Bennett v. CIT Bank, N.A.
| Decision Date | 27 August 2020 |
| Docket Number | CIVIL ACTION NO. 2:18-CV-00852-KOB |
| Citation | 482 F.Supp.3d 1204 |
| Parties | Jeanette BENNETT, et al., Plaintiffs, v. CIT BANK, N.A., et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
Walter Francis Scott, III, William K. Hancock, Galloway Scott Moss & Hancock LLC, Birmingham, AL, for Plaintiffs.
M. Brent Yarborough, Waurice Wutscher, LLP, Birmingham, AL, Coleman Jon Braun, Pro Hac Vice, Maurice Wutscher LLP, Chicago, IL, for Defendants.
This case arrived in this court after what can only be described as, to borrow the title of a renowned children's book series, "a series of unfortunate events." See, e.g., Lemony Snicket (aka Daniel Handler), The Bad Beginning (A Series of Unfortunate Events, 1st in the series) (Harper Collins) (1999). In A Series of Unfortunate Events , the remarkable Baudelaire children, orphaned by a fire at their parents’ mansion, must engage in a constant battle of wits against their guardian, the dastardly Count Olaf, to retain their rightful inheritance. Not unlike the Baudelaire children, the adult Plaintiffs in this case found themselves confronted with the exigencies of the loss of a parent, the loss of a property, a fire, and issues of inheritance.
But, the Plaintiffs’ situation in this case lacks any of the whimsy and humor of the children's books. Instead of detailing feats of cleverness to outwit a villainous guardian, this case tells the tale of plaintiffs engaged in lengthy litigation with financial institutions over an insurance payout. Additionally, it appears that the unfortunate events besetting the Plaintiffs must continue because the Plaintiffs cannot show entitlement to summary judgment, and, in fact, the Defendants can show entitlement to summary judgment on all but one of the Plaintiffs’ claims.
The series of unfortunate events that led the Plaintiffs Jeanette Bennett and Maggie Bell to court began when their mother, Catherine Getaw, took out a reverse mortgage on her home. Ms. Getaw then passed away after devising her home to the Plaintiffs. One of the Defendants in this case, CIT Bank, NA., notified the Plaintiffs that it was going to foreclose on the house pursuant to the reverse mortgage. But prior to the foreclosure sale, a fire damaged the property.
Before any insurance proceeds from the fire could be paid, the property sold at foreclosure to another Defendant, the Federal National Mortgage Association ("Fannie Mae"). Both the Plaintiffs and Fannie Mae—in concert with CIT—made insurance claims for the fire damage. Eventually, Fannie Mae obtained an insurance payout for the fire damage after CIT cashed a check made out to both CIT (under the name "Financial Freedom") and the estate of Ms. Getaw. CIT remitted the funds to Fannie Mae after cashing the check; however, Fannie Mae later sent around $11,000 of the payout back to CIT to refund to the Plaintiffs. CIT refunded that portion of the insurance proceeds to Ms. Getaw's estate, but Fannie Mae still holds the majority of the insurance proceeds.
The Plaintiffs brought the instant lawsuit and filed an amended complaint alleging that Fannie Mae, CIT, N.A., and CIT Group, Inc.,1 converted the insurance proceeds and seeking a declaratory judgment of their entitlement to the insurance proceeds. At this juncture, the case comes before the court on cross-motions for summary judgment. The Plaintiffs seek summary judgment solely on the issue of liability on their conversion claims, arguing that they are the only ones entitled to the insurance proceeds at issue because Fannie Mae, with CIT's help, wrongfully converted them. (Doc. 96, doc. 97). Fannie Mae and CIT separately move for summary judgment on all the Plaintiffs’ claims, arguing that the Plaintiffs cannot establish conversion, punitive or emotional distress damages, or entitlement to the insurance proceeds at issue in this case. (Doc. 119, doc. 125).
After considering the submissions of the parties and the evidence of the record, the court will DENY the Plaintiffs’ motion for summary judgment because they cannot meet the requirements to make a claim for conversion against any of the Defendants; this court has already dismissed the conversion claims against CIT, (doc. 103), and the Plaintiffs cannot show identifiable, convertible funds to make a claim against Fannie Mae.
The court will GRANT IN PART and DENY IN PART Fannie Mae's motion for summary judgment, because Fannie Mae is entitled to summary judgment on the Plaintiffs’ conversion claim, but genuine issues of material fact regarding who had an insurable interest in the property at issue preclude summary judgment on the Plaintiffs’ claim for declaratory judgment. So, the court could still potentially declare the Plaintiffs the rightful owners of the insurance proceeds. Finally, the court will GRANT CIT's motion for summary judgment because no justiciable controversy exists between the Plaintiffs and CIT at this time, as CIT claims no interest in the insurance claims at issue.
The Plaintiffs are heirs of their mother Catherine Getaw and the personal representatives of her estate. In November 2005, Ms. Getaw executed a promissory note that was secured by a reverse mortgage that encumbered her home in Birmingham, Alabama. A homeowner's property insurance policy issued by Foremost Insurance Company covered the house. The insurance policy named Ms. Getaw as the insured and Financial Freedom, a division of OneWest, as mortgagee. Before the foreclosure and insurance issues in this case arose, Financial Freedom became part of CIT.
Ms. Getaw died in April 2015. Her will devised her home to the Plaintiffs without limitations; so, under Ala. Code § 43-2-830(c), the Plaintiffs took the home subject to the reverse mortgage.
CIT then sent a letter to the Plaintiffs that included the following option for paying off the reverse mortgage loan:
[T]he mortgage will be released and no deficiency judgment will be taken if the property has no junior liens and is sold for at least 95 percent of the appraised value with the net proceeds paid to the investor, even if the debt is greater than the appraised value.
(Doc. 3 at ¶ 17) (emphasis in original).
In October 2015, CIT initiated foreclosure proceedings on the home. Then, on October 28, 2015, a fire burned the home. Plaintiffs promptly notified CIT of the fire and filed an insurance claim for fire damage with Foremost. (Doc. 3 at ¶¶ 19–21).
On November 2, 2015, CIT sold the property to Fannie Mae at a foreclosure sale. After the sale, Fannie Mae, through its attorney, contacted CIT regarding insurance information for the home. Then, on February 11, 2016, Fannie Mae filed an insurance claim with Foremost for the fire damage to the home.
Foremost responded by requesting evidence from Fannie Mae related to any lien holder's interest in the home, the insurance claim, and any resulting proceeds. Fannie Mae then requested the same information from CIT, as well as information regarding the foreclosure deed, mortgage, and assignments. (Doc. 3 at ¶¶ 29–32).
Fannie Mae's attorney forwarded the check to CIT, who cashed the check and later remitted the funds to Fannie Mae. The Plaintiffs demanded that CIT and Fannie Mae give all the proceeds to Plaintiffs. Fannie Mae and CIT released around $11,000 of the insurance proceeds to the Plaintiffs, but kept the rest, purportedly to offset remaining debt. This lawsuit followed.
Originally, the Plaintiffs brought claims against the Defendants for declaratory judgment, conversion, fraud and wantonness—all regarding the insurance proceeds. (Doc. 3). Fannie Mae and CIT both filed motions to dismiss, and the court dismissed the Plaintiffs’ claims for fraud and wantonness as inadequately pled. (Doc. 35, doc. 36).
Plaintiffs then filed an amended complaint against the Defendants with causes of action for declaratory judgment, conversion, and for breach of contract by Foremost. The court later dismissed the complaint against Foremost because the Plaintiffs complaint did not adequately state a claim for breach of contract. (See Doc. 102).
The remaining claims in the operative amended complaint center around the allegation that CIT endorsed and deposited the insurance proceeds check into its account without Plaintiffs’ signatures as personal representatives of their mother's estate, then transferred some or all of those funds to Fannie Mae. (Doc. 63 at ¶¶ 103, 108). The Plaintiffs allege conversion of the insurance proceeds against both CIT and Fannie Mae, including punitive and emotional distress damages, and seek declaratory judgment regarding their entitlement to the proceeds.
CIT filed a partial motion to dismiss, arguing that the Plaintiffs had not adequately stated a claim for conversion and had not stated any specific allegations against CIT Group, as opposed to its wholly owned subsidiary CIT Bank, N.A. (Doc. 73). The court granted CIT's motion to dismiss the Plaintiffs’ conversion claim against it because the Plaintiffs had not alleged that it wrongfully deposited the check, as the check bore one of CIT's names. (Doc. 103). But the court denied the motion to dismiss the claims against CIT Group, as the Plaintiffs’ allegations included both CIT Bank and its parent company, CIT Group. (Id. ). The Plaintiffs subsequently filed a motion for reconsideration, which this court denied. (Doc. 112; doc. 137; doc. 138).
While CIT's motion for partial dismissal was pending before this court, the Plaintiffs filed a motion for summary judgment on their conversion claims against CIT and Fannie May. After the court issued its order of partial dismissal dismissing the conversion claim against CIT, the Defendants each filed cross-motions for...
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