In re Madera

• Decision Date: 08 February 2007
• Docket Number: Bankruptcy No. 06-13000DWS.,Adversary No. 06-0417.
• Citation: 363 B.R. 718
• Parties: In re Deborah A. MADERA, Debtor. Deborah A. Madera, and Michael Madera, Plaintiffs, v. Ameriquest Mortgage Co., Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

363 B.R. 718

In re Deborah A. MADERA, Debtor Deborah A. Madera, and Michael Madera, Plaintiffs, v. Ameriquest Mortgage Co., Defendant.

Bankruptcy No. 06-13000DWS.

Adversary No. 06-0417.

United States Bankruptcy Court, E.D. Pennsylvania.

February 8, 2007.

David A. Scholl, Law Office of David A. Scholl, Newtown Square, PA, for Plaintiffs.

Sandhya Mathur Feltes, Kaplin Stewart, Blue Bell, PA, for Defendant.

Memorandum Opinion

DIANE WEISS SIGMUND, Chief Judge.

Before the Court is the Motion for Summary Judgment (the "SJ Motion") of Defendant Ameriquest Mortgage Company ("Ameriquest") and Plaintiffs' Motion for Permission to Amend Complaint (the "Amendment Motion").¹ For the reason that follow, the SJ Motion is granted and the Amendment Motion is denied.

FACTUAL AND PROCEDURAL BACKGROUND²

Plaintiffs Deborah ("Deborah") and Michael ("Michael") Madera (collectively "Plaintiffs") are co-owners of property located at 401 Twin Streams Drive, Warminster, Pennsylvania (the "Premises").³ In January 2005, Plaintiffs obtained a loan from Option One Mortgage Company ("Option One") secured by a mortgage upon the Premises (the "Option One Mortgage"). The Option One Mortgage paid off a prior mortgage and provided Plaintiffs with a cash payout to pay for their son's college tuition.⁴ Plaintiffs do not have any documents from the Option One Mortgage or any prior mortgage transaction and have no recollection as to the basic facts of that loan such as loan amount and interest rate.⁵ Of relevance here, neither recalls whether they were issued title insurance with respect to the Option One Mortgage.⁶ No documentary evidence supporting the existence of such insurance was presented with the Ameriquest SJ Motion or response thereto.

Approximately six months following the Option One Mortgage transaction, Plaintiffs contacted Ameriquest to refinance their Option One Mortgage. Deborah initiated the contact with Ameriquest by telephone and subsequently faxed to Ameriquest documents relating to Plaintiffs' income such as pay stubs and W-2 forms.⁷ Michael subsequently visited an Ameriquest office in Bensalem, Pa. and supplied financial statements from his credit union.⁸ Plaintiffs did not supply Ameriquest with any documents relating to the Option One Mortgage nor do they recall having any discussion with Ameriquest on the subject of title insurance.⁹

There appear to have been several telephone conversations between Plaintiffs and Ameriquest. Ameriquest gave Plaintiffs an estimated interest rate of eight percent over the phone and were told that the rate could change depending upon the appraisal.¹⁰ Michael states that the Ameriquest representative he spoke to told him the interest would be at a fixed rate.¹¹ Deborah recalls receiving a packet of documents through the mail, but could not specifically identify what those documents were and it does not appear Plaintiffs read these mailed documents.¹²

Plaintiffs entered into a loan transaction with Ameriquest on June 23, 2005 at a closing that took place in their home (the "Ameriquest Mortgage").¹³ Several hours before the closing of the loan, an Ameriquest representative called and told Deborah that the value reflected in the appraisal was less than expected and that Ameriquest would not be able to offer an 8% fixed rate loan.¹⁴ Despite this, Plaintiffs proceeded with the closing, which took place at approximately 9:00 p.m. The closing agent was Silk Abstract Company ("Silk Abstract").¹⁵

At the June 23 closing, Plaintiffs received another package of documents, none of which they could identify with specificity.¹⁶ However, they acknowledge signing various documents at the closing and authenticated their signatures upon loan documents presented to them during their depositions and attached to the SJ Motion.¹⁷ They have stipulated to having received a Federal Truth-in-Lending Disclosure Statement ("TILA Statement"),¹⁸ a Settlement Statement ("HUD Form"),¹⁹ Notices of the Right to Cancel within three days under TILA, and a One Week Cancellation Notice.²⁰

Deborah asserts that the closing "was sort of rushed" though she identified no particular conduct by the closing agent nor did she or Michael tell the closing agent that they wanted to read the closing documents before signing.²¹ In fact she states that they did not read the documents until the next day.²² In contrast, Michael indicates that he at least reviewed the documents sufficiently to question the closing agent as to why the interest rate and monthly payments were higher than he anticipated from his earlier conversations with Ameriquest representatives.²³ At the loan closing they were aware that they were getting an adjustable rate loan beginning at 8.450%, the amount of their monthly payment, and that they had one week to cancel the loan if they changed their mind.²⁴ They did not raise the issue of the title insurance charge by Silk Abstract indicated on the HUD Form nor did they discuss title insurance with the closing agent.²⁵ While they were unhappy with the terms of the loan, they nevertheless went through with it because they needed the cash payout to pay for college tuition for their son.²⁶ Nor did they seek to rescind the loan within the week period allowed by Ameriquest.²⁷

Plaintiffs made only one payment under the Ameriquest Mortgage.²⁸ Ameriquest initiated foreclosure proceedings in the Court of Common Pleas, Bucks County, Pennsylvania.²⁹ A default foreclosure judgment was entered against Plaintiffs on May 9, 2006.³⁰ Deborah filed her bankruptcy case on July 19, 2006. After the foreclosure judgment, but prior to filing this adversary proceeding, her counsel sent a letter to Ameriquest, addressed to an office address in Bensalem, Pennsylvania (the "Scholl Letter"), presumably the same office that Michael visited.³¹ The Scholl Letter is dated June 5, 2006, alleges violations of federal and state law by Ameriquest, asserts a right to rescind the Ameriquest Mortgage, and purports to be "a qualified written request under the Real Estate Settlement Procedures Act, 12 U.S.C. 2605(5)(e)," for information such as unpaid interest and escrow balances, monthly payments, how payments were credited, etc. (Emphasis in original).

By letter dated August 2, 2006, Ameriquest acknowledges receipt of the Scholl Letter, albeit not until July 27, 2006, and states inter alia, that it is researching the allegations and will respond upon completion of that research.³² Plaintiffs filed this adversary August 2, 2006.

The Complaint raises three claims. Counts I and II allege that Ameriquest failed to accurately disclose the loan terms of the Ameriquest Mortgage as required under the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"). Specifically Plaintiffs allege that they were overcharged for title insurance and that the overcharge should have been disclosed as a "finance charge" under TILA. Count I seeks damages and costs for the TILA violation while Count II seeks the remedy of rescission and statutory damages and costs for Ameriquest's failure to grant the rescission request in the Scholl Letter. Count III alleges that the Defendant violated the Real Estate Settlement Practices Act, 12 U.S.C. § 2610, et seq. ("RESPA"), by failing to respond to the Plaintiffs' "qualified written request" ("QWR") for certain information about the loan and seeks damages and costs.³³

At the time Deborah and Michael filed this bankruptcy case and adversary proceeding, there was pending before me another bankruptcy case by another debtor named Jennifer Glauser, see In re Glauser, No. 15-19233 (filed July 7, 2005), as well as an adversary action by Jennifer Glauser and her husband against Duetsche Bank National Trust Co. and Ameriquest. Glauser v. Duetsche Bank Nat'l Trust Co. No. 05-527 (filed August 19, 2005 and hereinafter the "Glauser Adversary"). Debtors' counsel David A. Scholl Esquire ("Scholl") represents the Glausers in those proceedings. Deborah is co-worker of Jennifer Glauser and was referred to Scholl by Mrs. Glauser.³⁴ Ameriquest was represented in the Glauser Adversary by the same counsel it has here, Sandhya M. Feltes, Esquire ("Feltes"). The claims in the Glauser Adversary are almost identical to Counts I and II of this Complaint. The Glausers allege that Ameriquest overcharged them for title insurance, which led to a disclosure violation under TILA and entitles them to damages and rescission of their mortgage. The trial of the Glauser Adversary was completed before the discovery deadline in this adversary of October 20, 2006.³⁵

Only after the close of discovery in this case and after Feltes filed the SJ Motion did Plaintiffs file the Amendment Motion, which seeks to: (1) add a new theory of TILA liability against Ameriquest as a basis for rescission; (2) add a claim against Ameriquest for its alleged violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Act, 73 P.S. § 201-1, et seq. ("UDAP")³⁶ seeking rescission and damages; and (3) withdraw the RESPA claim against Ameriquest and reassert it against a newly added party, AMC Mortgage Services, Inc. ("AMC"), the servicer of the loan. At the hearing on the Amendment and SJ Motions, Scholl conceded that he could assert his RE SPA claim in a separate adversary against AMC. Scholl did not press the Amendment Motion any further and I denied it from the bench, though I will further explain my reasons below.

Subsequently, Scholl filed a new adversary action on behalf of Plaintiffs against not only the servicer, AMC, but Ameriquest as well. Madera v. Ameriquest, et al, Adv. No. 07-0001 (filed January 2, 2007 and hereinafter "Madera II"). The claims against Ameriquest in the Madera II Complaint are the exact claims that are made in the Amended Complaint.

DISCUSSION

I.

A motion for summary judgment is governed by Federal Rules of Civil Procedure ("Fed.R.Civ.P.") 56 applicable in this proceeding pursuant to Federal Rule of Bankruptcy 7056. Summary judgment, ...