Banaszak v. CitiMortgage, Inc. et al
Filing
65
ORDER denying 63 Motion for Reconsideration. Signed by District Judge Thomas L. Ludington. (SGam)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
ANTHONY BANASZAK,
Plaintiff,
v
Case No. 13-13710
Honorable Thomas L. Ludington
CITIMORTGAGE, et al.,
Defendant.
__________________________________________/
ORDER DENYING PLAINTIFF’S MOTION FOR RECONSIDERATION
Plaintiff Anthony Banaszak initiated this case against Defendant CitiMortgage, alleging
that it had violated several provisions of the Servicemembers Civil Relief Act, 50 U.S.C. §§ 501
et seq. (“SCRA”) and had engaged in common-law fraud.
The allegations relate to
CitiMortgage’s management of his residential mortgage loan while he was on active duty status.
On November 1, 2013, CitiMortgage filed a motion to dismiss Bansaszak’s complaint
pursuant to Federal Rule of Civil Procedure 12(b)(6). The motion was referred to United States
Magistrate Judge Charles Binder, who issued a report recommending that CitiMortgage’s motion
be granted and that Banaszak’s complaint be dismissed. Banaszak timely filed objections to the
Magistrate Judge’s recommendation.
On September 10, 2014, this Court issued an order adopting in part and rejecting in part
the Magistrate Judge’s recommendation. The Court concluded that Banaszak had adequately
pleaded a claim for violations of § 527 and § 591 of the SCRA. However, the Court dismissed
Banaszak’s other claims pursuant to Rule 12(b)(6).
On September 23, 2014, Banaszak timely filed a motion for reconsideration of this
Court’s September 10, 2014 Order. Because Banaszak is attempting to re-assert arguments
already rejected by this Court in its previous Order, his motion for reconsideration will be
denied.
I
Anthony Banaszak is a captain in the United States Armed Services. On November 11,
2003, Banszak executed a mortgage securing property located at 1031 South Lincoln Street, Bay
City, Michigan.1 Compl. ¶ 4. The promissory note reflected a 30-year loan with a fixed rate of
interest at 6.875%. Compl. Ex. 1.
In September 2004, Banaszak was ordered to active duty from September 20004 through
March 31, 2006, and Banaszak explains that active duty “materially affected” his ability to pay
his mortgage. Compl. ¶ 5-7, Ex. 4. Because Banaszak was unable to comply with the terms of
his mortgage, CitiMortgage prepared a Loan Modification Agreement in which Banaszak
acknowledged that he had not paid certain interests, costs, and expenses as required by his
mortgage agreement. Specifically, the 2006 Loan Modification Agreement noted that accrued
interest, costs, and expenses in the amount of $27,219.82 had not been paid and would therefore
be added to Banaszak’s principal balance. The 2006 Loan Modification further stated that the
annual interest rate would remain at 6.875%. Id.
In September 2007, Banaszak was once again called for active duty, and he remained on
active duty until March 5, 2013. Compl. ¶¶ 11-12, 16, 20-22, 24. Banaszak claims that this
period of active duty “materially affected” his ability to comply with his mortgage obligations.
Therefore, while he was on active duty in 2008, he once again entered into a Loan Modification
1
Union Federal Bank of Indianapolis issued the mortgage and subsequently assigned it to CitiMortgage. Compl. ¶
44.
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Agreement with CitiMortgage in which he acknowledged that certain interest, costs, and
expenses had not been paid in accordance with the mortgage terms. Comp. ¶ 26. According to
the 2008 Loan Modification Agreement, those accrued costs would be added to the principal
balance, resulting in a new unpaid principal balance of $215,364.03. The September 2008 Loan
Modification again confirmed that the annual interest rate was 6.875%. Id.
About one month later, in October 2008, CitiMortgage sent Banaszak a letter confirming
that his interest rate had been lowered so as to comply with the SCRA: “According to your
previoius notification and in accordance with the [SCRA], CitiMortgage, Inc. (CMI) adjusted the
effective interest rate on your mortgage loan to 6.000%.” Compl. Ex. 8 at 8. The letter further
noted that his interest rate would revert back to 6.785% on October 1, 2008, given that
“Banaszak has been released from active duty as of 09/01/07.” Id.
When Banaszak returned from active duty in 2013, he discovered that the Bay County
Treasurer had posted a foreclosure notice on his property for non-payment of property taxes.
Compl. ¶ 30. As a result, Banaszak filed this lawsuit seeking damages and an injunction
prohibiting the foreclosure.
II
A motion for reconsideration will be granted if the moving party shows: “(1) a palpable
defect, (2) the defect misled the court and the parties, and (3) that correct the defect will result in
a different disposition of the case.” Michigan Dept. of Treasury v. Michalec, 181 F. Supp. 2d
731, 733-34 (E.D. Mich. 2002) (quoting E.D. Mich. LR 7.1(g)(3)). A “palpable defect” is
“obvious, clear, unmistakeable, manifest, or plan.” Id. at 734 (citing Marketing Displays, Inc. v.
Traffix Devices, Inc., 971 F. Supp. 2d 262, 278 (E.D. Mich. 7.1 (h)(3)).
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Banaszak moves for reconsideration on three claims: (1) the Court erroneously dismissed
his claim for emotional damages pursuant to state law; (2) the Court erroneously dismissed his
claim for violation of § 518; and (3) the Court erroneously dismissed his fraud claim.2
A
Banaszak first claims that this Court erred by concluding that he cannot recover
emotional damages for violation of § 527. In its September 10, 2014 Order, the Court concluded
that, pursuant to Michigan law, Banaszak could not recover emotional damages related to the
alleged violation of § 527 because Michigan does not permit recovery of emotional damages
related to breach of contract claims. Banaszak contends that this conclusion was in error because
it is against the great weight of authority.
“Motions for rehearing or reconsideration which merely present the same issues ruled
upon by the court, either expressly or by reasonable implication shall not be granted.” E.D.
Mich. LR 7.1(h)(3). A motion for reconsideration “is not properly used as a vehicle to re-hash
old arguments or to advance positions that could have been argued earlier but were not.” Smith
v. Mount Pleasant Schools, 298 F. Supp. 2d 636, 637 (E.D. Mich. 2003) (citing Sault Ste. Marie
Tribe of Chippewa Indians v. Engler, 146 F.3d 357, 374 (6th Cir. 1998)).
Here, Banaszak presents the same argument he made in his objection: that emotional
damages are available for violations of § 527. The Court has already concluded that it does not,
and therefore his request for reconsideration of this claim will be denied.
But even though the repetitiousness of the argument is sufficient to deny reconsideration,
the Court will address the argument. Banaszak contends that the “great weight of authority”
permits recovery of emotional damages for violations of § 527. But although Banaszak proffers
2
As discussed below, Banaszak claims that his “fraud” claim was actually a claim for relief pursuant to § 533. The
Court rejects this argument, and therefore will refer to it as a fraud claim.
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several cases discussing the SCRA, he does not produce a single case holding that emotional
damages are available for violations of § 527—let alone a “great weight” of authority.
Instead, the cases he proffers are either (1) inapplicable or (2) address whether punitive
damages are available under various provisions of the SCRA. For example, Banaszak first relies
on Brewster, in which the Ninth Circuit held that a plaintiff had stated a claim under § 533 by
alleging that the defendant failed to remove improper foreclosure fees. See Brester v. Sun Trust
Mortgage, Inc., et al., No. 12-56560 (9th Cir. Feb. 7, 2014). Banaszak contends that Brewster
“provides insightful interpretation of the remedies and damages permitted under the Act.”
Reconsideration at 11.
The Court disagrees. The Brewster court explicitly refused to address whether punitive
damages—let alone emotional damages—were recoverable under SCRA § 533: “At this stage of
the litigation, we need not and do not reach the question of whether punitive damages are
available under this section of the SCRA.” Brewster, No. 12-56560 at 5 n. 4. The Ninth
Circuit’s refusal to determine whether punitive damages are available (an issue not present in the
instant case) under § 533 (a provision not at issue in the instant case) does not provide any
guidance concerning whether emotional damages are available for violation of § 527.
Nor does the next case presented by Banaszak, Wray v. CitiMortgage, provide any
guidance. The Wray court did not address what types of damages are available under § 527. See
3:12-3628 (D.S.C. June 26, 2013). Instead, the Wray court merely concluded that the plaintiff
had sufficiently pleaded a violation of § 527.
are available for violations of § 527.
Wray does not discuss which types of damages
Thus, Wray does not provide any support for the
proposition that emotional damages are available under § 527.
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Similarly, Banaszak’s reliance on Rowles v. Chase Home Finance, LLC, is also
misplaced. In Rowles, the district court approved a settlement in a class action lawsuit. 2012
WL 80570, at *1 (D.S.C. Jan. 10, 2012). Rowles does not reference § 527, punitive damages, or
emotional damages, and thus it provides no guidance for this Court.
Finally, and most persuasively, Banaszak relies on Hurley v. Deutsche Bank Trust
Company Americas, 2009 WL 701006 (W.D. Mich. March 13, 2009). In Hurley, the district
court concluded that, absent any indication from Congress to the contrary, the SCRA must be
liberally construed to permit punitive damages: “While the question is not free from doubt, this
Court concludes that punitive damages may be recovered for SCRA violations.” Id. at *10.
Although the Hurley court addressed punitive damages, it did not address § 527 or emotional
damages. Thus, while persuasive, Hurley is not determinative of the present question: are
emotional damages recoverable under § 527?
In sum, not one of the four cases cited by Banaszak stands for the proposition that
emotional damages are available for violations of § 527. Three of the four cases do not reference
emotional damages or § 527, and the fourth addresses the availability of punitive damages. Thus,
Banaszak has not shown that this Court’s Setpember 10, 2014 Order was against the “great
weight” of legal authority.
Indeed, the only case that appears to directly address whether emotional damages are
available under § 527 concludes the opposite: that emotional damages are not available. In
Newton v. Bank of McKenney, the plaintiff claimed that emotional damages “for the aggravation
and anguish caused by the belief that they were accumulating interest at a rate higher than 6%”
in violation of § 527. 2012 WL 1752407, at *8 (E.D. Va. May 16, 2012). The Newton court first
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noted that “the SCRA effectively amends the contract between the parties . . . .” Id. (citing
Cathey v. First Republic Bank, 2001 WL 3626034, at *6 (W.D. La. July 6, 2001)).
Having determined that the SCRA amended the contract between the parties, the Newton
court determined that it “may only award contractual remedies for a breach of the amended
contract” and then concluded that emotional damages are not recoverable for breach of contract.
Id. at *8-9. In other words, the only court to explicitly address this question has determined that
emotional damages are not recoverable for a violation of § 527.
Here, Banaszak concedes that the SCRA affects contractual rights:
Admittedly, the SCRA is an unusual statute in that it affects prior legal
agreements and, under the conditions set forth in the Act, varies the terms of
written contracts and the normal methods of enforcement of obligations utilized
by creditors.
Reconsideration 7. Following Newton’s precedent, the Court’s September 10, 2014 Order then
surveyed state law before determining that emotional damages are not recoverable for a breach
of contract in Michigan.
Banaszak has not offered any support for his assertion that the Court erred in concluding
that emotional damages are not recoverable for violation of § 527. Indeed, three of the four
cases offered by Banaszak—Brewster, Wray, and Rowles—are not even applicable to the instant
question.
And although Hurley’s expansive reading of the SCRA concluded that punitive
damages were available, it did not address whether emotional damages are available under § 527.
Thus, Banaszak did not proffer any authority—let alone a “great weight of authority”—to
support his argument that emotional damages are recoverable for violation of § 527.
In contrast, the only other court to address the question has firmly rejected the idea that
emotional damages are recoverable. See Newton, 2012 WL 1752407, at *9 (E.D. Va. May 16,
2012). Thus, Banaszak has not shown that the Court’s conclusion that emotional damages are
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not recoverable under § 527 was in error or was against the great weight of authority.
Accordingly, Banaszak’s motion for reconsideration will be denied on this claim.
B
Banaszak next asserts that this Court erred when it determined that he had not adequately
pleaded a claim for violation of § 518. In general, § 518 prohibits a creditor from making an
adverse credit report simply because a plaintiff invoked the provisions of the SCRA. Banaszak
claims that he properly pleaded a cause of action under § 518 because the 2006 and 2008 Loan
Modifications negatively impacted his credit.
Here, Banaszak presents the same arguments he made in his objections: that he has
adequately pleaded a cause of action under § 518. To support this repetitive argument, he now
attempts to argue that the loan modifications effectively lowered his credit score, in violation of
§ 518.
Banaszak’s motion for reconsideration on this claim will be denied. Most importantly,
Banaszak is merely reasserting his original objection—that he adequately pleaded a cause of
action under § 518. Banaszak has not identified a “palpable defect” in the Court’s prior Order
regarding this claim; instead, he disagrees with the Court’s determination and seeks to argue
another theory of violation.
This repetitious argument is prohibited on motions for
reconsideration, and this is sufficient grounds on which to deny the motion for reconsideration.
Alternatively, even if the Court were to consider Banaszak’s reasserted argument, he still
would not be entitled to relief. Banaszak claims that the two loan modifications caused him to
suffer damage to his credit score, which would violate § 518.
It is noteworthy that this is the first occasion that Banaszak has presented this theory of a
violation under § 518. Indeed, Banaszak did not assert this purported violation in his response to
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CitiMortgage’s Motion to Dismiss (ECF No. 32); nor in oral arguments in front of the Magistrate
Judge (ECF No. 52); nor in his Objections to the Report and Recommendation (ECF No. 44); nor
in his Reply to CitiMortgage’s Response to his Objections (ECF No. 61). Thus, although
Banaszak had at least four prior opportunities to present this theory, he did not do so.
“Absent a legitimate excuse, an argument raised for the first time in a motion for
reconsideration at the district court generally will be forfeited.” In re Greektown Holdings, LLC,
728 F.3d 567, 575 (6th Cir. 2013) (quoting United States v. Huntington Nat’l Bank, 574 F.3d
329, 331-32 (6th Cir. 2009)). Banaszak has not presented a legitimate explanation for not
advancing the argument in earlier proceedings.
Therefore, Banaszak’s motion for
reconsideration of the denial of his § 518 claim will be denied.
Moreover, even examining Banaszak’s new argument, he is not entitled to relief. A
motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests a complaint’s legal
sufficiency. Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” “To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). In other
words, the complaint’s allegations “must do more than create speculation or suspicion of a
legally cognizable cause of action; they must show entitlement to relief.” League of United Latin
Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (emphasis in original) (citing
Twombly, 550 U.S. at 555-56).
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In its September 10, 2014 Order, the Court concluded that Banaszak was seeking
prospective relief under § 518. The Court noted that Banaszak’s Complaint states:
[P]ursuant to the provisions of 50 U.S.C. App. § 518, Plaintiff Banaszak seeks a
further order of this Court prohibiting the Defendant from making any adverse
report relating to the creditworthiness of Plaintiff Banaszak to agencies engaged
in the practice of assembling or evaluating consumer credit information
(including, but not limited to Equifax, Trans Union and Experian) as a result of
his exercise of his rights under the SCRA.
Compl. ¶ 62.
Furthermore, in his objection to the Magistrate Judge’s Report and
Recommendation, Banaszak admitted that he is seeking prospective relief pursuant to § 518
“simply as matter of precluding the Defendants from adversely reacting.” Obj. at 3.
In his motion for reconsideration, Banaszak contends that this Court erred when it
concluded he was seeking only prospective relief. He now asserts that the loan modifications
had a negative impact on his credit score, which he claims violates § 518. In other words,
Banaszak claims that the harm is no longer just prosepective; instead, he did in fact suffer a
violation when he entered into the loan modificatios.
Even assuming that the loan modifications improperly impacted his credit score in
violation of § 518, Banaszak did not plead this in his complaint, and therefore he cannot survive
a motion to dismiss the claim. In deciding whether a plaintiff sets forth a “plausible” claim, the
court must accept the factual allegations in the complaint as true. League of United Latin Am.
Citizens, 500 F.3d at 527 (citing Twombly, 550 U.S. at 555-56). That tenet, however, “is
inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice,” to prevent a complaint from being
dismissed on grounds that it fails to sufficiently comport with basic pleading requirements.
Iqbal, 129 S. Ct. at 1949. See also Twombly, 550 U.S. at 555; Howard v. City of Girard, Ohio,
346 F. App’x 49, 51 (6th Cir. 2009). Furthermore, a court is not required to “create a claim
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which [a plaintiff] has not spelled out in his pleading.” Clark v. Nat’l Travelers Life Ins. Co.,
518 F.2d 1167, 1169 (6th Cir. 1975).
Here, Banaszak did not state a viable legal conclusion for violation of § 518. Instead, he
sought prospective relief pursuant to § 518, which is not a viable legal claim. And the Court is
not required to “create a claim” that Banaszak failed to plead. He does not allege any other
violation of § 518 in his Complaint, much less factual allegations that would support a claim for
violation of § 518.
Accordingly, even considering Banaszak’s new argument—that
CitiMortgage violated § 518 by entering into loan modification agreements with him—Banaszak
has not stated a claim pursuant as required by Fed. R. Ci. P. 12(b)(6).
C
Banaszak’s motion for reconsideration of his Fraud claims face the same problems. In
his motion, he makes the perplexing argument that this Court should not have interpreted the
claim under the heading “SIXTH CAUSE OF ACTION FRAUD, MISREPRESENTATION
AND DECEIT BY DEFENDANT, CITIMORTGAGE”, see Compl. ¶ 75, as a fraud claim.
Instead, he alleges that that claim should be interpreted as a claim for relief pursuant to § 533 of
the SCRA.3
However, like his previous argument pursuant to § 518, this is the first time that
Banaszak has made this argument. Indeed, in all the four prior opportunities to plead his case,
Banasak argued that he had adequately pleaded a fraud claim pursuant to Michigan law. See
Response at iv (“Plaintiff’s Fraud Claim is Pled in Accordance with Michigan Law And with the
Particularity Required by Federal Rule of Civil Procedure 9(B)”); Transcript at 21 (Banaszak’s
counsel referring to his “fraud count”); and Obj. at 15 (referring to Banaszak’s “Fraud” claim).
3
In general, § 533 prohibits the sale, foreclosure, or seizure of property during or within one year after a
servicemember’s military service. 50 U.S.C. § 533(c ).
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Banaszak is once again attempting to present a new theory—that his “fraud” claim was
actually a request for relief pursuant to § 533—that he did not previously present. He has not
presented a legitimate excuse for why he did not present this argument earlier in the proceedings,
despite having four opportunities to do so. See Greektown, 728 F.3d at 575. And because
motions under Local Rule 7.1(h) “are aimed at reconsideration, not initial consideration,” his
motion for reconsideration of this claim will be denied. Gowens v. Tidwell, 2012 WL 4475352,
at *2 (E.D. Mich. Sept. 27, 2012) (citing F.D.I.C. v. World University Inc., 978 F.2d 10, 16 (1st
Cir. 1992)).
Moreover, even considering this new argument, the Court concludes that Banaszak does
not adequately plead a claim for violation of § 533. Banaszak’s complaint, in relevant part,
provides:
Plaintiff Banaszak relied to his detriment on Defendant’s implied and expressed
representations that they would comply with the laws of the United States of
America and afford Defendant[sic] the protections under the Servicemembers’
Civil Relief Act, including 50 U.S.C. App. § 501-597b.
Defendant committed fraud and misrepresented their intentions/actions and
deceived the Plaintiff Banaszak when Defendant . . .
(E)
Failed and/or refused to stay proceedings and/or adjust Plaintiff
Banaszak’s obligations under the note & mortgage so as to preserve
Plaintiff Banaszak’s interest in said obligation. 50 U.S.C. App. § 533.
Compl. ¶ 79, 80(E) (emphasis added). By the terms of his complaint, Banaszak is asserting that
CitiMortgage committed fraud by violating § 533 of the SCRA. The complaint does not assert
violation of § 533 as an independent cause of action; rather, Banaszak alleges that it is the
underlying fraudulent activity.4
And as noted in this Court’s September 10, 2014 Order,
4
In his motion for recommendation, Banaszak notes that “[t]he basis for Plaintiff’s claims under this count flow
from and are the direct result of the Defendant’s violations of the SCRA. The title of the count is therefore
misleading.” Reconsideration at 21. The Court disagrees, and finds that the title “Fraud, Misrepresentation and
Deceit by Defendant” accurately characterizes Banaszak’s attempt to plead a claim for fraud.
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violations of the SCRA are not fraud per se. Accordingly, Banaszak’s fraud claim does not
survive CitiMortgage’s motion to dismiss.
III
Accordingly, it is ORDERED that Plaintiff Banaszak’s Motion for Reconsideration
(ECF No. 63) is DENIED.
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: October 1, 2014
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on October 1, 2014.
s/Tracy A. Jacobs
TRACY A. JACOBS
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