Barnett v. JP Morgan Chase Bank, N.A., Case No.: 1:12-CV-1745-VEH

Decision Date26 June 2013
Docket NumberCase No.: 1:12-CV-1745-VEH
PartiesAPRIL K. BARNETT, Plaintiff, v. JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, as successor by merger to CHASE HOME FINANCE, LLC, Defendant.
CourtUnited States District Courts. 11th Circuit. United States District Court of Northern District of Alabama

APRIL K. BARNETT, Plaintiff,
as successor by merger to CHASE HOME FINANCE, LLC, Defendant.

Case No.: 1:12-CV-1745-VEH


DONE: June 26, 2013



This lawsuit filed by Plaintiff April K. Barnett ("Ms. Barnett") on Mach 7, 2012, originated in the Circuit Court of Talladega County, Alabama. (Doc. 1-1 at 2).1 Defendant JP Morgan Chase Bank, N.A., the successor by merger to Chase Home Finance, LLC ("Chase"), removed the litigation to federal court on May 1, 2012, on the basis of both federal question and diversity jurisdiction. (Doc. 1 at 1; id. at 5 ¶ 9; id. at 8 ¶ 14).

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Ms. Barnett's complaint arises out of her borrower-related dealings with Chase after her family's residence "was completely destroyed by an accidental electrical fire" on June 14, 2010. (Doc. 1-1 at 4 ¶ 10). Her pleading contains thirteen causes of action. (See generally Doc. 1-1).

On March 1, 2013, Chase filed a Motion for Partial Summary Judgment (Doc. 53) (the "Partial Motion") as separately supported by a brief (Doc. 54) and evidentiary materials. (Docs. 55, 57). The Partial Motion seeks a dismissal of the following counts: one through eleven, part of count twelve, and thirteen. (Doc. 53 at 1 ¶ 1). The Partial Motion also requests an "entry of judgment in its favor on Plaintiff's claim that she suffered a miscarriage as a result of Chase's alleged conduct." (Id. at 1-2 ¶ 2).

On March 15, 2013, Ms. Barnett filed a Motion To Strike (Doc. 59) (the "Strike Motion") certain exhibits relied upon by Chase. Ms. Barrett also opposed the Partial Motion with a brief (Doc. 60) and evidence (Doc. 61) on March 22, 2013, and additional proof (Doc. 63) on March 25, 2013. Ms. Barnett subsequently filed an amended response (Doc. 67) to Chase's Partial Motion on April 8, 2013.

Chase followed with a reply brief (Doc. 68), submitted more evidence (Doc. 69), and opposed Ms. Barnett's Strike Motion (Doc. 71), all on April 22, 2013. Finally, on April 23, 2013, supplemental proof in support of the Partial Motion was

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filed under seal (Doc. 72) pursuant to an earlier court order.

Both the Partial Motion and Strike Motion are now under submission. For the reasons stated below, the Partial Motion is GRANTED IN PART and DENIED IN PART, and the Strike Motion is TERMED as MOOT.


A. Ms. Barnett borrows money to purchase a home.

Ms. Barnett executed a note on May 15, 2007, (the "Note") in favor of ERA Mortgage ("ERA") in the original amount of $308,000.00, relating to her purchase of residential property for her family. AF No. 1.3 The Note obligated Ms. Barnett

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to make a monthly payment of principal and interest beginning on July 1, 2007, with a maturity date of June 1, 2037. The Note further provided that Ms. Barnett's failure to make a monthly payment by the date it was due would constitute default. AF No. 3.

The Note was secured by a mortgage executed by Ms. Barnett in favor of Mortgage Electronic Registration Systems, Inc. ("MERS"), acting solely as nominee for ERA (the "Mortgage"), on property owned by Ms. Barnett located at 101 Karian Court, Oxford, Alabama 36203 (the "Property"). AF No. 4. Pursuant to the terms of this Mortgage, Ms. Barnett was obligated "pay when due the principal of, and interest on, the debt evidenced by the Note . . . ." AF No. 5.

Concerning an insured loss, the Mortgage directed in part:

Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender's security is not lessened. During such repair and restoration period, Lender shall have the right to hold such insurance proceeds until Lender has had the opportunity to inspect the Property to ensure the work has been completed to Lender's satisfaction, provided that such inspection shall be undertaken promptly. Lender may disburse proceeds for the repairs and restoration in a single payment or in a series of progress payments as the work is completed. Unless an agreement is made in writing or Applicable Law requires interest to be paid on such insurance proceeds, Lender shall not be required to pay Borrower any interest or earnings on such proceeds. . . . If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds

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shall be applied to the sums secured by the Security Instrument, whether or not then due, with the excess, if any, paid to Borrower.

(Doc. 55-3 at 48-49 at 00006-00007).4

Federal National Mortgage Association ("Fannie Mae") became the investor of Ms. Barnett's Mortgage on May 29, 2007. AF No. 7. Chase began servicing the Mortgage on November 13, 2007. AF No. 8.

As part of the servicing transfer, Chase received physical possession of the Note, which was endorsed in blank. AF No. 9. Chase remained in possession of the Note until it was paid off on January 27, 2011. AF No. 10.

B. An electrical fire destroys Ms. Barnett's home.

On June 14, 2010, Ms. Barnett's home located on the Property was completely destroyed by an electrical fire. AF No. 11. Ms. Barnett made her monthly Mortgage payment in June of 2010. Ms. Barnett did not make her mortgage payments due in July and August of 2010. AF No. 13.

C. Ms. Barnett's efforts to use her insurance proceeds to pay off her loan serviced by Chase.

On August 24, 2010, Chase provided Ms. Barnett with a quote to pay off her Mortgage loan in the amount of $301,608.58, good through September 3, 2010. AF

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No. 14. On August 31, 2010, Ms. Barnett's insurance carrier, State Farm, mailed a check to Chase in the amount of $301,608.58. AF No. 15.

Chase received the draft from State Farm on September 3, 2010. (Doc. 66-5 at 1).5 The insurance proceeds check was deposited by Chase on September 13, 2010, to a restricted escrow account, which was tied to Ms. Barnett's loan. AF No. 16. Chase did not receive any interest or other income from the insurance funds. AF No. 17.

Chase contends that it did not receive written authorization from Ms. Barnett to apply the insurance proceeds from State Farm to pay off the loan until November 9, 2010. (Doc. 54 at 6 ¶ 18).6 However, prior to November 9, 2010, on July 1, 2010, Chase received a letter from Ms. Barnett advising that "[a]t a later date, we will be sending a check for the mortgage pay off." (Doc. 66-3 at 5).7 Additionally, on September 3, 2010, Chase received "a draft in the amount of $301,608.58 for the payoff of loan 1916804276. . . . on behalf of our insured [Ms. Barnett]." (Doc. 66-5

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at 1).

In an email dated November 24, 2010, Chase indicated to Fannie Mae that the payoff sent by State Farm was "short by about 6K . . . ." (Doc. 55-7 at 96 at CHASE 00414).8 Fannie Mae responded on this same date by asking if "the payoff [was] short by $6K when reconciled to the date that the haz[ard] ins[urance] funds were received?" Id. While the court has been unable to find in the evidentiary record where this particular question was ever directly answered by Chase, it appears that Chase calculated the payoff for Ms. Barnett's loan based upon the later date of November 9, 2010, and not September 3, 2010, the "RECEIVED" by "PAYOFF DEPT." date stamped on the bottom of the correspondence from State Farm to Chase dated August 31, 2010, which enclosed the draft of the insurance funds. (Doc. 66-5 at 1).

On November 29, 2010, of the following week, Chase sent a follow-up email to Fannie Mae indicating that Ms. Barnett was not repairing the home and reiterating that "the funds received do not cover the entire payoff amount of the loan." (Doc. 55-7 at 94 at CHASE 00412). In a subsequent email dated December 15, 2010, Fannie Mae advised that it would "not accept any short payoff on this loan." (Doc. 55-7 at

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86 at CHASE 00404). Fannie Mae further suggested that Chase ask Ms. Barnett if she would be willing to "consent to a deed in lieu of foreclosure . . . ." Id.

By letter dated December 16, 2010, Chase advised Ms. Barnett that "Fannie Mae ha[d] denied [her] request" "to accept the insurance claim funds received in the amount of $301,608.58 as a settlement for [her] mortgage loan." (Doc. 61-10 at 1).9 In this same correspondence, Chase informed Ms. Barnett about the deed-in-lieu alternative. AF No. 21.

Ms. Barnett's attorney sent a January 13, 2011, letter to Chase requesting that the insurance proceeds be applied to pay off the loan. AF No. 22. On January 27, 2011, Chase applied the insurance funds to pay off the loan effective September 7, 2010, charging off the shortage amount calculated to be $2,672.67.10 AF No. 23; (Doc. 66-14 at 1 at CHASE 2452).11 On January 28, 2011, Lanier Jeffrey ("Ms. Jeffrey") of Chase followed up with correspondence to Ms. Barnett, confirming that

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her loan had been paid "in full on 1/27/2011." (Doc. 61-13 at 1).12

Chase recorded a corporate cancellation with respect to Ms....

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