Beard v. Ocwen Loan Servicing, LLC

JAYNIE L. BEARD, Plaintiff v. OCWEN LOAN SERVICING, LLC, UDREN LAW OFFICES, P.C.,and CATHY MOORE, Defendants

CIVIL NO. 1:14-CV-1162

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

September 24, 2015

MEMORANDUM

I. Introduction

We are considering three motions for summary judgment. This matter relates to a two-count complaint in which Plaintiff Jaynie L. Beard alleges that Defendants violated various sections of the Fair Debt Collection Practices Act (FDCPA). (Doc. 1). On June 1, 2015, Defendants moved for summary judgment. Cathy Moore and Udren Law Offices filed a joint motion, while Ocwen Loan Servicing filed separately. (Doc. 30; Doc. 32). The following day Plaintiff filed a cross motion, asking that we grant her summary judgment as to liability. (Doc. 34). For the reasons discussed below, we will deny Defendants' motions, and we will grant Plaintiff's motion.

II. Background

Plaintiff owns real property located at 3515 Schoolhouse Lane, Harrisburg, Pennsylvania. (Doc. 30-2 at 1; Doc. 32 at 1; Doc. 34-2 at 1). She purchased the property with a loan from Columbia National, Inc. (Doc. 30-8). In connection with the loan, Plaintiff executed a promissory note and a mortgage. (Id. at 3). Relevant to this case, paragraph fourteen of the mortgage states that the "Lender may charge Borrower fees for services performed in connection with Borrower's default . . . including, but not limited to, attorneys' fees . . . ." (Id. at 12). Paragraph fourteen goes on to limit this authority, however, by stating, "Lender may not charge fees that are expressly prohibited by this Security Instrument or by Applicable Law." (Id.).

In 2010, Plaintiff defaulted on the promissory note. (Doc. 32 at 5; Doc. 44-2 at 3). At the time, her mortgage was serviced by American Home Mortgage Servicing, Inc. (Id.). To avoid continued default, Plaintiff and American entered into a loan modification agreement. (Id.). In 2012, Plaintiff defaulted on the modified agreement. (Id.). At the time of the second default, Homeward Residential, Inc. was the servicer of the mortgage. (Id.). Homeward offered to enter into a second loan modification agreement with Plaintiff on the condition that she completed a trial payment plan. (Doc. 30-2 at 11; Doc. 45-2 at 3). Plaintiff commenced the trial plan, after which Defendant Ocwen Loan Servicing became the servicer of Plaintiff's mortgage. (Doc. 32 at 5; Doc. 44-2 at 3-4). Upon successful completion of the plan, Ocwen offered her a second loan modification agreement. (Id.). Finding the terms unpalatable, Plaintiff declined the second agreement and retained counsel. (Doc. 32 at 6; Doc. 44-2 at 4).

In late August or early September 2013, Plaintiff contacted Ocwen and requested a reinstatement quote - the amount necessary to bring her note out of default. (Id.). She requested that Ocwen fax the quote to her attorney, Bernard Rubb. (Id.). Ocwen provided its foreclosure counsel, Defendant Udren Law Offices, with the reinstatement figures. (Id.). Defendant Cathy Moore, a legal assistant at Udren, prepared the reinstatement quote. (Doc. 30-2 at 4; Doc. 45-2 at 4-5). On September 11, 2013, as requested by Plaintiff, Moore faxed the quote to Rubb's office. (Id.). The fax coversheet and reinstatement quote were addressed to Plaintiff. (Doc. 37-4).

The reinstatement quote contained three pages. (Id.). The first page read as follows:

Dear Sir or Madame:

As requested, enclosed please find our reinstatement form indicating the sum needed to reinstate the referenced loan.

Please note the following:

1. PAYMENT MUST BE SENT TO OUR NEW JERSEY OFFICE and received by us no later than Two (2) days prior to the "Reinstatement Amount Anticipated Good Through Date" indicated on the payoff form attached. Thereafter, the Reinstatement amount may change and your check may be returned to you.

2. The enclosed payoff amount must be in the form of Cashier's Check, Certified Check, Cash or Money Order payable to UDREN LAW OFFICES, P.C. Any other form of payment will be returned to you.

. . . .

(Id. at 2). On the second page, under the heading "REINSTATEMENT AMOUNT GOOD THROUGH September 9, 2013," was an itemized list of payments and charges that Plaintiff owed as of September 9, 2013. (Id. at 3). On the last page, the quote stated the following:

REINSTATEMENT AMOUNT ANTICIPATED GOOD

THROUGH 9/20/2013

Amount Due as of 9/09/13

$6,418.87

Clerk of Court - Complaint Filing Cost

$162.00

Service of Process Cost

$400.00

Clerk of Court - Discontinue Action Cost

$13.00

Overnight Charges/Wire Cost

$25.00

Attorney Foreclosure Fee

$1,105.00

Grand Total

$8,123.00

(Id. at 4). At the time Moore faxed the reinstatement quote, Udren had not actually incurred the fees or costs listed on the last page. (Doc. 34-2 at 4; Doc. 42-2 at 2-3).

On June 17, 2014, Plaintiff filed her complaint, alleging that Defendants' inclusion of fees and costs on the last page of the reinstatement quote violated 15 U.S.C. §§ 1692e(2)(A)-(B), (10), and 1692f(1). (Doc. 1). In their respective motions for summary judgment, each party asserts that they are entitled to summary judgment pursuant to Federal Rule of Civil Procedure 56. (Doc. 30; Doc. 32; Doc. 34).

III. Discussion

A. Standard of Review

Pursuant to Federal Rule of Civil Procedure 56, summary judgment will only be granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a); Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir. 2008). "Material facts are those 'that could affect the outcome' of the proceeding, and 'a dispute about a material fact is genuine if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party.'" Roth v. Norfalco, 651 F.3d 367, 373 (3d Cir. 2011) (quoting Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011)). In determining whether a genuine issue of material fact exists, we "must view all evidence and draw all inferences in the light most favorable to the non-moving party." Lawrence, 527 F.3d at 310. With this standard in mind, we turn to the merits of the motions.

B. Ocwen's Threshold Arguments

To avoid any potential liability, Ocwen makes two threshold arguments. First, it argues that it cannot be held liable under the FDCPA because it is not a "debt collector." (Doc. 35 at 7-9). Second, it argues that it cannot be held vicariously liable for the acts of Udren and Moore. (Doc. 35 at 16-17). Although made separately, these two arguments collapse into one. Pursuant to Third Circuit precedent, if a defendant and the defendant's attorney are both "debt collectors," the defendant can be held vicariously liable for the acts of the attorney. Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 404-05 (3d Cir. 2000). Because Udren admits it is a debt collector (Doc. 34-2 at 1; Doc. 42-2 at 1), both of Ocwen's arguments present a single issue: whether Ocwen is considered a debt collector.

The FDCPA only governs the actions of "debt collectors." Pollice, 225 F.3d at 403. Creditors, mortgagors, and mortgage servicing companies, like Ocwen, are generally not debt collectors and are therefore statutorily exempt. Id. at 403; Scott v. Wells Fargo Home Mortg., Inc., 326 F. Supp. 2d 709, 718 (E.D. Va. 2003). If, however, an ordinarily-exempt entity acquires a debt obligation by assignment after the debt was already in default, the entity "may be deemed a debt collector."¹ Pollice, 225 F.3d at 403. The same is not true if the entity assumed the obligation due to a merger. When an entity assumes the debt obligation by way of a merger, courts hold that the debt was not "acquired" after the default. Sprague v. Neil, No. 1:05-CV-1605, 2007 WL 3085604 at * 3 (M.D. Pa. Oct. 19, 2007). The courts reason that in a merger, as opposed to an assignment, a successor corporation stands in the shoes of the disappearing corporation in every aspect and assumes all the debts and liabilities of the disappearing corporation as if it incurred those liabilities itself. Id. Thus, the successor corporation actually "acquired" the debt before default. Here, the parties agree that Ocwen started servicing Plaintiff's mortgage after she defaulted. They only dispute whether Ocwen acquired the mortgage via an assignment or assumed it through a merger.

Ocwen argues that it assumed Plaintiff's mortgage as the result of a merger. According to Ocwen, after Plaintiff defaulted, her mortgage servicer, American Home Mortgage, changed its name to Homeward Residential, Inc. (Doc. 35 at 6). Thereafter, Homeward's parent company merged with a subsidiary of Ocwen, resulting in Ocwen assuming thousands of mortgages in Homeward's portfolio, including Plaintiff's. (Id.). To support this argument, Ocwen provides one source of evidence - an affidavit from one of its employees. (Doc. 32-2).

Conversely, Plaintiff argues that Ocwen obtained her mortgage by assignment. (Doc. 44 at 11). She claims that American Home Mortgage assigned her mortgage to Homeward, and Homeward assigned the mortgage to Ocwen. (Id.). To support her arguments, Plaintiff points to two sources of evidence. First, she provides a copy of a verified foreclosure complaint that Ocwen filed against her in the Pennsylvania Court of Common Pleas of Dauphin County. (Doc. 44-5 at 8). In the very first paragraph, Ocwen is given the choice to identify itself as the current mortgagee of record, the legal holder of the mortgage by virtue of being successor in interest to the current mortgagee of record, or the legal holder of the mortgage by virtue of assignment of the mortgage. (Id.). Given this option, Ocwen identifies itself as legal holder by assignment. (Id.). The complaint states that American Home Mortgage assigned the mortgage to Homeward on March 12, 2003, and Homeward assigned it to Ocwen on December 4, 2013. (Id.). Plaintiff's second source of evidentiary support is a copy of a mortgage assignment recorded with the Dauphin County Recorder of Deeds. It, too, states that...