Burns v. Conley
| Decision Date | 02 November 2007 |
| Docket Number | C.A. No. 07-054-S. |
| Citation | 526 F.Supp.2d 235 |
| Parties | Mark W. BURNS and Elizabeth Burns, Plaintiffs, v. Colleen CONLEY and Federal Home Loan Mortgage Corporation, Defendants. |
| Court | U.S. District Court — District of Rhode Island |
Peter J. Comerford, Coia & Lepore, Ltd., Providence, RI, for Plaintiffs.
David M. Rosen, Harmon Law Offices, P.C., Newton, MA, for Defendants.
DECISION AND ORDER
Before the Court is an objection to Magistrate Judge Martin's Report and Recommendation to grant Defendant Federal Home Loan Mortgage Corporation's ("Freddie Mac")1 Motion to Dismiss under 12(b)(6) and that the Court decline to hear Plaintiffs Mark W. Burns and Elizabeth Burns's ("Plaintiffs") Motion for Judgment on the Pleadings. For the reasons explained below, the Court declines to accept the Report and Recommendation, GRANTS Plaintiffs' unopposed Motion for Judgment, and DENIES the Motion to Dismiss (without prejudice) as moot in light of the settlement reached between Plaintiffs and Freddie Mac.
On or about March 8, 1986, Mark and Elizabeth Burns purchased certain real property known as 26 Valley Street in Cumberland, Rhode Island. The property was encumbered by a mortgage held by Pawtucket Institute for Savings. The mortgage was subsequently assigned to Freddie Mac.
In early 1995, Plaintiffs fell in arrears in the payments of the mortgage. On or about February 24, 1995, Mark Burns filed a Chapter 13 Bankruptcy Petition in the United States Bankruptcy Court for the District of Rhode Island. Despite knowledge of the bankruptcy filing, Freddie Mac foreclosed on the mortgage and transferred the property to itself by way of a mortgagee's deed dated March 8, 1995, which was recorded in the land evidence records in the town of Cumberland, Rhode Island on March 16, 1995.
On or about March 20, 1995, Freddie Mac filed a motion in the Bankruptcy Court to lift the automatic stay so that it could proceed against the property. On July 6, 1995, the Bankruptcy Court issued a Decision and Order, denying Freddie Mac's motion and declaring the mortgagee's deed to be void. See In re Burns, 183 B.R. 670 (Bankr.D.R.I.1995). Approximately eight months later, on March 13, 1996, the Decision and Order was recorded in the land evidence records in the town of Cumberland. Freddie Mac never issued a corrective deed to reflect that Plaintiffs retained title notwithstanding the mortgagee's deed.
Plaintiffs at all times continued to reside at the property but, as a result of the recording of the mortgagee's deed, various bills, including sewer assessments levied by the town of Cumberland on the property, were sent only to Freddie Mac. Freddie Mac did not pay these bills or forward them to Plaintiffs, who remained unaware of the sewer assessments.
Consequently, on or about September 15, 2005, the tax collector for the town of Cumberland conducted a tax sale of the property pursuant to R.I. Gen. Laws §§ 44-9-1 et seq.3 In an apparent oversight, the town provided notice of the tax sale to Freddie Mac, but did not notify Plaintiffs. Freddie Mac did not forward the notification to Plaintiffs. No notice was ever provided directly to them as present owners of record.4 At the tax sale, the tax collector conveyed the property to defendant Colleen Conley. On September 20, 2005, a collector's deed5 reflecting this conveyance was recorded in the land evidence records of the town of Cumberland.
A little more than one year later, on September 29, 2006, Conley filed a miscellaneous petition in the Providence County Superior Court to foreclose the right of redemption in the property. Conley sent notice of the petition to Freddie Mac, but did not notify Plaintiffs. In the notice sent to Freddie Mac, Conley did not list Plaintiffs as a respondent. Freddie Mac never forwarded this notice to Plaintiffs. Plaintiffs further allege that Freddie Mac never filed an answer or other response to the petition filed by Conley.
On November 14, 2006, the Rhode Island Superior Court entered a final decree, foreclosing and barring all rights of redemption under the collector's deed. See Conley v. Fed. Home Loan Mortgage Corp., PM No. 06-5124 (R.I.Super.Ct. Nov. 14, 2006) (Final Decree in Tax Lien Case).6 Plaintiffs did not learn of the tax sale and of Conley's action to foreclose their right of redemption until after the superior court judge entered the final decree.
On January 9, 2007, Plaintiffs filed a complaint in the Superior Court against Conley and Freddie Mac. In their prayer for relief, Plaintiffs sought an order which would: 1) enjoin Conley from alienating or encumbering title to the property and from evicting Plaintiffs; 2) declare the mortgagee's deed elated March 8, 1995 null and void; 3) require Freddie Mac to execute a corrective deed conveying the property to Plaintiffs; 4) void the tax sale of the property and vacate the final decree entered in PM06-5124 on November 14, 2006; and 5) award compensatory damages. Pursuant to 12 U.S.C. § 1452(f),7 Freddie Mac removed the action to this Court on February 8, 2007.
On February 13, 2007, Freddie Mac filed this Motion to Dismiss.8 The Magistrate Judge conducted a hearing on the Motion to Dismiss on March 12, 2007. Based on statements by counsel at the hearing, it appeared to the Magistrate Judge that a settlement between Freddie Mac and Plaintiffs was possible. Accordingly, the Court continued the matter to April 5 2007, to allow counsel time to engage in settlement discussions.
On April 5, 2007, counsel for these two parties reported that they had reached basic agreement regarding resolution of the claims against Freddie Mac, but disagreed as to how the settlement would be implemented. The sticking point was that Plaintiffs wanted Freddie Mac to remain a party in the case even though the claims against Freddie Mac were to be dismissed as part of the settlement. Counsel for Plaintiffs explained that he believed Freddie Mac's continued involvement in the case was necessary in order to ensure that the complete relief which his clients sought could actually be implemented.
Noting that he had filed a Motion for Judgment against Conley, Plaintiffs' counsel suggested that the hearing on the Motion to Dismiss be continued to the date of the hearing on the Motion for Judgment. He opined that doing so could resolve the sticking point because no objection had been filed to the Motion for Judgment, and he anticipated that it would be granted by the Court. If it were, he stated that a consent order which Plaintiffs and Freddie Mac had negotiated could be entered because, at that point, Freddie Mac's continued involvement in the case would be moot.9 Counsel for Freddie Mac endorsed this proposed course of action. The Court agreed to continue the hearing on the Motion to Dismiss to the date of the hearing on the Motion for Judgment.
On April 23, 2007, the Magistrate. Judge conducted a hearing on the two Motions. Neither defendant objected to the Motion for Judgment, and no one appeared for Conley even though her counsel had been given notice of the hearing. Counsel for Plaintiffs argued that the Court should grant the Motion for Judgment against Conley and that such action would enable Plaintiffs and Freddie Mac to implement their settlement agreement. In response to a question from the Court, counsel for Freddie Mac indicated that he favored the approach suggested by Plaintiffs' counsel.
On May 07, 2007, the Magistrate Judge issued a Report and Recommendation to grant Freddie Mac's Motion to Dismiss. The Magistrate Judge further recommended that this Court decline to exercise supplemental jurisdiction over the claims against Conley and that the matter be remanded back to state court.
On June 29, 2007, this Court held a hearing in which Plaintiffs' counsel argued that: (1) the lack, of notice of the tax sale and the petition to foreclose the right of redemption invalidates the tax sale and Conley's deed; (2) the Magistrate Judge misconstrued the nature and meaning of Title 28 U.S.C. § 1341, the Tax Injunction Act; (3) the Magistrate Judge improperly found that Freddie Mac did not proximately cause their injuries; and (4) Freddie Mac's removal properly vested this Court with the discretion to hear Plaintiffs' Motion for Judgment against Conley.
At the June 29 hearing, Plaintiffs and Freddie Mac reiterated that a tentative settlement agreement between the two was still in place. Conley once again opted not to appear for the hearing, telling Plaintiffs' counsel by letter "that it was good of them to litigate this matter in federal court, but the proper forum was Rhode Island Superior Court, where the issue would eventually be decided." Conley not only has failed to appear for any proceeding in this matter either before the Magistrate Judge or this Court, she has also failed to file any responsive pleading whatsoever. She has not opposed the present Rule 12(c) motion and has not filed a motion to remand. Despite Conley's confidence that federal court was not the appropriate forum, as will be made clear in this Decision, this Court has proper jurisdiction over the parties. The Court takes Conley's inaction as acquiescence to this Court's jurisdiction and to Plaintiffs' Motion for Judgment.
The question of jurisdiction caught the Magistrate Judge's eye because this was a state tax case that might implicate the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341, which would bar federal court jurisdiction. The Magistrate Judge concluded, however, that because 12 U.S.C. § 1452(f) accords Freddie Mac agency status, it had the authority to remove the action against it to federal court. After analyzing the Magistrate Judge's conclusion, this Court agrees that jurisdiction is appropriate, albeit on slightly different grounds.
At first blush, it might seem as though the TIA would bar this Court from hearing the claims because it is a state tax...
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