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Case: 13-15340 Date Filed: 09/30/2014 Page: 1 of 16




No. 13-15340

D.C. Docket No. 4:12-cv-00043-CDL


a.k.a. Shawna Smith,

Plaintiff - Appellant,



Defendant - Appellee.

Appeal from the United States District Court

for the Middle District of Georgia (September 30, 2014) Before MARTIN, Circuit Judge, and RESTANI, * Judge, and HINKLE, ** District Judge.

* Honorable Jane A. Restani, United States Court of International Trade Judge, sitting by designation.

** Honorable Robert L. Hinkle, United States District Judge for the Northern District of Florida, sitting by designation.

Case: 13-15340 Date Filed: 09/30/2014 Page: 2 of 16


Appellant Shawna Bates (a.k.a. Shawna Smith) appeals from the district court’s entry of summary judgment against her on all claims stemming from Appellee JPMorgan Chase Bank’s (“Chase”) actions with respect to a mortgage it holds on Bates’s home. The district court held that Bates failed to plead and support a cognizable claim for breach of contract. Additionally, the court held that Bates failed to offer sufficient proof to support her claims of wrongful attempted foreclosure, trespass, and violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605(e) (2011). For the reasons below, we affirm, albeit on different grounds.

BACKGROUND Although the facts of the present case are extensive and convoluted, we summarize them below to the extent they are relevant to our disposition of the case. Bates purchased a home in Georgia in mid-2008 that she financed by agreeing to a federally-insured mortgage that was later acquired by Chase. By April 2011, Bates was already in default on the loan, having fallen two payments behind. Because of these defaults, Chase sent notices of intent to foreclose in May and July, in addition to several other notices of default.

The present dispute began when Bates attempted to make her June, July, and August payments via a personal check that she sent to Chase on September 7, Case: 13-15340 Date Filed: 09/30/2014 Page: 3 of 16

2011. There is some confusion as to what occurred with this payment, but ultimately Chase rejected it becauseit was paid with a personal check, providing Bates with a refund check that she apparently did not receive. Chase, in the meantime, referred the loan to outside foreclosure counsel on September 8, 2011.

After her attempt at payment in September, Bates continued to miss monthly payments. Her next attempted payment was in November when she sought to pay for September, October, November, and December, but without paying the late fees. This payment was rejected because it was not made with certified funds and did not bring the account current within 60 days, in violation of Chase’s policy of honoring partial payments.1 After the payment was rejected and returned to Bates on November 22, Bates contacted Chase. This prompted the beginning of discussions with Chase representatives, the transcripts of which make clear that Chase employees were confused as to what had happened to the September payment as well as the state of Bates’s account. Bates sent in the same payment two more times without using certified funds, but Chase continued to reject these payments per its policies.

Because Bates remained in default in Chase’s view, Chase began publishing notices of sale in the local newspaper on December 8, 2011, with a sale date of January 2012. Upon discovering the publication and receiving a notice of Because Chase had returned the payment sent in September, there were at least six monthly payments, plus fees, due at this point.

Case: 13-15340 Date Filed: 09/30/2014 Page: 4 of 16 foreclosure, Bates sent Chase a “qualified written request” (“QWR”) explaining that she had paid $3,495 in September, but Chase had never credited this amount.

She also informed Chase that it had rejected her subsequent payments in November three times. Bates asked what was needed to stay in her home.

In its response of January 25, 2012, Chase explained that with respect to the September payment, the “funds were returned due to insufficient to cure the default.” Chase also noted that the later payments were returned “due to insufficient to cure default or bring account within 60 days delinquent.” The notice also emphasized that only certified funds would be accepted for the full reinstatement amount once the account was referred to foreclosure counsel. The notice also listed the contact information of the foreclosure attorney and the Loss Mitigation department so that Bates could either obtain a loan modification or determine a reinstatement amount. 2 Bates did not seek modification, but she did request a reinstatement quote, which the foreclosure attorney provided on January 31, 2012.

Because Bates did not make further payments, Chase continued to publish foreclosure notices in January and March, but the sales were postponed while Chase “researched,” and a sale is not currently scheduled. During the period of The deed allowed Bates to reinstate the loan at any time, including after foreclosure proceedings were instituted, by tendering “in a lump sum all amounts required to bring Borrower’s account current including, to the extent they are obligations of Borrower...

foreclosure costs and reasonable and customary attorneys’ fees and expenses properly associated with the foreclosure proceeding.” DE 5-2 at 6.

Case: 13-15340 Date Filed: 09/30/2014 Page: 5 of 16 July 2011 to March 2012, Chase sent inspectors to Bates’s home to ensure that the property was still occupied and to value the house.

Bates filed suit in district court, alleging violations of RESPA, conversion, breach of contract, wrongful attempted foreclosure, and trespass. The district court granted summary judgment against Bates as to all claims. Bates filed a timely notice of appeal.

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I. Breach of Contract Claims Bates first claims that Chase breached the mortgage deed by failing to comply strictly with certain regulations promulgated by the Department of Housing and Urban Development (“HUD”) as part of the Federal Housing Administration lending program. The regulations were incorporated into her deed as conditions precedent to the power to accelerate and the power of sale. Chase raises a number of objections 3 to this theory of liability, and the district court accepted some of them, essentially holding that it would be anomalous to allow a In addition to arguing that HUD regulations cannot form the basis of a breach of contract action, Chase also argues that any breach of contract action by Bates would be barred under the first breach doctrine. In Georgia, according to the first breach doctrine, “[i]f the nonperformance of a party to a contract is caused by the conduct of the opposite party, such conduct shall excuse the other party from performance.” Ga. Code Ann. § 13-4-23 (2013). The non-breaching party’s performance, however, must have been rendered “useless or impossible” to be excused.

Progressive Elec. Servs. Inc. v. Task Force Constr., Inc., No. A140355, 2014 Ga. App. LEXIS 389, at *13 (June 18, 2014). Nothing about Bates’s default prevented Chase from continuing to perform under the deed. Moreover, taken to its logical conclusion, such a rule would prohibit any mortgagor from ever enforcing any contract terms governing acceleration and foreclosure, as these terms by definition come into play following a breach. Such an interpretation appears to be inconsistent with Georgia’s articulation of the first breach rule.

Case: 13-15340 Date Filed: 09/30/2014 Page: 6 of 16 suit for breach of contract based on the regulations when a direct suit for violations of the regulations is not permitted.

“The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken.” Norton v. Budget Rent A Car Sys., Inc., 705 S.E.2d 305, 306 (Ga. Ct. App. 2010); see Ga. Code Ann. § 13-6-1 (“Damages are given as compensation for the injury sustained as a result of the breach of a contract.”).

Although we conclude that Bates has established a contractual duty owed to her by Chase, we hold that Bates has failed to demonstrate any cognizable “resultant damages,” even assuming Chase actually breached, which we do not decide.

As Bates concedes, there is no express or implied statutory private right of action for HUD violations. See, e.g., Roberts v. Cameron-Brown Co., 556 F.2d 356, 360 (5th Cir. 1977)4 (“[T]he National Housing Act and the regulations promulgated thereunder deal only with the relations between the mortgagee and the government, and give the mortgagor no claim to duty owed nor remedy for failure to follow.”); Cornelius v. Bank of Am., N.A., No. 1:12-cv-0585-JEC, 2012 U.S.

Dist. LEXIS 139713, at *16 (N.D. Ga. Sept. 27, 2012); Krell v. Nat’l Mortg. Corp., 448 S.E.2d 248, 249 (Ga. Ct. App. 1994) (holding violation of HUD regulations The Eleventh Circuit adopted as binding precedent all decisions of the Fifth Circuit issued prior to the close of business on September 30, 1981. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).

Case: 13-15340 Date Filed: 09/30/2014 Page: 7 of 16 did not support a private cause of action). Georgia courts and courts in the Eleventh Circuit, however, have not addressed directly the question of whether a mortgagor has a cause of action under state law for breach of contract where the contract expressly conditions non-judicial foreclosure on compliance with HUD regulations.

Courts are split on this question, with some courts refusing to recognize such claims, citing either to the fact that no private right of action exists to enforce the regulations or to other principles of contract law, such as the pre-existing duty rule.

See Dixon v. Wells Fargo Bank, N.A., No. 12–10174, 2012 U.S. Dist. LEXIS, at *21–26 (E.D. Mich. Sept. 25, 2012) (rejecting a breach of contract claim based on HUD regulations incorporated into the contract because Michigan law does not permit breach of contract to lie where there is an independent statutory duty to comply with the regulations); Mitchell v. Chase Home Fin. LLC, No. 06-cv-2099, 2008 U.S. Dist. LEXIS 17040, at *8–11 (N.D. Tex. March 4, 2008); Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538, 543–47 (Md. 2007) (holding that mortgagor could not assert breach of contract claim in view of fact that deed was a form contract not drafted by lender and HUD regulations do not create a private right of action).

Other courts have recognized breach of contract claims based on a failure to comply with HUD regulations where the mortgage instrument expressly conditions

–  –  –

the mortgagee’s right to accelerate or sell the property on compliance with HUD regulations. See In re Silveira, No. 11-44812-MSH, 2013 Bankr. LEXIS 1904, at *45 (Bankr. Mass. May 3, 2013) (“While these [HUD] regulations do not provide a mortgagor with a private right of action … if they are incorporated into the various loan documents... they become enforceable by the parties to the loan documents.”); BAC Home Loans Servicing, LP v. Taylor, 986 N.E.2d 1028, 1033– 34 (Ohio Ct. App. 2013); Squire v. Va. Hous. Dev. Auth., 758 S.E.2d 55, 59–61 (Va. 2014); Mathews v. PHH Mortg. Corp, 724 S.E.2d 196, 202 (Va. 2012); see also Coll. Loan Corp. v. SLM Corp., 396 F.3d 588, 599 n.9 (4th Cir. 2005) (“[W]e have specifically recognized that, absent preemption, an injured plaintiff may sue under state law seeking redress for a violation of a federal regulation.”).

Under Georgia law, a condition precedent to a right or obligation set out in a contract must be satisfied in order for the right to accrue. See Brogdon v. Nat’l Healthcare Corp., 103 F. Supp. 2d 1322, 1355 (N.D. Ga. 2000). In determining whether a contract contains a condition precedent, Georgia courts look at the language of the agreement itself. Conditions precedent, although “not favored in interpreting contracts, are created by language such as ‘on condition that,’ ‘if,’ and ‘provided,’ or by explicit statements that certain events are to be construed as conditions precedent.” Massih v. Jim Moran & Assocs., Inc., 542 F. Supp. 2d 1324, 1330 ( M.D. Ga. 2008); see Munson v. Strategis Asset Valuation & Mgmt.,

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Inc., 363 F. Supp. 2d 1377, 1382 (N.D. Ga. 2005). Additionally, to the extent that a regulation is incorporated by reference into a contract, including as a condition precedent, it must be referenced in a way that establishes a “reasonably clear and ascertainable meaning.” Bowman v. Walnut Mountain Prop. Owners Ass’n, Inc., 553 S.E.2d 389, 393 (Ga. Ct. App. 2001); see Goldman v. Vinson, 535 S.E.2d 305, 307 (Ga. Ct. App. 2000).

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