Tim Neff, et al v. Flagstar Bank, FSB

Filing

OPINION filed: AFFIRMED, decision not for publication. Karen Nelson Moore, Circuit Judge; Deborah L. Cook, (authoring), Circuit Judge; and Avern Cohn, U.S. District Judge.

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0441n.06
Case No. 14-3837
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

FILED
TIM L. NEFF; BOBBIE K. NEFF,
Plaintiffs-Appellants,
v.
FLAGSTAR BANK, FSB,
Defendant-Appellee.

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Jun 12, 2015
DEBORAH S. HUNT, Clerk
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF
OHIO

BEFORE: MOORE and COOK, Circuit Judges; COHN, District Judge.*
COOK, Circuit Judge. This is the second appeal stemming from Flagstar Bank, FSB’s
foreclosure of Tim and Bobbie Neff’s home. See Neff v. Flagstar Bank, FSB, 520 F. App’x 323
(6th Cir. 2013). The Neffs allege that Flagstar induced them to forgo hiring counsel to defend
against foreclosure by repeatedly promising them it would modify their loan. The district court
granted summary judgment to Flagstar, and we AFFIRM.
In September 2009, the Neffs fell behind in their mortgage payments and requested a
loan modification from Flagstar. Compounding these financial difficulties, Tim Neff injured his
back at work the following month and began receiving workers’ compensation benefits at a
fraction of his regular salary.

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The Honorable Avern L. Cohn, Senior United States District Judge for the Eastern
District of Michigan, sitting by designation.

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During the next year and a half, Flagstar solicited financial documents from the Neffs in
support of their modification application, which they supplied. The Neffs offer evidence that the
bank led them to believe it would modify their loan to a payment structure they could afford.
Flagstar counters that it never guaranteed the Neffs a modification. Tim Neff acknowledged in
his deposition that a representative told him “that one of the issues that [the bank] was having
with modification . . . [was] that [he was] receiving temporary total as opposed to a permanent
disability payment.” The Neffs owed over $150,000 on the loan, and Flagstar offered them a
temporary forbearance on the condition they make four reduced payments and supply all
requested documentation.
In December 2010, the Neffs failed to send a tax document required under the
forbearance agreement, and the bank told them it would not modify their loan based on the
information they supplied. The Neffs executed the forms and sent them to Flagstar. Soon after,
Flagstar’s attorney sent a letter warning the Neffs that they were in default and the bank intended
to commence foreclosure proceedings. Tim Neff asserts that he phoned the bank in response to
the letter and that an employee assured him he would not need legal counsel for the impending
foreclosure action because Flagstar could “do everything an attorney could do” at no cost and
that foreclosure was “a formality.”
In January 2011, Flagstar filed a foreclosure action in the Knox County Court of
Common Pleas, and the Neffs—allegedly relying on Flagstar’s assurances—declined to hire an
attorney or answer the complaint. In June, the state court granted Flagstar’s motion for a default
judgment and scheduled the sheriff’s sale for early December. The Neffs state that, despite the
letter rejecting their application for a modification, the bank continued to assure them it was still
working diligently on a modification throughout this period.

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A few weeks before the sale date, Flagstar sent a letter denying the Neffs’ updated
application, citing another failure to provide the necessary documentation. At roughly the same
time, the Neffs learned of the sheriff’s sale and sought legal counsel. Through their attorney, the
Neffs moved for relief from the default judgment. But the sale proceeded as scheduled, and the
state court issued a one-sentence order overruling the Neffs’ motion several months later.
After the sale but before the denial of their Rule 60(B) motion, the Neffs sued Flagstar in
federal district court, alleging violations of the Fair Debt Collection Practices Act, fraudulent
misrepresentation, and promissory estoppel.1 The court dismissed the FDCPA claim under Rule
12(b)(6) of the Federal Rules of Civil Procedure, but permitted discovery on the state-law claims.
The Neffs do not challenge the dismissal of their FDCPA claim.
Following discovery, Flagstar moved for summary judgment on the fraud and promissory
estoppel claims, which the court granted. The court found the Neffs’ claims precluded by the
state-court default judgment and the Neffs’ failure to appeal the denial of their Rule 60(B)
motion. The Neffs timely appeal.
We review the district court’s grant of summary judgment de novo. Gargallo v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 918 F.2d 658, 660 (6th Cir. 1990). We construe all
reasonable inferences in favor of the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986), and uphold the grant of summary judgment if “there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law,” Fed. R. Civ. P. 56(a).

1

Although the complaint includes a claim for “Breach of Contract and Promissory
Estoppel,” the district court construed this as a claim only for promissory estoppel because it
found the Neffs neither alleged facts supporting a breach of contract nor advanced that claim in
any briefing. The Neffs do not challenge this ruling on appeal.
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Although the district court judged the Neffs’ claims precluded, Flagstar presses us to
affirm because the Neffs offer no evidence that they suffered any harm as a result of the bank’s
conduct. See Olympic Holding Co. v. ACE Ltd., 909 N.E.2d 93, 101 (Ohio 2009) (“[T]he party
claiming the [promissory] estoppel must have relied on conduct of an adversary in such a manner
as to change his position for the worse.” (citation omitted)); Roark v. Rydell, 881 N.E.2d 333,
343 (Ohio Ct. App. 2007) (listing causation and harm as elements of fraud). We agree and
affirm on this alternative ground.

See Airline Prof’ls Ass’n of Int’l Bhd. of Teamsters v.

Airborne, Inc., 332 F.3d 983, 986 n.3 (6th Cir. 2003) (“It is well-established that a prevailing
party may assert in a reviewing court any ground in support of his judgment, whether or not that
ground was relied upon or even considered by the trial court.” (citation and internal quotation
marks omitted)).
The Neffs allege that Flagstar misrepresented its willingness to modify the loan as well as
the Neffs’ need for an attorney in the foreclosure action.

They reason that, absent these

misrepresentations, they would have prevented the sale of their home by defending the
foreclosure action or paying the outstanding balance on their loan. First, this argument presumes
that the Neffs could have successfully defended the foreclosure action with the assistance of
counsel, a presumption their own evidence undermines. When asked how an attorney would
have improved their lot, Tim Neff cited the many solicitations he received from attorneys
promising to save his home and speculated that one of these “could have worked with Flagstar
and got a remodification of the loan.” But the Neffs identify no legal defense or other leverage
to bargain with; they entered default before requesting a modification, they had no way to make
their payments without a modification, and they recognized that Flagstar’s best offer might still
prove unaffordable. See Telxon Corp. v. Smart Media of Del., Inc., Nos. 22098, 22099, 2005

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WL 2292800, at *36 (Ohio Ct. App. Sept. 21, 2005) (“[C]onsequential damages are severely
limited by concepts such as proximate cause, foreseeability, mitigation, remoteness and
speculation.”).
Alternatively, the Neffs suggest that they “could have used their tax refunds to cure the
default” or “applied for state or federal funds to reinstate or modify their loan.” But the evidence
they point to shows that their tax refunds were too insubstantial to cure the default. And they
offer no evidence of their ability to obtain state or federal funding. If the Neffs could not assert a
colorable defense in the state court or otherwise stave off foreclosure, then Flagstar’s statements
were not the proximate cause of their alleged injury. See Roark v. Rydell, 881 N.E.2d at 343.
The same rationale applies to the promissory estoppel claim. The Neffs argue that they
detrimentally relied on Flagstar’s promise to provide a modification or a second temporary
forbearance plan. But as the facts above show, the Neffs had no alternative to a modification or
forbearance and therefore did not “change [their] position for the worse” due to Flagstar’s
promise. Olympic, 909 N.E.2d at 101. Thus, the Neffs failed to demonstrate that there exists a
genuine dispute of fact as to whether they suffered any harm as a result of Flagstar’s conduct.
See Fed. R. Civ. P. 56(c)(1).
We AFFIRM the judgment.

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