Scott v. Wells Fargo Home Mortg. Inc.

• Decision Date: 14 January 2003
• Docket Number: No. CIV.A. 2:02-cv-789.,CIV.A. 2:02-cv-789.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Michael A. & Terry A. SCOTT, Pro se Plaintiffs, v. WELLS FARGO HOME MORTGAGE INC., et al., Defendants.

326 F.Supp.2d 709

Michael A. & Terry A. SCOTT, Pro se Plaintiffs, v. WELLS FARGO HOME MORTGAGE INC., et al., Defendants.

No. CIV.A. 2:02-cv-789.

United States District Court, E.D. Virginia, Norfolk Division.

January 14, 2003.

Michael A. Scott, Virginia Beach, VA, pro se.

Terry A. Scott, Virginia Beach, VA, pro se.

Stanley G. Barr, Jr., Kaufman & Canoles, Norfolk, VA, for Defendants.

MEMORANDUM OPINION AND ORDER

JACKSON, District Judge.

Before the Court is Plaintiffs' Motion for Partial Summary Judgment. For the reasons set forth below, Plaintiffs' motion is DENIED and Partial Summary Judgment for Defendants is GRANTED as to each claim raised in Plaintiff's Motion except for the usury claim. Because the Court finds that, after granting summary judgment on the substantive federal claims, it no longer has subject matter jurisdiction, this case is DISMISSED WITH PREJUDICE.

I. FACTUAL & PROCEDURAL HISTORY

Plaintiffs are challenging two mortgages ("Mortgage 1" and "Mortgage 2") and seeking, inter alia rescission of both under the Truth in Lending Act, 15 U.S.C. § 1635a, et seq. ("TILA"). For convenience, the factual assertions relative to each mortgage are discussed in seriatim below.

A. Mortgage 1

Mortgage 1, is currently loan number 0012072963, which is held by GE Capital. Plaintiff and his wife, Terry A. Scott, (collectively, "the Scotts") assumed Mortgage 1 in 1990, under the Federal Housing Authority ("FHA") guidelines. At assumption, the Scotts' predecessor mortgagors were Mark and Cynthia Hanna and the mortgagee was Shearson Lehman Mortgage, a unit of American Express Company, and their loan number was 517128-8. This loan had a principal balance of approximately $48,233.00 and the APR was 11.5%. The Scott's refinanced the loan through Norwest Mortgage Inc. in November 1993. The mortgage was continually secured by residential real property located at 602 Zephyr Court, Virginia Beach, VA 23462 (the "Zephyr Court home"). The Scotts resided at the Zephyr Court home until May 1993. The Scotts' Note and Deed of Trust pertaining to this transaction was executed on November 29, 1993. The Note stated that the loan amount was $46,750.00 and the APR was 7.5%. The Note also stated the Scotts' monthly payment amount along with a disclosure concerning late charges (calculated as 4% of the payment amount) and escrow disclosures.

The Scotts allege, inter alia, that Norwest Mortgage failed to provide them with material disclosures such as the forms for rescinding the transaction and payment schedule. They now allege these same claims against GE Capital (who succeeded Shearson Lehman Mortgage as holder of his note and mortgage by paying off loan number 517128-8 with Norwest Mortgage). In 1999, Wells Fargo began servicing Mortgage 1 for GE Capital.

B. Mortgage 2

Mortgage 2 is currently loan number 145024 and is held by Wells Fargo Home Mortgage Inc. The Scotts initially assumed Mortgage 2 on May 21, 1993 under Veterans Administration ("VA") guidelines. The mortgagor prior to the Scotts' assumption was Jean S. Cross. Mortgage 2 was continually secured by residential real property located at 4753 Longmont Road, Virginia Beach, VA 23456. The Scotts currently reside and have resided at this residence since May 21, 1993. There are no allegations of TILA violations concerning this transaction. The Scotts' TILA claim with respect to Mortgage 2 arises under the modification/restructuring of that obligation discussed below.

C. The Delinquency and Restructuring

In 2001, the Scotts became delinquent on both Mortgage 1 and Mortgage 2. On October 31, 2001, Wells Fargo received a loan workout package from Plaintiffs but was unable to complete the workout due to Plaintiffs' inability to make the necessary contributions. On December 4, 2001, Wells Fargo learned that Mr. Scott filed for bankruptcy. Upon learning of the pending bankruptcy, Wells Fargo informed Plaintiffs that it would stop action on the loan workout. On March 26, 2002, the Scotts sought, and were subsequently approved for, a loan modification/restructuring with Wells Fargo as to Mortgage 1. As part of that restructuring, the Scott's monthly payments were changed, APR was adjusted to 7.5%, and the note maturity date was extended to represent a new thirty-year period.¹ The Scotts allege that the loan modification agreement was used to effect a scheme to manipulate, mislead and defraud him by "cleverly and deceitfully including compound interest based on ... illegally billed late fees for the escrow payments that were concealed from Scott..." See Complaint.

On June 15, 2001, Plaintiffs submitted a workout package to Wells Fargo in an effort to modify their loan on Mortgage 2 because of delinquencies. In July 2002, Wells Fargo confirmed approval of a similar request to modify/restructure Mortgage 2.² As part of that restructuring, the Scotts' monthly payment was changed, APR adjusted to 8.5%, escrow payments were adjusted, and the note's maturity date for the loan was extended to reflect a new thirty-year period. Plaintiffs, however, allege the same scheme to manipulate, mislead and defraud as they assert with respect to the restructuring agreement for Mortgage 1, supra.

The Scotts allege, inter alia, that both Wells Fargo (concerning the two restructuring agreements) and GE Capital (concerning Mortgage 1) deliberately failed to provide them with material disclosures such as the forms for rescinding the transaction, and disclosures of the finance charge, the payment schedule, and the total of payments, which he alleges "would have afforded Scott to have a clearer picture of the construction and makeup of each transaction as well as his rights under TILA and under Code of Virginia § 6.1-422(6)." (Complaint, pp. 8-9).

On September 17, 2002, Mr. Scott mailed, by certified mail, his notice of intent to rescind Mortgage 1, pursuant to TILA, to GE Capital and Wells Fargo.

D. The Bankruptcy Proceedings

On March 27, 2001, Mr. Scott filed a Chapter 7 Bankruptcy Petition, Case No. 01-21224-SCS, in the United States Bankruptcy Court for the Eastern District of Virginia. This case was dismissed by the Bankruptcy Court on April 26, 2001 due to Mr. Scott's failure to file required schedules. Petitioner sought and was granted relief from that judgment, but the case was later dismissed, on Scott's motion, on January 23, 2000.³ Defendants received a copy of the dismissal order and removed Mr. Scott's file from the system on May 18, 2001, noting that the Mr. Scott's bankruptcy case was dismissed as of April 26, 2001. Affidavit of Donna Lane, ¶ 3. From April 26, 2001, through October 26, 2001, Defendants did not have notice that Mr. Scott was engaged in bankruptcy proceedings. Id.

E. District Court Proceedings

Mr. Scott filed a Complaint⁴ in this Court on October 4, 2002, alleging statutory violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1635(a), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., The Sherman Act, 15 U.S.C. § 1, et seq., the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., the Bankruptcy Code, 11 U.S.C. 362(h); VA. CODE § 6.1-422(6), the Virginia Consumer Protection Act ("VCPA"), Va. Code, § 6-1330, et seq., and Va. Code § 8.01-2221. The Complaint also asserts common law claims of Breach of Contract, Tortious Interference, Breach of Fiduciary Duty and Trust, Trover, Conversion, Actual and/or Constructive Fraud, Deceit, and Misrepresentation. Mr. Scott also demands rescission of two real property mortgages on his two homes, monetary damages and injunctive relief.

On October 21, 2002, Mr. Scott prematurely filed a Motion for Partial Summary Judgment and a separate Motion for Emergency Injunction (which the Court construed as a motion for preliminary injunction). On November 1, 2002, Defendants filed their Memorandum in Opposition to Emergency Injunction, and on November 4, 2002, Defendants moved to dismiss Mr. Scott's Motion for Emergency Injunction and to join Mr. Scott's wife as an indispensable party. On November 8, 2002, Mr. Scott filed his reply. On November 12, 2002, the Court heard oral arguments on Plaintiff's Motion for Emergency Injunction. During the hearing, the Court conducted an inquiry concerning the availability of legal remedies. After determining that Mr. Scott was not likely to succeed on the merits, and that Mr. Scott had an adequate remedy at law in the event he prevails, the Court denied Mr. Scott's request for injunctive relief. The Court also ordered Mrs. Terry A. Scott joined as a necessary and indispensable party. The Court, on Mr. Scott's request, also accepted the prematurely filed Motion for Partial Summary Judgment as filed as of the date of the hearing and ordered Defendants' reply within 10 days. Defendants filed their reply on November 25, 2002. On November 29, 2002, Plaintiffs filed their reply. On December 3, 2002, Plaintiffs filed their Amended Complaint. On December 11, 2002, Plaintiffs moved for entry of a default judgment against all defendants. In a prior Order issued today, this Court denied Plaintiffs leave to file their Amended Complaint and denied Plaintiffs' Motion for Default Judgment.

II. LEGAL STANDARD

Rule 56(c) provides for summary judgment if the Court, viewing the record as a whole, determines "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding a motion for summary judgment, the Court must view the facts and inferences to be drawn from the facts in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). To defeat summary judgment, the nonmoving party must go beyond the pleadings with affidavits, depositions, interrogatories, or other...