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Coon v. Federal National Mortgage Association

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

June 27, 2019



          M. Hannah Lauck United States District Judge.

         This matter comes before the Court on Defendant Federal National Mortgage Association's ("FNMA") Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)[1] (the "Motion to Dismiss"). (ECF No. 14.) Plaintiff Maryfrances A. Coon responded, and FNMA replied. (ECF Nos. 16, 17.) Accordingly, the matter is ripe for disposition. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1332.[2] For the reasons that follow, the Court will grant FNMA's Motion to Dismiss.

         I. Factual and Procedural Background

         A. Procedural

         History Coon filed her original, three-count Complaint against FNMA and Defendant Equity Trustees, LLC ("Equity")[3] in the Circuit Court for Amelia County, Virginia. She sued for (I) "[r]escission of [f]oreclosure and [t]rustee's [d]eed and for [d]amages on [g]rounds of [d]ual foreclosure;" (II) "[r]escission of [f]oreclosure and [t]rustee's [d]eed and for [d]amages on [g]rounds of [b]reach of the [c]ure-[n]otice [requirement of [p]aragraph 22 of the [d]eed of [t]rust;" and, (III) "[b]reach of [i]mplied [c]ovenant of [g]ood [f]aith and [f]air [d]ealing: [s]uit for [d]amages." (Compl. 3, 7, 8, ECF No. 1-1.)

         FNMA removed the action to this Court under 28 U.S.C. § 1441[4] on the basis of diversity jurisdiction. Coon did not seek remand, and FNMA timely filed a motion to dismiss. Coon responded, and FNMA replied. On August 15, 2018, this Court dismissed Equity without prejudice, dismissed Count I of the Complaint with prejudice, dismissed Counts II and III without prejudice, and granted Coon leave to file an amended complaint.

         Coon timely filed her Amended Complaint against FNMA only and asserted only a single claim of breach of the implied covenant of good faith and fair dealing. FNMA then filed the instant Motion to Dismiss. Coon responded, and FNMA replied.

         B. Summary of Allegations in the Amended Complaint[5]

         This case centers around FNMA's alleged wrongful foreclosure of Coon's home (the "home"). Sometime before February 9, 2008, Coon inherited the home from her parents, free of any outstanding mortgage lien. On February 9, 2008, Coon conveyed ownership of the home to her husband, Stanley Coon ("Stanley"). The same day, Stanley entered into a mortgage loan with Advanced Financial Services, Inc. ("AFNI"), evidenced by a promissory note (the "Note") and secured by a deed of trust (the "Deed of Trust").[6] The Deed of Trust identified Stanley as the "Borrower."[7] (Deed of Trust 2, ECF No. 11-1 ("'Borrower' is Stanley G[.] Coon.").) Stanley passed away on July 11, 2011. At some point, according to Coon, AFNI assigned the Note to FNMA, which "claimed status as the owner of the [N]ote" and retained Seterus, Inc. ("Seterus"), to service the loan. (Am. Compl. ¶¶ 11, 12, ECF No. 11.)

         The Deed of Trust contains two provisions relevant to Coon's claims. First, the Deed of Trust defines applicable law as "all controlling applicable federal, state[, ] and local statutes, regulations, ordinances[, ] and administrative rules and orders (that have the effect of law) as well as all applicable final, non-appealable judicial opinions" (the "Applicable Law Definition"). (Deed of Trust 3.) Second, paragraph twenty-two of the Deed of Trust governs acceleration and foreclosure of the loan. That paragraph provides, in relevant part:

Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in [the Deed of Trust] .... The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and[, ] (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by [the Deed of Trust] and sale of the Property. ... If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by [the Deed of Trust] without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law...
If Lender invokes the power of sale, Lender or Trustee shall give to Borrower, the owner of the Property, and all other persons, notice of sale as required by Applicable Law. . . . Lender or its designee may purchase the Property at any sale.

(Deed of Trust 13 (the "Foreclosure Clause").)

         At an unidentified time in 2015, Seterus sent "correspondence" addressed to the Estate of Stanley Coon, "promis[ing] a loan modification based on qualification for the same and based on acceptance by telephone by a specified date and timely payment of three trial payments." (Am. Compl. ¶ 16.) Coon alleges that she called Seterus within the stated deadline, identified herself as Stanley's widow, "accepted the trial payment and loan modification offer," and timely made the three trial payments. (Id. ¶¶ 17, 18.) However, some time in 2016, Seterus "sent back the third payment," informing Coon that she must assume the loan. (Id. ¶ 20.)

         On January 19, 2016, Seterus sent a letter addressed to Stanley G. Coon. (Id. ¶ 21.) On the same day, Seterus sent a letter addressed to Coon.[8] (Id. ¶ 22.) "Both [letters] gave a deadline of February 23, 2018 to bring the loan current and indicated that failure to do so could result in acceleration of the [N]ote and foreclosure under the [D]eed of [T]rust." (Id. ¶ 23.) Each letter stated that the loan was in default. (Id. ¶ 26.)

         Coon contacted Seterus, and Seterus told Coon "she was required to complete certain paperwork towards assumption of the loan." (Id. ¶ 31.) Seterus also told Coon "to ignore the 30-day cure notice and not to make any further payments until the application process involving the paperwork for assumption of the loan was completed." (Id. ¶ 32.) Coon sent the requested paperwork to Seterus, disregarded the cure notice, and did not make further payments to bring the loan current. (Id. ¶¶ 35, 39.) Coon alleges that Seterus repeatedly told her she had "sent everything necessary for assumption of the loan," and then "repeatedly told [her] that Seterus needed more." (Id. ¶¶ 40, 41.) According to Coon, this happened at least three times. (Id. ¶ 40.)

         At some point, Seterus appointed Equity as "substitute trustees." (Id. ¶ 19.) Thereafter, "Seterus, on behalf of [FNMA], instructed Equity ... to foreclose on the home." (Id. ¶ 42.) Equity advertised the home for a foreclosure sale to occur on March 29, 2017. (Id.)

         Coon learned of the foreclosure sale "about a week before" the scheduled sale, and called Seterus to ask why the home was scheduled for foreclosure. (Id. ¶¶ 43, 44.) Seterus told Coon that it needed additional paperwork, and that Coon must be "appointed as administrator on [sic] Stanley Coon's estate." (Id. ¶¶ 44, 46.) Coon sent Seterus "proof of her appointment as administrator" of Stanley's estate[9] on March 28, 2017, the day before the scheduled foreclosure. (Id. ¶ 48.) Seterus nevertheless "instructed Equity ... to proceed with foreclosure of the home." (Id. ¶ 49.) Equity conducted a foreclosure sale, at which FNMA made the high bid of $166, 858.56, even though the home was assessed for tax purposes at $212, 400.00. (Id.) Coon contends that Equity "acted on its own and as agent for [FNMA]" when it conducted the foreclosure sale. (Id. ¶ 50.)

         Seemingly some time thereafter, FNMA "advertised an Internet Auction to sell the home," but Coon's filing of this lawsuit suspended the auction before it took place. (Id. ΒΆ 52.) Nothing in the record indicates that the auction has since occurred. FNMA also, at some point, "posted a notice on the door of the home asserting ...

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