Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Federal National Mortgage Association v. Cawood

United States District Court, E.D. Tennessee, Chattanooga

September 30, 2019

FEDERAL NATIONAL MORTGAGE ASSOCIATION and SETERUS, INC., Defendants/Appellants,
v.
JOSEPH C. CAWOOD, Plaintiff/Appellee.

          MEMORANDUM

          CURTIS L. COLLIER, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court from the Bankruptcy Court. Defendants/Appellants, Federal National Mortgage Association (“FNMA”) and Seterus, Inc. (“Seterus”; collectively with FNMA, “Defendants”), object to the Bankruptcy Court’s proposed findings of fact and conclusions of law on their motions to dismiss the adversary proceeding filed against them by Plaintiff/Appellee, Joseph C. Cawood. For the reasons stated herein, the Court will ACCEPT the Bankruptcy Court’s proposed findings of fact and conclusions of law, DENY Seterus’s motion to dismiss, GRANT IN PART and DENY IN PART FNMA’s motion to dismiss, DISMISS Count Six of Plaintiff’s Amended Complaint against FNMA, and REMAND the case to the Bankruptcy Court for further proceedings consistent with this opinion.

         I. BACKGROUND

         Defendants do not object to the Bankruptcy Court’s explanation of Plaintiff’s factual allegations for the purposes of Defendants’ motion to dismiss. The Court accordingly adopts Section One of the Bankruptcy Court’s Memorandum Opinion by reference and provides only a brief summary of the background here.

         A. Factual Background

         Plaintiff bought a house in Cleveland, Tennessee, in 2004, obtaining a loan from SunTrust Mortgage, Inc. (“SunTrust”). The loan was secured by a deed of trust.

         Plaintiff moved to Texas. He fell behind on his loan payments in 2008, and SunTrust instituted foreclosure proceedings. Plaintiff filed a voluntary Chapter 13 bankruptcy petition (the “Texas Case”) in the Bankruptcy Court for the Southern District of Texas (the “Texas Court”) on May 12, 2008, to stop the foreclosure. The Texas Case was completed on May 31, 2013. The Texas Court granted the trustee’s June 2013 motion deeming the mortgage current and directing Plaintiff to make future loan payments directly to SunTrust. Plaintiff received a discharge from the Texas Court on July 8, 2013.

         Plaintiff made loan payments to SunTrust for June, July, August, and September 2013. In October 2013, Seterus sent Plaintiff a letter informing him that Seterus had become the servicer of the loan on behalf of FNMA. The letter stated that there was unpaid interest of $2, 591.62 and an escrow overdraft of $745.33 on the loan. Seterus also returned Plaintiff’s September payment. Plaintiff made his October 2013 payment to Seterus as instructed. He also retained counsel, who wrote to Seterus in November 2013, resubmitting Plaintiff’s September 2013 payment and enclosing a copy of the order from the Texas Case deeming the loan current.

         Between October 2013 and August 2014, certain patterns repeated. Plaintiff submitted all of his payments to Seterus, Seterus returned certain payments, and Plaintiff resubmitted them. Seterus sent multiple letters to Plaintiff claiming the loan was in default and discussing new payment amounts, a possible loan modification, and the institution of foreclosure proceedings. Plaintiff’s counsel sent multiple letters telling Seterus to check the records from the Texas Case, asserting that Plaintiff had made all of his payments since the Texas Case on time, and asserting that foreclosure would violate the orders of the Texas Court. Seterus responded with letters saying the matter was under investigation.

         Foreclosure was scheduled and advertised for August 14, 2014. In order to stop the sale, Plaintiff filed a Chapter 13 petition on August 12, 2014, in the Bankruptcy Court for the Eastern District of Tennessee, to which Petitioner had returned. Seterus filed an objection to confirmation on the grounds that Plaintiff’s plan did not account for arrearages to Seterus of more than $7, 000.

         B. Procedural History

         Plaintiff filed this adversary proceeding on August 11, 2015, against FNMA, Seterus, SunTrust, and other entities allegedly involved in the planned foreclosure. His First Amended Complaint (the “Complaint”) seeks individual and class-action relief. He asserts causes of action for (1) an objection to Seterus’s claim; (2) breach of contract; (3) intentional or negligent misrepresentation; (4) negligence; (5) failure to credit payments in violation of 15 U.S.C. § 1639f; and (6) violation of the Fair Debt Collection Practices Act (the “FDCPA”).

         Seterus and FNMA each filed a motion to dismiss on July 8, 2016. Seterus argued the Bankruptcy Court lacks subject matter jurisdiction over all of Plaintiff’s claims for individual relief because they are attempts to enforce the discharge injunction from the Texas Case, and a contempt action for violation of a discharge injunction can only be heard in the court that issued the injunction. Similarly, Seterus argued for dismissal of the class-action claims as attempts to enforce discharge injunctions of other courts. In the alternative, it argued the Complaint fails to state valid claims for relief under Rule 12(b)(6) of the Federal Rules of Civil Procedure. FNMA’s motion sought dismissal on the grounds that the Complaint does not contain any factual allegations of misconduct by FNMA. In the alternative, FNMA adopted Seterus’s arguments for dismissal. The Bankruptcy Court heard oral argument on the motions to dismiss on September 20, 2016.

         The Bankruptcy Court issued a Memorandum Opinion and Order on September 29, 2017, which constitute the Bankruptcy Court’s proposed findings of fact and conclusions of law for this Court’s review.[1]See Fed. R. Bankr. P. 7012(b); 28 U.S.C. § 157(c)(1). The Bankruptcy Court first addressed Defendants’ challenge to subject-matter jurisdiction based on the discharge injunction in the Texas Case. (Op. at 10–14.) The Bankruptcy Court acknowledged the correctness of Defendants’ position that only a court that issues a discharge injunction may punish a violation of that injunction. (Id. at 10.) It concluded, however, that a discharge injunction was not at issue in Plaintiff’s Complaint, because Plaintiff’s debt to SunTrust was not discharged in the Texas Case. (Id. at 11–14 (quoting Perry v. EMC Mortgage Corp., 388 B.R. 330 (Bankr.E.D.Tenn. 2008) (long-term mortgage was excepted from discharge under 11 U.S.C. ยง 1328, so post-discharge collection actions by mortgage holder did not ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.