Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-3_11-cv-00313/USCOURTS-almd-3_11-cv-00313-3/pdf.json

Nature of Suit Code: 230
Nature of Suit: Rent, Lease, Ejectment
Cause of Action: 12:1452 Federa Home Loan Mortgage Corporation

---

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

EASTERN DIVISION

FREDDIE MAC a/k/a Federal Home )

Loan Mortgage Corporation, )

)

Plaintiff, )

 )

v. ) Civil Action No. 3:11cv313-WHA

 ) (WO)

HOMER BROOKS and LETHA BROOKS )

)

Defendants / Counterclaim )

Plaintiffs, )

)

v. )

)

FREDDIE MAC a/k/a Federal Home )

Loan Mortgage Corporation, )

PROMMIS SOLUTIONS, a limited )

liability company, PROMMIS )

SOLUTIONS HOLDING CORPORATION )

)

Counterclaim Defendants. )

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

This case is before the court on a Motion to Dismiss (Doc. #25), filed by

Plaintiff/Counterclaim Defendant Freddie Mac, together with Defendant/Counterclaim Plaintiffs’

Response thereto (Doc. #48).

In December, 2010, Plaintiff/Counterclaim Defendant Federal Home Loan Mortgage

Corporation (“Freddie Mac”) sued Homer and Letha Brooks (“Brooks”),1

 as well as fictitious

defendants, in the Circuit Court of Chambers County, Alabama. Brooks answered Freddie

1

Because Homer Brooks is deceased, this court will refer to Homer and Leetha Brooks in

the singular as “Brooks.”

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Mac’s Complaint and also brought counterclaims against Freddie Mac; PNC; McCalla Raymer,

LLC; MERS; MERSCORP; Prommis Solutions; and Prommis Solutions Holding Corporation. 

On April 22, 2011, Freddie Mac timely removed the state court case to this court pursuant to 12

U.S.C. § 1452(f), and this court denied Brooks’ Motion to Remand.

McCalla Raymer, LLC was dismissed by Stipulation on May 12, 2011 (Doc. #42). The

court granted Motions to Dismiss of PNC (Doc. #34) and MERS and MERSCORP (Doc. #46)

by order entered on August 22, 2011 (Doc. #53). Prommis Solutions and Prommis Solutions

Holding Corporation remain as Counterclaim Defendants.

 For reasons to be discussed, the Motion to Dismiss is due to be GRANTED.

II. MOTION TO DISMISS STANDARD

The court accepts the nonmovant’s allegations as true, Hishon v. King & Spalding, 467

U.S. 69, 73 (1984), and construes the pleading in the nonmovant’s favor, Duke v. Cleland, 5 F.3d

1399, 1402 (11th Cir. 1993). In analyzing the sufficiency of pleading, the court is guided by a

two-prong approach: one, the court is not bound to accept conclusory statements of the elements

of a cause of action and, two, where there are well-pleaded factual allegations, a court should

assume their veracity and then determine whether they plausibly give rise to entitlement to relief. 

See Ashcroft v. Iqbal, _ U.S. _, 129 S. Ct. 1937, 1949-50 (2009). “[A nonmovant’s] obligation

to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions,

and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp.

v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). To survive a motion to dismiss, a

pleading need not contain “detailed factual allegations,” but instead the pleading must contain

2

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“only enough facts to state a claim to relief that is plausible on its face.” Id. at 570. The factual

allegations “must be enough to raise a right to relief above the speculative level.” Id. at 555.

Ordinarily, in considering a motion to dismiss, the court does not consider matters

presented outside the pleadings. However, “[i]n ruling upon a motion to dismiss, the district

court may consider an extrinsic document if it is (1) central to the [nonmovant’s] claim, and (2)

its authenticity is not challenged.” SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d 1334,

1337 (11th Cir. 2010) (citations omitted).

III. FACTS

On May 6, 2005, Brooks received a mortgage loan on her home from Charterbank. In

exchange, Brooks executed a promissory note in favor of Charterbank, and also executed a

mortgage instrument. The mortgage instrument defined the “Borrower” or “Mortgagor” as

Brooks, and the “Lender” as Charterbank. The mortgage instrument defined the “Mortgagee” as

follows:

MERS is a separate corporation that is acting solely as nominee for Lender and

Lender’s successors and assigns. MERS is the mortgagee under this Security

Instrument.

Doc. #25-1 at 4 (emphasis added). The mortgage instrument further explained:

This Security Instrument secures to Lender: (i) the repayment of the Loan, and all

renewals, extensions and modifications of the Note; and (ii) the performance of

Borrowers’s covenants and agreements under this Security Instrument and the Note. 

For this purpose, Borrower irrevocably mortgages, grants and conveys to MERS

(solely as nominee for Lender and Lender’s successors and assigns) and to the

successors and assigns of MERS, with power of sale, [Brooks’ home]. . . . 

Borrower understands and agrees that MERS holds only legal title to the interests

granted by Borrower in this Security Instrument, but, if necessary to comply with law

or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has

3

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the right: to exercise any or all of those interests, including, but not limited to, the

right to foreclose and sell the Property; and to take any action required of Lender

including, but not limited to, releasing and canceling this Security Instrument.

Doc. #25-1 at 6 (emphasis added). The mortgage instrument also stated that the property could

be publicly auctioned under a power of sale upon Brooks’ default.

On April 13, 2010, MERS assigned the mortgage and promissory note to PNC. The

assignment stated:

FOR VALUE RECEIVED, [MERS], does hereby transfer, assign, set over and

convey unto [PNC], its successors, transferees, and assigns forever, all right, title

and interest of [MERS] in and to that certain Mortgage executed by [Brooks], to

[MERS] AS NOMINEE FOR CHARTERBANK dated the 6th day of May 2005,

and filed for record . . . covering property described in said mortgage, together

with the note and indebtedness secured by the Mortgage, and all interest of the

undersigned in and to the property described in said Mortgage.

Doc. #46-2 at 2 (emphasis added).

In mid-2010, Brooks defaulted on her mortgage. See Doc. #46-3. As a result, PNC

foreclosed on Brooks’ property through a non-judicial foreclosure sale, conducted on August 20,

2010.2

 At the sale, Freddie Mac was the highest bidder, and accordingly, PNC sold its interest in

Brooks’ property to Freddie Mac. Freddie Mac subsequently sought to take possession of

Brooks’ property, and Brooks refused to allow Freddie Mac to do so. Freddie Mac then brought

an action to eject Brooks from the property, and in response, Brooks brought the counterclaims

at issue here.

2

Ala. Code §§ 35-10-11 to -16 sets forth the requirements for conducting a non-judicial

foreclosure sale with respect to a mortgage executed in 1989 or later. Brooks does not contend

that the sale itself was conducted in an improper manner, rather, Brooks argues that there was no

right to conduct a foreclosure in the first place.

4

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IV. DISCUSSION

Brooks has made the following counterclaims against Freddie Mac: (1) negligence or

wantonness; (2) action to quiet title to real property; (3) trespass; (4) wrongful foreclosure; and

(5) negligent or wanton hiring, supervision, training or retention. Each of these counterclaims is

due to be dismissed.

1. Negligence or Wantonness and Negligent or Wanton Hiring, Supervision,

Training or Retention Counterclaims

Brooks’ negligence or wantonness and negligent or wanton hiring, supervision, training

or retention counterclaims are due to be dismissed.

First, Brooks has not pled sufficient facts to state a counterclaim for negligence or

wantonness. This court cannot discern what specific duty Brooks claims that Freddie Mac owed

to Brooks, how Freddie Mac breached that duty, or how Freddie Mac’s conduct was the cause in

fact and proximate cause of Brooks’ injuries. Because Brooks’ pleading makes no nonconclusory allegations that this court can discern regarding negligence or wantonness, that

counterclaim is due to be dismissed.

Second, the court is completely at a loss as to what facts Brooks relies on in her negligent

or wanton hiring, supervision, training, or retention counterclaim, because she has not alleged

any such facts. Thus, this claim is due to be dismissed.

2. Quiet Title, Wrongful Foreclosure, and Trespass Counterclaims

5

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Brooks’ quiet title, wrongful foreclosure, and trespass counterclaims are premised on the

allegation that the foreclosure on Brooks’ property was improper. Therefore, if the foreclosure

on Brooks’ property was proper, these claims fail.

Brooks argues that a party who holds a mortgage but is not the holder of the underlying

promissory note cannot foreclose on the mortgage, and therefore, “MERS” could not foreclose

on the mortgage because it lacked any interest in the underlying promissory note. The court

rejects Brooks’ argument. 

As a preliminary note, Brooks’ argument that MERS improperly foreclosed is irrelevant,

because MERS did not foreclose on Brooks’ property. Rather, PNC did so.3

Nevertheless, even if Brooks directed her argument at the actions of PNC, the actual

foreclosing party, she would not prevail. In Crum v. LaSalle Bank, 55 So. 3d 266 (Ala. Civ.

App. 2009), the Court of Civil Appeals of Alabama rejected a case with materially identical facts

as the one at bar. In Crum, a borrower executed a promissory note in favor of a lender, and also

executed a mortgage instrument, which named MERS as the mortgagee of the property. Id. at

267. The mortgage instrument stated, in pertinent part:

MERS is a separate corporation that is acting solely as a nominee for Lender and

Lender's successors and assigns. MERS is the mortgagee under this Security

Instrument. . . .

3

The court notes that Brooks’ response brief is extraordinarily confusing. For example,

Brooks writes that “MERS places great weight . . .” (Doc. #48 at 8) and “MERS argues . . . .”

(Doc. #48 at 12) with respect to arguments made by Freddie Mac, not MERS, despite the fact

that Brooks notes at the beginning of her brief that she is responding to Freddie Mac’s Motion to

Dismiss (Doc. #48 at 1). Brooks also argues, at various points in her brief, that either Freddie

Mac or MERS foreclosed on her property, when in fact PNC was the foreclosing party. Sadly, at

no point in Brooks’ response brief did she state that PNC foreclosed on her property, when PNC

was the actual foreclosing party. 

6

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This Security Instrument secures to Lender: (I) the repayment of the [l]oan, and all

renewals, extensions and modifications of the Note; and (ii) the performance of

Borrower's covenants and agreements under this Security Instrument and the Note.

For this purpose, Borrower irrevocably mortgages, grants and conveys to MERS

(solely as nominee for Lender and Lender's successors and assigns) and to the

successors and assigns of MERS, with power of sale, the . . . . property . . . .

Borrower understands and agrees that MERS holds only legal title to the interests

granted by Borrower in this Security Instrument, but, if necessary to comply with law

or custom, MERS (as nominee for Lender and Lender's successors and assigns) has

the right: to exercise any or all of those interests, including, but not limited to, the

right to foreclose and sell the [p]roperty; and to take any action required of Lender

including, but not limited to, releasing and canceling this Security Instrument.

Id. at 267-68 (emphasis and alterations in original). The mortgage instrument further explained

that the property could be publicly auctioned under a power of sale upon the borrower’s default. 

Id.

Approximately a year after the original mortgage and promissory note were executed,

MERS, as the lender’s nominee, assigned the note in favor of an assignee, who later foreclosed

on the borrower. Id. The assignment document stated:

[MERS] hereby assigns unto [the assignee] the . . . Security Deed having an

original principal sum of $112,800.00 [plus] interest, secured thereby, [t]ogether

with all moneys now owing or that may hereafter become due or owing in respect

thereof, and the full benefit of all the powers and of all the covenants and provisos

therein contained, and [MERS] hereby grants and conveys unto the . . . [a]ssignee

[its] beneficial interest under the Security Deed.

To have and to hold the said Mortgage and Note, and also the said property unto

the . . . [a]ssignee forever, subject to the terms contained in said Mortgage and

Note.”

Id. (emphasis and alterations in original).

To summarize, in Crum, MERS held the right to the mortgage as nominee, and could

perform “any act on the lender’s behalf as to the property, including selling the note and the

mortgage to a third party.” MERS subsequently exercised its power, and assigned the mortgage

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and the right to the promissory note to the assignee, which then conducted a non-judicial

foreclosure sale.

The Alabama Court of Civil Appeals reasoned that MERS’ assignment gave the assignee

the right to foreclose on the borrower. Id. at 269. It reasoned that, under Ala. Code § 35-10-12,

“with respect to mortgages executed in 1989 or later, a power to sell lands given in any mortgage

‘is part of the security’ and may be exercised ‘by any person, or the personal representative of

any person who, by assignment or otherwise, becomes entitled to the money thus secured.’” Id.

(quoting Ala. Code § 35-10-12) (emphasis in original). Thus, when MERS assigned the

mortgage and the right to the promissory note to the assignee, the assignee became entitled to the

money thus secured, and therefore, gained the power to sell lands given in the mortgage. See id.

at 269-70.

In this case, the relevant documents and facts are materially identical to those in Crum. 

In both cases: (1) a lender lent to a borrower; (2) the borrower executed a promissory note in

favor of the lender, signed a mortgage naming MERS the mortgagee, and the mortgage

instrument included a right of sale; (3) MERS assigned the right to the note and mortgage to an

assignee; and (4) the assignee foreclosed at a non-judicial foreclosure sale. Additionally, the

mortgage instrument in this case uses virtually identical language as the mortgage instrument in

Crum. While the language slightly differs between the assignment instruments in each case, the

language difference is insignificant because both instruments exercise MERS’ rights under the

mortgage to assign both the mortgage and the note to the assignee.

Additionally, the Southern District of Alabama addressed, and rejected, the argument

Brooks makes in this case, and, in doing so, cited Crum approvingly. Mortensen v. Mortgage

8

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Elec. Registration Sys., No. 09-0787-WS-N, Doc. #78 (S.D. Ala. Dec. 23, 2010) (Steele, J.).4

 In

Mortensen, the plaintiff argued that because the “note and the mortgage were initially held by

two different defendants . . . . this ‘split’ makes ‘a foreclosure unenforceable’ and means that

‘the note becomes, as a practical matter, unsecured.’” Id. at 10. The court rejected this

argument, explaining that it “overlook[ed] evidence that both the note and the mortgage are

today held by [the foreclosing party].” Id. at 11. The court cited to Crum in support, noting that

the Crum court rejected the “splitting” argument advanced by the plaintiff. Id. at 11-12.

Brooks makes no response at all to Mortensen. With respect to Crum, Brooks merely

says that Crum “ignores the law that a mortgage cannot be enforced without ownership of the

underlying note.” Doc. #48 at 7. In other words, Brooks makes no attempt to distinguish Crum,

but simply says that Crum is wrong.

Brooks’ argument is problematic when made before this court, due to the fact that this is

a federal court sitting in diversity. When sitting in diversity, federal courts must apply state

substantive law. Bravo v. United States, 577 F.3d 1324, 1325 (11th Cir. 2009). Thus, if a state

supreme court has ruled on an issue of state substantive law, this court must “apply it rather than

to prescribe a different rule, however superior it may appear from the viewpoint of ‘general law’

and however much the state rule may have departed from prior decisions of the federal courts.” 

Id. (quoting West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940)). Additionally, “‘federal

courts are bound by decisions of a state’s intermediate appellate courts unless there is persuasive

4

This opinion is not available on Westlaw or Lexis, but is listed as the “companion

opinion” to Mortensen v. Mortgage Elec. Registration Sys., No. 09-0787-WS-N, 2010 WL

5376332, at *1 n.1 (S.D. Ala. Dec. 23, 2010) (“Via separate Order entered on this date, the

undersigned has denied plaintiff's cross-motion for summary judgment. These two rulings are

properly viewed as companion Orders, and should be read together.”).

9

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evidence that the highest state court would rule otherwise.’” Id. (quoting King v. Order of United

Commercial Travelers of Am., 333 U.S. 153, 158 (1948)).

In other words, under the Erie doctrine, this court is bound by Crum, a decision made by

an intermediate appellate court, unless there is “persuasive evidence that the highest state court

would rule otherwise.” Brooks has not presented such persuasive evidence. While Brooks has

made an argument that Ala. Code § 35-10-1 textually prohibits a foreclosure after splitting the

note from the mortgage, that statute does not apply to this case, because Brooks’ mortgage was

executed after December 31, 1988. The statute that actually applies to this case, and which

Crum interpreted, is Ala. Code § 35-10-12, which applies to mortgages executed in 1989 or later. 

See Ala. Code § 35-10-16. Similarly, the cases that Brooks cites in support of her splitting

argument all predate Ala. Code § 35-10-12, or are from other jurisdictions. Finally, Brooks’

argument regarding Section 5.4(b) of the Third Restatement of Property is unpersuasive, as

Crum analyzed that section and found that it supported the ability to foreclose under the facts

presented. Crum, 55 So. 3d at 269; see also Mortensen, supra at 12 (“[T]he Crum court found

the mortgage enforceable even though the note and mortgage had originally been split, and even

after examining the very section of the Restatement on which Mortensen relies.”).

Brooks also makes a judicial estoppel argument. Brooks claims that MERS took an

inconsistent position on the splitting-the-note theory in prior litigation. This argument is

meritless. Under judicial estoppel, “a party is precluded from ‘asserting a claim in a legal

proceeding that is inconsistent with a claim taken by that party in a previous proceeding.’” 

Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002) (quoting 18 James Wm.

Moore et al., Moore’s Federal Practice § 134.30 at 134-62 (3d ed. 2000)) (emphasis added). The

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main problem with Brooks’ argument is that Brooks is stating that “MERS” is making the

arguments at issue, when in fact Freddie Mac is the party whose arguments Brooks is attacking. 

Thus, because Brooks is pointing to a prior position taken by MERS, not Freddie Mac, the

doctrine of judicial estoppel is inapplicable.

In sum, the foreclosure was proper, and therefore, under the facts and theories presented,

the quiet title, wrongful foreclosure, and trespass counterclaims are due to be dismissed.5

V. CONCLUSION

For the reasons discussed, it is hereby ORDERED that Freddie Mac’s Motion to Dismiss

(Doc. #25) is GRANTED, and all counterclaims against it are DISMISSED with prejudice.

DONE this 25th day of August, 2011.

 /s/ W. Harold Albritton 

W. HAROLD ALBRITTON

SENIOR UNITED STATES DISTRICT JUDGE

5

This court does not find that, in every case, a proper foreclosure precludes these types of

claims.

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