974 F. Supp. 2d 1358
S.D. Ala.2013Background
- Margaret Wallace obtained an adjustable-rate mortgage from SunTrust and fell behind in 2009; she signed a written forbearance agreement (May 23, 2009) requiring four $1,400 payments to avoid foreclosure.
- Wallace alleges she made the required payments and was told SunTrust would work with her, but in May 2010 SunTrust returned a payment, informed her the loan was delinquent, and later foreclosed on the property (foreclosure sale April 21, 2011).
- Wallace filed suit asserting wrongful foreclosure, fraud, breach of contract (breach of the forbearance agreement), breach of implied covenant of good faith, intentional infliction of emotional distress, negligence, wantonness, slander of title, and a transfer-of-title claim against Fannie Mae.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing statute-of-limitations/statute-of-frauds defects, failure to plead fraud with particularity, and that many tort claims are not recognized under Alabama law for mortgage servicing without physical injury.
- Magistrate Judge Bivins recommended dismissal of all claims except breach of contract; the district court adopted that recommendation, rejecting defendants’ argument that the forbearance had an express expiration date and noting the forbearance was written (so not barred by the Statute of Frauds).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Wrongful foreclosure | Foreclosure was improper because Wallace complied with forbearance and was not in default | Foreclosure was to secure the debt; no improper purpose alleged | Dismissed — Alabama law requires an improper purpose to state wrongful-foreclosure claim |
| Fraud (fraudulent misrepresentations/suppression) | SunTrust misrepresented compliance and concealed loan status; plaintiff relied to her detriment | Time-barred; insufficient particularity under Rule 9(b) | Dismissed — fraud re: pre-May 2010 conduct time-barred; remaining suppression allegations fail Rule 9(b) particularity |
| Breach of contract (forbearance) | Forbearance was written; Wallace performed; SunTrust foreclosed nonetheless | SunTrust says forbearance expired after a fixed period (allegedly four months) and did not breach; statute of frauds argument | Claim survives — complaint plausibly alleges a written forbearance, performance, breach, and damages; no expiration date in the agreement and writing satisfies Statute of Frauds |
| Other torts (good faith covenant, outrage, negligence/wantonness, slander of title, transfer of title) | Various harms from servicing and foreclosure justify these claims | Alabama law limits some torts (no covenant-of-good-faith tort outside insurance; negligence/wantonness not recognized for mortgage servicing absent physical injury); pleading defects for slander and transfer claims | Dismissed — covenant and outrage not cognizable here; negligence/wantonness fail (economic loss only); slander and transfer claims inadequately pleaded or dependent on wrongful-foreclosure success |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not accepted as true on a Rule 12(b)(6) motion)
- Jackson v. Wells Fargo Bank, N.A., 90 So.3d 168 (Ala. 2012) (wrongful-foreclosure claim requires improper purpose)
- Shaffer v. Regions Financial Corp., 29 So.3d 872 (Ala. 2009) (elements of breach-of-contract under Alabama law)
- Little v. Robinson, 72 So.3d 1168 (Ala. 2011) (limits on Alabama outrage claim)
- United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301 (11th Cir. 2002) (Rule 9(b) specificity for fraud)
- Barber v. Business Products Center, Inc., 677 So.2d 223 (Ala. 1996) (contract breaches do not generally give rise to tort claims)