DANISE v. SAXON MORTGAGE SERVICES, INC. et al

Filing 48

OPINION. Signed by Judge Jose L. Linares on 12/19/2016. (ld, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

Civil Action No.: 15-06062 (JLL)

TAMMY RIZZOLO DANISE, on behalf of
herself and all other similarly situated,

OPINION

Plaintiff,
V.

SAXON MORTGAGE SERVICES, INC., et
al.,
Defendants.

LINARES, District Judge.
This matter comes before the Court by way of two motions to dismiss this action filed by
Defendants Saxon Mortgage Services, Inc. (“Saxon”) and Ocwen Loan Servicing, Inc. (“Ocwen”)
(collectively, “Defendants”). Plaintiff has opposed both motions, and Defendants have replied to
Plaintiffs opposition. The Court decides these motions without oral argument pursuant to Federal
Rule of Civil Procedure 78.

For the reasons stated herein, Defendants’ motions to dismiss

Plaintiffs Amended Complaint are hereby granted.
I.

Background1

Plaintiff Tammy Rizzolo Danise is a New Jersey citizen who resides in East Hanover.
(FAC

¶

1). Plaintiff alleges that she is the borrower on a first real estate loan originally serviced

by Defendant Saxon, a Texas Corporation. (Id.). However, according to Plaintiff, in or about

The facts as stated herein are taken as alleged in Plaintiffs first Amended Complaint. (ECF No. 36, “FAC”). For
purposes of the pending motions to dismiss, these allegations are accepted by the Court as true. See Phillips v. County
of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008) (“The District Court, in deciding a motion [to dismiss under Rule]
12(b)(6), was required to accept as true all factual allegations in the complaint and draw all inferences from the facts
alleged in the light most favorable to [the plaintiff].”).

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April 2012, “Saxon largely ceased operations after selling substantially all its assets to Ocwen
Financial Corporation,” of which Defendant Ocwen is a subsidiary. (Id.

¶ 2-3). Plaintiff alleges

that, as a result of the cessation of Saxon’s operations and the sale to Ocwen, Plaintiffs mortgage
loan and all accompanying rights, titles, interests and obligations were transferred to Defendant
Ocwen. (Id.

¶). Ocwen, in turn, is a mortgage bank and home mortgage loan servicer with its

principal place of business in Florida.
In 2008, Plaintiff was struggling to pay back her mortgage loan. (FAC

¶ 61). In or about

August 2008, she contacted Saxon—her loan servicer at that time—for assistance in reducing her
monthly payments. (Id.). According to Plaintiff, she complied with Saxon’s requests to submit
various financial information in order to devise a solution; however, in October 2008, Saxon
denied Plaintiffs request to modify her loan, citing to Plaintiffs insufficient income. (Id.

¶J 61-

62).
Thereafter, in February 2009, the United States Department of Treasury announced the
Home Affordable Modification Program (“HAMP”). (Id.

¶J 5, 13, 63). According to Plaintiff,

the HAMP program “lowers borrowers’ monthly payments to 31 percent of their verified monthly
gross income and converts interest-only and adjustable rate mortgage loans into fixed rate fully
amortizing loans.” (Id.

¶ 13). On May 15, 2009, Saxon offered Plaintiff the ability to participate

in a HAMP Trial Period Plan (“TTP”). (Id.

¶ 63). Plaintiff claims that pursuant to the TPP, she

was required to, among other things, make timely monthly trial period payments—payments which
Saxon represented were an estimate of what Plaintiffs monthly mortgage payments would be if
her mortgage loan was permanently modified under the HAMP. (Id.

¶J 64-65). Plaintiff alleges

that Saxon “represented that if Plaintiff fulfilled her obligations under the TPP and her
representations as to her hardship, residency, property ownership and income continued to be true

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in all material respects during the trial period, Saxon would provide her with a permanent loan
modification.” (hi.

¶ 65).

Plaintiff alleges that despite complying with all of the terms and obligation of the TPP,
Saxon denied Plaintiff a permanent loan modification by way of letter date April 6, 2010. (Id.

¶

68). In support of its denial, Saxon advised Plaintiff that her loan had failed a Net Present Value
(“NPV”) calculation, which Plaintiff alleges was not grounds for denial under the TPP. (Id.).
Although Saxon thereafter invited Plaintiff to apply for subsequent loan modifications, it
consistently denied Plaintiff a permanent modification. (Id.

¶ 70-72).

Ultimately, Plaintiff was unable to make her monthly mortgage payments and, in
September 2010, Saxon served Plaintiff with a foreclosure complaint.

(Id.

¶

73).

Shortly

thereafter, on October 7, 2010, Plaintiff filed a voluntary petition under Chapter 13 of the
Bankruptcy Code. Plaintiff alleges that as a result of the bankruptcy, she “was compelled to pay
all arrears under the Saxon mortgage, including late charges, pre-petition attorneys’ fees and costs,
inspection fees and breach fees, added as charges under the terms of the mortgage in her Chapter
13 case.” (Id.). The bankruptcy court issued Plaintiff an Order of Discharge in March 2015. (Id.

¶ 74).
On May 29, 2015, about three months after satisfying her bankruptcy plan, Plaintiff filed
the instant lawsuit on behalf of herself and a putative class of similarly situated individuals in the
Superior Court of New Jersey, Morris County. (ECF No. 1,

¶

1). Defendants subsequently

removed this action to the District Court on the grounds of federal question jurisdiction on August
7, 2015. (Id.

¶J 2-3).

Plaintiff asserts claims against both Defendants for breach of contract,

breach of the implied covenant of good faith and fair dealing, promissory estoppel and violation
of the New Jersey Consumer Fraud Act (“NJCFA”) and asserts a claim against Defendant Ocwen

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under the F air Debt Collection Practices Act (“FDCPA”). (F AC at 31-39). In summary, Plaintiff
alleges that she and the putative class members
have been subject to and affected by a unifonTi course of conduct by Defendants that was
designed to evade the requirements of HAMP and avoid pennanent loan modifications in
an effort to increase Defendants’ income through, inter a/ia, maintaining high service fees
on larger principal balances, collecting additional late fees and process management fees
and avoiding increased fixed overhead costs.

(Id.

¶ $8).

Specifically, Plaintiff accuses Defendants of, among other things, failing to permanently

modify the mortgages of individuals who complied with their obligations under the TPP and by
prequalifying borrowers for a permanent loan modification under HAMP or failing to properly and
timely conduct the required prequalification analysis. (Id.

¶ 89).

Defendants now move for a dismissal of this action. (ECF No. 39-3 (“Ocwen Mov. Br.”);
ECF No. 40-1 (“Saxon Mov. Br.”). Plaintiff has opposed both motions (ECF No. 44 (“Pl.’s Saxon

Opp. Br.”); ECF No. 45 (“Pl.’s Ocwen Opp. Br.”)) and Defendants have replied to same (ECF No.
46 (“Ocwen Reply Br.”); ECF No. 47 (“Saxon Reply Br.”). These motions are now ripe for the
Court’s adjudication.
II.

Legal Standard
For a complaint to survive dismissal, it “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. 62, 678
(2009) (citing Bell Ati. Corp. v. Th’ornbly, 550 U.S. 544, 570 (2007)).

In determining the

sufficiency of a complaint, the Court must accept all well-pleaded factual allegations in the
complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips
v. Cnty. ofAllegheny, 515 F.3d 224, 234 (3d Cir. 200$). Additionally, in evaluating a plaintiffs
claims, generally “a court looks only to the facts alleged in the complaint and its attachments

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without reference to other parts of the record.” Jordan v. Fox, Rothschild, O’Brien & Frankel, 20
f.3d 1250, 1261 (3d Cir. 1994).
III.

Discussion

Defendants maintain that dismissal is warranted for the following reasons: (1) Plaintiffs
claims are barred by the doctrines of judicial estoppel and res judicata; (2) Plaintiff has not pled
the existence of the requisite contractual relationship necessary to prove some of Plaintiff s claims;
(3) Plaintiff is not permitted to sue for relief under the HAMP as a government program, and; (4)
Plaintiffs class claims are time-barred. Because the Court agrees with Defendants that the instant
litigation is barred by the doctrine of judicial estoppel, the Court need not address Defendants’
remaining arguments for dismissal.
“Judicial estoppel, sometimes called the ‘doctrine against the assertion of inconsistent
positions,’ is a judge-made doctrine that seeks to prevent a litigant from asserting a position
inconsistent with one that she has previously asserted in the same or in a previous proceeding.”
Ryan Operations G.P. v. Santiam-Mithvest Lumber Co., $1 F.3d 355, 358 (3d Cir. 1996) (citations

omitted). The doctrine “is designed to prevent litigants from ‘playing fast and loose with the
courts.” Id. (quoting Scarano v. Cent. R. Co. ofN.i, 203 F.2d 510, 513 (3d Cir. 1953)). “The
basic principle

.

.

.

is that absent any good explanation, a party should not be allowed to gain an

advantage by litigation on one theory, and then seek an inconsistent advantage by pursuing an
incompatible theory.” Id. (quoting 1$ Charles A. Wright, et al., federal Practice and Procedure

§

4477 (1981)). However, a court “may not employ judicial estoppel unless it is ‘tailored to address
the harm identified’ and no lesser sanction would adequately remedy the damage done by the
litigant’s misconduct.” Montrose Medical Grottp Participating Savings Plan v. Bulger, 243 F.3d

773, 779-80 (3d Cir. 2001) (emphasis added and citations omitted).

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With this framework in mind, the Court considers (1) whether Plaintiff has taken
irreconcilably inconsistent positions; (2) whether those positions were taken in bad faith; and
lastly, (3) whether any sanctions short of dismissal are available to remedy any damage done by
Plaintiffs conduct. See Id.

1. Plaintiffs Inconsistent Positions

Here, Defendants maintain that Plaintiff has taken an irreconcilably inconsistent position
as to the present claims by neglecting to raise these claims at any point during the course of her
Chapter 13 bankruptcy proceedings. (Saxon Mov. Br. at 12; Ocwen Mov. Br. at 6-7). Given the
below history of events leading to Plaintiffs filing of the pending action, the Court agrees that
Plaintiff has taken irreconcilably inconsistent positions with regards to the claims now pending.
Plaintiff alleges that Saxon unlawfully denied her requested loan modification on April 6,
2010. (FAC

¶ 68). Approximately five months later, in September 2010, Saxon served Plaintiff

with a foreclosure complaint, and Plaintiff filed for Chapter 13 bankruptcy the following month.
(Id.

¶ 73). In connection with Plaintiffs bankruptcy proceedings, Defendant Saxon filed a proof

of claim based on Plaintiffs original, unmodified mortgage.

(Saxon Mov. Br. at 6-7).

Specifically, Saxon sought pre-petition mortgage arrears and the monthly mortgage payment
contemplated by Plaintiffs original loan agreement. Id.
Notably, during the approximately five-year period that Plaintiffs bankruptcy proceedings
were pending, she never raised any issue with respect to Saxon’s claim relating to her mortgage.
That is, Plaintiff did not object to Saxon’s proof of claim, nor did Plaintiff challenge the validity
of the attached original loan documents.

(Id. at 7).

In other words, Plaintiff accepted the

representations made by Defendant Saxon that it was entitled to proceeds in bankruptcy in an
amount calculated under the original loan documents. Thus, the bankruptcy court confirmed
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Plaintiffs bankruptcy plan, thereby incorporating Saxon’s unopposed claim, on June 3, 2011.

(Id.). Plaintiff satisfied her Chapter 13 plan in March of 2015. (FAC

¶ 73).

About three months

later, on May 29, 2015, Plaintiff filed the instant lawsuit in which she alleges that she was
contractually entitled to a modification of her original loan with Saxon and seeks, among other
relief, “specific performance of Defendants’ contractual obligations” under the TPP. (Id. at 40).
Plaintiffs actions before the bankruptcy court in neglecting to challenge Defendants’ claim of
entitlement to payment under the terms of the original mortgage, and her instant request that this
Court order specific performance of the TPP, are entirely inconsistent.
Moreover, the bankruptcy rules impose a continued obligation on a debtor to disclose all
property, including any contemplated causes of action, on a “schedule of assets and liabilities.” 11
U.S.C.

§ 521(a)(1)(B)(i); See also DeFasquale v. Morgan Stanley Smith Barney LLC,

10-cv-6$2$,

2011 WL 3703110, *3 (D.N.J. Aug. 23, 2011) (“Plaintiff here had a duty to disclose her claim
against Morgan Stanley as soon as she became aware that a possible cause of action existed.”).
“These disclosure requirements are crucial to the effective functioning of the federal bankruptcy

system.” Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 362 (3d Cir. 1996).
Accordingly, the “doctrine ofjudicial estoppel frequently arises in the context of a failure to list a
claim as an asset in a bankruptcy, and the inconsistent pursuit of an undisclosed claim.” Clark v.
Clark v. Strober-Haddonfield Group, Inc., 07-cv-910, 2008 WL 2945972, *2 (D.N.J. July 29,
2008) (citations omitted); see also Lewis v. Eberle & BCI Serv., LLC, I 1-cv-4661, 2013 WL
4483529, *3 (D.N.J. Aug. 19, 2013). In this case, Plaintiff never listed the pending claims on the
schedule of assets and liabilities before the Bankruptcy Court, further evidencing her acceptance
of Saxon’s representations to that Court.

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In light of this information, the Court finds that Plaintiff has indeed taken irreconcilably
inconsistent positions as to the mortgage loan. That is, for five years, Plaintiff failed to raise any
flags with respect to the validity of Saxon’s claims. Then, only a few months after satisfying the
bankruptcy plan, Plaintiff filed the instant lawsuit which seeks a finding from this Court that
Defendant Saxon was not, in fact, entitled to the proceeds it claimed during the bankruptcy
proceedings. Plaintiffs omission of these claims during the entirety of the bankruptcy proceedings
is inconsistent with her filing of the instant lawsuit a mere three months after she received an order
of discharge.
2. Bad Faith

“Asserting inconsistent positions does not trigger the application ofjudicial estoppel unless
‘intentional self-contradiction is

.

.

.

used as a means of obtaining unfair advantage.” Ryan, 81

F.3d at 362 (quoting Scarano, 203 F.2d at 513). Thus, the Court must consider whether Plaintiffs
failure to raise the present allegations before the bankruptcy court was the result “of a good faith
mistake rather than as part of a scheme to mislead the court.” Id. (quotations omitted).
Notably, the Third Circuit has declined to adopt a rule that a debtor’s failure to disclose a
claim before the bankruptcy court isperse evidence of bad faith. Ryan, $1 F.3d at 364-65. Rather,
the Court should consider the record as a whole to determine whether “an inference of deliberate
manipulation could be drawn.” Id. at 3 63-65. “A rebuttable inference of bad faith arises when
averments in the pleadings demonstrate both knowledge of a claim and a motive to conceal that
claim in the face of an affirmative duty to disclose.” Kiystal Cadillac-Oldsmobile GMC Truck,
Inc. v. Gen. Motors Corp., 337 F.3d 314, 321 (3d Cir. 2003); see also Ryan, 81 F.3d at 364-65
(discussing Oneida Motor freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d Cir. 1988)).
A. Plaintiffs Knowledge

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The Parties dispute whether Plaintiff was aware of the existence of bases to assert the
present claims during the pendency of the bankruptcy action. A cause of action is deemed to be
“known” for purposes of disclosure in the bankruptcy proceedings “[i]f the debtor has enough
information

.

.

.

prior to confirmation to suggest that it may have a possible cause of action.”

Kiystal, 337 F.3d at 323. Here, Plaintiff maintains that “there is no evidence from which the Court
may infer that Plaintiff knew she had a claim against Defendants prior to receiving her discharge
in bankruptcy.” (P1.’s Saxon

Opp. at 9).

The record indicates otherwise.

First, the procedural history of this case indicates that Plaintiff was aware of all of the facts
underlying the present claims prior to filing a petition for bankruptcy. Specifically, the FAC
indicates that the correspondence between Saxon and Plaintiff relating to Plaintifrs loan
modification request occurred between August 200$ and July 2010. (See FAC
September 2010, Saxon served Plaintiff with a foreclosure complaint.

(Id.

¶

¶J

61-72). In

73).

Almost

immediately thereafter, in October 2010, Plaintiff filed for relief in the bankruptcy court. (Id.). In
March 2015 Plaintiff completed her bankruptcy plan. (Id.

¶

74). Finally, three months later,

Plaintiff filed the instant action.
In short, Plaintiff would have the Court believe that: (1) throughout the roughly five-year
period between Defendants’ denial of her loan modification requests and the satisfaction of her
bankruptcy plan, Plaintiff was unaware that she may have a cause of action against Defendants,
and; (2) during the three-month period following the bankruptcy court’s Order of Discharge, she
suddenly became apprised that she may have a basis to assert claims against Defendants. Yet
Plaintiff has not explained how it is that she only recently learned of the possible causes of action

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she now asserts against Defendants. (See Pl.’s Saxon Opp. Br. at 512).2 That is, Plaintiff has
failed to rebut the inference of knowledge gleamed from the sequence of events.3
Accordingly, the Court finds that Plaintiff had knowledge of the pending claims during the
five-year bankruptcy proceedings. This factor, therefore, militates against Plaintiff and in favor of
the application ofjudicial estoppel.
B. Motivation to Conceal

Additionally, the record demonstrates that Plaintiff indeed had a motivation to conceal her
claims from the bankruptcy court. As Saxon notes, and Plaintiff does not dispute, “[b]ecause
Plaintiffs obligations to creditors exceeded her scheduled assets, significant amounts of her
secured and unsecured debts—including her $ 150,00 second mortgage—were discharged entirely
by the final confinTied plan.” (Saxon Mov. Br. at 15). Additionally, among other relief requested
in the FAC, Plaintiff seeks actual damages, treble damages, and reasonable attorneys’ fees. (FAC
at 40). Certainly, disclosure of these claims, with their accompanying damage regimes, “would
have benefited Plaintiffs creditors by enlarging the bankruptcy estate.” DeFasquale, 2011 WL
3703110, *6.
In summary, “[t]his combination of knowledge of the claim and motive for concealment in
the face of an affirmative duty to disclose g[ives] rise to an inference of intent sufficient to satisfy
the requirements of judicial estoppel.” Ryan, 81 F.3d at 363. As Plaintiff has not offered any

The Court also notes that during the bankruptcy proceedings, Plaintiff appears to have been represented by at least
one of the two attorneys representing Plaintiff in the instant action.
2

Defendants point out that in an earlier motion to amend the compLaint filed before this Court, Plaintiff represented
that she may have a basis for an actual claim.” (Saxon
that “[i]t was not until April 2010 that Plaintiff discovered
Mov. Br. at 14 (citing ECF No. 27 at 5). Defendants urge the Court to consider this statement as further evidence that
Plaintiff undoubtedly knew of the possible causes of action six months before filing for bankruptcy in October 2010.
(Id.). Plaintiff, for her part, argues that this statement made in a prior brief is not a factual assertion for purposes to
the pending motion and is not properly before the Court at this time. Given the order of events in this case, outlined
above, the Court need not consider the above statement to find that Plaintiff knew of the possible causes of action she
now asserts.
.

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.

.

evidence to rebut this inference, the Court finds that, absent the availability of lesser sanctions,
judicial estoppel is appropriate.
C. Availability of Lesser Sanctions

Before a court may apply the doctrine of judicial estoppel, it must determine whether any
lesser sanction is available. Bulger, 243 F.3d at 779-80. Here, Plaintiff has not offered any
suggested lesser sanction, and Defendant Saxon maintains that “[t]he only lesser sanction available
in this case would be requiring Plaintiff to reopen her bankruptcy case in order to pay the nowdischarged obligations from any damages Plaintiff recovers here.”

(Saxon Mov. Br. at 16).

However, were the Court to issue this alternative sanction, “[Plaintiff] would still reap the benefit
of any recovery beyond the amount paid to satisfy outstanding debts. In addition, the integrity of
both the bankruptcy process and the judicial process would suffer.” Kiystal, 337 F.3d at 325.
Accordingly, the Court finds that no lesser sanction is appropriate.
IV.

Conclusion

For the reasons stated above, the Court grants Defendants’ motion to dismiss Plaintiffs
Amended Complaint. Plaintiffs claims are dismissed with prejudice on the grounds of judicial
estoppel. An appropriate Order accompanies this Opinion.
IT IS SO ORDERED.
DATED: December Lj

2016

ARES, U.&3-4—

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