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Davis v. Bank of America, N.A.

United States District Court, N.D. Alabama, Southern Division

October 9, 2014

GLENN S. DAVIS, et al., Plaintiffs,
BANK OF AMERICA, N.A., et al. Defendants.


R. DAVID PROCTOR, District Judge.

In 2007 financial markets around the world seized up. The United States suffered a major mortgage crisis which set off a dramatic chain reaction that adversely affected not only the housing market but brought about a broad range of financial chaos. Borrowers lost their homes. Financial institutions failed. As the public witnessed all of this, there was widespread panic.

In response to this mortgage crisis and economic recession, lenders were encouraged to offer loan modifications to assist struggling borrowers. Loan modifications were originally intended to help well-intentioned borrowers remain in their homes through the mortgage crisis and enable them to make their loan payments. However, a subset of borrowers made a discovery. If they challenged a foreclosure - even if they were undisputedly in default - they could stay in their homes, often "rent-free, " as their case made its way through the court system, a process which can take months, if not years. This trend enabled certain borrowers who were not qualified for a loan modification (and, in many cases, not interested in a loan modification or negotiating a settlement, but instead desired to live free until the foreclosure ran its course), to "game the system." This case presents just such a troubling scenario.[1]

Currently before the court is Defendants' Motions for Summary Judgment (Docs. # 69 and 71). The Motions have been fully briefed. (Docs. # 72, 74, 83 and 84). Upon the filing of Defendants' Motions for Summary Judgment, the court provided the pro se Plaintiffs a notice regarding their obligations in responding to the Motions and attached an explanation of Federal Rule of Civil Procedure 56. (Doc. # 76). Specifically, the court instructed Plaintiffs that "[t]he party opposing the motion must respond with counter affidavits and/or documents to set forth specific facts showing that there is a genuine issue of material fact to be litigated at trial." (Doc. # 76 at 1-2).

I. Undisputed Facts[2]

On or about April 6, 2005, Plaintiffs obtained a $366, 300.00 mortgage loan from MIT Lending ("MIT") (the "Loan"). In connection with the Loan, Mr. Davis executed and delivered a Promissory Note to MIT (the "Note"). (Doc. # 70-1 ¶ 5; Doc. # 70-2 at p. 5). As security for the Note, Mr. Davis executed a mortgage in favor of MERS, as nominee for MIT (the "Mortgage"). (Doc. # 70-1 ¶ 6; Doc. # 70-3 at p. 15). Although Mrs. Davis's signature appears on the mortgage and is notarized, Plaintiffs deny she signed the document.

The closing occurred in Birmingham, and Mr. Davis testified that his wife did not attend. (Doc. # 75-3 at pp. 41-43, 51-52). Mr. Davis testified that he attended the closing, but signed the note and mortgage a couple of weeks after the closing. (Doc. # 75-3 at pp. 44-47). However, a notary sealed the mortgage document with both of the Davis's signatures on the date of the closing. (Docs. # 53-56). Mr. Davis admits that his intent at closing was to borrow money to pay for his house and he intended to sign the note and the mortgage in relation to that transaction. (Doc. # 75-3 at pp. 48-52).

MIT endorsed the Note in blank and transferred the Note to Merrill Lynch Mortgage Lending, Inc. ("MLMI"). (Doc. # 70-1 ¶ 7; Doc. # 70-2). Pursuant to a Pooling and Servicing Agreement ("PSA") dated September 1, 2005, MLMI deposited certain notes (including the Note at issue) into a Trust, for which JPMorgan Chase Bank, N.A. ("JPM") was Trustee. (Doc. # 70-1 ¶ 8; Doc. # 77-1 at pp. 48-49; Doc. # 77-2). The Bank of New York Mellon Trust Company, N.A. ("BONY") is Successor Custodian to JP Morgan Trust Company, N.A. (Doc. # 70-1 ¶ 1). BONY's business records show that The Bank of New York Mellon Trust Company took possession of the original Note on May 6, 2005 and that the Note remained with the Trust until it was released to the servicer. (Doc. # 70-1 ¶¶ 9-10; Docs. # 70-6 and 70-7).

By way of assignment, BONY is the current holder of the Mortgage. (Doc. # 70-1 ¶ 11; Doc. # 70-8 at p. 1). Bank of America, N.A. ("BANA") was the servicer of the Loan between March 1, 2010 and December 1, 2012. During this two plus year period, BANA received nine payments from Plaintiffs, five of which were returned for insufficient funds. (Doc. # 70-9 ¶ 9; Doc. # 70-14 at p. 1).

On May 12, 2010, BANA sent Plaintiffs a notice of default and notice of intent to accelerate, which stated the amount required to cure Plaintiffs' default. (Doc. # 70-9 ¶ 10; Doc. # 70-15 at p. 1). Plaintiffs did not cure the default. The last regular monthly payment BANA received from Plaintiffs was in August 2010. (Doc. # 70-9 ¶ 11; Doc. # 70-14 at p. 1).

Between May 12, 2010 and October 18, 2011, BANA engaged in loss mitigation efforts with Plaintiffs, including reviewing them for a potential loan modification. (Doc. # 70-9 ¶ 12). Plaintiffs did not return all of the documents required for BANA to review them for a loan modification. For example, Plaintiffs did not include their tax returns, which they reported to BANA they had not filed since 2008. (Doc. # 70-9 ¶ 12). Therefore, BANA could not complete its review.

On October 18, 2011, BANA notified Plaintiffs in writing that it had accelerated their debt and that it would foreclose on the property at issue on December 1, 2011. BANA also enclosed the Notice of Foreclosure Sale that was to be published in the Alabama Messenger. (Doc. # 70-9 ¶ 13; Doc. # 70-16 at p. 3). The foreclosure sale was continued multiple times, and no sale has ever been conducted. (Doc. # 70-9 ¶ 13).

After receiving the foreclosure notice, Mr. Davis sent a letter to BANA dated November 14, 2011 requesting information about the Loan. (Doc. # 70-9 ¶ 14; Doc. # 73-1 at pp. 1-2). BANA received Mr. Davis's letter on November 18, 2011. (Doc. # 70-9 ¶ 14). BANA mailed an acknowledgement letter to Mr. Davis on December 19, 2011 and BANA's attorney mailed a response letter to Mr. Davis on February 14, 2012. (Doc. # 70-9 ¶ 14; Doc. # 73-1 at pp. 3-5).

Mr. Davis sent BANA a second letter dated February 14, 2012 requesting information about the Loan. (Doc. # 70-9 ¶ 15; Doc. # 73-2 at pp. 1-6). BANA received Mr. Davis's second letter on February 20, 2012. (Doc. # 70-9 ¶ 15). BANA mailed an acknowledgement letter to Mr. Davis on February 29, 2012, and BANA's attorney mailed a response letter to Mr. Davis on March 1, 2012. (Doc. # 70-9 ¶ 14; Doc. # 73-2 at pp. 7-11).

Two weeks after Mr. Davis sent his second letter to BANA, Plaintiffs filed a Complaint against BANA and BONY in the Circuit Court of Shelby County, Civil Action No. 2012-110. (Doc. # 73-3). On April 20, 2012, BANA and BONY removed this case to this court. Doc. # 1).

After Plaintiffs filed their initial Complaint, BANA again began a review of Plaintiffs for a loan modification. (Doc. # 70-9 ¶ 16). BANA voluntarily ceased all foreclosure activities with respect to Plaintiffs' loan on October 12, 2012. (Doc. # 70-9 ¶ 19).

On December 1, 2012, the servicing of the Loan transferred to Select Portfolio Servicing, Inc. ("SPS"), which continued to review Plaintiffs for a loan modification. (Doc. # 70-9 ¶ 16). After the Loan transferred to SPS, BANA continued to forward financial documents received from Plaintiffs to SPS for its review. (Doc. # 70-9 ¶ 16).

Plaintiffs' mortgage payments were, at all times, properly credited according to the terms of the Note and Mortgage, and any fees and/or late charges incurred were authorized according to the terms of the Note and Mortgage. (Doc. # 70-9 ¶ 17). As of December 1, 2012, the unpaid principal balance on the Loan was $349, 206.61; the escrow deficiency (due to advances BANA made for property taxes and hazard insurance) was $10, 216.35; the total late charges were $595.70; and the total fees owed were $11, 351.98. (Doc. # 70-9 ¶ 18; Doc. # 75-1 at ¶ 17).

Plaintiffs' lawsuit against BANA was pending at the time servicing rights transferred to SPS. SPS voluntarily agreed to (1) maintain a stay of foreclosure proceedings and (2) resume the loan modification review initiated by BANA. (Doc. # 75-1 ¶ 5).

Beginning in January 2013, the court stayed the case to enable the parties to renew their attempts to obtain a loan modification for Plaintiffs. (Doc. # 15). Since at least February 18, 2013, and during their prior attempts at loan modification, Plaintiffs were aware that copies of their tax returns for the previous years, with all relevant schedules, would be required to establish Plaintiffs' income and obtain a loan modification. (Doc. # 70-9 at ¶ 12; Doc. # 16).

On March 29, 2013, SPS wrote a letter to Mr. Davis informing him that his loan did not qualify for a modification under the Home Affordable Modification Program ("HAMP"). The letter also informed Mr. Davis that he had thirty (30) days to dispute the denial and set forth detailed instructions for submitting an appeal. (Doc. # 75-1 ¶ 4; Doc. # 75-1 at pp. 39-45).

On Sunday, April 28, 2013, the date the appeal period expired, Mr. Davis submitted an "appeal" to SPS's legal counsel consisting solely of a "Birmingham Area MLS - Shelby County Tax Report" with no explanation. (Doc. # 75-10). Mr. Davis was informed that, in order to pursue an appeal, he was required to follow the express procedures set forth in the March 29, 2013 letter, including the requirement that the appeal be submitted directly to the address/department identified in the denial letter. (Doc. # 75-10).

On June 14, 2013, SPS wrote a letter to Mr. Davis offering to review his loan for a modification pursuant to SPS's proprietary loan modification program. The letter advised Mr. Davis that, in order to be considered for such a modification, he would need to: (1) complete and submit an RMA form, (2) submit a signed and dated IRS Form 4506T-EZ, provide documentation of income (most recent federal income tax return with all schedules, two most recent pay stubs, and quarterly or year to date profit and loss statements if self-employed). The necessary forms were enclosed with the letter. (Doc. # 71-1 ¶ 10; Doc. # 75-2 at pp. 3-13).

On July 18, 2013, SPS sent Plaintiffs an "URGENT - FINAL NOTICE" letter stating that SPS needed certain previously requested documents by August 2, 2013, including the federal tax return for the previous year for each borrower, to process Plaintiffs' request for a loan modification. (Doc. # 25). However, on July 24, 2013, Plaintiffs represented to the court that they had not yet even filed their 2012 tax returns.

On August 28, 2013, SPS received an email from Mr. Davis containing some, but not all, of the documentation originally requested on June 14, 2013. (Doc. # 75-1 ¶ 13; Doc. # 75-2 at p. 24).

As of September 12, 2013, the following documents were missing from the Davis's loan modification package: (a) Current Hardship Explanation Letter (Letter provided was dated December 1, 2012); (b) The RMA form provided was missing a page with terms and conditions; (c) Current Homeowner's Association Statement; (d) Paystubs within the past 90 days (Mr. Davis reported that he did not receive a paystub for the month of August); (e) Bank Statements within the past 90 days (Mr. Davis reported that he did not have any bank accounts); and (f) Profit and Loss Statements from January 2013 to August 2013. (Doc. # 75-1 ¶ 14; Doc. # 75-2 at pp. 23-25).

Mr. Davis informed SPS that he would e-mail the missing documents to SPS "tomorrow" - i.e., on September 13, 2013. (Doc. # 75-2 at p. 23). Because SPS did not receive the missing documents on September 13, 2013, SPS telephoned Mr. Davis on September 14, September 16 and September 18, 2013, to follow up on the status of the missing documents but could not make contact with him. SPS did not receive any return calls, documents, correspondence, or any other communication from Mr. Davis after September 12, 2013. (Doc. # 75-1 ¶ 15; Doc. # 75-2 at p. 23).

In his deposition, Mr. Davis admitted that he never sent in the information/documentation as he promised to do on September 12, 2013. Mr. Davis testified as follows:

Q. Did you ever send it in, another [RMA hardship explanation] letter?
A. Nope.
Q. Why not?
A. Because I understood the court's order that nothing precluded us from doing this right here but proceed with litigation. And what the issues that was happening, the way things was going, it was futile. I sent in over and over and over again. It wasn't a big concern of mine at the time because I didn't think you guys were ever going to do it.

(Doc. # 75-3 at pp. 151-52).

On October 15, 2013, Plaintiffs filed their Amended Complaint which added SPS as a defendant in this case. (Doc. # 35).

On November 18, 2013, SPS wrote to Mr. Davis to advise him that his request for a loan modification had been denied for failure to supply the required documentation. (Doc. # 75-1 ¶ 16; Doc. # 75-1 at pp. 32-34).

SPS never received a mortgage payment from the Davises. (Doc. # 75-1 ¶ 17).

As of March 31, 2014, (1) the unpaid principal balance on the loan was $349, 206.61; (2) the escrow deficiency (due to advances made for the payment of property taxes and hazard insurance) was $18, 455.58; (3) the total late charges were $595.70 (assessed by BANA); (4) the total fees owed were $11, 351.98 (accessed by BANA); and (5) past due interest from July 1, 2010 in excess of $118, 000.00 for failure to make monthly mortgage payments. (Doc. # 75-1 ¶ 17).

On April 1, 2014, servicing of Plaintiffs' loan transferred from SPS to NationStar Mortgage. (Doc. # 75-1 ¶ 19; Doc. # 75-2 at 36-38).

II. Standard of Review

Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party asking for summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings or filings which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. Once the moving party has met its burden, Rule 56(e) requires the non-moving party to go beyond the pleadings and - by pointing to affidavits, or depositions, answers to interrogatories, and/or admissions on file - designate specific facts showing that there is a genuine issue for trial. See id. at 324.

The substantive law will identify which facts are material and which are irrelevant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the non-movant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. See id. 249.

When faced with a "properly supported motion for summary judgment, [the non-moving party] must come forward with specific factual evidence, presenting more than mere allegations." Gargiulo v. G.M. Sales, Inc., 131 F.3d 995, 999 (11th Cir. 1997). As Anderson v. Liberty Lobby, Inc . teaches, Rule 56(c) "does not allow the plaintiff to simply rest on his allegations made in the complaint; instead, as the party bearing the burden of proof of trial, he must come forward with at least some evidence to support each element essential to his case at trial." Anderson, 477 U.S. at 252. "Mere allegations" made by plaintiffs are insufficient. Id.

Summary judgment is mandated "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., 477 U.S. at 322. "Summary judgment may be granted if the non-moving party's evidence is merely colorable or is not significantly probative." Sawyer v. Southwest Airlines Co., 243 F.Supp.2d 1257, 1262 (D.Kan. 2003) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. at 250-51).

"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. "Essentially, the inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so onesided that one party must prevail as a matter of law.'" Sawyer, 243 F.Supp.2d at 1262 (quoting Anderson, 477 U.S. at 251-52); see also LaRoche v. Denny's, Inc., 62 F.Supp.2d 1366, 1371 (S.D. Fla. 1999) ("The law is clear... that suspicion, perception, opinion, and belief cannot be used to defeat a motion for summary judgment.").

III. Analysis

Plaintiffs' First Amended Complaint contains the following claims: (1) Count One alleges BANA violated the Real Estate Settlement Procedures Act ("RESPA") by failing to timely respond to purported qualified written requests ("QWRs"); (2) Count Two alleges BANA "deceived" Plaintiffs by purporting to review Plaintiffs' loan for a modification after the mortgage/note had been sold, (3) Count Three alleges that SPS has "been misleading" Plaintiffs by "dual tracking" their account by purporting to review Plaintiffs' loan for modification while continuing foreclosure proceedings; (4) Count Four, in which Plaintiffs make assertions disputing the validity of the mortgage and note at issue relating to their home at 919 Highland Lakes Lane; (5) Count Five, in which Plaintiffs assert payments were not applied properly, and unauthorized charges have been added, to their outstanding balance on the mortgage/note; (6) Count Six, in which Plaintiffs assert Defendants fraudulently represented they were reviewing Plaintiffs' loan for modification; and (7) Count Seven which requests an injunction against unspecified conduct by Defendants. (Doc. # 35). The court addresses these claims below.

A. Count One - Plaintiffs Failed to Establish a RESPA Claim

To establish a claim for a violation of § 2605(e), Plaintiffs must present evidence that (1) BANA was a loan servicer; (2) BANA was sent a valid QWR; (3) BANA failed to adequately respond within sixty days; and (4) actual damages or an entitlement to statutory damages. 12 U.S.C. § 2605(e)(1)(A) ...

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