Gray v. Land Home Financial Services, Inc.

Background

Brandon-Michael Gray represented himself. On January 12, 2020, Derrick Lee Roberts named Gray as attorney-in-fact for transactions involving a property referred to as Marvin H. Anderson’s Third Addition. Roberts later transferred ownership of the property to Gray by quitclaim deed. On January 16, 2020, Roberts entered into a mortgage agreement for the property with Land Home Financial Services, Inc. as lender and Mortgage Electronic Registration Systems, Inc. as mortgagee. The agreement stated that Roberts owed $303,053 and required periodic payments.

After receiving no mortgage payments from or on behalf of Roberts, Land Home Financial Services began foreclosure proceedings on September 1, 2022, through the defendant law firms. A sheriff’s sale occurred on December 20, 2022, and Land Home Financial Services acquired title. On February 21, 2023, Gray served the defendants with an “international promissory note” for $357,429.56, which he claimed discharged the debt and redeemed the property. Gray did not allege that he paid money to Land Home Financial Services, and the company did not accept, return, reject, or otherwise acknowledge the note.

Land Home Financial Services later began an eviction action. Gray filed this federal lawsuit and separately removed the eviction action from state court. He alleged that the defendants violated federal law and his constitutional due process rights during the foreclosure, trespassed by photographing the property’s exterior, and committed fraud by continuing the foreclosure and eviction after receiving the promissory note.

Motion to Dismiss

The defendants moved to dismiss under the pleading standard requiring a complaint to contain enough factual matter to state a plausible claim for relief. The court treated factual allegations in Gray’s “Affidavit of Truth” as part of the complaint and accepted those allegations as true for purposes of the motion.

Promissory-note, fraud, deceptive-practices, and debt-collection claims. The court treated the central theory as Gray’s contention that the promissory note discharged the mortgage debt during the redemption period. Minnesota law requires redemption of mortgaged property through payment of a sum of money and delivery of funds. The court held that a promissory note is an unconditional written promise, not actual payment. Because Gray did not allege that he paid money or attempted to deliver funds during the redemption period, the court concluded that the defendants did not violate federal law by continuing the foreclosure. The court dismissed these claims, including the alleged fraud, deceptive-practices, and Fair Debt Collection Practices Act claims, for failure to state a plausible claim.

Due process claims. Gray did not name government officials as defendants. The court explained that a constitutional due process claim generally requires conduct fairly attributable to the state, known as state action. It held that Gray did not allege facts showing that the private defendants’ foreclosure conduct had a sufficiently close connection with the government to constitute state action. The court therefore dismissed the due process claims.

Trespass claims. Gray alleged that the defendants trespassed on the property by entering and photographing its exterior. Under Minnesota law, trespass requires a wrongful and unlawful entry onto land that the plaintiff has the right to possess. The mortgage agreement allowed the lender or its agent to make reasonable entries and inspections and allowed entry after a breach. Because the court found that the mortgage authorized the alleged access, it dismissed the trespass claims.

Motion to Sever and Remand

Land Home Financial Services moved to sever the eviction action from the federal case and return it to state court. The court noted that eviction is fundamentally a state-law matter and that the party opposing remand bears the burden of establishing federal subject-matter jurisdiction. Because Gray’s asserted federal basis for jurisdiction depended on FDCPA violations that the court found had not been plausibly alleged, the court granted the motion to sever and remand as to the eviction action.

Disposition

The court granted the defendants’ Joint Motion to Dismiss. It granted Land Home Financial Services, Inc.’s Motion to Sever and Remand as to the Eviction Action, dismissed the complaint with prejudice, and remanded the removed eviction action, identified as Hennepin County District Court File No. 27-cv-23-10947, to state court. Judge Susan Richard Nelson directed that judgment be entered accordingly.