Brewster v. Sun Trust Mortgage

The attempted collection of fees incurred during a foreclosure proceeding, even if the foreclosure is rescinded, violates the Servicemembers Civil Relief Act if the collection efforts occur while the servicemember is on active duty; and a complaint alleging as much is sufficient to state a claim under the SCRA.

Marine Corps Reserve Lieutenant Colonel Christopher Brewster took out a mortgage on his California home in 2007 with Sun Trust Mortgage, Inc. (“Sun Trust”). On three occasions between 2008 and 2011, Brewster was called to active duty, and deployed overseas from October 2010 to March 2011, during which he failed to make all mortgage payments owed. Sun Trust initiated foreclosure proceedings by filing a Notice of Default in December 2009, which included various fees. Sun Trust rescinded the Notice of Default but failed to remove the fees, and transferred servicing rights on the mortgage to Nationstar Mortgage, LLC (“Nationstar”), which likewise did not remove the fees. Nationstar attempted to recover the fees during Brewster’s active duty service. Brewster alleged Nationstar violated the Servicemembers Civil Relief Act (“SCRA”) by maintaining the fees while he was on active duty. The district court dismissed the complaint for failure to state a claim. The Ninth Circuit found the SCRA limits judicial proceedings, including foreclosure proceedings, against members of the armed forces while on active duty in order to provide some relief to the armed forces from civilian problem. The panel found the statute refers to the entire proceedings, not just a single act, and the language of the statute does not limit the prohibited conduct to sale and seizure of property. To further pin down the term “foreclosure,” the panel looked to California law and found the state law definition of foreclosure contemplates fees in the proceeding. Thus, the panel held that the attempted collection of foreclosure fees violated the SCRA, despite the fact Nationstar did not initiate the proceedings. The panel held Brewster did plead facts sufficient to allege the failure to remove the fees continued the foreclosure proceeding, while Brewster was on active duty service, in violation of the SCRA. REVERSED.