Dickinson v. Suntrust National Mortgage Inc.

Cite as 2014 Ark. 513
SUPREME COURT OF ARKANSAS
No. CV-14-173
ROBERT DICKINSON AND PAMELA Opinion Delivered December 11, 2014
DICKINSON, FOR THEMSELVES
AND ALL RESIDENTS OF ARKANSAS CERTIFIED QUESTION FROM THE
WHO ARE SIMILARLY SITUATED UNITED STATES DISTRICT
PETITIONERS COURT EASTERN DISTRICT OF
ARKANSAS
V. [NO. 3:12-cv-00112-BSM]
HONORABLE BRIAN S. MILLER,
SUNTRUST NATIONAL MORTGAGE JUDGE
INC. AND FEDERAL NATIONAL
MORTGAGE ASSOCIATION CERTIFIED QUESTION
RESPONDENTS ANSWERED.
COURTNEY HUDSON GOODSON, Associate Justice
This case presents the following certified question from the United States District
Court for the Eastern District of Arkansas, Judge Brian Miller:
Whether the Federal National Mortgage Association satisfies the Statutory
Foreclosure Act’s authorized-to-do-business requirement, Ark. Code Ann. §
18-50-117, under 12 U.S.C. § 1716 et seq., or other federal laws, or must the
Federal National Mortgage Association satisfy Ark. Code Ann. § 18-50-117
by obtaining a certificate of authority in Arkansas prior to statutorily
foreclosing on property in Arkansas?
Petitioners, Robert and Pamela Dickinson, (“the Dickinsons”) contend that respondent, the
Federal National Mortgage Association (“Fannie Mae”), may not institute foreclosure
proceedings under the Statutory Foreclosure Act, codified at Ark. Code Ann. §§ 18-50-101
et seq., unless it is “authorized to do business in this state,” which the Dickinsons claim
requires Fannie Mae to obtain a certificate of authority from the Arkansas Secretary of State.
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Respondents argue that the statute allows any authorization, including authorization under
federal law. We hold that the statute does contemplate authorization under federal law and
that Fannie Mae’s federal charter is sufficient to allow it to proceed under the Statutory
Foreclosure Act.
This case stems from a statutory foreclosure proceeding instituted against the
Dickinsons by respondent, SunTrust National Mortgage Inc. (“SunTrust”). According to the
Dickinsons’ complaint in this case, they have a note and a mortgage owned by Fannie Mae
that is serviced by SunTrust. In early 2010, the Dickinsons fell behind on their payments,
and in November 2010, SunTrust initiated a foreclosure action pursuant to the Statutory
Foreclosure Act. In January 2011, shortly before the scheduled auction of their home, the
Dickinsons filed suit against Fannie Mae and SunTrust in the circuit court of Green County,
asserting causes of action for breach of contract, breach of the duty of good faith and fair
dealing, promissory estoppel, and violations of the Arkansas Deceptive Trade Practices Act,
codified at Ark. Code Ann. §§ 4-88-101 et seq. The circuit court granted the Dickinsons a
temporary restraining order halting the statutory foreclosure sale of their home.
Thereafter, the Dickinsons filed an amended class-action complaint against Fannie Mae
and SunTrust. Specifically, the complaint claimed that Fannie Mae, as the owner of the
mortgage and the note, was not “authorized to do business” in Arkansas, as required by the
Statutory Foreclosure Act, because it had failed to register to do business in Arkansas. The
amended class-action complaint also pled causes of action against Fannie Mae for violations
of the Arkansas Deceptive Trade Practices Act, unjust enrichment, and slander of title. The
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Dickinsons also reiterated their claims against SunTrust for violations of the Arkansas
Deceptive Trade Practices Act and unjust enrichment.
The respondents removed the case to federal court. Following a decision by the
Eighth Circuit Court of Appeals in JPMorgan Chase Bank N.A. v. Johnson, 719 F.3d 1010 (8th
Cir. 2013), in which the Eighth Circuit held that the “authorized to do business” clause was
satisfied by a federal law authorizing banks to do business in Arkansas, the respondents filed
a motion to dismiss for failure to state a claim. The Dickinsons opposed the motion to dismiss
and filed a cross-motion to certify the issues to this court. The district court granted the
Dickinsons’ motion and certified the above issue. We accepted certification.
The Statutory Foreclosure Act establishes a system of nonjudicial foreclosure
proceedings as an alternative to judicial foreclosures. Because the Act is in derogation of the
common law, its provisions must be strictly construed and complied with. Henson v. Fleet
Mortg. Co., 319 Ark. 419, 892 S.W.2d 250 (1995). The district court has asked for our
interpretation of Arkansas Code Annotated section 18-50-117 (Repl. 2003), which provides,
No person, firm, company, association, fiduciary, or partnership, either
domestic or foreign, shall avail themselves of the procedures under this chapter
unless authorized to do business in this state.
(Emphasis added.) The issue on certification is the meaning of the phrase “authorized to do
business in this state.” The Dickinsons argue that this phrase requires entities wishing to use
the nonjudicial foreclosure procedures to register with and receive a certificate from the
Arkansas Secretary of State. Respondents argue that authorization under federal law is
sufficient.
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The first issue is whether Ark. Code Ann. § 18-50-117 is ambiguous. A statute is
ambiguous if it is open to two or more constructions, or if it is of such obscure or doubtful
meaning that reasonable minds might disagree or be uncertain as to its meaning. Voltage
Vehicles v. Ark. Motor Vehicle Comm’n, 2012 Ark. 386, 424 S.W.3d 281; Yamaha Motor Corp,
U.S.A. v. Richard’s Honda Yamaha, 344 Ark. 44, 38 S.W.3d 356 (2001). In this case, section
18-50-117 clearly contemplates that an entity must be “authorized to do business” in
Arkansas to employ statutory foreclosure proceedings under the Statutory Foreclosure Act.
However, the statutory language fails to provide direction as to what an entity must do to
become “authorized to do business” in the state. As a result, we consider the statute to be
ambiguous. When a statute is ambiguous, this court must interpret it according to legislative
intent, and our review becomes an examination of the whole act. Simpson v. Cavalry SPV I,
LLC, 2014 Ark. 363, 440 S.W.3d 335. In reviewing the Act in its entirety, this court will
reconcile provisions to make them consistent, harmonious, and sensible in an effort to give
effect to every part. Id.
In examining other sections of the Statutory Foreclosure Act to determine legislative
intent for section 18-50-117, we note that section 18-50-102 also employs the phrase
“authorized to do business.” As initially enacted,1 section 18-50-102 (1987) provided,
(a) A trustee of a deed of trust shall be any:
(2) Bank or savings and loan association authorized to do business under the
1
The General Assembly has subsequently amended section 18-50-102 effective July
27, 2011, but no party has argued that the amendment applies to this case. Act of Mar. 31,
2011, No. 901 § 2, 2011 Ark. Acts 3615, 3617.
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laws of Arkansas or those of the United States.
Ark. Code Ann. § 18-50-102(a)(2)(emphasis added). Section 18-50-102(a)(2) allows an entity
to be a trustee under the Statutory Foreclosure Act if the trustee is authorized to do business
under the laws of the United States. The Dickinsons, however, argue that authorization to
do business under the laws of the United States is insufficient for purposes of section 18-50-
117. Thus, if we were to adopt the Dickinsons’ argument, an entity authorized to do business
under the laws of the United States but not registered in Arkansas could be a trustee in a
nonjudicial foreclosure under section 18-50-102 but simultaneously could not avail itself of
the procedures of the Statutory Foreclosure Act according to section 18-50-117. However,
the remaining sections of the Statutory Foreclosure Act contain provisions expressly directed
at the trustee regarding, for example, publication of notice (Ark. Code Ann. § 18-50-105)
and application of the proceeds of sale (Ark. Code Ann. § 18-50-109). To hold that an
entity could be appointed trustee under section 18-50-102 but then prohibited from utilizing
other sections of the statute governing actions of the trustee is an inconsistent and
inharmonious reading of the provisions. Respondents’ position, that section 18-50-117
allows authorization under the laws of the United States, is the most cogent interpretation
because it affords a consistent meaning to the phrase “authorized to do business” in both
sections of the statute.
The Eighth Circuit Court of Appeals has recently examined this issue and agreed that
authorization under federal law is sufficient to comply with section 18-50-117. The Eighth
Circuit compared the language of section 18-50-117 to section 18-50-102:
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Section 18-50-102(a) determines who may serve as a trustee in a non
judicial foreclosure proceeding. As initially enacted, it allowed any “[b]ank or
savings and loan authorized to do business under the laws of Arkansas or those
of the United States” to be a trustee. Ark. Code Ann. § 18-50-102(a)(2) (2003)
(emphasis added). Construing § 18-50-117 to allow only state law to
authorize banks to do business in Arkansas would mean a national bank could
be a trustee in a non judicial foreclosure without prior registration, but
simultaneously could not avail itself of the benefits of the SFA. The
homeowners see no inconsistency here. We believe the homeowners misread
the statute. Section 18-50-117 requires authorization for an entity to avail itself
of “the procedures under this chapter,” not just initiating a non judicial
foreclosure. Because the appointment of a trustee is part of the “procedures”
contained in the SFA, the two provisions are inconsistent. Reading the statute
in the manner JPMorgan suggests—in other words, an entity may initiate a non
judicial foreclosure pursuant to Arkansas law or the laws of the United
States—produces this consistency because the phrase “authorized to do
business” means the same thing in different parts of the statute. It is therefore
a preferable interpretation.
JPMorgan Chase Bank, N.A. v. Johnson, 719 F.3d 1010, 1016 (8th Cir. 2013). The Eighth
Circuit also looked to other related statutes to discern the legislative intent for section 18-50-
117:
Other Arkansas banking statutes lead to a similar conclusion. The Wingo Act
provides a foreign corporation may become authorized to transact business in
Arkansas by obtaining a certificate of authority from the Secretary of State. Ark.
Code Ann. § 4-27-1501(a). Elsewhere, the Branching Act requires an out-of-
state bank to file an application with the Arkansas Bank Commissioner before
it may open a branch in Arkansas. Id. § 23-48-1001(a). These statutes, which
contain express state certification requirements, demonstrate the General
Assembly is capable of articulating a certification requirement when it desires
one. Yet the SFA contains none. Arkansas courts presume the General
Assembly has in mind previous statutes relating to the same subject matter
when it enacts a new statute. See Cousins v. Dennis, 298 Ark. 310, 767 S.W.2d
296, 298 (1989). And when the General Assembly has demonstrated the ability
to include qualifying statutory language in a statute, but chooses not to do so
in a particular statute, Arkansas courts infer the omission was deliberate and
evidences a different legislative intent. See Bush v. State, 338 Ark. 772, 2
S.W.3d 761, 764 (1999) (holding the legislature’s approval of granting a
defendant credit against his sentence in a statute governing post-sentence
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electronic monitoring by the Department of Correction, but omission of that
approval in a separate statute relating to pre-trial electronic monitoring, “is
evidence that the legislature did not intend for credit to be given for electronic
monitoring while a defendant is awaiting trial”); Chatelain v. Kelley, 322 Ark.
517, 910 S.W.2d 215, 219 (1995) (“[T]he General Assembly knows how to
include proper terminology or exclude it in accordance with its intent....”),
overruled on other grounds by Aka v. Jefferson Hosp. Ass’n, 344 Ark. 627, 42
S.W.3d 508 (2001); Hales v. State, 299 Ark. 93, 771 S.W.2d 285, 286 (1989).
Applying these principles to the present matter, we must presume the General
Assembly did not intend to include in § 18-50-117 the exclusive state
registration it has insisted upon in other statutes.
Id. at 1016–17. Decisions of the federal circuit courts are not binding on this court, but we
may choose to follow their rationale if we find it persuasive. Larry Hobbs Farm Equip., Inc. v.
CNH Am., LLC, 375 Ark. 379, 291 S.W.3d 190 (2009). In this case, we find the Eighth
Circuit’s reasoning to be the correct interpretation of the statutory language.
Having established that section 18-50-117 does not require an entity to be licensed
under Arkansas law, the only remaining issue in the certified question is whether Fannie Mae
is authorized to do business in this state. The Dickinsons argue that the Federal National
Mortgage Association Charter Act, 12 U.S.C. §§ 1716 et seq., does not provide Fannie Mae
with enumerated or implied powers to conduct statutory foreclosures. The Dickinsons’
reading is too narrow. The issue is not whether the charter grants Fannie Mae explicit powers
to foreclose but whether it authorizes Fannie Mae to do business in this state, which it
unquestionably does. According to the charter, Fannie Mae has the power to “purchase,
service, sell, or otherwise deal in any mortgages” 12 U.S.C. § 1717. Additionally, the charter
states that Fannie Mae is authorized to “conduct its business without regard to any
qualification or similar statute in any State.” 12 U.S.C. § 1723(a). The charter clearly
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contemplates that Fannie Mae will engage in the business of dealing in mortgages in any state.
Such authorization is sufficient to satisfy the requirements of section 18-50-117. Thus, Fannie
Mae satisfies the Statutory Foreclosure Act’s authorized-to-do-business requirement contained
in section 18-50-117.
Certified question answered.
HART, J., dissents.
JOSEPHINE LINKER HART, Justice, dissenting. Holding that 12 U.S.C. § 1716 et
seq., the federal legislation that created the Federal National Mortgage Association, satisfies
the authorized-to-do-business requirement embodied in Arkansas Code Annotated section
18-50-117, requires a fundamental misunderstanding of our system of federalism and does not
comport with the rules of statutory construction.
As the Supreme Court noted, dual sovereignty is a defining feature of our nation’s
constitutional blueprint, and upon ratification of the Constitution, the States entered the
Union “with their sovereignty intact.” Sossamon v. Texas, ___ U.S. ___, 131 S. Ct. 1651,
1657 (2011) (quoting Federal Maritime Comm’n v. S. Carolina State Ports Authority, 535 U.S.
743, 751 (2002)). Absent federal preemption, as provided for by the Supremacy Clause of
Article 6 of the United States Constitution, the sovereign state of Arkansas has the authority
to regulate business within its borders. I am mindful that federal preemption can occur in
three ways: “(1) express preemption, where Congress defines explicitly the extent to which
its enactments preempt state law; (2) field preemption, where Congress’s regulation of a field
is so pervasive or the federal interest is so dominant that an intent to occupy the entire field
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can be inferred; and (3) conflict preemption, where state law stands as an obstacle to the
accomplishment of the full purposes and objectives of a federal statute.” GSS, LLC v.
CenterPoint Energy Gas Transmission Co., 2014 Ark. 144, at 11, 432 S.W.3d 583, 590. Despite
the majority’s citation to convenient language from a section of the U.S. Code1 that is
otherwise unrelated to the issue of express preemption, in my view, there is nothing in the
legislation that created the Federal National Mortgage Association to indicate that Congress
1
The full section reads as follows:
§ 1723a. General powers of Government National Mortgage Association and Federal
National Mortgage Association
(a) Seal, and other matters incident to operation
Each of the bodies corporate named in section 1717(a)(2) of this title shall have power to
adopt, alter, and use a corporate seal, which shall be judicially noticed; to enter into and
perform contracts, leases, cooperative agreements, or other transactions, on such terms as it
may deem appropriate, with any agency or instrumentality of the United States, or with any
State, Territory, or possession, or the Commonwealth of Puerto Rico, or with any political
subdivision thereof, or with any person, firm, association, or corporation; to execute, in
accordance with its bylaws, all instruments necessary or appropriate in the exercise of any of
its powers; in its corporate name, to sue and to be sued, and to complain and to defend, in
any court of competent jurisdiction, State or Federal, but no attachment, injunction, or other
similar process, mesne or final, shall be issued against the property of the Association or
against the Association with respect to its property; to conduct its business without regard
to any qualification or similar statute in any State of the United States, including the District
of Columbia, the Commonwealth of Puerto Rico, and the Territories and possessions of the
United States; to lease, purchase, or acquire any property, real, personal, or mixed, or any
interest therein, to hold, rent, maintain, modernize, renovate, improve, use, and operate such
property, and to sell, for cash or credit, lease, or otherwise dispose of the same, at such time
and in such manner as and to the extent that it may deem necessary or appropriate; to
prescribe, repeal, and amend or modify, rules, regulations, or requirements governing the
manner in which its general business may be conducted; to accept gifts or donations of
services, or of property, real, personal, or mixed, tangible, or intangible, in aid of any of its
purposes; and to do all things as are necessary or incidental to the proper management of its
affairs and the proper conduct of its business.
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intended to override Arkansas banking law.
In my view, the lack of federal preemption does not mean that the Federal National
Mortgage Association cannot do business in Arkansas. It merely means that it is subject to
some state regulation—the requirement that it obtain a certificate of authorization from the
secretary of state.
I am likewise mindful of the federal court decision in JPMorgan Chase Bank, N.A. v.
Johnson, 719 F.3d 1010 (8th Cir. 2013), which found that being “authorized by Congress to
carry on business of banking throughout the United States” allowed the bank to utilize
Arkansas’s statutory foreclosure procedure. However, I do not find it persuasive. JPMorgan
stipulated that it was not authorized to do business in accordance with section 18-50-117, but
the federal court found that the National Bank Act satisfied the authorized-to-do-business
requirement. I contend that a fairer interpretation of a national bank’s authority to do
business throughout the United States means only that such an institution does not need an
Arkansas charter to conduct banking business. That interpretation is consistent with Arkansas
banking law.2 This analysis should apply to the Federal National Mortgage Association
2
Arkansas Code Annotated section 23-45-102 embraces this interpretation:
(5)(A) “Bank” means a state bank or a national bank or an out-of-state state-chartered
bank that has received a certificate of authority under § 23-48-1001.
Requiring a certificate of authority is not a particularly onerous requirement.
Arkansas Code Annotated section 23-48-1001 states:
(a) An out-of-state bank that desires to operate a branch location in the State of Arkansas,
whether initial entry into the state is by an interstate merger transaction or establishment of
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because it is simply a federally chartered, but otherwise independent financial corporation.
Given that Arkansas has retained its sovereignty in this area, the only entity that can
“authorize” an entity to do business in this state, is the State of Arkansas itself. Accordingly,
the phrase is not ambiguous in that the alternative interpretation exists not because the words
of the statute are unclear.
The purpose of the rules of statutory construction is to give effect to the intent of the
legislature. State v. Colvin, 2013 Ark. 203, 427 S.W.3d 635. While the so-called “first rule
a full-service branch, shall apply for a certificate of authority to transact banking business in
this state. An applicant shall deliver an application to the Bank Commissioner for filing by
the consummation of an interstate merger transaction or before establishment of a full-service
branch. The application shall state:
(1) The name of the bank;
(2) The name of the state or country under whose law it is chartered;
(3) Its date of formation and period of duration;
(4) The street address of its principal office;
(5) The address of its registered office in this state and the name of its registered agent at that
office; and
(6) The number and par value, if any, of shares of the bank’s capital stock owned or to be
owned by residents of this state.
(b) The bank shall deliver with the completed application a certificate of existence, or a
document of similar import, duly authenticated by the bank supervisory agency which
chartered the bank or other official having custody of the corporate records of banking
institutions in the state or country under whose law it is chartered.
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of statutory construction” is to construe a statute just as it reads, giving the words their
ordinary and usually accepted meaning, Smith v. Simes, 2013 Ark. 477, 430 S.W.3d 690,
interpretation of a statute should not be done in a vacuum. In construing any statute, we
must place it beside other statutes relevant to the subject matter in question and ascribe
meaning and effect to be derived from the whole. Colvin, supra. Statutes relating to the same
subject must be construed together and in harmony, if possible. Id. In my view, section 18-
50-117 requires, at a minimum, an Arkansas certificate of authority before an entity can
undertake statutory foreclosure of property in Arkansas.
I respectfully dissent.
Emerson Poynter LLP, by Scott E. Poynter and Corey D. McGaha; The Cruz Law Firm,
by: Kathy A. Cruz; Arnold, Batson, Turner & Turner, by: Todd M. Turner; Joel Hargis; and
Annabelle Lee Patterson, PLC, by: Annabelle Lee Patterson, for petitioners.
Wright, Lindsey & Jennings LLP, by: Judy Simmons Henry; and Winston & Strawn LLP,
by: Linda T. Coberly, for respondents.
Kutak Rock LLP, by: David L. Williams; and Bracewell & Giuliani LLP, by: Daniel S.
Connolly, Rachel B. Goldman, and David J. Ball, for amicus curiae JPMorgan Chase Bank, N.A.
King & Spalding LLP, by: Michael J. Ciatti, Karen Schoen and Merritt E. McAlister; and
Quattlebaum, Grooms, Tull & Burrow PLLC, by: E. B. Chiles IV, for amicus curiae Federal
Home Loan Mortgage Corporation.
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