Elliott v. First Federal Community Bank of Bucyrus

Filing 81

ORDER denying 72 Motion for Summary Judgment; granting 73 Motion for Summary Judgment. Signed by Judge Algenon L. Marbley on 3/26/2019. (cw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
G. RALPH ELLIOTT,

:
:
:
:
:
:
:
:
:
:

Plaintiff,
v.
FIRST FEDERAL COMMUNITY
BANK OF BUCYRUS,
Defendant.

Case No. 2:17-CV-42
JUDGE ALGENON L. MARBLEY
Magistrate Judge
Elizabeth Preston Deavers

OPINION & ORDER
This matter comes before the Court on the parties’ cross-Motions for Summary
Judgment. (ECF Nos. 72, 73). For the reasons below, Defendant’s Motion is GRANTED, and
Plaintiff’s Motion is DENIED.
I.

BACKGROUND

Plaintiff brought this suit alleging a violation of the Truth in Lending Act (TILA), 15
U.S.C. § 1639c, § 1640, and common law negligence. Both Plaintiff and Defendant, First
Federal Community Bank of Bucyrus (“the Bank”), have filed Motions for Summary Judgment.
Plaintiff G. Ralph Elliott worked for 30 years as a realtor in the Marysville, Ohio area.
(ECF No. 34 at 8) (hereafter “Elliott Deposition”). Every three years, he completed 30 hours of
continuing education to maintain his license. (Id. at 9:4). Plaintiff was previously married to
Virginia Golan Elliott, who is also a realtor. Ms. Golan is a third-party defendant in this case but
is not party to the instant Motion. Plaintiff and his former spouse marketed themselves as “the
Elliott Team” and had two realtors and two support staff in the office. (Id. at 13:12-20).
Although Plaintiff is now in his eighties, he is a repeat player in the field of real estate and
mortgages, and a consumer of above-average sophistication.

In 2013, Plaintiff and Ms. Golan, then married, refinanced the mortgage on their 26-acre
property on Maple Ridge Road. This is the property at issue here. The Elliotts worked with
Defendant Bank on this refinancing. (Id. at 23:7-18). Eighteen months after this refinancing, the
Elliotts decided to separate. They agreed upon an asset and debt distribution plan. (ECF No. 73,
Ex. 4). Plaintiff would live on Maple Ridge Road. (ECF No. 73, Ex. 4). Ms. Golan would live in
a property on Restoration Drive. (Id.). As part of the separation, she would assume the mortgage
on this property herself and Plaintiff would not be responsible for the debt associated with the
Restoration Drive property. (Id.). The separation agreement also provided for Ms. Golan to pay
Plaintiff spousal support in the amount of $2,200.00 per month. (Id.).
In 2014, about eighteen months after the Elliotts refinanced their loan with the Bank,
Plaintiff Elliott, now separated, again requested to refinance the mortgage on the Maple Ridge
Road property. He hoped to place the property in his name only, pursuant to the separation
agreement. (ECF No. 73 at 5). Plaintiff completed a loan application with the following
information: he had a base income of $528.95 per month, spousal support of $2,300.00 per
month, social security of $1,975.00 per month, and rental income of $1,400.00 per month. (ECF
No. 46). Plaintiff reviewed and signed the loan application. (Elliott Deposition at 40:12-20).
Defendant Bank attempted to separate the debts of Plaintiff and Ms. Golan to calculate
accurately his finances for the new loan. Relying on the representations of Plaintiff and Ms.
Golan, and on the Separation Agreement, the Bank did not consider as Plaintiff’s debt Ms.
Golan’s mortgage for the Restoration Drive property. (ECF No. 47 at 33) (hereafter “Savidge
Deposition”). The Bank’s loan committee initially denied the refinancing request. (ECF No. 73,
Ex. A). Ms. Golan then approached the loan officer at the Bank to ask if the Bank would
reconsider. (Id.). Ms. Golan reassured the Bank she was committed to the separation agreement

2

by which she would pay Plaintiff spousal support sufficient to pay the mortgage. (Id.). The
Elliotts had been good customers of the Bank and at that time had never missed a payment. (Id.).
The loan officer with whom Ms. Golan spoke later scheduled a meeting with the Vice President
of the Bank to ask him to reconsider, relaying his conversation with Ms. Golan. (Id.).
With the information from Ms. Golan about Plaintiff’s income and the details of the
separation agreement, the Bank understood that Plaintiff’s finances were within the range for the
Bank to refinance the loan. His debt-to-income ratio was below the 40% threshold and his credit
score was at the bank’s threshold of 660. (Id.). For these figures, the Bank relied on the
representations of both Plaintiff and Ms. Golan and worked with their tax returns – even though
those were joint returns filed while the pair were married and required reliance on outside
information, such as how much Plaintiff would continue to earn from Ms. Golan’s realty office.
Because the Elliotts had been good customers, the Bank also waived other fees associated with
the refinancing and did not reappraise the property, because these processes had just been done
for the 2013 refinancing. (Savidge Deposition at 38).
After Plaintiff’s mortgage was refinanced, the relationship between Plaintiff and Ms.
Golan apparently deteriorated. In divorce proceedings, including a lengthy trial in the Union
County Court of Common Pleas, their property and debts were re-divided, and Plaintiff was now
ordered to receive $250.00 per month in spousal support. (ECF No. 73, Ex. F). Plaintiff was also
fired from his job at Ms. Golan’s office. With the loss of income both from spousal support and
from his job, in addition to the debts incurred during the divorce proceedings, Plaintiff fell
behind on his mortgage payments to Defendant Bank. He was sent notice of his duty to pay, at
which point he brought his suit. (ECF No. 73, Ex. L).

3

II.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(a) provides, in relevant part, that summary judgment
is appropriate “if the movant shows that there is no genuine issue as to any material fact and the
movant is entitled to judgment as a matter of law.” A fact is deemed material only if it “might
affect the outcome of the lawsuit under the governing substantive law.” Wiley v. United States,
20 F.3d 222, 224 (6th Cir. 1994) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). The nonmoving party must then present “significant probative evidence” to show that
“there is [more than] some metaphysical doubt as to the material facts.” Moore v. Philip Morris
Cos., Inc., 8 F.3d 335, 340 (6th Cir. 1993). The mere possibility of a factual dispute is
insufficient to defeat a motion for summary judgment. See Mitchell v. Toledo Hospital, 964 F.2d
577, 582 (6th Cir. 1992). Summary judgment is inappropriate, however, “if the dispute about a
material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson, 477 U.S. at 248.
The necessary inquiry for this Court is “whether ‘the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.’” Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting
Anderson, 477 U.S. at 251-52). The mere existence of a scintilla of evidence in support of the
opposing party’s position will be insufficient to survive the motion; there must be evidence on
which the jury could reasonably find for the opposing party. See Anderson, 477 U.S. at 251;
Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995). It is proper to enter summary judgment
against a party “who fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Where the nonmoving party has “failed to

4

make a sufficient showing on an essential element of her case with respect to which she has the
burden of proof,” the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S.
at 322 (quoting Anderson, 477 U.S. at 250). In evaluating a motion for summary judgment, the
evidence must be viewed in the light most favorable to the nonmoving party. S.E.C. v. Sierra
Brokerage Servs., Inc., 712 F.3d 321, 327 (6th Cir. 2013).
III.

ANALYSIS

A. Truth in Lending Act
Plaintiff alleges violations of the Truth in Lending Act. Defendant’s Motion for Summary
Judgment is granted because there can be no genuine dispute of material fact that the Bank acted
in compliance with their statutory obligations. 15 U.S.C. § 1639c(a)(1) requires:
In accordance with regulations prescribed by the Bureau, no creditor may make a
residential mortgage loan unless the creditor makes a reasonable and good faith
determination based on verified and documented information that, at the time the
loan is consummated, the consumer has a reasonable ability to repay the loan,
according to its terms, and all applicable taxes, insurance (including mortgage
guarantee insurance), and assessments.
Plaintiff argues that the Bank failed to make a “reasonable and good faith determination based on
verified and documented information” that he had a “reasonable ability to repay the loan” but
there can be no genuine dispute that the Bank did just this. Bradley Murtiff was the Bank’s Vice
President in 2014 when Plaintiff was refinancing his loan. Mr. Murtiff averred that he was “not
aware of any information/documents that were available that the bank has not obtained.” (ECF
No. 73, Ex. A at ¶ 15). The record in this case indicates the Bank did its due diligence to confirm
Plaintiff would have the ability to make the payments on his mortgage. At the time of
refinancing, Plaintiff was a good customer who had not missed a payment, and the data the Bank
had indicated he was a customer with the financial standing to allow for the refinancing. The fact
that Plaintiff and Ms. Golan did not keep the separation agreement and instead opted to divorce –
5

a series of events which reduced Plaintiff’s income by an order of magnitude – was not an event
that was reasonably foreseeable to the Bank.
Plaintiff may be unable to make his payments at this time. Though this is an unfortunate
outcome, it is not the responsibility of the Bank, which met its statutory obligations.
B. Appendix Q
In his Motion for Summary Judgment, Plaintiff argues Defendant Bank approved his
refinance in violation of “Regulation Q.” (ECF No. 72 at 7). Counsel raised this issue at oral
argument as well. In the colloquial, “Regulation Q” appears to be about the interest banks can
charge on deposit accounts. However, “Appendix Q” is an appendix to the regulations that
implement the Truth in Lending Act. 12 C.F.R. § 1026. Because Counsel included the
regulations from Appendix Q in his Motion for Summary Judgment (ECF No. 72, Ex. 3) and
because Appendix Q is relevant here, this Court considered the parties’ arguments on the subject
of Appendix Q, not Regulation Q.
The full title of Appendix Q is “Appendix Q to Part 1026 – Standards for Determining
Monthly Debt and Income.” The thrust of Plaintiff’s argument seems to be that Defendant Bank
did not abide by these regulations when determining Plaintiff’s income and debt for the purpose
of the 2014 refinance. In their brief and again at oral argument, the Bank insisted they had abided
by these regulations.
Appendix Q outlines how a lender may determine the income and debt of a potential
debtor. The regulations which Appendix Q supplements “provides that, to satisfy the
requirements for a qualified mortgage…the ratio of the consumer’s total monthly debt payments
to total monthly income at the time of consummation cannot exceed 43 percent.” 12 C.F.R. §
1026.43(e)(2)(vi). Defendant Bank notes that per Plaintiff’s loan application, his debt-to-income

6

ratio was 37.367%. (ECF No. 73 at 7). The Bank identified two additional relevant limits besides
those in Appendix Q: the “40% threshold at the time” and the “current 38% limit.” (Id.). By any
of these measures, Plaintiff qualified for this mortgage and the Bank did its due diligence as
required.
Plaintiff argues it was inappropriate, under Appendix Q, for the Bank to consider as
Plaintiff’s income the spousal support he would be receiving from Ms. Golan pursuant to the
separation agreement. (ECF No. 72 at 7). Plaintiff also contests the Bank’s determination of his
rental income. These arguments are exactly precluded by the text of Appendix Q, however,
which states: “Alimony, child support, or maintenance income may be considered effective if the
consumer provides the required documentation, which includes a copy of the legal separation
agreement.” § II.A.2.ii. The regulation further provides that the consumer will need to “provide
acceptable evidence that payments have been received during the last 12 months, such as tax
returns,” § II.A.3.iii, but notes that “periods less than 12 months may be acceptable provided the
creditor can adequately document the payer’s ability and willingness to make timely payments.”
Id. at n.i. The separation agreement, combined with Ms. Golan’s representations to the Bank,
constitute compliance with these portions of Appendix Q.
In addition, § D discusses the procedure for calculating the consumer’s income from
rental payments. The Bank reviewed Plaintiff’s tax returns, which “also confirmed he had
received rental income in the past,” and reviewed a then-current lease which “shows that in
March of 2014, Mr. Elliott entered a one-year lease, leasing a portion of his premises for
$1,000/month.” (ECF No. 73 at 9). The Bank had this information available when it made its
refinancing decisions – indeed, that is why the Bank is now able, in its briefing, precisely to
identify Plaintiff’s credit score and debt-to-income ratio. Plaintiff’s arguments that the Bank did

7

not comply with Appendix Q are unavailing. There can be no genuine dispute of these material
fact, and summary judgment is proper.
C. Negligence
Defendant’s Motion for Summary Judgment is also granted as to Plaintiff’s claim of
negligence. Under Ohio law, relationships governed by contract law cannot also be governed by
tort law. Ketcham v. Miller, 104 Ohio St. 372, 136 N.E. 145, 146 (1922). Because this is
unquestionably a relationship governed by contract, there is no genuine dispute of material fact
that Plaintiff cannot maintain a claim of negligence. An exception to the rule in Ketcham is
where “a special or fiduciary relationship exists between the parties and imposes a duty of good
faith” – in these circumstances, a party can bring a claim for a tort even though the relationship
was governed by contract. Empire-Detroit Steel Div. Cyclops Corp. v. Pennsylvania Elec. Coil,
Inc., 1992 WL 173313 at *3 (Ohio Ct. App. 1992). Plaintiff here has alleged no such “special or
fiduciary relationship” and indeed, Defendant did not owe Plaintiff a duty beyond those
enshrined in the contractual relationship. There is no genuine dispute of material fact.
D. Foreclosure
Defendant requests this Court award certain specific remedies to Defendant for Plaintiff’s
breach of contract – namely, defaulting on his mortgage. Because there is no genuine dispute that
Defendant complied with its statutory obligations, this Court grants Defendant’s Motion.
Specifically, this Court Orders judgment shall be entered for Defendant and against Plaintiff for:
1. Breach of contract, in the appropriate amount, plus court costs, accruing interest,
default interest, statutory interest after judgment, costs and expenses for protecting
and maintaining the collateral property; all costs, fees, and expenses incurred by
Defendant for pursuing collection because of Plaintiff’s default including, but not
limited to, attorney’s fees and expenses; and all fees and expenses incurred by
Defendant in the sale of the property; and
8

2. Foreclosure on the Maple Ridge Road property and all costs, fees, and expenses
incurred by Defendant in pursuing collection because of Plaintiff’s default, including
but not limited to attorney’s fees and expenses; and all fees and expenses incurred by
Defendant in the sale of the property.
Further, this Court hereby Declares:
1. the mortgage lien created by the loan documents Plaintiff concluded with Defendant
constitutes a valid and enforceable lien against the Maple Ridge Road property to secure
the entire amount due and payable to Defendant; and
2. the mortgage and lien against the Maple Ridge Road property be foreclosed against
Plaintiff and any and all persons claiming from, under or through him; and that Plaintiff
be forever barred and foreclosed of all right, title, interest, estate, or equity or right of
redemption in or to the property.
This Court enters judgment and Decree of Foreclosure and allows Defendant to exercise any and
all rights of foreclosure under applicable law against the Maple Ridge Road property and that
this property be sold either by private sale or by the appropriate Federal or State official in the
manner provided by law, without relief from valuation or appraisement laws. The proceeds of
any such sale shall be applied to: (1) the court costs and sale expenses; (2) Union County
Treasurer; (3) transfer taxes or fees; (4) satisfaction of Defendant’s judgments entered in this
action.
IV.

CONCLUSION

For the foregoing reasons, there is no genuine dispute of material fact. Defendant’s
Motion is GRANTED. As enumerated above, judgment is entered for Defendant.
IT IS SO ORDERED.

s/Algenon L. Marbley ___________
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: March 26, 2019
9