In re Residential Capital, LLC

• Decision Date: 21 April 2015
• Docket Number: Case No. 12–12020 MG Jointly Administered
• Parties: In re: Residential Capital, LLC, et al., Debtors.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

529 B.R. 806

In re: Residential Capital, LLC, et al., Debtors.

Case No. 12–12020 MG Jointly Administered

United States Bankruptcy Court, S.D. New York.

Signed April 21, 2015

MORRISON & FOERSTER LLP, Attorneys for ResCap Borrower Claims Trust, 250 West 55th Street, New York, New York 10019, By: Norman S. Rosenbaum, Esq., Jordan A. Wishnew, Esq., Jessica J. Arett, Esq.

LAIRD J. HEAL, ESQ., Attorney for Rhonda Gosselin, 120 Chandler Street, Suite 2R, Worcester, Massachusetts 01609, By: Laird J. Heal, Esq.

MEMORANDUM OPINION AND ORDER SUSTAINING IN PART AND OVERRULING IN PART THE RESCAP BORROWER CLAIMS TRUST'S OBJECTION TO CLAIM NUMBER 3862 FILED BY RHONDA GOSSELIN

MARTIN GLENN, United States Bankruptcy Judge

Pending before the Court is the ResCap Borrower Claims Trust's (the “Trust”) objection to Claim Number 3862 (the “Claim,” ECF Doc. # 7552–3, Ex. A) filed by Rhonda Gosselin (“Gosselin”). The objection to the Claim is included in the ResCap Borrower Claims Trust's Seventy–Fifth Omnibus Objection to Claims (No Liability Borrower Claims) (the “Objection,” ECF Doc. # 7552). The Objection is supported by the declarations of Deanna Horst (the “Horst Declaration,” ECF Doc. # 7552–3) and Norman S. Rosenbaum (the “Rosenbaum Declaration,” ECF Doc. # 7552–4). Gosselin filed an opposition to the Objection (the “Opposition,” ECF Doc. # 7652). The Trust filed a reply (the “Reply,” ECF Doc. # 7842), supported by the supplemental declaration of Deanna Horst (the “Supplemental Horst Declaration,” ECF Doc. # 7842–1). The Court held a hearing on the Objection on January 14, 2015 (the “Hearing”) and took the matter under submission.¹ This Opinion sustains in part and overrules in part the Objection to Gosselin's Claim.

I. BACKGROUND

A. The Loan History

Debtor GMAC Mortgage, LLC (“GMACM”) originated an $85,000 loan to Gosselin on July 26, 2006 (the “Loan”), evidenced by a note (the “Note,” Horst Supp. Ex. B) and secured by a mortgage (the “Mortgage”) on Gosselin's primary residence located at 16 Rolf Avenue, Chicopee, Massachusetts 01020 (the “Property”). (See Horst Supp. ¶ 7.) The Loan was a cash-out refinancing of the then-existing mortgage loan for the Property. (See id. ) Gosselin was provided with a Truth in Lending Act (“TILA”) disclosure (the “TILA Disclosure,” id. Ex. E) at the time the Loan was originated. (Horst Supp. ¶ 8.) GMACM transferred the Loan to the Federal National Mortgage Association (“Fannie Mae”) on September 15, 2006. (Obj. Ex. 1–A at 36.) GMACM serviced the Loan from July 26, 2006 until servicing rights were transferred to Green Tree Servicing LLC (“Green Tree”) on February 1, 2013. (Id. )

According to the Trust, Gosselin's Loan was approved by GMACM on the basis of her credit score and the 47% loan-to-value ratio at the time of closing. (Horst Supp. ¶ 7.) Gosselin signed a loan application and HUD–1 settlement statement (the “HUD–1 Statement,” id. Ex. C), indicating that the Loan paid off a prior lien on the Property in the amount of $24,559.46 as well as credit card debt totaling $41,528.45. (Horst Supp. ¶ 7; see id. Ex. C.) Gosselin also received $14,523.72 in cash from the Loan proceeds. (See Horst Supp. ¶ 7.) Before the origination of the Loan, Gosselin's monthly mortgage payment was $511.00 and her monthly credit card payments were $1,703.00 in the aggregate, totaling $2,214.00. (Id. ) After the Loan closed, Gosselin's monthly mortgage payment was $813.37 and her monthly payments on other debts were $538.00, totaling $1,351.37. (Id. ) Accordingly, the Loan reduced Gosselin's monthly debt payments by $863.00. (Id. )

The Loan was in default as of June 4, 2007, based on nonpayment of the April through June 2007 payments. (Id. ¶ 9.) Gosselin informed the Debtors that she would not be able to make all three delinquent payments, and the Debtors agreed to allow her to make the April and May payments in June 2007 and the June payment in July 2007. (Id. ) On July 9, 2007, Gosselin made a payment toward the April and May amounts due. (Id. ) The Debtors accidentally transferred the payment to another customer (the “Misdirected Payment”), and that customer refused to return the payment to the Debtors.² (Id. ) A GMACM employee advised Gosselin to put a “stop payment” on the Misdirected Payment check, and GMACM informed her that it would cover any related costs, amend her credit report if it was affected by the Misdirected Payment, waive any late charges, and offer to enroll her in a privacy guard. (Id. ) On June 25, 2007, Gosselin made another payment toward the delinquent April and May payments, and the Debtors accepted this payment and brought her account current. (Id. )

Gosselin again defaulted on the Loan and was notified of a breach on July 3, 2007 after the June and July 2007 Loan payments were not made. (See Reply ¶ 10.) Also in July 2007, Gosselin's escrow payment (paid along with principal and interest) increased as a result of higher than estimated taxes. (Horst Supp. ¶ 10.) The original escrow payment covered taxes on an estimated basis; the amount of principal or interest did not change, and the increase was not connected to the Misdirected Payment. (Id. )

The Loan was referred to foreclosure on August 9, 2007. (Obj. Ex. 1–A at 36.) Gosselin entered into a forbearance plan (the “Forbearance Plan”) on November 2, 2007. (Reply ¶ 10.) On November 15, 2007, GMACM placed a hold on the foreclosure due to the Forbearance Plan. (Id. ) Gosselin made payments under the Forbearance Plan on November 13, 2007 in the amount of $1,900.00, and on December 8, 2007, January 15, 2008, and February 14, 2008 in the amount of $800.00 each. (Obj. Ex. 1–A at 36.) As a result of Gosselin's compliance with the Forbearance Plan, she was approved for a traditional permanent modification (the “Loan Modification”) on February 20, 2008. (Id. ) Gosselin was required to execute and return the Loan Modification papers by February 29, 2008, but she failed to return the necessary documents. (Id. ) On May 15, 2008, because Gosselin failed to submit executed Loan Modification documents, the Loan Modification was denied and the hold on the foreclosure was removed. (Id. ) Foreclosure was restarted but again put on hold because GMACM received a demand letter (the “Chapter 93A Demand Letter”) from Gosselin pursuant to chapter 93A of the Massachusetts General Laws (“Chapter 93A”). (See Obj. Ex. 1–A at 36–37.) On June 30, 2008, GMACM responded to the Chapter 93A Demand Letter; foreclosure proceedings remained on hold until August 18, 2008. (Id. at 37.)

B. Gosselin's Bankruptcy Cases

After foreclosure proceedings were reinitiated, foreclosure was placed on hold after Gosselin filed a chapter 13 bankruptcy petition on September 18, 2008 (the “Chapter 13 Case”). (Id. ) Gosselin's Chapter 13 Case was dismissed, and foreclosure proceedings were once again restarted. (Id. ) In April 2010, Gosselin filed a chapter 7 bankruptcy petition (the “Chapter 7 Case”) in the United States Bankruptcy Court for the District of Massachusetts (the “Massachusetts Bankruptcy Court”), again staying foreclosure proceedings. (See id. ) Gosselin filed an adversary proceeding in her Chapter 7 Case against GMACM among other defendants (the “Adversary Proceeding”). (See also the “Complaint,” Horst Supp. Ex. A at 8–16; Obj. Ex. 1–A at 3; Horst Supp. Ex. A at 8–16.)

The Complaint filed in the Adversary Proceeding asserted claims for money damages, costs, and attorney's fees for breach of contract, negligence, wrongful foreclosure, violations of Chapter 93A, and breach of the implied covenant of good faith and fair dealing against defendants GMACM, Fannie Mae, and MERS. It also sought a declaration that the foreclosure proceedings on the Property were void. (See Horst Supp. Ex. A at 8–16.) Gosselin amended her Complaint (the “Amended Complaint,” id. at 17–24), adding a claim for violation of the Massachusetts Consumer Credit Cost Disclosure Act (the “MCCCDA”) and a count for declaratory relief. (See id. ) The Amended Complaint also sought: (i) an accounting of the Loan and payments made by Gosselin; (ii) rescission of the Loan; and (iii) a declaration that the applicable Mortgage and Note are bifurcated and that the Mortgage securing the Loan is void. (See id. at 23–24.) On April 18, 2012, the Adversary Proceeding was dismissed without prejudice because Gosselin lacked standing. (See Reply ¶ 12; Horst Supp. Ex. F (dismissal order).) No foreclosure on the Property had been completed at the time GMACM transferred servicing rights to the Loan to Green Tree. (Obj. Ex. 1–A at 37.)

C. The Claim

Gosselin filed her Claim on November 9, 2012, asserting a $153,669 secured claim and a $165,980 general unsecured claim against GMACM. (Horst Supp. ¶ 6; id. Ex. A.) The Claim is based on the causes of action asserted in the Adversary Proceeding and includes annexed copies of the Complaint and Amended Complaint. (See id. Ex. A at 8–24.) Gosselin's Claim therefore asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, wrongful foreclosure, violations of Chapter 93A, violations of the MCCDA, and declaratory relief. (See id. )

D. The Objection

The Trust argues that the Debtors have no liability for Gosselin's general servicing-based claims because the Debtors' records show that the Loan was in default on the date servicing rights were transferred to Green Tree. (Obj. Ex. 1–A at 37.) Gosselin's Complaint alleges that GMACM returned two of Gosselin's payments to the wrong borrower. (Id. ) The Trust admits that GMACM returned the $1,516.90 Misdirected Payment to another customer on June 9, 2007, and that such other customer refused to return the Misdirected Payment to GMACM. (Id. ) GMACM advised Gosselin to stop payment on the check and said it would cover any costs associated with this error. (Id. ) GMACM also agreed to amend Gosselin's credit report if necessary and waive any late charges; it also offered to enroll Gosselin in privacy guard at GMACM's...