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Neel v. Mae

United States District Court, S.D. Mississippi, Southern Division

March 6, 2014

CHARLES NEEL and BONNIE NEEL Plaintiffs,
v.
FANNIE MAE; RESIDENTIAL, CREDITSOLUTIONS, INC.; SAXON MORTGAGE SERVICES, INC.; CAPITAL LENDING, LLC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; and JOHN DOES 1-10 Defendants,

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT FANNIE MAE'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.'S AMENDED MOTION FOR SUMMARY JUDGMENT

HALIL SULEYMAN OZERDEN, District Judge.

BEFORE THE COURT is Defendant Fannie Mae's Motion for Summary Judgment [156], Plaintiffs Charles and Bonnie Neel's Response in Opposition [179], and Fannie Mae's Rebuttal [200]. Also before the Court is Mortgage Electronic Registration Systems, Inc.'s ("MERS") Amended Motion for Summary Judgment [164], Plaintiffs' Response in Opposition [176], and MERS' Rebuttal [192]. Having considered the parties' briefs, the record, and relevant legal authorities, the Court is of the opinion that Fannie Mae's Motion for Summary Judgment should be granted, that MERS' Amended Motion for Summary Judgment should be granted, and that Plaintiffs' claims against Fannie Mae and MERS should be dismissed with prejudice.

I. BACKGROUND

A. Factual Background

This civil action arises from the servicing of a note executed by Plaintiffs on February 23, 2007 ("the Note"). The record establishes beyond dispute the following facts. Payment of the Note was secured by a Deed of Trust related to Plaintiffs' home located at 7012 Red Bud Lane, Ocean Springs, Mississippi.[1] Dep. of Charles and Bonnie Neel ("Neel Dep.") 7:3-9, 33:4-9 [158-5]; Deed of Trust [156-2]. Capital Lending, LLC, was listed as the lender on the Note, and AmTrust was the initial servicer. Note [156-1], Neel Dep. 42:4-11 [158-5]. Pursuant to the terms of the Deed of Trust, MERS was listed as the beneficiary of record, as nominee for Capital Lending, LLC, its successors, and assigns, of the Deed of Trust that secured payment of the Note. Deed of Trust 3 [156-2]. The terms of both the Note and Deed of Trust permitted transfer of both instruments by the lender. Note ¶1, Deed of Trust ¶20.

The Loan was transferred to Fannie Mae in March 2010. Dep. of Keith Frantz ("Frantz Dep.") 10:14-11:14. Fannie Mae retained Defendant Saxon Mortgage Services, Inc., to act as servicer for Plaintiffs' Loan. Neel Dep. 42:4-11, 43:15-20; Frantz Dep. 19:16-22. Fannie Mae considers Saxon to be an independent contractor. Frantz Dep. 19:16-22; Ex. K to Fannie Mae's Mot. for Summ. J. [156-11]. Fannie Mae promulgated a set of servicing guidelines "intended to set forth the broad parameters under which [Saxon's employees] should exercise their sound professional judgment as mortgage loan servicers...." Ex. K to Fannie Mae's Mot. for Summ. J. [156-11]. The servicing guidelines do not "set forth absolute requirements" because servicers such as Saxon are expected "to maintain the discretion to apply appropriate judgment in dealing with borrowers and mortgage loans on a case-by-case basis...." Id.

On July 7, 2010, Plaintiffs applied to Saxon for a modification on their Loan. Making Home Affordable Program Request for Modification and Affidavit [156-6]. On August 13, 2010, Saxon informed Plaintiffs that they were approved for a trial modification period. Ex. G to Fannie Mae's Mot. for Summ. J. [156-7]. Plaintiffs were later approved for a permanent modification on January 5, 2011. Ex. H to Fannie Mae's Mot. for Summ. J. [156-8]. Plaintiffs did not agree with the terms of the permanent modification and rejected it in correspondence dated January 30, 2011. Neel Dep. 93:3-94:9, Ex. I to Fannie Mae's Mot. for Summ. J. [156-9]. Thereafter, Plaintiffs and Saxon engaged in a back-and-forth dispute over the terms of the Loan and the status of an escrow account which had been added to the Loan. Neel Dep. 110:14-111:22, 112:8-21, 112:22-113:5, 115:9-21, 116:6-19, 118:8-22, and 127:19-23.

In June 2011, Plaintiffs ceased making payments on the Loan and admit that they have not made a payment since that date. Id. at 133:10-13. On November 9, 2011, MERS assigned its interest in the Deed of Trust to Saxon pursuant to an Assignment and Transfer of Lien [164-1] ("the Assignment"). The Assignment was recorded in the probate records of Jackson County, Mississippi, on January 3, 2012. Ex. "C" to Aff. of Brian Blake [164-1].

B. Procedural Background

Plaintiffs filed suit against Fannie Mae, Saxon, MERS, and two additional Defendants on September 12, 2012, in the Circuit Court of Jackson County, Mississippi. Complaint [1-2]. The case was removed to this Court on October 12, 2012, on the basis of diversity jurisdiction. Notice of Removal 1 [1]. Plaintiffs filed an Amended Complaint [38] on March 26, 2013, and a Second Amended Complaint [63] on May 16, 2013. The Second Amended Complaint is not clear, but appears to assert claims for breach of contract, negligence, breach of the duty of good faith and fair dealing, breach of fiduciary duties, modification of Plaintiffs' Loan, a surrender of the mortgage, retraction of all negative credit reporting, conspiracy, fraudulent conveyance, violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. ("RESPA"), and violation of the Fair Debt Collection Practices Act, 15 U.S.C § 1692 ("FDCPA"). Second Am. Compl. 1-11.

Construing the pleadings in Plaintiffs' favor, they appear to advance claims against Fannie Mae for negligence, conspiracy, respondeat superior, "non-delegable duty, " failure to register Plaintiffs' mortgage with the Securities and Exchange Commission ("SEC"), and that Fannie Mae's receipt of the Note was pursuant to an invalid transfer. Id. at ¶¶ 26, 31. With respect to MERS, Plaintiffs appear to assert a claim for fraudulent conveyance. Id. at ¶ 27.

On November 22, 2013, Fannie Mae moved for summary judgment. Fannie Mae's Mot. for Summ. J. 2-3 [156]. Fannie Mae argues that, contrary to Plaintiffs' allegations, Plaintiffs' Loan is not a mortgage-backed security requiring registration with the SEC. Fannie Mae's Mem. Br. in Supp. of Mot. for Summ. J. 5 [157]. Fannie Mae further contends that Plaintiffs have failed to establish that the transfers of their mortgage were fraudulent. Id. at 5-6. With respect to Plaintiffs' claims stemming from the servicing of their Loan, Fannie Mae asserts it is entitled to judgment as a matter of law because Fannie Mae did not perform the servicing of Plaintiffs' Loan and retained an independent contractor to service the Loan. Id. at 6-7. Fannie Mae also reasons that Plaintiffs' claims pursuant to RESPA and the FDCPA fail as a matter of law because RESPA does not apply to Fannie Mae under the circumstances of this case, and Fannie Mae is not a "debt collector" under the FDCPA. Id. at 7-8. Lastly, Fannie Mae seeks summary judgment as to any fraud claim purportedly asserted by Plaintiffs on the basis that Plaintiffs have failed to plead or establish specific facts supporting such a claim. Id. at 8.

On November 25, 2013, MERS also moved for summary judgment. MERS' Am. Mot. for Summ. J. 1-2 [164]. MERS contends it is entitled to summary judgment because MERS was not involved in the servicing of the Loan, it cannot provide the relief Plaintiffs seek, the Assignment was properly executed and supported by consideration, and Plaintiffs lack standing to challenge the Assignment. Id. at 1-5. Plaintiffs dispute that MERS is entitled to summary judgment on the basis that the Assignment purports to assign an interest in the Note in addition to MERS' interest in the Deed of Trust. Pls.' Mem. in Supp. of Resp. in Opp'n to MERS Mot. for Summ. J. 1-2 [177]. As a result, the Assignment is void as a matter of law. Id. at 3. Plaintiffs further contend summary judgment in favor of MERS is inappropriate because the Assignment was not supported by consideration. Id. at 3-8.

II. DISCUSSION

A. Standard of Review

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). To rebut a properly supported motion for summary judgment, the opposing party must show, with "significant probative evidence, " that there exists a genuine issue of material fact. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000). "If the evidence is merely colorable, or is not significantly probative, ' summary judgment is appropriate." Cutting Underwater Technologies USA, Inc. v. Eni U.S. Operating Co., 671 F.3d 512, 517 (5th Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In considering a motion for summary judgment, the Court "may not make credibility determinations or weigh the evidence" and "must resolve all ambiguities and draw all permissible inferences in favor of the non-moving party." Total E&P USA Inc. v. Kerr-McGee Oil and Gas Corp., 719 F.3d 424, 434 (5th Cir. 2013) (citations omitted).

"There is no material fact issue unless the evidence is such that a reasonable jury could return a verdict for the nonmoving party." RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 858 (5th Cir. 2010). "A fact is material' if its resolution in favor of one party might affect the outcome of the lawsuit under governing law[, and] [a]n issue is genuine' if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party." Hamilton, 232 F.3d at 477 (citing Anderson, 477 U.S. at 248). "[M]ere conclusory allegations are not competent summary judgment evidence, and such allegations are insufficient, therefore, to defeat a motion for summary judgment." Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). "The court has no duty to search the record for material fact issues." RSR Corp., 612 F.3d at 858. "Rather, the party opposing summary judgment is required to identify specific evidence in the record and to articulate precisely how this evidence supports his claim." Id.

B. Fannie Mae's Motion for Summary Judgment

1. Plaintiffs' Negligence Claim Against Fannie Mae

Fannie Mae has moved for summary judgment as to Plaintiffs' claims related to servicing on the basis that Fannie Mae took no part in servicing Plaintiffs' Loan, and Plaintiffs' claims were made pursuant to Fannie Mae's servicing guidelines such that they fail as a matter of law. Mem. Br. in Supp. of Mot. for Summ. J. 6 [157]. Plaintiffs respond that Fannie Mae's guidelines are "ineffective" because the guidelines do not specifically address the precise situation presented in this case. Mem. in Supp. of Pls.' Resp. in Opp'n to Fannie Mae's Mot. for Summ. J. 6 [179]. Without citing any legal ...


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