Cynthia Lynn v. US Bank National Association

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-11015
Non-Argument Calendar
________________________
D.C. Docket No. 6:11-cv-00019-JRH-GRS
CYNTHIA LYNN, Individually, and in
her capacity as executrix of the estate of
Mrs. Lois Findley Lynn
Plaintiff - Appellant,
versus
US BANK NATIONAL ASSOCIATION,
As Custodian/Trustee, assignee of Lend Lease
Agri-Business, Inc.
Defendant - Appellee.
__________________________
Appeal from the United States District Court
for the Southern District of Georgia
_________________________
(October 2, 2013)
Before MARCUS, JORDAN, and KRAVITCH, Circuit Judges.
PER CURIAM:
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Cynthia Lynn, on behalf of herself and in her capacity as the executrix of her
mother's estate, brought suit against US Bank National Association (US Bank), the
Federal Agricultural Mortgage Corporation (Farmer Mac), and others for certain
alleged deficiencies in a foreclosure sale of a tract of agricultural land in Tatnall
County, Georgia. The district court dismissed Ms. Lynn's complaint under Rule
12(b)(6) and she timely appealed. We affirm. The allegations in the complaint,
taken as true, fail to state a claim upon which relief may be granted.
I.
Ms. Lynn's mother, Lois Lynn, owned a tract of agricultural land that served
as collateral for a promissory note. Additionally, Ms. Lynn encumbered her own
property to help secure her mother's loan. In failing health, Lois Lynn declared
bankruptcy in 2008 and, pursuant to her approved bankruptcy plan, was required to
make annual payments toward satisfying the note. In 2010, Lois Lynn missed her
annual payment, and was informed of the default in May of 2010. A month later,
in June of 2010, the bankruptcy stay was lifted at the request of the secured
creditor. At roughly the same time, Lois Lynn passed away.
Ms. Lynn was appointed temporary administratrix of her mother's estate on
September 28, 2010. A foreclosure sale of the entire tract that served as collateral
was advertised for, and conducted on November 2, 2010. The property was sold to
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Wallace Jarriel for $663,000, or $974.89 per acre (roughly a third of its fair market
value). Weeks later, Mr. Jarriel conveyed a large portion of the property to Alan
Sikes for $311,700, or $975 per acre.
Ms. Lynn does not claim any defect with respect to the notice for the
foreclosure sale provided by US Bank, the bank processing the foreclosure.
Instead, she alleged that US Bank breached its duty of good faith at the foreclosure
sale. According to Ms. Lynn, the sale price was grossly inadequate, and certain
circumstances concomitant with the sale contributed to that inadequate price.
Ms. Lynn also alleged that US Bank was not even legally entitled to
conduct the foreclosure sale. The Note was issued by Lend Lease Agri-Business
("Lend Lease"), who then sold the Note to Farmer Mac. Ms. Lynn cited to a
Custodial Agreement between US Bank and Farmer Mac whereby the former
accepted certain custodial/maintenance duties for the documentation of Farmer
Mac's loans, including Lois Lynn's Note. See Custodial Agreement, D.E. 5-3.
Pursuant to that agreement, Lend Lease assigned Lois Lynn's Note and Security
Deed to US Bank, specifically indicating US Bank's role "as Custodian/Trustee."
Assignment of Security Deed, D.E. 5-2 at 22-28. Although the Custodial
Agreement does not explicitly grant US Bank the power of conducting a sale under
any of the instruments in its custody, the assignment of the Security Deed to US
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Bank does not contain any language otherwise limiting its authority or powers
under the deed.
II.
On appeal, we exercise plenary review of a district court's order dismissing a
complaint under Rule 12(b)(6). See Lopez v. First Union Nat'l Bank of Fla., 129
F.3d 1186, 1189 (11th Cir. 1997). All facts set forth in the complaint "are to be
accepted as true and the court limits its consideration to the pleadings and exhibits
attached thereto." GSW, Inc. v. Long Cnty., 999 F.2d 1508, 1510 (11th Cir. 1993).
"Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). The factual allegations must state a claim that is not just conceivable, but
plausible on its face. Id. at 680.
III.
On appeal, Ms. Lynn argues that the district court should have concluded
that US Bank was not legally authorized to conduct the foreclosure sale. Ms. Lynn
believes that the powers delegated to US Bank under the Security Deed were
limited by the terms of the Custodial Agreement. The Custodial Agreement, says
Ms. Lynn, did not grant US Bank the right to execute a foreclosure sale on
collateral for any loans under its custodial possession. Because the assignment of
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the Security Deed to US Bank makes explicit reference of US Bank as a
"Custodian/Trustee," Ms. Lynn argues that the limitations defined by the Custodial
Agreement must be read into the Security Deed. The district court disagreed,
construing the terms of "the Security Deed [as] . . . not forbid[ding] an assignee
designated as 'Custodian/Trustee' from exercising the power of sale." D.E. 53 at
15.
As Ms. Lynn points out, see Appellant's Brief at 10, the Custodial
Agreement states that US Bank "shall not have duties or obligations other than
those specifically set forth" in the agreement. D.E. 5-3 at 33. But this provision
merely limits the affirmative duties and obligations US Bank owes to Farmer Mac;
it does not limit US Bank's ability to otherwise act. Specifically, the agreement
provides that US Bank "agrees to cooperate with Farmer Mac and the Central
Servicer to enable Central Servicer to perform its duties under the Servicing
Agreement. Without limiting the foregoing, [US Bank] agrees to execute such
instruments, agreements or such other documents as may be reasonably
requested in writing by Farmer Mac or Central Servicer in connection with the
assignment or recordation of documents relating to any Mortgage Loans subject to
this Agreement." D.E. 5-3 at 34 (emphasis added).
Ms. Lynn has never averred that US Bank's actions were conducted in
contravention of the wishes of Farmer Mac or Lend Lease, the "Central Servicer"
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of her mother's promissory note. Because the terms of the Custodial Agreement
do not prohibit US Bank from exercising the power of sale (and, in fact, require
such action if so desired by Farmer Mac), we need not opine on whether the
unambiguous provisions of a properly executed and filed Security Deed ought to
be subject to the terms of such an extrinsic agreement. Even if such terms could
constrain the rights under a security deed, they would not do so in this case.
Therefore, we find no error in the district court's refusal to limit US Bank's rights
under the Security Deed.
Ms. Lynn's related argument, that the district court improperly construed
O.C.G.A. § 23-2-114 to not require the terms of an extrinsic agreement to curtail
the rights granted in a Security Deed, is not persuasive. The statute in question
provides that "[u]nless the instrument creating the power specifically provides to
the contrary . . . an assignee thereof . . . may exercise any power therein
contained." O.C.G.A. § 23-2-114. The district court referenced the statute when it
found that "the Security Deed . . . does not forbid an assignee designated as
'Custodian/Trustee' from exercising the power of sale. . . . And per the plain
language of O.C.G.A. § 23-2-114, a transfer absent such restriction conveys the
power of sale." D.E. 53 at 15. Because an assignment of all rights to the Security
Deed was permitted under the Custodial Agreement, and Ms. Lynn did not suggest
that such complete assignment was not anticipated, contemplated, or desired by
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Farmer Mac or Lend Lease, Ms. Lynn has failed to show that US Bank was not
assigned full rights under the Security Deed. Therefore, Ms. Lynn's alternative
construction of § 23-2-114, even if valid, would be unavailing.
IV.
Ms. Lynn also asserts that US Bank breached its duty to conduct the
foreclosure sale in good faith. A plaintiff asserting a claim for wrongful
foreclosure in Georgia must "establish a legal duty owed to it by the foreclosing
party, a breach of that duty, a causal connection between the breach of that duty
and the injury it sustained, and damages." Heritage Creek Dev. Corp. v. Colonial
Bank, 601 S.E.2d 842, 844 (Ga. Ct. App. 2004). The duty of the foreclosing party
is limited "to advertise and sell the property according to the terms of the
instrument, and that the sale be conducted in good faith." Giordano v. Stubbs, 184
S.E.2d 165, 168 (Ga. 1971). A breach of this duty to conduct the sale in good faith
may arise where "the price realized is grossly inadequate and the sale is
accompanied by either fraud, mistake, misapprehension, surprise or other
circumstances which might authorize a finding that such circumstances contributed
to bringing about the inadequacy of price." Id. at 168-169.
A.
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First, Ms. Lynn contends that the foreclosure sale was sullied by collusive
activity between Messrs. Jarriel and Sikes, which led to a grossly inadequate sale
price. Ms. Lynn contends that the actual foreclosure sale price, roughly $975 per
acre, less than one-third of the then fair market value for the property, was grossly
inadequate. The district court, however, noted that while a sale price of less than
20% of fair market value may generally be considered inadequate under Georgia
law, see Brown v. Freedman, 474 S.E.2d 73, 76 (Ga. Ct. App. 1996), "prices
garnering 25% or more of fair market value are adequate." D.E. 53 at 21. The
district court relied on non-binding, non-Georgia case law to buttress this latter
position, a determination questioned by Ms. Lynn in her brief. But even if we
agreed with Ms. Lynn on this point, her complaint would still lack sufficient basis
to support the second prong of the breach of duty claim, i.e., that the sale was
accompanied by certain circumstances influencing the supposedly inadequate sale
price.
Ms. Lynn alleged that US Bank's liability arose from "selling the Property to
a buyer who was colluding with another prospective buyer to artificially lower the
Foreclosure sales price." First Amended Complaint, D.E. 25 at ¶ 75. We agree
with the district court that "even if true, allegations that Jarriel and Sikes colluded
to reduce the sales price cannot support a claim for breach against US Bank.
Plaintiff has not alleged that US Bank joined in any collusive conduct, nor has she
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cited any law to support the idea that a foreclosing party's duty of good faith is so
broad as to require avoidance of secret buyer machinations." D.E. 53 at 19.
Ms. Lynn cites to Brown, 474 S.E.2d at 76, to support her curious assertion
that US Bank's liability encompasses any putative collusion affecting the sale
price, regardless of US Bank's involvement in or knowledge of such collusion. See
Appellant's Brief at 29. We do not think, however, that Brown postulates such
unbounded liability. See 474 S.E.2d at 76.
Brown involved the purchase of a decedent-debtor's foreclosed property by
the secured creditor. The Georgia Court of Appeals found the fact that the creditor
later sold the house for five times the foreclosure sale price, and that the creditor
withheld material information from the debtor's heir, who had hoped to repay the
outstanding debt, could be construed by a jury as an unfair exercise of the power of
sale. Id. The untoward circumstances influencing the foreclosure sale price in
Brown were directly committed by a creditor-seller who also happened to be the
buyer. Id. Brown, in our view, endorses the district court's conclusion that there
must be some connection between the seller's conduct and the grossly inadequate
sale price to establish liability for a breach of the duty to conduct the sale in good
faith. See D.E. 53 at 19. See also Heritage Creek, 601 S.E.2d at 845 (plaintiff "did
not produce even a scintilla of evidence which shows any wrongdoing by the bank,
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or that any act or omission by the bank caused [plaintiff] to lose its equity in the
eight lots which were sold in foreclosure").
Additionally, Ms. Lynn contends that allegations in her complaint raise
concerns of possible collusive activity that should be imputed to US Bank. See
Appellant's Brief at 28. This is because the same attorney who represented US
Bank during the foreclosure process – Lester Castellow – later represented Messrs.
Jarriel and Sikes, the putatively colluding buyers, as they sought to evict Ms. Lynn
from the foreclosed property. See D.E. 25 at ¶¶ 36 and 44. Yet Ms. Lynn did not
allege that Mr. Castellow knew of any such collusion or that he worked in concert
with Messrs. Jarriel and Sikes during the foreclosure process, let alone directed US
Bank to act pursuant to such a conspiracy. As noted earlier, in order to properly
state a claim, a complaint must provide "factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct
alleged." Iqbal, 556 U.S. at 678. The allegation that Mr. Castellow colluded with
Messrs. Jarriel and Sikes, and that such collusion was endorsed or directed by US
Bank, is simply not conceivable on the face of the complaint.
B.
Second, Ms. Lynn says she alleged that a flawed chain of title to the
property discouraged potential bidders, resulting in a grossly inadequate sale price.
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Ms. Lynn points to US Bank's designation as "Custodian/Trustee" on the Security
Deed as a possible source of doubt for potential buyers whether US Bank had
legitimate authority to conduct the foreclosure sale. We disagree, and find
unpersuasive Ms. Lynn's reliance on a non-binding practitioner's guide. See
Appellant's Brief at 26 (citing to "Revised Title Standards," Real Property Law
Section, State Bar of Georgia, June 3, 2010). Ms. Lynn cites no binding authority
to support her contention that an assignment of a Security Deed is defective simply
because the grantee is designated a "Custodian/Trustee." It is therefore implausible
that such a designation, alone or in concert with any other facts averred in the
complaint, could depress the sale price.
Moreover, we disagree with Ms. Lynn that certain inconsistent terms listed
on the cover sheet to the assignment of the Security Deed rendered the chain of
title flawed. That cover sheet plainly states that "this cover page is for recording
purposes only and does not modify or amend the terms of the attached instrument."
Cover Pager to October 15, 2003 Assignment, D.E. 5-2 at 26.
C.
Third, Ms. Lynn argues that by offering the property for sale as a single
parcel, rather than splitting the property into smaller, more affordable tracts, US
Bank discouraged potential purchasers who were unable to afford the more costly
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single parcel. US Bank's composition of the sale, according to Ms. Lynn, directly
resulted in the grossly inadequate price. She admits, however, "that the Security
Deed permitted a foreclosure sale of the six non-contiguous tracts comprising the
Property as one parcel." Appellant's Brief at 30. See also Security Deed, D.E. 1-5
at 17. ("Lender may sell the Property, or any part thereof or any interest therein,
separately, at Lender's discretion"). We agree with the district court that the
decision to sell the property as a single parcel, a decision permitted by both the
Security Deed and Georgia law, cannot serve as a valid allegation that US Bank
breached its duty. See Marett Properties, L.P. v. Centerbank Mortg. Co., 419
S.E.2d 113, 115 (Ga. Ct. App. 1992) ("Since there was no requirement in the
security deed in the case presently before us that the property be sold as individual
lots, a bulk sale was permissible."); Classic Enter., Inc. v. Continental Mortg.
Investors, 217 S.E.2d 411, 412 (Ga. Ct. App. 1975) ("There was no requirement
that the appellee sell the property in individual tracts where there was no stated
obligation to that effect in the security deed itself.").
V.
To withstand a motion to dismiss, the facts alleged in a complaint must state
a claim plausible on its face. "Where a complaint pleads facts that are merely
consistent with a defendant's liability, it stops short of the line between possibility
and plausibility of entitlement to relief." Iqbal, 556 U.S. at 679 (internal quotation
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marks omitted). Because Ms. Lynn's allegations fail to state any plausible claim,
we affirm the district court's grant of the motion to dismiss.
AFFIRMED.
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