Money Source Inc. v. Paymap, Inc.
| Decision Date | 19 June 2020 |
| Docket Number | CIVIL ACTION 18-0151-WS-B |
| Parties | THE MONEY SOURCE INC., Plaintiff, v. PAYMAP, INC., Defendant. |
| Court | U.S. District Court — Southern District of Alabama |
This matter comes before the Court on plaintiff's Motion for Summary Judgment (doc. 108), defendant's Motion for Summary Judgment (doc. 110), and plaintiff's Motion to Strike (doc. 117). All three Motions have been briefed and are ripe for disposition at this time.
In 2015 and 2016, errors occurred in the routing of a series of payments made by Anastasia Diehl on her residential mortgage loan. Even though Diehl was current on her mortgage and caused all payments to be submitted in a timely fashion, her loan servicer did not receive several of them because of these errors. The servicer declared the loan to be delinquent and initiated aggressive collection efforts. In response, Diehl filed two separate lawsuits in this District Court against the servicer and others for their alleged roles in the mishandling of her mortgage payments and/or the ensuing collection activities, to-wit: Anastasia P. Diehl v. The Money Source Inc., et al., Civil Action No. 17-0125-TFM-B (the "Money Source Action"), and Anastasia P. Diehl v. Paymap, Inc., Civil Action No. 18-0017-WS-B (the "Paymap Action"). Both the Money Source Action and the Paymap Action concluded via settlement.
In the case at bar, a key defendant in the Money Source Action seeks to recover damages from the named defendant in the Paymap Action. Specifically, The Money Source Inc. ("TMS"), the entity that serviced Diehl's mortgage loan at relevant times and ultimately commenced collection efforts against her, filed suit against Paymap, Inc. ("Paymap"), the entity that directly collected the subject funds from Diehl and routed them to a third entity, nonparty LoanCare, LLC ("LoanCare"). In its Second Amended Complaint, TMS asserts state-law causes of action against Paymap for breach of contract (Count One), money had and received (Count Four), failure to indemnify (Count Five), and unjust enrichment (Count Six).1 TMS claims as damages the harm to its customer/servicer relationship with Diehl, the legal fees it incurred in defending itself and LoanCare (which it indemnified) in the Money Source Action, the payments it made to settle the Money Source Action, the legal fees it has incurred in prosecuting this case, and punitive damages. Correctly recognizing that the vast majority of the material facts are undisputed,2 both sides have now moved for summary judgment on all claims and issues joined in this action.
On or about April 15, 2014, Anastasia Diehl entered into a residential loan agreement with nonparty Home Mortgage of America, Inc., in connection with the purchase of her home in Mobile, Alabama. (Doc. 109-1, ¶¶ 7-8, PageID.859-60.) On May 27, 2014, servicing of Diehl'sloan was transferred from plaintiff TMS to LoanCare, such that LoanCare began sub-servicing the loan on behalf of TMS as of that date. (Id., ¶ 11, PageID.860.) This arrangement remained in place until August 3, 2015, when servicing of Diehl's loan was transferred back from LoanCare to TMS. (Id., ¶ 13.) LoanCare sent a letter to Diehl on July 17, 2015, notifying her of the servicing transfer of her loan back to TMS. (Id., ¶ 12.) Diehl was current on her loan payments at that time. (Id., ¶ 14; doc. 109-7, ¶¶ 12-13, PageID.1288.)
In December 2014, while her loan was still being serviced by LoanCare, Diehl enrolled in a product called the "Equity Accelerator Program" ("EAP") to facilitate and automate her mortgage payments. (Doc. 107, ¶ 25, PageID.770.)4 The EAP was marketed to Diehl as a (Doc. 107-1, Exh. J, PageID.834.) The EAP program was administered by defendant Paymap, pursuant to a contractual arrangement with LoanCare. (Doc. 107, ¶ 7, PageID.766.) By enrolling in the program, Diehl authorized "LoanCare or its authorized representatives and service providers [i.e., Paymap] to initiate transfers from [her] designated account to make monthly payments to [her] mortgage." (Doc. 107-1, Exh. J, PageID.832.) In other words, Paymap was to withdraw and distribute Diehl's mortgage payments from her bank account automatically. There was no direct contractual relationship between Paymap and TMS at any time.
There were no issues or problems with Diehl's mortgage payments or her participation in the EAP program between December 2014 (when she enrolled) and August 3, 2015 (when servicing of her loan transferred from LoanCare back to TMS). Upon being notified of the servicing transfer, Diehl called Paymap (as administrators of the EAP) on or about August 14, 2015 to inform them that the servicing of her loan was being transferred to TMS. (Doc. 109-3, PageID.1256; doc. 109-4, PageID.1272-74.) On or about September 23, 2015, Diehl followed up with Paymap by providing them with TMS's contact information, as well as a copy of the servicing transfer letter. (Doc. 109-3, PageID.1257; doc. 109-4, PageID.1274.) And on February 1, 2016, Diehl held a joint telephone conference with representatives from both TMS and Paymap, at which time the participants discussed the fact that TMS had never received certain mortgage payments, even though the funds had been debited from Diehl's account pursuant to the EAP program. (doc. 109-1, PageID.901-02.) During that call, the Paymap representative indicated that Paymap would update the payment process address to that of TMS. (Doc. 109-1, PageID.902.) There is no record evidence that LoanCare ever directly notified Paymap of the August 2015 servicing transfer of Diehl's loan from LoanCare to TMS. (Doc. 107, ¶ 17, PageID.769.)5
As a consequence of the servicing transfer in August 2015, Diehl's mortgage payments should have ultimately been remitted to TMS, the new servicer of her loan, rather than to LoanCare, the previous sub-servicer of Diehl's loan. Unfortunately, that is not what happened. Paymap sent Diehl's mortgage payments for August 2015, September 2015, October 2015, November 2015, December 2015, January 2016 and April 2016 to LoanCare. (Doc. 109-7, ¶ 21, PageID.1289.) LoanCare did not immediately (or, in some cases, ever) forward these payments to TMS. The January 2016 and April 2016 payments are critical to TMS's claims in this action,and to Diehl's claims asserted in the Money Source and Paymap Actions. (Doc. 57, ¶ 4, PageID.240.) TMS indicates that it "has never received a monthly payment for the months of January 2016 and April 2016 on Ms. Diehl's loan." (Doc. 109-1, ¶ 18, PageID.861.) Moreover, record evidence shows that Paymap refunded Diehl's January 2016 and April 2016 payments to her, even though it had already remitted those January 2016 and April 2016 payments to LoanCare. (Doc. 107, ¶¶ 30-31, PageID.771-72; doc. 107-1, ¶¶ 21-25, PageID.820; doc. 122-1, PageID.1543-44.) Those particular missed payments never received by TMS led to TMS deeming Diehl to be delinquent on her loan. (Doc. 109-1, ¶ 23, PageID.862.) Accordingly, TMS initiated collections activity against Diehl, which in turn set off a chain of events culminating in Diehl filing suit against TMS and LoanCare in the Money Source Action. After nearly 26 months of litigation in this District Court, the parties settled the Money Source Action, with TMS making certain payments to Diehl and her counsel. TMS indemnified LoanCare in the Money Source Action pursuant to a contractual indemnification provision in the TMS / LoanCare servicing agreement, and paid LoanCare's legal fees and costs in the Money Source Action. (Id., ¶ 27, PageID.862.) Now TMS seeks to recover from Paymap for (i) damages to its customer/servicer relationship with Diehl; (ii) legal fees and costs incurred in defending itself and LoanCare in the Money Source Action; (iii) the settlement value paid to Diehl in the Money Source Action; and (iv) TMS's legal fees and costs incurred in prosecuting the case at bar against Paymap. (Id., ¶ 28, PageID.862.)6 Thus, in substantial part, this case is an attempt by TMS to recoup from Paymap the attorney's fees it paid in the underlying litigation.
All parties agree that there is, and was, no direct contractual relationship between TMS and Paymap. Instead, TMS maintains that Paymap owed it certain contractual duties pursuant to the Equity Accelerator Service Agreement (the "Agreement") between Paymap and LoanCare. TMS's stance is that it is a third-party beneficiary of the Agreement. As such, the terms of that Agreement are of critical importance to the claims and issues joined in this action.
In Paragraph 2 of the Agreement, Paymap agreed to "provide the payment processing service and related activities" for the EAP "for use by Customers [of LoanCare]." (Doc. 107-1, ¶ 2, PageID.777.) The services Paymap was contractually bound to provide included "Process[ing] on-going debits from Subscriber accounts to the CHA," where the "CHA" is a custodial holding account that LoanCare was required to "open and maintain in its name at [LoanCare's] location or its correspondent bank." (Doc. 107-1, Schedule A, ¶¶ 1(c), 2(c)(7).) Paymap was further required under the Agreement to "Process monthly mortgage payments from the CHA to Client or a transferee designated by Client." (Id., ¶ 2(c)(8).) Paragraph 11 of the Agreement specifically provided for certain procedures and notifications in the event of a loan servicing transfer by LoanCare to a third party, as follows:
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