Wells Fargo Bank v. Hodges

• Decision Date: 10 June 2011
• Docket Number: No. 55A01-1007-MF-334,55A01-1007-MF-334
• Parties: WELLS FARGO BANK, N.A., Appellee/Plaintiff/Counterclaim Defendant, v. REED HODGES, ANGELIA HODGES, And the Unknown Tenant, Appellees-Defendants. TIMOTHY SWAFFORD, Appellant/Defendant/Counterclaim and Cross-Claim Plaintiff, v. REED HODGES and ANGELA HODGES, Appellants/Cross-Claim Defendants.
• Court: Indiana Appellate Court

WELLS FARGO BANK, N.A., Appellee/Plaintiff/Counterclaim Defendant, v. REED HODGES, ANGELIA HODGES, And the Unknown Tenant,

Appellees-Defendants.

TIMOTHY SWAFFORD, Appellant/Defendant/Counterclaim and Cross-Claim Plaintiff, v. REED HODGES and ANGELA HODGES, Appellants/Cross-Claim Defendants.

No. 55A01-1007-MF-334

COURT OF APPEALS OF INDIANA

Filed: June 10, 2011

Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT:

ELIZABETH J. WYSONG

CHRISTOPHER E. CLARK

Goodin Abernathy, LLP

Indianapolis, Indiana

APPEAL FROM THE MORGAN CIRCUIT COURT

The Honorable Matthew Hanson, Judge

Cause No. 55C01-0809-MF-824

MEMORANDUM DECISION - NOT FOR PUBLICATION

MATHIAS, Judge

Wells Fargo Bank, N.A. ("the Bank") appeals from the Morgan Circuit Court's order dismissing Timothy Swafford ("Swafford") from the Bank's complaint to foreclose on a mortgage executed in favor of the Bank's assignor by Reed and Angelia Hodges (collectively, "the Hodgeses"). The Bank raises one issue on appeal, which we restate as whether the trial court erred in concluding that the Bank was not entitled to foreclose on the property at issue. Because we hold that genuine issues of material fact remain as to whether any legal or equitable remedy is available to the Bank, and if so, what the terms of that remedy should be, we reverse and remand for further proceedings consistent with this opinion.

Facts and Procedural History

The details of the transaction underlying the mortgage foreclosure action at issue in this appeal were set forth in a previous opinion of this court as follows:

Swafford, a retired laborer, has a sixth grade education and is illiterate, except that he can read numbers and sign his name. In March 2002, Swafford separated from his wife, who had handled the couple's finances. Shortly thereafter, Swafford learned that she had missed several mortgage payments on the marital residence, which was also Swafford's childhood home. On June 7, 2002, Swafford's divorce property agreement was finalized. Pursuant to the terms of that agreement, he received the marital residence and was to refinance the two outstanding mortgages within ninety days to remove his wife from those obligations. In the months prior to June 7, 2002, he had approached several loan companies about obtaining a loan; his applications were denied because of his prior bankruptcy filing, as well as the impending foreclosure on his home. On June 7, 2002, Swafford went to Indiana Mortgage Funding ("IMF") inBloomington, Indiana, and met with mortgage broker Hope Seitzinger. He told Seitzinger that he wanted to apply for a loan to pay off the two mortgages on his home, make some home repairs, and to pay off his car loan and some other debts. His loan application showed the requested loan amount as $52,000.00, with an estimated value of the property of $95,000.00, and liens against the property in the amount of $33,000.00. The application was denied.

Swafford asked Seitzinger if she knew of any way that he could save his home. Seitzinger said that she knew a person who had invested in real estate in the past and might be willing to help Swafford. She called her brother, Reed Hodges, and suggested that he purchase Swafford's house and sell it back to him on land contract. Reed said that he would agree to purchase Swafford's house if he could make a profit and "pay off some of my stuff." Hodges talked it over with his wife, Angelia, and the couple agreed to participate in the transaction. Seitzinger explained to Swafford that he would have to transfer the deed to his house to the Hodgeses and buy the house back on land contract. She believed that he understood that the Hodgeses would pay off the mortgages on his house and that he would receive no additional money from the transaction.

Seitzinger prepared the land contract using a standard IMF form. She also originated a $57,400.00 loan for the Hodgeses that would enable them to purchase Swafford's home.¹ Seitzinger set up the date and time for the closing of these two transactions, and she met with Swafford and his nephew prior to the closing.

The land contract required Swafford to buy back his home for $59,000.00, with interest at the rate of 8.50 percent per annum. The Hodgeses also agreed to pay Swafford $4,000.00 at the time of closing, which Swafford had requested for the purpose of paying off some personal debts. The trial court determined that the value of the benefit Swafford received from the loan was $39,514.17. Swafford and the Hodgeses had never spoken to each other until the day of the closing, when they had a casual conversation with no discussion of the terms of the agreement. Seitzinger was not present at the closing. The Hodgeses concede that they did not provide Swafford with any disclosures regarding the transaction. Prior to closing, no one informed Swafford that Reed and Seitzinger were related.

Swafford and his nephew thought that Swafford would receive additional money following the closing, apparently because Swafford and Seitzinger had initially attempted to obtain a loan in an amount that would allow Swafford to pay off some debts and make various home repairs. Swafford did not receive additional funds after the closing, and he and his nephew visited IMF and asked Seitzinger for an explanation of the fees and costs included in the loan. She failed to provide the requested information. Swafford hired an attorney, who made similar requests, to which the Hodgeses also failed to respond. On July 17, 2003, Swafford filed a complaint against the Hodgeses, Seitzinger, and IMF expressing his intent to rescind the transaction.

The complaint alleged violations of the federal Truth in Lending Act ["the TILA"], the federal Home Ownership and the federal Equity Protection Act, the federal Real Estate Settlement Procedures Act, the Indiana Deceptive Consumer Sales Act, and the Indiana Loan Broker Act. Swafford also claimed fraud, fraudulent misrepresentation, constructive fraud, and equitable estoppel. On October 14, 2004, the trial court granted summary judgment in favor of IMF and denied summary judgment as to the Hodgeses and Seitzinger. A bench trial as to liability was held on February 15, 2005. On August 5, 2005, the trial court ruled in favor of Swafford and against the Hodgeses on the TILA and HOEPA claims. The court also found that the Hodgeses violated RESPA and DCSA and that Swafford had established the elements of equitable estoppel. The court found in favor of the Hodgeses on the remaining claims. It also ruled in favor of Seitzinger on all claims. On September 8, 2005, the Hodgeses filed a motion to correct error, which was denied on September 19, 2005.

On February 6, 2006, the trial court held a hearing on damages and equitable relief. On March 23, 2006, the court ordered the Hodgeses to transfer title to the home back to Swafford by warranty deed and ordered Swafford to sign a promissory note and mortgage on the property in favor of the Hodgeses, reduced by $21,150.00. The court also ordered the Hodgeses to pay $900.00 directly to Swafford, apparently to satisfy the delinquent balance on his car loan. Finally, it ordered the Hodgeses to file a warranty deed, promissory note, mortgage, and a satisfaction of the land contract with the county recorder.

Hodges v. Swafford, 863 N.E.2d 881, 883-85, amended on reh'g, 868 N.E.2d 1179 (Ind. Ct. App. 2007) (footnotes and citations omitted). For reasons that are unclear from the record before us, the Bank was never made a party to this action.

The Hodgeses appealed, and another panel of this court affirmed the trial court's ruling that Swafford was entitled to rescission of the land contract due to the Hodgeses' TILA and HOEPA violations. Id. at 888, 891. However, the court reversed and remanded on the issue of damages. Id. at 892-93. Specifically, the court concluded that as a result of Swafford's rescission under the TILA, the Hodges had retroactively lost the right to charge fees on the loan. Id. at 893. Thus, in order to determine the amount Swafford owed the Hodgeses, the court took the amount of the value Swafford actually received for his direct benefit from the Hodgeses and subtracted the total payments he had already made. Id. at 893. Applying this formula, the court determined that Swafford owed the Hodgeses $8,591.93 and remanded with instructions to order Swafford to execute a promissory note and mortgage in favor of the Hodgeses in that amount. Id. at 893.

On rehearing, the court amended its decision on damages. Hodges v. Swafford, 868 N.E.2d at 1181. Specifically, the court held that the portions of Swafford's payments covering insurance and property taxes benefitted Swafford and should therefore not be included in the total finance charge forfeited by the Hodgeses. Id. The court went on to instruct the trial court to apply a specific formula on remand to determine the amountSwafford owed to the Hodgeses and to order Swafford to execute a promissory note and mortgage in favor of the Hodgeses for the amount due. Id.

The trial court subsequently determined the amount Swafford owed, which he paid directly to the Hodgeses rather than executing a promissory note. In accordance with the trial court's order, the Hodgeses transferred title of the property back to Swafford by warranty deed on April 3, 2009. The Hodges also executed a "Satisfaction of Land Contract" on September 11, 2009. Appellant's App. p. 100.

However, nearly a year prior to deeding the property back to Swafford, the Hodgeses had stopped making monthly mortgage payments on the property to the Bank. As a result, the Bank filed its "Amended Complaint on Note and to Foreclose Mortgage on Real Estate" on September 23, 2008, naming the Hodgeses, Swafford, and an unknown tenant as defendants. Id. at 7-10....