Community Banc Mortgage Corporation v. North Salem State Bank
Filing
64
OPINION: The Motion to Alter Judgment 57 is GRANTED. The judgment entered July 6, 2017 is VACATED. The Clerk is directed to enter judgment in favor of the Defendant. The pending Motion for Award of Attorney's Fees, Costs, and Post-Judgment Interest 54 is DENIED AS MOOT. SEE WRITTEN OPINION. Entered by Judge Sue E. Myerscough on 10/02/2017. (SKN, ilcd) (Main Document 64 replaced on 10/2/2017) (SKN, ilcd).
E-FILED
Monday, 02 October, 2017 03:29:41 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
COMMUNITY BANC MORTGAGE
CORPORATION, an Illinois
Corporation,
Plaintiff,
v.
NORTH SALEM STATE BANK,
an Indiana banking corporation,
Defendant.
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No. 15-3051
OPINION
SUE E. MYERSCOUGH, U.S. District Judge.
The Court, sua sponte, reconsiders Defendants Motion to
Alter Judgment Pursuant to Federal Rule of Civil Procedure 59(e)
(d/e 57). The Motion is GRANTED.
The parties are familiar with the facts of the case. In brief,
Plaintiff and Defendant were parties to a Secondary Mortgage
Market Agreement (Agreement). Under the Agreement, Defendant
originated residential mortgage loans and sold the loans to
Plaintiff. Plaintiff then sold the loans to the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan
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Mortgage Corporation (Freddie Mac), and other secondary
mortgage market participants.
Under the Agreement, Defendant agreed to process the
mortgage loans in compliance with the law and to warrant that all
documents and representations were true and correct. Defendant
was responsible for closing and funding the loans, obtaining
releases, recording the mortgages, recording assignments, and
returning all documents to Plaintiff. Plaintiff then verified that all
documents were complete and correct per Freddie Mac
requirements. The Agreement also required that Defendant
indemnify and hold Plaintiff harmless for all losses and claims
made against Plaintiff as a result of Defendant’s failure to perform
its obligations under the Agreement.
The mortgage loan in question (the Wainman Loan) involves a
loan made to Stephen A. Wainman Jr., and Susan Wainman. The
property that secured the loan was located in Indiana and was
encumbered by pre-existing liens. One of those liens, the one at
issue, was a line of credit mortgage in favor of National City Bank
of Indiana (National City). The Wainmans executed a “Request to
Cancel Line of Credit and Affidavit of Balance” (Request to Cancel)
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directed toward National City requesting that the open line of
credit be closed and a release of mortgage be recorded. An agent
for Defendant tendered the request to National City along with a
check in an amount sufficient to pay the balance. The check
contained the language “PAYOFF.” Thereafter, Defendant assigned
the loan to Plaintiff, who then sold the loan to Fannie Mae. Plaintiff
retained the rights and obligations related to servicing the loan.
Despite the Wainman’s request to National City, the line of
credit was not closed and a release of mortgage was not recorded.
The Wainmans continued to use the line of credit. This caused a
problem when the Wainman loan went into default. During the
mortgage foreclosure proceedings, National City’s successor, PNC
Bank, N.A. (PNC), claimed a first mortgage on the property based
on the line of credit mortgage.
Upon learning this, Fannie Mae requested that Plaintiff
repurchase the Wainman loan, and Plaintiff did so. Eventually,
PNC entered into a stipulation that the mortgage held by United
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Community Bank was in first position.1 After the property was
sold, Plaintiff suffered a loss of $95,289.65.
Plaintiff demanded that Defendant indemnify Plaintiff for its
loss. Defendant refused. This litigation ensued. In July 2017, the
Court granted summary judgment in favor of Plaintiff, finding that
Defendant breached the Agreement and was required to indemnify
Plaintiff.
To prevail on a motion to alter or amend a judgment,
Defendant must establish the existence of a manifest error of law
or fact or must present newly discovered evidence. Fed. R. Civ. P.
59(e); Blue v. Hartford Life & Acc. Ins. Co., 698 F.3d 587, 598 (7th
Cir. 2012); Caisse Nationale de Credit Agricole v. CBI Indus., Inc.,
90 F.3d 1264, 1269 (7th Cir. 1996). Defendant may not use a
motion to alter or amend a judgment to relitigate issues or present
its case under a new theory. U.S. ex rel. Russo v. Attorney Gen. of
Ill., 780 F.2d 712, 715 n.4 (7th Cir. 1986). Defendant also may not
rely on evidence and arguments that could have been presented
Plaintiff assigned the mortgage to United Community Bank. After the
property was sold, United Community Bank remitted the net profit to Plaintiff.
1
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prior to the judgment. See Bordelon v. Chi, Sch. Reform Bd of
Trs., 233 F.3d 524, 529 (7th Cir. 2000).
The Court finds that a manifest error of law or fact occurred.
While it is true that Fannie Mae essentially required Plaintiff
repurchase the Wainman Loan, this was not due to any breach of
the Agreement by Defendant.
Defendant obtained a release of the line of credit mortgage
when Defendant’s agent tendered to National City the Wainman’s
request that the line of credit be closed and a release of mortgage
be recorded, along with a check for the balance. By operation of
Indiana law, this was sufficient to terminate the line of credit
mortgage. U.S. Bank Nat’l Ass’n v. Seeley, 953 N.E.2d 486, 489
(Ind. App. Ct. 2011) (holding that, where the evidence shows the
parties intended the payoff of a line of credit mortgage to terminate
the mortgage, the line of credit mortgage is deemed terminated);
Fin. Ctr. Fed. Credit Union v. Brand, 967 N.E.2d 1080, 1084 (Ind.
App. Ct. 2012 (discussing equitable subrogation and noting that a
refinance lender who provides the funds to pay off an existing
mortgage stands in the shoes of a senior lien and retains its
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priority status so long as the refinance lender is not culpably
negligent).
Clearly, a problem arose during the mortgage foreclosure
proceedings. However, this was not due to any breach of the
Agreement by Defendant. Defendant did everything it was required
to do under the Agreement. As noted above, when Defendant
assigned the Wainman Loan to Plaintiff, the line of credit mortgage,
by operation of Indiana law, was considered terminated.
Defendant is entitled to judgment in its favor.
Therefore, upon reconsideration, the Motion to Alter
Judgment (d/e 57) is GRANTED. The judgment entered July 6,
2017 is VACATED. The Clerk is directed to enter judgment in
favor of Defendant. The pending Motion for Award of Attorney’s
Fees, Costs, and Post-Judgment Interest (d/e 54) is DENIED AS
MOOT.
ENTER: October 2, 2017
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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