Re:
Dear Ms. Lee and Mr. Scott:
The purpose of this letter is to rule on the motions for summary judgment filed by plaintiff Beverlyann Lee (Debtor) and defendant Nationstar Mortgage, LLC, d/b/a Champion Mortgage Co. (Nationstar) in the above-referenced case and adversary proceeding. For the reasons explained below, I will deny Debtor's motion for summary judgment and grant in part Nationstar's cross-motion for summary judgment.
In March of 2009, Debtor entered into a reverse mortgage transaction with Bank of America. Complaint, p. 2, lines 1-4. The subject of the reverse mortgage transaction is Debtor's residence (the Property). Plaintiff's Concise Statement of Facts, ¶ 2. Nationstar is the current owner and servicer of the mortgage. Complaint, p. 2, lines 12-16. Plaintiff's Concise Statement of Facts, ¶ 2.
Three documents comprise the reverse mortgage transaction: (1) An Adjustable Rate Home Equity Conversion Line of Credit Deed of Trust (the DOT); (2) An Adjustable-Rate Note Home Equity Conversion (the Note); and (3) A Home Equity Conversion Loan Agreement (the Loan Agreement)(referred to collectively as the Loan Documents). Although Debtor objects to consideration of the Loan Agreement in connection with her motion and Nationstar's cross-motion for summary judgment, which objection I will address below, she admits in her complaint and in her memorandum in support of summary judgment that she signed a loan agreement when she entered into the reverse mortgage transaction. See Complaint, p. 18, lines 6-8; Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment, page 2, lines 12-22.
Nationstar paid $39,669.77 in real property taxes assessed against the Property for tax years 2010-2015. Plaintiff's Concise Statement of Facts, ¶ 3. Later, from August 2011 to January of 2015, Debtor made payments to Nationstar towards the property tax advances in the total amount of $8,581.55. Defendant's Response to Plaintiff's Concise Statement of Facts, ¶ B.4.
In March of 2016, Nationstar issued a Notice of Default and Election to Sell (the Notice). Complaint, Exhibit 5. The Notice recites that Debtor is in default for failing to maintain insurance and/or provide proof of insurance and failing to pay property taxes prior to the delinquency date.
Debtor filed a pro se chapter 13 petition on July 18, 2016. According to Debtor's Schedule D, Nationstar has an unliquidated $535,000 claim secured by the Property. Debtor does not schedule Nationstar's claim as disputed.
On October 6, 2016, the court entered an order confirming Debtor's chapter 13 plan dated September 20, 2016 (the Plan). Doc. No. 27. The Plan provides that Debtor will cure a $31,500 prepetition arrearage to Nationstar at 0% interest over 60 months.
On November 14, 2016, Nationstar timely filed a secured proof of claim in the amount of $542,140.81.
On December 28, 2016, Debtor filed an adversary complaint (the Complaint) against Nationstar, raising issues with its proof of claim and asserting various affirmative claims.
Doc. No. 40. The Court has consolidated Debtor's claim objection, which is a contested matter, with the adversary proceeding.
Debtor and Nationstar both seek summary judgment on Nationstar's claim and on the affirmative claims asserted by Debtor against Nationstar in the Complaint.
With a certain limitation not implicated here, Fed. R. Civ. P. 56 is made applicable to adversary proceedings by Fed. R. Bankr. P. 7056 and to contested matters like Debtor's objection to Nationstar's claim, by Fed. R. Bankr. P. 9014(c). Fed. R. Civ. P. 56(a) provides that a "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A court may grant summary judgment on a claim or defense or "part of each claim or defense." Fed. R. Civ. P. 56(a).
As mentioned above, the reverse mortgage transaction is comprised of three documents: the DOT, the Note and the Loan Agreement. "Generally, in the absence of anything to indicate a contrary intention, instruments executed at the same time, by the same contracting parties, for the same purpose, and in the course of the same transaction will be considered and construed together, since they are, in the eyes of the law, one contract or instrument." 17A Am.Jur.2d
First, Debtor argues that I may not consider the Loan Agreement because Nationstar failed to include that document as an attachment to its proof of claim. Debtor argues that Nationstar is thus "time barred" from any later submission and that the failure to attach the Loan Agreement should result in disallowance in full of Nationstar's claim. Debtor's Memorandum in Support of Motion for Summary Judgment, p. 6. Debtor is mistaken.
With a certain exception not applicable here, FRBP 3001(c)(1) requires that "when a claim . . . is based on a writing, a copy of the writing shall be filed with the proof of claim." Nationstar attached the DOT and Note to its proof of claim but failed to attach the Loan Agreement. That does not mean, however, that it is forever barred from remedying that omission. The Ninth Circuit has "a long established liberal policy" of allowing amendments to timely filed proofs of claim in the absence of undue prejudice to the opposing party.
Debtor does not affirmatively say, and has not shown, that she would be unduly prejudiced by allowing Nationstar to amend its proof of claim to include the Loan Agreement. As mentioned above, Debtor admits in the Complaint and in her memorandum in support of summary judgment that she signed a loan agreement as part of the reverse mortgage transaction.
Debtor does complain in her memorandum in reply and response to Nationstar's cross motion that she only had two weeks to inspect the Loan Agreement. Presumably, Debtor is referring to the fact that Nationstar attached the Loan Agreement to the Declaration of Michael Scott filed on April 14, 2017, in response to Debtor's motion for summary judgment.
Nationstar's attorney stated in connection with Debtor's motion for sanctions that his failure to attach the Loan Agreement to the proof of claim was a mistake.
Finally, it is true that Nationstar has not yet formally amended its claim to include the Loan Agreement, but I find its delay in doing so reasonable in this case. As I mentioned immediately above, Nationstar has provided the Loan Agreement to Debtor and the Court. Formally amending its claim before resolution of these potentially dispositive motions for summary judgment would have been a waste of resources and likely would have served only to confuse and hinder efficient resolution of the pending motions for summary judgment.
I will grant summary judgment in favor of Nationstar on the portion of Debtor's claim objection that seeks to disallow Nationstar's claim in full as a result of its failure to attach the Loan Agreement to its proof of claim. The parties have agreed to participate in a settlement conference, which is set for August 28, 2017.
Nationstar's attorney has stated in court that his client is considering amending its proof of claim to add charges incurred postpetition and to increase the amount of prepetition arrearages stated in its proof of claim. Although I will allow Nationstar to amend its proof of claim to attach the Loan Agreement, I express no opinion on the question of whether and to what extent any other amendments sought by Nationstar will be allowed over Debtor's objection.
Second, Debtor appears to raise an evidentiary objection to Nationstar's submission of the Loan Agreement in connection with its cross-motion for summary judgment, although the precise nature of that objection is not clear. Debtor's objection is based on her contention that there is "[n]o discernable signature or date for [Nationstar] or it assignor[.]" Debtor's Reply, Doc. No. 31, p. 2. The Loan Agreement recites on its first page that it is "made this 26th day of March 2009[.]" (Emphasis removed). Therefore, it does bear a discernable date and I will not address that contention further. Debtor's complaint about the signature on the Loan Agreement appears to be that she can not identify the person who signed on Bank of America's behalf.
Before turning to a more technical analysis of Debtor's objection, it is important to note that I must evaluate Debtor's evidentiary objection in light of the history of this case and the allegations and admissions made by Debtor in these proceedings. Fed. R. Evid. 102 instructs that the rules of evidence "should be construed so as to administer every proceeding fairly [and] eliminate unjustifiable expense and delay . . . to the end of ascertaining the truth and securing a just determination."
First, as I discussed above, Nationstar submitted the Loan Agreement in connection with its opposition to Debtor's earlier motion for sanctions. Debtor did not raise any evidentiary objection in connection with that motion or otherwise argue that the Loan Agreement was not genuine or enforceable against her. Second, as I discuss in more detail below, one of Debtor's arguments is that Nationstar's tax advances were improper because they violated a term of the Loan Agreement. Debtor's reliance on the Loan Agreement when she perceives it to be of benefit to her undercuts the validity of her evidentiary objection. Debtor cannot have it both ways. Finally, Debtor alleges in the Complaint that Bank of America obtained a security interest in the Property. Complaint, p. 2, lines 1-5. Debtor also concedes that Nationstar is the current owner and servicer of her reverse mortgage. Plaintiff's Concise Statement of Facts, ¶ 2; Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment, page 2, lines 12-15. Debtor does not allege in either her claim objection or the Complaint that the underlying reverse mortgage transaction is invalid or unenforceable against her. Therefore, it is far from clear why Debtor needs to identify the person that signed the Loan Agreement on behalf of Bank of America in the context of the allegations made by her in this proceeding. At the hearing on the motion for summary judgment, Debtor, for the first time, argued that the original loan documents are not enforceable. I am not addressing those issues because the only claims that are properly before this Court are those asserted by Debtor in her claim objection and the Complaint.
To the extent Debtor is raising an evidentiary objection, it appears to be one related to authentication. FRE 901 provides that, "[t]o satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is." FRE 901(a). FRBP 7056(c)(2) provides that a "party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence."
10 COLLIER ON BANKRUPTCY, ¶ 7056.05 (footnotes omitted)(original emphasis).
The Loan Agreement is attached to the Declaration of Michael S. Scott as Exhibit A.
Debtor raises two substantive objections to Nationstar's claim. First, Debtor argues that the arrearage amount claimed by Nationstar is incorrect because Nationstar's 2010-2015 tax advances were improper. Second, Debtor raises certain accounting issues with respect to the proof of claim filed by Nationstar. For the reasons that follow, I will grant summary judgment in favor of Nationstar with regard to the propriety of all the tax payments. Neither Debtor nor Nationstar have shown they are entitled to summary judgment on the accounting issues raised by Debtor.
Section 1327(a) provides that "[t]he provisions of a confirmed plan bind the debtor and each creditor[.]" "A confirmed plan that specifies the amount of an arrearage claim to a mortgage holder precludes postconfirmation objection that the arrearage claim was miscalculated." Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy, 4th Edition, § 229.1, at ¶ 111, Sec. Rev. Oct. 8, 2010,
Nationstar paid $39,669.77 in real property taxes assessed against the Property for tax years 2010-2015. Plaintiff's Concise Statement of Facts, ¶ 3. Debtor raises two arguments in support of her position that Nationstar improperly advanced those funds, both of which I reject.
First, Debtor argues that Nationstar made the tax payments before it was permitted to do so under the Loan Documents. Paragraph 2 of the DOT provides that Debtor shall pay certain property charges, including property taxes, "in a timely manner," unless Nationstar "pays property charges . . . by charging such payments to a line of credit as provided for in the Loan Agreement." Paragraph 5 of the DOT says that if Debtor fails to make the property charges as required by Paragraph 2, "then [Nationstar] may do and pay whatever is necessary to protect the value of the Property and [Nationstar's] rights in the Property, including payment of taxes, hazard insurance and other items mention in Paragraph 2." Under the DOT, any advances made by Nationstar under Paragraph 5 become part of the obligation owed to Nationstar's secured by the Property. DOT, ¶ 26. Article 2 of the Loan Agreement addresses Loan Advances. Section 2.10.5 of the Loan Agreement provides that "[i]f [Debtor] fails to pay the property charges in a timely manner, . . . [Nationstar] shall pay the property charges as a Loan Advance. . . ." A Loan Advance is defined to mean "all funds advanced from or charged to [Debtor's] account under conditions set forth in this Loan Agreement[.]" Loan Agreement, § 1.2.
ORS 311.250(1) provides, with a certain exception not applicable here, that on or before October 25 of each year, the tax collector shall deliver to real property owners "a written statement of property taxes payable on the following November 15." ORS 311.505(1) provides, with a certain exception not applicable here, that "the first one-third of all taxes and other charges due from the taxpayer or property, levied or imposed and charged on the latest tax roll, shall be paid on or before November 15, the second one-third on or before February 15, and the remaining one-third on or before May 15 next following." Subsection (2) of ORS 311.505 requires that interest be charged on property taxes "not paid when due[.]" "Taxes on real property not paid on or before May 15 are delinquent." ORS 311.510.
As shown in Official Form 410A attached to Nationstar's proof of claim, Nationstar made the following tax payments:
Debtor did not pay in a timely manner the property taxes for tax years 2010-2014, because Nationstar paid the taxes after May 15 when they were in a delinquent status according to ORS 311.510. It is not even necessary to consider the terms of the Loan Agreement to conclude that Nationstar's payments of the 2010-2014 taxes were proper. Although Nationstar paid the 2015 taxes on October 26 of that year before they were technically due, I will grant summary judgment in favor of Nationstar with regard to that payment as well.
Debtor argues that Nationstar's payment of the 2015 taxes was improper because it made the payment before the November 15 due date. Nationstar argues that it was entitled to pay the 2015 taxes early and secure a discount for doing so because Debtor "established a pattern and practice of failing to pay the taxes when due," which caused "an increase in the amount due with interest." AP 16-3156, Doc. No. 25. I agree with Nationstar.
Article 2.15 of the Loan Agreement is captioned Protection of Property. Section 2.15.1 provides that if Debtor "is in default under the Security Instrument, then Lender may make reasonable expenditures to protect and preserve the Property. . . ." The Security Instrument is defined to be the DOT together with the Loan Agreement. Loan Agreement, § 1.12. If a court determines that a contract is unambiguous, it must decide the contract's meaning as a matter of law. O'Connell & Stevenson, RUTTER GROUP PRAC. GUIDE: FEDERAL CIV. PRO. BEFORE TRIAL, § 14:208 (The Rutter Group 2017). Questions of reasonableness are generally fact questions not susceptible to summary judgment.
The question presented here is whether Nationstar's payment of the 2015 taxes was a reasonable expenditure to protect and preserve its interest in the Property. I will grant summary judgment to Nationstar because I conclude that it was reasonable as a matter of law for Nationstar to pay the 2015 taxes before the November 15 due date and secure a discount for doing so. When Nationstar paid the 2015 taxes, Debtor had not fully and timely paid the property taxes for the previous five years and Nationstar had commenced the foreclosure process, as evidenced by the fact that the Parties completed Oregon's Foreclosure Avoidance Program conference on October 14, 2015.
Debtor argues that Nationstar was not allowed to pay any of the property taxes until after the State declared a default or imposed a penalty. Debtor concedes that the DOT requires her to pay property taxes "in a timely manner," but her position is that so long as she paid the taxes before the State declared a default or imposed a penalty, they would be paid in a timely manner. Debtor also argues that the property taxes were not due and payable until the time that foreclosure is permitted by ORS 312.010, i.e., three years after the earliest date of delinquency.
Debtor's second argument is that the tax advances were improper because they exceeded the principal limit permitted under the Loan Agreement. This argument is without merit. The provision upon which Debtor relies, § 2.6.1, governs the circumstances under which
I will grant summary judgment in favor of Nationstar on the propriety of all the tax payments made by Nationstar from 2010-2015.
The accounting issues raised by Debtor fall into two categories. First, it appears that Debtor made the $8,581.55 in prepetition payments pursuant to certain repayment agreements between the parties. Debtor argues that under the repayment agreements, Nationstar was required to, but did not fully, credit her payments to its tax advances so that it would have been impossible for her to ever cure her default. Debtor argues, and it appears, that Nationstar applied at least some portion of her prepetition payments to Mortgage Insurance Premiums (MIPs). Second, Debtor argues in her claim objection that Nationstar's claim includes improper charges, including for an appraisal and recurring property inspection charges.
With regard to Nationstar's application of Debtor's prepetition payments, there are questions of fact that preclude summary judgment. The parties did not provide the Court with all of the repayment agreements. There are two such agreements dated July 31, 2014, and January 26, 2015, in the summary judgment record.
Debtor asserts eleven counts in the Complaint for breach of contract and violations of federal
The parties' concise statements of fact do not address at all the affirmative claims asserted in the Complaint. Moreover, although both parties move for summary judgment on all the claims asserted in the Complaint, neither party offers any legal analysis at all of those claims. "A party seeking summary judgment always bears the responsibility of informing the [court] and the opposing party of the specific ground(s) for its motion." O'Connell & Stevenson, RUTTER GROUP PRAC. GUIDE: FEDERAL CIV. PRO. BEFORE TRIAL, § 14:86 (The Rutter Group 2017). "The moving party must provide whatever arguments and citations to legal authority are required to support the motion."
Even though I am denying summary judgment on the claims asserted in the Complaint, I have serious concerns about the viability of most, if not all, of those claims. For example, my preliminary research suggests that Debtor's claims under the Fair Debt Collection Practices Act fail as a matter of law. Fed. R. Civ. P. 56(f)(2) provides that a court may grant summary judgment on grounds not raised by a party but only after giving notice and a reasonable time to respond. If the parties do not resolve this matter and it is necessary to set a trial date, I may notify the parties of the nature of my concerns and provide them with an opportunity to respond, with the goal being to narrow as much as possible the scope of the trial, thus minimizing expenses for both parties.
I will enter summary judgment in favor of Nationstar on Debtor's arguments that (1) Nationstar's claim should be disallowed in full based on its failure to attach the Loan Agreement to its proof of claim, and (2) Nationstar improperly advanced tax payments. I will also enter partial summary judgment in favor of Nationstar to the extent that the claims asserted in the Complaint are dependent on Debtor's contention that Nationstar improperly paid the 2010-2015 taxes. Both parties' motions for summary judgment will otherwise be denied. The Court will prepare the order.
Debtor did not respond to Nationstar's statement of additional facts filed in connection with its cross-motion for summary judgment. Therefore, the facts asserted by Nationstar are deemed admitted by Debtor.
