Mills v. Equicredit Corp.

• Decision Date: 15 November 2004
• Docket Number: No. 03-70453.,03-70453.
• Citation: 344 F.Supp.2d 1071
• Parties: Franklin D. MILLS and Eva Mills, Plaintiffs, v. EQUICREDIT CORPORATION, a foreign corporation; U.S. Bank National Association, Trustee, a foreign corporation; Fairbanks Capital, Corporation, a foreign corporation; Loan Servicing Center and Discount Mortgage Company d/b/a First Discount Mortgage, a Michigan corporation, jointly and severally, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

344 F.Supp.2d 1071

Franklin D. MILLS and Eva Mills, Plaintiffs, v. EQUICREDIT CORPORATION, a foreign corporation; U.S. Bank National Association, Trustee, a foreign corporation; Fairbanks Capital, Corporation, a foreign corporation; Loan Servicing Center and Discount Mortgage Company d/b/a First Discount Mortgage, a Michigan corporation, jointly and severally, Defendants.

No. 03-70453.

United States District Court, E.D. Michigan, Southern Division.

November 15, 2004.

Rochelle E. Guznack, Dearborn, MI, for Plaintiffs.

Joseph H. Hickey, Thomas M. Schehr, Dykema Gossett, Detroit, MI, David W. Warren, Joelson, Rosenberg, Marc N. Drasnin, Dixon & MacDonald, Farmington Hills, MI, for Defendants.

OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

BORMAN, District Judge.

I. BACKGROUND

This is a consumer lending case in which Plaintiffs Franklin and Eva Mills allege that Defendants Equicredit Corporation ("EquiCredit"), First Discount Mortgage ("First Discount"), U.S. National Bank Association ("U.S.Bank"), Fairbanks Capital Corporation ("Fairbanks"), and Loan Servicing Center ("LSC") engaged in improper lending practices. The Complaint states that Franklin Mills, 79 years old and Eva Mills, 76 years old, who are of African American ethnicity, decided to refinance their home mortgage loan twice, first in 1999 and again in 2000, through mortgage broker First Discount and lender EquiCredit.

Defendant First Discount is a mortgage broker, which provides advice and assistance to homeowners seeking credit, by arranging appraisals, obtaining credit information, and preparing loan applications and other documents. (Complaint at ¶ 25.)

In July or August of 1999, First Discount telephonically solicited Plaintiffs Franklin and Eva Mills to refinance their home mortgage loan and consolidate other debt into one monthly mortgage payment. (Complaint at ¶ 49.) Plaintiffs expressed interest in a refinancing arrangement, and First Discount set out to arrange a loan package for the Plaintiffs.

On August 12, 1999, Plaintiffs entered into a loan transaction with EquiCredit that was arranged by First Discount. Plaintiffs allege that the terms of the loan arranged by First Discount were substantially different than were previously discussed on the telephone in late July or early August. The Plaintiffs signed a promissory note for $85,000, which included $51,794.06 to pay off their previous mortgage, $886.90 for City of Detroit real estate taxes, $22,599 in disbursements to various creditors to pay off previously unsecured debts, and $2,922.54 in cash to Plaintiffs. Plaintiffs were also charged a direct broker fee of $5,500 that was rolled into the loan and an indirect broker fee of $1,700 in the form of a yield spread premium. The indirect broker fee was paid by EquiCredit to First Discount for getting Plaintiffs to agree to a high interest rate loan. ¹

Other fees paid by Plaintiffs included a $250 appraisal fee, a $270 processing fee, and a $777.50 fee for miscellaneous expenses including recording the deed, transferring the taxes, obtaining title insurance, and obtaining a credit report. The loan was for a 10 year period. Plaintiffs were required to make a monthly payment of $874.32 and a balloon payment of $80,279.76 at the end of the 10 year period.

All of the terms, fees and conditions referenced above were disclosed in the transaction documents. The Mortgage Loan Origination Agreement that Plaintiffs signed on July 22, 1999 stated specifically that the retail price offered to Plaintiffs — their interest rate, total points and fees includes First Discount's compensation. (Exh. H, Defendants EquiCredit, Fairbanks and LSC's Brief ("Defendants' Brief")). Further, Mr. Mills testified that he never read the document or asked questions about it. (Dep. of F. Mills pg. 46, Exh. A, Defendants' Brief). The $5,500 broker fee charged by First Discount was disclosed in the HUD Settlement Statement. (Exh. I, Defendants' Brief). The Plaintiffs also signed a broker fee disclosure which disclosed First Discount's fees. (Exh. J, Defendants' Brief). Plaintiffs also signed a Mortgage Broker/Borrower Agreement which stated that First Discount would act as their agent in obtaining a lender, and disclosed First Discounts total compensation. (Exh. D, Defendants' Brief). Plaintiffs testified that they did not read these documents or ask any questions about the documents. (Dep. of F. Mills, pgs. 67-72, Exh. A, Defendants' Brief; Dep. of E. Mills, pgs. 58-62, Exh. G, Defendants' Brief).

On January 6, 2000, approximately five months after the first loan closing, Plaintiffs were again solicited telephonically by First Discount to refinance the loan on their home. Plaintiffs were interested in refinancing their home, and applied over the telephone for another home refinancing loan. The second loan closing took place on February 29, 2000. This loan package included a direct broker fee of $6,700 charged to the Plaintiffs and a second indirect broker fee of $2,033 in the form of a yield spread premium paid by EquiCredit to First Discount. The indirect broker fee was paid by Equicredit to First Discount because Plaintiffs agreed to a higher interest rate loan. The Plaintiffs agreed to pay an interest rate of 11.97%. (Complaint at ¶ 65.) The second loan refinancing included a $270 "processing fee" and $759.50 in miscellaneous fees. (Complaint at ¶¶ 67-68.). Again, all of the terms, fees and conditions referenced above were disclosed in mostly identical transaction documents and the HUD settlement statement. (See Exhibits E, J, K, L and M of Defendants' Brief). Again, Plaintiffs testified that they did not read these documents or ask any questions about the documents. (Dep. of F. Mills, pgs. 119-140, Exh. A, Defendants' Brief; Dep. of E. Mills, pgs. 80-118, Exh. G, Defendants' Brief).

On January 6, 2003, Plaintiffs Franklin and Eva Mills filed the present lawsuit in Wayne County, Michigan Circuit Court against EquiCredit, First Discount, U.S. Bank, Fairbanks, and LSC, alleging eleven causes of action:

Count I — Federal Real Estate Settlement Procedures Act ("RESPA") — as to Equicredit and First Discount

Count II — Michigan Credit Services Protection Act ("CSPA") and Michigan Consumer Protection Act — Claims Regarding Broker Fee Agreements — as to Equicredit and First Discount

Count III — Federal Equal Credit Opportunity Act ("ECOA") — as to Equicredit

Count IV — Federal Fair Housing Act ("FHA") — as to Equicredit

Count V — Michigan Consumer Protection Act — as to Equicredit

Count VI — Federal Home Ownership and Equity Protection Act ("HOEPA") — as to Equicredit

Count VII — Federal Truth in Lending Act ("TILA") — as to Equicredit and U.S. Bank

Count VIII — Fraud, Michigan Consumer Protection Act, and Breach of Fiduciary Duty — as to Equicredit and First Discount

Count IX — Breach of Contract — as to Equicredit and Fairbanks

Count X — Fraud and Misrepresentation — as to Equicredit, U.S. Bank, and First Discount

Count XI — Intentional Infliction of Emotional Distress — All Defendants

Defendant U.S. Bank is the trustee for several pools of mortgage backed securities, and was the trustee of Plaintiffs' loans and was the legal owner of the Plaintiffs' loans. On April 1, 2002, U.S. Bank sold the Plaintiffs' loans to Defendant Fairbanks. Because U.S. Bank has not been served, it is not a party to this suit.

On February 3, 2003, Defendants removed this case from Wayne County, Michigan Circuit Court to this Court. On March 13, 2003, Defendants EquiCredit, Fairbanks, and LSC filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). On November 24, 2003 the Court granted Defendants' Partial Motion to Dismiss. The following counts remain:

Count VI (Home Ownership and Equity Protection Act 15 U.S.C. § § 1602 and 1939) as to EquiCredit;

Count IX (Breach of Contract) as to EquiCredit and Fairbanks;

Count X (Fraud and Misrepresentation) as to EquiCredit and First Discount; and

Count XI (Intentional Infliction of Emotional Distress) as to EquiCredit, First Discount, Fairbanks, and LSC.

On July 19, 2004 Defendants EquiCredit, Fairbanks and LSC filed a Motion for Summary Judgment on the remaining counts. Defendant First Discount also filed a Motion for Summary Judgment on remaining counts. First Discount filed a Concurrence with the Court on July 29, 2004 stating that it adopts Defendants EquiCredit, Fairbanks and LSC's facts and arguments into its brief. The Plaintiffs filed a Response to the Motions on October 26, 2004. Plaintiffs' Response was filed more than two months after it was due, just one day before oral argument, and was stricken from the record by the Court.² Oral argument was held October 27, 2004. At oral argument, Plaintiffs were allowed to fully present their response orally, and the Court has included that presentation in reaching the instant decision.

ANALYSIS

A. Standard for Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56, a party against whom a claim, counterclaim, or cross-claim is asserted may "at any time, move with or without supporting affidavits, for a summary judgment in the party's favor as to all or any part thereof." Fed.R.Civ.P. 56(b). Summary judgment is appropriate where the moving party demonstrates that there is no genuine issue of material fact as to the existence of an essential element of the nonmoving party's case on which the nonmoving party would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Of course, [the moving party] always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.

Id. at 323, 106 S.Ct. 2548; ...