PNC Bank v. Davis

• Decision Date: 29 September 2022
• Docket Number: CIVIL JKB-21-01367
• Parties: PNC BANK, N.A., Appellant - Defendant, v. TERESA DAVIS AND CHRISTOPHER DAVIS, Appellees - Plaintiffs.
• Court: U.S. District Court — District of Maryland

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PNC BANK, N.A., Appellant - Defendant,
v.
TERESA DAVIS AND CHRISTOPHER DAVIS, Appellees - Plaintiffs.

CIVIL No. JKB-21-01367

United States District Court, D. Maryland

September 29, 2022

MEMORANDUM

JAMES K. BREDAR, CHIEF JUDGE

This case comes before this Court from the United States Bankruptcy Court for the District of Maryland. It arises from an adversary proceeding filed by debtors Teresa and Christopher Davis against PNC Bank, N.A. (“PNC”) relating to the enforceability of a mortgage loan modification. This Court previously determined that this was a non-core proceeding and, therefore, has construed the Bankruptcy Court's findings as proposed findings of fact and conclusions of law. (See ECF Nos. 13, 14.) For the reasons set forth below, the Court adopts the Bankruptcy Court's determination that PNC is liable for breach of contract and has violated Maryland consumer protection statutes. The Court further adopts the Bankruptcy Court's determination that PNC is liable for $50,000 in emotional distress damages. However, the Court finds that the Davises have not proven the compensatory damages allegedly associated with the breach of contract. Further, while the Court finds that an award of attorneys' fees is appropriate, the total reasonable amount of such fees and expenses is $134,572.82.

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I. Factual and Procedural Background^[1]

In short and as described in more detail below, the Davises have filed for bankruptcy twice and, during the second bankruptcy proceeding, filed an adversary proceeding against PNC regarding to enforce a mortgage modification agreement The Bankruptcy Court recommended that PNC be found liable for breach of contract and concluded that PNC had violated two Maryland consumer protection statutes. The Bankruptcy Court also recommended contract damages and emotional distress damages, as well as an award of attorneys' fees and expenses. PNC has objected to several of the Bankruptcy Court's findings, which will be specified below.

In 2005, the Davises obtained mortgage financing from PNC. (Bankr. Ct. Findings of Fact and Conclusion of Law (“Bk. Findings”) at 4-5, ECF No. 3-3.) Beginning in 2013, the Davises sought to modify their mortgage. (Id., at 11.) The process was lengthy, distressing, and frustrating for the Davises. (Id. at 11-12.) In January 2014, PNC informed the Davises that their mortgage had been referred to the foreclosure department. (Id. at 12 n.46.) In a letter dated October 23, 2014, PNC notified the Davises that their home was scheduled for foreclosure sale on November 10, 2014. (Id. at 13.) On November 4, 2014, the Davises filed their first voluntary Chapter 13 bankruptcy case. (Id.)

In June 2015, PNC offered the Davises a Trial Period Plan (“TPP”). (PNC Trial Ex. 14 at

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DX014-003, ECF No. 4-2.^[2]) The letter offering the TPP specified that the Davises were required to make trial payments for three months and that “[a]fter all trial period payments are made on time and you have submitted the required documents, and if you continue to qualify, your mortgage will be permanently modified.” (Id.) The parties do not dispute that the Davises complied with the TPP.

In a letter dated October 21, 2015 (“Offer Letter”), PNC offered the Davises a permanent' mortgage modification. (PNC Trial Ex. 17 at DX0 17-001-02.) The Offer Letter explains:

Congratulations! You are eligible for a Home Affordable Modification. As previously described, if you comply with the terms of the Home Affordable Modification Trial Period Plan, we will modify your mortgage loan and waive all prior late charges that remain unpaid

The enclosed Home Affordable Modification Agreement (“Modification Agreement”) reflects the proposed terms of your modified mortgage

How to Accept This Offer:

STEP 1: COMPLETE AND RETURN THE ENCLOSED AGREEMENT BY THE DUE DATE

To accept this offer, you must sign and return both copies of the Modification Agreement to us in the enclosed pre-paid envelope by 11/04/15 If the Modification Agreement has notary provisions at the end, you must sign both copies before a notary public and return the notarized copies to us .... If you do not send both signed copies of the Modification Agreement by the above date, you must contact us if you still wish to be considered for this program and have your loan modified

STEP 2: CONTINUE TO MAKE YOUR TRIAL PERIOD PAYMENTS ON TIME

Be certain to make any remaining trial period payments on or before the dates they are due. If the trial period payments are made after their due dates or in amounts different from the amount required, your loan may not be modified.

To better understand the proposed terms of your modified mortgage, please read the attached summary of your modified mortgage and the Modification Agreement,

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(Id. at DX017-001.)

The Modification Agreement, which was included in the same package as the Offer Letter, includes the following language under Section 1 “My Representations and Covenants”: “I have obtained all necessary approvals for acceptance of this Modification required by the Bankruptcy Court and the trustee appointed to my bankruptcy case.” (Id. at DX017-004-05.) It notes that “[t]his Agreement will not take effect unless the preconditions set forth in Section 2 have been satisfied.” (Id. at DX017-004.) Section 2 provides, under the heading “Acknowledgments and Preconditions to Modification,” that:

A. If prior to the Modification Effective Date as set forth in Section 3 [November 1, 2015] the Lender determines that any of my representations in Section 1 [which includes the bankruptcy court approval requirement] are no longer true and correct, or any covenant in Section 1 has not been performed, the Loan Documents will not be modified and this Agreement will terminate. In that event, the Lender will have all of the rights and remedies provided by the Loan Documents; and .

B. I understand that the Loan Documents will not be modified unless and until (i) the Lender accepts this Agreement by signing and returning a copy of it to me, and (ii) the Modification Effective Date [November 1, 2015] has occurred. I further understand and agree that the Lender will not be obligated or bound to make any modification of the Loan Documents if I fail to meet any one of the requirements under this Agreement.

(Id. at DX 017-005.) The Modification Agreement also explains that, after the borrower signs and' returns the Modification Agreement, “the Lender will send [the Borrower] a signed copy of this Agreement.” (Id. at DX 017-004.)

The package PNC sent to the Davises includes references to a company called Title First. The Modification Agreement indicates, under the signature block for the Davises and PNC, that the Modification Agreement is to be sent to Title First after recording. (Id. at DX 017-010 (“After Recording Return to: Title First Agency”).) A letter enclosed in the package explained that the

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Davises could use Title First to notarize the Modification Agreement. (Davis Trial Ex. 17.) PNC provided a pre-paid FedEx return envelope. (Bk. Findings at 15.)

PNC also mailed copies of the Modification Agreement to the Davises' lawyer and to the bankruptcy trustee. (See PNC Trial Ex. 15; PNC Trial Ex. 16.) In those letters, PNC indicated that “PNC Mortgage must obtain a signed court order approving the modification by the bankruptcy court before we can officially approve and begin the modification process.” (Id.) .

As explained in more detail below, the parties disagree as to whether the Davises complied with the requirements set forth in these documents. The Davises contend that they signed, notarized, and mailed the documents via FedEx on October 31, 2015, while PNC argues that the Davises' testimony that they returned the documents as requested is not credible and that the record does not otherwise support the conclusion that the Davises returned the documents as instructed. (See PNC Br. at 11-12, ECF No. 18; Davis Br. at 9, ECF No. 23.)

PNC's internal Loss Mitigation Notes^[3] indicate that the Davises called PNC on November 2, 2015 to explain that they had mailed back the documents and that they were planning to bring the first payment under the Modification Agreement to a PNC branch. (PNC Trial Ex. 22 at DX 022-027.) The Davises made their first payment due under the Modification Agreement on November 6,2015. (Davis Trial Ex. 6.) The Loss Mitigation Notes indicate that the Davises also called PNC on December 8, 2015 to ensure that PNC had received their payment and that the Davises had made all required TPP payments. (PNC Trial Ex. 22 at DX 022-027.)

Further, on November 5, 2015, the Davises' attorney filed a motion seeking approval of the Modification Agreement. (PNC Trial Ex. 36.) There was a hearing scheduled for the approval

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of the motion on January 13, 2016. (PNC Trial Ex. 38.) The bankruptcy trustee objected to the Modification Agreement. (PNC Trial Ex. 40.) The Davises' attorney filed an amended motion on November 19, 2015. (PNC Trial Ex. 41.) The hearing remained scheduled for January 13, 2016. (Bk. Findings at 9.)

In a letter to the Davises dated December 22,2015 (“Termination Letter”), PNC explained that it was “no longer considering [their] request for a modification” because “[a]fter being offered a Trial Period Plan or Home Affordable Modification [they] notified [PNC] on December 22,2015 that [they] did not wish to accept the offer.” (PNC Trial Ex. 20.) There is no evidence that the Davises contacted PNC to indicate that they no longer wanted the loan modification, and PNC's internal notes do not indicate that the Davises made any such contact. (See generally PNC Trial Exs. 22, 23.) The PNC Customer Service Notes indicate that PNC was operating under a December 21,2015 deadline (i.e., 60 days from when PNC sent the Davises the Offer Letter) for bankruptcy court approval...