Rowe v. Aurora Commercial Corp., Civil Action No. 5:13-21369
| Decision Date | 01 August 2014 |
| Docket Number | Civil Action No. 5:13-21369 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | JAMES J. ROWE and SHARON H. ROWE, Plaintiffs, v. AURORA COMMERCIAL CORP. and NATIONSTAR MORTGAGE, LLC, Defendants. |
Pending before the court are defendants' motion to dismiss (Doc. No. 11) and plaintiffs' motion for leave to amend under Rule 15(a) (Doc. No. 23). For the reasons that follow, the motion to dismiss is granted, and the motion for leave to amend is granted in part and denied in part.
Plaintiffs, James and Sharon Rowe, purchased a home in Hilton Head, South Carolina on or about August 12, 2005. Doc No. 9 at 2. Plaintiffs retained the law firm of Laurich, Deeb & Wiseman, P.A. to handle the closing of the loan contracts and appointed the firm as their attorney-in-fact. Id. at 3. To finance this purchase, plaintiffs obtained a loan from TMCapital, Inc. ("TM Capital") for $626,250. Id. On August 12, 2005, plaintiffs' attorney-in-fact signed an Adjustable Rate Note ("Note I"). Id. at 3. Note I provides for an initial annual interest rate of 6.625%. Doc. No. 9-1 at 1. The note further provides that the 6.625% rate was subject to a change beginning in September 2010 and every six months thereafter by adding 2.25% to the current LIBOR six-month index.1 Id. at 1-2. Such changes to the interest rate were subject to a ceiling of 12.625% and a floor of 2.25%. Id. at 2. On August 19, 2005, plaintiffs' attorney-in-fact mailed plaintiffs the real estate documents including Note I along with accompanying correspondence indicating that the matter was closed. Doc. No. 9 at 3; Doc. No. 9-4.
On September 19, 2005, before the first payment was due on October 1, 2005, plaintiffs' attorney-in-fact sent a facsimile to plaintiffs. The cover sheet stated that the fax concerned a "New Original Note" and encouraged plaintiffs to call if they had any questions. Doc. No. 9-5 at 1. The fax contained a different Adjustable Rate Note ("Note II") which was also dated August 12, 2005 and signed by plaintiffs' attorney-in-fact. Id. at 2-9. Note II is identical to Note I except for two differences. First, Note II provides for an interest ratecalculation by adding 2.75% to the Libor index, as opposed to the 2.25% in Note I. Id. at 3. Second, it sets forth an interest rate floor of 6.625%, as opposed to the 2.25% floor in Note I. Id.
From 2005 until July 15, 2012, plaintiffs' loan was serviced by defendant Aurora Commercial Corp. ("Aurora"). Doc. No. 9 at 4-5. On July 15, 2012, the servicing of the loan was transferred to defendant Nationstar Mortgage, LLC ("Nationstar"). Id. at 5. On Feburary 15, 2013, Nationstar sent notice to plaintiffs of an interest rate change from 6.625% to 4.625%. Doc. No. 9-7. A little over a month later, Nationstar again notified plaintiffs of a rate change - this time from 4.625% back to 6.625%. Doc. No. 9-6. Nationstar cited the 6.625% rate floor set forth in Note II as the reason for the increase. Id. By letter dated May 15, 2013, plaintiffs disputed the interest rate increase. Doc. No. 9-7. Presumably relying on Note I, plaintiffs stated in the letter that they have been overcharged since 2010 (when the regular six-month interval changes to the rate were to begin) and sought a refund. Id. Since this letter, plaintiffs have not made any payments on the loan. On June 17, 2013, Nationstar sent a formal notice of default to plaintiffs. Doc. No. 9-8. On June 24, 2013, Nationstar sent correspondence to plaintiffs in response totheir May 15th letter. Nationstar declined the refund request and explained its methodology for calculating the interest rate, citing the Note II rate floor. Doc. No. 9-9.
Plaintiffs filed this action against the two loan servicers - Aurora and Nationstar - on August 1, 2013, alleging violations of the Truth in Lending Act ("TILA"), breach of contract, violations of the West Virginia Consumer Credit and Protection Act ("WVCCPA"), and fraud. Doc. No. 1. Plaintiffs filed an amended complaint to add a claim for usury. Doc. No. 9. The original creditor, TM Capital, and the current owner of plaintiffs' obligation, Citibank, M.A. as Trustee for Lehman XS Trust Mortgage Pass-Through Certificates, Series 2005-6 ("Citibank"), are not named as defendants in this action. On November 5, 2013, defendants filed the instant motion to dismiss seeking to have all of plaintiffs' claims dismissed for failure to state a claim and contending this court lacks jurisdiction based on the local action doctrine. Doc. Nos. 11 and 12. On January 17, 2014, plaintiffs moved for leave to amend their complaint to add Citibank and to otherwise replead certain matters to the extent that this court finds merit in defendants' motion to dismiss. Doc. Nos. 23 and 24.
Because defendants' contentions concerning the local action doctrine potentially affect the court's jurisdiction over this matter, the court will address this argument first. Defendants contend that this court lacks jurisdiction because this action involves a security interest in property located in South Carolina. Doc. No. 12 at 19-20. As such, they contend the local action rule requires this court to either dismiss the case or transfer it to the proper South Carolina district court. Doc. No. 19 at 15. Plaintiffs respond by contending that the local action rule is one affecting venue rather than jurisdiction, and that the Jurisdiction and Venue Clarification Act repealed the local action rule as it pertains to venue law. Doc. No. 14 at 18-19. In the alternative, plaintiffs argue that their claims are transitory in nature rather than local. Id. at 19.
At its core, the local action doctrine concerns the distinction between local and transitory actions. Local actions are those directly affecting real property which traditionally must be brought in the district where the real property is located. Transitory actions are essentially any action which is not a local action; a transitory action may be brought in any court with personal jurisdiction over the defendant. Thisdistinction traces its origins to the early common law. See Charles A. Wright, et. al, 15 Fed. Prac. & Proc. Juris. § 3822 n.5 (4th ed.). The leading case importing the doctrine into American jurisprudence is Livingston v. Jefferson, 15 F. Cas. 660 (C.C.D. Va. 1811) - a decision by Chief Justice Marshall made while riding circuit as a trial court judge.2 The court held that an action against Thomas Jefferson for trespass on land in Louisiana could not be brought in a Virginia court because of the local action doctrine. Chief Justice Marshall traced the history of the common law rule and somewhat reluctantly applied it to dismiss the action. Discussing the distinction between local and transitory actions, Chief Justice Marshall stated "that actions are deemed transitory, where transactions on which they are founded, might have taken place anywhere; but are local where their cause is in its nature necessarily local." Id. at 664.
Despite this early decision incorporating the local action doctrine into American jurisprudence, conflicting authorities abound as to the nuances of this ancient common law rule. As has been stated, "there is a divergence of authority on nearly every aspect of the doctrine." Fisher v. Virginia Elec. & Power Co. , 243 F. Supp. 2d 538, 540 (E.D. Va. 2003). Critical amongthese splits in authority are whether the doctrine affects jurisdiction or venue and what law to apply when characterizing an action as either transitory or local.
Jurisdiction relates to the power of courts to adjudicate. Venue, on the other hand, merely concerns matters of convenience. As such, venue defects can be waived, whereas problems with subject matter jurisdiction cannot. Under the Federal Courts Jurisdiction and Venue Clarification Act of 2011, "the proper venue for a civil action shall be determined without regard to whether the action is local or transitory in nature." 28 U.S.C. § 1391(a)(2). So, Congress has abolished the local action doctrine to the extent that it is solely an issue of venue. Unfortunately, this does not settle the issue. Courts applying the local action doctrine have split over whether the rule affects venue or jurisdiction. Compare Hayes v. Gulf Oil Corp., 821 F.2d 285, 291 (5th Cir. 1987) and Prawato v. PrimeLending, 720 F. Supp. 2d 1149, 1156-57 (C.D. Cal. 2010)(determining that the local action doctrine affects jurisdiction) with Hallaba v. Worldcom Network Servs. Inc., 196 F.R.D. 640, 648 (N.D. Okla. 2000) and Fisher, 243 F. Supp. 2d 538, 556-59 (). Because this action is clearly transitory as will be discussedbelow, this court need not wade into this conflict. That is, even if the doctrine affects jurisdiction, the matter is properly before this court.
Assuming that the local action doctrine affects jurisdiction rather than venue, the court must decide whether this action is transitory or local in nature. The basis for making this determination is another disputed aspect of the local action doctrine. Some courts, when characterizing an action as local or transitory, apply state law while others have applied federal law. See Fisher v. Virginia Elec. & Power Co., 243 F. Supp. 2d 538, 540 (E.D. Va. 2003)(applying federal law); Big Robin Farms v. California Spray-Chem. Corp., 161 F. Supp. 646, 647-49 (W.D.S.C.)(applying state law); Wheatley v. Phillips, 228 F. Supp. 439, 441-42 (W.D.N.C. 1964)(applying both federal and state law); Raphael J. Musicus, Inc. v. Safeway Stores, Inc., 743 F.2d 503, 506 (7th Cir. 1984)(declining to address the issue after noting the conflict in the case law). This conflict arises from Supreme Court dictum in Huntington v. Attrill, 146 U.S. 657, 669-70 (1892) erroneously suggesting that Chief Justice Marshal held that the law of the forum state should be applied. For...
To continue reading
Request your trial