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Federal Home Loan Mortgage Corp. v. Kantz

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

March 29, 2018

FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff/Counter-Defendant,
v.
WILLIAM KANTZ, Defendant/Counter-Plaintiff/Third-Party Plaintiff
v.
BANK OF AMERICA, N.A., and RUBIN LUBLIN TN, PLLC, Third-Party Defendants.

          To The Honorable William L. Campbell,

          REPORT AND RECOMMENDATION

          ALISTAIR E. NEWBERN UNITED STATES MAGISTRATE JUDGE.

         Plaintiff Federal Home Loan Mortgage Corporation (Freddie Mac) initiated this case on August 17, 2015, as an unlawful detainer action against Defendant William Kantz in the Davidson County Metropolitan General Sessions Court regarding a piece of residential property located in Nashville, Tennessee. (Doc. No. 1-1, PageID# 4.) Kantz removed the action to this Court (Doc. No. 1), where it was preceded by a related action regarding the same property, Kantz v. Rubin Lublin, LLC, et al., No. 3:14-cv-01113 (filed May 6, 2014) (Kantz I). It has now been joined by several other related actions. See Kantz v. Bank of America, N.A., No. 3:17-cv-00051 (filed January 31, 2017); Lee v. Rubin Lublin TN, PLLC, No. 3:17-cv-00891 (filed May 25, 2017).

         Now pending in this case are a motion to strike or dismiss filed by Third-Party Defendant Rubin Lublin TN, PLLC (Rubin Lublin) (Doc. No. 11) and a motion to dismiss a counterclaim and strike the third-party complaint filed by Freddie Mac and Third-Party Defendant Bank of America, N.A. (BANA) (Doc. No. 34).[1] These motions are ripe for consideration. For the following reasons, the Magistrate Judge RECOMMENDS that both motions be GRANTED.

         I. Background

         This action concerns Kantz's right to maintain possession of real property located at 1244 Mary Helen Drive in Nashville, Tennessee. That property and the circumstances of its sale in foreclosure were also the subject of the Kantz I action. The Sixth Circuit Court of Appeals summarized the relevant facts in its consideration of Kantz I, and those facts are not contradicted by Kantz's filings in this action. The Court therefore repeats them here:

In 2007, Kantz obtained a loan in the amount of $391, 800 from Bank of America, NA (“Bank of America”) for the purchase of his residence. Kantz executed a deed of trust conveying the property to PRLAP, Inc., as trustee for Bank of America. After Kantz stopped making payments on the loan in 2012, Rubin Lublin TN, PLLC (“Rubin”), acting as substitute trustee under the deed of trust, initiated foreclosure proceedings. Rubin noticed a foreclosure sale for February 20, 2014. Kantz alleges that a public foreclosure sale never took place at the noticed date and time, and that instead Rubin privately sold the property to Bank of America, making the foreclosure sale defective. A substitute trustee's deed indicates that Bank of America purchased the property for $398, 126.15 and conveyed the property to the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Kantz alleges that he would have been able to purchase the property, through an unnamed investor, for that sale price in February if Rubin had provided him the opportunity to participate in the foreclosure sale.
Kantz brought a civil action in state court, claiming that the sale violated the Fair Debt Collection Practices Act (“FDCPA”), see 15 U.S.C. § 1692(a), and was fraudulent because Rubin did not cry the sale as claimed in the substitute trustee's deed. The matter was removed to federal court. The district court granted Kantz thirty days to repurchase the property, after which, if he did not do so, Rubin could re-notice and conduct a new foreclosure sale. In a letter to Freddie Mac, Kantz offered that an investor was willing to purchase the property for $200, 000, which Freddie Mac rejected, replying that Kantz could repurchase the property for the full indebtedness (approximately $420, 000). Kantz states on appeal that his financial situation had changed since February and he could no longer afford to repurchase the property at full price. Kantz did not repurchase the property, and Rubin re-noticed the foreclosure sale to take place on August 26, 2014. Bank of America entered the sole and prevailing bid, $398, 126.15, although its non-discretionary bidding instructions directed that it would immediately bid $461, 359.51 in response to a third-party bid and that it would go no higher. Kantz does not allege that he would have or could have outbid Bank of America's maximum bid.

Kantz v. Rubin Lublin TN, PLLC, et al., No. 15-5490, slip op. at 1-2 (6th Cir. March 30, 2017).

         Judge Haynes dismissed Kantz I on April 6, 2015, when he granted Rubin Lublin and Freddie Mac's motions to dismiss and denied Kantz leave to amend his complaint for a third time, based on his finding that “there are not any factual allegations . . . that the August foreclosure was not properly noticed or cried, ” “the August foreclosure sale cured any alleged defects from the February foreclosure sale and moots many of [Kantz's] claims, ” and Kantz was therefore properly “divested from any interest in the property . . . and title is vested in [Freddie Mac].” Kantz v. Rubin Lublin, PLLC, No. 3:14-01113, 2015 WL 1543531, at *9, 13, 23 (M.D. Tenn. Apr. 6, 2015). With Kantz's appeal of that decision pending, Freddie Mac filed this detainer action.

         After removing the detainer action to this Court, Kantz filed an Answer and Counter-Claim for Declaratory Action and Other Relief and Third-Party Claims Against Rubin Lublin TN, PLLC and Bank of America, NA (Doc. No. 9). In that pleading, Kantz asserts claims for a declaration that the August 26, 2014 foreclosure sale was unlawful; fraudulent foreclosure; breach of contract and of the requirement of good faith and fair dealing; violation of the Tennessee Consumer Protection Act; violations of the Fair Debt Collection Practices Act; violations of the Real Estate Settlement Procedures Act and the Truth in Lending Act; and conspiracy. (Id. at PageID# 120- 35.)

         Rubin Lublin has filed a motion to strike or, in the alternative, to dismiss Kantz's third-party complaint against it (Doc. No. 11); Freddie Mac and BANA have moved to dismiss Kantz's counterclaim against Freddie Mac and to strike his third-party complaint against BANA. (Doc. No. 34.) At the heart of these motions is the assertion that Kantz's claims in this action are barred by res judicata because this Court has found and the Sixth Circuit has affirmed that the foreclosure sale of the property was not unlawful. Affirming Judge Haynes's decision, the Sixth Circuit held that:

The district court had things right: any harm Kantz might have suffered as a result of Rubin's failure to cry the February 2014 sale was cured by giving him an exclusive repurchase period and later by re-noticing the sale for August 2014. For thirty days, he had an exclusive opportunity to repurchase the home and did not take it. Kantz's pleadings stated that he would not have personally repurchased the property in either February 2014 or during the exclusive repurchase period, but rather an “investor” he had identified would do so. Kantz argues that the August sale was also defective, however, because after the property's note and deed were transferred to Freddie Mac, Rubin's appointment as substitute trustee lapsed. This argument contradicts his contention that the February 2014 sale was void: if the February 2014 sale was not legally effective, then Rubin's appointment would remain in place. Yet even if we accept that the August 2014 sale missed certain formalities, Kantz does not allege that those lapses prevented him from purchasing the home, but rather that his financial condition changed in the interim. In the end, it does not matter when the effective sale occurred, because Kantz lawfully lost his interest in the home and cannot maintain claims for fraud, breach of contract, conversion of property, or actual and punitive damages under the FDCPA. That moots all but two of his claims, damages under the TCPA and statutory damages under the FDCPA, and dismissal was proper under Rules 12(b)(1) and 12(b)(6).

         (Doc. No. 226-1, PageID# 2864.) The Sixth Circuit considered Judge Haynes's rulings on Kantz's Second Amended Complaint in that action. The Sixth Circuit held that Kantz forfeited any argument that Judge Haynes erred in denying him leave to file a third amended complaint in KantzI because he “failed to ...


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