Williams v. Select Portfolio Servicing Inc

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

VALERIE WILLIAMS, )

)

Plaintiff, )

)

v. ) Case No. 2:18-CV-01529-KOB

)

SELECT PORTFOLIO SERVICING, INC., )

and ROBERT DAWSON, )

)

Defendants. )

MEMORANDUM OPINION

This matter comes before the court on “Defendant Select Portfolio Servicing, Inc.’s

Motion for Judgment on the Pleadings and Incorporated Memorandum of Law.” (Doc. 10).

Plaintiff Valerie Williams sued Defendant SPS, the company that services her mortgage,1 and

Defendant Robert Dawson, a contractor, following a fire that destroyed much of her house. (Doc.

1-1). Ms. Williams asserts four claims: (1) breach of contract against SPS for withholding her

insurance funds to rebuild her house; (2) conversion of the insurance funds against SPS; (3)

conversion of the insurance funds against Mr. Dawson; and (4) breach of duty by various

unknown defendants.

In this motion, SPS raises two grounds for judgment on the pleadings: (1) Ms. Williams

does not plausibly state a claim for breach of contract, and (2) Ms. Williams’s conversion claim

fails as a matter of law. (Doc. 10). On March 7, 2019, Ms. Williams filed her response in

1 SPS services Ms. Williams’s mortgage on behalf of The Bank of New York Mellon, f/k/a The

Bank of New York, as successor Trustee to JPMorgan Chase Bank, N.A., as Trustee for Bear

Stearns Asset Backed Securities Trust 2006-SD1. (Doc. 10 at 1–2).

opposition to the motion for judgment on the pleadings. (Doc. 13). On March 14, 2019, SPS filed

its reply brief. (Doc. 14). The motion is now ripe for review.

For the reasons stated below, the court will GRANT SPS’s motion for judgment on the

pleadings against Ms. Williams in its entirety.

I. Background

Ms. Williams owned a house on Westchester Avenue in Bessemer, Alabama. Ms.

Williams had home insurance and a mortgage. At some point more than a year ago, the house

was heavily damaged by fire.

Following the fire, Ms. Williams called her home insurance provider to file a claim. The

insurer determined that the cost to be paid was $154,000.00. The insurer paid that amount to

SPS, which was the company servicing Ms. Williams’s mortgage. According to the complaint,

SPS retained these funds, but agreed to release funds to Ms. Williams to pay for the necessary

repairs to her house.

Ms. Williams hired Mr. Dawson to complete the repairs on her home. Mr. Dawson made

certain draws against the funds, totaling a payment of $64,000.00. Ms. Williams alleges that Mr.

Dawson “failed or refused to do the work in a good and workmanlike manner and according to

the instructions and desires of the Plaintiff to rebuild a home similar and of [the] same quality

[as] the one that was damaged by the fire.” (Doc. 1-1 at 8). After six months of work, Mr.

Dawson allegedly had completed only 10% of the work. Ms. Williams confronted Mr. Dawson

about his lack of performance and quality, at which point he announced he was leaving.

Subsequently, Ms. Williams has attempted to hire additional contractors to complete the

work, and after obtaining additional contractors, has requested that SPS release her funds. But,

“for more than five straight months, [SPS] has failed or refused to release the funds for reasons

that are now unknown and unexplained.” (Doc. 1-1 at 9). SPS asserts that Ms. Williams sought

to receive the full balance of the insurance funds, instead of as progress payments as the work is

completed. SPS contends that it has not released the funds to Ms. Williams because (1) she failed

to provide a contract cancellation notice signed by Mr. Dawson, and (2) Mr. Dawson informed

SPS that he was owed additional payment for the work he performed. (Doc. 10 at 3).

As a result of her inability to restore her house, Ms. Williams has been without her home

for a year, and her insurance will not continue to cover her temporary room and board expenses.

Ms. Williams filed this suit on July 31, 2018 in the Circuit Court of Jefferson County,

Alabama. She alleges four counts against Defendants. Count One alleges breach of contract

against SPS for “holding funds wrongfully and contrary to their obligation under the contractual

language between the parties and under their contractual obligation to exercise the contract and

interpret the same in good faith.” (Doc. 1-1 at 9). Count Two alleges conversion by SPS of the

funds allegedly owed to Ms. Williams from the insurance company. Count Three alleges

conversion against Mr. Dawson regarding the $64,000 he collected from SPS. Count Four

alleges that “certain unknown Defendants” have “participated in the above breaches of duty to

the Plaintiff and/or have conspired with one or more of the Defendants to cause the harm

occasioned thereby.” (Id.).

Defendants removed this action to federal court on September 18, 2018. (Doc. 1). SPS

filed this motion for judgment on the pleadings as to the two counts asserted against it on

February 21, 2019. (Doc. 10). Ms. Williams has not yet successfully served process on Mr.

Dawson.

II. Standard of Review

Rule 12(c) of the Federal Rules of Civil Procedure allows a party to move for judgment

on the pleadings after the pleadings are closed, but early enough to not delay trial. See Fed. R.

Civ. P. 12(c). A judgment on the pleadings is appropriate “when there are no material facts in

dispute, and judgment may be rendered by considering the substance of the pleadings and any

judicially noticed facts.” Horsley v. Rivera, 292 F.3d 695, 700 (11th Cir. 2002). To determine

whether the movant is entitled to a judgment on the pleadings, the court should “accept as true all

material facts alleged in the non-moving party’s pleading, and . . . view those facts in the light

most favorable to the non-moving party.” Perez v. Wells Fargo N.A., 774 F.3d 1329, 1335 (11th

Cir. 2014).

The court analyzes a Rule 12(c) motion for judgment on the pleadings the same way as a

Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. See

Dial v. City of Bessemer, No. 2:14-cv-01297-RDP, 2016 WL 3054728, at *3 (N.D. Ala. May 31,

2016). (“A Rule 12(c) motion for judgment on the pleadings is analyzed the same as a Rule

12(b)(6) motion to dismiss.”). “A motion to dismiss and a motion for judgment on the pleadings

should not be granted unless ‘the plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Losey v. Warden, 521 F. App’x 717, 719 (11th Cir. 2013) (quoting

Horsley v. Feldt, 304 F.3d 1225, 1131 (11th Cir. 2002)). So, “to survive a motion for judgment

on the pleadings, ‘a complaint must contain sufficient factual matter, accepted as true, to state a

claim to relief that it plausible on its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009)).

To be plausible on its face, the claim must contain enough facts that “allow[] the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556

U.S. at 678. Although “[t]he plausibility standard is not akin to a ‘probability requirement,’” the

complaint must demonstrate “more than a sheer possibility that a defendant has acted

unlawfully.” Id. “Where a complaint pleads facts that are merely consistent with a defendant’s

liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’”

Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)).

The Supreme Court has identified two working principles for the district court to use in

applying the facial plausibility standard. The first principle is that, in evaluating motions to

dismiss, the court must assume the veracity of well-pleaded factual allegations; however, the

court does not have to accept as true legal conclusions even when “couched as . . . factual

allegation[s]” or “threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements.” Iqbal, 556 U.S. at 678. The second principle is that “only a complaint

that states a plausible claim for relief survives a motion to dismiss.” Id. at 679.

Thus, under prong one, the court determines the factual allegations that are well-pleaded

and assumes their veracity, and then proceeds, under prong two, to determine the claim’s

plausibility given the well-pleaded facts. That task is “context-specific” and, to survive the

motion, the allegations must permit the court based on its “judicial experience and common

sense . . . to infer more than the mere possibility of misconduct.” Iqbal, 556 U.S. at 679. If the

court determines that well-pleaded facts, accepted as true, do not state a claim that is plausible,

the claim must be dismissed. Id.

III. Discussion

SPS moves the court for a judgment on the pleadings because (1) Ms. Williams fails to

state a plausible claim for breach of contract, and (2) Ms. Williams’s conversion claim fails as a

matter of law. The court will discuss each claim in turn.

a. Count One: Breach of contract

Ms. Williams alleges that SPS breached its contract by wrongfully holding the insurance

funds. To state a valid claim for breach of contract under Alabama law, the claimant must

establish: (1) the existence of a valid contract binding the parties; (2) the plaintiff’s performance

under the contract; (3) the defendant’s nonperformance; and (4) damages.” Capmark Bank v.

RGR, LLC, 81 So.3d 1258, 1267 (Ala. 2011).

Ms. Williams has failed to allege the most basic element of a breach of contract claim:

the existence of a valid contract. The only reference to a contract between Ms. Williams and SPS

in her entire complaint is a conclusory statement under Count One: “The Plaintiff would aver

that the Defendant SPS is holding funds wrongfully and contrary to their obligation under the

contractual language between the parties and under their contractual obligation to exercise the

contract and interpret the same in good faith.” (Doc. 1-1 at 9). But Ms. Williams never alleged

that she and SPS entered into an agreement, nor did she attach a copy of the agreement to her

complaint. In fact, without the help of SPS’s motion introducing the parties, the court could not

even determine how SPS was at all related to Ms. Williams.

A mere reference to some unknown contract is insufficient to plead breach of contract.

See Boler v. Bank of America, N.A., No. 2:17-cv-303-JEO, 2017 WL 6555343, at *5 (N.D. Ala.

Dec. 22, 2017) (holding that the plaintiff failed to state a claim for breach of contract when the

plaintiff vaguely asserted a mortgage existed, but “[left] it to the Defendants and this Court to

scour the letters and somehow decipher exactly what contract was breached and how.”). So, the

court cannot possibly determine if Ms. Williams plausibly alleged a breach of contract claim

because she has not even alleged the existence of a contract, never mind what provision of the

contract SPS allegedly breached.

Although SPS attached the mortgage contract in question to its motion for judgment on

the pleadings, the court cannot consider the attachment and still treat this motion as a motion for

judgment on the pleadings. (Doc. 10-1). Under Federal Rule of Civil Procedure 12(d), “[i]f, on a

motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not

excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”

As explained above, Ms. Williams neither attached this contract to her complaint—the sole

pleading in this case—nor alleged the existence of such a contract. So, to avoid considering this

Rule 12(c) motion as a motion for summary judgment, this court will exclude the mortgage

contract.

In her response brief, Ms. Williams makes arguments based upon this attachment. But

when considering a motion for judgment on the pleadings, the court must only judge the

pleadings, as suggested by the name of the motion. See Losey v. Warden, 521 F. App’x 717, 719

(11th Cir. 2013) (“[T]o survive a motion for judgment on the pleadings, ‘a complaint must

contain sufficient factual matter, accepted as true, to state a claim to relief that it plausible on its

face.’” (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))). And “a party cannot amend its

pleading via brief in response to a dispositive motion.” James v. Nationstar Mortg., LLC, 92 F.

Supp. 3d 1190, 1200 n.9 (S.D. Ala. 2015).

Because Ms. Williams’s complaint contained no allegations of a valid contract between

her and SPS. So, the court must GRANT SPS’s motion for judgment on the pleadings and must

DISMISS Count One without prejudice.

b. Count Two: Conversion

Ms. Williams alleges that SPS “converted funds owned by the Plaintiff herein and

refused, after numerous request [sic] and lawful request [sic] to return the same.” (Doc. 1-1 at

10). To establish a claim of conversion, a claimant must show: “(1) a wrongful taking, (2) an

illegal assumption of ownership, (3) an illegal use or misuse of another’s property, or (4) a

wrongful detention or interference with another’s property.” Kelly v. Conn. Mut. Life Ins., 628

So. 2d 454, 460 (Ala. 1993) (quoting Gillis v. Benefit Trust Life Ins., 601 So. 2d 951, 952 (Ala.

1992)).

Under Alabama law, “[g]enerally an action will not lie for the conversion of money,”

unless “the money at issue is capable of identification.” Greene Cty. Bd. of Educ. v. Bailey, 586

So. 2d 893, 898 (Ala. 1991). Historically, earmarked money such as “money in a bag or coins or

notes which have been entrusted to defendants’ care” was capable of identification for purposes

of conversion. Lewis v. Fowler, 479 So. 2d 725, 726 (Ala. 1985) (quoting Hunnicutt v.

Higginbotham, 35 So. 469, 470 (Ala. 1903)).

The evolution of our economic system has changed what “identifiable money” means for

purposes of conversion. See Lewis, 479 So. 2d at 726. (“The requirement that there be

‘earmarked money or specific money capable of identification’ before there can be a conversion

has been complicated as a result of the evolution of our economic system.”). Money traceable to

a special account would be sufficiently identifiable to support an action of conversion. See

Bailey, 586 So. 2d at 899 (“[M]oney directly traceable to a special account is sufficiently

identifiable to support an action for conversion.”). On the other hand, “[m]oney paid by an

insurance company to a hospital which had not been assigned by the plaintiff has been

determined as a matter of law not to be specific property that would support an action of

conversion.” Id. (citing Humana of Ala., Inc. v. Rice, 380 So. 2d 862 (Ala. Civ. App. 1979), cert.

denied, 380 So. 2d 865 (Ala. 1980)).

Here, Ms. Williams has only alleged that SPS “has converted funds owned by the

Plaintiff.” (Doc. 1-1 at 10). The court assumes Ms. Williams refers to the $154,000.00—or a

portion thereof, as payments have been made to Mr. Dawson—paid to SPS by the insurer,

although she alleges no other identification or earmarking of funds. In Boler v. Bank of America,

N.A., a colleague of the undersigned held that even alleging a sum certain, represented by an

insurance check, was insufficient to establish that the money was capable of identification

because the sum certain refers to an amount, but not to the specific money itself. No. 2:17-cv-

303-JEO, 2017 WL 6555343, at *6 (N.D. Ala. Dec. 22, 2017).

As noted by the Eleventh Circuit, Alabama cases “held that an action for the conversion

of money requires the money itself, not just the amount of it, to be specific and capable of

identification.” Edwards v. Prime, Inc., 602 F.3d 1276, 1303 (11th Cir. 2010). The Supreme

Court of Alabama noted that an “obligation to return the identical money” must exist, not merely

an obligation to repay a debtor or creditor. Lewis, 479 So. 2d at 727. But Ms. Williams makes no

allegation that the money at issue is identifiable in this way, such as being held in an escrow

account.

Instead, Ms. Williams relies heavily on Pike v. Reed to establish that an insurance check

constitutes identifiable money that has been earmarked. 47 So. 3d 253 (Ala. Civ. App. 2009).

First, Ms. Williams does not allege that an insurance check ever existed, only that SPS received

money from the insurance company. Second, Ms. Williams’s argument regarding Pike ignores

the unique facts of the case. In Pike, the defendant sought summary judgment on the conversion

claim because an insurance check had been deposited with the defendant and comingled with

other funds, making the check no longer identifiable. Id. at 257. The plaintiff contended that the

conversion did not happen once the funds were comingled, but when the check was deposited by

the defendant into the estate without authority. Id. So, the court held that the check itself

constituted specific money because the conversion occurred at the point of depositing—not after

the funds were comingled. Id. at 260.

In the case, Ms. Williams does not contend that the check itself—which she never even

alleges its existence—was converted. Instead, she alleges that the conversion occurred at some

point after the check was deposited and some of the funds were withdrawn. So, while a check

does indeed constitute identifiable money, Ms. Williams has not alleged that any identifiable

money was converted in her case.

To the extent that Ms. Williams relies upon the mortgage agreement to argue that her

funds were earmarked, the court reiterates that it cannot consider the mortgage agreement

pursuant to Rule 12(d) because the agreement was not alleged in or made part of the complaint.

Because Ms. Williams failed to allege that SPS converted identifiable money, the court

must DISMISS Count Two.

IV. Conclusion

For the reasons discussed above, the court will GRANT Defendant SPS’s motion for

judgment on the pleadings against Ms. Williams in its entirety. (Doc. 10). Because no count

remains against SPS, the court will DISMISS WITHOUT PREJUDICE Defendant SPS from this

suit. The court will enter a separate Order consistent with this Memorandum Opinion.

DONE and ORDERED this 9th day of July, 2019.

____________________________________

KARON OWEN BOWDRE

CHIEF UNITED STATES DISTRICT JUDGE