Dabney v. Bank of Am., N.A (In re Dabney)
| Decision Date | 25 October 2019 |
| Docket Number | Bankruptcy Case No.: 13-04227-JW,Adv. Pro. No.: 17-80037-jw |
| Citation | 613 B.R. 225 |
| Court | U.S. Bankruptcy Court — District of South Carolina |
| Parties | IN RE: Frank Scott DABNEY and Kathryn Harralle Dabney, Debtors, Frank Scott Dabney and Kathryn Harrelle Dabney, Plaintiffs, v. Bank of America, N.A; Specialized Loan Servicing, LLC; Shellpoint Mortgage Servicing ; and The Bank of New York Mellon, Defendants. |
Brian A. Calub, McGuirewoods LLP, Charlotte, NC, Jason S. Luck, Garrett Law Offices, LLC, North Charleston, SC, Robert B. Varnado, Brown & Varnado, LLC, Mt. Pleasant, SC, for Plaintiffs.
Brian A. Calub, Trent M. Grissom, McGuirewoods LLP, Charlotte, NC, Nicholas S. Hulse, Damon C. Wlodarczyk, Riley Pope & Laney, LLC, Graham S. Mitchell, Nelson Mullins Riley and Scarborough LLP, Columbia, SC, for Defendants.
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
This matter came before the Court for a hearing on the joint Motion for Summary Judgment filed by Defendants Shellpoint Mortgage Servicing ("Shellpoint") and The Bank of New York Mellon ("BNYM") and the joint Motion for Summary Judgment filed by Defendants Specialized Loan Servicing, LLC ("SLS"), and Bank of America, N.A. ("BANA") (collectively, "Motions"). Plaintiffs filed objections to the Motions. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2). The parties have consented to this Court's entry of final orders and judgments. Pursuant to Fed. R. Civ. P. 52, which is made applicable to this adversary proceeding by Fed. R. Bankr. P. 7052, the Court makes the following findings of fact and conclusions of law:1
PROCEDURAL BACKGROUND
Plaintiffs commenced this adversary proceeding on March 30, 2017, by filing a complaint against Defendants, the current and former holder and servicers of their Mortgage loan, alleging claims arising out of an alleged discrepancy between the adjustable interest rate provision of the Note and the provision in the Adjustable Rate Mortgage Rider simultaneously executed by Plaintiffs at the closing—the Adjustable Rate Mortgage Rider provides for an adjustable interest rate floor, while the Note does not. Plaintiffs allege that the Note is the controlling document and the absence of an adjustable interest rate floor in the Note should have allowed the interest rate charged to them on the loan to drop below that charged by the Defendants, resulting in an overcharge.
By order entered July 11, 2017, this Court granted motions to dismiss filed by SLS, Shellpoint and BNYM on the grounds that the facts alleged by Plaintiffs in the Complaint were insufficient to state plausible claims based upon violation of the automatic stay of 11 U.S.C. § 362 or contempt. On November 8, 2017, the Court granted the remaining defendant BANA's motion for judgment on the pleadings, finding that the Note and Adjustable Rate Mortgage Rider should be read as a single, unified transaction to provide for the adjustable interest rate floor, and thus the interest rate charged to Plaintiffs was proper and the conduct upon which all of Plaintiffs' claims are based could not form the basis for any claim upon which relief could be granted. Plaintiffs appealed this order to the District Court. On appeal, the District Court found that the loan documents were ambiguous regarding the interest rate floor issue and held that parol evidence indicating the parties' understanding and intentions at the time of the loan closing might resolve that ambiguity. This Court allowed Plaintiffs to file an Amended Complaint on January 15, 2019, which raised new claims against BANA, SLS, Shellpoint, and BNYM, and allowed the parties an opportunity for discovery. The parties completed discovery on June 5, 2019.2
On June 17, 2019, BANA and SLS filed their joint motion for summary judgment with supporting exhibits, and BNYM and Shellpoint filed their joint motion for summary judgment, wherein they joined all applicable arguments raised by BANA and SLS. Plaintiffs timely objected to the Motions. A hearing was held on the Motions on July 25, 2019, which was attended by counsel for all parties.
On May 11, 2006, Plaintiffs executed and delivered to Lendmark Financial Services, Inc. ("Lendmark"), an adjustable rate note in the original principal amount of $304,000 ("Note").3 With respect to the interest rate to be charged on the sums loaned (the "Loan"), the Note provides as follows:
The Note is secured by a first mortgage lien ("Mortgage") contemporaneously executed and delivered by Plaintiffs to Lendmark on May 11, 2006. The Mortgage encumbers a parcel of real estate and the improvements thereon located at 1844 Chelwood Circle, Charleston, SC 29407 ("Property"), which is owned by Plaintiffs and serves as their primary residence. Plaintiffs admit they had the opportunity to read the loan documents before signing them. They do not recall any of the conversations they had during the closing of the Loan.4
Contemporaneous with the execution of the Note and Mortgage, Plaintiffs executed and delivered to Lendmark an Adjustable Rate Rider ("ARR") which, by its express terms, "is incorporated into and shall be deemed to amend and supplement the Mortgage ... of the same date given by [Plaintiffs] to secure [the Note]."5 The ARR contains the following language regarding the interest rate to be charged on the Loan:
(Emphasis added).
The ARR explains the adjustable interest rate of the Note, including the initial rate, calculation and timing of the adjustments to the interest rate, and the upper and lower limits on the interest rate changes. The Mortgage and ARR were recorded in the Charleston County Register of Deeds Office on May 19, 2006, in Book A584, pages 861 and 869, respectively.
Lendmark sold, transferred, and assigned the Note, Mortgage, and Adjustable Rate Rider (collectively the "Loan Documents") to Countrywide Bank, N.A. on May 11, 2006. On or about September 2, 2006, Countrywide Bank, N.A. endorsed the Note to Countrywide Home Loans, Inc. Countrywide Home Loans, Inc. then sold and transferred the Note through blank endorsement to CWABS, Inc. CWABS, Inc. then conveyed its interest in the Note to BNYM as Trustee of the trust for...
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...uniformity in credit documents.” Hamm v. Ameriquest Mort. Co., 506 F.3d 525, 529 (7th Cir. 2007); see also Dabney v. Bank of Am. N.A., 613 B.R. 225, 240 (Bankr. D.S.C. 2019) (noting that “TILA . establishes uniformity in creditors' disclosures to borrowers.”) However, these statements were ......