Donald Trump has successfully run for the Republican presidential nomination as a friend of the common man. His speeches are about standing up for people who’ve been victimized by the recession, free trade agreements, and marauding hordes of Mexican rapists. His voters—relative to other Republicans, though not to Americans as a whole—skew working-class. He sometimes suggests that he wants to raise taxes on rich people.
And yet. Trump’s fortune is derived from having inherited millions of dollars and a real-estate company from his father. His own recent business history is one of fraudulently preying on regular people. His actual tax plan involves massive, hugenormous breaks for people in his income bracket. And now, the New Republic reports, he’s named a national finance chairman who made a ton of money running a bank that, per TNR, repeatedly committed fraud in the course of foreclosing on struggling homeowners during the housing crisis. That individual is Steve Mnuchin, former chairman and primary owner of OneWest Bank. Here’s a fact about that institution’s business practices:
When Jesus Sequeira’s wife, Yadira, died in 2008 from lung cancer, times soon grew tough.
Sequeira said his income plunged, leaving him unable to pay the mortgage on the couple’s Canyon Country home when payments more than doubled a year later.
Sequeira hoped a loan modification might save him, but there was a glitch: Even though he was listed on the title, only his wife was on the mortgage note — a setup Sequeira said a Countrywide Financial employee suggested given her superior credit.
MIDDLETOWN, Conn. (WTNH)–For Brendan and Janette Cameron, home is truly where the heart is.
“We got married after we bought the house. In the backyard. We’d been together for a very long time but I didn’t want to get married until we had our own place,” said Brendan.
The couple says it was a perfect day. The ceremony was held under a big red oak at their Middletown home. No one could have guessed that two years later they’d be fighting the bank to keep the house. A Desert Storm veteran who served in the Air Force from 1991 to 1997, Brendan was medically discharged after having a seizure.
COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII
LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)
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Sunday – May 8, 2016
Foreclosure Workshop #12: How And When You Can Use Either Rule 60(b) Or An Independent Action To Save Your Home Post-Judgment If Your Foreclosing Mortgagee Did Not Own Your Promissory Note And Mortgage When It Filed Its Foreclosure Complaint
(Please call in and share your experiences)
RealtyTrac®, a national source for comprehensive housing data, today released its Q1 2016 U.S. Home Equity and Underwater Report, which estimates that less than 1 percent of all seriously underwater properties nationwide potentially qualify for principal loan forgiveness under a new mortgage modification program introduced in April by the Federal Housing Finance Agency, which oversees government-backed loan agencies Fannie Mae and Freddie Mac.
To be considered eligible in the RealtyTrac analysis, the seriously underwater properties (loan-to-value ratio of at least 125 percent) needed to also be actively in foreclosure, owner-occupied, and have an estimated loan amount no more than $250,000 on a loan that is guaranteed by Fannie Mae or Freddie Mac.
Out of 6,703,857 million seriously underwater U.S. properties as of the end of Q1 2016, the RealtyTrac analysis estimated that 33,622 (0.50 percent) would potentially qualify for the FHFA principal reduction program.
IN THE SUPREME COURT OF THE STATE OF MONTANA
2016 MT 101
ROBIN C. JACOBSON and
KATHLEEN S. JACOBSON,
Plaintiffs and Appellees,
v.
BAYVIEW LOAN SERVICING, LLC,
and CHARLES J. PETERSON, Trustee,
Defendants and Appellants.
APPEAL FROM:
District Court of the Twenty-Second Judicial District,
In and For the County of Carbon, Cause No. DV 10-58Honorable Blair Jones, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Maxon R. Davis, Derek J. Oestreicher, Davis, Hatley, Haffeman& Tighe, P.C., Great Falls, Montana
For Appellees:
Raymond G. Kuntz, Attorney at Law, Red Lodge, Montana
Submitted on Briefs: December 9, 2015
Decided: May 4, 2016
Filed:
Clerk
Justice Michael E Wheat delivered the Opinion of the Court.
¶1 Bayview Loan Servicing, LLC, (“Bayview”) and Charles J. Peterson, Trustee,
(“Peterson”) appeal from the Order of the Montana Twenty-Second Judicial District
granting judgment for Robin C. Jacobson and Kathleen S. Jacobson (“Jacobsons”). The
District Court determined that Bayview violated the Fair Debt Collections Practices Act
(“FDCPA”), 15 U.S.C. § 1692a-p, and the Montana Consumer Protection Act
(“MCPA”), Title 30, Chapter 14, part 1, MCA. The District Court also awarded damages
in the amount of $226,408.14 and attorney fees in the amount of $109,108.50 to the
Jacobsons. The Jacobsons also prevailed on two post-trial motions for additional relief
and the District Court awarded the Jacobsons an additional $60,000.00 in damages and
$31,020.00 in attorney fees. We affirm.
ISSUES
¶2 Appellant raises several issues on appeal, which we address as follows:
1. Whether the District Court erred in determining that Bayview violated the
FDCPA.
2. Whether the District Court erred in determining that Bayview violated the
MCPA.
3. Whether the District Court erred in awarding damages to the Jacobsons.
4. Whether this Court should award costs and fees to the Jacobsons on appeal.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 In October 2007, the Jacobsons borrowed money and purchased a home and land
on Elbow Creek Road in Carbon County, Montana. They executed a Promissory Note
2
and Trust Indenture in the amount of $391,400.00 to secure the loan. The original lender
and servicer on the loan was CitiMortgage, Inc. and the “nominee” beneficiary of the
Trust Indenture was Mortgage Electronic Registration Systems, Inc. (“MERS”). The
2008 economic crisis brought negative financial impacts to Robin’s business as a home
builder. As a result, the Jacobsons missed at least one mortgage payment in December
2008. CitiMortgage worked with the Jacobsons by entering into an extension agreement
to defer the delinquent payment and interest to the end of the loan. On March 7, 2009,
CitiMortgage transferred the loan servicing duties to Bayview Loan Servicing, LLC.
¶4 On March 24, 2009, Bayview sent the Jacobsons a default letter demanding
payment of all past due amounts within 30 days or the loan would be accelerated with the
entire obligation due and payable, along with the commencement of foreclosure
proceedings. The letter further advised that once the loan was accelerated, it could be
reinstated if all past due installments and late charges were paid at least 5 days before the
scheduled foreclosure sale.
¶5 Both the Trust Indenture and the Promissory Note signed by the Jacobsons provide
rules for notice when the borrower is delinquent on payments or in default. Section 22(c)
of the Trust Indenture provides:
Acceleration; Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower’s breach of any covenant or agreement in
this Security Instrument (but not prior to acceleration under Section 18
[transfer of property] unless Applicable law provides otherwise). The
notice shall specify: (a) the default; (b) the action required to cure the
default; (c) a date, not less than 30 days from the date the notice is given to
Borrower, by which the default must be cured; and (d) that failure to cure
3
the default on or before the date specified in the notice may result in
acceleration. . . .
If the default is not cured on or before the date specified in the
notice, Lender at its option may require immediate payment in full of all
sums secured by this Security Instrument without further demand and may
invoke the power of sale and any other remedies permitted by Applicable
Law. (Emphasis added).
With regard to the Promissory Note, Section 6(c) states:
Notice of Default
If I am in default, the Note Holder may send a written notice telling
me that if I do not pay the overdue amount by a certain date, the note
holder may require me to pay immediately the full amount of Principal
which has not been paid and all the interest that I owe on that amount. That
date must be at least 30 days after the date on which the notice is mailed to
me or delivered by other means. (Emphasis added.)
¶6 As part of its efforts to collect payment from the Jacobsons, Bayview sent the
aforementioned default letter but did not send a notice of acceleration with a “date
specified” or “certain date” by “which the default must be cured” subsequent to the
default letter of March 24 as required by the Promissory Note. (If the default letter was
meant to be the notice, it did not conform to the requirements of the Promissory Note
because it failed to give the full 30 days and failed to specify the “certain date.”)
¶7 The Jacobsons made a payment on their loan on April 30, but Bayview resisted
acceptance of that payment. A Bayview representative told the Jacobsons to stop making
payments on their loan in May 2009, advising them that this would help them qualify for
a loan modification. Bayview represented to the Jacobsons in May 2009 that it would
4
process a loan modification for them, but did not forward an application for the HAMP1
program until January 2011. Instead, Bayview reinitiated foreclosure proceedings,
sending a second default letter on May 4, 2009, containing language identical to the
March foreclosure letter. Similar to the March foreclosure letter, Bayview failed to send
a notice of acceleration and provide a “certain date” for cure.
¶8 On July 21, 2009, as part of the first foreclosure proceeding, Bayview filed,
through Peterson, three documents with the clerk and recorder. The documents were an
“Assignment of Deed of Trust,” the “Substitution of Trustee,” and a “Notice of Trustee’s
Sale.” The “Assignment of Deed of Trust” assigned the deed of trust from MERS to
CitiMortgage. The “Substitution of Trustee” substituted Peterson as trustee in the place
of the original trustee, First American Title. Bayview also filed a “Notice of Trustee’s
Sale,” seeking to exercise the power of sale under the trust and setting a sale of the
Jacobsons property for November 23, 2009. In the Notice of Trustee’s Sale, Bayview
and Peterson identified Bayview as the beneficiary under the Trust Indenture, when
Bayview has never been the beneficiary of the Trust Indenture. The Notice of Trustee’s
Sale states in bold letters at the bottom of page 2 “THIS IS AN ATTEMPT TO
COLLECT A DEBT.”
The federal Home Affordable Modification Program (“HAMP”) “is intended to help
homeowners in default or at immediate risk of default on their home loans by modifying their
monthly payments to affordable levels. The program requires participating loan servicers to
execute a servicer participation agreement and service eligible loans according to a uniform
modification process. The process begins with a Trial Period Plan, under which the homeowner
makes reduced payments for three months, while the loan servicer verifies income and other
eligibility information. At the end of the trial period, if the homeowner has successfully made
the trial payments and if eligibility has been verified, the modification is made permanent.”
Morrow v. Bank of Am., N.A., 2014 MT 117, ¶ 11, 375 Mont. 38, 324 P.3d 1167.
5
¶9 In September 2009, Bayview informed the Jacobsons that they were not qualified
for HAMP, even though the Jacobsons were never given an application for modification
under the program. At this point, according to the record, the Jacobsons complained to
the Better Business Bureau because Bayview was “offering” modification while
simultaneously pursuing foreclosure against them. The Better Business Bureau
apparently contacted Bayview, because Bayview responded by cancelling the trustee’s
sale scheduled for November 2009 and offering a loan modification. Bayview then
offered to lower the interest rate from 9.5% to 7.5% and extend the term of the loan out to
480 months. The Jacobsons rejected the offer. The Jacobsons then complained about
Bayview’s practices to U.S. Senator Jon Tester. In a conference call with the Senator’s
office, Bayview, and the Jacobsons, Bayview made a second offer: offering to dismiss
the foreclosure action, waive the late charges, remove the negative credit reporting,
dismiss legal fees and costs, and reduce the interest rate to 7.5%, if the loan was brought
current. The Jacobsons accepted this offer, but Bayview refused to put the offer in
writing. As a result, no agreement was finalized between the parties.
¶10 In December 2009, Bayview once again sent the Jacobsons “notice of default”
letters. These letters again failed to provide a date for cure under § 22 of the Trust
Indenture and failed to grant the Jacobsons the ability to cure within the 5 days prior to
the date set for sale. Bayview also failed to send the required acceleration notice
subsequent to the default letter.
6
¶11 In January 2010, CitiMortgage, the true beneficiary of the loan, executed a power
of attorney, effective January 14, 2010, naming Bayview as its attorney-in-fact, but the
document did not ratify the past actions of Bayview. On February 5, 2010, Peterson
executed a second Notice of Trustee’s Sale setting a sale date of June 15, 2010. This
second notice also erroneously identified Bayview Loan Servicing as the beneficiary. On
March 9, 2010, Bayview assigned the Trust Indenture to U.S. Bank as trustee, and then
assigned it again to another entity identified as “CBO-6 REO Corp.” Bayview
represented that it was acting as attorney-in-fact for U.S. Bank for the purposes of this
second assignment when it had no such authority. Bayview subsequently executed a
false notarization of the assignment of the Trust Indenture to CBO-6 REO. Corp. CBO-6
REO Corp. did not exist on March 9 when Bayview purported to assign the Jacobsons’
Trust Indenture to that entity. Bayview claimed that it meant to assign the Trust
Indenture to “CBO-6 Corp.” and that the “REO” was a typographical error.
Nevertheless, CBO-6 Corp. was not formed until June 3, 2010, three months after the
alleged “typographical error” assignment on March 9.
¶12 On March 23, 2010, Bayview informed the Jacobsons that it was now servicing
their loan on behalf of U.S. Bank, with knowledge that U.S. Bank was not the
beneficiary. Bayview falsely represented that CBO-6 REO Corp. existed and that the
Jacobsons’ loan was transferred to the entity on June 10, 2010. Bayview also
misrepresented that it was servicing the loan on behalf of CBO-6 REO Corp. and that the
non-existent entity was the Jacobsons’ creditor. Bayview did not record the March 9,
7
2010 assignment of the Trust Indenture until September 21, 2010. When it did record,
the assignment from U.S. Bank to CBO-6 Corp. was still an assignment to a nonexistent
entity. As a result of these assignments, Bayview acted from March 9, 2010, to July 26,
2012, on behalf of beneficiaries that did not exist and had no interest in the Jacobsons’
loan.
¶13 The Jacobsons filed this action on June 9, 2010, to enjoin the sale of their house at
the June 15, 2010 trustee’s sale. The District Court issued an Order to cancel the
trustee’s sale set for June 15, 2010. Subsequently, the Jacobsons amended their
complaint to add FDCPA and MCPA claims. Bayview answered the Jacobsons’
complaint on November 8, 2010. After the case was filed, Bayview contacted the
Jacobsons, instead of their counsel, in June 2011, January 2011, February 2011, and July
2013.
¶14 Bayview moved for summary judgment in June 2012, asserting that it was the
current beneficiary of the deed of trust, and had the authority to foreclose. The court set a
hearing for September 19, 2012, on the motion for summary judgment. After changes in
counsel and numerous motions, including a second summary judgment motion by
Bayview, the court held a summary judgment hearing on August 7, 2013. The court
denied Bayview’s motion for summary judgment at the hearing. A bench trial was held
on November 21 and 22, 2013, at which both parties presented exhibits and witness
testimony. On March 10, 2014, the District Court issued its Findings of Fact,
Conclusions of Law, and Order. The court determined that Bayview engaged in deceit,
8
negligent misrepresentation, and intentional violations of the FDCPA and the MCPA.
The court awarded money damages under the FDCPA and the MCPA to the Jacobsons
including emotional distress damages and statutory damages totaling $226,408.14. The
court awarded the Jacobsons their costs and attorney fees in the case of $109,108.50.
¶15 After the trial, the Jacobsons filed a Motion for Additional Damages, Equitable
Relief and Sanctions because Bayview contacted them while they were still represented
by counsel, to notify them that Bayview was adding $33,696.00 to their loan for attorney
fees and expenses related to the November trial. On August 20, 2014, the court held a
hearing and determined that Bayview’s attempts to collect their trial-related attorney fees
and costs from the Jacobsons were in violation of the FDCPA, the MCPA, and the
District Court’s Order in the case prohibiting debt collection by Bayview during the
pendency of the action. Accordingly, the court imposed an additional $50,000.00 of
damages under § 30-14-133(1), MCA, to “further the remedial purposes of the Act.”
¶16 On the same day as the August 20, 2014 hearing, Bayview once again sent
additional correspondence to the Jacobsons. The letter was a mortgage statement which
included a $13,565.84 bill for attorney fees added to their mortgage. The Jacobsons filed
a Motion for Contempt and Bayview responded that it was deliberately charging the
Jacobsons for Bayview’s attorney fees and adding those to their mortgage. The District
Court held a hearing on the motion on October 28, 2014, at which Bayview continued to
assert its claims for attorney fees and other costs even while it could not produce any
authority for this claim. The District Court issued additional Findings of Fact,
9
Conclusions of Law, and Order on December 10, 2014, regarding the second violation of
the Order in the case. The court held:
1. Bayview is in contempt of the District Court, but may purge its
contempt by strict future compliance with the Court’s orders.
2. Bayview should pay Jacobsons attorney fees and costs incurred in
bringing the motions. Bayview should pay $10,000.00 to aid in
deterring Bayview’s unlawful conduct.
¶17 Two more Orders were entered in the case in regard to the attorney fees and costs.
The District Court determined:
1. Jacobsons are awarded $17,580.00 against Bayview and Peterson for the
first violation of the Order as determined by the District Court on
August 20, 2014.
2. Jacobsons are awarded $13,440.00 against Bayview and Peterson for the
second violation of the Order as determined by the District Court on
December 10, 2014.
¶18 Bayview appeals from the District Court’s Orders in this case, including the
subsequent orders related to Bayview’s violations of the original order. Bayview does
not appeal the attorney fees awarded pursuant to the Orders.
STANDARD OF REVIEW
¶19 This Court will affirm the factual findings of a district court sitting without a jury
unless those findings are clearly erroneous. Pedersen v. Ziehl, 2013 MT 306, ¶ 10, 372
Mont. 223, 311 P.3d 765 (citing M. R. Civ. P. 52(a)(6); Steiger v. Brown, 2007 MT 29,
¶ 16, 336 Mont. 29, 152 P.3d 705). “A district court’s findings are clearly erroneous if
they are not supported by substantial evidence, if the district court has misapprehended
the effect of the evidence, or if a review of the record leaves this Court with the definite
10
and firm conviction that a mistake has been committed.” Pedersen, ¶ 10 (citations
omitted). To determine whether substantial credible evidence supports the district court’s
findings, we review the evidence in the light most favorable to the prevailing party.
Pedersen, ¶ 10 (citation omitted). We review a district court’s conclusions of law for
correctness. Public Lands Access Ass’n v. Bd. of Co. Comm’rs, 2014 MT 10, ¶ 14, 373
Mont. 277, 321 P.3d 38.
DISCUSSION
¶20
1. Whether the District Court erred in determining that Bayview violated the
FDCPA.
¶21 The District Court made numerous determinations under the FDCPA, all of which
are contested by Bayview on appeal. The court found that Bayview was in violation of
the FDCPA for the following reasons: it engaged in FDCPA collection activity; it told
the Jacobsons to stop making payments and then commenced foreclosure; it informed the
Jacobsons it could not reinstate their loan within 5 days prior to the foreclosure sale; it
failed to provide a date for cure of the default; it wrongfully (under § 71-1-306(2), MCA)
appointed Peterson as trustee; it attempted to foreclose the property with a defective
trustee; it falsely represented that it held the beneficial interest as servicer; it falsely
promised to modify the loan in the Jacobsons favor; it falsely informed the Jacobsons
they were not qualified for the HAMP program; it falsely notarized the assignment of the
Trust Indenture to a corporation that did not exist; and falsely recorded the assignment to
a fictitious creditor without authority; it made false representations in discovery by
providing false answers and withholding documents; it contacted the Jacobsons while
11
they were represented by counsel; and it failed to comply with the requirements for
default procedure in the Trust Indenture.
¶22 On appeal, Bayview argues that its conduct and communications with the
Jacobsons do not constitute violations of the FDCPA or the MCPA and are insufficient to
justify the damages awarded to the Jacobsons. Bayview’s counsel argues that because no
foreclosure sale took place, no harm has been done, and regardless, conduct related to
foreclosure proceedings is not an attempt to collect a debt and is outside the scope of the
FDCPA and MCPA.
¶23 The Jacobsons argue that Bayview is a debt collector subject to the FDCPA. They
assert that Bayview’s claim to be exempt from the FDCPA is raised for the first time on
appeal. They further contend that Bayview and Peterson’s practices are the type of
abusive conduct the FDCPA and MCPA were enacted to remedy. They support the
District Court’s conclusions that Bayview’s actions were serious, material violations of
the law. Because the District Court made specific findings and conclusions regarding
Bayview’s violations of the FDCPA and MCPA, we consolidate and review the
conclusions with the parties’ arguments below. First, we address the Jacobsons’
argument that Bayview is changing its legal theory on appeal. Next, we review
Bayview’s violations of the FDCPA including the loan modification misrepresentations,
foreclosure rights misrepresentations, beneficiary status misrepresentations, improper
contact with a represented party, and the false assignments of the loan.
12
Change in Legal Theory on Appeal
¶24 On appeal, Bayview reframes its argument regarding the FDCPA. It argues the
FDCPA is inapplicable to Bayview because its actions—conduct related to foreclosure
proceedings by the originator of the loan—are not debt collection activity under the
FDCPA. This Court generally does not “address issues raised for the first time on appeal,
or a party’s change in legal theory” from that argued at the district court. Vader v.
Fleetwood Enterprises, Inc., 2009 MT 6, ¶ 37, 348 Mont. 344, 201 P.3d 139. The
District Court determined that “Bayview and Peterson are debt collectors” and supported
the conclusion by detailing Bayview’s debt collection efforts against the Jacobsons. The
District Court also noted in its Order that “[n]either Bayview nor Peterson has alleged
any affirmative defenses under the FDCPA, and neither has argued that they are not debt
collectors as defined by the FDCPA.” Bayview seeks to avoid the effect of these
conclusions by arguing a new theory on appeal. This theory was not offered to the
District Court, the District Court was not given the opportunity to weigh these arguments,
and we decline to address them on appeal. Instead, this Court will address the merits of
the arguments as they were made to the District Court.
Fair Debt Collection Practices Act (FDCPA)
¶25 The FDCPA is a strict liability statute which specifically prohibits “[t]he use of
any false representation or deceptive means to collect or attempt to collect any debt or to
obtain information regarding a consumer.” 15 U.S.C. § 1692e(10). The FDCPA was
enacted “to eliminate abusive debt collection practices by debt collectors, to ensure that
13
those debts collectors who refrain from using abusive debt collection practices are not
competitively disadvantaged, and to promote consistent State action to protect consumers
against debt collection abuses.” Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 591
(6th Cir. 2009) (quoting 15 U.S.C. § 1692(e)).
¶26 To assess whether particular conduct violates the FDCPA, courts use the “least
sophisticated debtor” standard. See Swanson v. Southern Oregon Credit Service, Inc.,
869 F.2d 1222, 1227 (9th Cir. 1988). This objective standard “ensure[s] that the FDCPA
protects all consumers, the gullible as well as the shrewd.” Clomon v. Jackson, 988 F.2d
1314, 1318-19 (2nd Cir. 1993).
¶27 When applying the “least sophisticated consumer” standard, the misleading
statement must also be materially false or misleading to violate FDCPA 15 U.S.C.
§ 1692e. Miller at 596-97. “The materiality standard simply means that in addition to
being technically false, a statement would tend to mislead or confuse the reasonable
unsophisticated consumer.” Wallace v. Washington Mut. Bank, F.A., 683 F.3d 323,
326-27 (6th Cir. 2012).
¶28 The District Court concluded that Bayview committed numerous violations using
false representations and unfair and deceptive practices to collect against the Jacobsons.
Loan Modification
¶29 The District Court found that Bayview’s authorized representatives told the
Jacobsons to stop making payments on their loan in May 2009 under the premise that it
would help them get a loan modification. Bayview also advised the Jacobsons that they
14
would not qualify for a HAMP modification without actually reviewing a HAMP
application submitted by the Jacobsons. Then, instead of assisting with a loan
modification, Bayview commenced foreclosure proceedings against the Jacobsons.
When the Jacobsons subsequently sought outside help, first from the Better Business
Bureau and then from Senator Tester’s office, Bayview finally engaged in “in-house”
loan modification negotiations. Bayview offered the first loan modification and the
Jacobsons rejected it because the terms were onerous. In the second negotiation (with
assistance from Senator Tester’s office), Bayview offered an acceptable loan
modification but refused to provide the offer in writing, resulting in its rejection by the
Jacobsons. The District Court found that Bayview’s false offers and promises to modify
constituted a false representation in connection with the collection of a debt and a
deceptive practice in the conduct of trade or commerce in violation of 15 U.S.C. § 1692e
and § 30-14-103, MCA.
¶30 Bayview argues that the District Court “completely misstates” the record
regarding negotiations between the parties, and that loan modification procedures were
online for the Jacobsons to access. In other words, Bayview did not fail to send a HAMP
application to the Jacobsons; the Jacobsons failed to pursue the option. Bayview asserts
that the loan modification negotiations were fair and the Jacobsons rejected the offer out
of hand. Finally, however, Bayview admits that its representative advised the Jacobsons
not to make mortgage payments.
15
¶31 The Jacobsons support the District Court’s findings regarding the loan
modification citing substantial evidence relied upon by the court. They argue that
evidence regarding the loan modifications was offered at trial, and the court made a
proper determination that Bayview made false representations that misled them in regard
to their modification options.
¶32 From the outset, we see no clear error in the District Court’s conclusions regarding
the loan modifications; the court relies on credible evidence. Bayview’s arguments
offered here were thoroughly weighed by the District Court. The court found Robin
Jacobson’s testimony regarding Bayview’s questionable HAMP application procedures
and subsequent negotiations for modification to be reliable, and gave it the greater weight
in light of the false statements made by Bayview’s witnesses to the court. The District
Court gave proper weight to testimony based on its evaluation of the witnesses and
supported its conclusions with substantial evidence. Furthermore, Bayview advised the
Jacobsons to stop making payments on their home while beginning foreclosure and
negotiating in bad faith regarding in-house loan modification. These false representations
caused the Jacobsons to question how they could modify or cure their default, and
whether they could trust any representation by Bayview regarding their loan. We
conclude the District Court relied on substantial evidence and properly found the false
representations regarding the loan modification were materially misleading and violations
of 15 U.S.C. § 1692(e) and § 30-14-103, MCA.
16
Foreclosure—False Representation of Debtor’s Rights
¶33 The District Court found that Bayview misrepresented the Jacobsons’ rights
regarding the reinstatement of their loan when it misinformed the Jacobsons regarding
their ability to cure and reinstate their loan within 5 days preceding the foreclosure sale in
its letters to the Jacobsons. The court determined that this was an unfair or deceptive
practice in violation of A.R.M. § 23.19.101(1)(l) and was a false representation of the
debtor’s rights in violation of 15 U.S.C. § 1692e(10). The District Court also found that
Bayview improperly advised the Jacobsons regarding their contractual rights by
demanding cure of the default in less than 30 days instead of the full 30 days, and failed
to give a specific date for cure provided by the Trust Indenture § 22(c). The District
Court determined these violations were false representations of the Jacobsons’ rights in
violation of 15 U.S.C. § 1692e(10) and constituted unfair practices in violation of
15 U.S.C. § 1692f and § 30-14-103, MCA.
¶34 Bayview does not deny these errors. Instead, it argues the errors are immaterial
because there was never a sale or foreclosure, and that the violations are only technical
and not the type of violation that the FDCPA intends to punish. The Jacobsons argue that
these are exactly the type of violations the FDCPA intends to prevent.
¶35 We find no error in the District Court’s interpretation or perception of the
evidence. Bayview failed to properly notify the Jacobsons regarding the timing of their
right to cure. Bayview’s argument does not hold up when compared to the statute. The
FDCPA provides that false representations connected to debt collection and “attempts
to
17
collect any debt” are violations of the law. 15 U.S.C. § 1692e(10) (emphasis added).
Bayview’s misrepresentations of the Jacobsons’ rights to cure the default pertained to
“attempts” to collect on the loan. Bayview’s misrepresentations regarding the time for
cure changed the contractual and statutory rights provided to the Jacobsons by cutting
short the time available for cure. Further, no specific date for cure was provided to the
Jacobsons, materially affecting their rights. The District Court correctly concluded
Bayview’s false representations about the Jacobsons’ legal rights are a violation of 15
U.S.C. § 1692e(10) and under 15 U.S.C. § 1692f are an unfair practice; the FDCPA
violations also constitute violations of § 30-14-103, MCA.
Beneficiary Status
¶36 The District Court found that Bayview was never the beneficiary on the
Jacobsons’ loan. Accordingly, the court concluded that Bayview misrepresented itself as
the beneficiary in both notices of trustee’s sale when Bayview stated: “[t]he beneficial
interest is currently held by Bayview Loan Servicing, LLC” as servicer for CitiMortgage.
The District Court held this constituted a false representation in connection with the
collection of a debt and a deceptive practice in the conduct of trade or commerce in
violation of 15 U.S.C. § 1692e and § 30-14-103, MCA. Bayview admits the
misrepresentation but argues the District Court erred in its conclusion because the
misrepresentation is irrelevant and immaterial to the Jacobsons’ default.
¶37 We conclude the misrepresentation was material because the Jacobsons were
misled regarding the identity of the beneficiary, which directly affected their ability to
18
resolve the debt. In addition, Bayview created a false corporation to hold the note, made
false representations regarding the note, and made an improper beneficiary designation;
the result is materially misleading to the consumer. Given the wide range of
misrepresentations, the “least sophisticated consumer” would clearly have difficulty
ascertaining who owns the loan, and who can foreclose or resolve the loan. Bayview’s
misrepresentation regarding the beneficiary of the Trust Indenture was a material
misrepresentation and the District Court properly concluded it was a deceptive practice in
violation of the FDCPA and the MCPA.
Bayview’s Improper Communications
¶38 The FDCPA prohibits a debt collector from communicating with a consumer in
connection with the collection of any debt “if the debt collector knows the consumer is
represented by an attorney . . . .” 15 U.S.C. § 1692c(a)(2). The District Court
determined that Bayview knew the Jacobsons were represented by counsel on June 9,
2010. The District Court found that at least four letters (June 28, 2010, January 18, 2011,
February 1, 2011, and July 1, 2013) sent to the Jacobsons after that date were direct
communications to collect a debt in violation of the statute. Bayview argues that these
communications were not violations of 15 U.S.C. § 1692c because they were not attempts
to collect a debt. However, the argument fails because the letters state “[t]his letter is an
attempt to collect a debt . . . .” Bayview knew the Jacobsons were represented by counsel
but persisted in sending debt collection notices in violation of the statute. The District
Court’s conclusions regarding Bayview’s direct communications with the Jacobsons are
19
properly based on substantial evidence. The District Court did not err when it determined
Bayview improperly contacted the Jacobsons.
False Assignments
¶39 The District Court found numerous FDCPA violations pertaining to Bayview’s
assignments of the Jacobsons’ Trust Indenture. The court sifted through a confusing
series of assignments finding the following: Bayview falsely told the Jacobsons that
U.S. Bank was the “current” beneficiary of the Trust Indenture and Bayview was
servicing on U.S. Bank’s behalf; Bayview then falsely represented that CBO-6 REO
Corp. existed and that the loan was transferred to the entity on June 10, 2010; Bayview
also falsely represented that it was servicing the loan on behalf of the non-existent entity;
Bayview recorded the false assignment without authority (because it was not the
beneficiary and was not attorney-in-fact for the beneficiary), to a non-existent entity,
CBO-6 REO Corp. It did not stop there. Bayview then misinformed the District Court
that Bayview was the current beneficiary of the loan when it was not. Bayview also
provided false discovery answers claiming to have no communications with either U.S.
Bank or CBO-6 REO Corp. and Bayview representative Gerardo Trueba admitted at trial
that he prepared false discovery responses regarding the misrepresentations. The District
Court concluded that this long series of Bayview’s actions was in violation of 15 U.S.C.
§ 1692e and § 30-14-103, MCA.
¶40 Bayview argues that the District Court’s conclusions regarding Bayview’s false
assignments are erroneous. It argues that Bayview’s foreclosure activity is not debt
20
collection, that the false assignments do not give rise to an actionable FDCPA claim, and
that it is not a violation of the FDCPA to initiate foreclosure before a note and mortgage
assignment is completed so long as it occurs prior to final judgment. The Jacobsons
argue that Bayview’s misrepresentations of the identity of the original creditor are
materially misleading and violations of the FDCPA.
¶41 The core of Bayview’s argument is that it can assign the note and mortgage so
long as it occurs prior to final judgment on the foreclosure. To support this argument,
Bayview cites Whittiker v. Deutsche Bank Nat’l Trust Co., 605 F. Supp. 2d 914, 931
(N.D. Ohio 2009), a case in which the court found no violation of the FDCPA when the
bank (DBNTC) falsely asserted it was the owner and holder of the notes and mortgages.
There, the court determined the claim failed because it was not misleading or deceptive
because the bank, which was properly the mortgage holder, could assign the loan so long
as the process was complete prior to final judgment in the foreclosure. Bayview relies on
the court’s conclusion that “simple inability to prove present debt ownership at the time a
collection is filed does not constitute a FDCPA violation.” Whittiker at 929.
¶42 Bayview’s actions here are easily distinguished from the actions in Whittiker.
Bayview’s misdeeds go far beyond a “simple inability to prove ownership” of the debt.
Whittiker at 929. Bayview made numerous misrepresentations as part of the false
assignments of the loan. It falsely represented that it was “attorney-in-fact” for U.S.
Bank when it assigned the Trust Indenture to “CBO-6 REO Corp.” when it did not exist.
The assignment to the non-existent entity was made with a false notarization by Bayview
21
and its employee. From there, Bayview falsely told the Jacobsons that U.S. Bank was the
current beneficiary, and falsely stated that it was servicing the loan for U.S. Bank. U.S.
Bank was never the beneficiary. Bayview never had authority to assign the loan because
it never was the beneficiary. Bayview misinformed the court that it was the beneficiary
of the loan. Bayview also admitted to providing false discovery answers. Finally,
Bayview recorded the assignment under false authority to a fictitious creditor.
¶43 Bayview’s arguments fall short because the sum of its misrepresentations is not
“simple.” Instead, Bayview’s activities are seriously misleading misrepresentations
regarding the Jacobsons’ loan and its status. The misrepresentations are material because
they would mislead the “least sophisticated consumer” due to the confusion regarding
who owns the loan and who possesses authority to impose requirements on the Jacobsons
regarding payment of the loan. Individually, and taken as a whole, the false
misrepresentations and conduct misled the Jacobsons regarding the status of their loan
and its true owner. The District Court did not err; it properly concluded that Bayview’s
false assignments and surrounding misrepresentations and conduct were unfair and
deceptive practices in violation of 15 U.S.C. § 1692e, f, and the MCPA.
¶44 The District Court’s factual findings pertaining to Bayview’s violations of the
FDCPA are supported by substantial evidence. Bayview repeatedly violated the FDCPA
and MCPA, and violated the contractual requirements of the Trust Indenture. Bayview’s
arguments that the violations are immaterial and irrelevant fail to account for intentional
violations of the law. Bayview’s unfair and deceptive practices against the Jacobsons
22
cannot be tolerated as they are clear violations of the FDCPA and the MCPA. We
conclude that the District Court made detailed and accurate conclusions of law under the
FDCPA and accordingly, we affirm its decision with respect to the FDCPA claims.
¶45 2. Whether the District Court erred in determining that Bayview violated the
MCPA.
¶46 The Montana Consumer Protection Act declares “[u]nfair methods of competition
and unfair or deceptive acts or practices in the conduct of any trade or commerce are
unlawful.” Section 30-14-103, MCA. In Baird v. Norwest Bank, we determined that the
Montana Consumer Protection Act applies to “consumer loans by banks in the lending
and collecting of such loans.” 255 Mont. 317, 328, 843 P.2d 327, 334 (1992). This
Court further determined that under the Montana Consumer Protection Act, “an unfair act
or practice is one which offends established public policy and . . . is either immoral,
unethical, oppressive, unscrupulous or substantially injurious to consumers.” Rohrer v.
Knudson, 2009 MT 35, ¶ 31, 349 Mont. 197, 203 P.3d 759. In Morrow, we noted it is
“an unfair or deceptive practice when a party ‘states that a transaction involves rights,
remedies or obligations that it does not involve.’” Morrow, ¶ 67 (citing Admin. R. M.
23.19.101(1)(l)). We further added that “[a] consumer may sue under the act if he or she
has suffered ‘any ascertainable loss of money or property’ as the result of an unfair
practice.” Morrow, ¶ 67 (citing § 30-14-133, MCA).
¶47 Bayview disputes the District Court’s determination that Bayview violated the
Montana Consumer Protection Act. Bayview argues that MCPA claims must be
established on “independent grounds” and that neither the Jacobsons, “nor the District
23
Court, cite any authority in the MCPA itself, or in any authority construing the MCPA,
for the proposition that purported violations of the FDCPA are also violations of the
MCPA.” For its “independent grounds” argument, Bayview cites Federal Home Loan
Mortgage Corp. v. Lamar, 503 F.3d 504, 513 (6th Cir. 2007).
¶48 In Lamar, the Sixth Circuit states, “the purpose of both acts [the FDCPA and
OCSPA [Ohio Consumer Sales Practices Act]] is to prohibit both unfair and deceptive
acts and this court holds that any violation of any one of the enumerated sections of the
FDCPA is necessarily an unfair and deceptive act or practice in violation of [Ohio’s
OCSPA] R.C. § 1345.02 and/or § 1345.03.” Lamar at 513 (emphasis added). A cursory
reading of the Lamar opinion establishes that Bayview misinterpreted the facts and law
of Lamar when it concluded that violations of the OCSPA (a law substantially similar to
Montana’s MCPA) require “independent grounds” from the FDCPA. The OCSPA
claims in the Lamar case failed because they relied entirely on the FDCPA claims, which
the court determined were not substantiated by the plaintiffs. In this case, the FDCPA
and MCPA claims rely on the same grounds, and we have determined that the FDCPA
claims are valid; thus, the MCPA claims succeed on the same basis. We reiterate here
and hold that it is well established that a violation of federal consumer law pursuant to the
FDCPA can also constitute grounds for violation of Montana law pursuant to the MCPA.
See Morrow, ¶¶ 67-69 (holding that HAMP claims under the FDCPA are violations
sufficient to state claims under the MCPA and, more generally, both the FDCPA and
MCPA apply to the “collection and servicing of loans”); see also, Lamar at 513.
24
¶49 On the merits, the District Court provided substantial evidence that Bayview’s
Action violated the MCPA. In Morrow, we held that instructing a borrower to default on
a loan, giving conflicting representations regarding the borrower’s status, all while
causing the borrower’s default to grow constitutes a practice “substantially injurious to
consumers” in violation of the MCPA. Morrow, ¶¶ 67-69. Here, the District Court
found that Bayview told the Jacobsons not to make payments, while at the same time
commencing foreclosure. Bayview also violated provisions of the Trust Indenture
§ 22(c) and § 71-1-306(2), MCA. These violations are very similar to those addressed in
Morrow
and clearly constitute violations of Montana law while also in violation of the
FDCPA.
¶50 In addition, Bayview violated Admin. R. M. 23.19.101(1)(l) when it failed to
provide an option for cure of the default in the five days preceding the Trustee’s sale.
The result of this violation would be “substantially injurious” to the Jacobsons and falls
well within unfair or deceptive practices prohibited by the MCPA. The District Court
also found specific grounds for Peterson’s liability, as he acted pursuant to an invalid
Trustee substitution when he twice initiated foreclosure proceedings against the
Jacobsons. The District Court properly concluded the action was a violation of
§ 71-1-306(2), MCA, and § 30-14-103, MCA. Finally, the court correctly concluded that
Bayview’s attempt to collect attorney fees and expenses post-trial against the Jacobsons
was a clear violation of the FDCPA and the MCPA.
25
¶51 We conclude that the District Court’s findings under the FDCPA regarding
Bayview’s actions establish state law grounds for violations of the MCPA. Further, we
find no error in the District Court’s conclusions because the findings are supported by
substantial evidence demonstrating Bayview and Peterson’s liability under the MCPA.
¶52 3. Whether the District Court erred in awarding damages to the Jacobsons.
¶53 Section 27-1-202, MCA, provides that “[e]very person who suffers detriment from
the unlawful act or omission of another may recover . . . [damages].” Section
30-14-133(1), MCA, provides that “[t]he court may, in its discretion, award up to three
times the actual damages sustained and may provide any other equitable relief that it
considers necessary or proper.” The MCPA provides this discretion to the courts
“without imposing any particular criteria, to grant an award of treble damages if it finds
that such an increase will further the purpose of the CPA.” Vader, ¶ 47. A district
court’s damage determination is a factual finding this Court will uphold if the finding is
supported by substantial evidence. Watson v. West, 2009 MT 342, ¶ 18, 353 Mont. 120,
218 P.3d 1227 (citing Tractor & Equipment Co. v. Zerbe Bros., 2008 MT 449, ¶ 12, 348
Mont. 30, 199 P.3d 222). This Court will not overturn a district court’s determination of
damages unless it is clearly erroneous. Watson, ¶ 18 (citation omitted).
¶54 The District Court awarded $226,408.14 on the FDCPA and MCPA claims, which
Bayview argues is not based on any injury sustained by the Jacobsons and is not
supported by evidence that could be construed as a violation of the FDCPA. Specifically,
the District Court awarded $172,615.20 of actual damages and $50,000.00 of additional
26
damages “for emotional distress suffered by the Jacobsons together with the deception,
stonewalling, and utter disregard for their contractual and statutory rights that the
Jacobsons have been forced to endure as a result of [Bayview’s] conduct.” The court also
assessed statutory damages of $1,000.00 for each of the Jacobsons under 15 U.S.C.
§ 1692k(a)(2). The court awarded money damages, emotional distress damages, statutory
damages, and additional damages for Bayview’s post-trial actions under the MCPA,
which we review individually.
Damages
¶55 The District Court concluded that because Bayview resisted payment and
instructed the Jacobsons not to pay on their loan, the Jacobsons incurred damages
resulting from Bayview’s conduct, and those damages were the late charges and interest
that Bayview assessed to the Jacobsons. To determine damages, the District Court used
Bayview’s February 5, 2010 “Notice of Trustee’s Sale.” The court calculated damages
across a date range from the first defective notice of foreclosure on March 24, 2009, until
the second day of trial on November 22, 2013. Thus, per the notice, this included
$1,792.94 in late charges, plus the interest accrued since the first notice of default until
the second day of trial, which was $101.30 interest per day multiplied by 1,704 days or
$172,615.20.
¶56 Bayview argues that because the Jacobsons’ house was never foreclosed and sold,
its actions have not damaged the Jacobsons in any way, because no “actual damage” was
sustained under the provisions of 15 U.S.C. § 1692k(a)(1) (stating that a debt collector
27
who fails to comply with the provisions of the FDCPA is liable to such person in an
amount equal to that persons actual damages). Under Bayview’s reasoning, a loan
servicer could undertake any sort of action to collect debt so long as the loan does not
actually foreclose. This logic fails because the FDCPA and the MCPA were enacted to
stop unfair practices including false representations of the sort Bayview has used in this
case. Furthermore, Bayview does not have to be successful in its debt collection actions;
it is liable for false representations and unfair practices because it was “attempting” to
collect debt. 15 U.S.C. § 1692e(10).
¶57 Here, in addition to its deception and unfair practices, Bayview imposed late
charges and interest on the Jacobsons’ loan, increasing the amount of their default. In
Morrow, we determined that causing a consumer’s default to grow would “constitute a
practice substantially injurious to consumers.” Morrow, ¶¶ 68-69. Here, Bayview
instructed the Jacobsons to miss payments and default on their loan. That default led to
subsequent misrepresentations by Bayview regarding the Jacobsons’ rights, including
their ability to cure the default. While Bayview was making misrepresentations to the
Jacobsons and using unfair practices, it was simultaneously increasing the amount of
their liability on their loan through late charges and interest. Similar to Morrow, this
increase in the loan liability is substantially injurious to the Jacobsons. The District
Court correctly found that the Jacobsons suffered a financial detriment because their loan
liability was wrongfully increased as a result of Bayview’s actions.
28
¶58 We find further support for this conclusion in Wigod v. Wells Fargo Bank, N.A.,
673 F.3d 547 (7th Cir. 2012). The U.S. Seventh Circuit Court of Appeals determined that
Wigod alleged recoverable pecuniary loss under the Illinois Consumer Protection Act as
a result of unfair HAMP procedures by Wells Fargo. Wigod, 673 F.3d at 575. The court
found Wigod’s allegations that “she incurred costs and fees, lost other opportunities to
save her home, suffered a negative impact to her credit, never received a Modification
Agreement, and lost her ability to receive incentive payments during the first five years
of the modification” were sufficient to establish pecuniary loss. Wigod, 673 F.3d at 575.2
The Jacobsons have suffered a pecuniary loss similar to that suffered by Wigod and
accordingly, we conclude that the damages suffered by the Jacobsons are a financial
detriment and the losses are properly considered actual damages by the District Court.
We reject Bayview’s contentions that the Jacobsons have suffered no financial detriment
as a result of Bayview’s conduct. There is no question that the Jacobsons suffered a
financial detriment as a result of Bayview’s unfair practices and conduct. We conclude
2 We also note that the Seventh Circuit Court of Appeals included the following at endnote 14 of
their opinion for additional support of this conclusion: “In a number of third-generation HAMP
cases, district courts have found that plaintiffs successfully pled claims under other states’
analogous consumer fraud statutes.” See, e.g., Allen v. CitiMortgage, Inc., No. CCB-10-2740,
2011 U.S. Dist. LEXIS 86077, 2011 WL 3425665, at *10 (D. Md. Aug. 4, 2011) (“The plaintiffs
have alleged that CitiMortgage’s misleading letters led to the following damages: damage to
Mrs. Allen’s credit score, emotional damages, and forgone alternative legal remedies to save
their home. Accordingly, at this stage, the plaintiffs have stated sufficiently an actual injury or
loss as a result of a prohibited practice under [the Maryland Consumer Protection Act].”);
Stagikas v. Saxon Mortg. Services, Inc., 795 F. Supp. 2d 129, 137 (D. Mass. 2011) (“The
complaint also alleges several injuries resulting from defendant’s allegedly deceptive
representations about plaintiff’s HAMP eligibility, including increased interest on the debt, a
negative impact on plaintiff’s credit history, and the loss of other economic benefits of the loan
modification. That is enough to sustain a claim of injury under [the Massachusetts Consumer
Protection Act].) (internal citation omitted).” Wigod, 673 F.3d at 575, n.14.
29
that these injuries alleged under the FDCPA and MCPA find a proper remedy in actual
damages.
¶59 We do not find error with the District Court’s damage award because it is
reasonable compensation for the substantial injury and financial detriment suffered by the
Jacobsons. As noted above in ¶ 56, the court calculated damages from the date of the
first defective notice of foreclosure on March 24, 2009, through the second day of trial on
November 22, 2013. The interest charged totaled $172,615.20, and the late charges
totaled $1,792.94. If Bayview was the mortgage holder in this case, we would direct that
the late charges and interest that have accumulated on the mortgage balance since the
date of the first defective notice of foreclosure be subtracted from the present mortgage
balance. However, Bayview is merely the loan servicer; it does not hold the mortgage.
In order that the Jacobsons have the funds necessary to pay down the mortgage balance
by the amount of late charges and accumulated interest, we deem it appropriate to uphold
this aspect of the District Court’s damage award against Bayview. In addition, because
we are remanding to the District Court for a hearing to determine attorney fees on appeal,
the District Court should also take the opportunity on remand to assess any additional late
charges and interest that have accumulated on the debt from November 22, 2013, through
the date of the District Court’s final order following remand.
Emotional Distress Damages
¶60 Under § 30-14-133(1), MCA, the District Court awarded $50,000.00 to the
Jacobsons for emotional distress damages based on testimony from Robin Jacobson
30
“together” with damages for the deceit, stonewalling, and disregard for the Jacobsons
rights. Bayview contests the award claiming the District Court speculated to obtain the
amount of damages without testimony or evidence. The Jacobsons argue that substantial
evidence establishes the damages inflicted by Bayview including the inability to
determine the holder of their Promissory Note or the beneficiary of their Trust Indenture,
and the consequent loss of ability to properly resolve the default.
¶61 Under § 30-14-133(1), MCA, the District Court is granted broad authority to
award, in its discretion, “up to three times the actual damages sustained and may provide
any other equitable relief that it considers necessary or proper.” (Emphasis added.)
Here, the District Court properly awarded damages under the MCPA based upon
testimony regarding the emotional distress of the Jacobsons and on the sum of the
damages “the Jacobsons were forced to endure” as a result of Bayview’s misconduct.
Robin Jacobson’s testimony and the extensive record of Bayview’s misdeeds are
substantial evidence offered by the court to support the damages. Further, we note that
under the FDCPA, witness testimony alone is sufficient to support an award for
emotional distress damages with no requirement for substantial evidence to support the
damages. Zhang v. American Gem Seafoods, Inc., 339 F.3d 1020, 1040 (9th Cir. 2003).
We conclude it was well within the District Court’s discretion to award these damages.
Statutory Damages
¶62 The District Court awarded statutory damages under 15 U.S.C. § 1692k(a)(2)(A)
of $1,000.00 for each of the Jacobsons as individual plaintiffs in the case. Bayview
31
argues the damages are limited to $1,000.00 in any one action under the statute. The
language of subsection 1692k(a)(2)(A) on its face dictates that a debt collector is liable
for a single award of statutory damages per plaintiff per lawsuit. In this case, the District
Court awarded a single award of $1,000.00 for each plaintiff in their lawsuit against
Bayview. Each plaintiff has an individual stake in the lawsuit, and we conclude that the
District Court properly awarded statutory damages to each of the Jacobsons.
Post-Trial Communication Damages
¶63 After trial, the District Court awarded damages under the MCPA of $50,000.00 on
the first post-trial motion and $10,000.00 on the second post-trial motion when Bayview
improperly contacted the Jacobsons about collections and attorney fees on two separate
occasions. Bayview argues that the damages are awarded in error as they are not
supported by “substantial credible” evidence. The Jacobsons accurately contend that
Bayview fails to discuss or analyze the District Court’s additional damage award as its
briefing only raises but does not analyze the issue. Nonetheless, we will briefly address
the issue on the merits.
¶64 Part of the inherent “remedial purpose” of the damage provisions of the MCPA is
to deter inappropriate action against consumers by debt collectors, or in this case, loan
servicing companies. Vader, ¶ 48. An award of damages may benefit the plaintiffs in a
case, but its remedial nature also serves as notice to all that violations of the MCPA are
consequential and will not be tolerated.
32
¶65 Here, the District Court issued two additional orders in the case. The August 20,
2014 Order was on a Motion for Additional Damages, Equitable Relief, and Sanctions
sought by the Jacobsons because Bayview, after trial, directly contacted them to collect
on the loan and attorney fees in violation of the Judgment in the case, the MCPA, and the
FDCPA. The District Court found for the Jacobsons on the motion and ordered Bayview
to pay $50,000.00 “to further the remedial purposes of the [MCPA].” The second Order
was on a Motion for Contempt of Court by the Jacobsons after Bayview contacted them
again for collection purposes and to inform them that it intended to charge the Jacobsons
for Bayview’s attorney fees related to the case. The District Court found that Bayview’s
actions violated the Small Tract Financing Act, the FDCPA, the MCPA, and the court’s
judgment in the case. The District Court awarded the Jacobsons an additional $10,000.00
as equitable relief under the MCPA.
¶66 The two damage awards are well within the court’s discretion under
§ 30-14-133(1), MCA. The damages serve as a proper deterrent under the Act to stop
Bayview’s improper conduct and to “further the purpose of the [MCPA]” by providing
warning to Bayview and other loan servicers that improper debt collection conduct will
not be tolerated. Vader, ¶ 47. The damages are supported by substantial evidence and
demonstrate a thorough, well-reasoned remedy fashioned by the court. We conclude that
the District Court did not err in awarding damages to the Jacobsons.
33
¶67 4. Whether this Court should award costs and fees to the Jacobsons on appeal.
¶68 The Jacobsons contend that attorney fees are available for consumers who
successfully defend a verdict in their favor under the MCPA. Vader ¶¶ 52-53. They also
argue that the Ninth Circuit Court of Appeals has held that a plaintiff who successfully
defends an FDCPA action is entitled to attorney fees and costs on appeal. Joe v.
Payco-General Am. Credits., 34 F.3d 1072 (9th Cir. 1994). The Jacobsons request that
we remand this matter to the District Court for a determination of reasonable attorney
fees and costs incurred on appeal.
¶69 We have held that, under the MCPA, attorney fees and costs are allowed upon
successful defense of a verdict on appeal. Vader, ¶¶ 50-53. The MCPA states, “[i]n any
action brought under this [Act] the court may award the prevailing party reasonable
attorney fees incurred in prosecuting or defending the action.” Section 30-14-133(3),
MCA; Vader, ¶ 52. In this action, the Jacobsons are entitled to fees and costs because
they necessarily defended the verdict in their favor. Bayview has not objected to an
award of attorney fees and costs on appeal. Accordingly, we remand this matter to the
District Court to determine a reasonable award of attorney fees incurred by the Jacobsons
in the defense of their claims on appeal.
CONCLUSION
¶70 The District Court did not err when it determined that Bayview violated the
FDCPA when it made false representations to the Jacobsons regarding the Trust
Indenture and engaged in unfair trade practices to collect the debt. Bayview violated
34
§ 30-14-103, MCA, because any violation of the FDCPA corresponds with an unfair and
deceptive act or practice in violation of the Act. The District Court properly determined
damages incurred by the Jacobsons as a result of Bayview’s actions and supported those
conclusions with substantial evidence. We conclude that the Jacobsons are entitled to
their attorney fees and costs on appeal because they have necessarily defended the verdict
in their favor under § 30-14-133(3), MCA.
¶71 Affirmed.
/S/ MICHAEL E WHEAT
We Concur:
/S/ MIKE McGRATH
/S/ PATRICIA COTTER
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
Justice Jim Rice, concurring.
¶72 I concur in the Court’s opinion.
¶73 The Court holds that Bayview committed numerous “clear violations of the
FDCPA,” Opinion, ¶ 44, and analyzes those violations extensively under Issue 1. I think
it bears repeating that, for procedural reasons, we have not undertaken consideration of
Bayview’s argument that the FDCPA does not apply, as a matter of law, to foreclosure of
secured interests. Thus, the Court’s holdings on that issue rest on the assumption that the
Act applies, which is how we have determined the matter was litigated before the District
Court. If properly raised and preserved, this would be a threshold issue about which, as
35
the parties note, there has been spirited debate in the federal courts. See Gray v. Four
Oak Court Ass’n, Inc., 580 F. Supp. 2d 883, 887 (D. Minn. 2008) (FDCPA’s “definition
of ‘debt collector’ clearly reflects Congress’s intent to distinguish between ‘the collection
of any debts’ and ‘the enforcement of security interests.’”) (citation omitted); Derisme v.
Hunt Leibert Jacobson P.C., 880 F. Supp. 2d 339, 363 (D. Conn. 2012) (“a majority of
courts who have addressed this question have also concluded that foreclosing on a
mortgage does not qualify as debt collection activity for purposes of the FDCPA” and
collecting cases); cf. Kaymark v. Bank of Am., N.A., 783 F.3d 168, 179 (3d Cir. 2015)
(“Nowhere does the FDCPA exclude foreclosure actions from its reach. On the contrary,
foreclosure meets the broad definition of ‘debt collection’ under the FDCPA . . . .”)
(citation omitted). Consequently, resolution of this threshold issue is left for another day.
The Third District Court of Appeal issued a remarkable opinion concerning the statute of limitations in mortgage foreclosure actions. The court had previously determined in its 2014 Deutsche Bank v. Beauvais opinion that the statute barred Deutsche Bank from filing a foreclosure action five years after the borrower’s default and the lender’s acceleration demanding full payment of the loan.
In a 6-4 decision April 12, the en banc court reversed itself and essentially held that the statute of limitations can never bar a bank’s effort to foreclose on a Florida homeowner until five years after maturity of the loan. The court’s ruling will ensure that the foreclosure crisis facing our court system will continue for years to come until the banks finally get it right, no matter how many times they do it wrong.
The Third District’s en banc decision based its holding on the 2004 Florida Supreme Court opinion in Singleton v. Greymar. In Singleton, the trial court dismissed a lender’s foreclosure action on an accelerated debt with prejudice after the bank failed to appear at a hearing. What is unclear from the Singleton record is why the lender failed to appear. It should have been noted that there was an agreement to reinstate under which the borrower made payments prior to the dismissal.
It is with great sadness that I report to you that Kings County, New York Judge Arthur Schack has died at age 71. He was a champion of the truth and will be notably remembered for being reversed in the HSBC BANK USA NA v Taher case because the higher courts did not like his ruling (which I believe was for political reasons). You can read the latest article on Judge Schack here: Beloved Bay Ridge Justice Arthur Schack dies at 71 | Brooklyn Daily EagleMy condolences go out to his family.
This is not the news I was expecting in my inbox this morning, given the number of foreclosures that are now being filed in all of the New York boroughs right now. In fact, due to the downturn in certain areas of the economy (which Wall Street and its pundits claim is on the rebound), various sectors of wage-earning workers are finding themselves unemployed (e.g., Lorain County, Ohio) and when people are unemployed, mortgages don’t get paid and foreclosures start back up again.
When we lose a justice like Judge Arthur Schack, the economy suffers because the banks have one less “hurdle” to face in court, which gets them closer to a win, especially in light of the apparent and continued use of illicitly-manufactured documents, supervised by the foreclosure mill law firms and manufactured by the servicers bringing the foreclosure actions on behalf of REMICs that have been paid off multiple times over!
UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
DAVID PAIVA,
Plaintiff,
v. Civil Action No. 14-cv-14531-ADB
THE BANK OF NEW YORK MELLON,
Defendant.
MEMORANDUM AND ORDER
August 11, 2015
BURROUGHS, D.J.
I. Background
Plaintiff David Paiva (“Paiva”) seeks to void the foreclosure sale of his home in
Massachusetts (the “Property”), conducted by Defendant Bank of New York Mellon
(“BONYM”) on April 28, 2014. BONYM, the lender at the time of the foreclosure sale, also
purchased the Property in foreclosure. Paiva, who has continued to live in the Property since the
foreclosure, has not made a mortgage payment since 2008 and does not dispute that he is in
default on the mortgage.
In his two-count complaint, Paiva alleges two independent grounds for voiding the
foreclosure sale. [Dkt. 1-4.] Count I alleges that the foreclosure did not strictly comply with
paragraph 22 of the mortgage because the notice of default required by that paragraph was sent
by the servicer of the loan, rather than by the lender. Paiva claims that this violated the statutory
power of sale under Massachusetts law, which requires a foreclosing bank to “comply with the
terms of the mortgage,” G.L. c. 183, § 21. Controlling case law requires strict compliance with
paragraph 22 of the mortgage, and Paiva argues that this standard was not satisfied by the loan
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servicer’s sending of the notice of default.
Count II alleges that BONYM failed to notify “the office of the assessor or collector of
taxes of the municipality in which the premises are located” within 30 days of conveying title, as
required by G.L. c. 244, § 15A (“§ 15A”). BONYM notified the tax collector by letter dated
February 12, 2015, more than nine months after the foreclosure sale. [Dkt. 20-1, Ex. 3.] Paiva
argues that § 15A is a “statute[] relating to the foreclosure of mortgages” pursuant to the
statutory power of sale, G.L. c. 183, § 21, and that, as with paragraph 22 of the mortgage, strict
compliance with § 15A is required. He further argues that the proper remedy under either count
of his complaint is to void the foreclosure.
In its counterclaim, BONYM alleges five counts, all of which turn on the validity of the
foreclosure. [Dkt. 8.] BONYM seeks a judgment for the difference between the total amount
owed by Paiva as of the date of the foreclosure sale and the sale price—a deficiency of
approximately $192,000.00. BONYM also seeks a judgment for possession and a writ of
assistance from the Court.
By agreement of the parties, Paiva and BONYM filed cross-motions for summary
judgment before conducting discovery in this case. Following careful consideration of the
parties’ briefs and further argument presented at a hearing conducted on August 6, 2015, the
Court concludes that there is no genuine dispute as to any material fact and that Paiva is entitled
to judgment as a matter of law on both counts of his complaint. The Court stated its reasons for
this ruling on the record at the hearing and supplements those reasons herein.
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II. Discussion
A. Legal Standard – Summary Judgment
Summary judgment is appropriate only “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A dispute is “genuine” if “the evidence is such that a reasonable jury could return a
verdict in favor of the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A “material” fact is one that “might affect the outcome of the suit under the governing
law.” Id. The moving party has the burden of proving that there is no genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
B. Count I: Alleged Failure to Comply with Paragraph 22 of the Mortgage
The parties’ briefs identify only one purportedly disputed fact in this case, which relates
to Count I of the complaint: the controlling date of an assignment of the mortgage from the
original lender, MERS as nominee for Countrywide Home Loan Inc. (“Countrywide”), to
BONYM. [Dkt. 22, ¶ 4.] The Court, however, finds that this is not a genuine issue of material
fact that would preclude summary judgment because at the hearing, BONYM acknowledged that
as of May 19, 2008—the date of Countrywide’s notice of default to Paiva—BONYM was the
lender and Countrywide was the servicer of the loan.1
Paragraph 22 of the mortgage sets forth, in relevant part, the following requirements for a
notice of default:
Lender shall give notice to Borrower prior to acceleration following Borrower’s
breach of any covenant or agreement in this Security Instrument . . . . The notice
shall specify: (a) the default; (b) the action required to cure the default; (c) a date,
not less than 30 days from the date the notice is given to Borrower, by which the
default must be cured; and (d) that failure to cure the default on or before the date
1 If Countrywide were still the lender as of May 19, 2008, then there would be no violation of the
requirement in paragraph 22 of the mortgage that the lender send the notice of default.
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specified in the notice may result in acceleration of the sums secured by this
Security Instrument and sale of the Property. The notice shall further inform
Borrower of the right to reinstate after acceleration and the right to bring a court
action to assert the non-existence of a default or any other defense of Borrower to
acceleration and sale. If the default is not cured on or before the date specified in
the notice, Lender at its option may require immediate payment in full of all sums
secured by this Security Instrument without further demand and may invoke the
STATUTORY POWER OF SALE and any other remedies permitted by Applicable
Law.
[Dkt. 19-1, ¶ 22.]
Paiva submits that Countrywide’s notice of default did not satisfy the requirements of
paragraph 22 of the mortgage, not because any of the required substance was missing from the
notice, but because the notice should have come from BONYM as the lender, rather than from
Countrywide as the servicer of the loan. BONYM responds that the word “Lender” in paragraph
22 should be read to include the servicer of the loan, and thus, the fact that Countrywide sent the
notice of default to Paiva did, in fact, comply with the requirement that “Lender shall give notice
to Borrower” of the default and action required to cure the default. [Dkt. 19-1, ¶ 22 (emphasis
added).]
The language of paragraph 22 is clear and unequivocal as to who must give the required
notice of default to the borrower: “Lender” must do so. The Court agrees with Paiva that
Countrywide’s notice of default did not strictly comply with paragraph 22 of the mortgage, as
required under the statutory power of sale and under the Massachusetts Supreme Judicial Court’s
(“SJC”) case law. See G.L. c. 183, § 21 (requiring a foreclosing bank to “comply with the terms
of the mortgage”); U.S. Bank Nat. Ass’n v. Ibanez, 458 Mass. 637, 647 (2011) (the terms of the
power of sale, G.L. c. 183, § 21, must be strictly adhered to); see also Pinti v. Emigrant
Mortgage Company, Inc., 33 N.E.3d 1213, 1226 (2015) (strict compliance with the notice of
default required by paragraph 22 is necessary in order for a foreclosure sale to be valid).
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Paragraph 22 specifically states that “Lender shall give notice to Borrower . . . .” Significantly, it
does not say that “Lender or the servicer of the loan shall give notice to Borrower . . . .” Nor is
the term “Lender” defined in the mortgage to include the servicer of the loan. Rather, the
mortgage defines “Lender” only as “Countrywide Home Loans, Inc.” [Dkt. 19-1, at 6.] As
discussed above, although Countrywide was the original lender under the mortgage, the parties
agree that by the time Countrywide sent the notice of default to Paiva, Countrywide had assigned
its interest to BONYM, which thereby became the lender. Thus, strictly construing paragraph 22
of the mortgage, BONYM, and not Countryside, had to send the notice of default to Paiva.
Further, this approach is consistent with the SJC’s recent decision in Pinti, which held
that a foreclosing bank’s “strict compliance with the notice of default required by paragraph 22
was necessary in order for the foreclosure sale to be valid,” and that the bank’s “failure to strictly
comply rendered the sale void.” 33 N.E.3d at 1226. The Court cites Pinti despite the SJC’s
decision to give it only prospective effect. Id. at 1227. Given that BONYM purchased the
Property in foreclosure, and that the Property has not changed hands to any third parties, the
SJC’s concern over the “possible impact that our decision may have on the validity of titles” is
attenuated here. Additionally, the cross-motions for summary judgment were fully briefed before
Pinti was issued on July 17, 2015. As Paiva was already advancing the same argument regarding
strict compliance with the paragraph 22 requirements that the SJC adopted in Pinti, it would be
inequitable to deny him the benefit of that decision. Further, the Court reads Pinti as a statutory
interpretation of the power of sale, G.L. c. 183, § 21, and an extension of the SJC’s prior ruling
in Ibanez, rather than a reversal of course.
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Because the Court finds that Countrywide’s notice of default did not strictly comply with
the requirements of paragraph 22 of the mortgage, the foreclosure sale is void.2
C. Count II: Failure to Comply with G.L. c. 244, § 15A
There are no disputed facts pertaining to Count II of the complaint. The parties agree that
BONYM did not strictly comply with § 15A, which requires a foreclosing bank to notify the tax
collector (among other third parties) of a foreclosure sale within 30 days of conveying title. G.L.
c. 244, § 15A. Here, BONYM did not make the required notification until more than nine months
after the foreclosure sale. [Dkt. 20-1, Ex. 3.] Paiva argues that this lapse invalidates the
foreclosure. BONYM responds that it does not because, in its view, § 15A is not among the
“statutes relating to the foreclosure of mortgages” pursuant to the statutory power of sale, G.L. c.
183, § 21, with which strict compliance is required for a foreclosure to be valid, largely because
the notification under § 15A isn’t required until after the foreclosure is complete.
The Court concludes that under several SJC decisions, strict compliance with § 15A is
required, and the consequence of non-compliance is the invalidation of the foreclosure sale. See
U.S. Bank Nat. Ass’n v. Schumacher, 467 Mass. 421, 432 (Gants, J., concurring) (“Where a
2 In reaching its conclusion that the notice of default did not strictly comply with the paragraph 22
requirements, the Court declines to follow the unreported holding in Federal National Mortgage
Association v. Rogers, No. 13-ADMS-10025, 2015 WL 2000845 (Mass. App. Div. Apr. 7, 2015). In
Rogers, the appellate division for the state district court held that a mortgage servicer’s sending of a
notice to cure satisfied the requirements of paragraph 22 of the mortgage. However, Rogers pre-dated, by
several months, the SJC’s decision in Pinti, in which the SJC mandated strict compliance with the notice
of default required by paragraph 22. It is not at all clear that the appellate division in Rogers applied the
same standard of strict compliance that was announced in Pinti. For example, the court in Rogers
explained that “[t]he obvious purpose of . . . paragraph 22 of the mortgage . . . is to allow the borrower
opportunity to cure default and avoid foreclosure. . . . This purpose was fulfilled by the loan servicer,
which was acting on behalf of the mortgagee, giving Rogers the required information.” 2015 WL
2000845, at *4 (emphasis added). Thus, the court in Rogers appears to have focused more on the purpose
of paragraph 22 than on its strict requirements. To the extent that Rogers applied a standard other than
strict compliance, that decision is at odds with Pinti, as well as with the clear language of the mortgage in
the instant case, and the Court therefore declines to follow Rogers.
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defendant in the summary process action claims that the mortgage holder failed strictly to adhere
to the requirements under the statutory power of sale set forth in G.L. c. 183, § 21, and the
related requirements in G.L. c. 244, §§ 11-17C, proof of any violation of these requirements will
void the foreclosure sale and, therefore, defeat the eviction.”) (emphasis in original); see also
Pinti, 33 N.E.3d at 1224; Eaton v. Fed. Nat. Mortgage Ass’n, 462 Mass. 569, 581 (2012);
Ibanez, 458 Mass. at 646. BONYM points to no contrary case or other authority for the
proposition that strict compliance with the requirements of § 15A is not required, and the Court
is not aware of any such authority. Further, the language of § 15A itself supports the holding that
it is a “statute[] relating to the foreclosure of mortgages” with which strict compliance is
required. Section 15A employs the mandatory language “shall,” corresponds to a particular
property (namely, the “mortgaged premises”), and sets a specific deadline of 30 days for
compliance. G.L. c. 244, § 15A.3
3 At the hearing, BONYM pointed out that there are a number of provisions within G.L. c. 244, §§ 11-
17C (the range of statutes cited by Justice Gants in his concurring opinion in Schumacher), where noncompliance
clearly could not void an individual foreclosure. For example, G.L. c. 244, § 14A, requires
the commissioner of the division of banks to maintain a foreclosure database to be used to generate an
annual report. It does not seem likely that a failure to maintain the database or to produce the annual
report would be construed as a “strict compliance” failure that would require the invalidation of an
otherwise proper foreclosure. See also G.L. c. 244, § 17A (establishing a two-year limitations period for
certain actions relating to foreclosure sales). BONYM reconciles these sorts of provisions and Justice
Gants’s language regarding strict compliance by pointing to his use of the words “related requirements”
and arguing that strict compliance is only required with regard to those portions of G.L. c. 244, §§ 11-
17C, that are “related” to the statutory power of sale set forth in G.L. c. 183, § 21. Even assuming,
arguendo, that BONYM is correct that Justice Gants did not mean to require strict compliance with every
provision within G.L. c. 244, §§ 11-17C, it would still be left to this Court to determine whether § 15A is
“related” to the statutory power of sale and therefore must be strictly adhered to for a valid foreclosure.
The Court concludes, given the absolute nature of the language used by Justice Gants, the mandatory
language of § 15A (“shall”), the fact that § 15A is specific to each individual foreclosure rather than a
more general directive such as the requirement to maintain a database, and the fact that § 15A sets forth a
specific deadline of 30 days, that, at least until further guidance from the state courts, strict adherence
with § 15A is required.
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All of this being said, the Court acknowledges the apparent unfairness to BONYM of
voiding the foreclosure sale, given that Paiva has now been living in the Property for many years
without making any payments on his mortgage. Under the relevant Massachusetts statutes and
case law governing foreclosure sales, however, this result is mandated by BONYM’s failure to
strictly comply with the pre-foreclosure notice of default required by paragraph 22 of the
mortgage and the post-foreclosure notice to the tax collector required by G.L. c. 244, § 15A.
III. Conclusion
For the above reasons, BONYM’s Motion for Summary Judgment [Dkt. 16] is DENIED,
and Paiva’s Cross-Motion for Summary Judgment [Dkt. 21] is GRANTED. The Clerk is directed
to enter judgment for Paiva pursuant to Fed. R. Civ. P. 58(a) on both counts of his complaint and
to close this action. The foreclosure sale is void for the reasons discussed in this opinion and at
the hearing. As Paiva has not demonstrated that any additional relief is warranted, however, his
request for damages, costs, interest, and attorney fees, is denied.
SO ORDERED.
Dated: August 11, 2015
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
DISTRICT JUDGE
Case 1:14-cv-14531-ADB Document 40 Filed 08/11/15 Page 8 of 8
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