgage company, the application will be held
by the collecting official until payment is received from the mortgage company. The
application is then mailed to the state tax relief office. If approved, the homeowner will
receive a state check for the tax relief amount. Id. The website further states that the
burden is on the homeowner to apply to the state office for tax relief. Id.
IV. Breach of Contract
Seterus asserts the breach of contract claim should be dismissed because Seterus
and Hanas are not in privity of contract.
Hanas contends that privity was established
when Seterus assumed responsibility for servicing his mortgage under the Deed of Trust.
However, the court need not address these arguments, because regardless of whether
privity exists between these parties, any claim for breach of contract would be barred by
Tennessee’s Statute of Frauds, as explained below.
V. Statute of Frauds
In the alternative, Seterus asserts that any claim for breach of the terms of the
Deed of Trust is subject to dismissal pursuant to Tennessee’s Statute of Frauds.
Assuming that a contract exists between Hanas and Seterus, and that Quicken
Loans entered into an oral or unwritten agreement that excused Hanas from making
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payments to cover property taxes, Hanas is barred from pursuing a claim for breach of
any such agreement pursuant to Tennessee’s Statute of Frauds, which provides:
No action shall be brought against a lender or creditor upon any promise or
commitment to lend money or to extend credit, or upon any promise or
commitment to alter, amend, renew, extend or otherwise modify or
supplement any written promise, agreement or commitment to lend money
or extend credit, unless the promise or agreement, upon which such action
shall be brought, or some memorandum or note thereof, shall be in writing
and signed by the lender or creditor, or some other person lawfully
authorized by such lender or creditor.
Tenn. Code Ann. § 29-2-101(b)(1).
First, the Deed of Trust falls within the Statute of Frauds because it is a written
“promise, agreement, or commitment to lend money or extend credit.” Id; see also
Lambert v. Home Fed. Sav. & Loan Ass’n, 481 S.W.2d 770, 772-73 (Tenn. 1972) (“A
mortgage or a deed of trust, in its legal respect is a conveyance of an estate or an interest
in land and as such within the meaning of the Statute of Frauds”). In addition, the Deed
of Trust at issue here contains an escrow provision that explicitly requires the payment of
funds to cover certain Escrow Items, which includes property taxes. Therefore, any
agreement to modify the terms of the Deed of Trust to excuse Hanas from making escrow
payments to cover property taxes would fall within the Statute of Frauds because the
agreement would represent a promise or commitment to “alter, amend, extend or
otherwise modify or supplement” an existing “promise, agreement or commitment to lend
money or extend credit.”
Second, assuming Hanas and Quicken Loans entered into an oral or unwritten
understanding that excused Hanas from making escrow payments, such an oral or
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unwritten agreement would be unenforceable. See Lambert, 481 S.W.2d at 773 (“An oral
contract to mortgage or to give security on real estate is unenforceable”). “It is also the
rule that a mortgage cannot be modified or extended by an oral agreement to secure
further indebtedness.” Id. Therefore, even if Hanas and Quicken Loans had an oral or
unwritten agreement to excuse Hanas from making escrow payments, such an agreement
would be unenforceable under the Statute of Frauds.
Finally, Seterus asserts that in the absence of an agreement which has been
reduced to writing, Hanas cannot rely upon parol or extrinsic evidence to argue that the
terms of the Deed of Trust were modified. The court agrees. “Perhaps no principle of
law is better settled than that parol evidence shall not be received to contradict or extend
a written agreement . . . . Upon this principle it has been settled by a variety of cases that
where there is a writing, the law holds that it contains all the contract made between the
parties, and will not permit parol proof to extend or alter it in any respect whatever.”
Betts v. Demumbrune, 3 Tenn. 39 (Tenn. 1812); see also Int’l House of Talent, Inc. v.
Alabama, 1985 Tenn. App. LEXIS 2751 at *10 (Tenn.Ct.App. 1985) (“One of the best
known and uniformly followed rules of contract law is the ‘parol evidence rule’ which
forbids the receipt of evidence to vary or contradict the terms of a written contract. This
is not merely a rule of evidence. It is a rule of substantive law in Tennessee”).
Because Hanas does not allege that any side agreement with Quicken Loans that
excused him from paying property taxes was reduced to writing, Hanas is barred by the
Statute of Frauds from pursuing a claim for breach of any such agreement. Moreover,
any oral agreement is unenforceable as a matter of law, nor could the existence of such an
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agreement be established by parol evidence. Accordingly, Hanas’ claim for breach of
any oral or unwritten contract is DISMISSED for failure to state a claim upon relief can
be granted.
VI. Duty of Good Faith and Fair Dealing
Hanas concedes that his claim for breach of the duty of good faith and fair dealing
should be dismissed if he cannot pursue a claim for breach of contract. Accordingly,
Hanas’ claim for breach of the duty of good faith and fair dealing is DISMISSED for
failure to state a claim upon relief can be granted.
VII. Defamation
Seterus asserts Hanas’ claim for defamation should be dismissed because truth is
an absolute defense to a defamation claim, and Hanas has acknowledged the truth of the
information Seterus allegedly reported to “one or more national credit bureaus.”
To establish a prima facie case of defamation under Tennessee law, a plaintiff
must establish (1) defendant published a statement; (2) with knowledge that the statement
was false and defaming to plaintiff; or (3) with reckless disregard for the truth of the
statement or with negligence in failing to ascertain the truth of the statement. Sullivan v.
Baptist Memorial Hosp., 995 S.W.2d 569, 571 (Tenn. 1991). Only false statements are
actionable, and truth is a nearly universal defense. West v. Media Gen. Convergence,
Inc., 53 S.W.3d 640, 645 (Tenn. 2001).
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Here, the Complaint alleges that Seterus “has reported the plaintiff as delinquent
to one or more national credit bureaus, with full knowledge that the plaintiff has timely
paid in full every mortgage payment which he is contractually obligated to make.”
However, in his Affidavit, Hanas acknowledges that he has refused to pay the funds
required to cover payment of property taxes:
Since acquiring the right to service my residential mortgage from the
lender, Quicken Loans, the Defendant has reported me delinquent on the
payment of my residential mortgage, because I refuse to pay the Defendant
additional funds to secure alleged payment of property taxes for which I am
exempt.
(R. 1-1, Hanas Aff. ¶ 5).
Hanas concedes that he has failed to make any payments for property taxes, as
required by the Deed of Trust. The failure to make escrow payments as required by the
express terms of the Deed of Trust results in a deficiency. Therefore, any delinquency
reported by Seterus to the national credit bureaus was true. Because truth is an absolute
defense to a defamation claim, Hanas’ claim for defamation is DISMISSED for failure to
state a claim upon which relief can be granted.
VIII. Tennessee Consumer Protection Act
Seterus asserts that Hanas’ claim for violation of the Tennessee Consumer
Protection Act (TCPA) should be dismissed because the TCPA does not apply to his
claims. In order to recover under the TCPA, Hanas must prove: (1) that Seterus engaged
in an unfair or deceptive act or practice declared to be unlawful by the TCPA; and (2)
that Seterus’s conduct caused an “ascertainable loss of money or property, real, personal
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or mixed, or any other article, commodity, or thing of value wherever situated.” Tenn.
Code Ann. § 47-18-109(a)(1).
In his Complaint, Hanas alleges that he has been required to make escrow
payments to provide for the payment of property taxes. However, pursuant to Tenn.
Code Ann. § 67-5-704, Hanas is entitled to reimbursement from the general funds of the
State of Tennessee for any property taxes paid due to his status as a disabled veteran. As
evidenced by information available on the Tennessee Comptroller’s website, contrary to
Hanas’ allegations, tax relief recipients are not exempt from paying property taxes. As
expressly stated in the documentation, “Tax relief is payment from the State of Tennessee
to reimburse certain homeowners who meet the legal requirements for a part or all of
property taxes paid, and is not an exemption.” [R. 8-3, p.2]. Where an individual’s taxes
are paid by their mortgage lender, the recipient will receive a state check for the tax relief
amount. Id.
Thus, while Hanas may be entitled to property tax relief under Tenn. Code Ann. §
67-5-704, he is not exempt from paying property taxes. Moreover, his property is subject
to a Deed of Trust, which clearly requires him to pay the property taxes. Based upon the
record, the court cannot find that Seterus has engaged in any unfair or deceptive act or
practice, as a matter of law, in attempting to collect funds for the payment of property
taxes required by the Deed of Trust.
Finally, to the extent that Hanas’ claim is based upon allegations that Seterus
reported him as delinquent on his mortgage obligation to any national credit bureau, the
failure to make escrow payments as required by the terms of the Deed of Trust would
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result in a deficiency; thus, any delinquency allegedly reported to the credit bureaus
would have been true. The reporting of truthful information does not constitute an unfair
or deceptive act or practice under the TCPA. Accordingly, Hanas’ claim for violation of
the TCPA will be DISMISSED for failure to state a claim upon which relief can be
granted.
IX. Conclusion
In light of the foregoing discussion, (1) Seterus’ motion to dismiss plaintiff’s
complaint in its entirety [R. 7] is GRANTED; and (2) Hanas’ motion for temporary
injunction [R. 4] is DENIED.
IT IS SO ORDERED.
____________________________________
UNITED STATES DISTRICT JUDGE
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