Adams v. Bank of America, N.A.
| Decision Date | 04 May 2004 |
| Docket Number | No. 3:02-CV-40104.,3:02-CV-40104. |
| Citation | 317 F.Supp.2d 935 |
| Parties | Julie R. ADAMS, Individually and as Administrator of the Estate of Robert L. Adams, Plaintiff, v. BANK OF AMERICA, N.A., successor by merger to Bank of America, FSB, Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
Stephen T. Fieweger, Katz Huntoon & Fieweger, Rock Island, IL, for Plaintiff.
Roger T. Stetson, Michael R. Reck, Holly M. Logan, Belin Lamson McCormick Zumback & Flynn PC, Des Moines, IA, for Defendant.
On April 19, 2004, the Court ordered a hearing on Defendant's Motion for Summary Judgment. In addition to the pending motion, the parties were instructed to discuss why the Court should exercise supplemental jurisdiction over the remaining state contract claims. A telephonic hearing was conducted on April 22, 2004. Representing Plaintiff Julie Adams was Stephen Fieweger; representing Defendant Bank of America was Michael Reck.
This case has always boiled down to a rather simple dispute, though arising from complicated communications failures, over the requirement that borrowers maintain homeowner's insurance to protect the real estate subject to the lender's mortgage. On November 1, 1996, Robert and Julie Adams ("the Adamses") executed a promissory note with Firstar Home Mortgage Corporation ("Firstar") which was assigned to Bank of America ("BOA") in July 1997. The Adamses were required to maintain homeowner's insurance as a term of the mortgage. The Adamses' initial homeowner's policy with Cincinnati Insurance was terminated in July 2000, so they secured another policy through First Liberty Mutual Insurance Company ("Liberty"). However, on the Liberty policy, the first mortgagee was incorrectly listed as "Firstar" rather than BOA; the policy also incorrectly indicated that the first mortgagee was the payer of the premium.
BOA was notified that Cincinnati terminated the Adamses' policy but never received notice that the Adamses had secured a replacement policy. According to BOA records, notifications were sent to the Adamses in February and March of 2001 seeking assurances that they had secured homeowner's coverage. Receiving no response from the Adamses, BOA exercised its right under the mortgage and secured a homeowner's insurance policy through ACE Insurance ("ACE"). On April 23, 2001, ACE sent a notice to the Adamses indicating BOA had ordered homeowner's insurance ("forced policy").
Beginning in July 2001, BOA began billing the Adamses an additional $317.75 per month for the premium on the forced policy. However, instead of paying the increased amount, the Adamses sent only the regular monthly payment amount. BOA returned the payment as insufficient and advised the Adamses that it was imperative to contact the bank to resolve the problem.
Again in August 2001, the Adamses sent only the regular monthly payment, and BOA again reversed the payment as insufficient. BOA sent the Adamses a notice informing them their mortgage was in default and warning that if the default was not cured by September 26, 2001, BOA may exercise its right to foreclose on the loan.
BOA records show that between August 31 and September 19, 2001, Robert Adams was in contact with BOA regarding his account and the forced policy.1 Adams told the BOA representative that he consistently paid for his own homeowner's insurance policy and would provide proof of coverage. On September 5, 2001, BOA received confirmation that a homeowner's policy through Liberty was established in August 2000. BOA acknowledged the Liberty policy and cancelled the forced policy. However, BOA soon discovered that the Liberty policy listed the mortgagee as the payer, and consequently, BOA had been paying the premiums.2 Since the Adamses had not been paying for the policy as required, BOA continued to bill the Adamses for the cost of coverage.
Without a resolution to the homeowner's insurance policy debt, BOA repeatedly reversed the Adamses' regular monthly payments as insufficient partial payments. On October 22, 2001, BOA sent the Adamses a letter stating they were three months behind and in default on their loan. BOA records indicate several unsuccessful attempts to contact the Adamses by telephone in November and December 2001.3 By January 4, 2002, the Adamses' mortgage was ninety-five days delinquent.
On January 15, 2002, BOA sent the Adamses a letter informing them that their account had been referred to BOA's legal department, and on January 23, 2002, BOA's legal counsel informed the Adamses that foreclosure proceedings had begun. On February 8, 2002, a petition for foreclosure was filed in Scott County District Court. The Adamses secured legal counsel who contacted BOA. The Adamses continued to send the regular monthly mortgage payment amount, which BOA continued to reverse as insufficient. On March 8, 2002, tragically, Robert Adams died of a heart attack. The foreclosure proceeded until July 2, 2002, when BOA filed a motion to dismiss without prejudice.
On August 19, 2002, Julie Adams, individually and on behalf of the estate of Robert Adams, filed a six count petition in Scott County District Court against BOA, alleging breach of contract, bad faith breach of contract, slander of title, violation of the Fair Debt Collection Practices Act ("FDCPA") on behalf of Julie Adams, violation of the FDCPA on behalf of Robert Adams' estate, and a wrongful death claim.
On September 4, 2002, BOA filed a timely notice of removal, wherein BOA stated federal jurisdiction was proper pursuant to 28 U.S.C. § 1332 because the parties were diverse and the amount in controversy exceeded $75,000. BOA also asserted jurisdiction was proper pursuant to 28 U.S.C. § 1331 because a federal question was presented in Counts IV and V in which Plaintiff sought relief under the FDCPA, 15 U.S.C. § 1692.
On July 16, 2003, BOA moved for summary judgment on all counts. Subsequent to BOA's motion, on August 18, 2003, Julie Adams voluntarily moved to dismiss the slander of title claim. On October 11, 2003, BOA filed a motion for sanctions pursuant to Fed.R.Civ.P. 11, arguing, inter alia, that Adams lacked good faith prior to filing her complaint, and that the claims were frivolous. BOA further argued that Adams had all the facts necessary to know that BOA was not a debt collector within the meaning of the FDCPA at the time of filing and even alleged those facts in her complaint which rendered her claim under the FDCPA frivolous. BOA also argued the Adams "knew from day one" that the wrongful death claim was frivolous and that no court has ever allowed a wrongful death through foreclosure claim.
On October 14, 2003, while the motion for sanctions was pending,4 Adams moved to dismiss both FDCPA claims, and on December 2, 2003, she moved to dismiss the wrongful death claim. The Court granted those motions, leaving only the bad faith breach of contract claims.
On April 19, 2004, the Court granted Defendant's request for a hearing on the pending motion for summary judgment and asked the parties to be prepared to discuss the issue of the Court's supplemental jurisdiction over the remaining state law claims. Both parties filed briefs on the issue.
BOA argues that the Court has diversity jurisdiction over the remaining claims, and therefore the Court need not determine whether to exercise supplemental jurisdiction. BOA asserts that the requirements for diversity jurisdiction, including the amount in controversy, were satisfied when this case was removed to federal court, and it is irrelevant that the potential recovery has decreased during the course of the litigation. Alternatively, BOA argues that should the Court find original jurisdiction lacking in the present case, supplemental jurisdiction would be appropriate because remanding the remaining claims would delay the proceedings which have progressed far beyond discovery.
Plaintiff asserts the principles of economy, convenience, fairness, and comity will best be served by remanding this matter to the Scott County District Court. Plaintiff further asserts that diversity jurisdiction is lacking because BOA's maintenance of branch offices in the state of Iowa makes it an Iowa citizen for purposes of diversity jurisdiction, and therefore the parties are not diverse.
On July 20, 2001, Adams filed this lawsuit in Scott County District Court, and on August 19, 2001, BOA removed the action to federal court. The proper procedure for removal of an action is set forth in 28 U.S.C. § 1441, which states in pertinent part,
(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending. For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded.
. . . . .
(c) Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.
28 U.S.C. § 1441(a) (emphasis added).
At the time of removal, there were two causes of action alleged under the laws of the United States; no objection to this Court's jurisdiction was raised at the time of removal. In light of the apparent federal question jurisdiction, this Court made no assessment of the value of the claims for diversity jurisdiction purposes.5 However, after Adams voluntarily dismissed four claims, including the federal question claims, the Court revisited...
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