OCWEN LOAN SERVICING, LLC v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY et al

Filing 130

ORDER Withdrawing Referral, Modifying Summary Judgment Order, and Determining Amount of Judgment (See Order). Signed by Judge Sarah Evans Barker on 3/28/2013.(MAC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
OCWEN LOAN SERVICING, LLC
Corporate Parent OCWEN FINANCIAL
CORPORATION; as servicer and
attorney-in-fact for HSBC Bank USA,
NA, as Trustee on behalf of ACE
Securities Corp Home Equity Loan Trust
and for the registered holders of ACE
Securities Corp Home Equity Loan Trust
Series 2005-SN1 Asset Backed PassThrough Certificates,
Plaintiff,
vs.
NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY,
AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,

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No. 1:07-cv-01449-SEB-DML

Defendants.

Order Withdrawing Referral, Modifying Summary Judgment
Order, and Determining Amount of Judgment
This Court’s order on the parties’ motions for summary judgment (Dkt. 104)
established, among other things, that defendant American Family Mutual
Insurance Company (“American Family”) is “liable to Ocwen [Loan Servicing
(“Ocwen”)] for the mortgage amount due on the Talley Avenue residence as of
November 12, 2005, plus accrued interest and fees incurred up to the date of
judgment.” Dkt. 104 at pp. 22, 31. The order also established that Nationwide’s
obligation is the same as American Family’s (see id. at 28), and the parties agree
that once the Court determines the amount due Ocwen under the applicable

policies, Nationwide and American Family would each be liable for one-half that
amount. (See Dkt. 122.)1
Following the summary judgment order, American Family filed a Motion to
Alter or Amend the Judgment (Dkt. 106). The Court denied that motion except as
to American Family’s arguments directed to the language quoted above that
establishes liability for “accrued interest and fees incurred up to the date of the
judgment.” The Court referred the matter to Magistrate Judge Lynch to consider
that issue as well as any other matters necessary to the entry of final judgment in
this cause. (Dkt. 120) Following that reference, the magistrate judge held a
pretrial conference and issued an order setting forth the parties’ stipulations and
their agreements as to what issues remained for determination. (Dkt. 122)
Defendants American Family and Nationwide later supplemented their positions on
the remaining issues (Dkts. 123 and 124), and plaintiff Ocwen opposed those
supplementations (Dkt. 125).
On March 6, 2013, the magistrate judge directed American Family and
Nationwide to submit any additional evidence on the supplemental issues they had
raised and to brief those issues. The insurers did so (Dkts. 127 and 128), and
Ocwen filed a brief in response (Dkt. 129). Having reviewed all of the parties’
submissions, the Court concludes that there are no further factual matters to be
determined in this case and therefore withdraws its reference to the magistrate

American Family maintains, however, that it is not contractually liable in the
first instance and intends to appeal the Court’s summary judgment ruling on that
issue.
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judge for a report and recommendation. The remaining issues are resolved as
follows, and final judgment will now issue.
Amount Owing Under the Policies
American Family has asked the Court to modify its summary judgment order
with respect to “interest and fees incurred up to the date of judgment,” arguing that
it is contrary to the policy language and Indiana law. As noted above, the Court
explained in its order of September 19, 2012, that it would reconsider that portion of
its order. Despite that directive, the only argument Ocwen has advanced in
response to American Family’s position is that this Court’s summary judgment
ruling on the issue is the law of the case. That, of course, is not a persuasive
response when the Court has announced its intention to reconsider it.
Having considered the parties’ arguments, the Court determines that it must
modify the portion of its March 29, 2012 summary judgment entry (Dkt. 104) that
describes the extent of American Family’s contractual obligation to Ocwen. The
Court stated that American Family is liable to Ocwen “for the mortgage amount due
on the Talley Avenue residence as of November 12, 2005, plus accrued interest and
fees incurred up to the date of judgment.” (Dkt. 104 at p. 31, emphasis added). The
court had made clear in its order, however, that American Family is not liable for
consequential damages, id. at p. 22 n.12, but only for losses under the policy’s
standard mortgage clause, which extended coverage to Ocwen as mortgagee “as its
interest appears.” Similarly, Nationwide has never disputed that its policy
extended coverage to Ocwen as mortgagee “as its interest appears.” See also Dkt.

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122 at (2) (Court’s entry noting that “Nationwide does not contest liability to Ocwen
under its policy, but rather the amount due”).
In Fifth Third Bank v. Indiana Ins. Co., 771 N.E.2d 1218 (Ind. Ct. App.
2002), the court held that under this language, the mortgagee’s interest is the
extent of its lien at the time of the loss. Id. at 1223-24. That includes mortgage
interest and fees accrued under the mortgage contract up to the date of the loss, but
does not include mortgage interest or fees after the date of the loss. Id. Ocwen has
never challenged the applicability of Fifth Third Bank. Its summary judgment
submissions are clear that the amount of its lien as of the date of the loss was
$86,776.63. (Ocwen Reply Brief, Dkt. 102, at p. 3). The “accrued interest and fees
up to the date of judgment” referenced by Ocwen in its summary judgment briefing
captured consequential damages (id. at pp. 4-5). The Court inadvertently borrowed
that phrase in its summary judgment entry, but it clearly ruled that Ocwen is not
entitled to consequential damages.
The Court must therefore correct its description of the type and amount of
damages awarded to Ocwen and against American Family, as well as against
Nationwide. The insurers are liable only for the mortgage debt on the Talley
Avenue residence—including principal and interest—as of the date of the loss of
November 12, 2005. It is undisputed that that amount is $86,776.63. (See Dkt. 102
at p. 3). The Court strikes paragraph (2) of the Conclusion section on page 31 of its
summary judgment order (and the same language at page 22), at Docket 104, and
adjudges instead that “American Family and Nationwide are liable to Ocwen for the

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mortgage debt owing on the Talley Avenue residence, including principal and
interest, calculated as of the date of the loss of November 12, 2005.”
Prejudgment Interest
Ocwen argues that if it is not entitled to interest and fees up to the time of
judgment as provided in the original summary judgment order, it should be
awarded prejudgment interest as provided by Indiana law. (See Dkts. 87 and 119.)
The Court agrees.
In diversity cases, the federal court applies state law to determine the
availability and calculation of prejudgment interest. Medcom Holding Co. v. Baxter
Travenol Laboratories, Inc., 106 F.3d 1388, 1405 (7th Cir. 1997). The parties have
never disputed that Indiana law applies to the subject insurance contracts. Under
Ind. Code §§ 24-4.6-1-102 and -103, the prevailing party in a contract action is
entitled to prejudgment interest at 8% simple interest per annum where contract
damages are “ascertain[able] as of a particular time in accordance with fixed rules
of evidence and known standards of evaluation.” Blue Valley Turf Farms, Inc. v.
Realestate Mktg. & Dev., Inc., 424 N.E.2d 1088, 1090-91 (Ind. Ct. App. 1981).
Kummerer v. Marshall, 971 N.E.2d 198, 201 (Ind. Ct. App. 2012) (prejudgment
interest appropriate in contract action where damages calculated based on amounts
owed under note).
Prejudgment interest accrues from the time “the principal amount was
demanded or due.” Thor Electric, Inc. v. Oberle & Assoc., Inc., 741 N.E.2d 373, 380
(Ind. Ct. App. 2000). The Court finds that in this case the appropriate date for the

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accrual of prejudgment interest as to both insurers is the date of demand, measured
by the date that Ocwen filed its complaint. The complaint served as an unequivocal
demand for payment and by the time of its filing, the insurers had had sufficient
opportunity to investigate Ocwen’s proof of claim and its pre-suit position that the
insurers were liable for the amount of Ocwen’s mortgage lien as of the date of the
loss.2
Prejudgment interest is appropriate here against American Family and
Nationwide because, as the Court has found, their policies obligated them to pay
Ocwen as mortgagee an easily calculable amount (the payoff balance as of the date
of loss). Undisputed evidence proved that the mortgage debt (calculated in
accordance with the mortgage instrument, and thus in accordance with fixed rules
of evidence and based on known standards of evaluation) as of November 12, 2005,
was $86,776.63. (See Ocwen’s Payoff Quote Good Through November 10, 2005, Dkt.
90-3 (Ex. 3(C)).
Simple interest at 8% per annum on $86,776.63, measured from November 9,
2007 (the date the complaint was filed), through and including March 29, 2013, is
$37,379.08 (principal of $86,776.63 multiplied by daily interest rate of .0002191
multiplied by 1966 days).

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Ocwen has asked for an earlier start date—the date of the fire loss. See Dkts. 87, 119.
But that is not the date the amount was due to or demanded by Ocwen. Ocwen has
not presented any evidence of a demand it made or a point at which payment could
be said to have been due that is earlier than the filing of its complaint in this case.
And, as Ocwen has forcefully argued in another context, all evidence as to liability
and damages should have been put before the Court at the summary judgment
stage. See Dkt. 125.
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Simple interest at 8% per annum on $43,388.32 (half of the amount owed
under the mortgage on November 12, 2005) from November 9, 2007, through and
including March 29, 2013, is $18,689.54.
Pro Rata Clauses for Other Insurance
All parties agree that the American Family and Nationwide policies each
contains an “other insurance clause” requiring the pro rata sharing of coverage. All
parties also agree that the clauses apply in this case. (See Dkt. 122.) American
Family’s policy states: “If both this and other insurance apply to a loss, we will pay
our share. Our share will be the proportionate amount that this insurance bears to
the total amount of all applicable insurance.” (Dkt. 85-1, page 11, pageID 786).
Nationwide’s policy states: “If a loss covered by this policy is also covered by other
insurance, we will pay only the proportion of the loss that the limit of liability that
applies under this policy bears to the total amount of insurance covering the loss.”
(Dkt. 88-1, page 45, pageID 908). Because the Court has adjudged that both
American Family and Nationwide owe coverage to Ocwen as mortgagee for the
same mortgage debt as of the date of loss on November 12, 2005, the other
insurance clauses are triggered. Each insurer is therefore liable for only one-half of
the mortgage debt as of November 12, 2005, plus prejudgment interest thereon.
The Court acknowledges, however, that American Family intends to appeal
the Court’s determination that its policy provided any coverage to Ocwen. In the
event that the Court’s judgment is reversed on appeal and the American Family
policy did not provide other insurance, then the parties may seek appropriate relief

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with respect to Nationwide’s obligation without application of the other insurance
clause of its policy.
Set-off and Mitigation
The Court rejects the insurers’ arguments that set-offs against the adjudged
mortgage debt as of November 12, 2005, are appropriate, or that the adjudged debt
should be reduced based on a mitigation of damages defense. The measurement of
damages in the form of the mortgage debt as of the date of the loss puts the parties
in the same but no better position than they would have been in had all contractual
promises been performed. And just as judgment in favor of Ocwen should not
include compensation with respect to events or matters accruing after the date of
loss, neither should Ocwen’s judgment be reduced by matters that occurred or failed
to occur after that date, including (a) Ocwen’s suit for insurance coverage rather
than foreclosure, (b) the insurers’ payment of expenses that protect their own
interests in the property, and (3) any post-loss payments Ocwen received to which
the insurers will be subrogated upon payment of the mortgage lien.
Payment by the insurers of the adjudicated amount set forth in this order
entitles them, under their insurance contracts, to assignment and transfer of the
mortgage or other collateral to the mortgage debt. Judgment in this case will not
alter those obligations.

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Conclusion
The Court thus resolves all pending motions regarding its summary
judgment order entered March 29, 2012, and the appropriate calculation of amounts
owed by the insurers. Judgment, by separate entry, will issue as follows:
a. In favor of plaintiff Ocwen and against defendant American Family
Mutual Insurance Company for the total amount of $62,077.86 (consisting
of one-half of the November 12, 2005 payoff amount, or $43,388.32, plus
prejudgment interest of $18,689.54).
b. In favor of plaintiff Ocwen and against defendant Nationwide Mutual Fire
Insurance Company for the total amount of $62,077.86 (consisting of onehalf of the November 12, 2005 payoff amount, or $43,388.32, plus
prejudgment interest of $18,689.54).

SO ORDERED.

03/28/2013
Date: ________________

_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

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Distribution:
Lucy Renee Dollens
FROST BROWN TODD LLC
[e-mail]

Melanie D. Margolin
FROST BROWN TODD LLC
[e-mail]
Michael A. Rogers
FROST BROWN TODD LLC
[e-mail]
Beth A Barnes
HUME SMITH GEDDES GREEN & SIMMONS
[e-mail]
Michael R. Bain
HUME SMITH GEDDES GREEN & SIMMONS
[e-mail]
Samuel Dustin Ellingwood
HUME SMITH GEDDES GREEN & SIMMONS
[e-mail]
Seth Robert Wilson
HUME SMITH GEDDES GREEN & SIMMONS LLP
[e-mail]
Robert Scott O’Dell
O’DELL & ASSOCIATES, P.C.
[e-mail]
Chantelle Renee Neumann
POTESTIVO & ASSOCIATES, P.C.
[e-mail]

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