Tolliver v. Bank of America (In re Tolliver)

Decision Date02 February 2012
Docket NumberBankruptcy No. 09–21742.,Adversary No. 09–2076.
Citation464 B.R. 720
PartiesIn re Pamela M. TOLLIVER, Debtor.Pamela M. Tolliver, Plaintiff v. Bank of America, et al., Defendants.
CourtU.S. Bankruptcy Court — Eastern District of Kentucky


West Codenotes

Recognized as Preempted

M.C.L.A. § 438.31

J. Eileen Zell, James P. McHugh, Michael J. O'Hara, Covington, KY, for Plaintiff.

Christopher M. Hill, Frankfort, KY, Kelly S. Herzik, Morris, Laing, Evans, Brock & Kennedy, Wichita, KS, for Defendant.


TRACEY N. WISE, Bankruptcy Judge.

When the Defendants Ocwen Federal Bank, FSB (Ocwen) and Bank of America, NA (BOA) filed a Proof of Claim for a secured mortgage loan in the principal amount of $836.24 and $4,716.94 in outstanding fees and costs, the Plaintiff Debtor responded by filing an adversary proceeding objecting to the claim and asserting multiple counterclaims for violations of state and federal law based on an allegation that the Defendants improperly assessed thousands of dollars to the Plaintiff's account for fees and costs contrary to the terms of their agreement, which allegedly resulted in an artificially inflated balance that forced her into default and caused her to pay more than she actually owed on the account. The parties moved for summary judgment on the Plaintiff's claims and during the interim, the United States Supreme Court decided Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), which called into question how this Court, being a court of limited jurisdiction, may proceed with the Plaintiff's state law counterclaims.

The Court, having reviewed the parties' briefs and hearing oral arguments, and having considered the parties' supplemental briefs on the effect of Stern on this proceeding, finds that this Court may enter final judgment on the Plaintiff's Objection to Claim and fraud/intentional misrepresentation claim (Count III), conversion claim (Count IV), breach of implied covenant of good faith claim (Count V), negligent misrepresentation claim (Count VI), breach of contract claim (VII) and the FDCPA claim (Count IX), but the limitations set forth in Stern require it to issue proposed findings of fact and conclusions of law as to the Plaintiff's remaining state law counterclaims, i.e., the Plaintiff's claims for violations of K.R.S. § 360.010 (Count I) and violations of the Kentucky Consumer Protection Act (Count II).

Acting pursuant to that authority, the Court shall recommend to the District Court following trial that it accept its proposed findings of fact and conclusions of law as to the Plaintiff's claim for violations of the Kentucky Consumer Protection Act (Count II) and grant summary judgment to the Defendant as a matter of law. The Court shall deny both the Plaintiff and the Defendants' cross-motions for summary judgment on the remaining claims, as there remain genuine issues of material fact to be resolved at trial, and following trial, will recommend the District Court accept its proposed findings of fact and conclusions of law as to the state law counterclaims that are related to this proceeding but upon which this Court may not enter final orders pursuant to 28 U.S.C. § 157 and Stern.

Factual and Procedural Background
A. The Note and Mortgage

The Plaintiff and her former husband, Richard Mulligan (now deceased), executed a note in the principal amount of $21,950.00 payable to Monmouth Federal Savings and Loan Association of Newport (“Monmouth”) on January 28, 1981 (the “Note”). The Note has a fixed interest rate of 10.875% and is scheduled to be paid in three hundred monthly installments of $213.17. The Note was endorsed and assigned that same day to Kentucky Housing Corporation (the “First Assignment”).

Also on January 28, 1981, the Plaintiff executed and delivered to Monmouth a mortgage on real property in Campbell County, Kentucky (the “Mortgage”), to secure repayment of the Note. Like the Note, the Mortgage was assigned to Kentucky Housing Corporation.

The Plaintiff's Mortgage provides that the Plaintiff's monthly Note payments shall be applied in the following order: (1) premium charges under the contract of insurance with the Secretary of Housing and Urban Development, or monthly charge (in lieu of mortgage insurance premium), as the case may be; (2) ground rents, taxes, special assessments, fire, and other hazard insurance premiums; (3) interest; and (4) principal. The Note allows charges for late payments, but does not allow for recovery by the lender or holder of any costs or fees associated with default and foreclosure. The Note and Mortgage are collectively referred to as the “Loan.”

Kentucky Housing Corporation assigned (the “Second Assignment”) the Plaintiff's Loan to the Department of Housing and Urban Development (“HUD”). The Second Assignment of the Mortgage, dated February 28, 1995, states “the sum of $16,867.86, together with interest thereon from May 1, 1994 at the rate of 10.875% per annum, computed as provided for in the credit instrument, is actually due and owing under said credit instrument.”

Ocwen Federal Bank, FSB (Ocwen Federal Bank) and Blackrock Capital Finance, LLC, purchased the Loan sometime in 1997. HUD assigned the Loan to Ocwen Federal Bank (the “Third Assignment”). The Third Assignment of the Mortgage, dated March 7, 1997, states that “any changes in the payment obligations under the Note by virtue of any forbearance or assistance agreement, payment plan or modification agreement agreed to by U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (‘HUD’), whether or not in writing, is binding upon the Assignee/Payee, its successors and assigns.”

The parties do not dispute that the Defendant Bank of America, NA, as successor by merger to LaSalle Bank NA, as Trustee for the Certificateholders of the Mortgage Passthrough Certificates 1997–R3 (“BOA”), is the current holder of the Note and Mortgage. Ocwen Loan Servicing, LLC (“Ocwen”), as successor in interest to Ocwen Federal Bank, is the servicing agent for BOA.

B. The Forbearance Agreements

Over the life of the Loan, the Plaintiff entered into a series of forbearance agreements that have become an issue in this litigation. The Defendants contend that the Plaintiff entered into her first forbearance agreement with HUD on March 26, 1996 (the 1996 Forbearance Agreement”). The Plaintiff admits she entered into a forbearance agreement with HUD in 1993 or 1994, but disputes that she entered into the 1996 Forbearance Agreement. A copy of the 1996 Forbearance Agreement has been produced as evidence, but it does not bear the Plaintiff's signature.

Whether the Plaintiff entered into the 1996 Forbearance Agreement is factually material because the parties dispute whether the Plaintiff was current on her Loan at the time Ocwen began servicing her loan, a fact that shall determine the applicability of one of the Plaintiff's claims at issue herein. Ocwen's records show that when it began servicing the loan on January 1, 1997, the Plaintiff was in default and Ocwen did not receive the first payment on the Loan until June 9, 1997. But testimony by Ocwen's representative, Gina Johnson, reflects that the Plaintiff was paying or performing under a payment plan with HUD, or the 1996 Forbearance Agreement.

While the 1996 Forbearance Agreement and the status of the Plaintiff's Loan in 1997 is disputed, the parties do not dispute that the Plaintiff entered into a series of three additional forbearance agreements with the Defendants after BOA purchased the loan and Ocwen began servicing it. The Plaintiff entered into her first forbearance agreement with Ocwen on or about July 24, 2003 (the 2003 Forbearance Agreement”) based on an alleged delinquency in her account of $2,013.76. The 2003 Forbearance Agreement does not authorize any additional charges beyond the terms of the original Note and Mortgage.

In October of 2004, the Defendants filed a foreclosure suit against the Plaintiff in Campbell Circuit Court based on the Plaintiff's alleged failure to pay a delinquency on the account. The Plaintiff testified in her deposition that, at that time, she was paying her regular monthly mortgage payment, but she was not paying additional fees and costs assessed to her account because she believed them to be incorrect. The Plaintiff entered into a second forbearance agreement on November 9, 2004 (the 2004 Forbearance Agreement”) with the Defendants to stop the foreclosure. According to the Defendants, as consideration for the 2004 Forbearance Agreement, the Plaintiff accepted the following revised conditions to her Note and Mortgage as set forth in an addendum to the Agreement, which she signed:

3B Fees and Costs

b. You specifically understand that Ocwen has the right to charge, and add to your loan balance, the costs of the following items: appraisals and broker price opinions, inspections, any advances which are made to pay taxes and/or insurance, foreclosure attorneys' fees and expenses, and collection fees.

The 2004 Forbearance Agreement also contains an agreement to release Ocwen for “any and all claims, to the extent that any claims may exist now, that are related or connected in any manner, directly or indirectly, to the Note, Mortgage, or aforementioned parties.”

According to the Defendants, the Plaintiff failed to cure the delinquency on her account as required by the 2004 Forbearance Agreement; as a result, the Plaintiff entered into a third forbearance agreement on December 5, 2005 (the 2005 Forbearance Agreement”). The 2005 Forbearance Agreement identifies a default in the amount of $4,971.75 and contains the following provision:

14. Borrower Release of Ocwen

As consideration, the Borrower hereby releases Ocwen from any and all claims known or unknown that the Borrower has against Ocwen, which in any way arise from or relate to the Note, the Mortgage, the Loan, or the Default. Borrower also specifically waives any right under any statute providing...

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