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Ralls v. Federal National Mortgage Association

United States District Court, W.D. Virginia, Charlottesville Division

August 12, 2019

WALTER B. RALLS, Plaintiff,
v.
FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al, Defendants.

          MEMORANDUM OPINION

          Hon. Glen E. Conrad Senior United States District Judge.

         Walter B. Ralls filed this action for fraud and breach of contract against Federal National Mortgage Association ("Fannie Mae") and Seterus, Inc. ("Seterus"). The case is presently before the court on the defendants' motion to dismiss. For the reasons set forth below, the motion will be granted in part and denied in part.

         Background

         The following facts are taken from the complaint and documents relied on therein. See Phillips v. LCI Int'l. Inc., 190 F.3d 609, 618 (4th Cir. 1999) (noting that the court can properly consider documents that are "integral to and explicitly relied on in the complaint" when ruling on a motion to dismiss).

         In February of 2005, Ralls obtained a refinance loan from Countrywide Home Loans, Inc. The loan was evidenced by a note signed by Ralls, and secured by a deed of trust on rental property located at 234 Stribling Avenue in Charlottesville, Virginia (the "Property"). The note was later assigned to Fannie Mae.

         At some point thereafter, Ralls defaulted on the note by failing to make monthly mortgage payments. See Compl. ¶ 10, Dkt. No. 1-1 ("Ralls fell into arrears on the note."); Note ¶ 6(B) ("If I do not pay the full amount of each monthly payment on the date it is due, I will be in default."). Seterus, acting as the loan servicer and agent for Fannie Mae, initiated foreclosure proceedings. Seterus engaged the law firm of Orlans, P.C. ("Orlans") to serve as foreclosure counsel, and directed ALG Trustee, LLC ("ALG"), the substitute trustee, to foreclose on the Property.

         "In July 2017, Ralls, realizing he was in arrears, called Seterus to inquire about the status of the loan." Compl. ¶ 14. A representative of Seterus (the "First Seterus Representative") "told him that the loan was in a foreclosure process." Id. Ralls inquired as to the amount of money that would be required to bring the loan current. The First Seterus Representative told Ralls that he would need to make a payment of $13, 671.

         By letter dated August 1, 2017, Orlans notified Ralls that a foreclosure sale would occur on August 22, 2017 at 2:30 p.m. The notice was sent to the physical address of the Property.

         At some point during the first half of August, Ralls called Seterus and spoke to another representative (the "Second Seterus Representative"). During the telephone conversation, the Second Seterus Representative indicated at least twice that the foreclosure sale was scheduled for August 24, 2017, rather than August 22, 2017. Ralls did not have the written notice with him during the conversation and therefore was unaware of any discrepancy between the notice and the information provided by the Second Seterus Representative.

         On August 16, 2017, Ralls contacted Robert Rowley, a friend who had helped him avoid foreclosure in the past. Ralls advised Rowley that he needed to make a payment of $13, 671 to stop the foreclosure on the Property and reinstate the loan. Rowley, who was preparing to drive to Indiana that same day, made arrangements to borrow the necessary funds from a third party. Rowley also arranged for his friend Sharon Millner to assist in facilitating the transaction.

         Ralls was aware that he could stop the foreclosure sale of the Property by filing a Chapter 13 bankruptcy petition. He also knew a local bankruptcy attorney who could assist him in doing so. However, Ralls did not want to file a bankruptcy petition if he could avoid foreclosure by bringing the loan current.

         On the morning of August 22, 2017, Ralls went to his car and found the August 1, 2017 notice from Orlans. Upon reading the notice, Ralls realized that the foreclosure sale was scheduled for 2:30 p.m. that day, as opposed to August 24, 2017. Ralls called Orlans and inquired as to whether he could send the law firm the amount needed to reinstate the loan and stop the foreclosure sale. An Orlans representative advised Ralls that the law firm was not authorized to accept any reinstatement funds and that Ralls should contact Seterus.

         Ralls immediately called Seterus and spoke to a manager (the "Seterus Manager")- The Seterus Manager confirmed that Ralls would need to make a payment of $13, 671 to stop the foreclosure sale and reinstate the loan. Ralls explained that he had previously been told that the foreclosure sale was scheduled for August 24, 2017, and that he had made arrangements to pay the required amount by that date. The Seterus Manager instructed Ralls to wire the $13, 671 payment to Seterus as soon as possible, and to send the Seterus Manager the wire transfer number. Ralls and the Seterus Manager then discussed the fact that it would take up to two days for Seterus to actually receive the wired funds. The Seterus Manager advised Ralls that he would consider the loan reinstated upon receipt of the wire transfer number, and that he would then instruct Orlans to stop the foreclosure sale.

         Realizing that it would take some time to get the funds wired, Ralls asked the Seterus Manager "whether the sale would be stopped if confirmation of the wiring of the funds came at or slightly after the sale time." Compl. ¶ 37. The Seterus Manager "told Ralls that the sale could be undone even after the sale and assured Ralls that if the wiring notification came soon after the foreclosure, the [Seterus Manager] would take the action ...


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