Sunday, September 19, 2010

Defendant Wins Summary Judgment for $3 Million in Damages Arising From the Misclassification of a Loan

This post is a summary brief of a case. Follow the link to the case to read more.

In CHARITY v. GMAC MORTGAGE INVESTMENTS, INC., et al.,CASE NO. 4:09-CV-02958-SL, (N.D. Ohio September 14, 2010), the Court granted Defendant GMAC's motion for summary judgment. Plaintiff and her then husband Rodney Cheatham (“Cheatham”) took out a mortgage and loans from Defendants in the amount of over $200,000. On February 15, 2008, nearly three years after receiving the home equity line of credit, Plaintiff filed a Complaint against Defendants in Trumbull County Common Pleas Court alleging that with regard to two loan applications she submitted Defendants had failed to meet various statutory notification requirements and had unlawfully discriminated against her in violation of the Federal Trade Commission Act (“FTCA”) and the Fair Credit Reporting Act (“FCRA”). Plaintiff sought $2 million in compensatory damages and $1 million in punitive damages. Shorty after Plaintiff filed she ceased making payments on the mortgage loan and home equity line of credit. As a result, Defendants initiated a foreclosure action against Plaintiff and Cheatham.  On or about August 25, 2008, Plaintiff and Defendants entered into a settlement agreement.

Within one year of having settled , Plaintiff submitted to ditech three separate applications seeking to refinance her loans. Defendants contend that for each of the refinancing applications Plaintiff submitted the available interest rate offered wa not materially lower than the interest rate Plaintiff enjoyed on the Senior Loan. As such, because of the costs associated with refinancing, there was no financial incentive for Plaintiff to refinance. Consequently, Defendants maintain, Plaintiff informed ditech that she was no longer interested in refinancing, and the applications were classified as “withdrawn and cancelled” in accordance with ditech company policy. Plaintiff then filed the Complaint in the within case, challenging Defendants’ stated rationale for classifying her applications for refinance as withdrawn and cancelled. Plaintiff alleged that Defendants violated numerous statutory reporting requirements, and breached the Charity I Settlement Agreement. Plaintiff sought $2 million in compensatory damages and $1 million in punitive damages.

On Plaintiffs first claim the court found that Plaintiff has failed to offer any evidence of damages arising out of Defendants’ alleged conduct with respect to the modification of the Junior Loan. On Plaintiffs second allegation, that even if Defendants were found to have “hidden” Plaintiff’s Junior Loan within the confines of the ditech website, Plaintiff failed to offer any evidence of damages resulting from her inability to find and pay her Junior Loan online. On Plaintiff's third claim the court found that the defendant did not exploit the plaintiff's ignorance in the original settlement and that nothing in the agreement that she signed obligated her to pay her original obligations to the company and that the agreement contained a clause specifically releasing the company from further claims. On Plaintiff's fourth claim was that because a co-borrower to the original home equity line of credit failed to sign the modification agreement, the converted loan is fraudulent. The court found that her husbands signature was unecessary to execute the loan and that she failed to establish any damages she sustained as a result of her ex-husband’s signature not being required on the Junior Loan modification agreement or the converted loan.

Plaintiff’s fifth claim was that Defendants breached the Charity I Settlement Agreement by failing to remove Plaintiff’s ex-husband from the Junior and Senior Loans. The court found that evidence indicated that the Plaintiff was fully aware that removal of her ex-husband’s name from the loans would not be part of the Charity I Settlement Agreement and that Plaintiff’s ex-husband’s removal from the loans a term of the Charity I Settlement Agreement.  Plaintiffs final allegation was that Defendant's caused Plaintiff duress and violated Ohio Unconscionable Consumer Sales Acts or Practices by initiating foreclosure proceedings against Plaintiff during settlement negotiations. The Court found that Defendants had a legal right to initiate foreclosure proceedings and that under Ohio law“[i]t is never duress to threaten to do that which a party has a legal right to do.” Accordingly, the court summary judgment on the claims to the defendant.