In re Ditech Holding Corp.

1

In re: Ditech Holding Corporation, et al., Debtors. ^[1]

No. 19-10412 (JLG)

United States Bankruptcy Court, S.D. New York

May 4, 2023

NOT FOR PUBLICATION

Chapter 11

(Jointly Administered)

APPEARANCES: ^[2]

JENNER & BLOCK, LLP Attorneys for the Consumer Representative By: Richard Levin, Esq.

WEIL GOTSHAL & MANGES LLP Attorneys for the Plan Administrator By: Ray C. Schrock, P.C., Esq. Richard W. Slack, Esq. Natasha S. Hwangpo, Esq.

Ms Lisa Janco Appearing Pro Se

MEMORANDUM DECISION AND ORDER SUSTAINING THE PLAN ADMINISTRATOR' S TWENTY-EIGHTH OMNIBUS OBJECTION, THE CONSUMER CLAIMS TRUSTEE'S FIFTIETH OMNIBUS OBJECTION AND THE PLAN ADMINISTRATOR'S AND CONSUMER CLAIMS TRUSTEE'S EIGHTY-FIRST OMNIBUS OBJECTION TO THE CLAIMS OF LISA JANCO

HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE

Introduction^[3]

In these Chapter 11 Cases, Lisa Janco (the "Claimant") brought an adversary proceeding (the "Adversary Proceeding")^[4] and the following three proofs of claim against Ditech Holding Corporation ("Ditech"): Proof of Claim 2585 ("Claim 2585"), Proof of Claim 2916 ("Claim 2916"), and Proof of Claim 2919 ("Claim 2919," collectively the "Claims"). The damages that the Claimant sought in the Adversary Proceeding complaint (the "Complaint"),^[5] which are also sought in the Claims, relate to and arise out of the Ditech's alleged pre-petition faults and wrongdoing in servicing a mortgage loan obligation of the Claimant. In broad strokes, in support of the Claims, she asserts that Ditech (i) required her to pay excessive amounts into the mortgage loan's escrow account, (ii) misapplied payments made in 2016 to her escrow account, (iii) refused to return funds paid by the State of California as part of the Property Tax Postponement Program (defined below as the "CA Property Tax Payment"), and (iv) failed to provide a timely disbursement of the proceeds of an insurance policy paid to Ditech by CSE Insurance Company (the "CSE Insurance Proceeds"). She also purports to assert causes of action against Ditech for violations of the Americans with Disabilities Act ("ADA"), the California Unruh Act, the California Disabled Persons Act (Cal. Civ. Code § 51.4), the Fair Credit Reporting Act ("FCRA"), the Federal Trade Commission Act, the Civil Rights Act, and the Real Estate Settlement Procedures Act ("RESPA"). In addition, she purports to allege causes of action against Ditech for personal injury against a disabled person, breach of contract, embezzlement, larceny, and fraud while acting in a fiduciary capacity.

The Consumer Claims Trustee and the Plan Administrator of Ditech Holding Corporation (f/k/a Walter Investment Management Corp.) and its debtor affiliates (excluding Reorganized RMS) filed Objections to the Claims. In substance, they seek to disallow and expunge the Claims on the grounds that the Claims fail to state claims for relief against Ditech under state or federal law and because, in any event, the Claims are time-barred. They also assert that the Claims are not entitled to administrative expense priority under the Bankruptcy Code-title 11 of the United States Code. The Claimant contests the Objections. On April 27, 2023, in accordance with the Claims Procedure Order,^[6] the Court conducted a Sufficiency Hearing on the Claims. Through counsel, the Consumer Claims Trustee and Plan Administrator appeared at the hearing. The Claimant did not appear at the hearing. The Court did not hear arguments from the Consumer Claims Trustee or the Plan Administrator, and it resolves the Objections based upon its review of the voluminous papers submitted in support of, and in opposition to, the Claims.

For the reasons stated herein, the Court sustains the Objections and disallows and expunges the Claims.

Jurisdiction

The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States District Court for the Southern District of New York, dated January 31, 2012 (Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b).

Background

Facts Relevant to the Claims

On January 21, 2016, the Claimant made a payment on her mortgage, and $484 was applied to her escrow account bringing the escrow balance to $1,328.59. Claim 2919 at 103. On February 12, 2016, the Claimant made a $2,500 payment to Ditech. Claim 2916 at 62. According to Ditech's records at that time it held $187.46 in suspense, and the Claimant was in arrears under the mortgage on account of her failure to pay January and February 2016 mortgage payments in the amount of $1,370.69 each, plus late fees in the amount of $44.33. Id. at 62, 64. Ditech applied the $2,500 payment first to the suspense account, bringing the account balance to $2,687.36. Id. at 64. It then applied the funds in the suspense account to the Claimant's outstanding January payment (i.e., $1,370.69), leaving a balance in the suspense account of $1,316.67. Id. As of that date, the balance in the escrow account was $1,812.59. Claim 2919 at 103.

On March 8, 2016, Ditech made a disbursement for property taxes in the amount of $1,919.36, leaving an escrow deficiency of ($106.77). Id. Ditech credited the escrow account with payments of $484 on each of March 12 and March 31, 2016, and it added interest of $5.59 to the escrow account, bringing the escrow account balance to $866.82. Id.

On May 9, 2016, the Claimant made a payment of $1,502 to Ditech (the "May 9 Payment"). See Claim 2916 at 64. Based upon what appeared to be the instructions on the remittance coupon, Ditech applied the payment to the escrow account. See id.; Complaint at 100-01. On July 21, 2016, Ditech ran an escrow analysis on the Claimant's account and refunded $1,562.46 to the Claimant. Claim 2916 at 64. The refund took into account the application of the May 9 Payment to the Claimant's escrow account. Id.

By letter dated March 14, 2017, the California State Controller's Office ("SCO") informed the Claimant that she was approved for a 2016-17 Property Tax Postponement. Id. at 57. The letter explained that the SCO would make a payment to the Los Angeles County Tax Collector's Office on her behalf by June 30, 2017. Id. It further explained that if the Tax Collector's Office received payments from the lender after the SCO office made the tax payment, the duplicate payment will be refunded to the lender. Id.

In July 2017, Ditech performed its annual analysis of the Claimant's escrow account. Because the mortgage was in delinquent status, Ditech did not share the analysis with the Claimant. Id.

On July 8, 2017, the SCO refunded the property tax disbursements made by Ditech on November 28, 2016 and on March 23, 2017, aggregating $3881.31 (the "CA Property Tax Payment"). Claim 2916 at 59. On July 8, 2017, Ditech applied the CA Property Tax Payment to the Claimant's escrow account bringing the escrow balance from a deficiency of ($751.57) to a surplus of $3,131.74. Claim 2919 at 103.

On July 10, 2017, Ditech approved the Claimant for a trial loan modification plan. Claim 2916 at 27. The trial plan called for the Claimant to make three payments to Ditech of $1,553.02 for the months of August, September, and October 2017. The Claimant made those payments. Id. at 63. On November 4, 2017, Ditech mailed the Claimant permanent loan modification documents printed in a standard font size. Id. The Claimant refused to sign these documents because the loan modification agreement called for her to make escrow payments for her property taxes. Claim 2919 at 19, 124, 156-57.

On January 16, 2018, Ditech sent the Claimant a year-end escrow account history. It showed escrow account deposits and disbursements of $3,256.45 and $1,739.70, respectively, and a resulting balance of $2,542.59. Claim 2916 at 52.

On January 30, 2018, Ditech responded to the Claimant's request for billing statements printed in larger fonts and informed her they were consulting with their vendor to determine if it was feasible for Ditech to accommodate the request. Id. at 64.

On March 7, 2018, Ditech sent the Claimant an escrow account disclosure statement that showed an escrow surplus of $3,671.24 and that informed her that she would receive a surplus check unless her account was past due. Claim 2919 at 83.

On March 18, 2018, Ditech sent the Claimant a mortgage billing statement showing that the Claimant had not made a mortgage payment since July 2017 and that she was $16,571.47 in arrears under the mortgage. Id. at 85. The billing statement also disclosed $278.66 in suspense and Ditech's March 14, 2018 distribution of $2,017.35 for property taxes. Id.

On April 6, 2018, Ditech referred the Claimant's account for foreclosure. At that time, the account was 279 days past due. Claim 2916 at 60.

The Claimant asserts Ditech withheld the CSE Insurance Proceeds. Id. at 3. Neither the Claims nor the Responses provide details on the amount of insurance proceeds, when Ditech allegedly received the proceeds, or the amount of the proceeds and interest thereon to which the Claimant believes she was entitled.

The Claimant lodged a complaint with the Los Angeles County Consumer & Business Affairs investigator, raising concerns over her monthly payment amount with Ditech particularly in relation to paying monthly escrow for property taxes. See Claim 2919 at 148-50. By a letter dated July 23, 2018, Ditech responded to the Los Angeles County Consumer & Business Affairs investigator, contending that it had not received any payments from the SCO for property taxes on the Claimant's account since its receipt of the CA Property Tax Payment in July 2017. Id. at 148. Ditech explained that, because the Claimant's Annual Statement of Postponed Property Taxes...