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Woody v. Nationstar Mortgage, LLC

United States District Court, E.D. Virginia, Richmond Division

January 30, 2017

ORLANDO C. WOODY, Plaintiff,


          Henry E. Hudson United States District Judge

         THIS MATTER is before the Court on Plaintiff Orlando C. Woody's ("Woody" or "Plaintiff) Motion to Remand (ECF No. 13, corrected in ECF No. 14), Defendant Professional Foreclosure Corporation of Virginia's ("PFC") Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 23), and Defendants U.S. Bank, National Association as Indenture Trustee for Springleaf Mortgage Loan Trust 2012-2 ("U.S. Bank") and Nationstar Mortgage LLC's ("Nationstar, " and together with U.S. Bank, the "Defendants") Motion to Compel Arbitration and Dismiss or Stay this Action Pending Binding Arbitration. (ECF Nos. 6, 7, 8).

         Each side has filed memoranda supporting their respective positions. The Court will dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the Court, and oral argument would not aid in the decisional process. E.D. Va. Loc. Civ. R. 7(J).

         For the following reasons, the Court will deny Plaintiffs Motion to Remand and grant Defendants' Motion to Compel Arbitration. The Court will dismiss Count VII against PFC with prejudice and dismiss PFC from this case. Since the Court is Granting Defendants' Motion to Compel Arbitration, Counts I-VI against Defendants will be dismissed without prejudice.

         I. BACKGROUND

         As required by Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court assumes Plaintiffs well-pleaded allegations to be true and views all facts in the light most favorable to him. T.G. Slater & Son v. Donald P. & Patricia A. Brennan LLC, 385 F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). At this stage, the Court's analysis is both informed and constrained by the four corners of Plaintiff s Complaint.[1] Viewed through this lens, the facts are as follows.

         On September 25, 2003, Bertha Woody entered into a loan for $30, 000 with American General Financial Services Inc. ("American General"), evidenced by a note signed by both parties. (Compl. ECF No. 1-1.) The loan was secured by a deed of trust, encumbering property at 2295 Desha Road in Tappahannock, Virginia. (Id. ¶¶ 6-7.) The deed of trust was duly recorded in the Essex County public land records in Deed Book 283, beginning at Page 702. (Id. ¶ 7.) American General subsequently assigned the note to U.S. Bank in July 2015, who engaged Nationstar as its servicer. (Id. ¶ 14-15.)

         The Home Equity Line of Credit Agreement ("HELOC Agreement") accompanying Bertha Woody's deed of trust contained an Arbitration Agreement that encompassed all claims and disputes arising out of, in connection with, or relating to:

My loan from lender today ... all documents, promotions, advertising, actions or omissions relating to this or any loan or Retail Contract made by or assigned to Lender... whether the claim or dispute must be arbitrated; the validity and enforceability of this Arbitration Agreement, and the Agreement, my understanding of them, or any defenses as to the validity of the Agreement and this Arbitration Agreement; any negotiations between Lender and me; the closing, servicing, collecting, or enforcement of any transaction covered by this Agreement; any allegation of fraud or misrepresentation; any claim based on or arising under any federal, state, or local law, statute, regulation, ordinance, or rule; any claim based state or federal property laws; any claim or dispute based on any alleged tort (wrong), including intentional torts; and any claim for injunctive, declaratory, or equitable relief.

(ECF No. 9-l, at7.)

Moreover, the Arbitration Agreement "applies to and runs to the benefit of [both parties'] assigns, successors, executors, heirs, and/or representatives.'''' (Id. at 8 (emphasis added).)

         Bertha Woody died intestate on November 9, 2014, leaving her only son, Orlando C. Woody, as her sole heir. (Compl. ¶ 10.) On April 24, 2015, Nationstar-acting as servicer of U.S. Bank-executed a document stating that it was appointing PFC as a substitute trustee under the deed of Trust. (Id. ¶ 13.) Woody claims that this document "did not, in fact, remove [the original trustee] and did not, in fact, appoint PFC as substitute trustee on the deed of trust because U.S. Bank was not [the] holder of the note on April 24, 2015." (Id.) In its capacity as substitute trustee, PFC placed an advertisement in a newspaper with general circulation in Essex County, Virginia, giving notice that it intended to conduct a foreclosure sale on the property encumbered by the deed of trust. (Id. ¶ 18.) And on February 16, 2016, PFC conducted the foreclosure sale and sold the property to Herbert Reynolds ("Reynolds"). (Id. ¶ 20.)

         Woody, who was living in the home on February 16, 2016, avers that he was unaware that the foreclosure sale was taking place and that he was attempting to obtain a loan from his credit union to pay off his mother's debt. (Id. ¶ 22.) Reynolds gave Woody a date to move out, and Woody remained in the home beyond that deadline. (Id. ¶ 26.) Reynolds evicted Woody from the home and changed the locks but still allowed him to return and pick up some of his personal property. (Id. ¶ 28.) Nevertheless, Woody was unable to retrieve all of his personal items, and some of the property that he was able to obtain was damaged in the move. (See id.)

         As a result, Woody filed a seven-count Complaint against Nationstar, U.S. Bank, and PFC in the Circuit Court of Essex County, Virginia on September 8, 2016, seeking damages from the foreclosure of his mother's home. In Count I, Plaintiff alleges that Nationstar breached the deed of trust by failing to give Plaintiff notice of default prior to foreclosure. (Id. ¶¶ 16-31.) Count II asserts that U.S. Bank wrongfully appointed PFC to act as substitute trustee because U.S. Bank was not the holder of the note at the time the substitution took place. (Id. ¶¶ 40-42.) In Counts III, IV, and V, Plaintiff alleges that Nationstar committed actual or constructive fraud by misleading Plaintiff to prevent him from pursuing Chapter 13 Bankruptcy and that U.S. Bank is vicariously liable for Nationstar's fraudulent acts. (Id. ¶¶ 43-83.) Alternatively, Woody contends in Count VI that the same fraudulent acts previously alleged in Counts III, IV, and V constituted a breach of an implied covenant of good faith. (Id. ¶ 84-88.) Finally, in Count VII, Plaintiff alleges "[interference by [PFC] with Contract Rights of [Plaintiff]." (Id. ¶¶ 89-96.)

         Woody seeks compensatory and punitive damages in the total amount of $1, 250, 000, as well as attorney's fees as they pertain to Count II. (Id. ¶¶ 19-20.)

         Nationstar is a limited liability company, and is a citizen of Texas and Delaware. (Notice of Removal ¶ 26, ECF No. 1.) U.S. Bank is a national banking association with its main office in Ohio. (Id. ¶ 27.) PFC is a Virginia Corporation with its principal place of business in Virginia. (Id. ¶ 29.) And Plaintiff is a citizen of the Commonwealth of Virginia. (Compl. ¶ 1.)

         Defendants, without PFC, removed the action to this Court pursuant to 28 U.S.C. § 1332(a) on October 7, 2016, well within the thirty-day timeline required by 28 U.S.C. § 1446. (See Notice of Removal.) They argue that, although Plaintiff and PFC are both citizens of Virginia, PFC was fraudulently joined in this action to prevent complete diversity. (Id.) Woody filed a Motion to Remand (ECF No. 13, corrected in ECF No. 14), opposing removal. Defendants filed a Motion to Compel Arbitration pursuant to the provisions in the HELOC Agreement. (ECF No. 6, 7, 8.) And PFC filed a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) on December 1, 2016. (ECF No. 23.)

         II. ...

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