Susan Mueller and David Barodofsky v. HSBC Bank USA ( 2023 )

COURT OF APPEALS OF VIRGINIA
UNPUBLISHED
Present: Chief Judge Decker, Judges Huff and Callins
SUSAN MUELLER AND
DAVID BARODOFSKY
v. Record No. 1164-22-2 MEMORANDUM OPINION*
PER CURIAM
HSBC BANK USA, N.A., FEBRUARY 14, 2023
SPECIALIZED LOAN SERVICING, LLC,
EQUITY TRUSTEES, LLC AND
FFC PROPERTIES, LLC
FROM THE CIRCUIT COURT OF FLUVANNA COUNTY
Richard E. Moore, Judge
(Edward M. Wayland, on briefs), for appellants.
(Samuel J. Kaufman; Bennette H. Sharpe IV; Aaron D. Neal; David
L. Ward; William D. Bayliss; Owen & Owens PLC; BWW Law
Group, LLC; Williams, Mullen, Clark & Dobbins, P.C., on brief), for
appellees.
Susan Mueller and David Barodofsky (collectively “Mueller”) appeal the circuit court’s
entry of a partial final judgment dismissing three causes of action in their complaint against HSBC
Bank USA, N.A., Specialized Loan Servicing, LLC (SLS), Equity Trustees, LLC, and FFC
Properties, LLC (collectively “the appellees”). On appeal, Mueller challenges the circuit court’s
dismissal of the first cause of action of the amended complaint based on the statute of limitations for
actions of fraud, arguing that they did not claim that the appellees engaged in fraud. After
examining the briefs and record, the panel unanimously holds that oral argument is unnecessary
because “the appeal is wholly without merit.” Code § 17.1-403(ii)(a); Rule 5A:27(a). We find no
error and affirm the decision of the circuit court.
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
BACKGROUND
In reviewing a circuit court’s judgment sustaining a demurrer, “we accept as true all factual
allegations expressly pleaded in the complaint and interpret those allegations in the light most
favorable to the plaintiff.” Coward v. Wellmont Health Sys., 295 Va. 351, 358 (2018).
In 2006, Mueller procured a mortgage loan from Washington Mutual, Inc. to purchase a
home.1 In 2007, Mueller refinanced the mortgage with Countrywide Home Loans, Inc. The
Countrywide representative informed Mueller that, after refinancing, the loan principal amount
would be $307,000 and her monthly payment amount would be approximately $1,400. Mueller
signed the mortgage documents without reviewing them, but did not sign the related deed of trust.
Countrywide did not provide Mueller a copy of the mortgage documents. Countrywide filed a deed
of trust with the circuit court allegedly bearing Mueller’s forged signature. Mueller later reviewed
her first mortgage statement and learned the principal balance of the mortgage was $324,000 and
the monthly payment was $3,800. Mueller contacted the Countrywide representative who assured
Mueller the terms of the loan would be corrected. However, no correction was made. Despite this
issue, Mueller made multiple mortgage payments at the higher amount and continued to ask for the
correction.
In 2008, Bank of America acquired Mueller’s loan after Countrywide went out of business.
Mueller applied for benefits under the Home Affordable Modification Program. Upon her
application, a Bank of America representative told Mueller to stop making mortgage payments
while her application was processed.
HSBC later acquired the mortgage loan from Bank of America, and appointed SLS as the
mortgage servicer on this account. Because Mueller had ceased making mortgage payments, SLS
treated her mortgage loan as if it were in default. Mueller claimed that SLS agents made several
1
Mueller purchased the home before she and Barodofsky married in 2016.
-2-
visits to her home over the years and “damaged the home, broke locks, and entered [Mueller’s]
home without their knowledge or consent.” SLS made several foreclosure attempts, but those
paused when Mueller sought bankruptcy protection.
Around 2015, Mueller filed a complaint against SLS in the United States District Court for
the Western District of Virginia (the federal court) asking for declaratory judgment that the deed of
trust on her property was void and inoperative because her signature had been forged. The federal
court interpretated this as a fraud claim and dismissed it because Mueller failed to plead “with
particularity the circumstances constituting fraud.” Mueller also claimed that SLS was liable for
intentional infliction of emotional distress. The federal court dismissed this claim because the
disputed conduct was “not outrageous and intolerable.” Finally, the federal court rejected Mueller’s
request for a preliminary injunction preventing further foreclosure actions because Mueller could
not succeed on the underlying claims.
In 2019, after the proceedings concluded in the federal court, SLS initiated another
foreclosure action against Mueller, and hired Equity Trustees, LLC to act as the trustee under the
deed of trust and to proceed with the collection action. Equity Trustees sold the residence to FFC
Properties, LLC in a foreclosure sale in December 2019. Mueller alleged that she was not notified
of the foreclosure sale. In January 2020, FFC Properties informed Mueller that they had to leave the
property. On February 24, 2020, FFC Properties filed a summons for unlawful detainer in the
Fluvanna County General District Court (GDC), seeking to evict Mueller from the property.
While the unlawful detainer was pending, Mueller filed a civil complaint in the circuit court
against HSBC, SLS, Equity Trustees, and FFC Properties, seeking declaratory and injunctive relief,
and alleging that the signature on the deed of trust was a forgery and that she did not receive notice
of the foreclosure sale. Mueller also claimed conversion, intentional infliction of emotional distress,
and trespassing, and sought compensatory and punitive damages. Mueller filed a motion for a
-3-
preliminary injunction to prevent the appellees from taking any action while the cause was pending.
In response, the appellees filed demurrers. Following a hearing, the circuit court sustained
appellees’ demurrers but gave Mueller 21 days within which to file an amended complaint.
In the first cause of action of the amended complaint, Mueller requested declaratory and
injunctive relief, alleging that her signature on the deed of trust was a forgery and that, because the
appellees were aware of this forgery, they had no legal right to proceed with the foreclosure sale on
Mueller’s home. In the second cause of action, Mueller claimed conversion, arguing that the
appellees entered Mueller’s property without notice or permission and “have broken locks, and
damaged or removed items.” In the third cause of action, Mueller alleged intentional infliction of
emotional distress, because the appellees had continued to try to remove her from her home without
legal basis. In the fourth cause of action, Mueller charged trespassing because the appellees entered
her property without consent. Mueller sought compensatory and punitive damages. HSBC, SLS,
and Equity Trustees demurred to the amended complaint. FFC Properties filed a demurrer and a
special plea of statute of limitations. Mueller opposed the demurrers.
The parties convened for hearing on April 15, 2021. On March 3, 2022, the circuit court
issued an opinion letter. The circuit court sustained the appellees’ demurrers to the first cause of
action. The circuit court held that because a declaratory judgment is “forward looking,” and “not a
means to address past wrongs,” it was not an appropriate method to achieve the relief Mueller
sought, which was to invalidate the deed of trust recorded years earlier or set aside the foreclosure
sale that had already occurred. The circuit court did not grant Mueller leave to replead this cause of
action. The circuit court also held that even if the declaratory judgment were permissible, Mueller’s
challenge to the alleged forgery was untimely under the statute of limitations for fraud. The circuit
court acknowledged Mueller’s argument that this was “not really a fraud case, but [was] a
declaratory judgment action simply alleging an invalid deed of trust and faulty sale.” The circuit
-4-
court rejected this claim because “the only way they prevail is by proving forgery,” and “[i]n
Virginia, forgery is fraud,” which has a two-year statute of limitations. The circuit court found that
Mueller learned of the alleged fraud in 2013, so the statute of limitations to assert such claim had
long since expired. The circuit court further held that “a declaratory judgment action cannot be used
to get around the applicable and appropriate statute of limitations.” The circuit court also
acknowledged Mueller’s argument that “they are not relying on a claim that any of the [appellees]
committed any fraud so the proper statute of limitation should be the one for adverse possession,
which is 15 years.” The circuit court found “it [made] no sense to frame” the case as one of adverse
possession as Mueller was “not claiming or asserting a claim under adverse possession, they are
asserting a claim saying they are the record owners. And FFC is not asserting a claim of adverse
possession, as they are claiming under the foreclosure sale.”
The circuit court sustained the appellees’ demurrer to the second cause of action because
“conversion applies only to goods/chattels/personal property,” and Mueller had “not pleaded any
specific personal property that was converted by any of the [appellees].” The circuit court did not
allow Mueller to replead this count because she had failed to cure the deficiencies of this argument
in the original brief, despite the opportunity to do so. The circuit court sustained the appellees’
demurrer to the third cause of action because Mueller did not allege facts that were “outrageous,
intolerable, or atrocious” to support a claim of intentional infliction of emotional distress. Because
Mueller also did not cure this claim in the amended complaint, the circuit court did not permit
Mueller to replead the claim in another amended complaint. The circuit court sustained the
appellees’ demurrer to the fourth cause of action of trespass because it was “not clear from the
pleading who committed a trespass, who authorized it, in what way any [the appellees] trespassed,
and what damages occurred from the trespass.” The circuit court, however, permitted Mueller to
file an amended complaint on this count.
-5-
The circuit court entered a partial final judgment under Rule 1:2, sustaining the appellees’
demurrers to the first three causes of action. The circuit court sustained the appellees’ demurrers to
the fourth cause of action, but permitted Mueller leave to file an amended complaint as to this count
only. The circuit court made the express finding that the interests Mueller raised in the first three
causes of action were “separate and distinct” from those in the fourth cause of action, that “the
results of any appeal from the partial final judgment cannot affect decision of the remaining claim,”
and that the circuit court’s decision in the fourth cause of action cannot impact the disposition of the
first three causes of action “if the Partial Final Judgment is reversed on appeal.” Mueller timely
appealed.
ANALYSIS
“This Court reviews a circuit court’s decision to sustain a demurrer de novo.” Givago
Growth, LLC v. iTech AG, LLC, 300 Va. 260, 264 (2021). “A demurrer tests the legal
sufficiency of the facts alleged in a complaint assuming that all facts alleged therein and all
inferences fairly drawn from those facts are true.” Id.In the assignment of error on appeal, Mueller argues that the circuit court erred in sustaining
the appellees’ demurrer based on the two-year statute of limitations for fraud. Mueller asserts that
they “have not claimed that any of the [appellees] were involved in placing . . . Mueller’s signature”
on the deed of trust. Mueller contends that because they “never signed the Deed of Trust, there
[was] no valid Deed of Trust, and the [appellees] did not have any legal authority to proceed with a
foreclosure sale under the process authorized by that Deed of Trust.” Mueller concludes that the
claim must be treated as one of adverse possession, which has a 15-year statute of limitations.
Mueller focuses solely on the circuit court’s finding that the two-year statute of
limitations for fraud applied to the cause of action requesting declaratory judgment. This,
however, was the circuit court’s alternative rationale for its holding. The circuit court also found
-6-
that declaratory judgment was not an available remedy for the relief that Mueller sought. “It is
well-settled that a party who challenges the ruling of a lower court must on appeal assign error to
each articulated basis for that ruling.” Ferguson v. Stokes, 287 Va. 446, 452 (2014) (quoting
Manchester Oaks Homeowner’s Ass’n v. Batt, 284 Va. 409, 421 (2012)). Thus, “in ‘situations in
which there is one or more alternative holdings on an issue,’ the appellant’s ‘failure to address
one of the holdings results in a waiver of any claim of error with respect to the court’s decision
on that issue.’” Johnson v. Commonwealth, 45 Va. App. 113, 116 (2005) (quoting United States
v. Hatchett, 245 F.3d 625, 644-45 (7th Cir. 2001)).2
Of course, “we still must satisfy ourselves that the alternative holding is indeed one that
(when properly applied to the facts of a given case) would legally constitute a freestanding basis
in support of the trial court’s decision.” Id. at 117. “But, in making that decision, we do not
examine the underlying merits of the alternative holding—for that is the very thing being waived
by the appellant as a result of his failure to raise the point on appeal.” Id.
Here, the circuit court sustained the appellees’ demurrer as to the first cause of action
because declaratory judgments provide prospective relief, and Mueller’s requested relief is
“backwards looking.” Declaratory judgments are only appropriate before a right has been
violated. See RECP IV WG Land Invs. LLC v. Cap. One Bank (USA), N.A., 295 Va. 268, 281
(2018). Otherwise stated, “[t]he intent of the declaratory judgment statutes is not to give parties
greater rights than those which they previously possessed, but to permit the declaration of those
rights before they mature.” Id. (quoting Cherrie v. Virginia Health Servs., 292 Va. 309, 317
2
Although Mueller addresses the alternative holding in their reply brief, we will only
consider arguments made in the opening brief. See Rule 5A:20 (requiring that all arguments are
in the opening brief). See also Palmer v. Atl. Coast Pipeline, LLC, 293 Va. 573, 580 (2017)
(refusing to consider an argument raised for the first time in the reply brief); Whitley v.
Commonwealth, 223 Va. 66, 79 n.2 (1982) (“[W]e will not notice a non-jurisdictional question
raised for the first time in a reply brief filed in this Court.”).
-7-
(2016)). Accordingly, “where claims and rights asserted have fully matured, and the alleged
wrongs have already been suffered, a declaratory judgment proceeding . . . is not an available
remedy.” Id. (quoting Charlottesville Area Fitness Club Operators Ass’n v. Albemarle Cnty. Bd. of
Sup’rs, 285 Va. 87, 98 (2013)). As the circuit court found, Mueller was seeking “to invalidate the
deed of trust that was recorded long ago, and to set aside the foreclosure sale that has already
occurred,” and declaratory judgment was not an available remedy for the relief that Mueller sought.
Accordingly, the record shows that there is “a separate and independent basis to affirm the circuit
court’s ruling and we will not reverse it.” Ferguson, 287 Va. at 453.3 This alternate holding makes
it unnecessary for this Court to examine Mueller’s statute of limitations argument.
CONCLUSION
For the foregoing reasons, the circuit court’s ruling is affirmed.
Affirmed.
3
In the substance of their brief, Mueller asserts that they should be able to recover
damages for intentional infliction of emotional distress because “the actions taken by the
[appellees] in selling their home at a foreclosure sale caused them serious emotional distress.”
However, that argument is not encompassed by their assignment of error. “An assignment of
error is not a mere procedural hurdle an appellant must clear in order to proceed with the merits
of an appeal. Assignments of error are the core of the appeal.” Forest Lakes Cmty. Ass’n v.
United Land Corp. of Am., 293 Va. 113, 122 (2017). We are “limited to reviewing the
assignments of error presented by the litigant.” Banks v. Commonwealth, 67 Va. App. 273, 289
(2017). “Consequently, we do not consider issues touched upon by [Mueller’s] argument but not
encompassed by [the] assignment of error.” Id. at 290.
-8-