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Whitt v. Seterus, Inc.

United States District Court, D. South Carolina, Columbia Division

February 28, 2018

D. Randolph Whitt, Plaintiff,
Seterus, Inc. and Federal National Mortgage Association, Defendants.



         Plaintiff D. Randolph Whitt filed a lawsuit against his loan servicer, Defendant Seterus, Inc. and mortgage loan company, Defendant Federal National Mortgage Associate (“Fannie Mae”) (hereinafter collectively referred to as “Defendants”), in Lexington County, South Carolina. Plaintiff alleges that during the pendency of a loan modification Defendants pursued a foreclosure action against Plaintiff's property. Plaintiff asserts causes of action for a class action, Rule 23, South Carolina Rules of Civil Procedure (First Cause of Action); Breach of Contract, Covenant of Good Faith and Fair Dealing (Second Cause of Action); Civil Conspiracy (Third Cause of Action); violation of S.C. Code. Ann. § 29-3-630, which requires debt secured must be established before sale by mortgagee (Fourth Cause of Action); Dual Tracking (Fifth Cause of Action). Plaintiff sues for compensatory and punitive damages. ECF No. 1. On July 5, 2017, Defendants removed this action to this court pursuant to 28 U.S.C. § 1332 on the basis of diversity jurisdiction. This matter is now before the court on Defendants' motion to dismiss and motion to strike class allegations pursuant to Fed.R.Civ.P. 12(b) and 12(f) filed on July 13, 2017, ECF No. 7, and Plaintiff's motion to remand filed on July 31, 2017. ECF No. 11.


         On or about August 1, 2014, Defendant Fannie Mae brought a foreclosure action in the Court of Common Pleas, Lexington County, South Carolina, against Plaintiff based on nonpayment of a Note.[1] Case No. 2014-CP-32-02795 (hereinafter the “Foreclosure Action”). Plaintiff subsequently filed an amended answer and counterclaims in the Foreclosure Action on or about March 27, 2015, asserting: (1) Breach of Contract/Breach of the Duty of Good Faith and Fair Dealing; and (2) Dual Tracking in violation of the Consumer Financial Protection Bureau.[2]Case No. 2014-CP-32-02795. On December 10, 2015, Defendant Fannie Mae filed a motion for summary judgment in the Foreclosure Action that was granted on April 29, 2016 by Special Referee Lisa Lee Smith (hereinafter “Special Referee”). Id.

         On June 1, 2016, Plaintiff filed a separate lawsuit against Defendants in the Court of Common Pleas, Lexington County, South Carolina.[3] Case No. 2016-CP-32-01960. Defendants removed the case to federal court on July 5, 2016. Whitt v. Seterus, Inc., C/A No. 3:16-2422-MBS (hereinafter “Whitt I”). Plaintiff alleged that Defendant Seterus, Inc., acting as a loan servicer and agent for Defendant Fannie Mae, offered a modification of the mortgage loan on February 18, 2016, during the pendency of the foreclosure suit. ECF No. 1-1 at 5. Plaintiff further alleged that he was denied a loan modification on May 9, 2016, and that between February 18, 2016 and May 9, 2016, “Defendants (i) scheduled a foreclosure hearing, (ii) attended a foreclosure hearing and presented evidence, (iii) submitted a judgment of foreclosure, (iv) filed a judgment for foreclosure after signature by the judge, and (v) scheduled a foreclosure sale.” Id. Plaintiff also alleged that Defendants held a foreclosure hearing without proper notice to Plaintiff. Id.

         According to Plaintiff, “the pursuit of the foreclosure during the pendency of the loan modification was prima facie evidence of improper ‘dual tracking' by Defendants.” Id. at 5. Plaintiff also argued that Defendants participated in the conduct set forth in the complaint with other residents in South Carolina. Id. at 6. As a result, Plaintiff alleged that the proposed class action would be composed of “all persons (i) whose properties were foreclosed upon, during the pendency of Defendants' sham Loan Modification offers, while the defendants were pursuing a Foreclosure action, and persons (ii) who received improper Notice of Foreclosure Hearings.” Id.

         On March 16, 2017, this court issued an order dismissing Plaintiff's complaint based on the Younger abstention doctrine.[4] Whitt I, ECF No. 33 at 5. The court found that Plaintiff's Foreclosure Action was an ongoing state proceeding and noted that foreclosure actions call into question important state issues, where state courts serve as the best venue for adjudication. Id. at 5-6. As a result, Defendants' motion to dismiss was granted without prejudice and Defendants' motion to strike class allegations was denied as moot. Id.

         The Special Referee issued an order in the Foreclosure Action on April 10, 2017, granting in part and denying in part Fannie Mae's motion for summary judgment. 2014-CP-32-02795, Order Regarding Motion for Summary Judgment. A hearing was scheduled for June 6, 2017, as to the remaining issues in dispute, but was adjourned by mutual consent for 60 days. The instant action was commenced in state court on June 1, 2017 and was removed by Defendants to this court on July 5, 2017.[5] Whitt v. Seterus, Inc., C/A No. 3:17-1753-MBS (hereinafter the “Whitt II”), ECF No. 1.

         On July 13, 2017, Defendants filed a motion to dismiss for failure to state a claim and a motion to strike class allegations. ECF No. 7. Defendants argue that the court should again rely on the abstention doctrine to dismiss Plaintiff's complaint. ECF No. 7-1 at 4. Defendants assert that the Foreclosure Action is still pending in state court and trial was scheduled for August 2017. Id. With respect to the class action, Defendants argue that Plaintiff's proposed class does not meet the requirements of Fed.R.Civ.P. 23(a) and further contend that the “proposed class is not ascertainable under any circumstances, and must be dismissed.” ECF No. 7-1 at 10. In response, Plaintiff argues that Defendants' motions have been ruled on by the court's prior order and therefore are barred by the doctrine of res judicata. ECF No. 10. Defendants filed a reply alleging that Plaintiff incorrectly applied the res judicata doctrine to the removal process. ECF No. 12 at 2.

         On July 31, 2017, Plaintiff filed a motion to remand, contending that Defendants are barred by the doctrine of res judicata and cannot bring the action to federal court. ECF No. 11 at 2. Plaintiff argues that the issue of federal jurisdiction has been “conclusively and finally determined” and thus the court cannot re-litigate this question. Id. On August 14, 2017, Defendants filed a reply requesting that the court reach the merits of Plaintiff's complaint and dismiss with prejudice. ECF No. 14 at 8.


         A. Diversity Jurisdiction

         Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). A defendant is permitted to remove a case to federal court if the court would have had original jurisdiction over the matter. 28 U.S.C. § 1441(a). A federal court has “original jurisdiction of all civil actions where the matter in controversy exceeds the sum or the value of $75, 000 and is between citizens of different states.” 28 U.S.C. § 1332(a). In cases in which the district court's jurisdiction is based on diversity of citizenship, the burden of establishing federal jurisdiction rests upon the party seeking removal. Strawn v. AT&T Mobility LLC, 530 F.3d 293, 298 (4th Cir. 2008) (holding that in removing cases based on diversity jurisdiction, the party invoking federal jurisdiction must allege same in their notice of removal and when challenged demonstrate basis for jurisdiction); Mulcahey v. Columbia Organic Chem. Co. Inc., 29 F.3d 148, 151 (4th Cir. 1994) (holding that the burden is on the removing defendant to establish subject matter jurisdiction). “Because courts are forums of limited jurisdiction, any doubt as to whether a case belongs in federal or state court should be resolved in favor of state court.” Messex v. Quicken Loans, Inc., C/A No. 2:15-cv-04773-JMC, 2016 WL 3597597, at *2 (D.S.C. July 5, 2016); See also Mulcahey, 29 F.3d at 151 (holding that “if federal jurisdiction is doubtful, a remand is necessary”).

         B. ...

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