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Matthews v. Bank of America, N.A.

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

December 4, 2019

JESSICA YVONNE MATTHEWS, Plaintiff,
v.
BANK OF AMERICA, N.A., Defendant.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE

         This action arises out of a home equity conversion mortgage transaction, commonly called a reverse mortgage. Jessica Yvonne Matthews (“Mrs. Matthews”) alleges that Bank of America (“BOA”) engaged in prohibited acts under Tennessee's Home Equity Conversion Mortgage Act (“HECMA”), Tenn. Code Ann. § 47-30-101, et seq., and committed fraud or constructive fraud. Pending is Mrs. Matthews' Motion to Remand (Doc. No. 8) and BOA's Motion to Dismiss (Doc. No. 6). For the reasons that follow, the motions will be denied.

         I. Allegations

         Mrs. Matthews and her husband Gayle Ceron Matthews (“Mr. Matthews”) resided at 190 Turkey Creek Highway, Carthage, Tennessee (the “Property”). Mr. Matthews sought a reverse mortgage from BOA. He executed a Fixed Rate Note (the “Note”) providing that BOA would advance him “up to a maximum principal amount of $177, 000.00, ” and that he “promise[d] to pay to [BOA] a principal amount equal to the sum of all Loan Advances made under the Loan Agreement with Interest . . at the rate of . . . 5.49% per year until the full amount of principal has been paid.” (Doc. No. 6-2.) Paragraph 6(A) of the Note, entitled “IMMEDIATE PAYMENT-IN-FULL . . . Death or Sale, ” provides that “Lender may require immediate payment-in-full of all outstanding principal and accrued interest if: (i) [a] Borrower dies and the Property is not the principal residence of at least one surviving Borrower.” (Id. at ¶ 6.) Mrs. Matthews did not sign the Note and is not listed as a Borrower. (Id. at ¶ 1 (definition of Borrower) and p. 5 (signatures)).

         The Note was secured by a Fixed Rate Home Equity Conversion Deed of Trust (“Deed of Trust”). (Doc. No. 1-1.) Under the Deed of Trust, BOA “may require immediate payment-in-full of all sums secured by [the Deed of Trust] if . . . A Borrower dies and the Property is not the principal residence of at least one surviving Borrower.” (Doc. No. 10-1 at 15, ¶ 9(a)(1)). The Deed of Trust further provides that after the lender requires payment-in-full, it “may invoke the power of sale.” (Id. at ¶ 20.) In such event, any person holding possession of the Property through the Borrower must immediately surrender possession of the Property to the purchaser at the sale. (Id.) Although the “Borrower” is identified as Mr. Matthews in the Deed of Trust (Doc. No. 6-3 at 1), it was executed by both Mr. and Mrs. Matthews as “Borrowers” (id. at 10).

         As part of the transaction, BOA required Mrs. Matthews to execute a Quitclaim Deed transferring all of her rights, title, and interest in the Property to Mr. Matthews. (Doc. Nos. 10-1 at ¶¶ 5, 8-10; 10-1 at Ex. A; 6-3 at 2.) According to Mrs. Matthews, BOA assured her this would not affect her right to continue living in the Property if she was predeceased by Mr. Matthews. (Doc. No. 10-1 at ¶ 9.) Mrs. Matthews avers that she believed she was executing the Quitclaim Deed to obtain the reverse mortgage and to remain in the Property regardless of what might happen. (Id. at ¶ 16.) She alleges that she would not have executed the Quitclaim Deed or Deed of Trust if she had known she could lose the Property upon Mr. Matthews' death. (Id. at ¶ 9, 11.)

         Mr. Matthews passed away in June 2013. He left all property to Mrs. Matthews. (Doc. No. 1-1 at 8.) In February 2018, Mrs. Matthews filed a Petition to probate his will in the Probate Court for Smith County, Tennessee. (Id. at 2-5.) The Petition asserted that Mr. Matthews' estate, which included the Property, passed to Mrs. Matthews according to the terms of Mr. Matthews' will. (Id.) The Probate Court admitted Mr. Matthews' will to probate and issued Letters Testamentary to Mrs. Matthews as Executrix. (Id. at 6-7.) There is no allegation that BOA made a claim on the Property in probate.

         Subsequently, BOA notified Mrs. Matthews that it intended to foreclose on the Property due to “a default having occurred.” (Doc. No. 10-1 at ¶ 18.) Mrs. Matthews was surprised by this turn of events. (Id. at ¶ 19.) Mrs. Matthews believed that the Deed of Trust gave her the right of possession to the Property. To protect her possessory interest, Mrs. Matthews filed an action in the Chancery Court of Smith County seeking an injunction to prohibit the foreclosure. (Doc. No. 1-1 at 18-21.) The Chancery Court granted a temporary injunction. (Id. at 16-17.) BOA then filed a motion to dismiss the petition for injunctive relief (id. at 29-30), which was granted (id. at 54).

         Mrs. Matthews filed an Amended Petition in the Chancery Court against BOA in March 2019.[1] (Doc. No. 10-1.) She described it as an action under the “laws and statutes governing Fixed Rate Home Equity Conversion Mortgages in the State of Tennessee.” (Doc. No. 10-1 at 3.) The Amended Petition restated the initial allegations and added allegations that BOA misrepresented material facts, made false promises, and took unfair and deceptive actions related to the reverse mortgage. (Id. at 4-5.) Based upon these claims, Mrs. Matthews alleges that BOA violated HECMA and committed fraud or constructive fraud. (Id. at 6-7.) She seeks injunctive relief against foreclosure and money damages. (Id. at 7-8.)

         II. Motion to Remand

         After eleven months, BOA removed the Chancery Court action to this Court on the basis of diversity jurisdiction. (See Doc. Nos. 1, 1-1.) Mrs. Matthews agrees diversity jurisdiction exists, but contends that remand is proper under the probate exception.

         The probation exception is narrow. This reflects the general rule that “when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res.” Marshall v. Marshall, 547 U.S. 293, 312 (2006). Federal courts are able to handle suits related to a decedent's estate as long as the federal court does not interfere with the probate proceedings or take jurisdiction over probate itself or of property that is in the custody of a state probate court. Cartwright v. Estate of Peterson, No. 3:17-cv-01464, 2018 WL 4945232, at * 2 (M.D. Tenn. July 2, 2018).

         The Sixth Circuit explains that the probate exception applies in three circumstances: (1) if the plaintiff seeks to probate a will; (2) if the plaintiff seeks to annul a will; or (3) if the plaintiff seeks to reach a res over which a state court has custody. Chevalier v. Estate of Barnhart, 803 F.3d 789, 801 (6th Cir. 2015) (quoting Wisecarver, 489 F.3d at 750); Wildasin v. Mathes, No. 3:14-cv-02036, 2019 WL 2269878, at *4 (M.D. Tenn. May 28, 2019). The first two circumstances are not at issue here. So, the question is whether the Chancery Court action seeks to reach a res over which the Probate Court has jurisdiction. Id. at 801-804. Determining if the probate exception applies is a two-step process. First, the Court must identify whether the causes of action are in personam or in rem. Chevalier, 803 F.3d at 801-802. Second, the Court must determine whether the plaintiff has asked a federal court to “elbow its way into” an ongoing “fight[ ] over a property or a person in [another] court's control.” Id. The latter question cannot be answered in the affirmative “unless a probate court is already exercising in rem jurisdiction over the property” at the time the case arrives in federal court. Id. at 804 (emphasis added).

         Here, the Chancery Court action seeks to resolve the dispute between Mrs. Matthews and BOA arising from her execution of the Deed of Trust and the Quitclaim Deed. She challenges the validity of both documents and thus BOA's right to foreclosure. Mrs. Matthews' statutory and tort claims are in personam claims against BOA that challenge only BOA's actions regarding the reverse mortgage process. Her claims do not require the Court to assume jurisdiction over the Property. See Chevalier, 803 F.3d at 801-02 (claims for breach of contract, default, unjust enrichment, fraud, and constructive trust were in personam and did not trigger the probate exception). The Court is capable of ...


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