Ocwen Loan Servicing, LLC v. Foodman Hunter & Karres, PLLC, CIVIL ACTION NO. 3:13-CV-697-DCK
| Decision Date | 09 September 2015 |
| Docket Number | CIVIL ACTION NO. 3:13-CV-697-DCK |
| Court | U.S. District Court — Western District of North Carolina |
| Parties | OCWEN LOAN SERVICING, LLC, Plaintiff, v. FOODMAN HUNTER & KARRES, PLLC, and JAMES W. SURANE, Defendants. |
THIS MATTER IS BEFORE THE COURT on Plaintiff's "Motion for Partial Summary Judgment and Incorporated Brief in Support" (Document No. 47); Defendant's "Motion to Dismiss Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for Lack of Subject Matter Jurisdiction" (Document No. 49); and Defendant's "Motion for Summary Judgment" (Document No. 51). The parties have consented to Magistrate Judge jurisdiction pursuant to 28 U.S.C. § 636(c), and these motions are now ripe for disposition.
Having carefully considered the motions, the record, and applicable authority, the undersigned will grant Defendant's "Motion to Dismiss...," and deny as moot Plaintiff's "Motion for Partial Summary Judgment ..." and Defendant's "Motion for Summary Judgment" (Document No. 51).
Dorothea and James Estes (the "Estes") executed a mortgage (the "Mortgage") in favor of Parkway Mortgage A Division of Midland National Life Insurance Company Its Successors AndOr Assigns ATIMA ("Parkway Mortgage") on August 31, 1999, to secure a promissory note (the "Note") in the amount of $145,000, and purportedly encumbering property at 3507 Burris Street, North Myrtle Beach, South Carolina 29582 (the "Property"). (Document No. 1, ¶7; Document No. 1-1; Document No. 47, p.1). The Estes executed the Mortgage before a Notary Public for South Carolina, and two witnesses, on August 31, 1999. (Document No. 1-1, p.8). Dorothea Estes, alone, executed the Note in Cornelius, North Carolina on that same date. (Document No. 1-2).
James Surane ("Surane"), a North Carolina-based attorney, and the firm Foodman Hunter & Karres PLLC ("FH&K") (together, "Defendants") were allegedly responsible for the closing of the Property.1 (Document No. 1, ¶8; Document No. 47, ¶¶ 2-6). Prior to the closing of the loan transaction, Surane received "Loan Closing Instructions..." (Document No. 1-3) from Parkway Mortgage. (Document No. 1, p.3; Document No. 47, p.2). The instructions required Defendants, among other things, to:
"RECORD ALL NECESSARY DOCUMENTS AND RETURN THEM TO THE LENDER IN A TIMELY MANNER" (emphasis in the original) and "provide written evidence that a binding mortgagee's policy of title insurance ... is or will be in force and effect as of the date of closing" and provide "THE AGENT AUTHORIZATION LETTER/CLOSING PROTECTION LETTER FOR THIS TRANSACTION."
(Document No. 1, ¶11) (quoting Document No. 1-3). Defendants were paid $500 for "Attorney and Title Fees" in connection with the closing. (Document No. 47, ¶6; Document No. 47-7, p.4).
Defendants deny that they were the closing agents responsible for disbursing funds, filing the Mortgage in South Carolina, or providing title insurance for the closing. (Document No. 50,p.3) (citing Document No. 50-2, pp.3-4). Instead, Defendants contend that the closing service they provided was likely a "witness closing." (Document No. 50, pp.3-4). Neither Defendant Surane, nor his former firm FH&K, possess any files regarding the closing because the North Carolina State Bar only requires attorneys to keep files for six (6) years, and the underlying transaction occurred in 1999—almost fourteen (14) years prior to this lawsuit being filed. (Document No. 50, p.3).
Plaintiff's counsel, Michael Griffin ("Griffin"), acknowledged at a hearing that Defendants had contacted the Van Osdell Lester Howe & Jordan law firm (the "Lester Firm") in South Carolina related to the underlying transaction. Mr. Griffin noted that the Lester Firm had a HUD form with information related to the Estes, but there is no evidence that shows that the Lester Firm ever received any disbursements, money, or any attorney's fees related to the Estes closing. Exhibit D to the Complaint is a "Commitment For Title Insurance" that is signed by Richard E. Lester, and appears to have been faxed between the Lester Firm, Defendants, and Parkway Mortgage on September 13, 1999 and/or September 29, 1999. (Document No. 1-4); see also (Document No. 1, ¶12).
Defendants note that Mr. Estes testified that he traveled to a South Carolina attorney's office for an appointment to close the loan in question, but when he arrived, the loan documents were not ready. (Document No. 50, p.3-4) (citing Document No. 50-3, p.3). Instead of returning to South Carolina, Mr. Estes testified that he executed the loan documents in North Carolina, either at his home or at an office. (Document No. 50, p.4) (citing Document No. 50-3, p.4-5).
The original address on the Mortgage (Document No. 1-1), 3405-B Burris Street, North Myrtle Beach, S.C. 29582, 3405 B, was scratched out and replaced with the handwritten notation "3507," initialed by the Estes. (Document No. 1, ¶7; Document No. 1-1, p.3). On other relevantdocuments, such as the "Note" (Document No. 1-2), the "Loan Closing Instructions..." (Document No. 1-3), the HUD-1 Settlement Statement (Document No. 47-7), and the "Assignment of Mortgage" (Document No. 52-6), the address of the subject property is 3405-B Burris Street.
Parkway Mortgage immediately assigned the Mortgage to Flagstar Bank on August 31, 1999. (Document No. 50, p.5; Document No. 52-6). Notably, the "Assignment Of Mortgage" (Document No. 52-6, pp.2-3), executed by two officers of Parkway Mortgage appearing before a Notary Public of New Jersey, leaves blank any information regarding the recording of the underlying Mortgage, and as noted above, identifies the wrong property allegedly securing the Mortgage being assigned. (Document No. 52-6, p.2). It is not alleged that Defendants had any responsibility for, or involvement in, the assignment of the Mortgage from Parkway Mortgage to Flagstar Bank. (Document No. 1).
The Mortgage was allegedly transferred to the Federal Home Loan Mortgage Corporation ("Freddie Mac") in or about 2004, although the Complaint does not provide a date, or any documentation or other information regarding that transaction or exactly what interests were transferred. (Document No. 1, ¶14; Document No. 52, p.5). Plaintiff's representative, Katherine Ortwerth, testified that she did not know when ownership of the underlying loan/mortgage transferred to Freddie Mac and that she had not seen any documents that transferred the ownership or assigned the ownership of the loan from Flagstar Bank to Freddie Mac. (Document No. 52-7, pp.3-4). Apparently, GMAC Mortgage LLC ("GMACM") obtained rights to service the Mortgage at some point, but the Complaint also lacks any explanation for how or when that occurred, or what if any actions GMACM took to service the Mortgage. See (Document No. 1, ¶14, n.1).
On or about August 9, 2005, the Estes sold the Property to a third party - Brian and Leigh Ann Holts (the "Holts") - without written consent of the Lender.2 (Document No. 47, ¶12). However, oddly enough, the Estes continued to make payments on the mortgage loan until about May 2010. (Document No. 1, ¶15; Document No. 47, ¶13). Mr. Estes testified that because "[w]e were doing a lot of business," he kept making payments on the Mortgage until 2010, even though he sold the Property allegedly securing the Note/Mortgage in August 2005. (Document No. 50, p.6; Document No. 52-3, p.6). Once the Estes realized the Property was sold, they ceased payments on the underlying obligation. (Document No. 47, ¶13).
According to the Complaint, Ocwen Loan Servicing, LLC ("Plaintiff" or "Ocwen") currently has rights to service the loan. (Document No. 1, ¶14). The Complaint specifically alleges that the "Estes missed the payment due on May 1, 2010 and Ocwen subsequently referred the loan to foreclosure to recoup its losses." (Document No. 1, ¶15) (emphasis added). "Counsel for Ocwen obtained a title search for both 3507 Burris Street and 3405 B Burris Street" on or about August 6, 2010, and neither revealed a recorded version of the Mortgage. (Document No. 1, ¶¶16-18; Document No. 47, ¶ 14) (emphasis added). The search did reveal that the Estes never owned the property located at 3405 B Burris Street, and that a third party possessed the property at 3507 Burris Street. (Document No. 1, ¶¶17-18). Furthermore, Plaintiff's counsel was unable to locate a Title Policy and a Closing Protection Letter. (Document No. 1, ¶19).
The Complaint does not allege any entity ever demanded full payment from the Estes pursuant to the Mortgage and/or the Note, or pursued judicial action to enforce the same.(Document No. 1); see also (Document No. 1-1; Document No. 1-2). The undersigned observes that the Mortgage and the Note include clauses providing: "[i]f all or any part of the Property or any interest in it is sold or transferred . . . without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument." (Document No. 1-1, p.6; Document No. 1-2, p.3) (emphasis added).
Despite Ocwen's knowledge by August of 2010 that the Estes had defaulted on their obligations under the Note and the Mortgage, and that the Mortgage was never recorded, Ocwen Financial Corporation ("Ocwen Financial") bid on and won the servicing rights to the loan at issue by November 21, 2012, and then transferred those interests to Plaintiff Ocwen Loan Servicing LLC on or about February 15, 2013. (Document No. 1, ¶¶14-16). Ocwen Financial purchased this asset, and other assets, from bankruptcy proceedings related to GMAC Mortgage LLC ("GMACM"). (Document No. 1, ¶14, n.1).
Plaintiff filed its "Complaint" (Document No. 1) against Defendants on April 25, 2013 in the United States District Court for the District of South Carolina, Florence Division, alleging professional negligence, negligence, and breach of contract. The Complaint contends that "there exists complete diversity and the...
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