Citron v. Wachovia Mortg. Corp.

• Citation: 922 F.Supp.2d 1309
• Decision Date: 12 February 2013
• Docket Number: Case No. 8:10–CV–1790–T–26TBM.
• Parties: Danielle Nicole CITRON and Michael B. Citron, Plaintiffs, v. WACHOVIA MORTGAGE CORPORATION, successor in interest to World Savings Bank, FSB, Defendants.
• Court: U.S. District Court — Middle District of Florida

922 F.Supp.2d 1309

Danielle Nicole CITRON and Michael B. Citron, Plaintiffs,

v.WACHOVIA MORTGAGE CORPORATION, successor in interest to World Savings Bank, FSB, Defendants.

Case No. 8:10–CV–1790–T–26TBM.

United States District Court,

M.D. Florida,

Tampa Division.

Feb. 12, 2013.

Karen Berger, Brian K. Korte, Scott J. Wortman, Korte & Wortman, PA, West Palm Beach, FL, for Plaintiffs.

Michael Keith Winston, Kristin Alexandra Gore, Carlton Fields, PA, West Palm Beach, FL, for Defendants.

ORDER

RICHARD A. LAZZARA, District Judge.

THIS CAUSE came before the Court for a nonjury trial on December 17, 2012. The Court now has before it the parties' post-trial briefs (Dkts. 188, 290) and proposed findings of fact and conclusions of law (Dkts. 189, 191), as well as the transcripts (Dkt. 184) and exhibits (Dkts. 179, 180, 181) from the trial proceedings.

OVERVIEW

On August 11, 2010, Plaintiffs, Michael Citron and Danielle Citron, husband and wife, brought this action against Wachovia Mortgage Corporation, as successor in interest to World Savings Bank, FSB, seeking rescission of a residential mortgage loan and damages under the Truth In Lending Act, 15 U.S.C. § 1601et seq. [“TILA”] and Federal Reserve Regulation Z, 12 C.F.R. § 226.1 et seq. (Dkt. 1.) When they filed their Second Amended Complaint on February 2, 2012, they omitted Wachovia Mortgage Corporation as the Defendant and substituted Wachovia Mortgage FSB, successor in interest to World Savings Bank, FSB. (Dkt. 125.) Plaintiffs allege that neither Danielle Citron, as the actual borrower, nor Michael Citron, as the co-owner of the property, received two copies of the Notice of Right to Cancel the loan as required by TILA. They also claim that Michael Citron's signature appearing on the Notice of Right to Cancel that was provided to World Savings Bank, FSB (Plaintiffs' lender) after the loan closing is a forgery and that the Notice also did not comply with TILA's requirements to be clear and conspicuous. Plaintiffs seek damages for Defendant's alleged failure to provide these Notices pursuant to TILA and for the alleged failure to timely rescind after receiving Plaintiffs' rescission request. Further, Plaintiffsseek to rescind the loan pursuant to TILA for these alleged violations.

Defense counsel raised at trial the defense that Plaintiffs have sued the wrong entity in this action. Specifically, counsel asserted that Plaintiffs improperly named Wachovia Mortgage Corporation and then Wachovia Mortgage, FSB as party Defendants, as opposed to the proper entity, Wachovia Mortgage, a division of Wells Fargo Bank, N.A. (“Wells Fargo”), as successor through merger of Wachovia Mortgage FSB, formerly known as World Savings Bank, FSB. However, counsel now advises the Court that he is withdrawing this contention and wishes to have the Court address the merits of the case. (Dkt. 191, p. 2.) Therefore, the Court will proceed to consider the merits of this case and will direct that the case style be amended to add the proper Defendant's name as set forth by defense counsel.

With respect to Mr. Citron's forgery claim, Defendant asserts that this claim is a disingenuous attempt to avoid the obligations under the Note and Mortgage and that the damages claim for allegedly failing to provide two copies of the Notice of Right to Cancel is time-barred pursuant to TILA's one-year statute of limitations. Defendant also alleges that Mr. Citron's claims regarding the form of the Notice fail as a matter of law. With regard to Mrs. Citron, Defendant asserts that her claims under TILA fail because it is undisputed that she executed an acknowledgment of receipt of two copies of the Notice of Right to Cancel, creating a rebuttable presumption of delivery that was not refuted at trial. Defendant claims that in any event, Plaintiffs abandoned this claim at trial. As to both Plaintiffs, Defendant asserts that their claims for damages for failing to timely rescind after receiving Plaintiffs' request to do so were waived and that the mortgage loan transaction was ratified by Plaintiffs' conduct. Similarly, Defendant asserts that Plaintiffs' claim for failing to provide the Notice of Right to Cancel was waived and ratified by Plaintiffs' conduct.

Finally, Defendant argues that if rescission under TILA is granted, the rescission process should be equitably re-ordered in accordance with binding precedent and as permitted by the express terms of TILA, so that Plaintiffs tender the loan proceeds before the mortgage is released. Defendant asserts that otherwise Plaintiffs will end up with a free house while Defendant becomes either an unsecured creditor in Plaintiffs' likely to be filed bankruptcy case or an unsecured creditor with an uncollectable judgment.

Defendants (or more specifically, Wells Fargo (successor through merger with Wachovia Mortgage, FSB), as the current owner and holder of the Note and Mortgage) also asserted a counterclaim for foreclosure of the subject mortgage because Plaintiffs have failed to make any monthly payments since June 2010. ¹ Plaintiffs challenge the counterclaim based on their alleged exercise of their right of rescission and Defendant's alleged failure to comply with an MDL settlement in offering Plaintiffs options for loan modification. Plaintiffs also assert that Defendant lacks standing and that it cannot recover because they received funds from the federal government under the Troubled Asset Relief Program (“TARP”). Defendant asserts, as alternative relief, that if it is not granted judgment on its counterclaim for foreclosure, that judgment be entered granting it an equitable lien under Florida law in the amount of funds used to satisfy the prior liens on the property as well as funds expended for taxes and insurance and that the Court enter a judgment foreclosing that lien.

In bench trials, the judge serves as the sole fact-finder and, thus, assumes the role of the jury. In this capacity, the judge's function includes weighing the evidence, evaluating the credibility of witnesses, and deciding questions of fact, as well as issues of law. See Childrey v. Bennett, 997 F.2d 830, 834 (11th Cir.1993) (holding that “it is the exclusive province of the judge in non jury trials to assess the credibility of witnesses and to assign weight to their testimony”). A plaintiff in a civil case bears the burden of satisfying the finder-of-fact that he or she has proven every element of his or her claim by a preponderance of the evidence. The Court has carefully considered the parties' stipulations of fact, the testimony and evidence admitted at trial, as well as the arguments and submissions of the parties' respective counsel and now makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

In July 2005, Plaintiffs purchased the Baracoa Court residential property at issue in this case. As part of this purchase, Plaintiffs entered into a mortgage and note for construction financing with First Horizon Home Loan Corporation. As a licensed mortgage broker, Plaintiff Michael Citron was familiar with how mortgage loans were originated, having been involved with hundreds of closings. (Dkt. 182, Trial Transcript, pp. 30–31, 35, 58.) In fact, both Michael Citron and Danielle Citron, through the company that employed them, Sloan Mortgage, had brokered approximately 47 loans for which World Savings Bank, FSB was the lender. ( Id. at 175–176.) On July 31, 2007, Plaintiffs entered into a second transaction with First Horizon Home Loan Corporation, through which they paid off their construction loan and entered into two new loans for in excess of $700,000.00. (Dkt. 189, Defendants' Trial Exs. 1 & 2.) About this same time, Plaintiffs sought to refinance the mortgage loan so that they could take additional cash out of their equity in the property. To this end, on August 3, 2007, Plaintiffs submitted a loan application to World Savings, FSB in which they sought to refinance once again with the purpose of the refinance being “cash out.” (Defendant's Trial Ex. 3.) The funds from this loan would be used to pay off the two existing mortgages from First Horizon Bank in the amounts of $625,271.23 and $78,701.31, totaling $703,972.54. (Dkt. 179, Plaintiffs' Trial Ex. 1.)

The loan application contained information that an individual named Al Vuolo had prepared the application. ( Id.) Although Mr. Citron testified at his deposition that he was acting as his own broker on the loan, he changed his testimony at trial, stating that he was not the broker and that Al Vuolo was. (Dkt. 182, Trial Transcript, pp. 100–102.) Michael Citron stated at trial that he “was obviously incorrect” at his deposition with regard to his deposition testimony. ( Id. at 101.) The loan application also reflected that Mr. Vuolo had taken the application over the telephone from Danielle Citron, whereas Michael Citron testified that he and his wife completed the application together. ( Id. at 92.) Danielle Citron then signed this application containing this false information. ( Id. at 91–93.)

As a result of his involvement in his own loan transaction, Mr. Citron testified during his deposition that the initial disclosures required by TILA were not sent because he “short-circuited” the normal origination process. ( Id. at 100–102; Dkt. 80, p. 49.) At the trial however, Mr. Citron testified that the disclosures were not sent out because they would have been hand-delivered either directly to him or his wife. (Dkt. 182, Trial Transcript, pp. 100–102.) When confronted with the conflicting deposition testimony, Mr. Citron again stated that he was “incorrect” at his deposition. ( Id. at 102.) Thereafter, Mr. Citron scheduled the closing with a closing agent, Angie Rivera, whom he had routinely used for his closings for his borrower customers. ( Id. at 33–34, 39.) Prior to the closing, World Savings Bank, FSB provided the closing agent with express closing instructions requiring it to provide both Mr. and...