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Smith v. HSBC Bank USA, N.A.

United States District Court, N.D. Mississippi, Oxford Division

August 18, 2017

BERNAL SMITH PLAINTIFF
v.
HSBC BANK USA, N.A., AS TRUSTEE FOR THE STRUCTURED RATE MORTGAGE LOAN TRUST PASS THROUGH CERTIFICATES 2005-21 DEFENDANTS

          MEMORANDUM OPINION AND ORDER

         Presently before the Court is defendant HSBC USA, N.A., as Trustee for the Structured Rate Mortgage Loan Trust Pass Through Certificates 2005-21's ("HSBC") Motion for Summary Judgment [44]. In the alternative of summary judgement, the Defendants move the court to limit the Plaintiffs damages to the statutory damages provided in 15 USC § 1640(a)(2)(A). Plaintiff Bernal Smith ("Smith") responded in opposition to the motion, and HSBC filed a reply. Having reviewed these submissions, along with relevant authorities and evidence, the Court is now prepared to rule.

         I. FACTUAL BACKGROUND

         On July 22, 2005, Bernal E. Smith and Twanda Peete-Smith executed a Deed of Trust in favor of Mortgage Electronic Registration Systems, Inc., as nominee for SouthStar Funding, LLC. Following several assignments, HSBC was assigned the Deed of Trust on January 12, 2015.

         On April 20, 2015, Smith filed a complaint in the Chancery Court of DeSoto County alleging, among other causes of action, HSBC's violation of 15 USC § 1641(g), a statutory requirement that an assignee give notice to the borrower when it acquires a deed of trust. On July 18, 2016, HSBC removed to this Court. On December 28, 2016, Smith filed his Amended Complaint alleging HSBC's violation of only § 1641(g) and its accompanying regulation 12 CFR § 226.39. Smith requests actual damages, statutory damages, and attorney fees pursuant to 15 USC § 1640(a)(1)-(a)(3). On June 2, 2017, HSBC filed the present motion, arguing that the filing of Smith's complaint exceeded the one year statute of limitations found in § 1640(e). In the alternative, HSBC argues that Smith has failed to adequately plead or support a claim for actual damages, and his recovery should be limited to statutory damages permitted in § 1640(a)(2)(A). Smith filed a response to the motion, and HSBC filed a reply. Upon due consideration of the parties' arguments, along with relevant authorities, and for the reasons set forth hereinafter, the Court finds that the primary motion is not well-taken and should be denied. Further, the Court finds that the alternative motion is well-taken and should be granted with modification.

         II. RULE 56 STANDARD

         Summary judgment is proper "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). A genuine dispute of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At the summary judgment stage, the court must "draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., 530 U.S. 133. 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). Once the moving party shows there is no genuine dispute as to any material fact, the nonmoving party "must come forward with specific facts showing a genuine factual issue for trial." Harris ex rel. Harris v. Pontotoc Cty. Sch. Dist., 635 F.3d 685, 690 (5th Cir. 2011). "[A] party cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or 'only a scintilla of evidence.'" Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)). However, "[s]ummary judgment is [] improper where the court merely believes it unlikely that the non-moving party will prevail at trial." U.S v. Miss. Dep't of Pub. Safety, 309 F.Supp.2d 837, 840 (S.D.Miss. 2004) (citing Nat'l Screen Serv. Corp. v. Poster Exch., Inc., 305 F.2d 647, 651 (5th Cir. 1962)).

         III. DISCUSSION

         A. Smith's claim is not barred by the statute of limitations

         HSBC asserts a default letter sent on August 1, 2013, describing Smith's creditor as "SARM 2005-21" placed Smith on notice that his Deed of Trust had been assigned to SARM 2005-21. HSBC asserts that this default letter is proof that an assignment to SARM 2005-21 occurred more than one year ago, and therefore, Smith's claim is barred by the one year statute of limitations set forth in § 1640(e). However, the Corporate Assignment of Deed of Trust recorded in the DeSoto County Chancery Court states "Date of Assignment: January 12th, 2015." [44-4, page 2].

         HSBC attempts to reconcile these conflicting dates by explaining "transfers of mortgages do not always appear on the record when they occur if a deed of trust is held by a nominee or agent . . ." indicating that the assignment actually occurred prior to August 1, 2013, but wasn't recorded until January 12, 2015. [45, page 3]. HSBC also cites Miss. Code Ann. § 89-5-37 as evidence that the assignment may not be entered on the record when it actually occurred. Section 89-5-37 provides an exemption to deed of trust disclosures where the beneficiary of the deed of trust is represented by a trustee, such as HSBC. However, this exemption applies to the duty to disclose to the clerk of the chancery court a new beneficiary to a deed of trust. Title 15 § 1641(g) is dependent not upon a state-mandated duty to disclose but upon the mere occurrence of an assignment.

         Further, HSBC is not exempt from disclosure because HSBC is not "disclosed as beneficiary in the mortgage or deed of trust." Miss. Code Ann. § 89-5-37; see Burton v. Nationstar Mortg., L.L.C., 642 F.App'x 422, 425 (5th Cir. 2016) (holding Mortgage Electronic Registration Systems, Inc. (MERS Corp.) can assign a deed of trust to other MERS members and not be required to record the assignment because MERS Corp. still holds the deed of trust in the public records). MERS is listed on the instant Deed of Trust, but HSBC does not allege that it or any other intermediate assignee is a MERS member. The Court notes that all assignees to this Deed of Trust must be MERS members to create a chain of assignment totally exempt from disclosure under § 89-5-37. Therefore, HSBC is obligated to disclose its assignment of the Deed of Trust. In fact, HSBC did so on January 12, 2015.

         The applicable statute of limitations states an action must be brought "within one year from the date of the occurrence of the violation." 15 USC § 1640(e). The question remaining is when did the "violation" occur, and if the violation occurred before the January 12, 2015 assignment, should the statute of limitations be tolled in light of HSBC's tardy disclosure of the assignment. The violation occurred when HSBC failed to give notice 30 days after the date of assignment or transfer. See 15 USC § 1641(g); 12 CFR § 226.39(b). The "date of transfer" is described as "either the date of acquisition recognized in the books and records of the acquiring party, or the date of transfer recognized in the books and records of the transferring party." 12 CFR § 226.39(b)(2). The only record that could match this description is the Corporate Assignment of Deed of Trust attached to HSBC's Motion. [44-4]. The Assignment clearly states "Date of Assignment: January 12th, 2015." [44-4, page 2]. Without further evidence of a date of acquisition "recognized in the books" of HSBC or the entity which assigned the Deed of Trust to HSBC, the Court can only conclude that the "date of transfer" was January 12, 2015.

         Regardless of the date of transfer, the clear intent of 15 USC § 1641(g) and 12 CFR § 226.39 is to give the borrower notice as to which entity holds his or her rights and responsibilities concerning payment, payment disputes, and rights of rescission. See 12 CFR § 226.39(d)(3). The policy goal of TILA can only be achieved if the borrower has a fair opportunity to seek redress for the lender's failure to give this notice. The Court cannot say that Smith was put on notice of the assignment merely by receiving a default letter describing his creditor as "SARM 2005-21." The policy goal can only be achieved if notice is given upon the filing of the assignment. Until the assignment is of record, the statute of limitations cannot logically or legally obtain. Therefore, regardless of the true date of assignment, the statute of limitations did not begin to run until the assignment was recorded with the Chancery Court of DeSoto County.

         Given that the Plaintiff filed this suit within one year of the filing of the Assignment on January 12, 2015, the suit is timely and proper. Therefore, ...


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