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Epps v. BSCMS 1999-CLF1 Clifton Highway REO, LLC

United States District Court, E.D. Tennessee, Knoxville Division

October 23, 2019

GARY EPPS, Plaintiff,
v.
BSCMS 1999-CLF1 CLIFTON HIGHWAY REO, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

         This case concerns commercial property located at 5727 Clinton Highway, Knoxville, Tennessee 37912 (“Property”). Plaintiff Gary Epps (“Epps”) seeks to prevent a pending foreclosure sale on the property by BSCMS 1999-CLF1 Clifton Highway REO, LLC (“Defendant”). The Property, which is in receivership, is subject to the Deed of Trust executed between Gibson and Epps, L.L.C. and Defendant's predecessor entity in 1997. Gibson and Epps, L.L.C. was administratively dissolved in 2001, then operated as a general partnership, then as a sole proprietorship by Epps. However, Epps does not claim any responsibility under the Promissory Note associated with the Deed of Trust.

         Before the Court are two motions: Epps' motion for a preliminary injunction [D. 11] and Defendant's motion to dismiss for failure to state a claim [D. 14]. The parties have responded in kind; both motions are ripe. The Court will first address Defendant's motion to dismiss, then Epps' motion for a preliminary injunction.

         I. Motion to Dismiss

         A. Background

         1. Factual Background

         In October 1997, Gibson and Epps, L.L.C. executed the Deed of Trust, along with a Promissory Note, to Bedford Capital Funding Corp., the original lender. The Deed of Trust secured the note, which had an original principal amount of $660, 800.00. Gibson and Epps, L.L.C. was administratively dissolved on July 20, 2001, but continued to operate as a general partnership with Jimmy Gibson (“Gibson”) and Epps as the only partners. On June 24, 2013, Jimmy Gibson assigned all of his interest in the general partnership to Epps and his wife, Jackie Epps. Jackie Epps subsequently assigned all of her interest to Epps, who now operates as a sole proprietorship.

         The Promissory Note went into default, and litigation arose in which Epps, along with Gibson and Epps, L.L.C., sued several parties including Defendant in Knox County Circuit Court regarding the property. See Gary Epps et al. v. Gibson & Assoc. et al., No. C-13-363913 (Knox Cty. Cir. Ct. filed 2013). On August 26, 2016, an “Agreed Order Appointing Receiver” was entered in the case, signed by counsel for Epps, in which a receiver (“Receiver”) was appointed to manage the Property, collect rents pursuant to a lease with the United States Postal Service. Gary Epps et al. v. Gibson & Assoc. et al., No. C-13-363913 (Knox Cty. Cir. Ct. Aug. 26, 2016). Pursuant to the order, the Receiver's fees and expenses were advanced by Defendant.

         On August 6, 2018, U.S. Bank National Association (“U.S. Bank”) initiated the appointment of a substitute trustee under the Deed of Trust, which was recorded. U.S. Bank then issued a “Notice of Trustee's Foreclosure Sale”, which was scheduled for September 10, 2018. On the morning of September 10, 2018, Epps filed suit in Knox County Chancery Court to enjoin the foreclosure sale, alleging that U.S. Bank was not the holder of the Promissory Note. A Temporary Restraining Order (“TRO”) was entered by the Chancery Court, and U.S. Bank removed that action to this Court. See Epps v. U.S. Bank National Association, et al., No. 3:18-cv-405 (E.D. Tenn. removed Sept. 24, 2018). The case lay stagnant until May 24, 2019, when U.S. Bank moved to dismiss the action for lack of prosecution. On June 27, 2019, Epps filed a Notice of Voluntary Dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i) on the grounds that U.S. Bank acknowledged that it was not the holder of the Promissory Note. On August 2, 2019, Defendant prompted the issuance of a “Notice of Trustee's Foreclosure Sale” setting the foreclosure sale for August 28, 2019.

         2. Procedural Background

         On August 23, 2019, Epps again filed suit in Knox County Chancery Court to enjoin the foreclosure sale. On August 26, 2019, Defendant removed the action to the Eastern District of Tennessee, where the case was initially assigned to the Honorable Harry S. Mattice, United States District Judge. Judge Mattice held a telephonic hearing regarding the case with the parties and Defendant cancelled the foreclosure sale and re-noticed it for September 16, 2019. Given the relation of this case to the previous action filed by Epps over the Property, the case was then transferred to this Court. Epps then filed his motion for a preliminary injunction on September 8, 2019 and requested a hearing on the motion. This Court sought to schedule a hearing on September 11, 2019, but counsel for the Defendant, who is based out of Kansas City, Missouri, could not appear in person. Consequently, Defendant re-noticed the foreclosure sale for October 25, 2019. On September 13, 2019, Defendant moved to dismiss the action and responded in opposition to the motion for a preliminary injunction on September 23, 2019. Epps responded in opposition to the motion to dismiss on October 16, 2019.

         B. Standard of Review

         To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must articulate a facially plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When ruling on a Rule 12(b)(6) motion, the court must view the complaint in the light most favorable to the plaintiff and accept all factual allegations in the complaint as true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Dismissal is appropriate only if the Court finds that the plaintiff “can prove no set of facts in support of his claims that would entitle him to relief.” Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir. 1990). But even with this liberal standard, the Sixth Circuit has made clear that “[c]onclusory allegations or legal conclusions masquerading as factual allegations will not suffice.” Bishop v. Lucent Techs., Inc., 520 F.3d 516, 519 (6th Cir. 2008). Instead, the “complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.” Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434 (6th Cir. 1988) (citations omitted).

         C. Analysis

         At the outset, the Court notes that Epps has included various documents in his verified complaint filed in the Chancery Court for Knox County, which was removed to this Court. These documents include a copy of the Deed of Trust (Exhibit C) as well as an “Agreed Order Appointing Receiver” from Gary Epps et al. v. Gibson & Assoc. et al., No. C-13-363913 (Knox Cty. Cir. Ct. Aug. 26, 2016) (Exhibit D). Likewise, Defendant has included several documents as exhibits to its response in opposition to the motion for a preliminary injunction Rule 10(c) provides that a “copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.” Fed.R.Civ.P. 10(c). Consequently, in weighing Defendant's motion to dismiss, the Court treats the documents attached to Epps' complaint as part of the pleadings. See, e.g., Peoples v. Bank of Am., No. 11-2863-STA, ...


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