Croye v. GreenPoint Mortg. Funding, Inc.

• Decision Date: 11 August 2010
• Docket Number: Civil Action No. 2:09-00048
• Court: U.S. District Court — Southern District of West Virginia
• Parties: William W. CROYE and Cheryl Croye, Plaintiffs, v. GREENPOINT MORTGAGE FUNDING, INC., Countrywide Home Loans Servicing, LP, U.S. Bank, NA, and E*Trade Bank, Defendants.

740 F.Supp.2d 788

William W. CROYE and Cheryl Croye, Plaintiffs,

v.GREENPOINT MORTGAGE FUNDING, INC., Countrywide Home Loans Servicing, LP, U.S. Bank, NA, and E*Trade Bank, Defendants.

Civil Action No. 2:09-00048.

United States District Court, S.D. West Virginia.

Aug. 11, 2010.

Daniel F. Hedges, Charles L. Phalen, Jr., Charleston, WV, for Plaintiffs.

Angela L. Beblo, Bruce M. Jacobs, Spilman Thomas & Battle, Carrie Goodwin Fenwick, Victoria L. Wilson, W. Jeffrey Vollmer, Richard David Owen, Goodwin & Goodwin, Charleston, WV, for Defendants.

MEMORANDUM OPINION AND ORDER

JOHN T. COPENHAVER, JR., District Judge.

Pending are the motions for summary judgment of defendant GreenPoint MortgageFunding, Inc. ("GreenPoint") and defendant Countrywide Home Loans Servicing, LP ("Countrywide"), filed March 15, 2010, and March 29, 2010, respectively. Also pending is GreenPoint's motion to dismiss Count V of the Third Amended Complaint, filed April 29, 2010.¹

I. Undisputed Facts

Plaintiff William Croye purchased his home at 1815 Orchard Avenue, Belle, West Virginia, for $16,500 in 1971. (Pl.'s Resp. 2). In 2000, Mr. Croye married plaintiff Cheryl Croye and she moved into the home. ( Id.). In 2003, Mr. Croye became very ill with a life-threatening condition, which prevented him from working for approximately three years. ( Id.).

On May 28, 2004, Ms. Croye obtained two GreenPoint mortgage loans in order to refinance the property. ( Id.; GreenPoint Mot. 3). GreenPoint served as the lender, and Countrywide has been assigned the servicing rights to the mortgage loans. (Third Am. Compl. ¶ 3(a)-(b)). US Bank, NA is the holder of the primary mortgage loan, and E*Trade Bank is the holder of the secondary mortgage loan. ( Id. at ¶ 3(c)-(d)).

The first mortgage secured an Adjustable Rate Note in the amount of $128,000, payable in 360 monthly installments beginning in July 2004 (the "ARM Note"). (GreenPoint Memo. 2). The ARM Note had an initial interest rate of 6.5% and an initial monthly payment of $693.34.² ( Id.).

The second mortgage was a "Home Equity Line of Credit Agreement and Promissory Note," in the amount of $24,000, with a draw period of 60 months, a repayment period of 120 months, and a maturity date of June 1, 2019 (the "HELOC Note"). (GreenPoint Mot., Ex. B). The initial interest rate on the HELOC Note was 4% for the first 3 months of the loan. ( Id.). The interest rate changed monthly thereafter, but could not exceed a maximum rate of 18%. ( Id. at Ex. B).

In order for Ms. Croye to refinance the property, Mr. Croye, together with Ms. Croye as his spouse, executed a "Quitclaim Deed" to the two of them to place the title of the property in the names of both plaintiffs as joint tenants with the right of survivorship. ( Id. at Ex. F). Concurrently with the mortgage loans, plaintiffs executed deeds of trust for each of the respective loans, granting GreenPoint a secured interest in the property. ( Id.). Only Ms. Croye executed the mortgage notes, given Mr. Croye's lack of employment, but both plaintiffs executed the deeds of trust. (Pl.'s Resp. 4). Mr. Croye also executed the rider, referred to by him as the Note Rider, which established the terms for adjusting the interest rate of the ARM Note and the lender's rights in the event that the borrowers sell or transfer the property during the life of the ARM Note. (Pl.'s Resp., Ex. A). Mr. Croye signed on one of the Note Rider lines designated for borrower signatures. ( Id.). Ms. Croye states that she was unaware at the time that she was the only signatory on the mortgage notes. (GreenPoint Mot., Ex. M, C. Croye Dep. at 29:2-5, Feb. 26, 2010).

The two GreenPoint mortgages essentially paid off two prior mortgages on the property. ( Id. at Ex. C). The two prior mortgages, obtained on or about January 21, 2000, were both held by Chase Manhattan Mortgage Corporation ("Chase"). ( Id.). The payoff on the Chase mortgages totaled $154,461.99. ( Id.). Specifically, the mortgages were in the amounts of $111,430.83 with an interest rate of 8.75% and $43,031.16 with an interest rate of 9.75%.³ (GreenPoint Memo. 8). GreenPoint calculates the monthly payments on the two Chase loans at $870.88 and $369.87, respectively. ( Id. at 8 n. 6).

Prior to GreenPoint issuing the two mortgage loans, Clara Midkiff of Associated Appraisers prepared an appraisal of the property, apparently for Dana Capital Group, Inc., that indicated its fair market value at the time was $161,000. ( Id. at Ex. H at 2). How the Midkiff appraisal came into GreenPoint's hands is not stated. In any event, GreenPoint conducted two reviews of the Midkiff appraisal. First, it conducted an electronic review which provided a risk assessment score based on the Midkiff appraisal. ( Id. at Ex. I). The electronic review concluded that Ms. Midkiff's valuation earned a moderate risk score of 650.( Id.). Scores from 600 to 699 are moderate risk scores, meaning that "some elements of the risk of a current overvaluation are present, but do not meet the threshold of high risk." ⁴ ( Id.). If there are additional high-risk elements based on the borrower's credit score or the loan type, moderate risk scores are treated like high risk scores and may require the representative of the lender to lower the loan amount, order a more extensive valuation, or decline the loan. ( Id.). If there are low-risk elements in addition to the moderate risk score, no further action is necessary with regard to valuation. ( Id.). Second, GreenPoint had another appraiser, Jason J. Schwendeman, provide an independent review of the Midkiff appraisal. ( Id. at Ex. K). The independent review found that the Midkiff appraisal provided a reasonable valuation of the property. ( Id.).

Four years later, in 2008, plaintiffs hired Teresa Moore, a real estate appraiser, to perform a retrospective appraisal of the property. (GreenPoint Mot. Ex. D at 1). On July 15, 2008, Ms. Moore provided plaintiffs with her appraisal which retrospectively valued the property at $98,500 as of March 2004. ( Id. at 4). Defendant Countrywide commissioned an appraisal of plaintiffs' residence on April 15, 2008, which valued the home at $88,000 as of that date. (Pl.'s Resp. Ex. D at 13).

On June 16, 2004, approximately three weeks after the execution of the two GreenPoint mortgage loans, Mr. Croye filed bankruptcy. (Pl.'s Resp. 5). In his 2004 bankruptcy petition, Mr. Croye listed the value of the property as $155,000. (GreenPoint Mot. Ex. O at 3). Some six years later, and subsequent to the filing of GreenPoint's motion for summary judgment in March 2010, Mr. Croye moved to reopen his bankruptcy case and filed amended Schedules A, B, C, and D listing the value of the property as $88,000. ( Id.).

Plaintiffs separated in 2008 and then divorced. (Pl.'s Resp. 2). During the divorce,Ms. Croye moved out and agreed to re-convey her interest in the property to Mr. Croye.⁵ ( Id.). Payments were timely made on the mortgages until approximately October 2008. (GreenPoint Mot. Ex. P).

II. Procedural History

Plaintiffs filed this action against GreenPoint and Countrywide on December 11, 2008, in the Circuit Court of Kanawha County. Defendants removed on January 15, 2009. Since the filing of the complaint, plaintiffs contend that Countrywide has communicated, both orally and in writing, with the plaintiffs in an effort to collect on the mortgage loans. (Third Am. Compl. ¶ 22). Plaintiffs contend that Countrywide directly contacted them despite knowing that plaintiffs were represented by counsel at the time. ( Id.).

Plaintiffs allege that the defendants have engaged in "predatory lending, whereby large national lenders solicit[ ] unsophisticated consumers to enter into unwise home loans." (Third Am. Compl. ¶ 1). Plaintiffs claim that they were "successively flipped into higher loans through (1) solicitation, (2) bogus valuation, and (3) refinancing of inflated principal." ( Id. ¶ 2(b)).

On March 13, 2009, Mr. Croye filed a motion to add Wells Fargo Bank, NA ("Wells Fargo") as a party defendant inasmuch as he believed Wells Fargo to be the holder of the ARM Note. On April 10, 2009, the court granted the motion and added Wells Fargo as a party defendant. On March 1, 2010, Mr. Croye filed a motion to substitute U.S. Bank, NA and E*Trade Bank for Wells Fargo as party defendants. On April 9, 2010, the court granted the motion.

On April 12, 2010, the court granted plaintiffs' motion to file a third amended complaint. The third amended complaint contains five counts: Count I Unconscionability, Count II Fraud, Count III Illegal Loan, Count IV Illegal Debt Collection, and Count V Joint Venture, Conspiracy and Agency against all the defendants. Of these, Counts I, II, and III are alleged against GreenPoint, and Count IV is alleged against Countrywide.

Plaintiffs seek the following relief under Count I Unconscionability, consisting of a declaration that the loans were induced by unconscionable conduct; a declaration that the loan agreement is void and unenforceable; and actual damages and civil penalties of $4,300. Under Count II Fraud, plaintiffs seek a declaration that the defendants engaged in a joint venture to fraudulently misrepresent the market value of the property; an injunction against enforcement of the contracts; and actual and punitive damages. Under Count III Illegal Loan, plaintiffs ask that the loan and security interest be declared void, and that the plaintiff be awarded damages pursuant to W. Va. Code § 31-17-17. Under Count IV Illegal Debt Collection, plaintiffs seek civil penalties of $4,400 for each violation and actual damages. Under Count V Joint Venture, Conspiracy, and Agency, plaintiffs seek actual and punitive damages. Under all five Counts, plaintiffs seek reasonable attorneys fees and costs of litigation as well as any other relief the court may find equitable and just.

III. Governing Standard

A party is entitled to summary judgment "if the pleadings, the discovery and disclosure materials on file, and...