Clemmons v. Mortgage Elec. Reg. Sys. ( 2014 )

FILED
United States Court of Appeals
Tenth Circuit
November 12, 2014
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
CLEO CLEMMONS, as administrator
for Sheila Bowers (deceased),
BENJAMIN BOWERS, as successor
administrator for Roy Bowers
(deceased),
Plaintiffs-Counter Defendants -
Appellants,
v. No. 13-3204
(D.C. No. 10-CV-04141-JTM-DJW)
MORTGAGE ELECTRONIC (D. Kan.)
REGISTRATION SYSTEMS, INC.;
LORNA SLAUGHTER; FIRST
AMERICAN TITLE INSURANCE
COMPANY,
Defendants - Appellees,
and
WELLS FARGO BANK, N.A.,
Intervenor-Defendant
Counterclaimant - Appellee.
ORDER AND JUDGMENT *
Before KELLY, LUCERO, and MATHESON, Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
Plaintiffs-Appellants Roy and Sheila Bowers, through their successor
administrators, appeal from several orders of the district court concerning claims
arising out of a mortgage refinance that failed to close, including claims for
slander and disparagement of title, conversion, fraud, negligence, and violations
of the Kansas Consumer Protection Act (KCPA) and the federal Real Estate
Settlement Procedures Act (RESPA). Plaintiffs contend that: (1) the district court
lacked jurisdiction over Wells Fargo’s foreclosure claim based upon the original
mortgage; (2) the district court should not have disposed of their claims by
summary judgment; (3) the district court was not authorized to “rewrite”
Plaintiffs’ mortgage contract; (4) the district court erred in ordering equitable
reinstatement of the original mortgage; (5) Wells Fargo was not entitled to an in
personam judgment against Plaintiffs given its collection of their mortgage
insurance premium; (6) First American Title Insurance Co. (First American)
should not have been dismissed from the case; and (7) the Kansas Consumer
Protection Act (KCPA) applies, notwithstanding the district court’s contrary
conclusion. Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm.
Background
In mid-2009, Plaintiffs initiated a refinance of a 2008 note secured by a
residential mortgage, which at that time was held and serviced by Wells Fargo
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Bank, N.A. (Wells Fargo). The refinance closing never occurred, but the closing
agent, Transcontinental Title Company (Transcontinental), mistakenly informed
Wells Fargo that it did. Accordingly, Wells Fargo released its 2008 mortgage lien
and notified the mortgage insurer (FHA) which, in turn, terminated the applicable
mortgage insurance policy. For four months, Wells Fargo sent the Plaintiffs
statements with lower monthly payment amounts, as if the refinance had occurred.
In August 2009, Transcontinental advised Wells Fargo that the refinance
closing had not occurred and reimbursed the closing fee. Wells Fargo then
reinstated collection of the 2008 note. The terminated mortgage insurance was
not reinstated. To correct its error in releasing the mortgage lien before
satisfaction, Wells Fargo registered a notice of mistaken release of the 2008
mortgage (the “caveat”) with the county register of deeds. The caveat was
executed by Wells Fargo employee and MERS signing officer Lorna Slaughter. 1
Despite the caveat, Plaintiffs refused to make payments on the reinstated
2008 note. Wells Fargo commenced foreclosure proceedings. Plaintiffs then sued
MERS and Ms. Slaughter, claiming that the contents of the caveat were false and
asserting the following counts: (I) slander and disparagement of title, (II)
1
Mortgage Electronic Registration Systems, Inc. (MERS) was the
mortgagee as nominee or agent for the originating debt holder and its successors
or assigns, which was Wells Fargo at all times relevant to this action. As holder,
Wells Fargo was entitled to enforce the note and mortgage.
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conversion, (III) negligence, (IV) fraud and/or misrepresentations, and (VI)
violations of the KCPA. 2 Plaintiffs sought over $16 million in damages.
MERS and Ms. Slaughter removed the action to federal court on November
16, 2010. Wells Fargo then dismissed its state foreclosure proceedings and
successfully moved to intervene pursuant to Fed. R. Civ. P. 24(a)(2) and
(b)(1)(B). Wells Fargo counterclaimed for equitable reinstatement of the 2008
mortgage and its foreclosure.
First American was added as a necessary party on Plaintiffs’ motion, and,
on March 19, 2012, Plaintiffs filed an amended complaint incorporating claims
against First American related to its alleged role in the execution and recording of
the caveat. Plaintiffs also added Count V for violations of RESPA.
On September 11, 2012, the district court granted First American’s motion
to dismiss for failure to state a claim. Bowers v. Mortg. Elec. Registration Sys.,
No. 10–4141–JTM, 2012 WL 3984471 (D. Kan. Sept. 11, 2012). On October 4,
2012, the court granted the remaining defendants’ motion for summary judgment
and Wells Fargo’s equitable counterclaim for reinstatement of the 2008 mortgage
loan. Bowers v. Mortg. Elec. Registration Sys., Inc., No. 10–4141–JTM, 2012
WL 4747162 (D. Kan. Oct. 4, 2012). On March 26, 2013, the district court
granted summary judgment on Wells Fargo’s counterclaim for foreclosure and
awarded attorney’s fees to Wells Fargo, pursuant to the terms of the relevant loan
2
The original petition did not include a Count V.
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documents. Bowers v. Mortg. Elec. Registration Sys., Inc., No. 10–4141–JTM,
2013 WL 1308237 (D. Kan. Mar. 26, 2013).
Discussion
We have repeatedly held that appellants must advance developed legal
arguments, supported by authority, and provide record citations adequate to
permit appellate review. Fed. R. App. P. 28(a)(8)(A); see also U.S. Sec. and
Exch. Comm’n v. Maxxon, Inc., 465 F.3d 1174, 1175 n.1 (10th Cir. 2006).
Arguments not raised before the district court cannot proceed here without a
discussion of how they meet the plain error standard. See McKissick v. Yuen,
618 F.3d 1177, 1189 (10th Cir. 2010). With these principles in mind, we address
Plaintiffs’ many arguments below.
A. The District Court’s Jurisdiction Over Wells Fargo’s Foreclosure Claim
Plaintiffs first argue that the district court erred in exercising jurisdiction
over Wells Fargo’s foreclosure claim. Aplt. Br. 2. Under this heading, they offer
a variety of related jurisdictional arguments: the district court lacked subject
matter jurisdiction to reinstate the original 2008 mortgage; it should not have
allowed Wells Fargo to intervene in the first instance; any intervention should
have been limited to defending against Plaintiffs’ tort claims; and abstention as to
Wells Fargo’s foreclosure claim was appropriate because Kansas state courts have
an important interest in developing a body of state foreclosure law. Id. at 10–19.
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According to Plaintiffs, the district court lacked authority to reinstate the
original mortgage because a federal agency had previously denied Wells Fargo’s
request for the same relief. Id. at 10–12. However, Wells Fargo explains that the
FHA denied its request to reinstate insurance that was cancelled when the
mortgage was erroneously released—not the loan itself. Aplee. Br. 28–29 (citing
III R. 178, 187, 497; II R. 750). Indeed, the FHA does not issue or reinstate
mortgages, and Plaintiffs offer no support for their assertions to the contrary.
Plaintiffs next argue that the court erred in granting Wells Fargo’s request
for intervention both as of right or, in the alternative, permissively. We review an
order granting intervention as of right de novo and an order granting permissive
intervention for abuse of discretion. United States v. Albert Inv. Co., 585 F.3d
1386, 1390 (10th Cir. 2009); DeJulius v. New England Health Care Emps.
Pension Fund, 429 F.3d 935, 942 (10th Cir. 2005). A party may intervene as of
right when it “claims an interest relating to the property or transaction that is the
subject of the action,” and when disposing of the action would “impair or impede
the movant’s ability to protect its interest.” Fed. R. Civ. P. 24(a)(2). Permissive
intervention is appropriate when a party “has a claim or defense that shares with
the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(1)(B).
Plaintiffs assert that Wells Fargo’s interests—primarily, in securing
repayment of the original loan—bear no relationship to Plaintiffs’ claims. They
also argue that the district court should have remanded the action to state court
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when it learned that Wells Fargo had initially filed a foreclosure action in, and
therefore “selected,” the Kansas court system. Aplt. Br. 17, 19. Neither
argument is persuasive. Plaintiffs’ claims rest squarely on the caveat, which was
executed when Wells Fargo discovered that the 2008 loan was released in error
and sought to enforce the 2008 note. Wells Fargo’s interests are inextricably tied
to property at issue in this action, and these interests share common legal and
factual elements with Plaintiffs’ various claims. Accordingly, Plaintiffs have
shown neither error nor an abuse of discretion by the district court.
Next, Plaintiffs argue that, if allowed, Wells Fargo’s intervention should
have been limited to a defense of their tort claims; according to Plaintiffs, the
federal district court did not have jurisdiction to hear Wells Fargo’s additional
affirmative claims for reinstatement and foreclosure. Id. at 14–17. Although 28
U.S.C. § 1367(b), cited by Plaintiffs, generally bars an intervening party from
asserting claims through supplemental jurisdiction in a diversity action, this bar
does not apply to claims which independently satisfy the requirements of original
diversity jurisdiction. Here, all parties are citizens of different states, and Wells
Fargo’s claims for reinstatement and foreclosure placed more than $75,000 in
controversy. 28 U.S.C. § 1332. The district court properly exercised its
jurisdiction.
We need not address Plaintiffs’ final jurisdictional argument that the
district court should have abstained from hearing Wells Fargo’s claims. Aplt. Br.
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18–19. They offer inadequate explanation and no legal support for this
contention. Fed. R. App. P. 28(a)(8)(A).
B. Summary Judgment for MERS, Ms. Slaughter and Wells Fargo
Plaintiffs next contest whether the district court properly disposed of their
tort claims at the summary judgment stage. Summary judgment is appropriate “if
the movant shows that there is no genuine dispute as to any material fact and that
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). We
review de novo a grant of summary judgment, viewing the facts and drawing
reasonable inferences in the light most favorable to the non-moving party.
Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1216 (10th Cir. 2002). In
opposing summary judgment, the non-moving party must make a specific showing
of a genuine issue of material fact suitable for trial. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 256 (1986).
In granting summary judgment, the district court set forth 28 pages of
uncontroverted facts. In their briefing and during oral argument, Plaintiffs
challenge some of these facts and attempt to present a variety of new facts.
However, only a few facts—all clearly established in the record and fully
considered by the district court—constitute the operative facts vis-a-vis Plaintiffs’
tort claims.
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1. Slander of Title and Fraud
A slander of title claim requires a false and malicious statement disparaging
to a person’s title to real property that causes him injury. LeBarge v. City of
Concordia, 927 P.2d 487, 492 (Kan. Ct. App. 1996). A fraud claim requires “an
untrue statement of fact, known to be untrue by the party making it, made with
the intent to deceive or with reckless disregard for the truth, upon which another
party justifiably relies and acts to his or her detriment.” Alires v. McGehee, 85
P.3d 1191, 1195 (Kan. 2004). It is indisputable that the caveat contained only
true statements—most importantly, that the original 2008 mortgage loan had not
been fully paid or satisfied. Furthermore, Plaintiffs did not demonstrate either
actual damage caused by the publication of the caveat or intent to disparage or
deceive by any of the parties involved in its execution. Thus, their slander of title
and fraud claims fail as a matter of law. 3
2. Conversion
Conversion is the “unauthorized assumption or exercise of the right of
ownership over goods or personal chattels belonging to another to the exclusion
of the other’s rights.” Bomhoff v. Nelnet Loan Servs., Inc., 109 P.3d 1241, 1246
(Kan. 2005). The district court found that, under Kansas law, a mortgage lien
3
Plaintiffs may have intended to argue—which is by no means clear—that
Wells Fargo’s potential knowledge of the failed closing prior to its release of the
original loan contributed to the disparaging or fraudulent nature of the caveat.
Yet, Plaintiffs have failed to adequately allege, let alone offer any evidence,
suggesting any intent on the part of Wells Fargo to disparage or deceive.
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interest is not capable of being converted. Bowers, 2012 WL 4747162, at *15
(citing Tustin v. Baker, No. 93,250, 2005 WL 2254497, at *10 (Kan. Ct. App.
Sept. 16, 2005)). Plaintiffs fail to provide any argument or legal authority to the
contrary.
3. Negligence
The district court correctly held that the Defendants did not owe Plaintiffs a
duty of due care. Id. at *16. As lender and borrower, Wells Fargo and Plaintiffs
had an adversarial relationship, and Wells Fargo was not obligated to act in
Plaintiffs’ best interest. Jack v. City of Wichita, 933 P.2d 787, 793 (Kan. Ct.
App. 1997). MERS and Ms. Slaughter similarly owed no duty, since they served
merely as Wells Fargo’s agents in executing the caveat.
Bank of America v. Narula, 261 P.3d 898 (Kan. Ct. App. 2011), cited by
Plaintiffs, is not to the contrary. The court in Narula held that Bank of America
owed its customers a duty of due care—but only as an exception to the general
rule that a creditor-debtor relationship is not fiduciary in nature. Id. at 918. The
court found “ample evidence” of a “long-standing, close relationship” and
“special confidence” between Bank of America and the borrowers. Id. at 903,
918–19. Plaintiffs have not alleged such a special relationship here.
Regardless, even if Plaintiffs could somehow demonstrate that Wells Fargo
and its agents owed them a duty of due care, Plaintiffs have not shown that such a
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duty was breached by the recording of the caveat, which truthfully described and
sought to correct the mistaken release of the original 2008 mortgage loan.
4. KCPA
Plaintiffs challenge the district court’s holding that their KCPA claim fails
because the communication at issue—the recording of the caveat—was related to
a mortgage obligation and not to the “sale, lease, assignment or other disposition
for value of property or services within this state . . . to a consumer.” Bowers,
2012 WL 4747162, at *16 (quoting Kan. Stat. Ann. § 50-624(c)). Regardless,
Plaintiffs have not shown that the Defendants knew or had reason to know of any
deceptive practices or unconscionable acts. Kan. Stat. Ann. §§ 50-626, 50-627.
Again, we agree with the district court that the caveat was truthful.
5. RESPA
RESPA requires plaintiffs to pursue their claims within a one-year
limitations period, running “from the date of the occurrence of the violation.” 12
U.S.C. § 2614. Courts generally interpret this to mean the date of the relevant
closing. Snow v. First Am. Title Ins. Co., 332 F.3d 356, 358–60 (5th Cir. 2003).
Plaintiffs’ RESPA claims accrued no later than June or July of 2009, when
Transcontinental allegedly failed to ensure that Plaintiffs’ new mortgage was
properly closed. The RESPA claims are time-barred.
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6. Outstanding Discovery Motions
Plaintiffs argue that the district court should not have granted summary
judgment in light of four outstanding discovery motions and a Rule 56(d)
affidavit outlining various alleged failures by the Defendants to provide necessary
information. Although a court may refuse summary judgment or defer
consideration if the non-moving party shows, for specified reasons, that it cannot
present facts essential to justify its opposition, Fed. R. Civ. P. 56(d), a court is
not required to await the completion of discovery before ruling. Pub. Serv. Co. of
Colo. v. Cont’l Cas. Co., 26 F.3d 1508, 1518 (10th Cir. 1994). When, as here, the
non-movants seek broad additional discovery without demonstrating the essential
value of specific evidence expected to be obtained, a grant of summary judgment
is appropriate. Id.
C. Rewriting of the Original Mortgage Contract
Plaintiffs contend that the district court “re-wrote” Plaintiffs’ contract when
it granted reinstatement of the 2008 mortgage loan. They first suggest that the
court had no authority to reinstate the loan with a higher monthly payment than
Wells Fargo previously charged Plaintiffs. Aplt. Br. 33. Yet, the record shows
that the higher required payment was due to an increase in the escrow amount for
real estate taxes and property insurance. III R. 199, ¶ 21–22. It was not, as
Plaintiffs argue without support, a “mathematical impossibility.” Aplt. Br. 33.
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Next, Plaintiffs argue that the court should have reinstated the 2008
mortgage note using the new terms agreed upon for the failed refinancing. Id.
Reinstating the original loan with terms other than those contained in the original
loan contract would be, by definition, “rewriting” that contract—an action
Plaintiffs argue is not authorized.
D. Equitable Reinstatement of the Original Mortgage Loan
Plaintiffs correctly assert that a court cannot provide an equitable remedy,
such as reinstatement, that would violate existing statutory or constitutional
rights. Id. at 36. No showing of any such violation has been made here.
Plaintiffs’ conclusory allegations, including that Wells Fargo “wanted Roy’s
home” and that reinstatement has resulted in “substantial unfairness to the Bowers
where they lost their life savings and home for paying what they agreed,” id. at
37–38, will not suffice.
Plaintiffs also argue that the district court “ignored” homestead protections
under the Kansas Constitution by reinstating the original loan, id. at 36, but
Kansas law clearly allows equitable relief when a mortgage has been released in
error. Mid-Continent Lodging Assocs., Inc. v. First Nat’l Bank of Chicago, 999
F. Supp. 1443, 1447–48 (D. Kan. 1998) (citing S. Kan. Farm, Loan & Trust Co. v.
Garrity, 48 P. 33 (Kan. 1897); Conner v. Koch Oil Co., 777 P.2d 821 (Kan.
1989); Harper v. Cont’l Oil Co., 805 F.2d 929 (10th Cir. 1986); N. River Ins. Co.
v. Aetna Finance Co., 352 P.2d 1060 (Kan. 1960)). Although Plaintiffs suggest
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that the district court could have equitably found a mortgage on the terms that
failed to close, rather than reinstating the 2008 mortgage, their failure to brief a
reasoned argument in support means that any such argument is waived.
E. In Personam Judgment for Deficiency After Foreclosure
We do not consider Plaintiffs’ argument that they cannot be held liable in
personam for any deficiency after foreclosure, Aplt. Br. 48–49, because Plaintiffs
did not present this argument to the district court. Schrock v. Wyeth, Inc., 727
F.3d 1273, 1284 (10th Cir. 2013); Quigley v. Rosenthal, 327 F.3d 1044, 1069
(10th Cir. 2003).
F. Plaintiffs’ Claims Against First American
This court reviews de novo a district court’s dismissal under Fed. R. Civ. P.
12(b)(6) of a complaint for failure to state a claim, applying the same standards as
the district court. Teigen v. Renfrow, 511 F.3d 1072, 1078 (10th Cir. 2007);
Cnty. of Santa Fe, N.M. v. Pub. Serv. Co. of N.M., 311 F.3d 1031, 1034 (10th
Cir. 2002). The district court properly dismissed Plaintiffs’ slander, fraud,
negligence and RESPA claims against First American as time-barred. Kansas law
required Plaintiffs to bring their claim for slander of title within one year of the
publication of the defamatory statement. Kan. Stat. Ann. § 60-514. Plaintiffs
were required to bring their fraud and negligence claims within two years of the
date when the fraud or act giving rise to the cause of action caused substantial
injury or when that injury or fraud became reasonably ascertainable. Id. § 60-
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513(a)(3), (b). The caveat underlying Plaintiffs’ slander, fraud and negligence
claims was registered on November 13, 2009; therefore, those claim are time-
barred. As discussed above, a one-year limitations period bars Plaintiffs’ RESPA
claim.
Concerning Plaintiffs’ KCPA claim against First American, as discussed
above, Plaintiffs failed to show any deceptive practice or unconscionable act in
the recording of the caveat.
G. Plaintiffs’ KCPA Claims
We have addressed above why Plaintiffs’ seventh issue on appeal,
concerning their KCPA claims, fails.
We conclude that Plaintiffs’ remaining arguments not specifically
addressed above are either waived or without merit.
AFFIRMED. All pending motions are DENIED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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