Christopher Brewster v. Nationstar Mortgage, LLC
2014 U.S. App. LEXIS 2399
9th Cir.2014Background
- Brewster, a U.S. Marine Corps Reserve Lieutenant Colonel, was on active duty (including an overseas deployment) between 2008–2011 and fell behind on mortgage payments for a California home whose loan originated before his service.
- Sun Trust (original servicer) filed a Notice of Default in December 2009 and assessed foreclosure-related fees, but rescinded the Notice in August 2010 and did not remove those fees from Brewster’s account.
- Nationstar acquired servicing rights in November 2010 while Brewster remained on active duty and did not remove the previously assessed foreclosure fees; Nationstar attempted to collect those fees during roughly five months of Brewster’s active service.
- Brewster sued under § 533 of the Servicemembers Civil Relief Act (SCRA), alleging the attempted collection/retention of fees incident to a Notice of Default constituted a prohibited foreclosure action while on active duty; the district court dismissed under Rule 12(b)(6).
- The Ninth Circuit reversed, holding that the attempted collection/continuing retention of foreclosure-related fees incident to a Notice of Default can constitute continuation of a foreclosure “proceeding” barred by § 533.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 533’s term “foreclosure” includes actions short of sale/seizure, such as continued assessment or collection of foreclosure-related fees | Brewster: attempted collection/retention of fees incident to a rescinded Notice of Default is part of the foreclosure proceeding and thus barred by § 533 during active duty | Nationstar: § 533 should apply only to formal foreclosure steps that transfer ownership or culminate in sale/seizure; fees incidental to an abandoned proceeding are not a continuing foreclosure | Held: “Foreclosure proceedings” is broad; attempted collection/retention of fees related to a Notice of Default can be a continuation of foreclosure and violates § 533 when occurring during servicemember’s active duty |
| Whether Nationstar’s assumption of servicing after the Notice of Default was rescinded insulated it from liability for continuing the foreclosure | Brewster: assignee/servicer who continues to impose or collect fees perpetuates the foreclosure proceeding and is liable under § 533 | Nationstar: liability should not extend to a servicer who did not initiate the Notice of Default and where the formal proceeding was terminated before transfer | Held: Nationstar’s failure to remove and its attempts to collect the fees after acquiring servicing rights plausibly alleged a continuation of the foreclosure; reversal of dismissal |
| Whether the court must resolve availability of private cause of action under SCRA or retroactivity of 2010 amendment | Brewster: § 597a (added 2010) provides a private right of action for violations after its enactment; relief can be awarded for conduct post-enactment | Nationstar: raised arguments about implied rights and retroactivity of the Veterans Benefits Act amendment | Held: Court relied on § 597a (2010 amendment) for post-enactment conduct and did not decide broader implied-right or retroactivity questions |
| Availability of punitive damages under § 533 | Brewster sought damages including possibly punitive damages | Nationstar opposed; court invited supplemental briefing | Held: District court decision reversed; Ninth Circuit did not decide availability of punitive damages at this stage |
Key Cases Cited
- Boone v. Lightner, 319 U.S. 561 (1943) (broad equitable relief and stays granted to protect servicemembers in state proceedings)
- LeMaistre v. Leffers, 333 U.S. 1 (1948) (SCRA construed broadly to effect the statute’s beneficent purpose)
- Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202 (1997) (plain-meaning statutory interpretation principles)
- Metro One Telecomms., Inc. v. C.I.R., 704 F.3d 1057 (9th Cir. 2012) (statutory words presumed to bear ordinary meaning absent contrary indication)
- Spencer Enters., Inc. v. United States, 345 F.3d 683 (9th Cir. 2003) (avoid construing statutory provisions as redundant)
- Gordon v. Pete’s Auto Serv. of Denbigh, Inc., 637 F.3d 454 (4th Cir. 2011) (discussing § 597a and private right of action under amended SCRA)