DAUTRICH et al v. NATIONSTAR MORTGAGE, LLC. et al
Filing
77
OPINION. Signed by Judge Renee Marie Bumb on 6/29/2018. (dmr)
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[Dkt No. 59, 60]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
DAVID and DIANE DAUTRICH,
Plaintiffs,
Civil No. 15-8278
v.
OPINION
NATIONSTAR MORTGAGE, LLC, and
SAFEGUARD PROPERTIES
MANAGEMENT, LLC,
Defendants.
APPERANCES:
NORTHEAST LAW GROUP, LLC
By: Adam Deutsch, Esq.
P.O. Box 60717
Longmeadow, MA 01106
Counsel for Plaintiffs
TROUTMAN SANDERS LLP
By: Kyle D. Deak, Esq.
Stephen J. Steinlight, Esq.
Amanda Lyn Genovese, Esq.
875 Third Avenue
New York, NY 10022
Counsel for Defendant Nationstar Mortgage LLC
MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN
By: Christopher B. Block, Esq.
425 Eagle Rock Avenue
Suite 302
Roseland, NJ 07068
and
GOLDBERG SEGALLA, LLP
By: Elizabeth Anne Chang, Esq.
900 Carnegie Boulevard West
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Suite 100
Princeton, NJ 08540
Counsel for Defendant Safeguard Properties
BUMB, UNITED STATES DISTRICT JUDGE:
This matter comes before the Court upon Defendant
Nationstar Mortgage LLC’s (“Nationstar”) Motion for Summary
Judgment and Plaintiffs David and Diane Dautrich’s Cross Motion
for Summary Judgment on Counts 2 and 3 of the Complaint.
For
the reasons set forth below, the Court will grant in part and
deny in part Nationstar’s motion, and deny the Dautrichs’
motion. 1
I.
Facts and Procedural History
At all relevant times, the Dautrichs have owned a five
bedroom, four and a half bathroom, oceanfront second home in
Stone Harbor, New Jersey.
(Plaintiffs’ Response to Defendant’s
Statement of Undisputed Facts ¶¶ 4, 9)
The house’s fair market
value is approximately 2.9 to 3.6 million dollars.
(Id. ¶ 8)
It is undisputed that in July 2012, when Defendant
Nationstar took over servicing the Dautrichs’ mortgage on the
Stone Harbor property 2, the Dautrichs were already in default.
1
The Court exercises federal question subject matter
jurisdiction pursuant to 28 U.S.C. § 1331 and supplemental
jurisdiction pursuant to 28 U.S.C. § 1367.
2
The mortgage is secured by an adjustable rate note in the
amount of 1.5 million dollars. (Plaintiffs’ Response to
Defendant’s Statement of Undisputed Facts ¶ 5)
1
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(Plaintiffs’ Response to Defendant’s Statement of Undisputed
Facts ¶ 5)
Nationstar’s first letter to the Dautrichs advising
them of the servicing change reflects that, as of July 15, 2012,
the Dautrichs’ monthly mortgage payment was $11,122.83, their
principal balance was $1,480,682.89, and the escrow balance was
$0.00. (David Dautrich Cert. Ex. 2)
Once loans are in default, Nationstar “maintains protocols
to inspect the property at least once a month.”
(Plaintiffs’
Response to Defendant’s Statement of Undisputed Facts ¶ 15)
While the precise legal relationship between Nationstar and
Defendant Safeguard Properties (“Safeguard”) 3 is presently
unclear, it is undisputed that Safeguard inspected the
Dautrichs’ Stone Harbor property on a monthly basis beginning in
October, 2013 through March, 2014.
(Deutch Cert. ¶ 3) 4
Based on an inspection performed on February 27, 2014,
Safeguard concluded that the property was “vacant but
maintained.”
(Deutch Cert. Ex. 7)
On March 4, 2014, Safeguard
3
By Orders dated March 5, 2018, and upon stipulation of the
parties, all claims and crossclaims against Safeguard were
dismissed. Safeguard has been terminated as a party to this
suit.
4
The parties may dispute whether Safeguard is an “independent
subcontractor” for Nationstar. (Plaintiffs’ Response to
Defendant’s Statement of Undisputed Facts ¶ 15) That issue,
however, has not been briefed by either party. Accordingly, for
the purposes of the instant motions only, the Court assumes
without deciding that Nationstar may be held liable for actions
taken by Safeguard.
2
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sent a work order to Four Corners Management directing Four
Corners to change the locks and winterize the property.
Exs. 8-9)
(Id.
The Dautrichs assert that during the course of
changing the locks and winterizing the property, the front door
doorjam was “damaged,” the custom-made back door was “damaged,”
the custom-made crawlspace door was “dented and scratched,” and
the water heater was improperly drained without turning off the
electricity which caused the water heater to burn out.
Dautrich July 7, 2017 Dep. p. 25-41)
(David
The Dautrichs also assert
that inspection stickers were placed on granite and porcelain
surfaces in the house.
(Id. p. 42)
David Dautrich discovered that the locks had been changed
on the house sometime in “late March or early April 2014.”
(David Dautrich July 7, 2017 Dep. p. 22)
The record does not
disclose exactly what happened after it was determined that the
Dautrichs had not abandoned the house; David Dautrich testified
that he and his wife were still able to rent out the house
without a decrease in the rental value.
(Id. p. 41)
A few months later, in a letter dated July 28, 2014,
Nationstar sent the Dautrichs a proposed Loan Modification
Agreement.
(David Dautrich Cert. Ex. 4)
The proposed
modification was a two year reduction of the interest rate and a
two year interest-only monthly payment of $5,612.42.
(emphasis added).
(Id.)
The letter stated that “to take advantage of
3
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this opportunity you must” sign the agreement before a notary
and return the signed, notarized agreement with “your initial
payment of $14,398.38.” 5
(Id.)
Significantly, the letter also
stated that, “[t]his offer to modify your loan expires on
31JUL2014.”
(Id.)
David Dautrich testified that he received the letter in the
evening of July 29th or 30th, and called Nationstar the next day
to tell them that he was interested in a loan modification but
that it would be “impossible” to perform in such a short period
of time.
(David Dautrich Dec. 8, 2016 Dep. p. 39) 6
Dautrich
further testified that he told Nationstar’s representative,
“Joe”, that Dautrich and his wife “want[ed] to back everything
up 30 days” so that they could have enough “time to get the
money together.”
(Id. p. 42)
It is undisputed that “Nationstar
agreed to change the date upon which the qualifying payment and
Loan Modification Agreement had to be returned executed.”
(Plaintiffs’ Response to Defendant’s Statement of Undisputed
Facts ¶ 28)
5
The parties refer to this payment as the “Qualifying Payment.”
The Court will do so as well.
6
Dautrich testified that Nationstar “had requested . . . that
the[] documents be executed and returned with a qualifying
payment [to Nationstar in Texas] by July 31st of 2014. We
obviously couldn’t do that because we didn’t get the documents
themselves until a day or two before that.” (David Dautrich
Dec. 8, 2016 Dep. p. 49)
4
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In a letter to Nationstar dated August 1, 2014, David
Dautrich memorialized his telephone conversation with Nationstar
concerning the proposed modification:
(Steinlight Cert. Ex. I)
Around August 28, 2014, the Dautrichs delivered to
Nationstar a check in the amount of $14,398.38 and executed
copies of the documents Nationstar included in its July 28th
letter.
(Plaintiffs’ Response to Defendant’s Statement of
5
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Undisputed Facts ¶ 31) 7
Importantly, however, the Dautrichs
changed material terms of the proposed Loan Modification
Agreement before they executed it:
(Dautrich Cert. Ex. 4)
It is undisputed that Nationstar never
executed the altered Loan Modification Agreement.
(Plaintiffs’
Response to Defendant’s Counterstatement of Undisputed Facts ¶
32)
Nationstar deposited the Dautrichs’ check into their
“suspense account” and did not credit any of the money towards
7
Nationstar asserts that it did not receive the check and
executed documents until August 29, 2014. The Dautrichs dispute
this assertion. The one-day difference, however, is not
material to the Court’s legal analysis. As set forth infra,
even if the Court assumes that Nationstar received the check and
documents by the August 28, 2014 deadline, summary judgment in
favor of Nationstar is still warranted.
6
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the loan at issue.
(Plaintiffs’ Response to Defendant’s
Counterstatement of Undisputed Facts ¶ 33) 8
On September 16, 2014, approximately two weeks after
Nationstar maintains that the Dautrichs’ next mortgage payment
was due, Nationstar commenced a foreclosure proceeding against
the Dautrichs.
(Plaintiffs’ Response to Defendant’s
Counterstatement of Undisputed Facts ¶ 36) 9
Sometime around this
time, the Dautrichs sent Nationstar another check in the amount
of $5,612.42.
(Clopton Dep. p. 60-61, 70-71)
Like the
Qualifying Payment check, Nationstar deposited the $5,612.42
check into the suspense account and did not credit any of the
money toward the Dautrichs’ loan.
(Plaintiffs’ Response to
Defendant’s Counterstatement of Undisputed Facts ¶ 33)
In the following months, David Dautrich continued to send
Nationstar checks in the amount of $5,612.42, interest-only
payments under the Loan Modification Agreement.
Ex. 7)
(Dautrich Cert.
Each time Nationstar received a check, it returned the
check to the Dautrichs with a letter explaining why the check
8
Nationstar’s Fed. R. Civ. P. 30(b)(6) witness testified that a
“suspense account” is “a holding account” for funds which
“ha[ve] not been applied to the . . . balance owed on the loan.”
(Clopton Dep. p. 52)
9
After this lawsuit was filed, Nationstar voluntarily dismissed
the foreclosure suit. (Id. ¶ 37)
7
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was being returned.
such letters.
(Id.)
In total, Nationstar sent twelve
Eleven letters state:
(Dautrich Cert. Ex. 7; Plaintiffs’ Response to Defendant’s
Statement of Undisputed Facts ¶ 40)
A twelfth letter is
identical to the other letters except that it states “[w]e
recently received a payment on your behalf in the amount of
$1,000.00.”
(Defendant’s Response to Plaintiffs’ Statement of
Undisputed Facts ¶ 25)
Each of the twelve letters is
undisputedly erroneous insofar as the amount required to bring
the Dautrichs’ loan current at all times greatly exceeded
$99,999.99.
(Id. ¶ 31) 10
As discussed further infra,
Nationstar asserts that the erroneous $99,999.99 figure resulted
from a computer “glitch” which prevented dollar amounts
10
Nationstar calculated that as of September 2015, the amount
required to bring the loan current was $236,665.82. (Clopton
Dep. p. 81)
8
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exceeding seven digits from being auto-populated in the
letters. 11
The Complaint asserts six counts: (1) breach of the Loan
Modification Agreement; (2) violation of the Fair Debt
Collection Practices Act, “FDCPA”, 15 U.S.C. § 1692e; (3)
violation of the New Jersey Consumer Fraud Act, “NJCFA”,
N.J.S.A. 56:8-2; (4) violation of the Truth in Lending Act,
“TILA”, 15 U.S.C. § 1639f(a); (5) violation of the Real Estate
Settlement Procedures Act, “RESPA”, 12 U.S.C. § 2605(f); and (6)
“property tortiously damaged.”
In response to Nationstar’s Motion for Summary Judgment,
Plaintiffs state in their opposition brief, “Plaintiffs
withdraw/dismiss their claim for relief under the Truth in
Lending Act set forth under Count IV of the Complaint.”
(Opposition Brief, p. 1)
Accordingly, the Court will dismiss
the TILA claim (Count 4) pursuant to Fed. R. Civ. P. 41(a)(2).
II.
Summary Judgment Standard
Summary judgment shall be granted 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.”
Civ. P. 56(a).
Fed. R.
A fact is “material” only if it might impact the
11
The Dautrichs make no separate claim based on the one letter
which erroneously states that the Dautrichs sent Nationstar a
check in the amount of $1000.
9
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“outcome of the suit under the governing law.”
Gonzalez v.
Sec’y of Dept of Homeland Sec., 678 F.3d 254, 261 (3d Cir.
2012).
A dispute is “genuine” if the evidence would allow a
reasonable jury to find for the nonmoving party. Id.
In determining the existence of a genuine dispute of
material fact, a court’s role is not to weigh the evidence; all
reasonable inferences and doubts should be resolved in favor of
the nonmoving party.
Melrose, Inc. v. City of Pittsburgh, 613
F.3d 380, 387 (3d Cir. 2010).
However, a mere “scintilla of
evidence,” without more, will not give rise to a genuine dispute
for trial.
2001).
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir.
Moreover, a court need not adopt the version of facts
asserted by the nonmoving party if those facts are “utterly
discredited by the record [so] that no reasonable jury” could
believe them.
Scott v. Harris, 550 U.S. 372, 380 (2007).
In
the face of such evidence, summary judgment is still appropriate
“where the record taken as a whole could not lead a rational
trier of fact to find for the nonmoving party.”
Walsh v.
Krantz, 386 F. App’x 334, 338 (3d Cir. 2010).
The movant has the initial burden of showing through the
pleadings, depositions, answers to interrogatories, admissions
on file, and any affidavits “that the non-movant has failed to
establish one or more essential elements of its case.”
Connection Training Servs. v. City of Phila., 358 F. App’x 315,
10
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318 (3d Cir. 2009).
“If the moving party meets its burden, the
burden then shifts to the non-movant to establish that summary
judgment is inappropriate.”
Id.
In the face of a properly
supported motion for summary judgment, the nonmovant’s burden is
rigorous: he “must point to concrete evidence in the record”;
mere allegations, conclusions, conjecture, and speculation will
not defeat summary judgment.
Orsatti v. New Jersey State
Police, 71 F.3d 480, 484 (3d Cir. 1995); accord. Jackson v.
Danberg, 594 F.3d 210, 227 (3d Cir. 2010) (citing Acumed LLC. v.
Advanced Surgical Servs., Inc., 561 F.3d 199, 228 (3d Cir. 2009)
(“[S]peculation and conjecture may not defeat summary
judgment.”).
However, “the court need only determine if the
nonmoving party can produce admissible evidence regarding a
disputed issue of material fact at trial”; the evidence does not
need to be in admissible form at the time of summary judgment.
FOP v. City of Camden, 842 F.3d 231, 238 (3d Cir. 2016).
III. Analysis
A. Breach of the Loan Modification Agreement
Nationstar moves for summary judgment on the breach of
contract claim (Count 1) arguing 12: (1) “a contract was never
formed with respect to the Loan Modification Agreement because
12
The Court observes that one may advance a legal “argument”
without being overly argumentative or discourteous. In this
regard, counsel for both parties are encouraged to be mindful of
the manner in which they advocate for their clients’ respective
11
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Plaintiffs made a counteroffer with new terms, namely a modified
payment schedule, which Nationstar never accepted.”
(Moving
Brief, p. 22), and alternatively, (2) even if a contract was
formed, the Dautrichs breached the contract by failing to pay
escrow charges. 13
In opposition, the Dautrichs argue, (1)
“[t]here is a legitimate question of fact as to whether
Nationstar’s August 1 adjustment of the deadline to submit the
qualifying payment and executed Modification also included an
adjustment to the first monthly payment of $5,612.42 from
September 1 to October 1,” (Opposition Brief, p. 6); and (2)
Nationstar failed to disclose “what escrow was owed.”
(Id. p.
9)
The record evidence that Nationstar agreed to push back the
first modified loan payment of $5,612.42 from September 1 to
October 1 is exceedingly thin.
David Dautrich’s deposition
testimony concerning his telephone conversation with a
Nationstar representative on August 1 is muddled at best.
Three
times during David Dautrich’s deposition, Dautrich was
specifically asked whether Nationstar agreed to push back the
positions to ensure that their arguments maintain an appropriate
level of courtesy. Here, the briefs are unnecessarily nasty.
13
Nationstar also argues that a contract was never formed
because the Dautrichs missed-- by one day-- the extended
deadline for returning the loan modification documents. The
Court does not reach this argument.
12
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due date of the first payment, and each time Dautrich failed to
directly answer the question. 14
First, Dautrich was asked:
Q: So you are saying that Nationstar told you that you
could handwrite in these edits to the modification?
A: Yes.
Q: They explicitly said the modification would begin on
October 1, 2014?
A: Say that again.
Q: Nationstar agreed that the payments would begin on
October 1 not September 1 as written in the loan
modification agreement?
A: I told them I can’t make the payment – I believe I
got that letter – the cover letter showed up on my porch
either 28th or the 29th. I said I need – I can’t- I
can’t- I need to confer with an attorney. I need to get
the money together. I need another 30 days. So is it
all right if I back everything up 30 days. The guy –
Joe—he gave me an employee number. He did not have the
authority.
He said he would have to confer with a
supervisor.
He conferred with a supervisor and then
came back and said this is going to be okay.
It’s a
loan modification. You have a fresh start for two years.
And then I breathed a sigh of relief. Those were his
words: “You have a fresh start for two years.” That to
me was clear and unambiguous.
(Dautrich Dec. 8, 2016 Dep. p. 39-40)
Next, he was asked:
Q: And Nationstar
September payment?
agreed
to
14
allow
you
to
skip
the
As Nationstar points out, David Dautrich’s failure is
noteworthy given the undisputed evidence that Dautrich is an
experienced litigator with real estate transaction experience.
13
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A: Later when they complained about it, I offered to
send the extra payment. I said if some reason that’s
now an issue for you, I’ll send the extra payment in.
They refused to accept that.
(Id. p. 41)
Lastly, he was asked:
Q: What led you to believe that the start date could be
moved from September to October?
A: Because if everything got pushed back 30 days,
September, I changed everything, I moved everything 30
days down the road. I changed September 1st to October
1st.
I changed September 1st to October 1st. . . . It
didn’t appear to be a concern to them at that point. I
thought – and when it did come to my attention that they
were complaining that I was a month behind, I said all
right, I will send the extra payment, then that will
cure that, and that wasn’t acceptable.
(Id. p. 55) 15
Viewing the summary judgment record, as the Court must, in
the light most favorable to the Dautrichs, the Court finds that
the Dautrichs have just barely raised a material issue of fact
as to whether Nationstar agreed to push back the start date to
October 1st.
Dautrich testified that he asked to “back
everything up 30 days” and that Nationstar’s representative
“said this is going to be okay.”
15
(Dautrich Dec. 8 Dep. p. 39-
Similarly, David Dautrich testified that he “recall[ed]”
asking Nationstar to change the start date, but Dautrich did not
testify that Nationstar agreed to such change: “Q: When you
asked that everything be . . . pushed back 30 days, did you
explicitly ask that the modification start in October instead of
September? A: As I recall, I did.” (Dautrich Dec. 8, 2016
Dep. p. 43)
14
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40)
While a factfinder might conclude that Nationstar’s
representative was only referring to pushing back the due date
of the Qualifying Payment (or that Dautrich himself was not
referring to the start date during the telephone conversation 16),
a reasonable factfinder might also find that “this is going to
be okay” did include an agreement to push back the September 1
start date to October 1.
Thus, the Court holds that a
factfinder could reasonably find that both the Dautrichs and
Nationstar agreed to all material terms of the Loan
Modification, including an October 1st start date, and therefore
a contract was formed.
Nonetheless, summary judgment is still warranted for
Nationstar.
Even if a factfinder found that a contract was
formed, the undisputed record evidence demonstrates that the
Dautrichs immediately breached the Loan Modification when they
failed to make their escrow account payment.
Indeed, the
Dautrichs admit that, at during the relevant time period, they
never paid any money towards escrow.
(Plaintiffs’ Response to
Defendant’s Statement of Undisputed Facts ¶ 34-35)
They argue,
however, that they did not know, and “could not determine,” how
much was due for escrow.
(Plaintiffs’ Opposition Brief, p. 9)
16
As Nationstar observes, Dautrich’s letter to Nationstar
memorializing the telephone conversation omits any reference to
changing the September 1 date. (Steinlight Cert. Ex. I)
15
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This argument is insufficient to defeat summary judgment, and is
contrary to the record.
First, as a matter of law, ignorance of the terms of a
contract does not excuse a breach of the contract.
Second, no
reasonable factfinder could conclude on this record that, under
the terms of the Loan Modification Agreement, the Dautrichs
reasonably believed that they owed nothing towards escrow;
nothing in the Loan Modification documents supports a conclusion
that the Dautrichs owed no escrow money.
To the contrary, the record establishes that Nationstar’s
modification offer included: (1) a one-page cover letter setting
forth “the basic terms of [the] modification,” and how the
Dautrichs could accept the offer; (2) a one-page “Letter
Acknowledgement” setting forth the amount of the Qualifying
Payment ($14,398.38) and explaining how that money would be
applied; (3) a two-page “Loan Modification Agreement” setting
forth the amount of the interest-only loan payments ($5,612.42);
and (4) a one-page “Agreement to Maintain Escrow Account.”
(Dautrich Cert. Ex. 4) 17
17
The pagination of the documents makes clear that the
documents were intended as a complete package; the cover letter
is “Page 1 of 5,” the Letter Acknowledgement is “Page 2 of 5,”
the Loan Modification Agreement is Pages 3 and 4 of 5, and the
Agreement to Maintain Escrow Account is “page 5 of 5.”
(Dautrich Cert. Ex. 4)
16
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The title of the fourth document alone-- “Agreement to
Maintain Escrow Account”-- indicates that the Dautrichs’ escrow
payments were expected to continue after the modification, and
the contents of the document confirm this conclusion.
The
agreement states, “Borrower agrees to pay Lender, on the day
Periodic Payments are due under the Note, . . . a sum to provide
for payment of amounts due for: . . . taxes and assessments . .
. premiums for any and all insurance required by Lender . . .
and “Mortgage Insurance Premiums.”
(Dautrich Cert. Ex. 4)
Most significantly, however, the Dautrichs themselves
submit a “Mortgage Payoff Statement” dated October 8, 2014-i.e., seven days after the Dautrichs contend the Loan
Modification Agreement became effective-- reflecting that the
Dautrichs, at that time, owed $2,0077.50 as an “Escrow Payment.”
(Dautrich Cert. Ex. 5) 18
Yet, the next check the Dautrichs sent
to Nationstar-- which is also the first check Nationstar
returned to the Dautrichs-- is an October 27, 2014 check for
$5,612.42 (i.e., the exact amount to cover solely the interestonly payment, leaving nothing for escrow). (Dautrich Cert. Ex.
7)
Thus, the undisputed record evidence demonstrates that,
assuming the parties agreed to the Loan Modification Agreement,
the Dautrichs breached that agreement when they sent the October
18
The Statement also reflects that Nationstar had paid
$18,150.04 in “Escrow Advances.” (Dautrich Cert. Ex. 5)
17
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27, 2014 check which included no funds for escrow.
Therefore,
as a matter of law, any breach Nationstar allegedly committed
when it failed to credit that money (and all other subsequent
checks) towards the Dautrichs’ loan was excused.
See City of
Trenton v. Cannon Cochran Mgmt. Servs., Inc., 2011 WL 3241579,
at *4 (App. Div. 2011) (“A party in breach of contract cannot
rely on the other party’s subsequent failure to perform to
excuse its own prior breach.”) (citing Nolan v. Lee Ho, 120 N.J.
465, 472 (1990), and Restatement (Second) of Contracts § 237).
Thus, as to the breach of contract claim, the Dautrichs
have failed to carry their summary judgment burden of raising a
genuine issue of disputed fact as to whether they failed to pay
their escrow obligations, and whether such failure was a
material breach of the Loan Modification Agreement.
Even if a
reasonable factfinder could find that both parties mutually
assented to all material terms of the Loan Modification
Agreement (including the October 1 start date, as the Dautrichs
assert), that same factfinder could only find on this record
that the Dautrichs breached the Loan Modification Agreement
almost immediately after the contract was formed.
Therefore, as
matter of law, the alleged subsequent breaches by Nationstar
were excused.
Nationstar’s Motion for Summary Judgment as to
Count 1 will be granted.
18
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B. FDCPA
It is undisputed that Nationstar’s letters which
accompanied the Dautrichs’ returned checks were false and that
15 U.S.C. § 1692e prohibits false representations made in
connection with the collection of a debt. 19
Two issues are
presented: (1) does the FDCPA apply to Nationstar’s attempts to
collect on a loan secured by a property which undisputedly is
not the Dautrichs’ primary residence? (2) is Nationstar entitled
to the FDCPA’s “bona fide error” defense, 15 U.S.C. § 1692k(c)?
The Court addresses each in turn.
(1)
Applicability of the FDCPA
The FDCPA applies to attempts to collect on debts “arising
out of a transaction in which the money, property, insurance, or
services which are the subject of the transaction are primarily
for personal, family, or household purposes.” 15 U.S.C. §
1692a(5).
Nationstar argues that the Dautrichs’ beach house is
an investment property and therefore the mortgage on the
property is not a debt incurred primarily for personal, family,
or household purposes.
19
“A debt collector may not use any false, deceptive, or
misleading representation or means in connection with the
collection of any debt. Without limiting the general
application of the foregoing, the following conduct is a
violation of this section: . . . (2) The false representation
of-- (A) the character, amount, or legal status of any debt.” 15
U.S.C. § 1692e(2)(A).
19
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The record evidence does not support Nationstar’s position.
The undisputed fact that the Dautrichs sometimes rent out their
beach house 20 is not irreconcilably inconsistent with their use
of the house primarily for personal, family, or household
purposes.
Moreover, the “Second Home Rider” to the mortgage at issue
states in relevant part,
Borrower shall occupy, and shall only use, the Property
as Borrower’s second home.
Borrower shall keep the
Property available for Borrower’s exclusive use and
enjoyment at all times, and shall not subject the
Property to any timesharing or other shared ownership
arrangement or to any rental pool or agreement that
requires the Borrower to rent the Property or give a
management firm or any other person any control over the
occupancy or use of the property.
(Plaintiffs’ Response to Defendant’s Statement of Undisputed
Facts ¶ 7)
This evidence also supports a finding that the debt
at issue was incurred primarily for personal, family, or
household purposes.
The Court holds that the FDCPA applies; Nationstar’s Motion
for Summary Judgment as to this issue will be denied. 21
20
David Dautrich testified that the “property is a second home
that’s also rented . . . . in June, July, August, September, and
maybe part of October.” (Dautrich Dec. 8, 2016 Dep. p. 22); see
also Merkle Dep. p. 56 (“Q: How many weeks per year does the
property typically get rented? A: It can vary between 12 and 16
weeks.”).
21
In passing, Nationstar also asserts that the Dautrichs cannot
establish a FDCPA claim because “the false reinstatement amount
was such a small fraction of what Plaintiff [sic] owed to be
20
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(2)
The bona fide error defense
The issue is whether Nationstar is entitled to the “bona
fide error” defense, 15 U.S.C. § 1692k(c).
Nationstar moves for
summary judgment asserting that it is; the Dautrichs move for
summary judgment asserting that it is not.
The statute provides, “[a] debt collector may not be held
liable in any action brought under this subchapter if the debt
collector shows by a preponderance of evidence that the
violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error.” 15 U.S.C.A. § 1692k(c).
“[T]o
avail itself of the defense, [the debt collector must]
establish: (1) the alleged violation was unintentional, (2) the
reinstated, it could not be considered material such that it
would alter the decision-making process of the least
sophisticated debtor.” (Moving Brief, p. 26; see also Opposition
Brief, p. 27) In support of this assertion, Nationstar cites
Gordon v. Bank of America, N.A., 2017 WL 1377673 at *4 (D.N.J.
2017), which held that “while likely false and erroneous,” a
$390.00 total charge for 26 property inspections “could not be
considered material” when it was undisputed that a “total [of]
$221,906.10 [was] due on the mortgage.”
Gordon is
distinguishable; the erroneous figure at issue here-$99,999.99-- far exceeds $390. See generally Jensen v. Pressler
& Pressler, 791 F.3d 413, 421 (3d Cir. 2015) (“a statement in a
communication is material if it is capable of influencing the
decision of the least sophisticated debtor. As our
jurisprudence in this area has shown, this is not a particularly
high bar. . . . [T]he materiality requirement, correctly
applied, effectuates the purpose of the FDCPA by precluding only
claims based on hypertechnical misstatements under § 1692e that
would not affect the actions of even the least sophisticated
debtor.”).
21
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alleged violation resulted from a bona fide error, and (3) the
bona fide error occurred despite procedures designed to avoid
such errors.”
Beck v. Maximus, Inc., 457 F.3d 291, 297–98 (3d
Cir. 2006).
As to the second prong-- the existence of a bona fide
error-- the undisputed record establishes that the $99,999.99
figure originated from a computer program glitch.
(Plaintiffs’
Response to Defendant’s Counterstatement of Undisputed Facts ¶
42) 22
This is the type of “clerical . . .
mistake[],” Jerman v.
Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587
(2010), to which the bona fide error defense may apply. 23
Likewise, the failure of Nationstar’s employees to identify and
correct the computer glitch upon review of the computergenerated letter is a clerical mistake to which the defense may
apply.
Accordingly, the Court holds that Nationstar has carried
its burden of establishing the second prong of the defense.
22
See Clopton Dep. p. 67 (“Q: . . . there’s a paragraph that
says, as of the date of this letter, the total amount required
to bring this account current is $99,999.99. A: Yes. Q: Is
that accurate? A: No. That’s [an] error due to a glitch with
the form, with this particular . . . template.”); p. 74 (“Q: So
the cause for the error is that the program could not put a
number greater than 99,999.99? A: At that time, yes. The tool
had a glitch. And so the form fields were not reading and it
was not picking up.”).
23
Jerman held that the bona fide error defense does not apply
to a violation resulting from a debt collector’s mistaken
interpretation of the legal requirements of the FDCPA. 559 U.S.
at 577.
22
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As to the first prong-- the intent prong-- the statute
requires that the violation of the FDCPA “not [be] intentional.”
15 U.S.C.A. § 1692k(c).
Stated another way, the statutory bona
fide error defense may be available to the debt collector unless
the debt collector acted with intent to violate the FDCPA.
See
Rush v. Portfolio Recovery Assocs. LLC, 977 F. Supp. 2d 414, 440
(D.N.J. 2013) (“while the Third Circuit has not directly
addressed the issue, I note that district courts in this
circuit, as well as other circuit courts, focus their intent
inquiry on whether the debt collector intended to violate the
FDCPA, not whether it intended to communicate, or attempted to
communicate.”) (internal citations omitted); cf. Jerman, 559 at
582–83 (“Our law is . . . no stranger to the possibility that an
act may be ‘intentional’ for purposes of civil liability, even
if the actor lacked actual knowledge that her conduct violated
the law.”). 24
24
The Dautrichs quote Allen ex rel. Martin v. LaSalle Bank,
N.A., which states, “[t]he FDCPA is a strict liability statute
to the extent it imposes liability without proof of an
intentional violation.” 629 F.3d 364, 368 (3d Cir. 2011).
Allen-- which did not involve the bona fide error defense-- is
entirely consistent with the above-cited cases. The FDCPA does
impose liability “without proof of an intentional violation”
because, as the statute itself states, the bona fide error
defense is an affirmative defense for which the debt collector
bears the burden of proof. 15 U.S.C.A. § 1692k(c). In other
words, a plaintiff need not prove the debt collector’s intent to
establish liability, nonetheless, the debt collector may be
excused from its FDCPA violation if it can prove all three
elements of the bona fide error defense.
23
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Contrary to the Dautrichs’ assertion (see Opposition Brief,
p. 16), Nationstar does submit evidence that it did not intend
to misrepresent the amount required to bring the Dautrichs’
mortgage current; it is not genuinely disputed that the
$99,999.99 figure originated from a computer program glitch.
(Plaintiffs’ Response to Defendant’s Counterstatement of
Undisputed Facts ¶ 42)
Nevertheless, the Dautrichs observe that
“[t]he ‘error’ was not merely a computer system issue,” (id.),
and urge the Court to infer from the following undisputed
evidence that Nationstar intentionally failed to correct the
error.
First, each letter undisputedly was reviewed by a
Nationstar employee before it was sent, and each time (i.e.,
twelve consecutive times) the error was not corrected.
(Defendant’s Response to Plaintiffs’ Statement of Undisputed
Facts ¶ 30)
Second, Nationstar undisputedly continued to use the faulty
computer program even after the glitch was discovered, for a
period of approximately six months-- November 2014 to April
2015-- while Nationstar attempted to fix the issue. (Clopton
Dep. p. 75, 77-78)
The Court holds that this evidence
sufficiently supports submitting to a jury the issue of
Nationstar’s intent.
A reasonable juror could conclude that
Nationstar’s repeated conduct of sending twelve erroneous
letters in a row-- four of which undisputedly are dated after
24
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Nationstar asserts that it fixed the glitch 25-- is evidence that
Nationstar intentionally failed to correct the $99,999.99 error.
Similarly, the Court holds that a jury should decide
whether Nationstar’s “procedures [were] reasonably adapted to
avoid any such error.”
15 U.S.C.A. § 1692k(c).
In this regard,
it is clear that the “error” the Dautrichs assert is not the
generation of the $99,999.99 figure in the first instance, but
rather, the failure of Nationstar’s employees to identify and/or
correct the erroneous figure, even after the computer glitch was
detected.
(Plaintiffs’ Reply Brief, p. 9)
Nationstar’s
representative’s testimony as to this third prong is rather
vague; Clopton testified that “[w]e just received notice in
general that there were issues with the tool and to be careful
when using it because it was producing some errors with the
figures it was giving.”
(Clopton Dep. p. 78)
A jury should
evaluate the reasonableness of Nationstar’s response, or lack of
response, as the case may be.
Accordingly, with regard to the FDCPA claim (Count 2),
Nationstar’s Motion for Summary Judgment will be denied, and the
Dautrichs’ Motion for Summary Judgment will be denied.
25
Defendant’s Response to Plaintiffs’ Statement of Undisputed
Facts ¶¶ 25-28 (letters dated May 30, 2015; June 27, 2015;
August 3, 2015; and October 2, 2015).
25
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C. NJ CFA
According to the Dautrichs, Nationstar engaged in an
“unconscionable” business practice in violation of the New
Jersey Consumer Fraud Act because “no contractual clause under
the terms of the original mortgage loan or modification, and no
statute or regulation [] permitted Nationstar to hold $20,020.80
of Plaintiffs’ money in an unapplied funds suspense account.”
(Moving Brief, p. 23)
“Once accepted,” the Dautrichs explain,
“Nationstar was obligated to apply the funds as of the date
received, in the manner set forth within the [original mortgage]
contract.” (Id. p. 25-27)
At most, this argument asserts that Nationstar breached the
original mortgage contract, and as Nationstar correctly
observes, a mere breach of contract, without more, is not
actionable under the NJ CFA.
See Cox v. Sears Roebuck & Co.,
138 N.J. 2, 18 (1994) (“a breach of warranty, or any breach of
contract, is not per se unfair or unconscionable . . . and a
breach of warranty alone does not violate a consumer protection
statute. . . . Because any breach of warranty or contract is
unfair to the non-breaching party, the law permits that party to
recoup remedial damages in an action on the contract; however,
by providing that a court should treble those damages and should
award attorneys’ fees and costs, the Legislature must have
intended that substantial aggravating circumstances be present
26
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in addition to the breach.”).
Moreover, the Dautrichs have not
established that the original mortgage’s provisions concerning
application of funds survived their undisputed default on the
loan.
In other words, the summary judgment record does not even
establish that Nationstar breached any contract, much less that
any such breach was accompanied by aggravating circumstances
that would give rise to a NJ CFA claim.
Accordingly, as to the CFA claim (Count 3), the Dautrichs’
Motion for Summary Judgment will be denied, and Nationstar’s
Motion for Summary Judgment will be granted.
D. RESPA
The Dautrichs assert that Nationstar violated RESPA by
sending them the loan modification offer dated July 28, 2014
which required that the Dautrichs except the offer by July 31,
2014.
RESPA’s implementing regulations require that a servicer
give a borrower at least 14 days to “accept or reject an offer
of a loss mitigation option.”
12 C.F.R. § 1024.41(e)(1).
Nationstar asserts that the undisputed record is clear that
it gave the Dautrichs more than 14 days to accept the proposed
loan modification; the parties do not dispute that when David
Dautrich called Nationstar, Nationstar “agreed to change the
date upon which the qualifying payment and Loan Modification
Agreement had to be returned executed,” extending it to August
27
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28, 2014. (Plaintiffs’ Response to Defendant’s Statement of
Undisputed Facts ¶ 28).
The Dautrichs respond that “[t]he extension of time was
non-compliant because RESPA requires loss mitigation offers to
be in writing and Nationstar never confirmed in writing that Mr.
and Mrs. Dautrich could extend the time to accept the
Modification.”
(Opposition Brief, p. 29)
In support of this
assertion, the Dautrichs cite 12 C.F.R. § 1024.41(c)(1)(ii)
which states that “a servicer shall . . . [p]rovide the borrower
with a notice in writing stating the servicer’s determination of
which loss mitigation options, if any, it will offer to the
borrower on behalf of the owner or assignee of the mortgage.”
The undisputed record demonstrates that Nationstar complied
with § 1024.41(c)(1)(ii); the Loan Modification offer was in
writing.
Nothing in the regulation requires that extensions of
the § 1024.41(e)(1) 14-day minimum deadline be in writing.
Moreover, to the extent that the intent of the regulations
is to ensure that the borrower receives adequate notice of a
servicer’s decisions, there can be no dispute that the Dautrichs
were well-aware that Nationstar extended the due date for the
Loan Modification documents.
David Dautrich’s August 1st letter
states, “I called . . . and requested that the temporary
modification offered documents be extended until August 28,
2014.
Nationstar employee No. 8972096, Joe, said he received
28
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authority to extend Nationstar’s modification offer to August
28, 2014.”
(Steinlight Ex. I)
Accordingly, Nationstar’s Motion for Summary Judgment as to
the RESPA claim (Count 5) will be granted.
E. “Property tortiously damaged”
Lastly, Nationstar asserts that the economic loss doctrine
bars the Dautrichs’ claim which essentially asserts that their
house was negligently damaged when the locks were changed.
This
argument fails.
“At common law a plaintiff who had a contractual
relationship with the defendant was able to sue in tort if the
plaintiff could establish that the alleged breach of duty
constituted a separate and independent tort.”
Saltiel v. GSI
Consultants, Inc., 170 N.J. 297, 309, 788 A.2d 268, 276 (2002).
Such is the case at bar.
While the parties’ relationship was,
indeed, created by contract, nothing in the parties’ contract
contemplated that Nationstar would damage the Dautrichs’ house
while changing the locks.
In this way, contrary to Nationstar’s
argument, Nationstar did have an independent duty extrinsic to
the parties’ contract; “an independent legal duty to refrain
from damaging [the Dautrichs’] property.”
Lacroce v. M. Fortuna
Roofing, Inc., No. CV 14-7329 (JBS/KMW), 2017 WL 6342150, at *5
(D.N.J. Dec. 12, 2017) (denying defendants’ motion for summary
judgment, holding that the economic loss doctrine did not bar
29
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the plaintiff’s negligence claim); contrast Saltiel, 170 N.J. at
310 (“there is no general duty to exercise reasonable care to
avoid intangible economic loss[es] . . . that do not arise from
tangible physical harm to persons and tangible things.”)
(emphasis added).
In asserting their claim for property damage,
the Dautrichs are not merely “seek[ing] the benefit of the
bargain they made in their agreement” with Nationstar, Saltiel,
170 N.J. at 312, and thus the economic loss doctrine does not
apply.
Accordingly, Nationstar’s Motion for Summary Judgment as to
the “property tortiously damaged” claim (Count 6) will be
denied.
IV.
Conclusion
For the forgoing reasons: (a) Nationstar’s Motion for
Summary Judgment will be granted as to Counts 1 (breach of
contract), 3 (NJ CFA), and 5 (RESPA) of the Complaint, and
denied as to Counts 2 (FDCPA) and 6 (“property tortiously
damaged”) of the Complaint; (b) the Dautrichs’ Cross-Motion for
Summary Judgment will be denied; and (c) Count 4 (TILA) of the
Complaint will be dismissed pursuant to Fed. R. Civ. P.
41(a)(2).
An appropriate Order shall issue.
June 29, 2018
__s/ Renée Marie Bumb _______
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE
30
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