Grady v. Ocwen Loan Servicing Ctr LLC

Filing 80

ENTER MEMORANDUM OPINION AND ORDER: For the reasons stated below, the Court grants Defendants' partial motion for summary judgment 67 and denies Plaintiff's cross-motion for summary judgment 75 . The only claim remaining for dispositi on is Plaintiffs claim that OLS charged for excessive valuations. Status hearing set for 1/30/2014 at 09:00 AM. to discuss how to proceed on Plaintiff's remaining claim. Signed by the Honorable Robert M. Dow, Jr on 1/21/2014. Mailed notice(tbk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LAURETTA GRADY,

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Plaintiff,
v.
OCWEN LOAN SERVICING, LLC, ET AL.,
Defendants.

Case No. 11-cv-1531
Judge Robert M. Dow, Jr.

MEMORANDUM ORDER AND OPINION
In this case, Plaintiff Lauretta Grady contests 80 charges, disbursements, or adjustments
on her mortgage loan, which is serviced by Defendant Ocwen Loan Servicing, LLC. This matter
is now before the Court on Defendants’ partial motion for summary judgment [67] and Plaintiff’s
cross-motion for summary judgment [75].

For the reasons stated below, the Court grants

Defendants’ partial motion for summary judgment [67] and denies Plaintiff’s cross-motion for
summary judgment [75]. The only claim remaining for disposition is Plaintiff’s claim that OLS
charged for excessive valuations.
I.

Background
Sometime in 2002, Plaintiff Lauretta Grady purchased her home located at 2547 West

118th Street in Chicago, IL. To finance the purchase, Grady signed a note, secured by a
mortgage, with Ameriquest Mortgage Company (“Ameriquest”) for a total amount of
$168,000.000. On January 25, 2005, Defendants Ocwen Loan Servicing, LLC (“OLS”), a
company that services residential mortgage loans that are initiated through other lenders,
acquired Grady’s home loan for servicing.

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On March 4, 2011, Plaintiff filed a pro se complaint against OLS and also filed motions
for leave to proceed in forma pauperis and appointment of counsel. The Court granted Plaintiff
leave to proceed in forma pauperis, appointed her counsel, and directed appointed counsel to
confer with Ms. Grady about filing an amended complaint. On June 30, 2011, Grady filed an
amended complaint, which named Ocwen Financial Corporation (“OFC”) in addition to Ocwen
Loan Servicing, LLC.
Defendants filed a motion to dismiss, and the Court dismissed Counts II, IV, and V of
Plaintiff’s amended complaint, leaving her with Count I, which alleges violations of the Fair
Debt Collection Practices Act (“FDCPA”), and Count III, which alleges unjust enrichment. In
short, Grady alleged that Defendants violated the FDCPA by charging and seeking to collect
improper fees, costs, and charges that are either not legally due under the mortgage contract or
applicable law, or that are in excess of the amounts that are legally due. She also alleged that
Defendants have reported credit information that they knew or should have known was false.
In July 2012, Plaintiff responded to Defendants’ discovery requests and provided a list of
all the charges, fees, disbursements and account adjustments that she contested. On February 28,
2013, Plaintiff supplemented that response to add additional items.

After elimination of

duplicates on Plaintiff’s list, there are 80 items Plaintiff attempts to contest: three disbursements
from escrow to pay Plaintiff’s insurers; 29 charges that pre-date July 27, 2007; 35 charges after
July 27, 2007 but before January 20, 2010; the account adjustment in 2010 that capitalized
certain past-due amounts as agreed in the HAMP modification; and 12 charges after the 2010
HAMP modification.
On July 27, 2007, Plaintiff signed a release of claims against OLS as part of a
forbearance agreement that saved her from foreclosure. In that agreement, Plaintiff admitted that

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she was in default and admitted the amounts past due. Further, the release of claims in that
agreement, under the heading “BORROWER RELEASE OF OCWEN,” states in part:
As consideration, the Borrower hereby releases Ocwen from any and all claims
known or unknown that Borrower has against Ocwen, which in any way arise
from the Note, the Mortgage, the Loan, or the Default. Borrower also specifically
waives any right under any statute providing that a release does not extend to
claims that the releaser did not know, did not have reason to know, and did not
suspect to exist in his favor at the time of executing the release, which, if known
by him, would materially affect his settlement with the release.
In the list of charges fees, disbursements and account adjustments that Plaintiff contests, 29
charges pre-date July 27, 2007.
In 2009, Plaintiff again found herself in default under the terms of her mortgage. On
October 23, 2009, she signed a trial agreement under the Home Affordable Modification
Program (“HAMP”). After completing the trial period, on January 20, 2010, Plaintiff signed a
permanent modification agreement under HAMP.

In that HAMP modification agreement,

Plaintiff again admitted that she was in default and agreed to a new principal balance on her loan
that capitalized past-due amounts. The modification also gave her other benefits such as a lower
interest rate. Specifically, the agreement stated: “The modified Principal balance will include all
amounts and arrearages * * * * The new Principal balance of my Note will be $165,319.92.”
The loan was modified in OLS’s system to comply with the HAMP agreement. Although Ms.
Grady now disputes the terms of those agreements, she signed and dated both of them.
II.

Legal Standard on Cross Motions for Summary Judgment
Summary judgment is proper if “the movant shows that 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). On cross motions for summary judgment, the Court construes all facts and inferences “in
favor of the party against whom the motion under consideration is made.” In re United Air Lines,

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Inc., 453 F.3d 463, 468 (7th Cir. 2006) (quoting Kort v. Diversified Collection Servs., Inc., 394
F.3d 530, 536 (7th Cir. 2005)); see also Gross v. PPG Indus., Inc., 636 F.3d 884, 888 (7th Cir.
2011); Foley v. City of Lafayette, Ind., 359 F.3d 925, 928 (7th Cir.2004). To avoid summary
judgment, the opposing party must go beyond the pleadings and “set forth specific facts showing
that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)
(internal quotation marks and citation omitted).
A genuine issue of material fact exists if “the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Id. at 248. The party seeking summary judgment
has the burden of establishing the lack of any genuine issue of material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Summary judgment is proper against “a party who fails to
make a showing sufficient to establish the existence of an element essential to that party's case,
and on which that party will bear the burden of proof at trial.” Id. at 322. The party opposing
summary judgment “must do more than simply show that there is some metaphysical doubt as to
the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986). “The mere existence of a scintilla of evidence in support of the opposing] position will
be insufficient; there must be evidence on which the jury could reasonably find for the [opposing
party].” Anderson, 477 U.S. at 252.
III.

Analysis of Defendants’ Motion for Summary Judgment
A.

Grady’s Claim Against Ocwen Financial Corporation

Defendants have put forth evidence that it is OLS, not OFC, that has been servicing
Grady’s loan, and that OFC should be dismissed because it has no connection to the loan. As a
general principle, a parent corporation is not liable for the acts of its subsidiaries. However,
under the direct participant theory of liability, a parent corporation may be held liable if “there is

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sufficient evidence to show that the parent corporation directed or authorized the manner in
which an activity is undertaken.” Forsythe v. Clark USA, Inc., 864 N.E.2d 227, 242 (Ill. 2007)
(holding that “[t]he key elements to the application of direct participant liability, then, are a
parent’s specific direction or authorization of the manner in which an activity is undertaken and
foreseeability”); Santora v. Starwood Hotel & Resorts Worldwide, Inc., No. 05 C 6391, 2007
WL 3037098, at *6 (N.D. Ill. Oct. 16, 2007) (noting that “where there is evidence sufficient to
prove that a parent company mandated an overall business and budgetary strategy and carried
that strategy out by its own specific direction or authorization, surpassing the control exercised
as a normal incident of ownership in disregard for the interests of the subsidiary, the parent
company could face liability”) (internal quotations omitted). When a corporation specifically
directs an activity where injury is foreseeable, or if it mandates an overall course of action and
then authorizes the manner in which specific activities contributing to that course of action are
undertaken, the corporation can be liable for foreseeable injuries. Cima v. WellPoint Health
Networks, Inc., 556 F. Supp. 2d 901, 905-06 (S.D. Ill. 2008).
Plaintiff has not put forth any evidence of wrongdoing by OFC. Instead, in responding to
Defendants’ summary judgment motion, Plaintiff “accept[ed]” Defendants’ representations as to
OFC’s involvement in this matter.

Thus, summary judgment in favor of Defendants is

appropriate on Plaintiff’s claims against Defendant OFC, and Defendant OFC is dismissed from
this matter.
B.

Plaintiff’s Claims Pertaining to Non-Lender-Placed Insurance Payments

According to OLS, of the four insurance payments about which Plaintiff complains, only
the 2005 payment is for lender-placed insurance (insurance obtained by the lender when a
borrower fails to insure her property). The other three payments are to insurers chosen by

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Plaintiff, with OLS administering the escrow account on the loan. Plaintiff has not rebutted
Defendant’s contention.
OLS contends that Plaintiff cannot advance any claim for relief against OLS making
requested insurance payments from escrow. Plaintiff does not respond to Defendant’s argument
regarding the three non-lender-placed insurance payments, and instead discusses only the lenderplaced insurance policy from 2005. Thus, summary judgment is appropriate on Plaintiff’s claims
regarding the three non-lender-placed insurance payments. The Court addresses Plaintiff’s claim
pertaining to lender-placed insurance below.
C.

Plaintiff’s Claims Arising Between 2005 through 20091
1.

Defendants’ Answer

Defendants maintain that Plaintiff waived many of her claims in agreements that she
signed in 2007, 2009, and 2010. Plaintiff claims that Defendants have waived these, and other,
arguments.2

Plaintiff attempts to cast all of Defendants’ arguments as waived affirmative

defenses. However, many of Defendants’ theories are not so readily cabined.
In her complaint, Plaintiff, who bears the burden of proof, alleged that improper charges
had been added to her account. In its answer, Defendants denied these allegations, stated that
there was “no error on Plaintiff’s account with Ocwen,” and asserted the following affirmative
defenses: (i) Plaintiff claims are frivolous, (ii) Defendants did not err in the accounting on
Plaintiff’s account, and (iii) Plaintiff failed to state a claim. Although Defendants’ denials were
vague, Plaintiff’s amended complaint also is vague. In order to give Defendants a better idea of
her claims, in July 2012, Plaintiff provided Defendants with a list of all the charges, fees,
disbursements and account adjustments that she contested. Then, on February 28, 2013, Plaintiff

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Plaintiff’s claims between 2005 and 2009 include the 2005 charge for lender-placed insurance.

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The following analysis also applies to Defendants’ statute-of-limitations arguments.   

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supplemented that response to add additional items. The record reflects that in early 2013, right
around the time that Plaintiff filed her supplemental list and prior to the filing of dispositive
motions, Defendants alerted Plaintiff that they believed many of her claims to be null in light of
the 2007 forbearance agreement and the 2010 HAMP modification agreement, or barred by the
statute of limitations. Plaintiff now claims that Defendants have waived these arguments. The
Court disagrees.
First, Defendants’ answer and conduct to date have been sufficient to put Defendants’
theories before the Court on summary judgment. Furthermore, Plaintiff knew that she signed the
agreements, understood the benefits she received from those agreements, and, most importantly,
was on notice prior to summary judgment that Defendants intended to assert these exact
arguments. She now seeks to avoid two contracts and a federal statute that clearly bar many of
her claims. Such a ruling, which would not be on the merits but rather on a technicality, would
not comport with the “just, speedy, and inexpensive determination of every action and
proceeding.”

See also Snyder v. Barry Realty, Inc., 60 Fed. Appx. 613, 614 (7th Cir. 2003)

(noting that “the law prefers that cases be resolved on their merits”).
In its response brief, Defendants represent that they will amend the answer to include the
specific affirmative defenses that Plaintiff contends must be pled, if the Court believes that is
necessary.

“[T]he decision to grant or deny a motion to file an amended pleading is a matter

purely within the sound discretion of the district court.” Brunt v. Serv. Employees Int'l
Union, 284 F.3d 715, 720 (7th Cir. 2002). Federal Rule of Civil Procedure 15(a)(2), which
addresses amendments before trial, allows a party to amend its complaint with the district court’s
leave. Fed. R. Civ. P. 15(a)(2). The court should freely give leave when justice so requires but
may deny leave to file an amended complaint in the event of “undue delay, bad faith or dilatory

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motive on the part of the movant, repeated failure to cure deficiencies by amendments previously
allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and]
futility of amendment.” Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 2010); see also RR
Donnelley & Sons Company v. Xerox Corporation, 2013 WL 6645472, at *1 (N.D. Ill. Dec. 16,
2013).
In an abundance of caution, the Court grants Defendants leave to amend their answer to
include additional affirmative defenses. Plaintiff correctly laid out the standard for granting
leave to amend in her summary judgment briefing, noting that the Court’s primary concerns are
undue delay and prejudice to Plaintiff.

The Court liberally grants pro se plaintiffs the

opportunity to amend their complaints, construes those complaints liberally, and, in some cases,
such as this one, recruits counsel to assist plaintiffs in shaping their claims. However, the Court
also liberally grants leave to defendants to amend their answers, particularly when a defendant is
shooting at a moving and ill-defined target. In fact, courts routinely grant motions to amend
pleadings up to the time of, and even during, trial. See Fed. R. Civ. P. 15(b); Williams v. Iowa
Pipeline Assoc., Inc., 2008 WL 1946016, at *2 (S.D. Ind. Apr. 29, 2008) (“The issue has been
briefed and is before us for resolution; no prejudice exists to any party; therefore the pleadings
should reflect those issues * * * * Accordingly, we grant Vectren’s motion to amend * * *.” ).
The decisions in these cases almost uniformly note a preference for deciding cases on the merits.
See, e.g., Planet Hollywood (Region IV), Inc. v. Hollywood Casino Corp., 80 F. Supp. 2d 815,
885 (N.D. Ill. 1999) (“What matters is that at this advanced stage of the proceedings, fairness
dictates that a judgment be entered on the merits * * *.”).
Here, while there has been some delay, there is no prejudice to Plaintiff. First, Plaintiff
has been on notice of OLS’s position for some time, certainly before briefing on dispositive

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motions began, and also was well aware of the documents that she signed that twice removed her
from default on her loan. Second, Plaintiff’s supplemental list of charges were provided for the
first time in a letter dated February 28, 2013, more than six months after the deadline for
amending pleadings. Defendants certainly could have moved to amend their answer sooner, and
presumably refrained from doing so in order to save costs. But even if Defendants’ actions
indicate a desire for the speedy and inexpensive resolution of these type of cases, the lack of
prejudice to Plaintiff as well as the Court’s preference for resolving claims on the merits dictates
that Defendants be allowed to amend their answer.
2.

Plaintiff’s Claims

In July 2007, OLS gave Plaintiff a forbearance agreement, which included a release of all
claims by Plaintiff and in which Plaintiff agreed to the amounts owed. In late 2009, OLS gave
Plaintiff a HAMP trial modification, and in early 2010, OLS gave Plaintiff a permanent
modification under HAMP. As set forth previously, the HAMP modification contract includes a
provision setting out the new balance. Plaintiff agreed to the new principal balance, which
included all amounts and arrears owed by Plaintiff, and in return received a lower interest rate
and additional benefits.
In the 2007 forbearance agreement signed by Plaintiff,3 Plaintiff admitted that she was in
default, admitted the amount past due, and released all claims against OLS. In turn, OLS did not
foreclose on the property and provided Plaintiff with the opportunity to make payments on her
home, which she was able to do for two additional years. All-encompassing releases such as the

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Plaintiff argues that the agreement is not enforceable because it is not signed by OLS. But it is signed
by Plaintiff, which is all that is necessary in Illinois under these circumstances. See St. Francis Medical
Center v. Vernon, 576 N.E.2d 1230, 1231 (Ill. App. Ct. 1991) (“Where a contract is enforced on the basis
of a single signature, it must generally be signed by the party to be charged under the contract and
delivered to the nonsigning party who indicates acceptance by performing.”). OLS accepted the
agreement by not continuing with the foreclosure process and providing Plaintiff with additional benefits
that allowed her to avoid default.

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one signed by Plaintiff are routinely enforced under Illinois law, and will be enforced here. See,
e.g., Hoseman v. Weinschneider, 322 F.3d 468, 473 (7th Cir. 2003) (stating that “[u]nder Illinois
law, ‘[a] release is a contract and, as such, is subject to the traditional rules of contract
interpretation,’” and that “’[t]he intention of the parties, thus, controls the scope and effect of the
release, and this intent is discerned from the release’s express language as well as the
circumstances surrounding the agreement.’”). Plaintiff’s attempt to avoid the terms of the 2007
agreement that she signed fails. Summary judgment in favor of OLS is appropriate on all of
Plaintiff’s claims regarding the 29 charges prior to July 27, 2007.
Similarly, in the 2010 HAMP modification agreement, Plaintiff admitted that she was in
default and agreed to a new principal balance on her loan that would capitalize some past-due
amounts in exchange for a lower interest rate and additional benefits that would help her stay
current on her payments. The HAMP modification agreement specifically stated, “The modified
Principal balance will include all amounts and arrearages * * * * The new Principal balance of
my Note will be $165,319.92.” The charges that Plaintiff now contests were subsumed in the
new principal balance to which Plaintiff agreed. In other words, Plaintiff previously agreed to
the new principal balance, which included the amounts she now contests, and therefore cannot
now contest the component parts of that balance.4 Thus, Plaintiff’s attempt to contest charges to
the loan prior to the HAMP modification fails.

Summary judgment in favor of OLS is

appropriate on all of Plaintiff’s claims regarding the 35 charges that fall after the 2007 release of
claims but prior to January 20, 2010, as well as Plaintiff’s attack on the 2010 HAMP
modification agreement. Plaintiff entered into a contract, which provided her with benefits in

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As discussed below, even if Plaintiff could still bring an FDCPA claim (because the HAMP agreement
did not contain a release), that claim is time-barred.

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exchange for the capitalization of past-due amounts, and she has not provided a sufficient basis
for challenging the bargain that she struck.
D.

Plaintiff’s FDCPA Claims

Plaintiff filed her original complaint on March 4, 2011; thus, any FDCPA claims prior to
March 4, 2010, are time-barred. See 15 U.S.C. 1692k(d) (“An action to enforce any liability
created by this subchapter may be brought in any appropriate United States district court without
regard to the amount in controversy, or in any other court of competent jurisdiction, within one
year from the date on which the violation occurs.”); Randolph v. IMBS, Inc., 368 F.3d 726, 73031 (7th Cir. 2004) (same); Hill v. Wells Fargo Bank, N.A., 946 F. Supp. 2d 817, 822 (N.D. Ill.
2013). All of the charges that Plaintiff details in her cross-motion for summary judgment are
prior to March 4, 2010. These claims are untimely.
In sum, of the 80 charges, disbursements, and modifications that Plaintiff contests, 64 of
them pre-date a release of the claims or a modification on the account and thus are not subject to
attack. Another three are payments to Plaintiff’s own insurers and thus are not fees or charges by
OLS. Additionally, Plaintiff cannot seek to avoid the capitalization of past due amounts that the
HAMP modification added to her principal balance, but retain all the benefits of the
modification, including the interest rate reduction and avoidance of foreclosure. Plaintiff signed
the modification and has not presented a valid reason to void the modification; thus, she is bound
by its terms. And finally, any FDCPA claims prior to March 4, 2010, are untimely. For these
reasons, summary judgment is granted in favor of OLS on Plaintiff’s claims regarding insurance
payments and on claims arising between 2005 and the end of 2009.

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IV.

Analysis of Plaintiff’s Cross Motion for Summary Judgment
A.

FDCPA Claims After March 4, 2010 and Post-HAMP-Modification Unjust
Enrichment Claims

Among other things, the mortgage that Plaintiff signed requires that charges are “for the
purpose of protecting Lender’s interest in the Property and rights under this Security
Instrument.” Plaintiff has presented evidence that OLS performed valuations on 2547 West
118th Street on January 30, 2011, June 9, 2011, and October 18, 2011. These three valuations
were performed in an interval that is less than nine months from the original valuation to the
third valuation. OLS’s 30(b)(6) deponent, Gina Johnson, testified that it is OLS’s policy to
perform a home valuation if a property is in default. Ms. Johnson further stated that OLS would
get new valuations at a six month interval. Each valuation was good for six months and
thereafter a new valuation would be performed if a home was still in default. Plaintiff maintains
that some of the valuations that were done were unnecessary and redundant and do not serve the
purpose of protecting Lender’s interest.

In short, Plaintiff claims that performing three

valuations in less than nine months resulted in unnecessary fees and charges to Plaintiff’s
account. It is unclear whether Plaintiff seeks to recover for all three violations, or just one.
Defendants contend that the mortgage does not limit valuations to every six months.
Rather, the mortgage specifically authorizes property inspections and valuations in Paragraph 14,
and also provides that if the borrower has defaulted, then the lender “may do and pay for
whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under
the Security Instrument, including protecting and/or assessing the value of the Property.”
Mortgage ¶ 9. Here, there is not enough evidence in the record to determine whether these
charges are “reasonable or appropriate to protect Lender’s interest.” Defendants contend the
charges are appropriate based on the mortgage itself; Plaintiff points to Defendant’s 30(b)(6)
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witness to suggest they were unnecessary. Thus, a genuine issue of material fact exists, and
summary judgment is denied as to Plaintiff’s claim regarding the valuations.5
III.

Conclusion
For the reasons stated above, the Court grants Defendants’ partial motion for summary

judgment [67] and dismisses Defendant OFC. The Court directs Defendant OSL to file its
amended answer within 10 days of the date of this order. The Court denies Plaintiff’s cross
motion for summary judgment [75]. The only claim remaining for disposition is Plaintiff’s claim
that OLS charged for excessive valuations.

Dated: January 21, 2014

__________________________________
Robert M. Dow, Jr.
United States District Judge

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Defendants note that only the first of these three charges appear in Plaintiff’s discovery list of charges
she contests, and that Plaintiff’s supplemental response does not add the other two charges. Defendants
argue that Plaintiff cannot move for summary judgment on a charge that she never identified. Consistent
with the Court’s ruling regarding Defendants’ defenses, the Court again notes its preference for resolving
claims on the merits, and will allow Plaintiff to proceed with her valuation claim. In any event, based on
Plaintiff’s version of the facts, at best only one of the charges provides a basis for recovery. However,
reference to all three illustrates Plaintiff’s theory of recovery.

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