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Tucker v. Specialized Loan Servicing, LLC

United States District Court, D. Maryland, Southern Division

November 1, 2016

ADRIENNE TUCKER, et al., Plaintiffs,


          Paul W. Grimm, United States District Judge.

         Plaintiffs Adrienne Tucker and Maurice Holmes claim that they entered into a valid mortgage loan modification agreement, but the loan servicers refused to accept their monthly payments under the modified agreement, applying them instead to an earlier version of the loan. Plaintiffs stopped making payments and, as a result, found themselves facing foreclosure on their home.[1] They filed suit in the Circuit Court for Prince George's County against, inter alios, their current loan servicer, Defendant Specialized Loan Servicing, LLC (“SLS”); their previous loan servicer, Defendant Saxon Mortgage Services, Inc. (“Saxon”); and the owner of their current loan, Defendant FV-I, Inc., in trust for Morgan Stanley Capital Holdings LLC (“FVI”). ECF No. 2. FVI and SLS removed to this Court on the basis of diversity of citizenship. ECF No. 1. Following two amendments to the complaint, as well as my ruling on Defendants' motions to dismiss, five counts remain. As to Defendants SLS and FVI only, Plaintiffs allege breach of contract and violations of the Maryland Consumer Debt Collection Act, Md. Code Ann., Com. Law §§ 14-201 et seq. (“MCDCA”), and the Maryland Consumer Protection Act, Md. Code Ann., Com. Law §§ 13-101 et seq. (“MCPA”). They also allege that all three remaining Defendants are liable for defamation and injurious falsehood. Feb. 3, 2015 Mem. Op. & Order, ECF Nos. 40 & 41; Second Am. Compl., ECF No. 42.

         Now pending is Defendants' Motion for Summary Judgment on liability. ECF No. 94.[2]Because the undisputed evidence establishes that Plaintiffs refused to make payments to bring their loan current, summary judgment in Defendants SLS and FVI's favor is appropriate on the breach of contract claim. Given that it also shows that Defendants had the right to foreclose on Plaintiffs' Property, Defendants SLS and FVI also are entitled to judgment as a matter of law on Plaintiffs' MCDCA and MCPA claims. And, because Plaintiffs cannot show that the information allegedly reported was false for purposes of a defamation or injurious falsehood claim, those claims are preempted by federal law and I will grant summary judgment in favor of all Defendants on those claims.


         Adrienne Tucker executed a $601, 000.00 promissory note (“Original Note”) on November 22, 2005 as part of a loan agreement. Jt. Stmt. ¶ 2, ECF No. 94-3. The Original Note set Tucker's initial monthly payments at $3, 443.23. Orig. Note § 3(B), 4(A), Jt. Rec. 336-37. She and her husband, Maurice Holmes, executed a Purchase Money Deed of Trust (“Deed of Trust”) the same day. Jt. Stmt. ¶ 4. Plaintiffs used the funds they received from the loan to purchase 13901 Edsall Street, Upper Marlboro, Maryland (the “Property”) and build a home there. Id. ¶¶ 1, 3. They are the record owners of the Property. Id. ¶ 1.

         The Deed of Trust created a lien against the Property to ensure repayment of the Original Note. Id. ¶ 5. It provides:

Borrower covenants and agrees that Borrower's obligations and liability shall be joint and several. However, any Borrower who co-signs the Security Instrument [i.e., Deed of Trust] but does not execute the Note (a “co-signer”): (a) is co-signing this Security Instrument only to mortgage, grant and convey the cosigner's interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co-signers consent.

Id. ¶ 6 (quoting Deed of Tr. § 13, Jt. Rec. 550). Because Holmes signed the Deed of Trust but not the Original Note, he qualifies as a “co-signer” under it and, in signing the Deed of Trust, “agree[d] that Lender and any other Borrower [i.e., Tucker] can agree to extend, modify, forbear or make any accommodations with regard to the terms of this [Deed of Trust] or the Notice without the co-signers [sic] consent.” Id. The Deed of Trust also provides:

Lender may return any payment or partial payment if the payment or partial payments are insufficient to bring the Loan current. Lender may accept any payment or partial payment insufficient to bring the Loan current, without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial payments in the future, but Lender is not obligated to apply such payments at the time such payments are accepted. . . . Lender may hold such unapplied funds until Borrower makes payment to bring the Loan current. If Borrower does not do so within a reasonable period of time, Lender shall either apply such funds or return them to Borrower.

Deed of Tr. § 1, Jt. Rec. 544.

         Plaintiffs and the original lender entered into and recorded a Loan Modification Agreement in 2006 (“2006 Modification Agreement), agreeing to a new monthly mortgage payment of $3, 380.63. Jt. Stmt. ¶¶ 7, 8, 10. The 2006 Modification Agreement defined Tucker and Holmes as the Borrowers, “amend[ed] and supplement[ed]” the Original Note and Deed of Trust, and provided:

Nothing in this Agreement shall be understood or construed to be a satisfaction, release or novation in whole or in part of the Note and Security Instrument [i.e., Deed of Trust]. Except as otherwise specifically provided in this Agreement, the Note and Security Instrument will remain unchanged, and the Borrower(s) and Lender will be bound by, and comply with, all of the terms and provisions thereof, as amended by this Agreement.

Id. at 1 & ¶ 11 (quoting 2006 Loan Modification Agr., Jt. Rec. 3). The unpaid principal balance remained $601, 000.00. Id. ¶ 1. Together, the Original Note and Deed of Trust, as modified by the 2006 Modification Agreement, comprise the “Loan Documents.”[4]

         When, “[a]t some point prior to 2009, Ms. Tucker began having difficulty making the monthly mortgage payments, ” she applied to GMAC Mortgage (“GMAC”), [5] which serviced the loan at the time, for a loan modification. Id. ¶¶ 13, 14. “GMAC offered Ms. Tucker a trial loan modification under the Home Affordable Modification Program, ” and after she successfully made “trial payments on November 1, 2009, December 1, 2009 and January 1, 2010, ” it offered her a permanent modification agreement in January 2010 (“January 2010 GMAC Modification Agreement” or “GMAC Agreement”). Id. ¶¶ 15-16. She signed it on January 23, 2010, and a “Limited Signing Officer” Dated: behalf of GMAC on February 1, 2010. Id. ¶¶ 18, 19.

         The GMAC Agreement identified Tucker as the Borrower. Jan. 2010 GMAC Modif. Agr. 1, Jt. Rec. 6. In Section 1, Tucker represented that she was “experiencing financial hardship” causing her to be “in default under the Loan Documents” (i.e., the Original Note and the Deed of Trust, as amended by the 2006 Modification Agreement) and unable “to make the monthly mortgage payments”; that she “live[d] in the Property as [her] principal residence”; that the Property's ownership had not changed; that she had “provided documentation for all income that [she] receive[d]”; that she would obtain credit counseling if required by the Lender; and that she would or already had made “all payments under a Trial Period Plan or Loan Workout Plan, ” and she certified under penalty of perjury that all of the documents and information she had provided were true and correct. Jan. 2010 GMAC Modif. Agr. § 1, Jt. Rec. 6-7. The January 2010 GMAC Modification Agreement provided that, if these “representations . . . continue[d] to be true in all material respects, ” then the GMAC Agreement would, “as set forth in Section 3, amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.” Id. at 1.

         It also stated that “TIME IS OF THE ESSENCE, ” and “[i]f prior to the Modification Effective Date as set forth in Section 3 the Lender determine[d] that [Tucker's] representations in Section 1 [were] no longer true and correct, the Loan Documents [would] not be modified and th[e] Agreement [would] terminate.” Id. § 2(A)-(B). Additionally, “the Loan Documents [would] not be modified unless and until (i) [Tucker] receive[d] from the Lender a copy of this Agreement signed by the Lender, and (ii) the Modification Effective Date (as defined in Section 3) ha[d] occurred.” Id. § 2(C), Jt. Rec. 7. The GMAC Agreement also provided that “the Lender [would] not be obligated or bound to make any modification of the Loan Documents if [Tucker] fail[ed] to meet any one of the requirements under th[e] Agreement.” Id. Section 3 provided that, if Tucker's Section 1 representations “continue[d] to be true in all material respects and all preconditions to the modification set forth in Section 2 ha[d] been met” (i.e., that the Section 1 representations remained true and Tucker received a copy of the GMAC Agreement signed by the lender), then “the Loan Documents [would] automatically become modified on 02/01/2010 (‘The Modification Effective Date') and all unpaid late charges that remain unpaid [would] be waived.” Id. § 3.

         Monthly payments of $2, 297.82 (to adjust annually after the first year) under the January 2010 GMAC Modification Agreement were due beginning on February 1, 2010. Id. § 3(C). The new principal balance was $504, 176.89. Id. § 3(B). As part of the GMAC Agreement, Tucker agreed “[t]hat all persons who signed the Loan Documents or their authorized representative(s) have signed this Agreement, unless a borrower or co-borrower is deceased or the Lender has waived this requirement in writing.” Id. § 4(A).

         GMAC received the signed January 2010 GMAC Modification Agreement on January 28, 2010, July 21, 2010 GMAC Ltr. to Div. of Fin. Reg., Jt. Rec. 28; signed it on February 1, 2010, Jt. Stmt. ¶ 18; and then returned it to Turner, Holmes Dep. 178:10-13, Jt. Rec. 219. Viewing these facts in the light most favorable to Plaintiffs, a reasonable jury could find that the January 2010 GMAC Modification Agreement went into effect on February 1, 2010.

         When GMAC “attempt[ed] to record the modification, ” however, “the documents were rejected as the recorded Deed of Trust also listed Maurice D. Holmes.” July 21, 2010 GMAC Ltr. to Div. of Fin. Reg., Jt. Rec. 28. “Because the loan modification documents are required to be recorded, ” GMAC sent Plaintiffs a new modification agreement with the same terms on March 18, 2010 and asked them both to sign and return it by March 26, 2010. Id.; Jt. Stmt. ¶¶ 20, 21. Plaintiffs signed it late, on April 8, 2010; GMAC did not receive it until April 20, 2010; and the modification was denied and the proposal marked “VOID.” Void Modif. Agr., Jt. Rec. 12-15; July 21, 2010 GMAC Ltr. to Div. of Fin. Reg., Jt. Rec. 28. Then, in April 2010, GMAC sent Tucker yet another modification agreement, identifying only Tucker as the Borrower, but Plaintiffs did not return a signed copy before the May 1, 2010 deadline. Interest Only Step Rate Loan Modif. Agr., Jt. Rec. 18; July 21, 2010 GMAC Ltr. to Div. of Fin. Reg., Jt. Rec. 28; Sept. 27, 2010 GMAC Ltr. to Div. of Fin. Reg., Jt. Rec. 31.

         The Financial Transactions history on Tucker's account shows that the principal balance from March 9, 2009 through April 9, 2010 remained $601, 000.00. Jt. Rec. 34-40. It also shows that GMAC received payments of $2, 297.82 on February 5, 2010; $2, 298.00 on March 8, 2010; $2, 298.00 on April 12, 2010; and $2, 295.29 on May 11, 2010. Jt. Rec. 35-36; see also Tucker Dep. 50:14 - 51:10, Jt. Rec. 113 (testifying that Plaintiffs made four payments between February and May 2010); Holmes Dep. 70:22 - 72:15, Jt. Rec. 192 (same). The majority of the funds appear as “unapplied” funds, which “mean[s] funds that were received from the Plaintiffs that were insufficient to bring the loan current, and which were placed into a suspense account.” Ward Aff. ¶ 7, Jt. Rec. 65; see also Tucker Dep. 50:3-13, Jt. Rec. 113 (a payment noted as “unapplied” means “they are not accepting payment”).

         On October 5 and November 13, 2009 and April 9 and June 7, 2010, GMAC applied $3, 380.63 (the amount due monthly under the 2006 Modification Agreement) from Plaintiffs' account to the interest. Jt. Rec. 34, 36. According to Defendants, “[o]n June 7, 2010, GMAC applied a portion of the ‘unapplied' funds to the $3, 380.63 payment that had been due on February 1, 2009.” Defs.' Mem. 2. In correspondence with Lucy Cardwell, an Assistant Attorney General in the Consumer Protection Division of the Maryland Office of the Attorney General, SLS explained that “the payments that were made by Ms. Tucker were applied to the account and advanced the contractual due date to March 2009 in accordance to the terms of the original Note because the modification was never finalized.” Jan. 2, 2015 email from Rachel Crampton, SLS Legal Dep't, to Cardwell, Jt. Rec. 45. In other words, SLS believed that GMAC applied the payment to the Original Note and Deed of Trust, but not to the 2006 Modification Agreement or the January 2010 GMAC Modification Agreement, even though the amount applied was that due under the 2006 Modification Agreement. Although Defendants acknowledge that “[th]e GMAC payment history accurately reflects the payment history for the Subject Loan, ” Defs.' Mem. 3, they do not discuss the April 9, 2010 payment. In a June 8, 2010 letter to Tucker, GMAC informed her that her “request for a loan modification . . . ha[d] been denied” because the “[e]xecuted agreement [was] not returned.” June 8, 2010 Ltr. from GMAC to Tucker, Jt. Rec. 24-25. The letter referred in the singular to Tucker's “request for a loan modification, ” but it did not specify which request had been denied. Id. Thus, a reasonable jury could find that the January 2010 GMAC Modification Agreement remained in effect.

         The loan was assigned to Defendant Saxon for servicing on May 27, 2010. Jt. Stmt. ¶ 22. Holmes spoke with Saxon in July 2010, when Plaintiffs were “prepared to make the July 2010 payment for $2, 298, ” and learned that Saxon was “just trying to accept the payments from the original note.” Holmes Dep. 180-81, Jt. Rec. 219-20. Plaintiffs did not remit any payments to Saxon ...

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