Seaberry v. Cenlar FSB (In re Seaberry)

• Decision Date: 12 April 2019
• Docket Number: ADV. PROC. 18-00044-NPO,CASE NO. 17-04570-NPO
• Parties: IN RE: PERCY A. SEABERRY, DEBTOR. PERCY A. SEABERRY PLAINTIFF v. CENLAR FSB, CMG MORTGAGE, INC., AND SNL COMPANY DEFENDANTS
• Court: United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Mississippi

IN RE: PERCY A. SEABERRY, DEBTOR.

PERCY A. SEABERRY PLAINTIFF v. CENLAR FSB, CMG MORTGAGE, INC., AND SNL COMPANY DEFENDANTS

CASE NO. 17-04570-NPO

ADV. PROC. 18-00044-NPO

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF MISSISSIPPI

April 12, 2019

The Order of the Court is set forth below. The docket reflects the date entered.

CHAPTER 13

MEMORANDUM OPINION AND ORDER ON DEFENDANTS' AMENDED MOTION TO DISMISS, OR IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT

This matter came before the Court for hearing on March 6, 2019 (the "Hearing"), on the Defendants' Amended Motion to Dismiss, or in the Alternative, Motion for Summary Judgment (the "Amended Motion to Dismiss") (Adv. Dkt. 61)¹ filed by Cenlar FSB ("Cenlar") and CMG Mortgage, Inc. ("CMG"); the Memorandum in Support of Amended Motion to Dismiss, or in theAlternative, Motion for Summary Judgment (the "Cenlar/CMG Brief") (Adv. Dkt. 62) filed by Cenlar and CMG; the Joinder in Amended Motion to Dismiss, or in the Alternative, Motion for Summary Judgment (the "SNL Joinder in Amended Motion to Dismiss") (Adv. Dkt. 63) filed by SNL Company, LLC ("SNL"); the Memorandum in Support of Amended Motion to Dismiss, or in the Alternative, Motion for Summary Judgment (the "SNL Brief") (Adv. Dkt. 64) filed by SNL; the Plaintiff's Response to Defendants' Amended Motion to Dismiss or in the Alternative for Summary Judgment (the "Response to Amended Motion to Dismiss") (Adv. Dkt. 66) filed by the debtor, Percy A. Seaberry (the "Debtor"); the Plaintiff's Memorandum of Authorities in Support of his Response to Defendants' Amended Motion to Dismiss or in the Alternative for Summary Judgment (the "Debtor's Brief") (Adv. Dkt. 67) filed by the Debtor; and the Reply Memorandum in Support of Amended Motion to Dismiss, or in the Alternative, Motion for Summary Judgment (the "Reply in Support of Amended Motion to Dismiss") (Adv. Dkt. 68) filed by Cenlar and CMG in the Adversary. Cenlar and CMG attached exhibits to the Amended Motion to Dismiss that were not filed by the Debtor with the Amended Complaint Seeking to Set Aside Foreclosure (the "Amended Complaint") (Adv. Dkt. 60), including the Declaration of Jeffrey Stanley (the "Stanley Declaration") (Adv. Dkt. 61-1) and the Declaration of Elizabeth Crowell Price (the "Price Declaration") (Adv. Dkt. 61-2). They attached these same documents to the Cenlar/CMG Brief. (Adv. Dkt. 62-3; Adv. Dkt. 62-5).² The Debtor did not attach any exhibit to the Response to Amended Motion to Dismiss or to the Debtor's Brief but relied on the exhibits filed previously with the Amended Complaint. (Adv. Dkt. 60-1; Adv. Dkt. 60-2).

At the Hearing, Louise Harrell represented the Debtor; Erin Saltaformaggio and Elizabeth Crowell Price ("Price") represented Cenlar and CMG, and Joshua C. Lawhorn represented Harold J. Barkley, Jr., the chapter 13 trustee (the "Trustee"). No one appeared at the Hearing on behalf of SNL.

Jurisdiction

The Court finds that it has subject matter jurisdiction pursuant to 28 U.S.C. § 1334. The cause of action in the Amended Complaint that alleges a violation of the automatic stay is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). Bankruptcy judges have the authority to enter final orders and judgments in all core proceedings. 28 U.S.C. § 157(b)(1). The remaining causes of action in the Amended Complaint are non-core, or "otherwise related to" proceedings. The parties have consented to entry of final orders and judgments by this Court on the non-core claims. Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1940 (2015); MISS. BANKR. L.R. 7008-1. The Court, therefore, has the authority to enter a final order and judgment on all causes of action in the Amended Complaint. Notice of the Amended Motion to Dismiss and the SNL Joinder in Amended Motion to Dismiss was proper under the circumstances.

Facts³

For reasons discussed later in this Opinion, the Court treats the Amended Motion to Dismiss as a motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure ("Rule 56").⁴ Under Rule 56, the Court generally views the evidence and inferences in the lightmost favorable to the non-moving party. Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299, 304 (5th Cir. 2010).

On October 18, 2013, the Debtor purchased a home located at 258 Sun Drive, Jackson, Mississippi (the "Property"). To finance the purchase, the Debtor signed a promissory note (the "Note") (Cl. #6-1 at 11-13) in the original principal amount of $68,732.00 in favor of CMG. The Debtor agreed to repay the loan in monthly installments of $491.35 with a maturity date of November 1, 2028. (Cl. #6-1 at 11).

Repayment of the Note was secured by a deed of trust (the "Deed of Trust") (Adv. Dkt. 60-1) on the Property. Under paragraph 9 of the Deed of Trust, the Debtor would be considered in default if he failed to pay any monthly payment in full, in which event CMG could accelerate the loan balance. Upon acceleration of the loan balance, paragraph 18 authorized CMG to sell the Property "in the manner prescribed by applicable law," but CMG first had to give notice of the foreclosure sale to the Debtor pursuant to paragraph 13. The acceleration, notice, and power-of-sale provisions in paragraphs 9, 13, and 18 of the Deed of Trust provide, as follows:

9. Grounds for Acceleration of Debt.

(a) Default. Lender may, except as limited by regulations issued by the Secretary [of Housing and Urban Development], in the case of payment defaults, require immediate payment in full of all sums secured by this Security Instrument if:

(i) Borrower defaults by failing to pay in full any monthly payment required by this Security Instrument prior to or on the due date of the next monthly payment, or

(ii) Borrower defaults by failing, for a period of thirty days, to perform any other obligations contained in this Security Instrument.

13. Notices. Any notice to Borrower provided for in this Security Instrument shall be given by delivering it or by mailing it by first class mail unless applicable law requires use of another method. The notice shall be directed to the Property Address or any other address Borrower designates by notice to Lender. Any notice to Lender shall be given by first class mail to Lender's address stated herein or any address Lender designates by notice to Borrower. Any notice provided for in thisSecurity Instrument shall be deemed to have been given to Borrower or Lender when given as provided in this paragraph.

18. Foreclosure Procedure. If Lender requires immediate payment in full under paragraph 9, Lender may invoke the power of sale and any other remedies permitted by applicable law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this paragraph 18, including, but not limited to, reasonable attorneys' fees and costs of title evidence.

If Lender invokes the power of sale, Lender shall give Borrower, in the manner provided in paragraph 13, notice of Lender's election to sell the Property. Trustee shall give notice of sale by public advertisement for the time and in the manner prescribed by applicable law. Trustee, without demand on Borrower, shall sell the Property at public auction to the highest bidder for cash at such time and place in HINDS County as Trustee designates in the notice of sale in one or more parcels and in any order Trustee determines. Lender or its designee may purchase the Property at any sale.

(Adv. Dkt. 60-1 at 4-7).

The Debtor defaulted on his monthly payments. On July 17, 2017, CMG mailed the Debtor a letter titled "Pre-Foreclosure Notice" (Adv. Dkt. 62-3 ¶ 3), informing the Debtor of the amount due to "cure the default or reinstate your loan" and alternatives to foreclosure. "The holder of the mortgage, deed of trust or other lien on our property has the right to begin the process of foreclosing on the debt and may sell your property at public auction to satisfy the debt at any time after forty-five (45) days from the date of this notice." (Adv. Dkt. 62-3 at 3); see MISS. CODE ANN. § 81-18-55(f). Jeffrey Stanley stated in the Stanley Declaration that as vice president of document execution for CMG, he is "familiar with how CMG services its mortgage loans and how it maintains its records."⁵ (Adv. Dkt. 62-3 ¶ 2). His testimony authenticated the Pre-Foreclosure Notice.

CMG thereafter retained a law firm, Dean Morris, L.L.C. ("Dean Morris"), to act as its agent in conducting a non-judicial foreclosure sale of the Property. (Adv. Dkt. 62-5 at 1). OnOctober 9, 2017, Dean Morris mailed the Debtor a letter titled "Notice Pursuant to the Fair Debt Collection Practices Act" (the "FDCPA Notice") (Adv. Dkt. 62-5, Ex. A at 3-4), that said CMG had instructed the law firm "to institute a foreclosure to enforce the security interest" and that Dean Morris intended "to initiate foreclosure before the expiration of the 30-day period." The FDCPA Notice also informed the Debtor that he owed CMG $58,103.09. (Adv. Dkt. 62-5 ¶ 2). The FDCPA Notice purported to provide notice "to the extent that existing or future . . . judicial decisions . . . might subject such proceedings to the provisions of the Fair Debt Collection Practices Act."⁶ (Adv. Dkt. 62-5, Ex. A at 3). Price stated in the Price Declaration that she is an attorney at Dean Morris and that Dean Morris mailed the FDCPA Notice to the Debtor. Her testimony authenticated the FDCPA Notice.

There is no evidence in the record that either the Debtor or his counsel responded to the Pre-Foreclosure Notice or the FDCPA Notice to dispute the amount of the loan balance or to attempt to reinstate the Note by paying the mortgage arrearage in lump sum. (Adv. Dkt. 60-1 ¶ 10). Instead, the Debtor filed a voluntary petition for relief (Bankr. Dkt. 1) under chapter 13 of the Bankruptcy Code on December 12, 2017.

The commencement of the Bankruptcy Case imposed an automatic stay on "any act to collect, assess, or recover" a pre-petition claim against the Debtor. 11 U.S.C. § 362(a)(6)...