DeHart v. Homeq Servicing Corp.

47 F.Supp.3d 246

James S. DeHART, et al., Plaintiff

v.HOMEQ SERVICING CORPORATION, et al., Defendants.

Civil Action No. 11–416.

United States District Court, E.D. Pennsylvania.

Signed Sept. 22, 2014.

Daniel J. Mazaheri, Lampeter, PA, for Plaintiff.

Donald E. Wieand, Jr., Stevens & Lee, Bethlehem, PA, James Bucci, Genova Burns, Nicholas J. Repici, Genova Burns & Giantomasi, Philadelphia, PA, for Defendants.

Memorandum Opinion

GOLDBERG, District Judge.

On November 9, 2007, Plaintiffs' home was improperly sold at a sheriff's sale, on the mistaken understanding that Plaintiffs' mortgage obligations were in substantial arrears, and that an appropriate foreclosure judgment had been entered several years prior. On December 14, 2007, with the consent of the mortgage company, the sale of the home was set aside, and Plaintiffs were never removed from their home. This lawsuit contends that the Defendants¹ , who are persons and entities involved in the servicing, lending, and foreclosure at issue, committed several torts and breached the mortgage agreement.

Currently before me is Defendants' motion for summary judgment. Despite having engaged in substantial discovery, Plaintiffs have failed to provide sufficient evidence that they were the victims of any torts, or that they suffered any damages from the breach of contract apart from any costs and fees associated with having the sheriff's sale set aside. Accordingly, and for reasons set forth below, I will grant Defendants' motion.

I. Factual Background

The following facts are undisputed unless otherwise indicated:

On February 23, 1996, Plaintiffs James and Judy DeHart obtained a fixed-rate fifteen-year home loan at 10.25% interest in the amount of $126,400, secured by a mortgage on their property. (Wells Fargo MSJ, Ex. 1–2.) The note listed the monthly payment of principal and interest as $1,132.68. (Wells Fargo MSJ, Ex. 2.) The mortgage contained a paragraph requiring additional payments for, among other things, taxes and insurance:

2. Funds for Taxes and Insurance. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly payments are due under the note, until the Note is paid in full, a sum (“Funds”) for: (a) yearly taxes and assessments which may attain priority over this Security Instrument as a lien on the Property; ... (c) yearly hazard or property insurance premiums ....

(Wells Fargo MSJ, Ex. 1 (emphasis added).) An additional term of the mortgage provided that the mortgage servicer would apply payments to taxes and insurance owed before any application to interest and principal. (Wells Fargo MSJ, Ex. 1.) Further, the mortgage required Plaintiffs to maintain property insurance, and indicated that if they did not, the Lender had the right to obtain insurance on its own, and that any premiums paid by the Lender in that manner would “become additional debt of Borrower secured by this Security Instrument” (Wells Fargo MSJ, Ex. 1, ¶ 7.):

5. Hazard or Property Insurance. Borrower shall keep the Improvements now existing and hereafter erected on the Property insured against loss by fire, [certain defined hazards], and any other hazards ... for which Lender requires insurance.... If Borrower fails to maintain the coverage described above, Lender may, at the Lender's option, obtain coverage to protect the Lender's rights in the Property.

(Wells Fargo MSJ, Ex. 1.)

Mr. DeHart testified that when he and his wife signed the note and mortgage, they also entered into an agreement with the Lender to waive the Paragraph 2 requirement that they make payments to the servicer to cover taxes and insurance. (Jam. DeHart Dep. 47:8–16.) Although Mr. DeHart “imagine[d]” that such an agreement would probably be in writing, at the time of his deposition (March 20, 2013), he was still “in the process of trying to locate it.” (Jam. DeHart Dep. 48:22–23, 50:1–4.) To date, neither party has identified a written waiver of the requirement.

It appears that for the first several years, Plaintiffs made their mortgage payments without incident. According to Mr. DeHart, “problems began” around November of 2000 when HomeEq Servicing Corporation became Plaintiffs' mortgage servicer. (Jam. DeHart Dep. 62:11–15; Wells Fargo MSJ, Ex. 20.) Around that time, HomEq began to add taxes into the payments of interest and principal, but Plaintiff was “never notified” of this action. (Jam. DeHart Dep. 62:15–21.) Plaintiffs also experienced a “lapse[ ]” in their homeowner's insurance (which they had secured and were paying for themselves) for about four months, at which time the servicer acquired insurance and began to charge Plaintiffs for the premium payments. (Jam. DeHart Dep. 63:5–18.) Mr. DeHart could not recall whether he received notice of the changes (he was later told that his monthly payment had increased by approximately $300 to account for the added taxes and insurance, (Jam. DeHart Dep. 67:1–8)), but he stopped sending mortgage payments for a couple of months because he did not receive monthly statements from HomEq, (Jam. DeHart Dep. 71:19 to 72:2). Plaintiffs then received an “Act 91” notice indicating that they were in default and that foreclosure proceedings would be initiated if the default was not cured. (Jam. DeHart Dep. 72:6–10.)

On October 31, 2001, a foreclosure complaint was filed against Plaintiffs in the Northampton County Court of Common Pleas. (Wells Fargo MSJ, Ex. 13.) According to the docket, Plaintiffs were served with the foreclosure complaint on December 11, 2001. (Wells Fargo MSJ, Ex. 13.) Plaintiffs never responded to the complaint, and a default judgment in the amount of $143,696.75 was entered on May 1, 2002. The law firm of Milstead and Associates, a Defendant here, represented the Bank of New York in this foreclosure action. (Wells Fargo MSJ, Ex. 13.) A sheriff's sale of Plaintiffs' property was scheduled for July of 2002, but was averted when Plaintiffs' counsel filed a voluntary chapter 13 bankruptcy petition on June 21, 2002. (Mazaheri Dep. 114:19 to 115:7.)

After the bankruptcy case was dismissed on April 17, 2003, the bank filed a writ of execution in the Northampton County foreclosure matter, and a sheriff's sale of the property was again scheduled for September 5, 2003. (Wells Fargo MSJ, Ex. 6, 15.) Sometime before the sale, Plaintiffs made a payment of nearly $28,000 to reinstate their mortgage, and the sale was canceled.² (Jam. DeHart Dep. 100:23 to 101:4.)

Following the reinstatement, Plaintiff did not restart monthly payments. Mr. DeHart testified that the mortgage servicer was supposed to send Plaintiffs a coupon book or monthly statements, but that they received neither. (Jam. DeHart Dep. 124:6–11.) Because Plaintiffs did not know where to send their payments, Plaintiffs again missed several mortgage payments, and received another Act 91 notice of intent to foreclose in December 2003 indicating that they were three months delinquent on their payments, and quoting an amount of $4,758.49 to cure the default. (Jam. DeHart Dep. 124:12–19. Wells Fargo MSJ, Ex. 15.) Plaintiffs paid that amount. (Jam. DeHart Dep. 128:19–22.) When asked if monthly payments then resumed, Mr. DeHart responded: “They already started foreclosure proceedings on me. And after they stole so much money on me, the criminals that they are, I decided at that point from here on out my attorney will be handling this indefinitely, because I am not sending them anymore money, period, because they are thieves.” (Jam. DeHart Dep. 130:20 to 131:1.)

HomEq filed a foreclosure complaint in the Northampton County Court of Common Pleas on March 17, 2004 (represented by Milstead and Associates), and Plaintiffs were served with the complaint on March 19, 2004. (Wells Fargo MSJ, Ex. 7.) Plaintiffs gave the complaint to their attorney, who they were “sure” would “file[ ] a response.” (Jam. DeHart Dep. 132:19–22.) But Plaintiffs' counsel neither entered an appearance nor filed anything in response to the foreclosure complaint, and another default judgment was entered on September 29, 2004, in the amount of $137,543.58.³ (Wells Fargo MSJ, Ex. 7.)

Plaintiffs did, however, file another voluntary chapter 13 bankruptcy petition on January 4, 2005, triggering an automatic stay of the foreclosure proceeding. (Wells Fargo MSJ, Ex. 8.); 11 U.S.C. § 362(a). Wachovia Bank of Delaware, N.A. filed a proof of claim in the bankruptcy action for $147,308.99. (In re DeHart, No. 05–20035, Doc. No. 26–2.) Of this amount, $119,262.33 was attributed to principal, $16,177.56 to interest, and the rest to attorney's fees and other items. (Id. ) As of the date of the bankruptcy filing, Wachovia claimed $28,859.30 in arrearages, including $16,990.20 in missed monthly payments. (Id. ) Plaintiffs objected on the grounds that the amount claimed was “excessive and unreasonable,” and a hearing was scheduled. (In re DeHart, No. 05–20035, Doc. No. 46.)

Mr. DeHart testified at the bankruptcy hearing on May 4, 2006 that he “always” paid his property taxes and insurance on his own, and not to his mortgage servicer. (Wells Fargo MSJ, Ex. 9, at 6.) He further explained that the “house went into foreclosure, because ... the payments that I was sending to the bank were not enough ... because they were adding these insurance costs to my payments that I was unaware of and did not realize until a later date.” (Wells Fargo MSJ, Ex. 9, at 7.) DeHart admitted on cross-examination that, at the time of the hearing, Plaintiffs had not made a mortgage payment in approximately a year. (Wells Fargo MSJ, Ex. 9, at 23.) At the conclusion of the hearing, the Bankruptcy Judge ruled from the bench that: (1) It was “inappropriate” for the bank to add insurance and tax payments to the mortgage payment, and that those amounts “need not be paid going forward”; (2) That the $28,000 payment made in late 2003 brought the DeHarts current on their mortgage through October 2003, and that the “bank's claim is equal to the principal amount that existed on...