Schoen v. Bank of America, N.A.
Filing
32
OPINION AND ORDER granting in part and denying in part 25 and 27 Motions for Summary Judgment. Status Conference set for 2/27/2019 at 10:00 AM. Signed by Magistrate Judge Kimberly A. Jolson on 2/13/2019. (ew)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
NICOLE L. SCHOEN,
Plaintiff,
v.
Civil Action 2:17-cv-648
Magistrate Judge Jolson
BANK OF AMERICA, N.A.,
Defendant.
OPINION AND ORDER
This matter, in which the parties have consented to the jurisdiction of the Magistrate Judge
pursuant to 28 U.S.C. § 636(c) (Doc. 7), is before the Court on Plaintiff Nicole Rollins’ (formerly
Nicole Schoen) Motion for Summary Judgment (Doc. 27) and Defendant Bank of America, N.A.’s
Motion for Summary Judgment (Doc. 25). Fully briefed, the matter is ripe for decision. For the
reasons that follow, the parties’ cross motions are GRANTED IN PART and DENIED IN PART.
I.
BACKGROUND
On December 24, 2009, Plaintiff purchased a house in New Albany, Ohio. (Doc. 1 at ¶ 13).
To make the purchase, Plaintiff took out a Federal Housing Administration (“FHA”) loan from
American Midwest Mortgage Corporation, which was backed by a mortgage by Mortgage
Electronic Registration Systems, Inc. as nominee for American Midwest Mortgage Corporation.
(Doc. 25-1 at ¶ 4–5). Relevant here, Defendant Bank of America, N.A. began servicing the loan
on March 1, 2010. (Id. at ¶ 4).
Unfortunately, Plaintiff began to fall behind on her monthly mortgage payments on or
about January 2014. (Doc. 21-1 at 18–20). Roughly eight months later, on August 26, 2014,
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Defendant filed to foreclose upon the property. (Doc. 27-3). In response, Plaintiff requested
mediation regarding the foreclosure action.
(Doc. 27-4).
Defendant sent Plaintiff a letter
instructing her to contact Defendant’s foreclosure counsel, Manley, Deas & Kochalski, LLC
(“MDK”), if she had any questions concerning the mediation. (Doc. 27-5).
On December 5, 2014, Plaintiff submitted a loss mitigation packet to MDK. (Doc. 27-6).
On December 11, 2014, Defendant received the packet and then acknowledged receipt on
December 13, 2014. (Doc. 25-1 at ¶ 6). On December 16, 2014, Defendant notified Plaintiff that
her application was incomplete (Doc. 27-7) and requested information regarding a bonus Plaintiff
received, an additional month of bank statements, and a signed and dated tax return. (Doc. 25-4).
On January 5, 2015, Plaintiff supplemented her application. (Doc. 27-8 at 2). In response,
Defendant requested a signed and dated letter of explanation regarding a performance bonus.
(Doc. 27-8 at 1). Plaintiff responded on January 7, 2015. (Id. at 13).
On January 9, 2015, Defendant sent a letter requesting a written explanation “to understand
some of the transactions” on Plaintiff’s bank account statements. (Doc. 27-9). The request did
not state the specific transactions to be explained but instead directed Plaintiff to contact a
customer relationship manager for further detail. (Id.). On January 14, 2015, Defendant contacted
Plaintiff through MDK asking for a signed and dated letter explaining a $1,200 withdrawal that
appeared on Plaintiff’s December 2014 bank statement. (Doc. 27-10). That same day, Plaintiff
responded that the withdrawal was a daycare expense. (Id.).
Plaintiff was approved for a trial modification agreement on January 23, 2015, under the
FHA’s Home Affordable Modification Program (FHA-HAMP). (Doc. 27-11). Plaintiff made
three trial payments—as required under the trial plan—after which Defendant sent Plaintiff a letter
notifying her of her approval for a loan modification under the FHA-HAMP. (Doc. 25-9; Doc.
2
27-12). This letter stated that Plaintiff was required to submit the following documents by June
11, 2015 to receive the permanent modification: A signed and notarized Loan Modification
Agreement, a signed Partial Claim Subordinate Note, and a signed and notarized Subordinate
Partial Claim Security Instrument (the “Required Documents”). (Id.).
Plaintiff made four attempts to submit the Required Documents. Defendant rejected the
first three for perceived notary errors and rejected the fourth for untimeliness.
Plaintiff first submitted the Required Documents on June 9, 2015. (Doc. 27-13). Three
days later, on June 12, 2015, Defendant sent Plaintiff a letter stating that the required notary
signatures were defective and requested that Plaintiff re-sign and re-notarize the documents. (Doc.
27-14).
On June 17, 2015, Plaintiff submitted a second copy of the Required Documents with new
signatures and notarization. (Doc. 27-15). On July 3, 2015, Defendant again notified Plaintiff that
the notarization was defective and requested Plaintiff re-sign and notarize the documents. (Doc.
27-16).
On July 15, 2015, Plaintiff submitted a third copy of the Required Documents with new
signatures and notarization. (Doc. 27-18). On July 23, 2015, Defendant again notified Plaintiff
that the notary was defective and requested the documents to be re-signed, notarized, and sent to
Defendant no later than August 7, 2015. (Doc. 27-19).
On August 12, 2015, Defendant notified Plaintiff that she was no longer eligible for a
permanent loan modification under FHA-HAMP because it had not received the Required
Documents. (Doc. 27-21). For a fourth time, Plaintiff submitted the Required Documents; the
signatures on these Required Documents are dated August 27, 2015. (Doc. 28-16). Plaintiff’s
fourth submission was denied by Defendant because it was submitted after the specified deadline.
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(Doc. 28-17).
In the months of July, August, and September of 2015—the time period that Plaintiff
attempted to submit the Required Documents—she paid $1,508.23 per month, as required under
the permanent loan modification. (Docs. 27-12; 27-17; 27-20; 27-22).
II.
STANDARD OF REVIEW
Summary judgment is appropriate when “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The party seeking
summary judgment bears the initial “responsibility of informing the district court of the basis for
its motion, and identifying those portions” of the record that demonstrate “the absence of a genuine
issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts
to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). “The evidence of the nonmovant is to
be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255 (citing Adickes
v. S.H. Kress & Co., 398 U.S. 144, 158–59 (1970)). A genuine issue of material fact exists if a
reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248; see
also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (defining
“genuine” as more than “some metaphysical doubt as to the material facts”). Consequently, the
central issue 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.” Anderson, 477
U.S. at 251–52.
III.
DISCUSSION
Plaintiff alleges three counts against Defendant: 1) violation of the Real Estate Settlement
Procedures Act and implementing regulations (“RESPA”), 2) breach of contract, and 3) fraud.
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(See generally Doc. 1). Both Plaintiff and Defendant submitted cross motions for summary
judgment on claims brought under 12 C.F.R. § 1024.41(b)(2), 12 C.F.R. § 1024.41(b)(1), 12
C.F.R. § 1024.41(e)(2)(iii), 12 U.S.C. § 1601 et. seq., and breach of contract. Only Defendant
moves for summary judgment on Plaintiff’s 12 C.F.R. § 1024.41(c)(1), 12 C.F.R. § 1024.38(b)(2),
and fraud claims, and Plaintiff has not responded to Defendant’s motion on these claims. The
Court will consider each claim in turn.
A. Real Estate Settlement Procedures Act
“RESPA is a consumer protection statute that regulates the real estate settlement process.”
James v. Ocwen Loan Serv., LLC, No. 1:17-cv-0501, 2017 U.S. Dist. LEXIS 203790 at *9, 2017
WL 6336760 (S.D. Ohio Dec. 12, 2017), report and recommendation adopted, 2018 U.S. Dist.
LEXIS 35965, 2018 WL 1173035 (internal quotations omitted). Congress intended RESPA “to
insure that consumers throughout the Nation are provided with greater and more timely
information on the nature and costs of the settlement process and are protected from unnecessarily
high settlement charges caused by certain abusive practices that have developed in some areas of
the country.” Id. (quoting 12 U.S.C. § 2601(a)). “Although the ‘settlement process’ targeted by
the statute was originally limited to the negotiation and execution of mortgage contracts, the scope
of the statute’s provisions was expanded in 1990 to encompass loan servicing.’” Id. (quoting
Marais v. Chase Home Fin. LLC, 736 F.3d 711, 719 (6th Cir. 2013) (other quotations omitted)).
“As a remedial statute, RESPA is construed broadly to effectuate its purposes.” Marias, 736 F.3d
at 719 (internal quotations omitted).
Regulation X consists of the Mortgage Servicing Rules promulgated by the Consumer
Financial Protection Bureau (“CFPB”) pursuant to § 1022(b) of the Dodd-Frank Act, 12 U.S.C.
§ 5512(b), and RESPA, 12 U.S.C. § 2601, et seq. Cooper v. Fay Serv., LLC, 115 F. Supp. 3d 900,
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903 n.6 (S.D. Ohio 2015). Regulation X imposes certain obligations on a loan servicer with respect
to loss mitigation generally and the processing of a borrower’s loan modification application.
James, 2017 U.S. Dist. LEXIS 203790, at *10 (internal citations omitted).
“Whoever fails to comply with any provision of [RESPA] shall be liable to the borrower
for each such failure[.]” 12 U.S.C. § 2605(f). If liability is established, “an individual may recover
actual damages, and any additional damages, as the court may allow, in the case of a pattern or
practice of noncompliance with the requirements of RESPA and Regulation X, in an amount not
to exceed $2,000.” James, 2017 U.S. Dist. LEXIS 203790, at *10 (citing 12 U.S.C. § 2605(f)(1)).
“An individual also may be awarded the costs of the action and reasonable attorneys’ fees.” Id.
(citing 12 U.S.C. § 2605(f)(3)).
1. 12 C.F.R. § 1024.41(b)(2)(i)(A)-(B)
If a complete loss mitigation application is received at least 45 days prior to a foreclosure
sale, the servicer must “promptly review a loss mitigation application for completeness and
‘[n]otify the borrower in writing within 5 days . . . after receiving the loss mitigation application
that the servicer . . . has determined that the loss mitigation is either complete or incomplete.”
Washington v. Green Tree Serv. LLC, No. 1:15-cv-354, 2017 U.S. Dist. LEXIS 69330, at *19
(S.D. Ohio May 5, 2017), report and recommendation adopted, 2017 U.S. Dist. LEXIS 92038,
2017 WL 2599252 (quoting 12 C.F.R. § 1024.41(b)(2)(i)). An application is complete if the
“servicer has received all the information that the servicer requires from a borrower in evaluating
applications of the loss mitigation options available.” 12 C.F.R. § 1024.41(b). If the application
is complete, the servicer must acknowledge its receipt within five days; if it is incomplete, the
servicer must provide notice of the documents needed to make it complete within five days. (Id.).
The five-day period excludes legal public holidays, Saturdays, and Sundays. § 1024.21(b)(2)(i).
Plaintiff sent a loss mitigation application to MDK via email on December 5, 2014. (Doc.
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27-6 at 2). There was no foreclosure sale scheduled when she sent it. On December 11, 2014, an
employee of MDK, Samantha Janning, sent Plaintiff an email stating, “I’ve sent everything to
[Defendant] for review and I will let you know of any additional documents that are needed.” (Id.
at 1).
On December 16, 2014, Defendant sent Plaintiff a letter notifying her that, as of that date,
defendant could not complete its review of Plaintiff’s “loan because some financial
information . . . [was] missing or incomplete.” (Doc. 27-7 at 1). The letter also directed Plaintiff
to provide pay stubs, bank account statements, and tax returns to Defendant no later than January
20, 2015. (Id.). On January 5, 2015, Plaintiff submitted the requested application materials to
MDK. (Doc. 27-8 at 2).
On January 6, 2015, Ms. Janning again sent Plaintiff an email. This time, Ms. Janning
asked for a signed and dated letter explaining a bonus that had appeared on Plaintiff’s application
materials. (Id. at 1). Plaintiff sent a letter explaining the bonus to Ms. Janning on January 7, 2015,
and that same day Ms. Janning confirmed that the letter was forwarded to Defendant and Ms.
Janning would let her know once there was more information. (Id. at 1, 13).
On January 14, 2015, Ms. Janning asked for additional information. Specifically, Ms.
Janning requested Plaintiff to explain a $1,200 withdraw on her December bank statement. (Doc.
27-10 at 1). Plaintiff again responded the same day and provided the requested information. The
next day, January 15, 2015, Ms. Janning acknowledged receipt. (Id. at 1, 6).
Plaintiff argues Defendant violated Regulation X at § 1024.41(b)(2) by allowing more than
five business days between its receipt of and response to her loss mitigation application and
subsequently requested documents. (Doc. 27 at 9). Defendant counters that the five-day period
under § 1024.41 began not when Plaintiff sent the loss mitigation application and supplemental
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documents to MDK, but when MDK forwarded them to Defendant. (Doc. 28 at 4–5). For this
argument, Defendant claims that MDK is not a “servicer” for the purposes of RESPA and, based
upon the dates that Defendant received the documents from MDK, it did not violate RESPA. (Id.).
Defendant further argues that “expanding the definition of ‘servicer’ to include its counsel”
construes RESPA “so broadly to the point where its overall purpose becomes unrecognizable.”
(Id. at 4). Put simply, Defendant argues that it did not matter when MDK received the application;
all that matters is when Defendant received the application. Defendant, however, cites no law to
support its reading of “servicer” in § 1024.41, and the Court does not find it persuasive.
“Servicer” is defined under RESPA as “the person responsible for servicing of a loan,” and
“servicing” is “receiving any scheduled periodic payments from a borrower pursuant to the terms
of any loan . . . and making payments of principal and interest and such other payments with
respect to the amounts received from the borrower as may be required pursuant to the terms of the
loan.” 12 U.S.C. § 2605(i)(2)-(3). Servicer’s agents are treated as servicers for the purposes of
§ 1024.41. See Swanson v. Bayview Loan Serv. LLC, No. 6:15-cv-1078, 2016 U.S. Dist. LEXIS
94180, at *7–9 (M.D. Fla. July 19, 2016) (denying motion to dismiss where servicer argued it was
not liable under § 1024.41 because the borrower contacted servicer’s counsel and not the servicer
directly); see also DeLeon v. Ocwen Loan Serv., No. 16-10402, 2016 U.S. Dist. LEXIS 118194,
at *7, 2016 WL 4575314 (D. Mass. Sept. 1, 2016) (implying that contacting servicer’s agent about
a loan modification could create liability for the servicer under § 1024.41); McKerracher v Green
Tree Serv., LLC, No. 1:15-cv-235, 2015 U.S. Dist. LEXIS 175682, at *16 (W.D. Mich. Dec. 17,
2015) (finding that borrower’s contact with servicer’s agent created obligations for the servicer
under § 1024.41). The Court notes there are cases where RESPA claims are dismissed because
the borrower failed to communicate directly with the servicer of a loan. See, e.g., Bishop v.
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Quicken Loans, Inc., No. 2:09-01076, 2010 U.S. Dist. LEXIS 93692, at *18 (D. WV. Sept. 8,
2010) (citations omitted). These cases, however, are distinguishable as they are confined to
qualified written requests under 12 U.S.C.S. § 2605(e) (2018). Accordingly, the Court follows the
holding in Swanson.
The undisputed facts establish that Defendant did not respond to Plaintiff’s loss mitigation
within five days required by Regulation X. If a complete loss mitigation application is received at
least 45 days prior to a foreclosure sale, the servicer must “[n]otify the borrower in writing within
5 days . . . after receiving the loss mitigation application that the servicer . . . has determined that
the loss mitigation is either complete or incomplete.” 12 C.F.R. § 1024.41(b)(2)(i)(B). Plaintiff
sent her loss mitigation application to MDK on December 5, 2014, and Defendant did not
acknowledge the receipt of the application and communicate whether it was complete until
December 16, 2014. Accordingly, Defendant did not notify Plaintiff within five days (excluding
legal public holidays, Saturdays, and Sundays) that the application was complete or incomplete in
violation of § 1024.41(b)(2)(i)(B). Indeed, Defendant was two days late.
And Defendant missed another deadline. After Defendant notified Plaintiff that her
application was incomplete, she sent supplemental documents to MDK on January 5, 2015.
Defendant was silent until January 14, 2015, seven business days after it received the application.
Thus, for a second time, Defendant missed its five-day window by two days. Importantly, although
MDK periodically communicated with Plaintiff following the submission of her loss mitigation
application and subsequent requested documents, these communications were insufficient because
they did not inform plaintiff whether the application was complete or incomplete as required by
§ 1024.41(b)(2)(B).
Although Plaintiff has shown two RESPA violations, recovery under the statute requires
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more. “The Plaintiff must suffer actual, demonstrable damages, and the damages must occur as a
result of the specific violation.” Justice v. Ocwen Loan Serv., No. 2:13-cv-165, 2015 U.S. Dist.
LEXIS 5665, at *50–51, 2015 WL 235738 (S.D. Ohio Jan. 16, 2015) (internal quotations omitted).
As stated, RESPA recognizes two types of damages: 1) actual damages the borrower sustained as
a result of the RESPA violation, and 2) “any additional damages, as the court may allow, in the
case of a pattern or practice of noncompliance with the requirements of this section, in an amount
not to exceed $2,000.” 12 U.S.C. § 2605(f)(1). Actual damages are “[a]n amount awarded to a
complainant to compensate for a proven injury or loss; damages that repay actual losses.” Justice,
2015 U.S. Dist. LEXIS 5665, at *51–52 (explaining that the common definition of actual damages
applies in the RESPA context) (citations omitted). “Keeping in mind that RESPA is a remedial
statute that is construed broadly to effectuate its purpose . . . actual damages [encompasses] all
expenses, costs, fees, and injuries fairly attributable to [the servicer’s] failure to respond
appropriately pursuant to the regulations.” Id. at *52. (internal quotations and citations omitted).
As explained below in section III.A.6. of this Opinion and Order, Plaintiff has not shown a practice
or pattern of noncompliance. Thus, Plaintiff must rely on actual damages in order to recover.
The Court finds that Plaintiff has not done so. More specifically, Plaintiff did not produce
sufficient evidence to establish that she suffered actual damages because of Defendant’s combined
four days of delay. See, e.g., Grustch v. Wells Fargo Bank, N.A., No. 2:15-cv-2583, 2017 U.S.
Dist. LEXIS 42429, at *17, 2017 WL 1091681 (S.D. Ohio Mar. 23, 2017) (indicating a borrower
cannot maintain a claim where servicer takes six days to respond to a loss mitigation application
with no showing of actual damages resulting from the additional day). Plaintiff has not produced
evidence, in her affidavit (Doc. 27-2) or otherwise, of legal fees or other costs incurred due to
Defendant’s tardy acknowledgements. Cf. Paz v. Seterus, Inc., No. 14-62513, 2016 U.S. Dist.
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LEXIS 186562, at *18–19, 2016 WL 3948053 (S.D. Fla. Apr. 28, 2016) (borrower’s incursion of
attorney fees due to servicer’s errors in handling a loss mitigation application was adequate to
establish a genuine issue of material fact under RESPA); Guillermo v. Caliber Home Loans, Inc.,
No. 14-04212, 2015 U.S. Dist. LEXIS 99178, at *13 (N.D. Cal. July 29, 2015) (borrower’s
incursion of additional late fees and lost wages from time spent trying to avoid foreclosure
adequately stated claim of actual damages). Plaintiff has stated that “[a]s a result of [Defendant’s]
refusal to honor the Modification ever increasing arrearage on the loan, and threats of foreclosure,
I was forced to retain counsel and incur attorney’s fees in defense of [Defendant’s] attempt to
continue the state foreclosure case.” (Doc. 27-2 at ¶ 29). But these fees are not relevant to liability
under § 1024.41(b)(2)(i)(B) because, in Plaintiff’s own words, they were “a result of [Defendant’s]
refusal to honor the Modification,” not its delay in acknowledging her application.
Instead, Plaintiff’s argument rests on emotional damages. The Sixth Circuit has held that
actual damages under RESPA may include emotional damages. Houston v. U.S. Bank Home
Mortg. Wisc. Serv., 505 F. App’x 543, 548 (6th Cir. 2012).
However, to recover under RESPA,
a plaintiff must present evidence to establish a causal link between the servicer’s noncompliance
and the claimed damages. Miller v. Caliber Home Loans, Inc., No. 3:16-cv-621, 2018 U.S. Dist.
LEXIS 25504, at *11, 2018 WL 935439 (W.D. Ky. Feb. 16, 2018) (citations omitted). Applied
here, Plaintiff must show that her emotional distress is linked to Defendant’s failure to
acknowledge her application within five business days. Id. at *12 (dismissing RESPA claims for
lack of evidence showing causal link between defendant’s failure to send notice and emotional
distress.).
Plaintiff claims that she has experienced a tremendous emotional toll due to Defendant’s
RESPA violations. (See generally Doc. 27-2). Specifically, “[t]he loss mitigation process and
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handling of my loan modification by [Defendant] . . . resulted in sleepless nights, anxiety, stress,
and a great deal of uncertainty in my life and the lives of my family.” (Id. at ¶ 32). Plaintiff points
to “extreme stress and anxiety” while pregnant, having a child in fear of keeping her home, and
that she “remains in fear that her family . . . will lose our home.” (Id. at ¶¶ 21–25, 27).
The Court does not reject out of hand Plaintiff’s evidence of emotional distress but, fatally,
the timing is off. The emotional distress Plaintiff alleges stems from the rejection of her
application for a permanent loss mitigation application, not Defendant’s combined four days of
delay in responding to her application for a temporary modification. Plaintiff’s Affidavit drives
this point home:
The modification denial and [Defendant’s] handling of my loss mitigation
application was very stressful for my family and me. When we were approved for
the modification, we had recently found out I was pregnant with our youngest child.
We were relieved to put this part of our lives behind us, move on, and bring home
a healthy baby. That relief quickly turned to fear and worry. The denial caused
several sleepless nights and anxiety about losing our family home with a baby on
the way. I knew stress was not healthy for me or our baby, so I had to ultimately
limit my verbal communication with MDK and [Defendant]. I was very emotional
when talking about our position with [Defendant]. It was hard for me to control
my emotions, and I would and still do get very upset when thinking about this
process.
(Id. at ¶ 30). The stress, sleepless nights, and strained pregnancy resulted from Defendant’s denial
of the modification, long after its delay in responding to her loss mitigation application. In fact,
Plaintiff was relieved when she was approved for the temporary modification and, according to
her affidavit, the emotional distress did not begin until after this approval. (Id.)
The only evidence of emotional distress potentially related to the loss mitigation
application and subsequent requests is Plaintiff’s testimony that “[w]ith every additional,
unreasonable request and explanation by [Defendant], such as incomplete and unexplained
requests for a letter of explanation . . . I suffered emotional distress and an increased feeling of
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helplessness.” (Id. at 25). Even this statement, however, is no enough because Plaintiff claims
emotional damages stemming from the unreasonable requests, not Defendant’s delay.
Consequently, Plaintiff has failed to present evidence of a causal link between Defendant’s
violation of § 1024.41(b)(2)(i)(B) and her emotional damages, and summary judgment is therefore
granted to Defendant on this claim. See Miller, 2018 U.S. Dist. LEXIS 25504, at *11.
2. 12 C.F.R. § 1024.41(b)(1)
Regulation X requires a servicer to exercise “reasonable diligence in obtaining documents
and information to complete a loss mitigation application.” 12 C.F.R. § 1024.41(b)(1). Servicers
may request “the documents and information necessary to make the loss mitigation application
complete,” though a duty of “reasonable diligence” is imposed during the information-gathering
process. 12 C.F.R. § 1024.41(b)(1).
However, “Regulation X affords servicers latitude in
determining what information is needed in evaluating applications.” Gutsch v. Wells Fargo Bank,
N.A., No. 2:15-cv-2583, 2017 U.S. Dist. LEXIS 42429, at *18, 2017 WL 1091681 (S.D. Ohio Mar.
23, 2017).
Section 1024.41 does not define “reasonable diligence,” but courts interpreting the
regulation have found that “a servicer may fail to exercise reasonable diligence if it repeatedly
requests documents it already possesses or documents that it knows or should know are not
required to complete the borrower’s application.” Benner v. Wells Fargo Bank, N.A., No. 2:16cv-00467, 2018 U.S. Dist. LEXIS 52716, at *30–32, 2018 WL 1548683 (D. Me. Mar. 29, 2018)
(citations omitted). The CFPB has also suggested that to meet the reasonable diligence standard a
server must “promptly request the additional information or a corrected version of a previously
submitted document” if the servicer determines during its review of a loss mitigation application
that such information is necessary. 12 C.F.R. § 1024, Supp. I, cmt. 41(b)(2)(i)(B) ¶ 1.
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Plaintiff suggests that Defendant “violated the due diligence requirements of Regulation X
by requesting documents and information already in its possession . . . .” (Doc. 27 at 11). However,
from Plaintiff’s first application for a loan modification until her final submission of Required
Documents to obtain a permanent modification, the only document Plaintiff believes Defendant
improperly requested to complete her December 2014 application was her bank statement. (Doc.
21-1 at 46–47). Plaintiff does not cite any authority to support her argument that the bank
statements were not needed to evaluate her application for loss mitigation. (See generally Doc. 27
at 11–12; Doc. 29 at 5–7). Nor does Plaintiff cite instances in which the Defendant requested
documents that were already in its possession. (Id.). Finally, Plaintiff has not provided any
evidence that Defendant failed to act promptly when it deemed additional documents necessary,
and the record evidence shows otherwise.
In addition to Plaintiff’s arguments that Defendant was not reasonably diligent in
evaluating her loss mitigation application, she also argues that Defendant failed to exercise
reasonable diligence by rejecting her submissions of the documents required to obtain a permanent
modification due to notary errors. (Doc. 27-13, 27-15, 27-18). More specifically, Plaintiff argues
Defendant violated § 1024.41(b) by its “repeated requests for additional executed modifications
and its failure to board the executed modification.” (Doc. 27 at 12). Here, Plaintiff misses the
mark.
The section of Regulation X requiring reasonable diligence is concerned with loss
mitigation applications, not a borrower’s response to an offer for a permanent loan modification.
12 C.F.R. § 1024.41(b)(1) (“A servicer shall exercise reasonable diligence in obtaining documents
and information to complete a loss mitigation application.” (emphasis added)). Defendant’s
handling of the Required Documents submitted to obtain a permanent modification is not under
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the purview of § 1024.41(b)(1) because Plaintiff’s loss mitigation application had already been
approved. Defendant complied with § 1024.41(b)(1) so the Court grants summary judgment in its
favor on this claim.
3. 12 C.F.R. § 1024.41(c)(1)
Plaintiff next alleges Defendant failed to evaluate and inform her of the loss mitigation
options available to her within thirty days after receiving the December 2014 application. (Doc. 1
at ¶¶ 61–62). If a complete application is received at least thirty-seven days prior to a foreclosure
sale, within 30 days the servicer shall evaluate the borrower’s loss mitigation options and so notify
the borrower. 12 C.F.R. § 1024.41(c)(1). As discussed earlier, Defendant received Plaintiff’s loss
mitigation application on December 5, 2014. (Doc. 27-6). Defendant made multiple requests for
additional documents and the application was deemed complete on January 16, 2015. (Doc. 25-1
at 4). On January 23, 2015, Defendant approved Plaintiff for a trial modification (Doc. 25-7 at 1);
thus, only seven days passed between Plaintiff’s submission of a complete application and
approval for a temporary modification. This means Defendant evaluated Plaintiff’s loss mitigation
options and notified her within thirty days of its receipt of a complete application. Defendant
complied with § 1024.41(c)(1) so the Court grants summary judgment in its favor.
Further, summary judgment for Defendant is proper because Plaintiff abandoned her
§ 1024.41(c)(1) claim by failing to address Defendant’s motion for summary judgment. The Sixth
Circuit’s “jurisprudence on abandonment of claims is clear: a plaintiff is deemed to have
abandoned a claim when a plaintiff fails to address it in response to a motion for summary
judgment.” Brown v. VHS of Mich., Inc., 545 F. App’x 368, 372 (6th Cir. 2013) (holding that a
district court properly declined to consider the merits of a claim when a plaintiff fails to address it
in response to a motion for summary judgment); Clark v City of Dublin, 178 F. App’x 522, 524–
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25 (6th Cir. 2006) (holding a plaintiff abandons its claims by failing to respond to arguments made
in a defendant’s motion for summary judgment).
4. 12 C.F.R. § 1024.41(e)(2)(i)
Plaintiff next claims that Defendant violated RESPA by wrongly rejecting her application
for a loss mitigation option. (See Doc. 31 at 10 (making clear that Plaintiff is asserting a violation
of § 1024.41(e)(2)(i))).
At base, Plaintiff argues that RESPA protects her from a servicer
erroneously rejecting her valid acceptance of a loss mitigation option.
To analyze this argument, the Court first looks to the rule implementing RESPA’s loss
mitigation procedures, which narrows the application of subsequent rules:
Nothing in § 1024.41 imposes a duty on a servicer to provide any borrower with
any specific loss mitigation option. Nothing in § 1024.41 should be construed to
create a right for a borrower to enforce the terms of any agreement between a
servicer and the owner or assignee of a mortgage loan, including with respect to the
evaluation for, or offer of, any loss mitigation option or to eliminate any such right
that may exist pursuant to applicable law.
12 C.F.R. § 1024.41(a). In promulgating the rules implementing RESPA, the CFPB mandated
“processes that provide consumer protections without mandating specific outcomes, primarily due
to concern that a focus on outcomes would adversely affect the housing market and the ability of
consumers to access affordable credit.” James H. Pannabecker & David McF. Stemler, The
RESPA Manual: A Complete Guide to the Real Estate Settlement Procedures Act § 14.10 (4th ed.
2018). Regulation X “imposes certain obligations on a loan servicer with respect to loss mitigation
generally and the processing of a borrower’s loan modification application.” James v. Ocwen
Loan Serv., LLC, No. 1:17-cv-501, 2017 U.S. Dist. LEXIS 203790, 2017 WL 6336760 (S.D. Ohio
Dec. 12, 2017).
Regulation X section 1024.41(e) governs servicers’ conduct in setting and enforcing the
deadlines by which a borrower must accept or reject a loss mitigation offer. It reads in relevant
16
part:
(1) [I]f a complete loss mitigation application is received 90 days or more before a
foreclosure sale, a servicer may require that a borrower accept or reject an offer of
a loss mitigation option no earlier than 14 days after the servicer provides the offer
of a loss mitigation option.
(2)(i) [A] servicer may deem a borrower that has not accepted an offer of a loss
mitigation option within the deadline established pursuant to paragraph (e)(1) of
this section to have rejected the offer of a loss mitigation option.
(2)(ii) A borrower who does not satisfy the servicer’s requirements for accepting a
trial loan modification plan, but submits the payments that would be owed pursuant
to any such plan within the deadline established pursuant to paragraph (e)(1) of this
section, shall be provided a reasonable period of time to fulfill any remaining
requirements of the servicer for acceptance of the trial loan modification plan
beyond the deadline established pursuant to paragraph (e)(1) of this section.
12 C.F.R. § 1024.41(e).
A plain reading of § 1024.41(e) and caselaw indicates that a servicer may be liable under
this section in two circumstances: 1) failing to set a valid deadline—of at least 14 days after the
offer—by which a borrower must accept the offer of a loss mitigation option; or 2) failing to honor
a deadline the servicer initially set. See 12 C.F.R. § 1024.41(e)(1); Washington v. Green Tree
Serv. LLC, No. 1:15-cv-354, 2017 U.S. Dist. LEXIS 69330, at *24–27 (S.D. Ohio May 5, 2017)
(holding a servicer violated § 1024.41(e)(2)(ii) when it denied a loan modification for failure to
complete requirements by the deadline, but previously told the borrower she had eighteen
additional days to complete the requirements).
Defendant did not violate either deadline
requirement. Defendant allowed at least fourteen days for Plaintiff to accept its offer of a loss
mitigation and an additional 14 days to resubmit the Required Documents after each rejection.
(Docs. 27-12; 27-14; 27-16). Plaintiff’s fourth submission was after the validly set deadline and
Defendant rejected it under the authority granted to servicers by § 1024.41(e)(2)(i).
Plaintiff seeks to hold Defendant liable under § 1024.41(e)(2)(i)—a section of Regulation
17
X that gives a servicer a right to treat a borrower as if they rejected a loss mitigation offer if it is
not accepted within a validly set deadline. The Court is therefore forced to grapple with the
following question: Is a “wrongful rejection” of a loss mitigation option, without regard to setting
or enforcing deadlines, a violation of § 1024.41(e)(2)(i)?
The parties did not brief this issue, but the Court’s independent review of the relevant
caselaw uncovered one case holding § 1024.41(e) supports a general “wrongful rejection” claim.
Duffy v. Wells Fargo Bank, N.A., No. 16-4453, 2017 U.S. Dist. LEXIS 83119, at *24–25, 2017
WL 2364196 (D. N.J. May 31, 2017). The Duffy court held a borrower stated a valid claim under
§ 1024.41(e) where the servicer rejected an agreement for a loan modification due to borrower’s
omission of a signature, but no respective signature line appeared on the agreement. Id. at *25.
Duffy, however, was decided at the pleading stage and the decision offers no guidance on the
elements a plaintiff must establish to show a servicer “wrongfully rejected” an offer for a
permanent loan modification under 12 C.F.R. § 1024.41(e)(2)(i). See id. The Duffy decision sits
alone in indicating there is a cause of action available for “wrongful rejection” in general under
§ 1024.41(e).
This Court comes to a different conclusion. The plain language of the provision gives a
servicer the right to treat a borrower as if she rejected an offer for a loss mitigation option if the
borrower does not accept it by the validly set deadline. Accordingly, it provides an option to the
servicer but requires nothing of the servicer. Because it requires nothing, there can be no violation.
The Court’s conclusion is bolstered by the fact that the entirety of § 1024.41(e) governs timing,
not substance. If this Court were to read § 1024.41(e) as imposing a substantive requirement that
a servicer not reject a loss mitigation option application under certain conditions, the statute would
be transformed. The Court will not do so and finds no violation of § 1024.41(e)(2)(i), even if the
18
rejection here was “wrongful.”
Importantly, however, Plaintiff is not without a remedy. This question of erroneous
rejection is resolved under contract law principles as discussed in section III.B. of this Opinion
and Order. See Vassalotti v. Wells Fargo Bank, N.A., 732 F. Supp. 2d 503, 509–10 (E.D. Pa. 2010)
(holding that “plaintiff’s assertion that the defendant’s response was contrary to the terms of the
agreement yields an action for breach of contract, not a violation of RESPA”) (citing Jones v.
Select Portfolio Serv., Inc., No. 08-972, 2008 U.S. Dist. LEXIS 33284, at *28, 2008 WL 1820935
(E.D. Pa. Apr. 22, 2008)).
5. 12 C.F.R. § 1024.38(b)(2)
Plaintiff next argues that Defendant violated 12 C.F.R. § 1024.38(b)(2). (Doc. 1 at ¶ 65).
This Court need not address Plaintiff’s substantive claim because Plaintiff has no right of action
under 12 C.F.R. § 1024.38. The CFPB expressly addressed this issue in its final rule adopting the
regulation:
Ultimately, the Bureau agrees with the commenters that allowing a private right of
action for the provisions that set forth general servicing policies, procedures, and
requirements would create significant litigation risk . . . The Bureau believes that
supervision and enforcement by the Bureau and other Federal regulators for
compliance with and violations of § 1024.38 respectively, would provide robust
consumer protection without subjecting servicers to the same litigation risk and
concomitant compliance costs as civil liability for asserted violations of § 1024.38.
78 Fed. Reg. 10778-10779. Based on the official interpretation, the Court concludes that while
§ 1024.38(b)(2) protects Plaintiff, she lacks a private right of action to enforce the rule provision
against Defendant. James v. Ocwen Loan Serv., LLC, No. 1:17-cv-0501, 2017 U.S. Dist. LEXIS
203790, at *11 n.5, 2017 WL 6336760 (S.D. Ohio Dec. 12, 2017), report and recommendation
adopted, 2018 U.S. Dist. LEXIS 35965, 2018 WL 1173035. Additionally, Plaintiff has abandoned
this claim due to her failure to address Defendant’s motion for summary judgment. Id. (citing
19
Brown v. VHS of Mich., Inc., 545 F. App’x 368, 372 (6th Cir. 2013); Clark v. City of Dublin, 178
F. App’x 522, 524-25 (6th Cir. 2006)). Accordingly, Defendant is granted summary judgment on
Plaintiff’s § 1024.41(b)(2) claim.
6. 12 U.S.C. § 1601, et seq.
Plaintiff argues that Defendant engaged in a pattern or practice of noncompliance with the
requirements of RESPA. (Doc. 1 at ¶ 67). If an individual establishes a pattern or practice of
noncompliance
with
the
requirements
of
RESPA
and
Regulation
X,
under
12
U.S.C. § 2605(f)(1)(B) they may recover statutory damages in an amount not to exceed $2,000.00.
James, 2018 U.S. Dist. LEXIS 203790 at *20–21.
To establish a pattern or practice of
noncompliance, “one or two violations alone are insufficient.” Id. (citing Moore v. Caliber Home
Loans, No. 1:14-cv-852, 2015 U.S. Dist. LEXIS 117737, 2015 WL 5162482, at *8 (S.D. Ohio
Sept. 3, 2015) (further citations omitted). Plaintiff has established that Defendant violated RESPA
twice, and two violations alone are insufficient to establish a pattern or practice of noncompliance.
Defendant did not engage in a pattern or practice of RESPA violations so summary judgment is
granted in its favor.
B. Breach of Contract
Beyond the RESPA claims, Plaintiff asserts breach of contract. The Court first addresses
two preliminary matters. At the start, the Court must consider whether a state-law breach of
contract claim is available in this circumstance—in other words, whether federal law preempts
such a claim. In 2012, the United States Court of Appeals for the Seventh Circuit held that a
servicer’s failure to offer a loan modification under HAMP can serve as the basis of a state-law
claim. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 585 (7th Cir. 2012) (holding that federal
law does not preclude a borrower from pursuing state-law claims, including breach of contract,
20
where a borrower breaches a loan modification under HAMP). In Wigod, a borrower alleged that
the lender had breached its promise to permanently modify her mortgage if she successfully
completed a trial loan modification and she qualified under HAMP guidelines. Id. at 555. The
Seventh Circuit allowed the state-law claim to proceed because “[t]he absence of a private right of
action from a federal statute provides no reason to dismiss a claim under state law just because it
refers to or incorporates some element of the federal law.” Id. at 558. The United States Court of
Appeals for the Sixth Circuit has followed suit. See Pittman v. Experian Info. Sol., Inc., 901 F.3d
619, 631–32 (6th Cir. 2018); see also Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 166–
67 (6th Cir. 2014); Bolone v. Wells Fargo Home Mortg., Inc., 858 F. Supp. 2d 825, 832 (E.D.
Mich. 2010) (holding HAMP does not preempt a common law breach of contract claim).
Accordingly, Plaintiff may bring a breach of contract claim in this instance.
Next, the Court addresses which law applies to this claim. The parties briefed the issue
pursuant to Ohio law, and the Court’s independent review of the evidence revealed that the
permanent modification instruments at issue are “governed by Federal law and the law of the
jurisdiction in which the Property is located,” which is Ohio. (Doc. 25 at 13; Doc. 27 at 15; Docs.
27-13 at 11; 27-15 at 11; 27-18 at 29). Under Ohio law, the elements of a breach of contract claim
are: 1) the existence of a contract; 2) performance by the plaintiff; 3) breach by the defendant; and
4) damage or loss to the plaintiff as a result of the breach. Ohio Nat’l Life Assur. Corp. v. Crescent
Fin. & Ins. Agency, Inc., No. 1:15-cv-727, 2016 U.S. Dist. LEXIS 19608, at *3, 2016 WL 659153
(S.D. Ohio Feb. 18, 2016) (citing V&M Star Steel v. Centimark Corp., 678 F.3d 459, 465 (6th Cir.
2012)). “Essential elements of a contract include an offer, acceptance, contractual capacity,
consideration (the bargained for legal benefit and/or detriment), a manifestation of mutual assent
and legality of object and of consideration.” Williams v. Ormsby, 966 N.E.2d 255, 258 (Ohio
21
2012). As explained below, the stickiest part of the parties’ dispute is whether a contract was ever
formed.
1. Offer and Acceptance
Both sides agree that Defendant made an offer but dispute whether Plaintiff did enough to
accept. Following Plaintiff’s completion of the trial loan modification period, Defendant notified
Plaintiff that she had “been approved for a loan modification under the Federal Housing
Administration’s Home Affordable Modification Program (FHA-HAMP).” (Doc. 25-9). The
offer letter stated that Plaintiff was required to sign and notarize the Required Documents and
make her first modified payment of $1,508.23 by July 1, 2015, in order to accept the offer. (Id.).
Plaintiff made the required payment and attempted to submit the Required Documents four times.
(Docs. 25-10; 25-12; 25-14; and 26-2). Plaintiff’s claim turns on whether any of these submissions
was a valid acceptance. It is undisputed that Plaintiff’s fourth submission was late pursuant to a
validly set deadline under 12 C.F.R. § 1024.41(e)(2). Consequently, the Court analyzes Plaintiff’s
first three attempts.
Under Ohio law, “the offeror is the master of his offer and may require acceptance in
precise conformity with his or her offer before a contract is formed.” Bernabei v. St. Paul Fire &
Marine Inc. Co., 2005 Ohio App. LEXIS 609, at *7 (5th Dist. Ohio 2005). Similarly, the
Restatement of Contracts reads, “[i]f an offer prescribes the . . . manner of acceptance its terms in
this respect must be complied with in order to create a contract.” Restatement (Second) of
Contracts § 60 (Am. Law Inst. 1981). However, the comment to this section goes on to instruct
that “frequently in regard to the details of methods of acceptance, the offeror’s language, if fairly
interpreted, amounts merely to a statement of a satisfactory method of acceptance, without positive
requirement that this method shall be followed.” Id. Cmt. (a) (emphasis added).
22
In Bergey v. HSBC Bank USA, an Ohio appellate court applied Restatement § 60 to
determine whether a contract had been formed under Ohio law. 2010 Ohio App. LEXIS 2257, at
*10–13 (9th Dist. Ohio 2010). In that case, the offeree bank had sent an email accepting an offer
but later argued that no contract had been formed because it had not complied with the prescribed
method of acceptance. Id. More specifically, the offeree bank argued that “[a]ccording to the
Offer’s own terms, it became a legally binding contract only upon acceptance in writing,” which
it interpreted to require filling out the “Acceptance” section of the document containing the offer.
Id. at *10. The court disagreed. Although the offer stated that the acceptance must be in writing,
it did not specifically “prescribe how that written acceptance was to be made.” Id. In other words,
the terms merely suggested—but did not require—the offeree to complete the blank “Acceptance”
section of the offer to effectuate a valid acceptance. So the email, standing alone, was a valid
written acceptance as a matter of law. Id.
Shortly after Bergey was decided, this Court addressed a somewhat analogous situation in
Bishop v. Children’s Center for Developmental Enrichment, No. 2:08-cv-766, 2011 U.S. Dist.
LEXIS 87369, at *17 (S.D. Ohio Aug 8, 2011). Among other terms, the offer in that case stated
that the offeree “agrees to pay the sum of money in the amount of $25,000.00” as tuition for the
child to attend the school. Id. at *18. Although the offeree signed the offer, the offeror later argued
that payment was required for contract formation, relying on “the general rule is that, where an
offer prescribes the place, time, or manner of acceptance, those terms must be strictly complied
with by the offeree.” Id. at *19 (citing Ritchie v. Cordray, 461 N.E.2d 325, 328 (10th Dist. Ohio.
1983); Restatement (Second) of Contracts, § 60 (Am. Law Inst. 1981) (other citations omitted)).
The Court disagreed:
The Restatement of the Law of Contracts, to which the Ritchie court cites to support
this proposition, gives examples of contract language prescribing a mode of
23
acceptance: [1] I must receive your acceptance by return mail; [2] send your boy
around with an answer to this by twelve o’clock; [3] you must accept this if, at all,
in person at my office at ten o’clock tomorrow.
Id. (quotations and citations omitted). It concluded that there “was no specifically prescribed way
of acceptance, much less a requirement that [offeree’s] acceptance could be made only by
performance.” Id. The “pay the sum of money” language was not “a prescribed manner of
acceptance of the contract” and “[u]nless otherwise indicated by the language or the circumstances,
an offer invites acceptance in any manner reasonable under the circumstances.” Id. (quoting
Restatement (Second) of Contracts, § 30(2) (Am. Law Inst. 1981)).
a. The Offer
With Bergey and Bishop as guideposts, the Court analyzes what was required to accept
Defendant’s offer here. The offer letter includes a section titled, “How to Accept This Offer” and
provides:
We have enclosed the following documents that you need to carefully review. We
have indicated below which documents need to be signed and returned to us by
June 11, 2015 before we can permanently modify your loan. These Documents
Include:
1.
2.
3.
Loan Modification Agreement. One copy signed by all borrowers and any
other owner(s) of the property in front of a notary.
Partial Claim Subordinate Note. One copy signed by all borrowers.
Subordinate Partial Claim Security Instrument. One copy signed (in front
of a notary) by everyone with any ownership interest in the property.
(Doc. 25-9 at 1). The offer letter goes on to state that “[y]ou must also make your first modified
payment of $1,508.23 by July 1, 2015,” and additionally warns that “[i]f we do not receive your
first payment and signed documents by the required dates, (1) your loan may no longer be eligible
for this loan modification under FHA-HAP and (2) if your circumstances have not changed, we
may proceed with foreclosure as permitted by FHA guidelines and by law.” Id.
Although the offer letter is just over one page, it lists a number of enclosures, including
24
“Notary instructions.” (Id. at 2). Actually titled, “Sample Borrower Signature Page and Notary
Instructions” (the “Instructions”) (Doc. 25-9 at 5–9), the Instructions provide, in pertinent part:
These notary instructions are being provided as a reference to assist in accurate
completion of you loan documents.
Please note that the notary
language/requirements may vary depending on the specific state/county
requirements. It is your responsibility to make sure that the notary properly
notarizes your signatures.
• Do not fill out the Notary information. This should only be completed by
the Notary.
• Corrections should be lined through and initialed by the Notary. Do not use
white-out on the document.
(Id. at 6). The Instructions continue and state “[t]he following instructions correspond to the
Notary Block above” and provide:
1. The Notary should fill in the applicable state.
2. The Notary should fill in the County where the document is being notarized.
3. The date must match the date that you visit the Notary, and also align with the date
you signed in the borrower signature section. (For example, if you visited the
Notary on May 17, 2014, this line should be completed to read: “On the 17th day of
May in the year 2014 . . .”)
4. The notary should fill in his/her name. Note: The Notary cannot have the same last
name as the borrower.
5. The Borrower name should be printed here exactly as it appears in the borrower
signature section above. In most cases, it will already be pre-printed for the
borrower.
a. If there is a middle initial, the signature must include the middle initial.
b. If there is no middle initial, the signature should not include the middle
initial.
c. The last name must be signed as printed beneath the signature line and
exactly as it appears on the loan at Bank of America. For example, if a
borrower uses a hyphenated last name but it is not hyphenated on the loan
document, the borrower’s signature should match the name as printed on
the signature page.
d. If the borrower name on the agreement includes a suffix (i.e.: Jr., Sr., II,
etc.) this MUST be included. Also if the name on the agreement omits a
suffix (i.e.: Jr., Sr., II, etc.) this SHOULD NOT be included.
6. The Notary should sign here.
7. The Notary should print his/her name here and stamp their seal on this line. Note:
the notary seal should be stamped clearly from corner to corner, with the
commission expiration date clearly visible and dark enough to be legible.
8. The Notary should provide the date their commission expires.
25
(Id.).
b. Plaintiff’s Attempts to Accept
As noted, the Court must consider Plaintiff’s first three attempts to accept Defendant’s
offer. Plaintiff’s first attempt at submitting the Required Documents occurred on or about June 9,
2015. Defendant argues that several errors were fatal to Plaintiff’s acceptance. The most
important for the Court’s purposes, however, is the fact that Plaintiff inserted her name in the
acknowledgment clause where the name of the notary should have appeared. (Doc. 25-10 at 7).
In other words, Plaintiff’s name was where the notary’s name should have been. The Instructions
state, “Do not fill out the Notary information.” It is at least arguable that this prescriptive statement
is clear enough to make this particular instruction a prescribed manner of acceptance, and it is
undisputed that Plaintiff did not comply. Thus, Plaintiff’s first submission at least potentially was
not a valid acceptance. The Court, however, does not need to answer this difficult question because
it concludes that Plaintiff’s second and third attempts were valid acceptances of Defendant’s offer.
Defendant criticizes Plaintiff’s second and third attempts for, among other things: the
notary signing her name differently on the second and third attempts, the notary not including her
full name in the notary section, and the notary not using the same name as the name registered
with the State of Ohio. (See Doc. 25 at 16–19). Defendant, however, fails to tie these critiques to
any aspect of the offer letter, and the Court therefore rejects Defendant’s argument that these flaws
vitiated acceptance. What is left is Defendant’s argument that Plaintiff failed to follow the
following part of the Instructions, “[c]orrections should be lined through and initialed by the
Notary.” (Doc. 25-9 at 6).
In the second attempt, the notary made two changes without initialing them. (Doc. 25-12).
And, in the third, the notary and Plaintiff bolded the K and S, respectively, in their names:
26
(Docs. 25-12, 25-14). The Court puts aside whether the imperfections in the third attempt amount
to “corrections,” because, relying on Bergey and Bishop, the Court concludes that initialing
corrections merely suggested a manner of acceptance but did not require strict compliance. Three
aspects of the offer letter lead the Court to this conclusion.
27
First, the offer letter’s language does not make clear that initialing corrections is the
exclusive mode of acceptance. On this point, the Court finds the following illustration from the
Restatement of Contracts useful:
A makes an offer to B and adds, ‘my address is 53 State Street.’ This is a business
address. B sends an acceptance to A’s home which A receives promptly. Unless
the circumstances indicate that A has made a positive requirement of the place
where the acceptance must be sent, there is a contract.
Restatement (Second) of Contracts § 60, Illustration 5 (Am. Law Inst. 1981). See also Bergey,
2010 Ohio App. LEXIS 2257, at *10–13 (holding that completion of “Acceptance” section of
contract was not required for contract formation). Relatedly, Corbin on Contracts explains that
“an offeror can prescribe a single and exclusive mode of acceptance”—even an “unreasonable”
one, but the offer must “clearly express[] . . . the intention to exclude all other modes of
acceptance.” Corbin on Contracts § 3.34 (2018). The treatise goes on to note that “[t]he more
unreasonable the method appears, the less likely it will be that a court will interpret the offer as
requiring it and the more clear and definite must be the expression of an intention in words.” Id.
Thus, the more unreasonable a requirement is, the clearer it needs to be stated.
While the offer letter provides that acceptance must include signing and notarizing the
Required Documents, it does not expressly prescribe the way this must be done. Importantly, the
offer letter does not make clear that strict compliance with each and every directive of the
Instructions is a must. And parts of the Instructions—like the phrase, “[t]hese notary instructions
are being provided as a reference”—imply that they in fact are not requirements but only
guideposts. (Doc. 25-9 at 6). Thus, the directive that corrections be initialed is not clear and
definite. What is clear, however, is that other modes of acceptance are passable. Specifically, the
Instructions note that “language/requirements may vary depending on the specific state/county
requirements. It is your responsibility to make sure that the notary properly notarizes your
28
signatures.” (Id.). All of this leads the Court to conclude that the directive that “corrections should
be lined through and initialed by the Notary” did not clearly express an intention to exclude all
other modes of acceptance. The Court finds this especially true with regard to the third attempt.
As demonstrated above, the identified errors in that submission were the bolded K and S, and
Corbin on Contracts states the Court ought to consider the relationship between reasonableness
and clarity. See § 3.34 (2018). If acceptance required perfection, the letter offer should have
expressly stated so.
Second, the Court reads the word “should” in this context—that “[c]orrections should be
lined through and initialed by the Notary” (Doc. 25-9 at 6)—as merely a suggestion or a best
practice, not a mandatory requirement. The United States Court of Appeals for the Second Circuit
has explained the word this way:
Webster’s Dictionary defines the phrase “should be” as something “that ought to
be.” Webster’s Third New Int’l Dictionary 2104 (1st ed. 1993). See also Black’s
Law Dictionary 1379 (6th ed. 1990) (“[The word “should”] ordinarily implies duty
or obligation; although usually no more than an obligation of propriety or
expediency.”) (emphasis added). In contrast, the word “shall” is “used to express a
command or exhortation,” and is “used in laws, regulations, or directives to express
what is mandatory.” Webster’s Dictionary, at 2085. See also Black’s Law
Dictionary, at 1375 (“As used in statutes, contracts, or the like, this word is
generally imperative or mandatory.”). Thus, the common meaning of “should”
suggests or recommends a course of action, while the ordinary understanding of
“shall” describes a course of action that is mandatory.
United States v. Maria, 186 F.3d 65, 70 (2d Cir. 1999). The Court finds that understanding of
“should” is the best fit for the language at issue here.
Third, the Court has already noted that the Instructions state that “notary
language/requirements may vary depending on the specific state/county requirements,” and “[i]t
is [the borrower’s] responsibility to make sure that the notary properly notarizes your signatures.”
(Doc. 25-9 at 6). Consequently, the Instructions indicate their purpose is to ensure that the
29
execution of the documents complies with applicable law. Ohio Revised Code § 5301.01 governs
conveyances, and “Ohio courts favor the validity of a mortgage if the execution of a mortgage
‘substantially complies’ with the statutory requisites[.]” In re Robinson, 403 B.R. 497, 502 (Bankr.
S.D. Ohio 2008). Defendant does not dispute Plaintiff’s satisfaction of this standard, and the Court
likewise finds no reason to doubt that the submissions were sufficient under Ohio law. Id.
Accordingly, Plaintiff satisfied the notarization requirement, which was a requirement for valid
acceptance.
In sum, the Court holds that Plaintiff validly accepted Defendant’s offer to enter a
permanent loan modification, thereby forming an enforceable contract.
2. Breach
As noted, the remaining elements of Plaintiff’s contract claim are less difficult. “In order
to prove a breach by the defendant, a plaintiff must show that the defendant did not perform on
one or more of the terms of a contract.” Jarupan v. Hannah, 878 N.E.2d 66, 73 (10th Dist. Ohio
2007) (quotations omitted). “A ‘material breach of contract’ is a failure to do something that is so
fundamental to a contract that the failure to perform defeats the essential purpose of the contract
or makes it impossible for the other party to perform.” Marion Family YMCA v. Hensel, 897
N.E.2d 184, 186 (3d Dist. Ohio 2008) (citing Williston on Contracts, § 63:3 (4th ed. 2000)). “[A]
material breach of contract will entitle a party to stop performance.” Nious v. Griffin Constr., Inc.,
No. 03AP-980, 2004 Ohio App. LEXIS 3744, at *8 (10th Dist. Ohio Aug. 5, 2004).
Here, Defendant materially breached the contract. Defendant sent Plaintiff a letter stating
that it would not grant a permanent loan modification. (Doc. 27-21). Plaintiff performed on the
contract by paying the amount required under the permanent loan modification until she received
this letter notifying her that Defendant did not intend to perform. (Doc. 27-22). At that point,
30
Plaintiff was relieved from performance following Defendant’s material breach because its failure
to recognize the payments rendered Plaintiff’s performance impossible. See Marion Family
YMCA, 879 N.E.2d at 186; Nious, 2004 Ohio App. LEXIS 3744, at *8.
3. Damages
At this stage, Plaintiff has sought summary judgment as to liability and has requested the
court to subsequently “hold a hearing on the damages caused by [Defendant’s] breach of contract.”
(Doc. 27 at 17). In the alternative, Plaintiff asks the Court to order specific performance under the
contract. (Id.). The Court concludes that the better course is to determine damages at a subsequent
proceeding. Accordingly, summary judgment is granted to Plaintiff for her breach of contract
claim on liability, and appropriate damages will be determined at a subsequent proceeding before
the Court.
C. Fraud
Defendant seeks summary judgment on Plaintiff’s fraud claim. (Doc. 25 at 23–25). In
Ohio, the elements of common law fraud are the following:
(a) a representation or, where there is a duty to disclose, concealment of a fact,
(b) which is material to the transaction at hand,
(c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness
as to whether it is true or false that knowledge may be inferred,
(d) with the intent of misleading another into relying upon it,
(e) justifiable reliance upon the representation or concealment, and
(f) a resulting injury proximately caused by the reliance.
Washington v. Green Tree Serv. LLC, No. 1:15-cv-354, 2017 U.S. Dist. LEXIS 69330, at *37–38
(S.D. Ohio May 5, 2017), report and recommendation adopted, 2017 U.S. Dist. LEXIS 92038,
2017 WL 2599252 (addressing fraud in the context of loan modification communications between
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a borrower and servicer where RESPA claims were also brought) (citing Burr v. Bd. of Cty.
Comm’rs of Stark Cry., 491 N.E.2d 1101, 1105 (Ohio 1986)).
Defendant argues Plaintiff cannot prove any of the following: 1) Defendant gave
knowingly false information to Plaintiff regarding the permanent modifications; 2) Defendant
intended to mislead Plaintiff when offering her the modifications; or 3) damages caused by the
reliance. (Doc. 25 at 23). The Court finds merit in Defendant’s second argument and, therefore,
does not consider the other two.
Plaintiff alleges that she signed, notarized and returned the Required Documents in a timely
manner but Defendant provided false information to her by denying the modifications because it
“knew that she had complied with the terms required to accept the [m]odification.” (Doc. 1 at ¶¶
84–87, 88). Plaintiff also argues that Defendant sent the August 15, 2015 Modification Denial
Letter to mislead Plaintiff into believing that she no longer had a binding modification with
Defendant and that the mortgage loan was not modified. (Id. at ¶ 95).
Plaintiff has failed to support these arguments with evidence. Defendant informed Plaintiff
in writing at least four times that it would not accept the permanent modifications due to perceived
errors in the submitted Required Documents. (Doc. 25 at 24; Docs. 25-1, 25-9, 25-11, 25-13, 261). Without opining on the legality of these rejections, the Court finds no indication that Defendant
intended to mislead Plaintiff by sending these four letters. Plaintiff has failed to point to any
evidence indicating Defendant intended to mislead Plaintiff when offering her loan modifications.
Additionally, Plaintiff has not sought summary judgment on the fraud claim in her cross
motion nor has she responded to Defendant’s motion for summary judgment arguments on fraud.
(See Doc. 27; Doc. 29). Upon review, the Court finds Plaintiff’s fraud claims have been
abandoned.
Brown v. VHS of Mich., Inc., 545 F. App’x 368, 372 (6th Cir. 2013) (holding that a
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district court properly declined to consider the merits of a claim when a plaintiff fails to address it
in response to a motion for summary judgment); Clark v City of Dublin, 178 F. App’x 522, 524–
25 (6th Cir. 2006) (holding a plaintiff abandons its claims by failing to respond to arguments made
in a defendant’s motion for summary judgment). Plaintiff has not addressed fraud in any of its
summary judgment briefing. (See Docs. 27, 29, 31). Based on the forgoing, Defendant’s motion
for summary judgment on Plaintiff’s fraud claim is granted.
IV.
CONCLUSION
For the reason stated above, the Defendant’s motion for Summary judgment (Doc. 25) is
GRANTED in PART and DENIED in PART. Specifically, the motion is:
•
GRANTED with respect to Plaintiff’s RESPA claims;
•
DENIED with respect to liability on Plaintiff’s breach of contract claim; and
•
GRANTED with respect to Plaintiff’s fraud claim.
Plaintiff’s Motion for Summary Judgment (Doc. 27) is GRANTED in PART and
DENIED in PART. Specifically, the motion is:
•
DENIED with respect to Plaintiff’s RESPA claims; and
•
GRANTED with respect to Plaintiff’s breach of contract claim on liability.
Further, the Court SETS a status conference in this matter for February 27, 2019, at 10:00
a.m. to schedule a hearing on damages.
IT IS SO ORDERED.
Date: February 13, 2019
/s/ Kimberly A. Jolson
KIMBERLY A. JOLSON
UNITED STATES MAGISTRATE JUDGE
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