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Daee v. JP Morgan Chase Bank, N.A.

United States District Court, M.D. Tennessee, Nashville Division

May 4, 2015

MAX DAEE and TONI DAEE, Plaintiff,


ALETA A. TRAUGER, District Judge.

Pending before the court are multiple motions filed by both parties. The plaintiffs have filed a Motion for Sanctions Against Defendant for Violation of Fed.R.Civ.P. 37 (Docket No. 47) ("Motion for Sanctions"), to which the defendant has filed a Response in opposition (Docket No. 52), and the plaintiffs have filed a Reply (Docket No. 53).[1] The plaintiffs have also filed a Motion to Compel the Defendant to Provide Court Ordered Deposition Testimony and For Sanctions (Docket No. 57) ("Motion to Compel"), to which the defendant has filed a Response in opposition (Docket No. 59), and the plaintiffs have filed a Reply (Docket No. 62). The plaintiffs have also filed a Motion for Summary Judgment (Docket No. 60) and a Motion to Withdraw Untimely Response Argument (Docket No. 63). The defendant has filed a Second Motion for Summary Judgment (Docket No. 54), to which the plaintiffs have filed a Response in opposition (Docket No. 61).

For the reasons stated herein, the plaintiffs' Motion for Sanctions, Motion to Compel, and Motion to Withdraw Untimely Response Argument will be granted, the court will award fees and expenses in favor of the plaintiffs, the court will order the defendant to supplement certain interrogatory responses, and the court will deny the Rule 56 motions as moot.


This case concerns efforts by the defendant, JP Morgan Chase Bank, N.A. ("Chase"), to collect on two mortgage loans on which the plaintiffs defaulted and to foreclose on the plaintiffs' properties. The court summarized the procedural history and certain facts (based on the record at the time) in its October 10, 2014 Memorandum & Order (Docket No. 25), familiarity with which is assumed.

I. Basic Facts of the Case[2]

On December 3, 1998, the plaintiffs refinanced two rental homes in Hendersonville, Tennessee (the "Properties"). The plaintiffs executed two Adjustable Rate Notes in favor of Chase (the "Notes") and, as security for the Notes, executed Deeds of Trust in favor of Chase (the "Deeds of Trust") relating to each of the two refinanced Properties. The Notes state that the plaintiffs "understand that the Lender may transfer the Note;" the Deeds of Trust state that "[t]he Note (together with this security instrument) may be sold one or more times without prior notice to the borrower." Chase recorded the Deeds of Trust with the Sumner County Register of Deeds on December 8 and 9, 1998.

On December 17, 1998 (two weeks after executing the Notes and the Deeds of Trust), Chase endorsed over the Deeds of Trust and associated Notes to Citibank (the "Assignments"). Chase Assistant Treasurers Jackie Fouche and Luis A. Martinez executed one of the Assignments; Fouche and Chase Assistant Treasurer Barbara Eddowes executed the other. Both Assignments contain identical language, stating that Chase has "endorsed" to Citibank all of its interest as "holder" of the Deeds of Trust and associated Notes. It also states that it "hereby constitutes and appoints the Assignee its attorney irrevocable to collect and receive said debt, and to foreclose, enforce, and satisfy said lien." Unlike the Deeds of Trust, the Assignments were not contemporaneously recorded. Chase recorded the stamped Assignments in the Sumner County Registry of Deeds on May 22, 2000.[3]

At an unspecified time, Chase Assistant Treasurer Amanda Munoz affixed a signed stamp to each Note, which states, in relevant part: "Pay to the order of Citibank, N.A., as trustee, WITHOUT RECOURSE. Chase Manhattan Mortgage Corporation."

On an unspecified date, Chase Vice Presidents Kayla Cooley and Tina Richard signed an allonge to each note (the "Allonges"), in which (a) Chase purported to act as "attorney in fact" for Citibank and (b) in that capacity, endorsed the Notes back to Chase "without recourse." The Allonges are undated and were not recorded. Thus, the public record continued to reflect only the initial Assignments to Citibank, but not the purported Allonges endorsing Citibank's interests back to Chase.

Although the factual record is not developed, it appears that Chase continued to service the mortgage, notwithstanding the Assignments to Citibank. In 2004 and 2008, Chase attempted to "enforce the Notes" in some fashion.[4] The plaintiffs fell behind in making payments in 2008, at which point Chase initiated foreclosure proceedings. Chase scheduled foreclosure sales for November 4, 2013, leading to this lawsuit.

II. State Court Proceedings and Removal

On October 30, 2013, the plaintiffs filed this case in Sumner County Chancery Court as a "Petition to Stay Foreclosure." (Docket No. 1, Ex. A at PageID #: 6-10.)[5] In their initial Petition, the plaintiffs alleged that, after falling behind in their mortgage payments, they had unsuccessfully attempted to negotiate with Chase. They contended that, in its negotiation and in its initiation of foreclosure proceedings, Chase had violated federal and state debt collection practice regulations. (Petition to Stay Foreclosure ¶ 6.) The initial Petition asked the Chancery Court to stay the foreclosures and to permit the plaintiffs to pursue "any and all private rights and causes of action to which they are entitled...." (Id. ¶ 7.) Chase reset the foreclosure sales for December 4, 2014. (Docket No. 1, Ex. A, at PageID #: 14, Notice of Preliminary Hearing Reset.) Chase initially filed a Motion to Dismiss, in which Chase argued that the plaintiffs' Petition failed to state a claim. (Docket No. 1, Ex. A, Motion to Dismiss by JP Morgan Chase and Memorandum Supporting Motion to Dismiss by Defendant JP Morgan Chase, at PageID #: 15-20.)

The plaintiffs sought leave to file an Amended Petition, in which they alleged that, as reflected in the recorded Assignments, Chase was not a "holder" entitled to enforce the instruments because it had assigned its interests to Citibank. The plaintiffs alleged that Chase had erroneously and fraudulently accepted mortgage payments from them, that Chase had fraudulently held itself out as the holder during loan modification negotiations, that Chase initiated foreclosure proceedings without authority to do so, that the plaintiffs faced a risk that Citibank would attempt to collect on the debts or foreclose on the Properties based on Citibank's rights under the Assignments, and that the plaintiffs therefore faced the potential for double liability. The Amended Petition attached copies of the Deeds of Trust and Assignments at issue. Chase substituted counsel, voluntarily retracted its Motion to Dismiss the original Petition, removed the case to this court based on diversity jurisdiction on November 27, 2013 (Docket No. 1), and agreed to defer the foreclosure sales until January 3, 2014.

III. The Complaint

Following removal, on December 16, 2014, the plaintiffs filed an Amended Petition for Injunction to Stay the Sale of Real Estate Conveyed by Deed of Trust and Complaint for Damages, which the court will refer to as the "Complaint." (Docket No. 7.) Chase apparently deferred the foreclosure sales.

In the Complaint, the plaintiffs allege that the recorded Assignments to Citibank were effective as a "special endorsement" under Tenn. Code Ann. § 47-3-205(a), that no subsequent assignments were recorded in Sumner County, that Citibank (not Chase) therefore was entitled to hold the notes and enforce them from December 1998 forward, that Chase violated Tenn. Code Ann. § 47-3-412 and the Assignments' terms by collecting mortgage payments from 1998 through 2008, and that Chase initiated wrongful foreclosure proceedings in which it failed to list Citibank as the trustee. The plaintiffs also alleged that Chase engaged in "unlawful and unethical pre-foreclosure tactics" by walking unannounced into the homes (which were occupied by rental tenants), presenting foreclosure documents to the tenants, changing locks on the doors of one of the Properties, and placing large postings on the Properties stating that they were subject to foreclosure. The plaintiffs alleged that these tactics, which allegedly spanned five years, caused the tenants not pay rent to the plaintiffs and to move out prematurely, resulting in over $100, 000 in lost rental income.

In their Complaint, the plaintiffs acknowledged that (1) based on a "[p]reliminary unofficial inquiry to Citibank, " Citibank had no record of the Assignments or that it became a holder of the Notes under Tennessee law, (2) Citibank had not, to date, attempted to collect, receive, or foreclose on the Notes, and (3) "[b]ased on interactions between [the plaintiffs] and the Defendant, " Chase never modified the plaintiffs' account in Chase's internal system to reflect that Citibank was the assignee of the Deeds and holder of the Notes, as reflected in the recorded Assignments. The plaintiffs alleged that Chase simply ignored (intentionally or unintentionally) the Assignments, notwithstanding the special endorsements stated therein. Thus, the plaintiffs alleged that Chase's servicing of the debt, attempts to renegotiate the debt, and efforts to foreclose on the debt were all unlawful. The plaintiffs demanded a refund of all payments made to Chase, an injunction against foreclosure proceedings by Chase, damages related to the foreclosure proceedings, a release of all claims against the plaintiffs, and that Chase pay Citibank for the plaintiffs' (alleged) liability to Citibank.

IV. Post-Complaint Proceedings

A. The CMO and the Presentation of the Allonges to the Plaintiffs

On January 15, 2014, the court issued an initial Case Management Order ("CMO"). (Docket No. 13.). In the plaintiffs' theory of the case, the plaintiffs contended that Chase had specially endorsed and sent the Notes to Citibank about two weeks after Chase had lent the money to the plaintiffs and that Chase had no authority to collect on the underlying debts or to initiate foreclosure proceedings. In response, among other things, Chase argued that it was "the proper holder and/or servicer of the loan in question, " although it did not explain why. The CMO set a ...

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