Beal Bank, SSB v. David and Connie Prince ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
November 8, 2012 Session
BEAL BANK, SSB v. DAVID AND CONNIE PRINCE
Appeal from the Circuit Court for Lawrence County
No. CC189606 Stella L. Hargrove, Judge
No. M2011-02744-COA-R3-CV - Filed January 31, 2013
Plaintiffs appeal the dismissal pursuant to Rule 12.02(6) of the Tennessee Rules of Civil
Procedure of their claims for conspiracy, negligence, and negligent infliction of emotional
distress arising from an alleged wrongful foreclosure. We affirm the trial court in all respects.
Tenn. R. App. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed
F RANK G. C LEMENT, J R., J., delivered the opinion of the Court, in which P ATRICIA J.
C OTTRELL, P.J., M.S., and A NDY D B ENNETT, J., joined.
Peter T. Skeie, Nashville, Tennessee, for the appellants, David and Connie Prince.
John A. Barney, Brentwood, Tennessee, for the appellees, Wilson & Associates, PLLC,
Aaron Squyres and Leslie Garrett Sarver.
OPINION
This appeal derives from a complicated procedural history that includes proceedings
in state and federal trial courts and appellate courts. The underlying action arises from an
alleged wrongful foreclosure of the residence owned by plaintiffs David and Connie Prince.1
In January of 1995, the Princes took out a loan from the Small Business Administration
secured by a Deed of Trust on their home. The Deed of Trust and the note was subsequently
purchased by LPP Mortgage, who in turn assigned the servicing of the loan to Beal Bank,
SSB. Beal Bank then contracted with Countrywide Home Loans to service the mortgage. In
2003, the Princes filed for Chapter 13 bankruptcy and received an order of the bankruptcy
1
During the pendency of this action, Mrs. Prince passed away and her husband continued the action
on behalf of her estate. A notice of substitution does not appear in the record. We will refer to David Prince
and his late wife’s estate herein as “the Princes.”
court on December 15, 2003, discharging them from Chapter 13 bankruptcy. Subsequently,
the Princes fell behind on their mortgage payments; they made only one payment from April
2004 to April 2005. The Princes received notice in April 2005 of impending foreclosure on
their home. In May 2005, they made a lump sum payment to cure the deficit on their loan;
despite this, foreclosure proceedings began in August 2005 and the house was sold at public
auction in November 2005 by Aaron L. Squyres and Leslie Garrett Sarver, who work for the
firm Wilson & Associates, PLLC, and were co-successor Trustees under the Deed of Trust.
The first of several actions that pertain, directly or indirectly, to the issues in this
appeal began with Beal Bank filing a detainer action against the Princes in the Lawrence
County General Sessions Court to evict the Princes from their residence following the
foreclosure and sale. The detainer action was removed to the Lawrence County Circuit Court,
where the Princes filed a counter-claim and a Third Party Complaint against Wilson &
Associates, Squyres, and Sarver (collectively “the Wilson defendants”). The Princes
subsequently amended their complaint and LPP Mortgage was permitted to intervene and be
substituted as the real party in interest.2 Thereafter, the action was removed to the United
States Bankruptcy Court for the Middle District of Tennessee where a separate adversarial
proceeding was occurring challenging the foreclosure of the home based on the prior Chapter
13 bankruptcy proceeding. The Princes then filed a Consolidated and Amended Complaint
against the Wilson defendants before the bankruptcy court asserting causes of action for
conspiracy, negligence, and negligent infliction of emotional distress. The Wilson defendants
filed a motion to dismiss the claims against them and the motion was granted. The
bankruptcy court also granted summary judgment to Countrywide, Beal Bank, and LPP on
the state law claims. The Princes appealed to the U. S. District Court, which reversed the
dismissal of the claims against the Wilson defendants and remanded the action back to the
bankruptcy court. The district court affirmed the summary dismissal of the state law claims
against the other defendants. The Princes then withdrew the claims based on federal law and
the bankruptcy court remanded the action to the Lawrence County Circuit Court.
The Wilson defendants then filed a Motion to Enter a Final Order of Dismissal, or,
in the alternative, to Dismiss the Consolidated and Amended Complaint for failure to state
a claim. On November 4, 2011, the trial court entered a Memorandum Opinion dismissing
the claims finding that the conspiracy claim was invalid as the claims against the other
defendants had been dismissed, that the negligence and negligent infliction of emotional
distress claims were indistinguishable from the original breach of fiduciary duty claim
previously dismissed by the trial court, and that the negligent infliction of emotional distress
claim failed as there was no greater duty than the contractual duties and David Prince could
2
In the interim, the Wilson defendants filed a Motion to Dismiss, which the circuit court granted. The
Princes appealed and this court dismissed the appeal upon the finding that no final order existed.
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not prove a serious or severe emotional injury related to the action of the Wilson defendants.
Thereafter, the court entered an order dismissing the action and the Princes filed a timely
appeal.3
A NALYSIS
On appeal, the Princes contend the trial court erred in dismissing their claims for
negligence, negligent infliction of emotional distress, and conspiracy against the Wilson
defendants. We find no error with the trial court’s decision to dismiss these claims.
The standards by which Tennessee courts are to assess a Tennessee Rule of Civil
Procedure 12.02(6) motion to dismiss are well established and have not changed since the
adoption of the Tennessee Rules of Civil Procedure in 1970. Webb v. Nashville Area Habitat
for Humanity, Inc., 346 S.W.3d 422 (Tenn. 2011).4
A Rule 12.02(6) motion challenges only the legal sufficiency of the complaint,
not the strength of the plaintiff’s proof or evidence. Highwoods Props., Inc. v.
City of Memphis, 297 S.W.3d 695, 700 (Tenn. 2009). The resolution of a
12.02(6) motion to dismiss is determined by an examination of the pleadings
alone. Leggett v. Duke Energy Corp., 308 S.W.3d 843, 851 (Tenn. 2010). A
defendant who files a motion to dismiss “admits the truth of all of the relevant
and material allegations contained in the complaint, but . . . asserts that the
allegations fail to establish a cause of action.” Brown v. Tenn. Title Loans,
Inc., 328 S.W.3d 850, 854 (Tenn. 2010) (quoting Freeman Indus., LLC v.
Eastman Chem. Co., 172 S.W.3d 512, 516 (Tenn. 2005)).
In considering a motion to dismiss, courts “must construe the complaint
liberally, presuming all factual allegations to be true and giving the plaintiff
the benefit of all reasonable inferences.” Tigg v. Pirelli Tire Corp., 232 S.W.3d
28, 31–32 (Tenn. 2007) (quoting Trau–Med, 71 S.W.3d at 696); see Leach v.
Taylor, 124 S.W.3d 87, 92–93 (Tenn. 2004). A trial court should grant a
3
In their brief, the Princes attempted to appeal from the order entered by the bankruptcy court
granting summary dismissal to Countrywide Home Loans, Inc., Beal Bank, SSB, and LPP Mortgage. This
court issued an order on August 1, 2012, dismissing the appeal as to the issues arising out of the federal court
orders and the dismissing Countrywide, Beal Bank, and LPP Mortgage as parties to this appeal.
4
In Webb, the Tennessee Supreme Court made it clear that the “plausibility” pleading standard set
forth in the United States Supreme Court decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
and Ashcroft v. Iqbal, 556 U.S. 662 (2009) is not to be followed by Tennessee courts. Webb, 346 S.W.3d at
430.
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motion to dismiss “only when it appears that the plaintiff can prove no set of
facts in support of the claim that would entitle the plaintiff to relief.” Crews
v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852, 857 (Tenn. 2002). We review the
trial court’s legal conclusions regarding the adequacy of the complaint de
novo. Brown, 328 S.W.3d at 855; Stein, 945 S.W.2d at 716.
Webb, 346 S.W.3d at 426 (some internal citations omitted).
With regard to the negligence claims, the allegations are that the Wilson defendants
should have performed a reasonable review of the documents, which would have revealed
that the Princes were not in default. Further, the Princes allege that the Wilson defendants
should have exercised reasonable diligence in determining the veracity of the documents
provided by LPP Mortgage and Countrywide. The Wilson defendants, however, correctly
state that they had no such duty, relying on Tennessee Code Annotated § 35-5-116. The
statute provides that “[a] trustee shall not be liable for any good faith error resulting from
reliance on any information in law or fact provided by the borrower or secured party or their
respective attorney, agent, or representative, or other third party.” Id. As the statute clearly
and expressly provides, there is no liability for a trustee acting in good faith in reliance upon
information provided by the borrower or secured party. There are no allegations that the
Wilson defendants acted in bad faith when relying on the information provided by LPP
Mortgage and Countrywide. We also note that there are no allegations in the Princes’
complaint that the Wilson defendants violated the duties set forth in the Deed of Trust.
Therefore, we affirm the trial court’s dismissal of the negligence claim against the Wilson
defendants.
A claim for negligent infliction of emotional distress requires a party to establish the
elements of negligence. Eskin v. Bartee, 262 S.W.3d 727, 735 (Tenn. 2008). As we have
affirmed the trial court’s dismissal of the claim for negligence, the Princes also failed to set
forth a claim for negligent infliction of emotional distress. Thus, we affirm the trial court’s
dismissal of this claim.
We now turn our attention to the conspiracy claim. Conspiracy claims must be pled
with some degree of specificity, and conclusory allegations unsupported by material facts
will not be sufficient to state such a claim. Id. (citing McGee v. Best, 106 S.W.3d 48, 64
(Tenn. Ct. App. 2002)). The essential elements of a cause of action for civil conspiracy are:
(1) a common design between two or more persons,
(2) to accomplish by concerted action an unlawful purpose, or a lawful
purpose by unlawful means,
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(3) an overt act in furtherance of the conspiracy, and
(4) resulting injury.
Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn. Ct. App. 2006) (citing Morgan v.
Brush Wellman, Inc., 165 F. Supp. 2d 704, 720 (E.D. Tenn. 2001)).
The relevant allegations against the Wilson defendants that are at issue in this appeal
as stated in the lengthy Consolidated and Amended Complaint are as follows:
81. If Leslie Garrett and Wilson & Associates had conducted a reasonable
review of Countrywide’s documents they would have determined that the
Princes were not in default and that they did not owe $34,742.08.
94. On October 7, 2005, LPP Mortgage and Countrywide appointed Aaron
Squyres and Leslie Garrett of Wilson & Associates to serve as Trustees to the
Deed of Trust to the Princes’ property.
107. On November 7, 2005, LPP Mortgage, Leslie Garrett and Aaron Squyres
knew, or by exercise of reasonable diligence would have known, that the
Princes were not in default.
185. Beal Bank, Countrywide, LPP Mortgage, Garrett, Squyres, and Wilson
& Associates worked together to coordinate the transfer of title to the Princes’
home from Beal Bank to LPP Mortgage even though they knew that Beal Bank
had no title to transfer. Accordingly, Defendants are liable to the Princes for
conspiracy.
188. All Defendants have been grossly negligent in the execution of their
responsibilities and in the course of their conduct toward the Princes and the
Princes’ property. LPP Mortgage, Beal Bank and Countrywide failed in their
duty to maintain accurate and truthful records of the Princes’ mortgage
payments. LPP Mortgage, Countrywide, Garrett, Squyres and Wilson &
Associates failed in their duty to exercise reasonable diligence to determine the
veracity of LPP Mortgage and Countrywide’s erroneous documents. And, LPP
Mortgage, Countrywide, Garrett, Squyres and Wilson & Associates failed in
their duty not [to] use erroneous documents – whose lack of veracity would
have been obvious had they exercised reasonable diligence – to foreclose on
the Princes’ home and sell it at public auction.
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194. Medical proof establishes that David Prince has suffered severe
emotional distress as a direct result of Defendants’ negligence. Accordingly,
Defendants are liable to David Prince for negligent infliction of emotional
distress.
As noted earlier, conspiracy claims must be pled with some degree of specificity and
conclusory allegations unsupported by material facts are not sufficient to state an actionable
conspiracy claim. Eskin, 262 S.W.3d at 735. We have determined the civil conspiracy
allegations in the complaint are little more than conclusory allegations that the defendants
“worked together to coordinate the transfer of title”; thus, they are insufficient to state a
claim for conspiracy. See Kincaid, 221 S.W.3d at 38.
I N C ONCLUSION
The judgment of the trial court is affirmed, and this matter is remanded with costs of
appeal assessed against the Appellants.
______________________________
FRANK G. CLEMENT, JR., JUDGE
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