Susan Mueller and David Barodofsky v. HSBC Bank USA

• Court: Court of Appeals of Virginia
• Decided: February 14, 2023
• Docket: 1164222
• Status: Unpublished

Opinion

COURT OF APPEALS OF VIRGINIA UNPUBLISHED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-