Clemons v. Home Savers, LLC, Action No. 2:07cv244.

• Decision Date: 15 January 2008
• Docket Number: Action No. 2:07cv244.
• Citation: 530 F.Supp.2d 803
• Parties: Angela D. CLEMONS, Plaintiff, v. HOME SAVERS, LLC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

530 F.Supp.2d 803

Angela D. CLEMONS, Plaintiff, v. HOME SAVERS, LLC., Defendant.

Action No. 2:07cv244.

United States District Court, E.D. Virginia, Norfolk Division.

January 15, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Tanya Bullock, Bullock & Cooper PC, Virginia Beach, VA, for Plaintiff.

Darlene Paige Bradberry, Randolph Courtland Duvall, Breeden Salb Beasley & Duvall, Norfolk, VA for Defendant.

OPINION & ORDER

TOMMY E. MILLER, United States Magistrate Judge.

This matter was referred to the undersigned United States Magistrate Judge pursuant to the provisions of 28 U.S.C. § 636(c)(1) and Rule 72 of the Rules of the United States District Court for the Eastern District of Virginia. On June 19, 2007, all parties consented to trial before a Magistrate Judge, and an order of reference was filed June 27, 2007.

I. PROCEDURAL AND FACTUAL BACKGROUND

In 1995, Plaintiff, Angela D. Clemons ("Clemons") purchased a home at 2016 Candlelight Drive in Chesapeake, Virginia for $63,800 by borrowing all but $300 of the purchase price. Clemons subsequently refinanced her mortgage loan three times before she fell behind on her payments in 2006. At that time, her monthly mortgage payments were $847.20. Shortly after receiving notice from her mortgage lender of pending foreclosure proceedings, Clemons contacted Defendant, Home Savers, LLC ("Home Savers") — whose billboard advertisement reading "stop foreclosure, save your home, save your equity, save your credit" she had seen on her drive to work. Pl. Dep. 37:25-38:2, Aug. 3, 2007.

At the parties' first meeting, Home Savers's CEO, William F. Law, Jr. ("Law") and President, Ulysses "Chuck" Gray ("Gray") suggested that they could help Clemons avoid foreclosure by purchasing her home, leasing it back to her, and granting her an option to repurchase after an agreed upon period of time. Clemons consented to the proposed transaction, and on October 20, 2006, at the law office of White & Selkin in Norfolk, Virginia, the parties executed a number of documents including an Agreement of Sale, Deed of Assumption, and Lease Agreement.¹ Although Albert C. Selkin, Esq. ("Selkin"), the attorney that conducted the real estate closing, summarized each document and offered Clemons an opportunity to ask questions, Clemons does not recall posing a single question before or after signing the documents. She further acknowledges that the documents accurately set forth her agreement with Home Savers.

Pursuant to the Agreement of Sale, Home Savers assumed Clemons's mortgage in the amount of $109,576.81, and paid: $3,400.88 in arrearages, $847.02 for Clemons's November 2006 mortgage payment, and $800.00 toward "Clemons's outstanding payday loans. Thus, Home Savers paid a total of $114,624.71 for the property.²

Under the terms of the Lease Agreement, which included an Option to Purchase Addendum ("Option Agreement"), Clemons agreed to pay rent in the amount of $850 for five months. At the end of that time, the Option Agreement provided Clemons an opportunity to repurchase the property for 90 percent of its then appraised fair market value. To exercise the option, Clemons was to make timely rental payments as prescribed by the Lease Agreement, provide Home Savers with written notice of her intent to repurchase by February 20, 2007, request or obtain an appraisal of the property in February or March 2007; and pay the option price by March 31, 2007. If Clemons chose not to exercise her option to purchase and instead voluntarily vacated the home, the Option Agreement required. Home Savers to pay Clemons an additional $2,000.

On October 24, 2006, Home Savers recorded the Deed of Assumption with the Clerk of the Chesapeake Circuit Court. Thereafter, Clemons began paying rent to Home Savers and in a letter dated February 19, 2007, she gave Home Savers written notice of her intent to repurchase the property. But, despite her clearly expressed intent, Clemons failed to comply with the remaining terms of the Option Agreement. She never requested or obtained an appraisal of the property. She was delinquent on her March rental payment. And, while she attempted to obtain financing, Clemons was unable to pay the option price by March 31, 2007.

Once Clemons notified Home Savers that her March rental payment would be late, the parties discussed and executed an additional agreement. Pursuant to the agreement, dated March 17, 2007, Clemons acknowledged that Home Savers owned the property and Home Savers agreed to extend Clemons's lease by one month until April 30, 2007, at which time Clemons was to amicably vacate the property. Home Savers later notified Clemons by letter that it would begin eviction proceedings if she had not vacated the property by May 1, 2007.

On April 18, 2007, Clemons filed an eleven-count complaint in the Circuit Court of Chesapeake alleging violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., as well as state law claims including fraud, conversion, unjust enrichment and breach of implied covenant of good faith and fair dealing. On May 24, 2007, Home Savers removed the case to this Court based on federal question jurisdiction. The Court entered an Order dismissing Count II of Clemons's claim on September 21, 2007. Now before the. Court are cross motions for summary judgment, in which Clemons and Home Savers each seek summary judgment as to all counts.

II. STANDARD OF REVIEW

Summary judgment should be granted if, after viewing all facts in the light most favorable to the non-moving party, there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law, Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Facts are deemed material if they might affect the outcome of the case. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Moreover, the evidence presents a "genuine" issue of material fact if a reasonable jury could return a verdict for the non-moving party. Anderson, 477 U.S. at. 248, 106 S.Ct. 2505. Either party may submit as evidence "pleadings, depositions, answers to interrogatories, and admissions on file, together with ... affidavits" to support or rebut a summary judgment motion. Fed.R.Civ.P. 56(c).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Alternatively, a party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials, but must set forth specific facts in the record showing that there is a genuine issue for trial. Anderson, 477 U.S. at 256, 106 S.Ct. 2505. With these controlling principles in mind, the Court turns to the merits of the parties' motions for summary judgment.

III. ANALYSIS

A. Truth In Lending Act, 15 U.S.C. § 1601 et seq. (Count VI)

The pivotal question before this Court is whether the instant transaction was an absolute sale or, under the equitable mortgage doctrine, was actually a loan. If the former, federal law does not govern the transaction and the parties are likely bound by the terms of their agreement, but if the latter, Clemons may be entitled to rescind the transaction pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. It is necessary then for the Court to address this issue at the outset.

The TILA is a federal statute that governs the terms and conditions of consumer credit, including certain mortgage loans, in an effort to protect consumers from the uninformed use of credit and inaccurate and unfair credit practices. See 15 U.S.C. § 1601(a). As a remedial measure, the TILA entitles a consumer to rescind a transaction if a creditor fails to make specific disclosures required by the statute. See 15 U.S.C. § 1635(f). The Act defines the term "mortgage," in part, as "a consumer credit transaction that is secured by the consumer's principal dwelling." 15 U.S.C. § 1602(aa)(1). Additionally, the Act's implementing regulation, Regulation 2, 12 C.F.R. § 226, clarifies that a "security interest" is "an interest in property that secures performance of a consumer credit obligation and that is recognized by state or federal law." 12 C.F.R. § 226.2(a)(25). That is, the TILA may apply here if Virginia law classifies the instant transaction as a loan secured by Clemons's dwelling.

Under Virginia's equitable mortgage doctrine, a court may find that an instrument appearing to convey fee simple title is actually a mortgage loan in which the grantee holds a mortgagee's interest and must reconvey the property to the grantor when the grantor repays the underlying debt. Seven Springs, Inc. v. Abramson, 159 B.R. 752, 755 (E.D.Va. 1993). Yet, such instances are rare. For a deed absolute on its face is presumed absolute unless the party challenging the presumption can prove by "clear, unequivocal and convincing evidence" that the instrument is something other than what it purports to be. Pretlow v. Hopkins, 182 Va. 826, 30 S.E.2d 557, 558 (1944).

The court's threshold consideration is whether the parties enjoy a borrower-lender relationship. Seven Springs, Inc., 159 B.R. at 756. A mortgage may, exist if after an instrument is executed there is some debt owed by the grantor to the grantee which is secured by title to the property. Johnson v. Johnson, 183 Va 892, 33 S.E.2d 784, 789 (1945); Magee v. Key, 168 Va. 361, 191 S.E. 520, 523-24 (1937); Hunter v. Bane, 153 Va. 165, 149 S.E. 467, 468 (1929); Tuggle v. Berkeley, 101 Va. 83, 43 S.E. 199, 201 (1903). On the other hand, an absolute sale occurs if after a conveyance no debt remains due from the grantor to the grantee. Holladay v. Willis, 101 Va. 274, 43 S.E. 616, 618 (1903). "The existence of a debt is the test." Id. Only after a borrower-lender relationship is established, may the court take account of whether the following...