ARCPE 1, LLC v. Nationstar Mortg., LLC

261 F.Supp.3d 1235

ARCPE 1, LLC, Plaintiff,

v.NATIONSTAR MORTGAGE, LLC, Defendant.

Case No. 16–20448–CIV–GAYLES/OTAZO–REYES

United States District Court, S.D. Florida.

Signed August 10, 2017

Jeremy Adam Koss, Koss, Jacobs & Zilber, P.A., Sunrise, FL, for Plaintiff.

Eric Shaun Matthew, Miami, FL, William Patrick Heller, Akerman LLP, Fort Lauderdale, FL, Marissa Ximena Kaliman, Akerman, LLP, Miami, FL, for Defendant.

REPORT AND RECOMMENDATION

ALICIA M. OTAZO–REYES, UNITED STATES MAGISTRATE JUDGE

THIS CAUSE came before the Court upon Defendant Nationstar Mortgage, LLC's ("Defendant" or "Nationstar") Motion for Summary Judgment [D.E. 63]. This matter was referred to the undersigned by the Honorable Darrin P. Gayles, United States District Judge, pursuant to Title 28, United States Code, Section 636 [D.E. 84]. The undersigned held a hearing on this matter on May 18, 2017 [D.E. 89]. Having heard the arguments of counsel and having considered the record and the applicable law, the undersigned respectfully recommends that the Motion for Summary Judgment be GRANTED.

PROCEDURAL AND FACTUAL BACKGROUND

In this action, Plaintiff ARCPE 1, LLC ("Plaintiff" or "ARCPE") brings a single claim against Nationstar for conversion of a Note and Mortgage. See Am. Comp. [D.E. 15]. ARCPE alleges the following facts in support of its conversion claim:

• On March 21, 2003, James F. Higginbotham and Sherry L. Higginbotham ("the Higginbothams") executed and delivered the Note to Homecomings Financial Network, Inc. ("Homecomings") in the principal amount of $306,000.

• On the same date, the Higginbothams executed and delivered the Mortgage to Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for Homecomings.

• The Mortgage secured the amounts due under the Note and encumbered certain real property ("Property") located in Manatee County, Florida, which was owned by the Higginbothams.

• The Mortgage was recorded in the Public Records of Manatee County, Florida.

• The Mortgage was assigned to GMAC Mortgage, LLC in 2007 and to Nationstar in 2010. Both assignments were recorded in the Public Records of Manatee County, Florida.

• On August 9, 2011, Nationstar assigned the Mortgage to Roundpoint Mortgage Servicing Corporation ("Roundpoint"). The assignment was recorded in the Public Records of Manatee County, Florida.

• On August 9, 2013, Nationstar filed an action to foreclose on the Mortgage. After a foreclosure sale, a Certificate of Title to the Property was issued to the Federal National Mortgage Association ("Fannie Mae").

• On May 2, 2014, the Certificate of Title to the Property was recorded in the Public Records of Manatee County, Florida.

• On May 19, 2015, Fannie Mae sold the Property to Susan R. Grainger and Wesley R. Grainger ("the Graingers").

• On August 11, 2015, ARCPE purchased the Note and Mortgage from Roundpoint. Roundpoint executed an Allonge to Note, endorsing the Note to ARCPE. Roundpoint executed an Assignment of Mortgage and Other Loan Documents to ARCPE, assigning all rights, title and interest in the Note and Mortgage to ARCPE.

Id. Based on these alleged facts, ARCPE claims that Nationstar did not own the Note and Mortgage and did not have the right to bring the foreclosure action in August 2013. Id. ARCPE seeks to recover damages in an unspecified amount, plus interest and costs. Id.

Nationstar seeks summary judgment on ARCPE's conversion claim on the grounds that ARCPE did not have a right to possess the Note and did not demand its return. See Motion for Summary Judgment [D.E. 63 at 6–7]. As shown above, there is no allegation that Nationstar endorsed the Note to Roundpoint; ARCPE only alleges that Nationstar assigned the Mortgage to Roundpoint in August 2011. ARCPE responds that, even if the Note was not endorsed to Roundpoint, ARCPE still has a viable claim for conversion of the Mortgage. See Plaintiff's Response to Motion for Summary Judgment [D.E. 65 at 8–9]. ARCPE also argues that it is a bona fide purchaser ("BFP") of the Mortgage as a result of the Assignment to Roundpoint being recorded in the public records. Id. at 11–13. Thus, ARCPE's conversion claim against Nationstar is limited to the Mortgage and is wholly predicated on its alleged BFP status. Finding no basis in law or fact for this narrowed conversion claim, the undersigned respectfully recommends that Nationstar's Motion for Summary Judgment be GRANTED.

APPLICABLE LAW

I. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). When determining whether a genuine issue of material fact exists, courts "view all evidence and draw all reasonable inferences in favor of the non-moving party." Smith v. Royal Caribbean Cruises, Ltd., 620 Fed.Appx. 727, 729 (11th Cir. 2015). "Yet, the existence of some factual disputes between litigants will not defeat an otherwise properly grounded summary judgment motion; ‘the requirement is that there be no genuine issue of material fact.’ " Weiner v. Carnival Cruise Lines, No. 11-CV-22516, 2012 WL 5199604, at *2 (S.D. Fla. Oct. 22, 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Indeed,

[T]he plain language of [ Rule 56 ] mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be no genuine issue as to any material fact, since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.

Cohen v. Carnival Corp., 945 F.Supp.2d 1351, 1354 (S.D. Fla. 2013) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). Hence, the mere existence of a scintilla of evidence in support of the non-moving party's position is insufficient; there must be evidence upon which a jury could reasonably find for the non-movant. Anderson, 477 U.S. at 251, 106 S.Ct. 2505.

II. Conversion Claim

"A conversion occurs when a person who has a right to possession of property demands its return and the demand is not or cannot be met." Ginsberg v. Lennar Fla. Holdings, Inc., 645 So.2d 490, 500 (Fla. 3d DCA 1994) (quoting Shelby Mut. Ins. v. Crain Press, 481 So.2d 501, 503 (Fla. 2d DCA 1985) ). "However a demand and refusal are unnecessary w[h]ere it would be futile and the act preventing a return results in a depriving of possession and, thus equates to a conversion." Id.

III. Relationship Between Note and Mortgage

"A mortgage is the security for the payment of the negotiable promissory note." Cleveland v. Crown Fin., LLC, 183 So.3d 1206, 1209 (Fla. 1st DCA 2016). "A promissory note is not a mortgage." Id. Further,

The promise to pay is one distinct agreement, and, if couched in proper terms is negotiable. The pledge of real estate to secure that promise is another distinct agreement, which ordinarily is not intended to affect in the least the promise to pay, but only to give a remedy for failure to carry out the promise to pay. The holder of the note may discard the mortgage entirely, and sue and recover on the note.

Id. at 1210.

"[A] mortgage—as a mere incident to the debt it secures—follows the note unless the parties have clearly expressed a contrary intent." Taylor v. Bayview Loan Servicing, LLC, 74 So.3d 1115, 1118 (Fla. 2d DCA 2011). Thus, "an assignment of the mortgage without an assignment of the debt creates no right in the assignee." Tilus v. AS Michai LLC, 161 So.3d 1284, 1286 (Fla. 4th DCA 2015).

IV. Bona Fide Purchaser

"[T]o be a bona fide purchaser three conditions must be satisfied: the purchaser must have (1) acquired the legal title to the property in question; (2) he must have paid value therefor; and (3) he must have been innocent of knowledge of the equity against the property at the time when he paid his value and acquired his title." Demosthenes v. Girard, 955 So.2d 1189, 1192 (Fla. 3d DCA 2007).

UNDISPUTED MATERIAL FACTS ¹

1. The Higginbothams obtained a $306,000 loan on March 21, 2003 (hereafter, "Loan# 1").

2. The Higginbothams modified their loan terms on March 14, 2009.

3. The Higginbothams stopped making loan payments in May 2009.

4. Nationstar foreclosed on August 9, 2013. The complaint alleged that Fannie Mae was the loan owner and that Nationstar was the loan servicer and authorized party to foreclose.

5. The complaint named junior lienholders, including a $215,000 mortgage in favor of Private Lender Services, Corp. ("Private Lender").

6. The state court granted final judgment in favor of Nationstar on March 11, 2014.

7. Nationstar assigned its judgment credit bid to Fannie Mae. A certificate of title was issued to Fannie Mae on May 2, 2014.

8. After taking title to the property post-foreclosure, Fannie Mae sold it to a third party on May 19, 2015.

9. Fannie Mae owned the $306,000 loan (Loan # l).²

10. Fannie Mae did not sell the $306,000 loan (Loan # 1).³

11. The Higginbothams obtained a $215,000 second mortgage loan designated in the loan documents as a "wraparound" mortgage on August 16, 2006 in favor of Private Lender (hereafter, "Loan # 2"). It secured a $510,000 promissory note.⁴

12. The Wrap Around Mortgage Rider provides, in key part:

WRAP AROUND MORTGAGE RIDER

This Rider is executed this 16th day of August, 2006 and is incorporated into that certain mortgage dated August 16, 2006 (the "Mortgage") executed by James Higginbotham and Sherry Higginbotham (the "Mortgagor") in favor of Private Lender Services, Corp. (the "Mortgagee") securing a promissory note in the amount of $510,000.00 (the "Note"). Mortgagor and Mortgagee agree as follows:

1. The mortgage is subordinate and inferior to that

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