Shontay House v. Fed. Home Loan Mortg. Corp.
| Decision Date | 09 January 2015 |
| Docket Number | No. 4:14-CV-129-D,4:14-CV-129-D |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | SHONTAY HOUSE, and MARY VEGA, Plaintiffs, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, and BROCK & SCOTT, PLLC, Defendants. |
On July 30, 2014, defendants Federal Home Loan Mortgage Corporation ("Freddie Mac") and Brock & Scott, PLLC ("Brock & Scott"), moved to dismiss plaintiffs' complaint for failure to state a claim upon which relief can be granted [D.E. 5]. See Fed. R. Civ. P. 12(b)(6). Plaintiffs Shontay House and Mary Vega ("plaintiffs") responded in opposition [D.E. 7], and defendants replied [D.E. 8]. As explained below, the motion to dismiss is granted in part and denied in part.
On March 15, 2013, plaintiffs ("the Renters") entered into a one-year lease agreement with Steve Mills ("the mortgagor") to rent his residential property in Greenville, North Carolina ("the rental property"). Compl. [D.E. 1-2] ¶ 7-8. In February 2014, the mortgagor and the rental property were the subjects of a foreclosure action. Id. ¶ 11. On February 5, 2014, foreclosure took place. Id. On February 17, 2014, equitable title to the rental property transferred to Freddie Mac,1 and FreddieMac recorded the title transfer on March 3, 2014. Compl. ¶ 11.
On June 5, 2014, Brock & Scott, acting on behalf of Freddie Mac, applied for writ of possession with the clerk of Pitt County Superior Court. Defs.' Mem. Supp. Mot. Dismiss [D.E. 6] 4; Writ App. [D.E. 6-2].2 The clerk granted the application and the sheriff served the Renters with an ejectment notice. See [D.E. 6-4]; Comp. ¶ 14. The ejectment notice stated that if the Renters failed to vacate the premises by June 16, 2014, the sheriff would forcibly eject them. Id. The Renters did not vacate the premises by June 16, 2014. Thus, the sheriff evicted them on that date. Compl. ¶ 15.
On June 23, 2014, the Renters filed a complaint in Pitt County Superior Court. In the complaint, the Renters asserted nine claims under North Carolina law: (1) motion for temporary restraining order; (2) motion for preliminary injunction; (3) breach of lease; (4) wrongful interference with contract; (5) trespass; (6) trespass to chattel; (7) conversion; (8) intentional infliction of emotional distress; and (9) unfair and deceptive trade practices. Id. ¶¶ 21-72. On June 24, 2014, the Pitt County Superior Court entered an order enjoining any further attempt to eject the Renters from the rental property. See [D.E. 1-2] 12-13. The Superior Court scheduled a preliminary injunction hearing for July 3, 2014. Id. 13. However, before the hearing, the Renters agreed to voluntarily vacate the premises on July 7, 2014, rendering the hearing and the Renters' claims for injunctive relief moot. See Pls.' Resp. 2 n.1. On July 23, 2014, Freddie Mac removed the action to this court pursuant to 28 U.S.C. §§ 1331 and 1442 and 12 U.S.C. § 1452(f).
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for "failureto state a claim upon which relief can be granted" tests whether the complaint is legally and factually sufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 543 (4th Cir. 2013); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), aff'd, 132 S. Ct. 1327 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). The court need not accept a complaint's conclusions of law. See Iqbal, 556 U.S. at 678-79; Twombly, 550 U.S. at 555; Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009). As for a complaint's factual sufficiency, a party must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "[N]aked assertions of wrongdoing" cannot "cross the line between possibility and plausibility of entitlement to relief." Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quotation omitted); see Vitol, S.A., 708 F.3d at 543. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. A plaintiff armed with nothing more than "labels and conclusions" or a formulaic recitation of the elements of a cause of action cannot proceed. Twombly, 550 U.S. at 555 & n.3; Vitol, S.A., 708 F.3d at 543; Francis, 588 F.3d at 193.
"Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. Moreover, in considering a motion to dismiss, a court must focus on the complaint. However, the court may also consider documents attached to the complaint if they "are integral to the complaint and authentic." Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009); Phillips v. LCI Int'l, Inc., 190 F.3d 609, 618 (4th Cir. 1999).
Initially, the court must determine the substantive law that governs this action. "[A]ll civil actions to which [Freddie Mac] is a party shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such actions,without regard to amount or value . . . ." 12 U.S.C. § 1452(f). Section 1452(f) imparts federal question jurisdiction and requires the court to apply federal common law. See, e.g., Rose v. Fed. Home Loan Mortg. Corp., No. 1:09-cv-170, 2010 WL 2640460, at *6 (W.D. Mich. June 30, 2010) (unpublished); Dupuis v. Fed. Home Loan Mortg. Corp., 879 F. Supp. 139, 142 (D. Me. 1995). However, where there is no applicable federal common law or where there is no "demonstrated need for a uniform national rule," district courts should "generally incorporate state law as the rule of decision." Rose, 2010 WL 2640460, at *6; see Fed. Home Loan Mortg. Corp. v. Riverdale Bank, No. 92 C 1332, 1992 WL 73539, at *2 (N.D. Ill. March 27, 1992) (unpublished). In determining whether to incorporate state law as the federal rule of decision, the court considers three factors: (1) the need for a nationally uniform body of law; (2) whether the application of state law would frustrate specific objectives of a federal program; and (3) the extent to which application of a federal rule would disrupt commercial relationships predicated on state law. United States v. Kimbell Foods Inc., 440 U.S. 715, 728-29 (1979). Thus, in Riverdale Bank, the court applied the three Kimbell Foods factors, held that "there is no need for national uniformity in the law of real property," and applied Illinois law. See Riverdale Bank, 1992 WL 73539, at *2. Likewise, in Rose, the court applied Michigan law, noting that Freddie Mac "relie[d] exclusively on [state] law" and did "not suggest the existence of any need for a uniform federal rule of decision or a significant conflict between federal interests and [state] mortgage law." Rose, 2010 WL 2640460, at *6.
Here, the parties did not discuss choice of law in their briefs and did not provide any reason to depart from North Carolina law. Rather, the parties cite exclusively to North Carolina law. Accordingly, having considered the Kimbell Foods factors, the court applies North Carolina law as the federal rule of decision.
This case requires the court to analyze the Protecting Tenants at Foreclosure Act ("PTFA"). See Pub. L. No. 111-22, § 702, 123 Stat. 1632, 1660-61 (2012) (codified at 12 U.S.C. § 5220 note).Congress enacted the PTFA in the midst of the 2009 financial crisis to protect "bona fide" tenants of rental property subject to foreclosure. See 155 Cong. Rec. S5110-11 (daily ed. May 5, 2009) (statement of Sen. Kerry). The PTFA terminated on December 31, 2014. See 42 U.S.C. § 1437f (note under "Termination of Amendments").
Subject to a few exceptions, the PTFA applies to bona fide tenants who are in rental property that is foreclosed upon during the lease term. The PTFA provides such bona fide tenants the ability to remain in their rental residence until the end of the lease term, or to receive a minimum of 90 days' notice to vacate the rental residence. See Pub. L. No. 111-22, § 702, 123 Stat. 1632, 1660-61 (2012) (codified at 12 U.S.C. § 5220 note). The 90-day PTFA notice requirement also applies to bona fide tenants without a lease or with a lease terminable at will. Id. at § 702(a)(2)(B).
Although the PTFA requires pretermination notice, the PTFA does not create a private right of action. See, e.g., Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 160 (6th Cir. 2014); Logan v. U.S. Bank Nat'l Ass'n, 722 F.3d 1163, 1169-73 (9th Cir. 2013); Fulcrum Enters., LLC v. Bank of Am., N.A., No. H-13-1930, 2014 WL 1669098, at *5 (S.D. Tex. Apr. 25, 2014) (unpublished). Rather, a bona fide tenant can use the PTFA "as a defense to an unlawful detainer action," or "[i]n cases where successors in interest do not initiate judicial proceedings, tenants . . . . must be permitted to use available state law causes of action, such as wrongful eviction, to enforce the PTFA's protections." Mik, 743 F.3d at 165, 167: see Fulcrum Enters., LLC, 2014 WL 1669098, at *5 n.46.
Section 702(a) of the PTFA states:
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