Bayer v. CitiMortgage, Inc.

Filing 48

MEMORANDUM (Order to follow as separate docket entry) re 19 MOTION to Enforce Judgment Reached at Mediation filed by Patricia Bayer. Signed by Honorable Matthew W. Brann on 8/22/14. (km)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
PATRICIA BAYER
Plaintiff,
v.
CITIMORTGAGE, INC.
Defendant.

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Case No. 3:11-CV-02105
(Judge Brann)

MEMORANDUM
August 22, 2014
Before the Court is Plaintiff Patricia Bayer’s (“Plaintiff” or “Bayer”) Motion
to Enforce Judgment Reached at Mediation (ECF No. 19) on April 2, 2013 with
Defendant CitiMortgage, Inc. (“Defendant” or “CitiMortgage”). The Parties
briefed the matter. The Court held a hearing on the motion on July 17, 2014 at
which it evaluated the evidence and credibility of the Parties and their counsel. In
accordance with the following, the Plaintiff’s Motion to Enforce Judgment is
granted.
Pursuant to Federal Rule of Civil Procedure 52, the Court enters the
following findings of fact and conclusions of law.

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I.

FINDINGS OF FACT
Plaintiff Patricia Bayer obtained a $131,000 loan on August 30, 2007 from

Castle Point Mortgage, Inc. In May 2008, the loan was assigned to CitiMortgage,
which also serviced the loan. On November 10, 2011, Bayer filed the Complaint
originating the instant lawsuit against CitiMortgage, alleging multiple violations of
federal and state law. Plaintiff’s claims were essentially predicated upon her
contention that, when she entered into a loan modification agreement with
CitiMortgage to settle prior litigation in December 2009, she was relieved of her
obligation to pay CitiMortgage escrow for taxes and insurance.
Pursuant to the mediation program maintained by the United States District
Court for the Middle District of Pennsylvania, the Parties in this matter attended a
voluntary mediation before mediator Walter Grabowski, Esquire on April 2, 2013.
Those present at the mediation included: Bayer, her attorney William Schwab,
Esquire; CitiMortgage attorney Martin Bryce, Esquire; a CitiMortgage
representative; and Mr. Grabowski,. Attorneys for both Parties had binding
settlement authority at the mediation.
At the conclusion of the mediation, the Parties reached a settlement
agreement on material terms. The Parties agreed to memorialize these terms in a
subsequent writing. Mr. Grabowski believed that settlement was reached at the
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mediation, and he later reported to the Court that a settlement was in fact reached.
The terms the Parties agreed to were as follows:
(1) the mortgage would be reduced to a principle amount of
approximately $75,000,1 with interest fixed at 5.25%;
(2) CitiMortgage would establish an escrow for future tax and
insurance with Bayer’s monthly payment of principle, interest, tax,
and insurance fixed for eighteen months;
(3) Bayer’s payments would begin thirty (30) days after the execution
of the written memorialization of these terms;
(4) CitiMortgage would issue Bayer a 1099 miscellaneous
demonstrating that the principle reduction was related to her
emotional distress claims, not debt forgiveness income, so that she
was not saddled with a debt forgiveness tax burden;
(5) CitiMortgage agreed to credit repair to the best of its ability,
reporting to the credit agencies that Bayer had been current at all
times with prior payments that CitiMortgage had returned to her;
(6) Bayer agreed to waive her claims against CitiMortgage;2
(7) CitiMortgage agreed to pay $20,000 in attorney’s fees to Schwab.
After the conclusion of the mediation, CitiMortgage attorney Bryce began

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The principle amount agreed to is not exactly $75,000 because the parties agreed the
amount would be determined by CitiMortgage’s amortization tables. The amount nearest
$75,000 in the appropriate amortization table would be the principle amount. .
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Attorney Schwab’s mistaken language in correspondence after the date of settlement
discussing a mutual waiver is attributable to mere scrivener’s error, which attorney Schwab
admitted in testimony before the Court after the respective positions of the Parties were clarified.
CitiMortgage did not and would not agree to waive claims against Bayer while she maintains an
ongoing mortgage obligation.
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drafting a formal memorialization of the terms of the settlement. On May 28,
2013, Bryce circulated a draft settlement agreement that did not contain all material
terms that the Parties had agreed to at the mediation and included other terms not
discussed previously. Of particular concern to Bayer, the draft memorialization of
the settlement included a three month “trial period” that required Bayer to make
three months of payments before the loan was permanently modified.
After reviewing Bryce’s draft, counsel for the Parties exchanged several email communications in which Schwab expressed his belief that the draft did not
express the terms of the settlement the Parties reached at mediation. In response to
Bayer’s draft and the ensuing communications, Schwab filed the instant Motion to
Enforce Judgment Reached at Mediation on behalf of Bayer on July 7, 2013. The
Court held a hearing on July 17, 2014, during which Schwab, Bayer, and Bryce
testified.
II.

CONCLUSIONS OF LAW
A.

The Parties Agreed to Specific Material Terms of a Binding
Settlement Agreement at Mediation

“An agreement to settle a lawsuit, voluntarily entered into, is binding upon
the parties, whether or not made in the presence of the court, and even in the
absence of a writing.” Green v. John H. Lewis & Co., 436 F.2d 389, 390 (3d Cir.
1970). The validity of settlement agreements is governed by state contract law.
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Shell’s Disposal and Recycling, Inc. v. City of Lancaster, 504 Fed. App’x 194, 200
(3d Cir. 2012); Mazzella v. Koken, 559 Pa. 216, 739 A.2d 531, 536 (1999).
“Under Pennsylvania law, ‘the test for enforceability of an agreement is
whether both parties have manifested an intention to be bound by its terms and
whether the terms are sufficiently definite to be specifically enforced.’”3 Id.
(quoting Channel Home Ctrs v. Grossman, 795 F.2d 291, 298–99 (3d Cir. 1986)).
“The intent of the parties is a question of fact which must be determined by the
factfinder. . . . If the existence and binding effect of the settlement agreement is
contested by the parties, an evidentiary hearing exploring these matters is the
appropriate procedure.”4 Standard Steel, LLC v. Buckeye Energy, Inc., CIV.A.
04-538, 2005 WL 2403636, *9 (W.D. Pa. Sept. 29, 2005).
“An oral settlement agreement may be enforceable and legally binding
without a writing.” Kazanjian v. New England Petroleum Corp., 332 Pa. Super 1,
480 A.2d 1153, 1157 (1984). “If parties agree upon essential terms and intend
them to be binding, ‘a contract is formed even though they intend to adopt a formal

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“[T]he applicable law is that of the place with the most significant relationship to the
parties and the transaction.” Tiernan v. Devoe, 923 F.2d 1024, 1033 (3d Cir. 1991).
Accordingly, Pennsylvania law applies to this matter.
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The “[b]urden of proof is on the party attempting to enforce the settlement to establish
that the parties reached an oral agreement.” Lanett Co., Inc. v. Celgene Co., CIV.A. 08-3920,
2011 WL 1193912, *2 (E.D. Pa. Mar. 29, 2011) (citing Mazella v. Koken, 559 Pa. 216, 739 A.2d
531, 537 (1999)).
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document with additional terms at a later date.’” Johnston v. Jonston, 346 Pa.
Super. 427, 499 A.2d 1074, 1076 (Pa. Super. Ct. 1985) (quoting Courier Times,
Inc. v. United Feature Syndicate, Inc., 300 Pa. Super. 40, 54, 445 A.2d 1288, 1295
(1982)).
Furthermore, there is a strong judicial policy favoring voluntary settlement
of lawsuits. “Permitting parties to void settlement agreements on a whim, because
the agreement becomes unpalatable or the parties become greedier, ‘would work a
significant deterrence contrary to the federal policy of encouraging settlement
agreements.’” Orta v. Con-Way Transp., CIV.A. 02-1673, 2002 WL 31262063, *2
(E.D. Pa. Oct. 2, 2002) (quoting D.R. v. East Brunswick Bd. of Educ., 109 F.3d
896, 901 (3d Cir. 1997)).
For example, in Standard Steel v. Buckeye Energy, Inc., CIV.A. 04-538,
2005 WL 2403636 (W.D. Pa. Sept. 29, 2005), the court found that the evidence of
record demonstrated that the parties had reached a settlement agreement on five
material terms, and granted the plaintiff’s motion to enforce that agreement even
when the parties later intended to reduce the agreement to writing. The court
wrote:
10. Here, there may well be gaps in the oral agreement reached by the
parties. Nonetheless, so long as there was agreement as to essential
terms, the oral agreement is enforceable. . . . Here the negotiation
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during mediation focused throughout every phase on the five key
issues outlined by [the mediator], the five key issues were agreed
upon by every party, and the mediation was deemed concluded after
each party specifically assented to terms necessary to resolve the five
key issues. The record supports the court’s determination that the
terms resolving the five key issues constitute the essential terms of the
agreement.
11. The court will enforce the agreement that was reached regarding
the terms resolving the five key issues found to be the essential terms
of the agreement. The court, however, will not fill in gaps or interpret
ambiguities, nor go beyond that which the evidence demonstrated that
each party assented to, in enforcing the agreement. See Olson v. N.
Am. Indus. Supply, 441 Pa. Super. 598, 658 A.2d 358, 362 (Pa. Super.
Ct. 1995).
Standard Steel, 2005 WL 2403636, at *10–11.
Similarly in the case sub judice, the Parties reached a settlement agreement
on seven (7) material terms that were the focus of the negotiations and underlying
litigation. As stated, the terms agreed to were:
(1) Principle of approximately $75,000,5 with interest fixed at 5.25%;
(2) CitiMortgage would establish an escrow for future tax and
insurance with Bayer’s monthly payment of principle, interest, tax,
and insurance fixed for eighteen months;;
(3) Bayer’s payments would begin thirty (30) days after the execution
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As stated, the principle amount agreed to was not precisely $75,000 because the Parties
agreed the amount would be determined by CitiMortgage’s amortization tables. The amount
nearest $75,000 in the appropriate amortization table would be the principle amount. Despite
CitiMortgage’s objections, the record and testimony are clear that this final principle amount was
agreed to. Regardless of the manner in which the Parties explain the calculation, the result is
effectively the same: as near to $75,000 as the amortization tables allow.
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of the written memorialization of these terms;
(4) CitiMortgage would issue Bayer a 1099 miscellaneous
demonstrating that the principle reduction was related to her
emotional distress claims, not debt forgiveness income, so that she
was not saddled with a debt forgiveness tax burden;
(5) CitiMortgage agreed to credit repair to the best of its ability,
reporting to the credit agencies that Bayer had been current at all
times with prior payments that CitiMortgage had returned to her;
(6) Bayer agreed to waive her claims against CitiMortgage;
(7) CitiMortgage agreed to pay $20,000 in attorney’s fees to Schwab.
The settlement reached at mediation was not contingent upon reducing those
terms to writing. It is well settled that when both parties expressly intend that a
mutually acceptable writing is an condition of settlement, an oral agreement is not
enforceable. See, e.g., Krebs v. United Ref. Co. of Pennsylvania, 893 A.2d 776,
785 (Pa. Super. Ct. 2006). Nevertheless, “[w]hen parties, through their respective
counsel, assent to the terms of the oral agreement, and writing is not a condition of
the agreement, the oral settlement agreement is binding.” Orta, 2002 WL
31262063, at *1.

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In the case at bar, the evidence indicates that the Parties reached agreement
on the aforesaid material terms at the mediation and did not include a writing as a
material condition of a binding settlement agreement. While the Parties agreed to
memorialize the terms of the settlement agreement in a mutually acceptable
writing, to work out particular non-material details in that writing, and then execute
the document, the writing was not a material condition of the binding settlement
reached at mediation. See id.
B.

The Statute of Frauds Does Not Bar Enforcement of the Settlement
Agreement

The statute of frauds is a traditional principle of contract law that maintains
that modifications to interests in land must be in writing. See 33 P.S. § 1; Kurland
v. Stolker, 516 Pa. 587, 533 A.2d 1370, 1372 (1987). “[T]his particular section of
the Statute of Frauds relating to interests in land constitutes a statement of public
policy. . . . It does not render oral agreements void.” Springton Pointe Assocs. v.
Ledbetter, 50 Pa. D. & C.3d 503, 507 (Pa. Comm. Pl. 1989). “[T]he Statute of
Frauds is meant ‘to be used as a shield, not as a sword.’” Id. (quoting Fanin v.
Cratty, 331 Pa. Super. 326, 332, 480 A.2d 1056, 1059 (1984). Said another way,
the purpose of the statute of frauds “is not to prevent the performance or the
enforcement of oral contracts that have in fact been made; it is not to create a
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loophole of escape for dishonest repudiators.” 4-22 CORBIN ON CONTRACTS §
22.1; see also Standard Steel, 2005 WL 2403636, at *12 (“[T]he purpose of the
Statute of Frauds is to prevent parties from escaping legal obligations.”).6
In Pennsylvania, mortgages and modification of mortgages are generally
subject to the statute of frauds.7 Phoenix Four Grantor Trust #1 v. 642 North
Broad St. Assocs., CIV. A. 00-597, 2000 WL 876728, *5 (E.D. Pa. June 29, 2000);
Linsker v. Savings of America, 710 F. Supp. 598, 600 (E.D. Pa. 1989); In re
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Associate Justice Michael A. Musmanno of the Supreme Court of Pennsylvania
eloquently expounded on the policy of the statute of frauds, writing:
Ever since that venerable statute was armed with authority to prevent the assertion
of verbal understandings regarding title to land, it has been called upon to strike
down agreements which were not committed to writing. The laudable purpose of
this guardian of truth is to prevent frauds and perjuries. Occasionally, however,
an embattled property owner or prospective purchaser of land, summons the
statue to enforce a condition which does not seem to coincide with principles of
honesty and fair dealing. In such cases the Courts should study the situation
involved to make certain that the statute is not being used to perpetrate fraud and
perjuries rather than prevent them.
Simplex Precast Indus., Inc. v. Biehl, 395 Pa. 105, 149, 149 A.2d 121, 108–09 (1959).
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It is noteworthy, however, that mortgages in other lien theory jurisdictions are not
necessarily subject to the statue of frauds:
It has been held, however, that the result is different in a state that follows a lien
theory rather than a title theory; since a mortgage does not transfer title,
possession, or any other interest except a naked lien, and rights accrue to the
mortgagee only when there has been a default, court foreclosure, and sale to the
mortgagee and a transfer of title to it according to law, an oral agreement to make
a mortgage is not within the statute of frauds.
9 WILLISTON ON CONTRACTS § 25:7 (4th ed. 2014) (citing Martyn v. First Federal Sav. & Loan
Ass’n of West Palm Beach, 257 So.2d 576 (Fla. Dist. Ct. App. 4th Dist. 1971)).
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Whatever, LLC, 478 B.R. 7000, 710 (Bankr. W.D. Pa. 2012). An agreement
generally subject to the statute of frauds may be taken out of its purview if: (1)
“there is evidence to establish that the agreement was made,” Stelwagon Mfg. Co.
v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1276 (3d Cir. 1995); (2) the
modification is admitted by the party against whom enforcement is sought, Zloviter
v. Zloviter, 355 Pa. 299, 49 A.2d 779 (1946); or, (3) there has been performance or
part performance. M. Leff Radio Parts, Inc. v. Mattel, Inc., 706 F. Supp. 387, 394
(W.D. Pa. 1988). Evidence demonstrating that an agreement was made must be
clear and competent, and “it may be proven by the acts and declarations of the
parties, either together or separately.” Kurland, 533 A.2d at1373. These
exceptions promote “the underlying purposes of the statute of frauds: to prevent
perjury and fraud . . . and to prevent parties from escaping their legal obligations.”
Stelwagon Mfg. Co., 63 F.3d at 1276 (citing Mattel, 706 F. Supp. at 394; Simplex,
149 A.2d at 123).
In the case before the Court, the only portions of the Parties’ oral agreement
that generally are subject to the statute of frauds are the modified principle amount
of the mortgage, the escrow payment period, and the date on which Bayer’s
payments commence. Those terms constitute the modification of a mortgage,
which place the agreement within reach of the statute of frauds under Pennsylvania
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law. See Linsker, 710 F. Supp. at 600. Nevertheless, “the acts and declarations of
the parties” as well as the evidence of record demonstrate clearly that those three
terms were unequivocally agreed upon by the Parties. As such, enforcement of
those terms is not barred by the statute of frauds, the purpose of which is “to
prevent parties from escaping legal obligations.” Standard Steel, 2005 WL
2403636, at *12.
III.

CONCLUSION
Considering the evidence of record, the law, the institutional expertise and

deference that trial courts exercise in these matters,8 and the strong judicial policy
in favor of enforcing settlement agreements,9 the Plaintiff’s Motion to Enforce
Judgment is granted.

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“Findings of fact, whether based on oral or other evidence, must not be set aside unless
clearly erroneous, and the reviewing court must give due regard to the trial court’s opportunity to
judge the witnesses’ credibility.” FED. R. CIV. P. 52(a)(6).
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Pennwalt Corp. v. Plough, Inc., 676 F.2d 77, 80 (3d Cir. 1982); Orta, 2002 WL
31262063, at *2.
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An appropriate Order follows.
BY THE COURT:
s/Matthew W. Brann
Matthew W. Brann
United States District Judge

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