WILLIAM P. DIMITROULEAS, District Judge.
THIS CAUSE is before the Court upon Defendant's Motion to Dismiss [DE 7], filed on September 28, 2012. The Court has carefully considered the motion, Plaintiff's Response in Opposition [DE 9], Defendant's Reply [DE 15], and arguments made at an oral hearing on November 19, 2012. The Court converted the motion into a motion for summary judgment. [DE 19]. The parties then submitted a joint statement of material fact, [DE 20], which the Court has also considered. The Court is otherwise fully advised in the premises.
Summary judgment is proper if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The facts in this case are not in dispute. Plaintiff had a mortgage on her home in Broward County, Florida. In her mortgage, Plaintiff and the original mortgagee, Nation One Mortgage Company, Inc., agreed that
[DE 20-1 at 21 ¶ 20]. Defendant U.S. Bank is not listed on either the note or the mortgage. Plaintiff's loan was assigned to the C-Bass Mortgage Loan Trust 2007-CB3, Asset-Backed Certificates, Series 2007-CB3. The Pooling and Servicing Agreement for the Trust lists Litton Loan Servicing, L.P. as the master servicer and U.S. Bank as the trustee.
There is no dispute that U.S. Bank took the role of an assignee of the subject loan and that the assignment was voluntary. Nor is there any dispute that U.S. Bank has retained Litton as the loan servicer at all material times.
Plaintiff sent Litton a written request on July 12, 2011, asking Litton to identify the owner or master servicer of Plaintiff's mortgage obligation. Litton responded, "The current beneficial holder of the loan is U.S. Bank, National Association. However, since Litton is currently servicing the loan, we recommend you submit all inquiries to the address listed on the top of page one." Litton included its phone number, address, fax number, and website. Litton did not specifically identify itself as the "master servicer," though it in fact was the master servicer. Because Litton did not provide the name, address, and telephone number of the owner, nor identified
U.S. Bank argues that the Court need not consider the merits of Plaintiffs TILA claim because Plaintiff is contractually barred from bringing this action without giving U.S. Bank notice and an opportunity to cure. The Court will begin by analyzing this threshold issue.
In her mortgage, Plaintiff promised to give Nation One Mortgage Company notice prior to any suit arising due to Nation One Mortgage Company's breach of "any duty owed by reason of" the mortgage. [DE 20-1 at 21 ¶ 20]. At least two questions arise from this clause: first, whether U.S. Bank as an assignee steps into Nation One's shoes for the sake of this provision; second, whether the current TILA action arises by way of any duty owed by reason of the mortgage.
Plaintiff argues rigorously that the contract would require notice only if Nation One had breached the contract. Because neither U.S. Bank nor Litton was a party to the contract, Plaintiff surmises that U.S. Bank cannot enforce this provision. The Court disagrees. The mortgage clearly anticipates that Nation One could sell it. See [DE 20-1 at 21 ¶ 20]. Furthermore, the mortgage states, "The covenants and agreements of this Security Instrument shall bind (except as provided in Section 20) and benefit the successors and assigns of Lender." Id. at 19 ¶ 13. The benefit of a notice and cure provision runs to U.S. Bank as assignee. If the notice and cure provision is an affirmative defense in this case, U.S. Bank would be able to invoke it.
Plaintiff also briefly argues that the notice and cure provision cannot be utilized because Litton is the entity that breached the mortgage contract and Litton is not an assignee of Nation One Mortgage. Plaintiff's argument is belied by Plaintiff's use of vicarious liability in all other portions of her complaint. Plaintiff is not suing Litton; she is suing U.S. Bank. Plaintiff has argued that U.S. Bank is liable because of its agent's actions on its behalf. This Court has found that a creditor is liable for its assignee's breach of § 1641(f)(2).
The major caveat in the preceding paragraph is that the notice and cure provision of the mortgage can act as a bar only if it applies by its terms to this action. The provision applies if Plaintiff is alleging that U.S. Bank breached a duty "owed by reason of" the mortgage. This Court has previously construed a mortgage provision to find that a subsequent TILA suit was governed by the underlying mortgage contract. See Foley v. Wells Fargo Bank, N.A., 849 F.Supp.2d 1345, 1352 (S.D.Fla. 2012).
In Foley, the plaintiff sued Wells Fargo under TILA. Id. at 1346. Wells Fargo was the owner of the mortgage and note. Id. Wells Fargo was also the servicer. Id. Wells Fargo moved to strike the plaintiffs request for a jury trial because in the mortgage the plaintiff waived his right to trial by jury "in any action, proceeding, claim, or counterclaim ... arising out of or in any way related to this Security Instrument or Debt Instrument." Id. at 1352. The plaintiff argued that his TILA claim did not arise out of the mortgage. Id. Because plaintiff repeatedly referred to the note throughout his complaint, the Court ruled that the TILA action was related in some way to the loan documents, and thus the "related in any way" language of the mortgage applied. Id. The Court was careful to note that the plaintiffs claim likely did not arise from the loan documents. Id.
U.S. Bank argues that Foley is closely analogous to this case. Plaintiff promised to give notice before bringing a lawsuit for breach of "any provision of, or any duty owed by reason of" the mortgage. The only reason U.S. Bank and Litton have a TILA duty is because Plaintiff obtained a mortgage. Therefore, U.S. Bank's TILA duties, as a matter of but-for causation, were owed by reason of the mortgage.
The Eleventh Circuit recently weighed in on how closely a cause of action must relate to a mortgage in order to be governed by the terms of that mortgage. See Bahamas Sales Assoc., LLC v. Byers, 701 F.3d 1335 (11th Cir.2012). In that case, Byers purchased a lot in the Bahamas. Id. at 1338. His purchase contract required him to litigate all disputes in the Bahamas. Id. He had a mortgage with Bahamas Sales with a forum-selection clause designating Florida as the proper forum. Id. After Bahamas Sales sued Byers in Florida for failing to make payments under the mortgage, Byers counterclaimed against Bahamas Sales claiming that it had engaged in appraisal fraud. Id. Bahamas Sales persuaded the trial court that Byers should not be allowed to bring his appraisal fraud claim in Florida because he was bound by the forum-selection clause in the purchase contract to sue in the Bahamas. Id. at 1338.
Byers appealed, arguing that his counterclaim did not relate to the lot purchase contract. Id. at 1340. The Eleventh Circuit began its analysis by setting forth the standard: "To determine if a claim falls within the scope of a clause, we look to the language of the clause." Id. The clause stated, "[T]he courts of the Commonwealth [of the Bahamas] ... will be the venue for any dispute, proceeding, suit or legal action... related in any way to [the lot purchase contract]." Id. The Eleventh Circuit was thus forced to address whether an appraisal fraud claim related in any way to the lot purchase agreement. It then provided helpful analytical guideposts:
Id. at 1340-41.
The Eleventh Circuit then rejected the trial court's reasoning. The trial court had surmised that the forum-selection clause was "very broad," it gave rise to the parties' relationship, and without the lot purchase contract, Byers would not have signed the mortgage and become a victim of appraisal fraud. Id. at 1341. In rejecting that line of thinking, the Eleventh Circuit held that the appraisal fraud claim did not have a direct relationship to the lot purchase contract. Id. at 1341. It was also not the source of several parties' relationship because they were not signatories to the lot purchase agreement. Id. Finally, the Eleventh Circuit noted that "a butfor relationship between the claims and the lot purchase contract does not mean the claims `relate to' the contract." Id. Concluding that the appraisal fraud claim was not "a fairly direct result of the performance of contractual duties" under the lot purchase contract, the Eleventh Circuit found that the forum selection clause in the lot purchase agreement did not bar Byers from in bringing his counterclaim in Florida.
The decision of whether the notice and cure provision applies in this case is a close one. The provision only applies if U.S. Bank breached "any provision of, or any duty owed by reason of" the mortgage. Though U.S. Bank makes a fair but-for argument, the Court concludes that the duty to disclose the name of the owner or master servicer is not a duty owed by reason of the mortgage. It is a duty owed by reason of TILA. The parties have not directed the Court to any provision in the mortgage requiring U.S. Bank or its servicer to provide the name, address, and phone number of the owner or master servicer. In the absence of TILA, there would be no suit. The claim is not directly related to the mortgage, so the notice and cure provision does not apply.
The Court now moves to the substance of Plaintiff's Amended Complaint. Plaintiff asked Litton for the name, address, and phone number of the owner or master servicer of her obligation. Litton responded by giving the name of the owner, but did not provide its address or phone number. Litton did indicate that Litton was servicing the loan and gave its own name, address, and phone number. Litton did not state whether it was the master servicer or a subservicer. There were no contextual clues from which Plaintiff could have deduced Litton's true status as either master servicer or subservicer. Nevertheless, U.S. Bank insists that Litton's disclosure was sufficient.
The Court recently addressed a similar situation in Runkle v. Federal National Mortgage Association, 905 F.Supp.2d 1326, No. 12-61247, 2012 WL
In Runkle, the Court also confronted the issue of whether an assignee could be liable for its servicer's § 1641(f)(2) errors. The Court found that principles of vicarious liability applied. The Court will set forth the reasoning of that Order here:
Runkle, 905 F.Supp.2d at 1332-34, No. 12-61247, 2012 WL 5861803 at *6-7.
To this reasoning, the Court would merely reemphasize that "disclosure statement" is not defined in § 1641(a) and that term can be construed to encompass postassignment disclosures. The Court acknowledges that many of the instances in TILA where disclosures are mentioned address situations at the inception of the creditor-debtor relationship. E.g. 15 U.S.C. § 1604 (discussing model disclosure forms for mortgage loan transactions). But not all references to disclosures occur in the pre-assignment context. When Congress amended TILA in 2009, it added § 1641(g). See Helping Families Save Their Homes Act of 2009, Pub.L. No. 111-22 § 404, 123 Stat. 1632, 1658. That section states, "In addition to other disclosures required by this title," whenever a mortgage loan is sold, transferred, or assigned, "the creditor that is the new owner or assignee" must provide the obligor with contact information. 15 U.S.C. § 1641(g) (emphasis added). Congress then created a private right of action for violating this new subsection, as well as for violating 1641(f)(2). See id.
As the 2009 amendments demonstrate, Congress considered postassignment informational disclosures to be disclosures within the purview of TILA. By the plain terms of § 1641(g), assignees who fail to make that informational disclosure can be liable. There is no limitation of the term "disclosure statement" to mean only those disclosures made initially between the borrower and original creditor. The new § 1641(g) emphatically creates liability purely for the assignee's own disclosures or lack thereof. At the very least, the 2009 amendments broadened the meaning of "disclosure statement" to include disclosures made by the assignee post-assignment. The Court concludes that when an assignee's servicer fails to make a disclosure under § 1641(f)(2), then the error is apparent from the face of that particular disclosure statement and an assignee may be liable.
For the first time in Reply, U.S. Bank suggests that 15 U.S.C. § 1641(e) applies to limit its potential liability in this case. "A new ground for summary judgment raised for the first time in a reply memorandum ... will not be considered." Burger King Corp. v. H & H Restaurants, LLC, No. 99-2855, 2001 WL 1850888, at *7 n. 2 (S.D.Fla. Nov. 30, 2001). Even if the Court were to consider the argument, the Court would be unlikely to accept it.
Section 1641(e) closely follows § 1641(a). For comparison, the Court will set forth the relevant portions of § 1641(a) and (e):
(a) Prerequisites
15 U.S.C. § 1641(a), (e) (emphasis added to highlight distinctions between the subsections). Subsection (e) was added in 1995. See Truth in Lending Act Amendments of 1995, Pub.L. No. 104-29 § 7. Section 1641(f) was added at the same time. Id.
Second, the purpose of § 1641(e) was to "eliminate two uncertainties under the present law as to an assignee's liability for an original creditor's violation of the act." Senate Report No. 96-73 (1979), 1980 U.S.C.C.A.N. 280, 296 (emphasis added). This case is not about the original creditor's violation of TILA. It is about the assignee's own violation. Therefore, the language of section 1641(e) was not designed to address the problem facing the Court. The Court would therefore be inclined to find that § 1641(e) is not a bar to Plaintiff's claim.
Third, it is possible to interpret § 1641(e) in such a way as to preserve Plaintiff's claim in this case. Section 1641(e)(1) limits liability to violations apparent on the face of disclosure statements provided in connection with consumer credit transactions secured by real property "except as otherwise specifically provided in this subchapter." Folding in the understanding that the Save Our Homes Act created a new meaning of "disclosure statement," and that § 1641(f)(2) specifically creates a duty and liability for making certain disclosures, § 1641(f)(2) can be seen as a provision specifically providing assignee liability, triggering § 1641(e)(1) exception. This Court's interpretation does not make § 1641(e) superfluous, because it would still bar assignee liability for initial disclosures, such as when a loan
The Court concludes that an assignee of a consumer credit transaction secured by real estate can be liable for its servicer's § 1641(f)(2) violations.
Though Plaintiff agreed to give U.S. Bank notice of certain defects under the mortgage, Plaintiff's TILA claim is not sufficiently related to that mortgage to be governed by the notice and cure provision. Litton's disclosure to Plaintiff did not satisfy § 1641(f)(2). U.S. Bank can be liable for this post-assignment informational disclosure failure, even as an assignee.
Accordingly, it is
