United States District Court, D. Oregon
NORMAN D. GRAY and LAWANA L. GRAY, Plaintiffs,
SETERUS, INC., and THE FEDERAL MORTGAGE ASSOCIATION, Defendants.
MICHAEL J. MCSHANE UNITED STATES DISTRICT JUDGE.
reasons set forth below, Defendant Fannie Mae's Motion
for Summary Judgment [#91] is GRANTED in part, Defendant
Seterus' Motion for Summary Judgment [#95] is GRANTED in
part, and Plaintiffs' Motion for Summary Judgment [#96]
is DENIED. Defendant Fannie Mae is dismissed as a party to
this lawsuit. A three day bench trial for the remaining
claims against Defendant Seterus is set for June 12, 2017.
Norman & Lawana Gray filed this action against defendants
Seterus, Inc. and the Federal National Mortgage Association
("Fannie Mae"), seeking damages for alleged
violations of the Equal Credit Opportunity Act (ECOA), 15
U.S.C. § 1691, Title VII of the Civil Rights Act of
1968/Fair Housing Act (FHA), 42 U.S.C. §§
3601-3631, and breach of contract (breach of the covenant of
good faith & fair dealing and promissory estoppel).
Defendant Fannie Mae's Motion for Summary Judgment [#91],
has been joined and adopted in Defendant Seterus' own
Motion for Summary Judgment [#95]. The Plaintiffs also filed
a Motion for Summary Judgment [#96]. Oral arguments were
heard on all three motions on 9/9/2016 [#122]. This court has
jurisdiction under 28 U.S.C. § 1331 and 1367.
is little factual dispute in this case. In 2003 the Grays
took a mortgage for their Lane County home from the lender
"Green Point Mortgage, " who then sold the loan to
Fannie Mae. Seterus is the loan Servicer for Fannie Mae. When
the Grays originally secured this loan, they used
Norman's brother (Howard Gray) as a cosigner in order to
qualify. Howard filed for Chapter 7 bankruptcy in 2009 and
Quit Claimed his interest in the property to the Plaintiffs
on July 8, 2011. In Howard's bankruptcy proceedings, his
obligation on the mortgage was discharged without reaffirming
the debt. Howard does not live in Oregon, has never lived on
the property, and has never contributed toward any mortgage
September 2010, Lawana Gray applied for a loan modification
and mortgage assistance from Seterus based solely on her and
her husband's finances. The Grays were ultimately granted
a trial payment plan (TPP) beginning October 1, 2010. In
December 2010, Seterus offered the Grays a permanent modified
plan under the Home Affordable Modification Program (HAMP),
if they accepted it by January 31, 2011. The Grays believe
they in fact accepted the offer on or about January 25, 2011,
but interlineated the acceptance documents to remove
Howard's name, replacing it with that of Lawana's
because Howard was no longer involved (not to mention
bankrupt) and their TPP had been accepted without him. The
Grays made payments under the new plan through May of 2011.
mortgage was subject to "double-tracking, " wherein
a borrower requests mortgage assistance and the servicer,
while reviewing the request, continues to proceed with
foreclosure. Seterus completed a non-judicial foreclosure
sale on January 19, 2011, which was 16 days after accepting
the Gray's January 2011 payment under the new permanent
modification plan and 12 days before the Grays had been given
to execute and return the documents. Seterus rescinded
Plaintiffs' modification without notice and later
verbally claimed that they did so because the acceptance
documents had been improperly changed by removing
Howard's name and replacing it with Lawana's. This
appears to be a justification in hindsight, as the documents
from the Gray's did not arrive at Seterus' office
until 7 days after Seterus had made the sale. The Grays claim
that Seterus rescinded the modification in retaliation for
their raising concerns regarding the foreclosure sale after
they made their January payment and before they were required
to return the permanent modification acceptance forms.
did not offer Plaintiffs any further loan modifications, even
though the Grays allegedly qualified for a HAMP modification
and mortgage assistance. The Grays received help from a HUD
counselor and an attorney, but Seterus and Fannie Mae were
allegedly reluctant to communicate with them or with the
Grays themselves. The Grays filed this lawsuit in October
court must grant summary judgment if there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). An issue of
fact is genuine "if the evidence is such that a
reasonably jury could return a verdict for the nonmoving
party." Villiarimo v. Aloha Island Air., Inc.,
281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The
court views the evidence in the light most favorable to the
non-moving party. Allen v. City of Los Angeles, 66
F.3d 1052, 1056 (9th Cir. 1995) (citing Jesinger v.
Nevada Federal Credit Union, 24 F.3d 1127, 1130 (9th
Cir. 1994)). On a motion for summary judgment, "the
moving party bears the initial burden to show the absence of
a material and triable issue of fact; the burden then moves
to the opposing party, who must present significant probative
evidence tending to support its claim or defense."
Richards v. Neilsen Freight Lines, 810 F.2d 898, 902
(9th Cir. 1987). If the moving party shows that there are no
genuine issues of material fact, the nonmoving party must go
beyond the pleadings and designate facts showing an issue for
trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324
(1986); see Fed. R. Civ. P (56)(c). Where the
non-moving party bears the burden of an issue at trial and
the motion challenges that issue, the non-moving party must
set forth specific facts showing that there is a genuine
issue for trial. Fed.R.Civ.P. 56(e)(2); Crane v.
Allen, No. 3:09-cv-1303-HZ, 2012 WL 602432, at *2 (D.
Or. Feb. 22, 2012).
all inferences should be drawn in favor of the non-moving
party, the mere existence of some alleged factual
dispute will not defeat an otherwise properly supported
motion for summary judgment. Anderson, 477 U.S. at
247-48. Rather, the non-moving party must proffer evidence
that could reasonably affect the outcome of the suit.
Miller v. Glenn Miller Prods., Inc., 454 F.3d 975,
988 (9th Cir. 2006). The substantive law determines whether a
disputed fact is material. Richards, 810 F.2d at
Fannie Mae correctly claims in their Motion for Summary
Judgment that they are immune from the plaintiffs' claims
and should be dismissed as a defendant in this action under
the Merrill Doctrine (see Federal Crop Ins.
Corp. v. Merrill, 332 U.S. 380 (1947). They claim that
the Merrill Doctrine shields them from liability
because they are a "federal instrumentality" in the
context of this case. [#91 at pp.12-13].
it is true that there is no case directly on point,
the Ninth Circuit has ruled that an entity such as Fannie Mae
may be a federal instrumentality in some circumstances and
not in others. U.S. ex rel. Adams v. Aurora Loan Servs.,
Inc.,813 F.3d 1261 (9th Cir. 2016). Because of the lack
of caselaw, this Court had to look outside the Circuit for
guidance on this issue. In Hinton v. Fed. Nat'l
Mortg. Ass 'n, the 5 Circuit court found that under
the Merrill doctrine, Fannie Mae could not be held
liable for the acts of servicers that it had not expressly
authorized. Hinton v. Fed Nat'l Mortg.
Ass'n,945 F.Supp. 1052, 1060 (S.D. Tex. 1996),
affd,137 F.3d 1350 (5th Cir. 1998). This finding
that Fannie Mae is a federal instrumentality for the purposes
of the Merrill doctrine has been echoed in other
cases, which have found that the Merrill doctrine