Gordon v. Bank of Amercia, N.A. (In re Merriweather)
| Decision Date | 28 August 2015 |
| Docket Number | CASE NO. 13-53022-BEM,ADVERSARY PROCEEDING NO. 15-5096-BEM |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
| Parties | IN RE: RODNEY MERRIWEATHER, Debtor. NEIL C. GORDON, CHAPTER 7 TRUSTEE, Plaintiff, v. BANK OF AMERCIA, N.A., AS SUCCESSOR BY MERCER TO BAC HOME LOANS SERVICING, LP DBA BANK OF AMERICA HOME LOANS FKA COUNTRYWIDE HOME LOANS SERVICING LP and THE BANK OF NEW YORK MELLON, Defendants. |
This matter comes before the Court on Bank of America, N.A.'s ("BOA") Motion to Dismiss [Doc. No. 4], The Bank of New York Mellon's ("BONY," and together with BOA, the "Defendants") Motion to Dismiss [Doc. No. 17], the Trustee's Consolidated Response to the Motions to Dismiss [Doc. No. 25], Defendants' Reply to the Trustee's Response [Doc. No. 30], the Trustee's Motion for Leave to File an Amended Complaint [Doc. No. 27], and Defendants' Opposition to the Trustee's Motion to Amend [Doc. No. 31]. Plaintiff's complaint (the "Complaint") asserts claims for wrongful foreclosure, violation of the Georgia Racketeer Influenced and Corrupt Organizations ("RICO") Act, violations of the Fair Debt Collection Practices Act ("FDCPA"), violation of the Georgia Fair Business Practices Act ("FBPA"), money had and received, unjust enrichment, quantum meriut, and fraudulent transfer. Plaintiff seeks to amend the Complaint to change language that describes the effect of foreclosure without confirmation in Georgia. Defendants seek dismissal of the Complaint on the basis that it fails to state a claim upon which relief may be granted. Defendants oppose amendment of the Complaint on the ground that doing so would be futile.
Plaintiff's proposed amended complaint (the "PAC") differs from the Complaint in two respects. First, it eliminates a claim of unfair practices under the FDCPA, 15 U.S.C. § 1692f. Second, where the original Complaint characterized the mortgage debt as extinguished due to failure to confirm the foreclosure sale, the PAC characterizes the debt as being unenforceable. Both statements are conclusions as to the legal effect of failing to confirm a foreclosure sale; therefore, they do not represent a substantive change to Plaintiff's factual allegations. Defendants objected to the motion to amend on the sole ground that the amendment would be futile as still failing to state a claim upon which relief can be granted. Therefore, theCourt will evaluate the motions to dismiss based on the allegations in the PAC, which will inform the Court's decision on the motion to amend.
Prior to filing for bankruptcy, Debtor owned real property at 792 Parson Street, SE, Atlanta (the "Property"). (PAC ¶ 6.) He purchased the Property with a traditional home loan and a home equity line of credit (collectively, the "Loans") from GreenPoint Mortgage Funding, Inc. ("GreenPoint"). Id. Mortgage Electronic Registration System, Inc. as nominee for GreenPoint held first and second security deeds on the Property securing the Loans. Id. ¶ 7.
In December 2008, Countrywide Home Loans Servicing LP ("Countrywide") began servicing the Loans; at that time and intermittently thereafter, the Loans were in default for nonpayment. Id. ¶¶ 8, 11. On April 27, 2009, Countrywide changed its name to BAC Home Loans Servicing, LP, and operated under the trade name Bank of America Home Loans ("BAC"). Id. ¶ 9. In 2011, BAC merged into BOA. Id. ¶ 10. By assignment dated March 10, 2010 and recorded on March 16, 2010, GreenPoint transferred its interest in the security deeds to BONY. Id. ¶ 12. At the time of the assignment, the Loans were in default. Id. ¶ 13.
In early 2010, BAC, through its counsel, commenced foreclosure proceedings against the Property, with the foreclosure sale scheduled for May 4, 2010. Id. ¶ 14. On or before April 30, 2010, Debtor and BAC reached an agreement to stop the foreclosure and cure the default (the "Workout Agreement"). Id. ¶ 15. Pursuant to the Workout Agreement, Defendants had a duty not to foreclose the Property. Id. ¶ 54. Defendants breached that duty when BAC conducted the foreclosure sale on May 4, 2010. Id. ¶¶ 16, 55. BONY purchased the Property with a credit bid of $34,000. Id. ¶ 16. The deed under power was recorded on May 26, 2010. Id. ¶ 18. BONY did not confirm the sale. Id. ¶ 17. Therefore, Defendants were prohibited from suingDebtor for the resulting deficiency. Id. Debtor was unaware of the foreclosure until the meeting of creditors in his bankruptcy case held on March 18, 2013. Id. ¶¶ 5, 19.
In response to a request for production of documents by Plaintiff, BOA produced post-foreclosure correspondence with Debtor and a 2012 Atlanta Solid Waste bill that identified BONY as the Property owner. Id. ¶¶ 22, 23. In addition, Debtor produced monthly account statements he received from BOA for December 2011 to May 2012 and July 2012 to September 2012 (the "Statements"). Id. ¶ 30. The Statements include the purported principal balance on the Loans, the payment amount due, the due date, late charges, and a statement identifying BOA as a debt collector. Id. ¶ 31. The Statements either explicitly or implicitly misrepresented the nature of the account balance as pre-foreclosure and failed to reduce the balance by the amount of the foreclosure proceeds. Id. ¶ 39.
Between the time of the foreclosure and the petition date, BAC sent Debtor at least six notices of intent to accelerate, dated July 30, 2010, August 16, 2010, September 16, 2010, October 13, 2010, November 29, 2010, and December 17, 2010 (the "Acceleration Notices"). Id. ¶ 41. The Acceleration Notices stated: (1) the traditional loan was in default; (2) the amount of the arrearage; (3) the method of curing the default; (4) that if the default was not cured the loan could be accelerated and foreclosed; (5) that BAC was entitled to attorney's fees to cure the default; (6) that BAC could pursue a deficiency judgment after foreclosure; and (7) that the notices were from a debt collector. Id. ¶ 42.
Between the time of the foreclosure and the petition date, BAC and BOA sent Debtor at least six notices of default, including notices dated September 13, 2013 and January 16, 2013. (the "Default Notices"). Id. ¶ 43. The September 13, 2013 notice identifies BOA as a debt collector. Id. ¶ 44.
BAC and, subsequently, BOA sent the Statements, Acceleration Notices, and Default Notices to Debtor through the United States mail for the purpose of obtaining money from him. Id. ¶¶ 61, 62. The correspondence included representations that were false, including the ability of BAC and BOA to enforce any post-foreclosure liability. Id. ¶ 64. The content of the representations as contained in the Statements, Acceleration Notices, and Default Notices is incorporated into the Complaint, providing with specificity the dates and exact misrepresentations used. Id. ¶ 67. BONY was complicit in these acts of its agents, which are imputed to BONY. Id. ¶ 72. BONY ratified the acts by accepting the proceeds from them. Id. ¶ 73.
Debtor made $62,953.55 in post-foreclosure payments between May 2010 and February 2013 in response to BAC and BOA's solicitation of payments. Id. ¶ 45. Of that amount, $38,169.40 was paid within two years of the petition date at a time when Debtor was insolvent as evidenced by his chronic default on the Loans and his subsequent bankruptcy. Id. ¶¶ 118, 121. Defendants accepted the payments. Id. ¶ 100. At the time Debtor made the payments, he had unsecured creditors. Id. ¶ 126. In addition, Debtor spent money, in an amount to be proven at trial, preserving and maintaining the Property, including payments for insurance, taxes, and general upkeep and repairs. Id. ¶ 46. Defendants knew or should have known Debtor would incur the preservation and maintenance costs. Id. ¶ 101. Defendants accepted the benefits of the preservation and maintenance costs, which provided value to them. Id. ¶ 102, 108. Debtor expected that by making payments and bearing the preservation and maintenance costs he would enjoy ownership of the Property. Id. ¶ 103. Debtor was deprived of ownership by the foreclosure. Id. ¶ 104.
At all relevant times, BAC and BOA had actual, inquiry, constructive, and imputed knowledge of the foreclosure. Id. ¶ 47. At the time it sent the Statements, Acceleration Notices, and Default Notices and collected payments, BAC had actual knowledge of the foreclosure as evidenced by its execution of the deed under power, and it was imputed with its attorney's knowledge of the foreclosure. Id. ¶¶ 48, 50. At the time BOA sent Statements and Default Notices and collected payments, BOA had actual knowledge of the foreclosure as evidenced by the Solid Waste bill, and it was imputed with its attorney's knowledge of the foreclosure. Id. ¶¶ 49, 51.
Debtor filed a Chapter 7 petition on February 13, 2013. Id. ¶ 5. Plaintiff was appointed trustee and conducted the § 341(a) meeting of creditors on March 18, 2013. Id. On January 9, 2015, Plaintiff sent Defendants an ante litem notice pursuant to O.C.G.A. § 10-1-399(b) that identified Plaintiff, identified unfair and deceptive acts, and made a demand for relief. Id. ¶ 88. Plaintiff made a demand on Defendants for a return of the post-foreclosure payments made by Debtor; Defendants refused the demand. Id. ¶¶ 94, 95.
Plaintiff filed the original Complaint in this adversary proceeding on February 12, 2015. Plaintiff attached seven exhibits to the Complaint as follows: (1) Exhibit A, the deed under power executed by officers of BONY on May 4, 2010; (2) Exhibit B, the 2012 Atlanta Solid Waste bill for the Property listing BONY as the property owner; (3) Exhibit C, Statements for the home loan for the periods December 2011 to May 2012 and July 2012 to September 2012; (4) Exhibit D, six Acceleration Notices sent by BAC each month from July 2010 to December 2010; (5) Exhibit E, notices dated February 24, 2011 and February 28, 2011 indicating recent payments were not sufficient to...
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