Court Opinion

ID: 3165184
Source: CourtListenerOpinion
Date Created: 2015-12-23 17:07:45.572364+00
Date Added: 2024-06-11T12:08:54.179830
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                          Assigned on Briefs October 13, 2015

    FEDERAL NATIONAL MORTGAGE ASSOCIATION v. DANNY O.
                        DANIELS

                  Appeal from the Circuit Court for Haywood County
                     No. 2012CV4085 Clayburn Peeples, Judge

                          ________________________________

              No. W2015-00999-COA-R3-CV – Filed December 21, 2015
                      _________________________________

This appeal arises from the trial court’s grant of summary judgment in favor of Plaintiff in an
unlawful detainer action. The property at issue was sold in a foreclosure sale, and the
purchaser assigned its interest in the property to Plaintiff. Plaintiff filed this unlawful
detainer action seeking possession of the property from Defendant. The General Sessions
Court entered judgment in favor of Plaintiff, and Defendant appealed to the Circuit Court. In
the Circuit Court, Defendant asserted that the property was wrongfully foreclosed because he
was not in default at the time foreclosure proceedings were initiated. The Circuit Court
granted summary judgment in favor of Plaintiff, and Defendant appealed. We affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and
                                    Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which BRANDON O. GIBSON,
and KENNY ARMSTRONG, JJ., joined.

Stephen R. Leffler, Memphis, Tennessee, for the appellant, Danny O. Daniels.

Edward D. Russell, Brentwood, Tennessee, for the appellee, Federal National Mortgage
Association.

                                         OPINION

                       I. BACKGROUND AND PROCEDURAL HISTORY

      On August 15, 2005, Danny and Gloria Daniels executed a promissory note
evidencing a home loan in the amount of $120,150. The promissory note was secured by a
deed of trust on the Daniels’s home at 2455 Forked Deer Road, Ripley Tennessee. Both Mr.
Daniels and Ms. Daniels signed the deed of trust and, in doing so, agreed to be held jointly
and severally liable for all obligations and liability arising under it. The beneficiary under the
deed of trust was First South Bank, the original lender. In 2010, the promissory note and
deed of trust were assigned to Nationstar Mortgage, LLC (―Nationstar‖).

        In addition to the regularly scheduled payments due under the promissory note, the
deed of trust required the Daniels to pay premiums for private mortgage insurance to protect
the lender and subsequent purchasers of the promissory note from losses incurred if the
Daniels failed to repay the loan as agreed. The promissory note provided that the Daniels’s
failure to pay the full amount of each monthly payment on the date it was due would result in
default. In the event of default, the deed of trust provided the lender with the option to sell
the property at public auction. In part, the deed of trust provided that:

              If Lender invokes the power of sale, Trustee shall give notice of sale by
       public advertisement in the county in which the Property is located for the time
       and in the manner provided by Applicable Law, and Lender or Trustee shall
       mail a copy of the notice of sale to Borrower in the manner provided in Section
       15. Trustee, without demand on Borrower, shall sell the Property at public
       auction to the highest bidder at the time and under the terms designated in the
       notice of sale. Lender or its designee may purchase the Property at any sale.

               Trustee shall deliver to the purchaser Trustee’s deed conveying the
       Property without any covenant or warranty, expressed or implied. The recitals
       in the Trustee’s deed shall be prima facie evidence of the truth of the
       statements made therein. . . . If the Property is sold pursuant to this Section 22,
       Borrower, or any person holding possession of the Property through Borrower,
       shall immediately surrender possession of the Property to the purchaser at the
       sale. If possession is not surrendered, Borrower or such person shall be a
       tenant at will of the purchaser and hereby agrees to pay the purchaser the
       reasonable rental value of the Property after sale.

       Ms. Daniels passed away in August 2007. In 2009, Mr. Daniels began to fall behind
on his monthly payments. On May 19, 2011, Nationstar sent a letter to inform Mr. Daniels
that he was in default under the terms of the promissory note and that failure to cure the
default within 35 days might result in acceleration of all sums due and a foreclosure sale of
the property. Mr. Daniels applied for a loan modification but was notified that the loan
would not be modified. Nationstar subsequently accelerated the balance due under the note
and initiated foreclosure proceedings.

                                                2
       The property was sold at auction on August 17, 2011, at the Haywood County
courthouse. Nationstar was the high bidder and purchased the property for $101,749.22.
Pursuant to federal law, Nationstar issued IRS Form 1099-As (―Form 1099-A‖) to Mr.
Daniels and Ms. Daniels reflecting that it had acquired an interest in the property in partial
satisfaction of their indebtedness on it.1 Nationstar subsequently assigned its interest in the
property to the Federal National Mortgage Association (―FNMA‖). (Id. at 361) A trustee’s
deed reflecting the transfer of ownership to FNMA was recorded in the Haywood County
Register’s Office on September 2, 2011.

       On October 4, 2011, FNMA filed an unlawful detainer action against Mr. Daniels for
possession of the property in the Haywood County General Sessions Court. Following Mr.
Daniels’s unsuccessful attempt to remove the matter to federal court, the General Sessions
Court entered a judgment in favor of FNMA on November 7, 2012. Shortly thereafter, Mr.
Daniels filed a timely notice of appeal to the Haywood County Circuit Court.

       FNMA filed a motion for summary judgment in the Circuit Court on October 17,
2013. Mr. Daniels did not file a response to the motion, and the Circuit Court granted
summary judgment in favor of FNMA on December 16, 2013. Shortly thereafter, however,
Mr. Daniels filed a motion to alter or amend the judgment in which he asserted that he never
received notice of FNMA’s motion for summary judgment. Following a hearing, the Circuit
Court entered an order in which it set aside its previous order granting summary judgment in
favor of FNMA.

       On April 2, 2014, Mr. Daniels filed a request for admissions. In part, Mr. Daniels
requested that FNMA admit that Nationstar mortgage forgave the debt owed by Ms.
Daniels’s estate on the promissory note on August 17, 2011—the date of the foreclosure sale.
 Mr. Daniels also requested that FNMA admit the authenticity of the Form 1099-As that
Nationstar issued Mr. Daniels and Ms. Daniels on that date and admit that Ms. Daniels was
covered by a private mortgage insurance policy at the time of her death in August 2007.
Along with the request for admissions, Mr. Daniels filed a request seeking production of,
among other things, (1) documents from predecessors in interest having an interest in the
mortgage and promissory note and establishing proof of ownership and the right to foreclose
on the property, (2) assignments filed in Haywood County with respect to the mortgage and
note, (3) all private mortgage insurance policies related to the property, (4) documents
showing that the mortgage and/or note were bundled and sold as a security, and (5)

1
 Under federal income tax laws, any person who, in connection with his or her trade or business, lends money
secured by property must provide the borrower with a Form 1099-A if the lender ―in full or partial satisfaction
of any indebtedness, acquires an interest in any property which is security for such indebtedness . . . .‖ 26
U.S.C. § 6050J(a)(1).

                                                      3
documents showing that any private mortgage insurance provider refused to pay off debt
related to the property.

        In response to Mr. Daniels’s discovery requests, FNMA filed a motion seeking an
order of protection to protect FNMA from being required to respond to Mr. Daniels’s
discovery requests on the grounds that the evidence sought was neither admissible nor
reasonably calculated to lead to the discovery of admissible evidence. FNMA argued that the
documents Mr. Daniels requested related to the ownership history of the promissory note and
Nationstar’s right to foreclose on the property which were not relevant because Mr. Daniels
did not dispute either the validity of Nationstar’s lien on the property, or that the promissory
note was endorsed in blank and transferred to Nationstar prior to the foreclosure sale.
Additionally, FNMA asserted that documents related to private mortgage insurance on the
property were not relevant because such a policy does not provide protection to borrowers
but rather protects lenders in the event that proceeds from the sale of a foreclosed property
are insufficient to cover the balance outstanding on the loan. Mr. Daniels filed a response
opposing FNMA’s motion for a protective order in which he argued that discovery related to
private mortgage insurance on the property was necessary to determine whether Nationstar
wrongfully foreclosed on the property. Mr. Daniels asserted that the Form 1099-As reflected
that his debt on the property had been discharged. Mr. Daniels theorized that Nationstar’s
transmission of the Form 1099-As raised a question of whether all debt owed on the
promissory note was paid under the private mortgage insurance policy following Ms.
Daniels’s death in August 2007. Mr. Daniels asserted that if private mortgage insurance had
indeed paid the outstanding debt prior to Nationstar’s initiation of foreclosure proceedings,
Nationstar had no right to foreclose on the property or assign an interest in the property to
FNMA.

       After conducting a hearing on the matter, the Circuit Court granted FNMA’s motion
for protective order in its entirety on October 15, 2014.

        On October 10, 2014, FNMA filed a second motion for summary judgment, along
with a memorandum of law and statement of undisputed facts. According to FNMA’s
filings, the undisputed evidence in the record showed that: Mr. Daniels and Ms. Daniels
executed the promissory note secured by a deed of trust on the property in August 2005; the
promissory note was assigned to Nationstar in November 2010; Mr. Daniels fell behind on
payments due under the promissory note and was in default in May 2011 when Nationstar
notified him that it intended to initiate foreclosure proceedings; Nationstar conducted a
foreclosure sale in compliance with the deed of trust and Tennessee law; and Nationstar
purchased the property at the foreclosure sale and subsequently assigned its interest in the
property to FNMA. FNMA asserted that because the deed of trust established a

                                               4
landlord/tenant relationship between a foreclosure sale purchaser and the borrower, Mr.
Daniels was a tenant at will of FNMA and subject to eviction at its election.

       In response to FNMA’s motion for summary judgment, Mr. Daniels requested that the
Circuit Court deny FNMA’s motion for summary judgment and set aside its protective order
to allow further discovery related to the private mortgage insurance on the property. In both
his written memorandum and his response to FNMA’s statement of undisputed facts, Mr.
Daniels asserted that further discovery was necessary to determine whether all outstanding
debt owed under the promissory note was forgiven prior to the foreclosure sale. Mr. Daniels
submitted an affidavit in which he asserted that the Form 1099-As Nationstar transmitted to
him indicated that the debt on the property had been forgiven, and that Ms. Daniels was
covered by a private mortgage insurance policy intended to satisfy the mortgage indebtedness
upon her death in August 2007. The affidavit did not contain any further explanation of the
evidentiary materials that Mr. Daniels needed to oppose summary judgment.

     On January 9, 2015, the Circuit Court entered an order on FNMA’s motion for
summary judgment. In part, the Circuit Court’s order stated:

               Mr. Daniels cannot rely on the IRS Form 1099-A for his assertion that
       the loan was satisfied before the foreclosure sale. Only after a foreclosure sale
       does the lender send the required Form 1099-A, and, that form only reflects a
       loss or gain to be reported on the borrowers’ tax return.

               Mr. Daniels’ additional claim that the private mortgage insurance
       (―PMI‖) should have satisfied the Note is also incorrect. Paragraph 10 of the
       Trust Deed expressly provides that the PMI is for the benefit of the lender and
       that insurance is not for the benefit of Mr. Daniels. The PMI does not relieve
       the borrower from the obligation to pay on the loan. He is not entitled to any
       benefit from the PMI. Because there was no privity of contract with the
       mortgage insurer, Mr. Daniels cannot assert a claim under the PMI. The PMI
       does not affect [FNMA]’s standing.

(internal citations omitted). The Circuit Court determined that because the deed of trust
established a landlord/tenant relationship between the foreclosure sale purchaser and the
borrower, Mr. Daniels was considered a tenant at will of FNMA. The Circuit Court therefore
concluded that FNMA was entitled to possession of the property and granted its motion for
summary judgment.

      Mr. Daniels subsequently filed a motion to alter or amend judgment arguing that he
was not able to adequately respond to FNMA’s motion for summary judgment because he
                                              5
was prevented from conducting discovery related to the effect of the Form 1099-A and
private mortgage insurance policy. Following a hearing, the Circuit Court entered an order
denying Mr. Daniels’s motion to alter or amend on May 10, 2015. Mr. Daniels filed a timely
notice of appeal to this Court on May 27, 2015.

                                     ISSUE PRESENTED

       The sole issue Mr. Daniels presents on appeal, as stated in his appellate brief, is:

       1.     Whether the trial court committed error by denying Mr. Daniels the
              opportunity to take discovery.

                                   STANDARD OF REVIEW

        On appeal, we review a trial court’s ruling on a motion for summary judgment de
novo, with no presumption of correctness. Abshure v. Methodist Healthcare–Memphis
Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing so, we must make a fresh determination
of whether the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been
satisfied. Estate of Brown, 402 S.W.3d 193, 198 (Tenn. 2013). A trial court’s grant of
summary judgment is appropriate when ―there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.‖ Tenn. R. Civ. P. 56.04.

       The party moving for summary judgment bears the ultimate burden of establishing
that judgment in its favor is appropriate as a matter of law because there are no disputed
material facts that create a genuine issue for trial. Thompson v. Memphis City Sch. Bd. of
Educ., 395 S.W.3d 616, 622 (Tenn. 2012). ―If the moving party makes a properly supported
motion for summary judgment, the burden of production shifts to the nonmoving party to
demonstrate the existence of a genuine issue of material fact requiring trial.‖ Town of
Crossville Hous. Auth. v. Murphy, 465 S.W.3d 574, 578 (Tenn. Ct. App. 2014) (citing Byrd
v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993)). A disputed fact is ―material‖ if it must be
decided in order to resolve the substantive claim or defense at which the summary judgment
motion is directed. Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008) (citing
Byrd, 847 S.W.2d at 215). A disputed fact only presents a ―genuine issue‖ if ―a reasonable
jury could legitimately resolve that fact in favor of one side or the other.‖ Id. In determining
whether to award summary judgment, the trial court must review the evidence in the light
most favorable to the nonmoving party and draw all reasonable inferences in its favor. Id. If
the nonmoving party seeks to continue a motion for summary judgment by submitting an
affidavit requesting additional time for discovery in compliance with Tennessee Rule of Civil
Procedure 56.07, we review the trial court’s decision to deny additional time for discovery

                                               6
for an abuse of discretion. Regions Fin. Corp. v. Marsh USA, Inc., 310 S.W.3d 382, 401
(Tenn. Ct. App. 2009).

                                         ANALYSIS

       Tennessee’s unlawful detainer statute creates a right to bring a cause of action for a
writ of possession when a lessee remains on leased property after the lease has been
terminated. Cain P’ship Ltd. v. Pioneer Inv. Servs. Co., 914 S.W.2d 452, 456 (Tenn. 1996).
The statute provides:

       Unlawful detainer is where the defendant enters by contract, either as tenant or
       as assignee of a tenant, or as personal representative of a tenant, or as
       subtenant, or by collusion with a tenant, and, in either case, willfully and
       without force, holds over the possession from the landlord, or the assignee of
       the remainder or reversion.

Tenn. Code Ann. § 29-18-104 (2012). When a deed of trust establishes that, in the event of a
foreclosure, a landlord/tenant relationship is created between the foreclosure sale purchaser
and the mortgagor in possession of the property, constructive possession is conferred on the
foreclosure sale purchaser upon the passing of title; that constructive possession provides the
basis for maintaining the unlawful detainer. See CitiFinancial Mortg. Co., Inc. v. Beasley,
No. W2006-00386-COA-R3-CV, 2007 WL 77289, at *7 (Tenn. Ct. App. Jan. 11, 2007)
(citing Metro. Life Ins. Co. v. Moore, 72 S.W.2d 1050, 1051 (Tenn. Ct. App. 1934)). Thus,
to succeed on its motion for summary judgment, FNMA was required to establish (1) its
constructive possession of the property and (2) its loss of possession by Mr. Daniels’s act of
unlawful detainer. See id. (citing Foster v. Hill, 510 S.W.2d 520, 522 (Tenn. Ct. App.
1973)).

        As an initial matter, we conclude that FNMA’s motion for summary judgment was
properly supported. In support of its motion for summary judgment, FNMA produced
evidence that established its constructive possession of the property at issue. Specifically,
FNMA submitted copies of the promissory note and deed of trust that Mr. Daniels signed in
August 2005. Those documents reflect that Mr. Daniels agreed to make monthly payments
due under the promissory note and that his failure to do so would result in a default
conferring a power of sale on the holder of the promissory note. The documents also provide
that, in the event of a foreclosure sale, Mr. Daniels was required to surrender the property
immediately or became a tenant at will of the foreclosure sale purchaser and pay the
reasonable rental value of the property. FNMA provided a letter indicating that the
promissory note was transferred to Nationstar in November 2010 and a summary of Mr.
Daniels’s payment history reflecting that he defaulted on his payment obligations under the
                                              7
promissory note in May 2011. FNMA submitted documents reflecting that, as a result of Mr.
Daniels’s default, Nationstar initiated foreclosure proceedings in accordance with the
promissory note and deed of trust. FNMA submitted a copy of a trustee’s deed reflecting that
Nationstar purchased the property as the highest bidder at the foreclosure sale and
subsequently assigned its interest in the property to FNMA. Finally, FNMA submitted copies
of the Form 1099-As that Nationstar issued to the Danielses following its purchase of the
property at the foreclosure sale. FNMA asserted that because a Form 1099-A is only sent
following a foreclosure sale to inform the borrower that the lender has acquired an interest in
the secured property, the Form 1099-As could not lead a reasonable person to conclude that
the Daniels’s debt was forgiven prior to the foreclosure. Accordingly, FNMA asserted that
Mr. Daniels’s reliance on the Form 1099-As to assert that Nationstar wrongfully foreclosed
on the property was misplaced. In light of that evidence, we conclude that, along with its
motion for summary judgment, FNMA produced evidence to establish its unlawful detainer
claim against Mr. Daniels. 2

      As we previously discussed, when a party submits a properly supported motion for
summary judgment, the burden shifts to the nonmoving party to establish the existence of a
genuine issue of material fact requiring trial. Town of Crossville Hous. Auth., 465 S.W.3d at
578. The nonmoving party may satisfy its burden of production and avoid summary
judgment by:

        (1) pointing to evidence either overlooked or ignored by the moving party that
        creates a factual dispute, (2) rehabilitating evidence challenged by the moving
        party, (3) producing additional evidence that creates a material factual dispute,
        or (4) submitting an affidavit in accordance with Tenn. R. Civ. P. 56.07
        requesting additional time for discovery.

Regions, 310 S.W.3d at 401 (quoting Rains v. Bend of the River, 124 S.W.3d 580, 587–88
(Tenn. Ct. App. 2003)). Here, it appears that Mr. Daniels attempted to satisfy his burden of
production and avoid summary judgment by requesting additional time for discovery
pursuant to Tennessee Rule of Civil Procedure 56.07. Although Mr. Daniels’s response does
not specifically cite Rule 56.07, Mr. Daniels asserted the need for further discovery in both

2
 When the party filing a motion for summary judgment has the burden of persuasion at trial, it must produce
evidence for all unadmitted elements of its claim, and the evidence must be such that, if uncontradicted, no
reasonable jury could find against the movant and the movant would be entitled to a directed verdict at trial.
Robert Banks, Jr. & June F. Entman, Tennessee Civil Procedure § 9-4(m) (4th ed. 2015). Here, there was no
dispute that Mr. Daniels continued to possess the property following the foreclosure sale. Thus, the only
unadmitted element of an unlawful detainer action that FNMA was required to produce evidence in support of
was its constructive possession of the property.

                                                      8
his written memorandum and his response to FNMA’s statement of undisputed facts. Mr.
Daniels also submitted his own affidavit that, in pertinent part, stated:

      2. In 2011, I received the attached IRS Form 1099 indicating that on August
      17, 2011, Nationstar Mortgage, 350 Highland Drive, Lewisville, Texas,
      forgave the debt I owed for the debt due to Nationstar Mortgage on the
      mortgage indebtedness on 2455 Forked Deer Road, Ripley, Tennessee. The
      document attached as Exhibit One (IRS Form1099) is an authentic copy of the
      document received by me at that time.

      3. My wife, Gloria Daniels died on August 20, 2007. The death certificate
      attached as Exhibit Two hereto as Exhibit Two is an authentic copy of the
      death certificate of Gloria Daniels.

      4. In 2011, I received a similar IRS Form 1099 indicating that on August 17,
      2011, Nationstar Mortgage, also forgave the debt owed by the Estate of Gloria
      Daniels, my wife who died on August 20, 2007, for the debt due to Nationstar
      Mortgage on the mortgage indebtedness on 2455 Forked Deer Road, Ripley,
      Tennessee. The document attached as Exhibit Three (IRS Form1099) is an
      authentic copy of the document received after the death of Gloria Daniels.

      5. On August 20, 2007, Gloria Daniels was a mortgagor for the property at
      2455 Forked Deer Road, Ripley, Tennessee.

      6. On August 20, 2007, Gloria Daniels was covered by PMI insurance for the
      mortgage debt for the property at 2455 Forked Deer Road, Ripley, Tennessee.
      PMI insurance is intended to satisfy mortgage indebtedness upon the death of a
      mortgage obligor covered under the PMI policy.

       Having carefully reviewed the filings Mr. Daniels submitted in response to FNMA’s
motion for summary judgment, we conclude that Mr. Daniels failed to comply with the
requirements of Rule 56.07. Rule 56.07 was enacted to serve as a safeguard against an
improvident or premature grant of summary judgment by insuring that a diligent party is
given a reasonable opportunity to prepare its case. See Kenyon v. Handal, 122 S.W.3d 743,
753 n.7 (Tenn. Ct. App. 2003) (citations omitted). The rule provides that:

      Should it appear from the affidavits of a party opposing the motion that such
      party cannot for reasons stated present by affidavit facts essential to justify the
      opposition, the court may refuse the application for judgment or may order a

                                              9
           continuance to permit affidavits to be obtained or depositions to be taken or
           discovery to be had or may make such other order as is just.

Tenn. R. Civ. P. 56.07. Thus, an affidavit submitted by a party seeking further discovery
pursuant to Rule 56.07 need not contain evidentiary facts related to the substantive merits of
the case; rather, it must explain why the nonmoving party has not been able to obtain and
present the evidentiary material needed to oppose the summary judgment motion. Kenyon,
122 S.W.3d at 753 n.7; see also 4 Nancy Fraas MacLean, Tennessee Practice Series-Rules of
Civil Procedure Annotated § 56:9 (4th ed. 2006) (―The request for a continuance must be
based upon affidavit stating the reasons why the party is unable to present by affidavit facts
essential to justify opposition to the motion for summary judgment.‖). When the nonmoving
party seeks to continue a motion for summary judgment pursuant to Tennessee Rule of Civil
Procedure 56.07, we review the trial court’s decision to deny the continuance for an abuse of
discretion. Regions, 310 S.W.3d at 401. The statements in Mr. Daniels’s affidavit relate
solely to the substantive merits of his position; it does not state the reasons why he is unable
to present by affidavit the facts needed to oppose FNMA’s motion for summary judgment.
Thus, because Mr. Daniels failed to comply with Rule 56.07, we conclude that the Circuit
Court did not abuse its discretion in denying his request for further discovery.

         Moreover, even assuming that Mr. Daniels submitted his request for further discovery
in compliance with Rule 56.07, summary judgment would have nevertheless been appropriate
because the discovery he sought was irrelevant to determining whether or not FNMA was
entitled to summary judgment. A trial court’s decision to deny a request for discovery ―must
be viewed in the context of the issues being tried and the posture of the case at the time the
request for discovery is made.‖ Cardiac Anesthesia Servs., PLLC v. Jones, 385 S.W.3d 530,
538 (Tenn. Ct. App. 2012) (quoting Regions, 310 S.W.3d at 401)). Thus, even if Mr. Daniels
had complied with Rule 56.07, summary judgment would have been appropriate if the
requested discovery would not have assisted him in responding to FNMA’s motion for
summary judgment. See Regions, 310 S.W.3d at 401 (citing Simmons v. State Farm Gen.
Ins. Co., No. W2003–02643–COA–R3–CV, 2004 WL 2715341, at *5 (Tenn. Ct. App. Nov.
24, 2004) (no perm. app. filed)). Mr. Daniels argues on appeal that the Circuit Court abused
its discretion in denying him the opportunity to conduct further discovery related to the
private mortgage insurance policy maintained on the property. Mr. Daniels theorizes that,
based on the Form 1099-As, a reasonable person could conclude that his debt under the
promissory note was paid pursuant to a private mortgage insurance policy following Ms.
Daniels’s death in August 2007, and that Nationstar therefore wrongfully foreclosed on the
property and had no right to purchase the property through foreclosure or transfer any interest
in it to FNMA.3 Simply put, Mr. Daniels asserts that a reasonable person could conclude that

3
    In his appellate brief, Mr. Daniels states:
                                                  10
FNMA lacked constructive possession of the property. Mr. Daniels’s theory fails, first and
foremost, because it is based on an inaccurate assertion that Nationstar’s transmission of the
Form 1099-As could lead a reasonable person to conclude that Mr. Daniels’s obligation to
make payments under the promissory note was discharged prior to foreclosure. Federal law
requires any person who, in connection with his or her trade or business, lends money
secured by property to provide the borrower with a Form 1099-A if the lender ―in full or
partial satisfaction of any indebtedness, acquires an interest in any property which is security
for such indebtedness . . . .‖ 26 U.S.C. § 6050J(a)(1). Nationstar acquired an interest in the
property by purchasing it at the foreclosure sale and was therefore required to provide the
Daniels with a Form 1099-A. Thus, by its very definition, a Form 1099-A does not reflect
that Nationstar or any of its successors in interest forgave the debt owed under the
promissory note prior to foreclosure sale; rather, it only reflects that Nationstar acquired an
interest in the property at the foreclosure sale. Contrary to Mr. Daniels’s assertion, no
reasonable person could conclude that the Form 1099-As are evidence that Mr. Daniels’s
debt under the promissory note was forgiven or that Nationstar wrongfully foreclosed on the
property.4 Moreover, accepting Mr. Daniels’s theory requires an incorrect understanding of
private mortgage insurance. Private mortgage insurance protects lenders from mortgage
default risk; it does not relieve borrowers of the obligation to pay amounts due under the
promissory note. See BLACK’S LAW DICTIONARY 924 (10th ed. 2014). That principle
is clearly set forth in Section 10 of the deed of trust, which addresses the Daniels’s obligation
to maintain private mortgage insurance:

        Mortgage Insurance reimburses Lender (or any entity that purchases the Note)
        for certain losses it may incur if Borrower does not repay the Loan as agreed.
        Borrower is not a party to the Mortgage Insurance.

        Daniels made a good faith showing that the 1099s were issued to Daniels by an FNMA
        predecessor in interest; that prior to the issuance of the 1099s, Daniels’ wife had died; that the
        Daniels had PMI insurance on the property that presumably would have covered the death of
        a mortgage obligor; and that there is no other reasonable explanation for the issuance of the
        1099s other than forgiveness of the mortgage indebtedness. These facts, taken together,
        would lead a reasonable person to question whether the PMI had paid off the debt on the
        property before FNMA obtained it.
4
 As an aside, we note that the payment history submitted along with FNMA’s motion for summary judgment
reflects that although Mr. Daniels fell behind on his monthly payments, he continued to make payments
sporadically until at least April 2011. Thus, given Mr. Daniels’s assertion that his obligations under the
promissory note were discharged by private mortgage insurance after Ms. Daniels passed away in August
2007, we find it curious that Mr. Daniels does not purport to advance any claim for payments erroneously
made after that date.
                                                    11
The fact that a private mortgage insurance policy was in effect at the time of Ms. Daniels’s
death in August 2007 would not have had any effect on Mr. Daniels’s obligation, having also
signed the promissory note as a borrower, to continue making payments to avoid default.
The payment history that FNMA submitted along with its motion for summary judgment
reflects that he failed to do so. Thus, even viewing the record in the light most favorable to
Mr. Daniels and allowing all reasonable inferences in his favor, there is no evidence in the
record from which a reasonable person could find that Nationstar wrongfully foreclosed on
the property.

       In sum, Mr. Daniels’s theory that Nationstar wrongfully foreclosed on the property is
based on an inaccurate assertion that the Form 1099-A could lead a reasonable person to
conclude that Mr. Daniels’s debt under the promissory note was discharged prior to
foreclosure and an incorrect understanding of private mortgage insurance. The undisputed
evidence demonstrates that Mr. Daniels’s debt was not discharged, and further discovery
related to private mortgage insurance would not have assisted Mr. Daniels in demonstrating
any genuine issue of material fact. We therefore conclude for these additional reasons that
the Circuit Court did not abuse its discretion in denying Mr. Daniels’s discovery requests.
The judgment of the Circuit Court is affirmed.

                                       CONCLUSION

       Based on the foregoing, the judgment of the Circuit Court is affirmed. The costs of
this appeal are taxed to the Appellant, Danny O. Daniels, and his surety, for which execution
may issue if necessary.

                                                  _________________________________
                                                  ARNOLD B. GOLDIN, JUDGE

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