Christopher Brewster v. Nationstar Mortgage, LLC , 742 F.3d 876 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER AYDEN BREWSTER, No. 12-56560
individually,
Plaintiff-Appellant, D.C. No.
3:12-cv-00448-
v. LAB-WMC
SUN TRUST MORTGAGE, INC.,
Defendant, OPINION
and
NATIONSTAR MORTGAGE, LLC,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
Larry A. Burns, District Judge, Presiding
Argued and Submitted
November 8, 2013—Pasadena, California
Filed February 7, 2014
Before: Ronald M. Gould and Jay S. Bybee, Circuit Judges,
and Edward M. Chen, District Judge.*
Opinion by Judge Gould
*
The Honorable Edward M. Chen, District Judge for the U.S. District
Court for the Northern District of California, sitting by designation.
2 BREWSTER V. SUN TRUST MORTGAGE
SUMMARY**
Servicemembers Civil Relief Act
Reversing the district court’s dismissal under Federal
Rule of Civil Procedure 12(b)(6), the panel held that a
complaint stated a claim under § 533 of the Servicemembers
Civil Relief Act by alleging that the defendant failed to
remove improper foreclosure fees associated with a prior
mortgage-service company’s rescinded Notice of Default
while the plaintiff was on active duty.
COUNSEL
Christopher Ayden Brewster (argued) and Kenneth Alexander
Lee (argued), Brewster & Lee, PC, Costa Mesa, California,
for Plaintiff-Appellant.
Regina J. McClendon (argued) and Sally W. Mimms, Locke
Lord LLP, San Francisco, California, for Defendant-
Appellee.
Nathaniel S. Pollock, United States Department of Justice,
Washington, D.C., for Amicus Curiae the United States of
America.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
BREWSTER V. SUN TRUST MORTGAGE 3
OPINION
GOULD, Circuit Judge:
In this appeal, we must determine the scope of the term
“foreclosure” for the purposes of § 533 of the
Servicemembers Civil Relief Act (“SCRA”). Christopher
Brewster appeals the district court’s dismissal under Federal
Rule of Civil Procedure 12(b)(6) of his claim that Defendant
Nationstar Mortgage, LLC, (“Nationstar”) violated § 533
when it maintained certain fees related to a rescinded Notice
of Default on his account while he was on active duty.
50 U.S.C. app. § 533. We review a district court’s grant of a
motion to dismiss for failure to state a claim de novo. Dennis
v. Hart, 724 F.3d 1249, 1252 (9th Cir. 2013). We have
jurisdiction under 28 U.S.C. § 1291, and we reverse.
I
Brewster is a Lieutenant Colonel in the United States
Marine Corps Reserve, and was called up to active duty on
three occasions between 2008 and 2011, including an
overseas deployment from October of 2010 to March of
2011.1 During this time, Brewster failed to make the full
payments owed on the mortgage on his home in California.
Brewster had originally taken out the mortgage in 2007,
before he was recalled to active duty service. His initial loan
servicer, Sun Trust Mortgage, Inc., (“Sun Trust”) started
1
Because this case is an appeal of a motion to dismiss under Fed. R.
Civ. P. 12(b)(6), all facts are taken from the complaint and interpreted in
the light most favorable to the non-moving party. Brewster’s complaint
also contained additional allegations against Sun Trust, but those claims
were settled prior to this appeal and are therefore not at issue here.
4 BREWSTER V. SUN TRUST MORTGAGE
foreclosure proceedings on December 11, 2009 by filing a
Notice of Default, which was accompanied by various fees.
Sun Trust rescinded the Notice of Default in August 2010,
but it did not remove the associated foreclosure fees from his
account. During the month of November 2010, Sun Trust
transferred the servicing rights on Brewster’s mortgage to
Nationstar, the appellee in this action. Nationstar similarly
did not remove the fees associated with Sun Trust’s attempted
foreclosure before Brewster’s filing of this suit, and it
attempted to recover those fees during roughly five months of
Brewster’s active-duty service, including three and a half
months while Brewster was deployed overseas.2
II
The Servicemembers Civil Relief Act was passed “to
enable [servicemembers] to devote their entire energy to the
defense needs of the Nation.” 50 U.S.C. app. § 502(1). It
accomplishes this purpose by imposing limitations on judicial
proceedings that could take place while a member of the
armed forces is on active duty, including insurance, taxation,
loans, contract enforcement, and other civil actions.
50 U.S.C. app. § 501 et seq. These limitations are “always to
be liberally construed to protect those who have been obliged
to drop their own affairs to take up the burdens of the nation.”
2
In the briefing, the parties note that Nationstar removed the fees from
Brewster’s account after Brewster filed this lawsuit. However, while the
fact that Brewster does not allege that Nationstar ever actually collected
the fees goes to the amount of damages to which Brewster may be eligible
if he is successful in this lawsuit, it does not impact the analysis of
whether or not the SCRA was violated in the first place, because we hold
that the attempted collection of fees incident to a Notice of Default was
itself a part of the foreclosure proceedings barred by the SCRA. 50 U.S.C.
app. § 533.
BREWSTER V. SUN TRUST MORTGAGE 5
Boone v. Lightner, 319 U.S. 561, 575 (1943) (granting a stay
in state trustee proceedings); see also LeMaistre v. Leffers,
333 U.S. 1, 6 (1948) (overturning a state tax sale by giving a
broad construction to the SCRA in light of its “beneficient
purpose” and noting that “the Act must be read with an eye
friendly to those who dropped their affairs to answer their
country’s call”).
The part of the statute at issue in this case provides that
“[a] sale, foreclosure, or seizure of property for a breach of an
obligation described in subsection (a) [a mortgage that
originated before the servicemember’s military service] shall
not be valid if made during, or within one year after, the
period of the servicemember’s military service” unless the
foreclosure is approved by a court. 50 U.S.C. app. § 533(c).
Violations or attempted violations of this section can be
punished by the federal government through fines or
imprisonment of up to one year and private plaintiffs3 may
receive equitable relief as well as appropriate monetary
damages,4 costs, and attorney’s fees. 50 U.S.C. app.
3
50 U.S.C. app. § 597a was added to the SCRA by the Veterans
Benefits Act of 2010, which became law on October 13, 2010. Pub. L.
111-275 (2010); Gordon v. Pete’s Auto Serv. of Denbigh, Inc., 637 F.3d
454, 457 (4th Cir. 2011). This section contains an explicit private right of
action. Because we hold that Nationstar violated the SCRA by failing to
remove the improper fees from Brewster’s account between November
2010 and April 2011, see Part III, infra, after the adoption of the Veterans
Benefits Act, we need not reach the questions raised in Nationstar’s
supplemental briefing of whether the remainder of the SCRA contains an
implied right of action or whether the Veterans Benefits Act of 2010
applies retroactively.
4
At this stage of the litigation, we need not and do not reach the
question of whether punitive damages are available under this section of
the SCRA. We asked for supplemental briefs on this issue, and we have
6 BREWSTER V. SUN TRUST MORTGAGE
§ 533(d); 50 U.S.C. app. § 597a. The SCRA sets a serious
prohibition aimed at keeping members of the armed forces
free of foreclosures which would be distractions and unfair
while they serve their country.
III
Brewster alleges that Nationstar violated § 533 of the
SCRA when it did not remove improper foreclosure fees
associated with the prior mortgage-service company’s Notice
of Default, even after Brewster complained about the fees that
appeared on a statement. We agree.
Section 533 does not define the term “foreclosure.”
Appellee argues that the statute should be read only to apply
to the proceedings which were terminated before Nationstar
assumed the serving rights of Brewster’s mortgage. However,
the statute’s plain language suggests two reasons that the term
encompasses more than just the formal foreclosure
proceeding seeking the transfer of ownership or the sale of
property. First, the statute refers to foreclosure
“proceedings,” a term which generally means a process rather
than a single act. 50 U.S.C. app. § 533(b) (providing for a
“stay of proceedings”); Metro One Telecomms., Inc. v. C.I.R.,
704 F.3d 1057, 1061 (9th Cir. 2012) (“[I]n the absence of an
indication to the contrary, words in a statute are assumed to
bear their ordinary, contemporary, common meaning.”
(quoting Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202,
207 (1997))); see also Kachlon v. Markowitz, 85 Cal. Rptr.
3d 532, 542 (2008) (describing a “foreclosure proceedings”
competing views of counsel, but we have concluded that this issue should
not be decided absent an appropriate record developed in the district court,
and that there should be a decision of the district court in the first instance.
BREWSTER V. SUN TRUST MORTGAGE 7
that continued while a “foreclosure sale” was abandoned);
“Foreclose,” Black's Law Dictionary (9th ed. 2009)
(describing “foreclosure proceedings” as encompassing
“appropriate statutory steps” that precede the sale of a
mortgaged property). Second, the language of the statute
specifically bars a “sale, foreclosure, or seizure of property,”
thereby suggesting that foreclosure must mean more than just
a sale or seizure. 50 U.S. app. § 533(c); Spencer Enters., Inc.
v. United States, 345 F.3d 683, 691 (9th Cir. 2003) (noting
the “cardinal rule of statutory interpretation that no provision
should be construed to be entirely redundant.”). We must
move beyond the statute’s explicit terms to determine exactly
what the word “foreclosure” encompasses, in addition to the
sale or seizure that conclude the foreclosure proceedings.
California Civil Code § 2924 et seq. outlines the steps that
make up a foreclosure proceeding in the state of California,
where Brewster’s property and mortgage are located. The
statute includes numerous requirements relating to fees,
establishing the causes for which they can be imposed,
creating time limits on their imposition, and requiring them
to be in reasonable amounts. See, e.g., Cal. Civ. Code
§ 2924c. Because the state-law statutory definition of
foreclosure contemplates the inclusion of specified fees as a
part of the foreclosure proceeding, and because the United
States Supreme Court has unambiguously required courts to
give a broad construction to the statutory language of the
SCRA to effectuate the Congressional purpose of granting
active-duty members of the armed forces repose from some
of the trials and tribulations of civilian life, we hold that the
attempted collection of fees related to a Notice of Default on
a California property constitutes a violation of § 533 of the
Servicemembers Civil Relief Act.
8 BREWSTER V. SUN TRUST MORTGAGE
Nationstar gained servicing rights on Brewster’s mortgage
in November 2010, while Brewster was on active-duty
service. Over the next five months, while Brewster remained
on active duty (and deployed overseas for a large portion of
the time), Brewster alleges that they attempted to collect fees
from him. Even though Nationstar did not issue the Notice of
Default that began the foreclosure proceeding, Brewster has
pled facts sufficient to allege that Nationstar’s continuing
failure to remove the fees incidental to the Notice of Default
was a continuation of that foreclosure proceeding while
Brewster was on active duty service in violation of § 533 of
the Servicemembers Civil Relief Act.
The decision of the district court is REVERSED and the
case is remanded for further proceedings consistent with this
opinion.