In re Maxwell

Citation281 B.R. 101
Decision Date16 July 2002
Docket NumberAdversary No. 00-1568.,Bankruptcy No. 00-14283-JNF.
PartiesIn re Pearl MAXWELL, Debtor. Pearl Maxwell, Plaintiff, v. Fairbanks Capital Corporation, Defendant.
CourtUnited States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

Tara Twomey, Jamaica Plain, MA, for debtor.

Shiva Karimi, Boston, MA, for Fairbanks Capital Corp.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are the Motion for Partial Summary Judgment filed by the Plaintiff, Pearl Maxwell ("Maxwell" or the "Debtor"); and the Opposition to Debtor's Motion for Partial Summary Judgment and Cross-Motion for Summary Judgment filed by the Defendant, Fairbanks Capital Corporation ("Fairbanks"). The Court heard the Motion for Partial Summary Judgment and the Opposition and Cross-Motion on May 9, 2002 and took the matters under advisement. The Court now makes its findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.

The Debtor filed an adversary complaint against Fairbanks on November 29, 2000. The Debtor formulated nine counts in her Complaint as follows: Count A: Violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o (West 1998) ("FDCPA"); Count B: Violation of the Truth in Lending Act, 15 U.S.C. §§ 1601-1667e (West 1998)("TILA"); Count C: Violation of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617 (West 2002) ("RESPA"); Count D: Violation of the Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws Ann. Ch. 140D, §§ 1-34 (West 1991 & Supp.2001)("MCCCDA"); Count E: Violation of Mass Gen. Laws Ch. 183, § 60 (West 1991 & Supp.2001); Count F: Violation of Mass. Gen. Laws Ch. 183, § 63 (West 1991 & Supp.2001); Count G: Violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws Ann. Ch. 93A, §§ 1-11 (West 1997) ("Chapter 93A"); Count H: Unconscionability; and Count I: Breach of Contract. In moving for Partial Summary Judgment, the Debtor sought judgment only with respect to Counts A, C, D, and H.

Specifically, in her Motion for Partial Summary Judgment, the Debtor stated that she is entitled to judgment on Count A as a result of Fairbanks's conduct in "demanding payments due that were in fact not due at the time of the demand and by attempting to collect monies which are not expressly authorized by the agreement or law;" that she is entitled to judgment on Count C because of Fairbanks's conduct in "failing to respond to two qualified written requests for information;" that she is entitled to judgment on Count D because she "was not provided a Truth In Lending Statement or Notice of her Right of Rescission at the time of the loan;" and that she is entitled to judgment on Count H because "the terms of the mortgage loan in this circumstance, where the monthly payment nearly equaled the borrowers [sic] total monthly income and the balloon payment exceeded the original principal balance, are so unfair and oppressive as to be unconscionable."

Fairbanks, in its Opposition, contended that Maxwell is not entitled to partial summary judgment because it is not subject to the FDCPA, stating it is not a "debt collector," or, in the alternative, that "its actions fall within the `bona-fide error' exception;" that it is not subject to RESPA because the Debtor did not make a "qualified written request," and, in the alternative, if there were a qualified written request, the Debtor failed to show a pattern and practice of non-compliance with RESPA's provisions; that the Debtor is not entitled to rescission under MCCCDA because there is evidence that the required disclosures were made; and, finally, that it is entitled to judgment on Count H because "none of the Maxwell loans are unconscionable."

The Debtor submitted a Statement of Undisputed Facts with her Motion for Partial Summary Judgment supported by references to the record developed in this proceeding. Fairbanks did not submit a separate Statement with its Cross Motion. The issues presented include whether Fairbanks has a bona-fide error defense under the FDCPA, and whether the Debtor is entitled to rescind the agreement pursuant to which she executed the Note and Mortgage at issue in this proceeding because the payment terms were unconscionable and because Fairbanks can not produce evidence that Truth in Lending disclosures were made to the Debtor. For the reasons set forth below, the Court grants the Debtor's Motion for Summary Judgment, overrules Fairbanks's Opposition and denies its Cross-Motion for Summary Judgment.

II. PROCEDURAL BACKGROUND

On June 22, 2000, the Debtor filed a Chapter 13 petition. The Debtor previously had filed a Chapter 13 petition on December 7, 1999. Approximately three and one-half months later, on March 24, 2000, the Court dismissed the Debtor's prior Chapter 13 case because the Debtor, who had been granted permission to pay the filing fee in installments, failed to pay the balance of the filing fee. See 11 U.S.C. § 707(a)(2); Fed. R. Bankr.P. 1006(b).

In the Debtor's prior Chapter 13 case, the Court, on March 1, 2000, granted Fairbanks relief from the automatic stay because neither the Debtor nor any party in interest filed an objection to the motion. In the instant case, Fairbanks filed a Motion for Relief from the Automatic Stay on June 30, 2000. The Debtor timely filed an objection, and the Court conducted a number of hearings. On November 30, 2000 the Debtor filed an Assented to Motion to Consolidate Debtor's Complaint and Motion to Lift Stay Filed by Fairbanks Capital. The Court granted the Motion to Consolidate on December 5, 2000.

In the instant adversary proceeding, Fairbanks failed to raise a statute of limitations defense in its Answer. On December 13, 2001, it filed a Motion to Dismiss with respect to Counts B through H of the Debtor's Complaint on grounds that those counts are time barred by applicable statutes of limitation. On December 17, 2001, Fairbanks also filed a Renewed Motion to Amend Answer together with a Proposed Answer and a Demand for a Jury Trial in which it again attempted to raise applicable statutes of limitation as defenses to the Debtor's claims. The Debtor filed oppositions to Fairbanks's motions.

At a hearing conducted on January 30, 2002, this Court denied the Renewed Motion to Amend Answer but granted Fairbanks's Motion to Dismiss in part. The Court dismissed Count B with respect to the Debtor's TILA claim, citing Beach v. Ocwen Fed. Bank, 523 U.S. 410, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998). The Court, however, determined that even if applicable statutes of limitation precluded any affirmative recoveries by the Debtor because of expired statutes of limitation, her recoupment claims, if any, are preserved by Mass. Gen. Laws Ch. 260, § 36 (West 1992).1 One day after the January 30 2002 hearing, the Court ordered the completion of discovery by March 29, 2002.

III. FACTS

The Debtor is an 83 year old woman with minimal schooling and limited financial resources. Fairbanks is a corporation organized and existing under the laws of Utah. According to the individual designated by Fairbanks to appear for a deposition pursuant to Fed.R.Civ.P. 30(b)(6), Vince Brando ("Brando"),2 Fairbanks's principal business is servicing residential mortgage loans, and it specializes in sub- and non-performing loans. Fairbanks buys loans in bulk without checking to ascertain whether each loan is accompanied by proper documentation.

Fairbanks claims to be the holder of a Note dated February 12, 1991 given by the Debtor and her granddaughter, Maritza Ranger ("Ranger"), to Aetna Finance Company d/b/a ITT Financial Services ("ITT"), in the original principal amount of $149,150.50, secured by a mortgage on the Debtor's property located at 49 Stockton Street, Dorchester, Massachusetts. Fairbanks, however, cannot produce the Note and, from the existing record, discussed below, it is unclear whether it ever possessed the Note or whether it has lost, misplaced or misfiled the Note.

Brando testified at his deposition that Fairbanks paid $129,344 for the Debtor's loan. He admitted, however, that Fairbanks at one point claimed to have paid $175,955 for the Debtor's loan. Indicating that the correct payment amount was $129,344, Brando added that Fairbanks paid 86.2 cents on the dollar for the loan. Later in his deposition, Brando indicated that Fairbanks has no documents in its possession to substantiate payment of that amount, and Fairbanks cannot identify any account, fund or other source of monies from which that amount was paid. Moreover, Fairbanks, through Brando, admitted that it is a debt collector under the FDCPA. It also represented itself as such in correspondence with the Debtor.

The circumstances surrounding the Debtor's execution of the Note and Mortgage to ITT are set forth both in the Debtor's Complaint and in the Statement of Undisputed Facts (the "Statement"). Fairbanks's stated in its Answer that it could neither admit nor deny these facts. These background facts are undisputed.

In the winter or early spring of 1988, Maxwell and Ranger were approached by a door-to-door salesman who suggested a variety of home repairs to the Debtor's home, including replacement of siding and installation of new windows. The salesman referred Maxwell and Ranger to ITT to enable them to finance the repairs and to consolidate other outstanding loans. On April 13, 1988, Maxwell and Ranger consolidated their existing debts, which included two mortgages, one in the sum of $24,683.87 to Connecticut National Bank and the other in the sum of $76,596.86 to First American Services, and funded the home repairs by borrowing $137,611.01 from ITT. The 1988 ITT loan was secured by a first mortgage on the Debtor's Stockton Street property. The term of the loan was 15 years with an Annual Percentage Rate ("APR") of 16.78%. The monthly payment was $1,908. Additionally, the prepaid...

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