IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CHERYL WILLIAMS, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 15-0164-WS-N

 )

WELLS FARGO HOME )

MORTGAGE, INC., et al., )

 )

Defendants. )

 ORDER

This matter is before the Court on the defendants’ motions to dismiss. 

(Docs. 18, 20). The parties have filed briefs and evidentiary materials in support 

of their respective positions, (Docs. 18, 29, 32, 33), and the motions are ripe for 

resolution. After careful consideration, the Court concludes the motions to 

dismiss are due to be denied.

BACKGROUND

According to the amended complaint, (Doc. 17), defendant Federal 

National Mortgage Association (“Fannie Mae”) owned the mortgage loan on the 

plaintiff’s residence. Defendant Wells Fargo Home Mortgage, Inc. (“Wells 

Fargo”) acted as loan servicer. When the loan fell into default, the mortgage was 

assigned to Wells Fargo, for the sole purpose of enabling Wells Fargo as servicer 

to conduct a foreclosure sale on Fannie Mae’s behalf. Possession of the note was 

also transferred to Wells Fargo, for the same sole purpose. Fannie Mae purchased 

the property at foreclosure, in an amount that just satisfied the indebtedness, and 

received from Wells Fargo (acting on Fannie Mae’s behalf) a foreclosure deed. 

Pursuant to the prior agreement of Fannie Mae and Wells Fargo, possession of the 

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note automatically reverted to Fannie Mae after the sale; despite temporarily 

parting with possession, Fannie Mae at all times remained owner of the note.

The plaintiff timely vacated the property and at all relevant times retained 

her statutory right of redemption. Within the redemption period, Fannie Mae sold 

the property to a third party for approximately $122,000 more than the plaintiff’s 

indebtedness. The plaintiff brings this action to recover that excess, asserting five 

causes of action: (1) breach of the note; (2) breach of quasi-fiduciary duty; (3) 

money had and received; (4) unjust enrichment; and (5) constructive trust. (Doc. 

17 at 6-9). The defendants1 raise a single, global argument: lack of duty. (Doc. 

18 at 6, 7, 8, 9, 11, 13, 14, 15, 17, 19; Doc. 32 at 2, 3, 4, 5).2

DISCUSSION

In Springer v. Baldwin County Federal Savings Bank, 562 So. 2d 138 (Ala. 

1989), the Alabama Supreme Court held that “a mortgagee who purchases the 

mortgaged property at a foreclosure sale and then resells it to a third party during 

the statutory redemption period is required to apply the profit (the sum realized by 

the mortgagee in excess of the amount it paid at foreclosure) to the reduction of 

the mortgagor’s debt.” Id. at 139. The defendants acknowledge Springer but 

argue it does not apply here for two reasons: (1) when Fannie Mae purchased the 

plaintiff’s property, it was not the mortgagee; and (2) the plaintiff is not seeking a 

reduction of her debt but an affirmative recovery. (Doc. 18 at 12). The Court 

considers these arguments in reverse order.

“[A] mortgagee is, in a sense, a trustee for the mortgagor, and is charged 

with the ‘duty of fairness and good faith in its execution to the end that the 

 1 Wells Fargo has submitted no independent briefing but simply “joins in and 

adopts” Fannie Mae’s briefing. (Doc. 20 at 1; Doc. 33 at 1). 

2 As to the first of these theories, the defendants argue there can be no breach of 

the note because “there is not one single provision within the Note relating to post-sale 

proceeds.” (Doc. 17 at 9). Since the defendants have not submitted the note for 

inspection, they cannot obtain dismissal on this basis. 

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mortgagor’s property may be disposed of to his pecuniary advantage in the 

satisfaction of his debt.’” Springer, 562 So. 2d at 139 (quoting J.H. Morris, Inc. v. 

Indian Hills, Inc., 212 So. 2d 831, 843 (Ala. 1968) (emphasis added)). Thus, 

“[t]he mortgagee, as trustee for the mortgagor, is obligated to apply that profit 

realized after foreclosure and during the redemption period to the reduction of the 

mortgagor’s debt ....” Id. at 140. The defendants conclude from this language 

that when, as here, the debt has been satisfied, the mortgagee can have no further 

duty to the mortgagor. (Doc. 18 at 14-15). But Springer did not so cabin its rule, 

and other authorities on which it relied indicate the Alabama Supreme Court 

would extend Springer to require a mortgagee, upon a profitable sale within the 

redemption period, to remit to the mortgagor amounts in excess of the mortgage 

debt.

First, Springer did not itself limit a mortgagee’s duty as the defendants 

wish, because Springer did not involve the mortgagee’s resale of the mortgaged 

property for an amount in excess of the mortgage debt.3 Thus, “[t]he issue” before 

the Springer Court was naturally framed as whether the mortgagee had a duty to 

apply its profit on resale “to the reduction of the mortgagor’s debt.” 562 So. 2d at 

139. Since no more expansive issue was involved, the absence of a more 

expansive holding (extending to the present situation) is not significant; Springer

leaves that question open.

Second, Springer recognized the existing rule that, “when mortgaged 

property is sold at a foreclosure sale ‘[t]he mortgagee becomes a trustee for the 

mortgagor as to the surplus received.’” 562 So. 2d at 140 (quoting Bartlett v. 

Jenkins, 105 So. 654, 655 (Ala. 1925)). Pursuant to that rule, “[w]hen property is 

sold at a foreclosure sale, conducted under the power of sale contained in a 

mortgage, at an amount greater than the indebtedness secured by the mortgage, the 

 3 In Springer, the mortgagee purchased the property at foreclosure for $88,200, 

leaving a $20,885.76 deficiency. It then sold the property for $99,000, and the question 

presented was whether this $10,800 profit should have been offset against the deficiency. 

562 So. 2d at 139.

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mortgagee is liable to the mortgagor for the surplus.” Davis v. Huntsville 

Production Credit Association, 481 So. 2d 1103, 1106 (Ala. 1985). The 

defendants concede that “Alabama law is replete with cases permitting the 

borrower to insist on receiving the ‘surplus’ realized by the mortgagee at a 

foreclosure sale.” (Doc. 18 at 11).

These cases establish the following propositions: (1) when the mortgagee 

sells the property to a third party at a foreclosure sale, the mortgagor is entitled to 

the excess of the sales price over the debt; (2) when the mortgagee buys the 

property at a foreclosure sale and then sells the property to a third party at a higher 

price (within the redemption period), the mortgagor is entitled to a corresponding 

reduction in the deficiency; and (3) both these results derive from the mortgagee’s 

status as trustee for the mortgagor.

As Springer illustrates, a mortgagee can purchase property at a foreclosure 

sale and resell it almost immediately. See 562 So. 2d at 139 (sale to third party 

occurred three days after foreclosure). The defendants struggle to explain why 

Alabama law would require the mortgagee/trustee to remit excess funds to the 

mortgagor when the excess arises at the foreclosure sale but not require the 

mortgagee/trustee to remit excess funds to the mortgagor when the excess arises at 

a resale immediately thereafter. All they can manage is a citation to Johnny Ray 

Sports, Inc. v. Wachovia Bank, 982 So. 2d 1067 (Ala. 2007), which held only that 

“a mortgagee that has purchased mortgaged property at a foreclosure sale has no 

duty to resell the property within the one-year statutory redemption period, even if 

the opportunity for such a sale is presented and even if the sale would extinguish 

the mortgagor’s debt.” Id. at 1076. The absence of a duty to sell, however, is a far 

cry from the absence of a duty (once the mortgagee elects to sell) to account for 

sale proceeds in excess of the debt – especially when the Springer Court has 

already imposed a duty to account for sale proceeds to reduce a deficiency. 

The rules in Springer, Davis and Barnett address the duties of a 

“mortgagee.” The defendants argue that, since Fannie Mae assigned the mortgage 

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to Wells Fargo, it was not a mortgagee but a “third-party purchaser” and therefore 

had no duty to the plaintiff mortgagor. (Doc. 18 at 7-9). Their implicit but 

unsupported assumption is that the Alabama rules discussed above hinge on labels 

rather than practical realities. The practical reality here is that Fannie Mae, by its 

own admission, has been “at all times the owner of the mortgage note,” (Doc. 17 

at 3), and thus the actual and intended beneficiary of the mortgage and underlying 

debt. The mortgage was not assigned to Wells Fargo in order to impart these

benefits to Wells Fargo but so that Wells Fargo, for a fee, could foreclose for the 

benefit of Fannie Mae. Whether Fannie Mae employed this roundabout procedure 

in an effort to evade its duties under Alabama law is immaterial; what matters is 

that the defendants have failed to show that the Alabama Supreme Court would 

permit a mortgagee to shed its duties towards the mortgagor by the simple 

expedient of assigning its mortgage to another for the limited purpose of 

foreclosing, while retaining for itself all the accruing benefits.

4

 The very fact that 

the mortgagee’s duties are those of a “trustee” reflects a substantial judicial 

solicitude for the mortgagor’s position, making it even less likely the state courts 

would approve of avoiding those duties so easily.5 

 4 The defendants’ sole authority is a lower court decision from Massachusetts, 

(Doc. 18 at 10), which would be irrelevant even if it were from Alabama, since it 

addressed only an attempt to require a defendant that had never been a mortgagee to 

satisfy the duties of a mortgagee.

The defendants appeal generally to public policy (encouraging property sales, 

keeping a “clear balance” of rights and duties), (Doc. 18 at 16-19), but they have not 

shown that the Alabama Supreme Court would deem these considerations more weighty 

than those it has expressed in the cases discussed in text.

5 Springer was decided in 1989 and Davis in 1985, a simpler time when, it seems, 

mortgagees conducted their own foreclosure sales. There was thus no reason for those 

decisions to anticipate the procedural developments on display here. 

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CONCLUSION

For the reasons set forth above, the defendants’ motions to dismiss are 

denied.

DONE and ORDERED this 30th day of July, 2015.

s/ WILLIAM H. STEELE

CHIEF UNITED STATES DISTRICT JUDGE

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