August, 2016 | FORECLOSURE FRAUD | by DinSFLA

Archive | August, 2016

TFH 9/4/16 | Special Labor Day Rebroadcast of the January 12, 2014 Foreclosure Hour Radio Show entitled: Special Robo-Signer Exclusive Expose.

TFH 9/4/16 | Special Labor Day Rebroadcast of the January 12, 2014 Foreclosure Hour Radio Show entitled: Special Robo-Signer Exclusive Expose.

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Sunday – September 4, 2016

Special Labor Day Rebroadcast of the January 12, 2014 Foreclosure Hour Radio Show entitled:

Special Robo-Signer Exclusive Expose.

 Listen to and view on our Website www.foreclosurehour.com the hidden video tapes that the pretender lenders are trying to keep you and your foreclosure judge from seeing.

Did these robo-signers put their names on your mortgage documents?

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Deutsche Bank National Trust Company v. Wuensch | WI Appeals Court – we conclude that, after Wuensch unambiguously demanded proof at trial that the plaintiff possessed the note at issue, the plaintiff failed to offer any evidence on the possession issue at  trial

Deutsche Bank National Trust Company v. Wuensch | WI Appeals Court – we conclude that, after Wuensch unambiguously demanded proof at trial that the plaintiff possessed the note at issue, the plaintiff failed to offer any evidence on the possession issue at trial

OFFICE OF THE CLERK
WISCONSIN COURT OF APPEALS
110 EAST MAIN STREET, SUITE 215
P.O. BOX 1688
MADISON, WISCONSIN 53701-1688
Telephone (608) 266-1880
TTY: (800) 947-3529
Facsimile (608) 267-0640
Web Site: www.wicourts.gov
DISTRICT IV

Before Kloppenburg, P.J., Higginbotham and Blanchard, JJ.

Thomas Wuensch appeals a foreclosure judgment, which the circuit court granted
after a bench trial, in favor of the plaintiff, “Deutsche Bank National Trust Company as
Trustee for American Home Mortgage Assets Trust 2007-2 Mortgage-Backed Pass-
Through Certificates, Series 2007-2, by American Home Mortgage Servicing Inc., its
attorney-in-fact.” Wuensch raises several challenges to the judgment. After reviewing
the record, we conclude at conference that this case is appropriate for summary

disposition. See WIS. STAT. RULE 809.21 (2013-14).1 As explained below, we conclude
that, after Wuensch unambiguously demanded proof at trial that the plaintiff possessed
the original note at issue, the plaintiff failed to offer any evidence on the possession issue
at trial.2 Further, there is no suggestion that Wuensch at any point admitted, waived,
stipulated, or forfeited the possession issue. Accordingly, we reverse the judgment of
foreclosure in this action.3

1 All references to the Wisconsin Statutes are to the 2013-14 version unless otherwise noted.

2 Persons entitled to enforce a negotiable instrument include the “holder” of the original
instrument. WIS. STAT. § 403.301. Generally speaking, a “holder” is the person in possession of the
negotiable instrument, in this case the note. WIS. STAT. § 401.201(2)(km)1. “If endorsed in blank, an
instrument becomes payable to bearer ….” WIS. STAT. § 403.205(2). “Bearer” means “a person … in
possession of an instrument … payable to bearer or endorsed in blank.” WIS. STAT. § 401.201(2)(cm).
Thus, the plaintiff here is entitled to enforce the note that is endorsed in blank if the plaintiff possesses the
original note. The plaintiff does not argue that its right to a judgment of foreclosure can be sustained
based on any legal theory other than holder-in-possession.

3 Wuensch also makes other arguments challenging the judgment. Because we conclude that the
plaintiff’s failure to offer evidence that the plaintiff possessed the note at the time of trial is dispositive,
we do not address Wuensch’s other arguments. See Barrows v. American Family Ins. Co., 2014 WI App
11, ¶9, 352 Wis. 2d 436, 842 N.W.2d 508 (2013) (“An appellate court need not address every issue
raised by the parties when one issue is dispositive.”).

The parties agree to the following facts. In December 2006 Wuensch signed an
adjustable rate note promising to repay HLB Mortgage the principal sum of $301,500.
The note was secured by a mortgage on property that Wuensch owned. The note contains
two endorsements, one from HLB Mortgage to American Home Mortgage, and one from
American Home Mortgage in blank. After Wuensch defaulted on the note, the plaintiff
initiated this foreclosure action. In his answer, Wuensch denied the allegation in the
complaint that “Plaintiff is the lawful holder of the note and mortgage.” In addition, we
see no suggestion in the record that, in advance of or at trial, Wuensch admitted or
stipulated that the plaintiff possessed the original note.

At the start of the trial to the circuit court but before the first witness testified, the
plaintiff’s counsel identified to the court, over Wuensch’s attorney’s objection, two
documents. The plaintiff’s counsel described one document as being the original note
and the other as a copy of the original note, with the copy having been marked as an
exhibit. The plaintiff’s counsel, appearing before the circuit court strictly as legal
counsel and not having been sworn as a witness, stated, “Your Honor, I’m handing
[Wuensch’s attorney] a copy of the original note. I also have the original here today. I’m
going to allow [Wuensch’s attorney] to inspect the original document and compare it to
the copy.” Wuensch’s attorney objected “on foundational grounds” and “to the plaintiff’s
counsel testifying.” The circuit court noted that it had not “heard any testimony yet.”
The court stated that the purported original and the copy appeared to the court to be
identical. The court stated that it was admitting the purported copy into evidence over
Wuensch’s attorney’s repeated objection that the plaintiff had failed to produce a proper
witness to testify about the purported original note.

Based on this record, the circuit court found that the plaintiff possessed the
original note at the time of trial, and concluded that the plaintiff was the holder of the
original note with the right to enforce it.

The sole witness called by the plaintiff was a loan analyst for the servicer of
Wuensch’s note. He testified only regarding the payment history and amounts owed by
Wuensch on the note.

Wuensch testified primarily as to his difficulties in communicating with American
Home Mortgage Servicing, Inc., and in obtaining accurate information about the status of
his loan.

The circuit court granted judgment of foreclosure in favor of the plaintiff in the
amount of $455,641.85. Wuensch appeals.

Wuensch’s principal argument on appeal is that the circuit court erred in finding
that the plaintiff was, at the time of trial, the holder of the original note, and therefore the
court lacked a factual basis to grant judgment of foreclosure. This finding was error,
Wuensch contends, because over Wuensch’s explicit objection, the court did not require
the plaintiff to present any evidence that the purported original note brought to trial by
plaintiff’s counsel was in fact the original note that counsel had obtained from the
plaintiff. Rather, Wuensch contends, the court erroneously treated the plaintiff’s
counsel’s assertions as proof that the plaintiff possessed the original note.

Upon initial conferencing of this case, this court determined that the parties’ briefs
did not adequately address what we identified as a “narrow proof-of-possession issue,”
namely, whether a plaintiff in a foreclosure action may, in the face of an express refusal
to stipulate the possession issue, prove at trial that the plaintiff possesses the original note
at the time of trial solely by having its counsel present to the circuit court a document that
counsel represents is the original note. Therefore, we ordered the parties to file
supplemental letter briefs addressing this issue.

Upon further conferencing after our receipt of the letter briefs, we resolve the
“proof-of-possession issue” in this action in favor of Wuensch. As noted above, the
pleadings placed possession of the original note in dispute, and there is no dispute that
this was an issue that the plaintiff had to prove at trial. See Wis. Stat. § 401.201(2)(km)1.
(defining “holder” as a legal term that means, in the context of this case, “[t]he person in
possession of a [note] that is payable either to bearer or to an identified person that is the
person in possession”).

As summarized above, before witnesses were called at trial, the plaintiff’s counsel
presented a document that counsel represented was “the original note,” over Wuensch’s
attorney’s objection. Wuensch’s attorney clearly stated his objection to any attempt by

the unsworn plaintiff’s counsel to give what amounted to testimony that counsel had
obtained the original note from its holder, the plaintiff. That is, by his objections,
Wuensch’s attorney clearly declined to stipulate that plaintiff possessed the original note
and instead demanded a witness with personal knowledge to testify on the possession
topic.

As we have noted, the plaintiff’s sole witness at trial did not testify on the topic of
the possession of the original note, nor did the witness give testimony from which a
reasonable inference could be drawn on this topic. The same goes for the testimony of
Wuensch, the only other witness.

In his letter brief filed in response to our request for supplemental briefing,
Wuensch cites the following statutes: (1) WIS. STAT. § 906.03(1), which provides that a
witness must take an oath before testifying; (2) WIS. STAT. § 906.02, which states, “A
witness may not testify to a matter unless evidence is introduced sufficient to support a
finding that the witness has personal knowledge of the matter;” and (3) WIS. STAT.
§ 901.04, which provides that a judge is to make preliminary determinations on the
qualifications of a person to be a witness. Wuensch also could have cited any of the
extensive authority establishing the axiomatic point that “‘unsworn statements’” have
“‘no proper place’” as substitutes for evidence in a trial. See, e.g., Nelson v. State, 35
Wis. 2d 797, 812, 151 N.W.2d 694 (1967) (quoted source omitted).

We agree that here, where the plaintiff’s counsel did not take an oath and did not
lay a foundation to establish personal knowledge about possession of the original note,
the plaintiff’s counsel was not acting as a witness on whose statements or implied
statements the circuit court could rely to prove possession. We need not delve into the
various difficulties that the plaintiff’s counsel would likely have encountered had he
attempted to testify at trial as a witness about the original note and its possession. It is

sufficient to observe that sworn testimony from someone with personal knowledge was
necessary, given Wuensch’s unambiguous objections at trial.

In its letter brief, filed in response to Wuensch’s, the plaintiff does not address the
statutes that Wuensch cited. Rather, the plaintiff makes two unavailing arguments. First,
the plaintiff repeats the argument that it makes in its initial respondent’s appellate brief,
namely, that an original note is self-authenticating, and that the circuit court properly
admitted the copy of the note after comparing it with the authenticated purported original
note. However, self-authentication is not the issue here. See WIS. STAT. §§ 909.01,
901.04(2) (authentication is an issue of conditional relevancy, addressing whether there is
sufficient evidence to support a finding that the matter is what the proponent claims).
The plaintiff does not in its initial brief or its letter brief even attempt to explain how
merely establishing self-authentication of a purported original note endorsed in blank
could in itself stand as proof as to what person or entity currently possessed the original
note.

Second, the plaintiff acknowledges that there are no reported Wisconsin cases that
directly address the particular narrow “proof-of-possession” issue here, but points us to
our decision in Dow Family, LLC v. PHH Mortg. Corp., 2013 WI App 114, 350 Wis. 2d
411, 838 N.W.2d 119, aff’d, 2014 WI 56, 354 Wis. 2d 796, 848 N.W.2d 728. The
plaintiff notes that in that case we concluded that “[w]ithout the original note, or a
properly authenticated copy, there is no factual showing that [the plaintiff] is entitled to
enforce the note as the party in possession of a note endorsed in blank.” Id., 350 Wis. 2d
411, ¶24. The plaintiff argues that here, in contrast, the plaintiff’s counsel presented the
self-authenticating original note and asked the circuit court to compare the original to the
copy and to admit the copy into evidence. Accordingly, the plaintiff argues, it “proved
possession by establishing the copy of the note was what it claimed to be—‘a true and
correct copy of an original note in [its] possession.’” However, the plaintiff here never

offered proof through any witness, as demanded by Wuensch, that the original note was
in the plaintiff’s possession.

We pause to make two observations relating to proof of possession of the original
note. First, we observe that in foreclosure actions, the vast majority of which do not
result in a trial, the defendant frequently admits, waives, or stipulates to the plaintiff’s
possession of the original note, or else the defendant in some manner forfeits the issue.
In addition, in the somewhat rare foreclosure trial, we suspect that the plaintiff’s current
possession of the original note is shown or reasonably inferred from at least one and
usually more than one source of testimony or documentary evidence. But our review of
the record here reveals neither an admission, waiver, stipulation, or forfeiture by
Wuensch, nor any evidence from which a reasonable inference of current possession
could arise, and the plaintiff does not argue to the contrary on appeal, even after we
highlighted the issue for supplemental briefing.

Second, the rules of evidence may not be sidestepped based on the common sense
expectation that the particular entity seeking to enforce a note is generally going to be the
entity legally entitled to enforce the note. Circuit courts might logically believe that the
entities with the best claim of legal entitlement to enforce notes are the entities that bring
foreclosure actions. So here, it would be expected that the plaintiff is the holder of the
note, because otherwise a different entity would be litigating the matter. However, logic
cannot substitute for the rules of evidence. And the likelihood that an attorney would be
a reliable source of information in this context is irrelevant under the system of proof that
parties are entitled to rely on at a trial. The plaintiff was obligated to prove, under the
rules of evidence, that the document in the plaintiff’s counsel’s hands in fact came from
his client and not from some other person or entity.

Significantly, the plaintiff does not attempt to persuade us that the circuit court
could make a finding of possession-by-the-plaintiff based solely on the implied
representation of current possession by the plaintiff’s counsel as either an officer of the
court or the plaintiff’s agent. We recognize that the circuit court, as the fact-finder at a
bench trial, had wide latitude to receive and weigh evidence, and that our mandate
reversing the judgment of foreclosure in this action may appear at first blush to elevate
form over substance and to produce a highly inefficient result. However, as we have
explained, we see no shortcut in the law to the admission of necessary evidence at trial,
whether jury or bench, when, as here, the opposing party appropriately preserves the
issue and demands proof in the form of admissible evidence. The plaintiff does not
provide us with any authority under which the circuit court could properly make a finding
of possession by the plaintiff, given the lack of any evidence on this topic properly
admitted at trial.

IT IS ORDERED that the foreclosure judgment in this action is summarily
reversed under WIS. STAT. RULE 809.21(1).

Diane M. Fremgen

Clerk of Court of Appeals

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HSBC v LEES | FL 4DCA –  Supporting Striking of Witness

HSBC v LEES | FL 4DCA – Supporting Striking of Witness

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

HSBC BANK MORTGAGE CORPORATION (USA),

Appellant,

v.

DAVID T. LEES; VICTORIA WOODS HOMEOWNERS’ ASSOCIATION,
INC.; WYNDAM PARK HOMEOWNERS ASSOCIATION, INC.; RAINA M.
RUELLE; and Unknown Tenant(s) In Possession Of The Subject Property,

Appellees.

No. 4D15-2083

[August 31, 2016]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Richard L. Oftedal, Judge, and Susan R. Lubitz, Senior
Judge; L.T. Case No. 502010CA027739XXXXMB.

Nicholas S. Agnello and John Chiles of Burr & Forman, LLP, Fort
Lauderdale, for appellant.

Christine M. Deis, Peter Ticktin, Joshua Bleil, Kendrick Almaguer and
Jon Hodges of The Ticktin Law Group, P.A., Deerfield Beach, for appellee
David Lees.

CIKLIN, C.J.

HSBC Bank Mortgage Corporation (USA) (“the bank”) appeals from:
(1) Judge Oftedal’s order granting defendant David T. Lees’s (“the
homeowner”) motion in limine to strike the bank’s trial witness; and
(2) Judge Lubitz’s subsequent order involuntarily dismissing the bank’s
action without prejudice based on Judge Oftedal’s order. Because the
bank failed to comply with Judge Oftedal’s pre-trial order, we affirm.

This appeal arises from a mortgage foreclosure action commenced in
2010. In a pre-trial order entered on February 13, 2015, the case was set
for trial almost eight weeks later on April 7, 2015. The pre-trial order
required the parties to disclose the specific names of all trial witnesses
within ten days of the date of the pre-trial order (by February 23, 2015)
and complete discovery no later than ten days before trial (by March 27,
2015). Although not necessary because it is axiomatic that parties to an
action must comply with court directives, the pre-trial order warned that
noncompliance with the order may result in the striking of witnesses.

Despite the clear and unequivocal directives of the pre-trial order to file
witness lists within ten days (by February 23, 2015), the bank did not file
its witness list until one month later — March 13, 2015 — listing
“[r]epresentative of Plaintiff,” “[o]ther representatives on behalf of Plaintiff,”
and thirteen named witnesses, one of whom was Peter Killinger.

On Thursday, April 2, 2015, (just five calendar days, including a two-
day weekend, before trial on Tuesday, April 7, 2015), the bank filed its
amended witness list, which named only Killinger and eliminated all other
specifically named witnesses on the previous list.

On Monday, April 6, 2015 (the day before trial), the homeowner filed a
motion in limine seeking to strike the Bank’s witness, or in the alternative,
to continue the trial. The homeowner argued that the Bank failed to
comply with the pre-trial order twice (both with its initial and amended
witness list), and that the parties could not reach an agreement to
schedule Killinger’s deposition in the few days available before trial. The
homeowner further argued that he was prejudiced by the bank’s failure to
specifically name its trial witness until five calendar days before trial and
provide him with a reasonable opportunity to depose its trial witness. The
homeowner’s motion included an analysis of the factors promulgated in
Binger v. King Pest Control, 401 So. 2d 1310, 1314 (Fla. 1981).

On the day of trial, April 7, 2015, Judge Oftedal considered the
homeowner’s motion in limine seeking to strike the bank’s witness, or in
the alternative, to continue the trial. The homeowner argued that the bank
offered only one date for deposition, on which date no attorneys at the
homeowner’s firm were available. The bank responded by arguing that its
original witness list was provided twenty days1 or more prior to trial, and
argued that the trial court should analyze the issue pursuant to Binger.

1 The bank asserts that a twenty-day period is not prejudicial in that Florida
Rule of Civil Procedure 1.440(c) requires “only” 30 days’ notice of a trial that is
scheduled by a trial judge.

Judge Oftedal clearly took issue with the fact that the bank initially
filed such an extensive witness list: “Well, that’s really no list at all. I
mean, that’s [13] witnesses. The pretrial order requires you name the
witness, not just list every witness in the Plaintiff’s army. The bank
responded, “We didn’t know who would be testifying. But had the
deposition been coordinated we would have provided opposing counsel the
name of a witness who was going to be testifying.”

Judge Oftedal entered an order granting the homeowner’s motion in
limine and striking the bank’s witness. The trial division judge, Judge
Lubitz, then involuntarily dismissed the case without prejudice based
upon Judge Oftedal’s order.

On appeal, the bank first argues that Judge Oftedal reversibly erred in
failing to consider the Binger factors. It further contends that application
of the Binger factors did not support striking its witness.

Where a party has failed to disclose the name of a witness in accordance
with the trial court order, the testimony of that witness may be excluded
at the trial court’s discretion. Binger, 401 So. 2d at 1313. “[D]iscretion is
abused only where no reasonable man would take the view adopted by the
trial court.” Canakaris v. Canakaris, 382 So. 2d 1197, 1203 (Fla. 1980)
(citation omitted).

In Binger, the Florida Supreme Court set forth a test for trial courts to
apply in determining whether undisclosed witnesses should be excluded
from trial. Binger, 401 So. 2d at 1313-14. A trial court’s discretion in
striking witnesses “should be guided largely by a determination as to
whether use of the undisclosed witness will prejudice the objecting party.”
Id. at 1314. Other factors to be considered include:

(i) the objecting party’s ability to cure the prejudice or,
similarly, his independent knowledge of the existence of the
witness; (ii) the calling party’s possible intentional, or bad
faith, noncompliance with the pretrial order; and (iii) the
possible disruption of the orderly and efficient trial of the case
(or other cases).

Id.

The approach prescribed by Binger “leaves ultimate control over
witness disclosure problems to the broad discretion of the trial judge and
focuses on prejudice in the preparation and trial of a lawsuit.” Id. at 1312.
However, “a trial court should exercise caution when the witness sought
to be excluded is a party’s only witness or one of the party’s most important
witnesses because if the witness is stricken, that party will be left unable
to present evidence to support his or her theory of the case.” Pascual v.
Dozier, 771 So. 2d 552, 554 (Fla. 3d DCA 2000).
While we agree with the bank that the application of the Binger factors
is a part of the trial court’s exercise of its discretion, Allstate Property &
Casualty Insurance Co. v. Lewis, 14 So. 3d 1230, 1234 (Fla. 1st DCA 2009),
it appears that the trial court indeed considered the necessary factors.

Although Judge Oftedal did not explicitly reference Binger before
striking the witness, the homeowner outlined an analysis of the Binger
factors in its motion in limine. Additionally, the homeowner argued both
in its motion in limine and at the hearing on its motion on the day of trial
that it was prejudiced by the bank’s failure to properly disclose its witness,
and asserted that prejudice is the first principle enunciated in Binger. The
record additionally reveals that Judge Oftedal considered the bank’s
potential willful noncompliance with the pre-trial order, another Binger
factor, when he explained, “The pre-trial order requires you name the
witness, not just list every witness in the plaintiff’s army.” As such, the
record does not support a conclusion that Judge Oftedal failed to consider
the Binger factors.

We also disagree with the bank’s contention that application of the
Binger factors did not support striking its witness — particularly, the bank
argues, when considering prejudice to the opposing party — in this case,
the homeowner. “Prejudice in this sense refers to the surprise in fact of
the objecting party, and it is not dependent on the adverse nature of the
testimony.” Binger, 401 So. 2d at 1314.

This court recently addressed the element of “surprise in fact” in Reive
v. Deutsche Bank National Trust Co., 40 Fla. L. Weekly D725 (Fla. 4th DCA
Mar. 25, 2015), a mortgage foreclosure action. There, a bank moved to
continue trial after the subject loan was transferred to a new servicer,
which would in turn need time to get acquainted with the loans and
documents before trial, but the motion was denied. Id. Four days before
trial, the bank provided notice of several new witnesses and documents in
violation of the pre-trial order, and Judge Oftedal admitted the witnesses
and documents over the defendant’s objection. Id. This court reversed,
concluding:

[T]he court’s denial of the continuance together with the
admission of witnesses and documents not timely disclosed to
the defendant constituted “surprise in fact” in this case and
violated Binger v. King Pest Control, 401 So. 2d 1310, 1313-14
(Fla. 1981). The failure to give adequate notice of evidence
and witnesses constitutes a due process violation. S.Z. v.
Dep’t of Children & Family Servs., 873 So. 2d 1277, 1277 (Fla.
3d DCA 2004) (delivery of discovery packet the Friday before
a Monday trial constituted “trial by ambush” and violated the
defendant’s due process rights).

Id.

Similarly, with regard to the instant facts, the bank’s failure to disclose
its witnesses in a manner that was in compliance with the pre-trial order
constituted surprise in fact, and thus, under the facts of this case,
prejudiced the homeowner. The bank filed its amended witness list a mere
five calendar days (including a two-day weekend) before trial, and the bank
offered only one date for deposition, on which date no attorneys at the
homeowner’s firm were available, thus making it impossible for the
homeowner to cure the prejudice.

While a trial judge is constrained by the standards set forth in Binger,
the discretion afforded to trial courts when faced with this type of non-
compliance is broad and will only be disturbed upon a disregard for the
fundamental principles surrounding a trial court’s decision. The bank had
five years to prepare for trial, yet failed to supply a true and accurate
witness list until five calendar days before trial.

The dissent’s argument that the bank disclosed its witness list well
before trial, albeit late, omits the big picture. As the trial court observed,
the bank’s initial witness list, filed twenty days late and only three weeks
before trial, identified thirteen named witnesses and other unnamed
witnesses. The dissent’s argument would require the homeowner, in the
three weeks remaining before trial, either to have engaged in a fishing
expedition by deposing all thirteen named witnesses, or to have played a
guessing game to determine which of the thirteen named witnesses the
Bank actually intended to call at trial.

The dissent’s suggestion that the homeowner could have taken the
witness’s deposition in the few days remaining before trial is misplaced
and the record suggests otherwise. The bank filed its amended witness
list a mere five calendar days (including a two-day weekend) before trial,
and the bank offered only one date for a deposition, on which date no
attorneys at the homeowner’s firm were available.

While the dissent’s suggestion that Judge Oftedal could have granted
the homeowner’s alternative motion for a continuance is true, making that
suggestion coupled with the dissent’s de facto requirement that Judge
Oftedal exercise that option unacceptably subjugates his efforts at docket
control to the bank’s inexplicable non-compliance and would have the
affect of removing any force from Judge Oftedal’s pre-trial order. Just
because as the dissent characterizes it, this matter “after all . . . was a
mortgage foreclosure”, a trial court’s pre-trial order does not carry any less
weight. To suggest otherwise would cast a pall over a trial court’s inherent
duty of steadfast case management and demean the sanctity of a trial
court’s pre-trial order that sets forth pre-trial procedures which, unless
the trial court orders otherwise, is not optional.

Yes, as the dissent muses, Judge Oftedal could have allowed the
homeowner to take the witness’s deposition just before trial. But then, that
would have placed the burden to cure the prejudice upon the homeowner
where the burden did not belong. This unfair advantage was caused by
the bank’s intransigence as to Judge Oftedal’s pre-trial order. There was
nothing unclear—or optional—about Judge Oftedal’s pre-trial order.

In sum, contrary to the dissent’s argument, there were not “many
options,” available to the trial judge in his duty to cure the prejudice
dumped upon the homeowner by the bank. Short of striking the bank’s
sole witness, the two judges in the trenches in this case, Judges Oftedal
and Lubitz, had limited case management tools at their disposal. Judge
Oftedal, exercising his broad discretion, chose what he considered to be
most appropriate option—striking the bank’s witness—leading Judge
Lubitz to dismiss the bank’s underlying foreclosure action without
prejudice.

In this type of “without prejudice posture”, a bank generally may refile
its case. See generally Evergrene Partners, Inc. v. Citibank, N.A., 143 So.
3d 954, 955 (Fla. 4th DCA 2014) (“While a foreclosure action with an
acceleration of the debt may bar a subsequent foreclosure action based on
the same event of default, it does not bar subsequent actions and
acceleration based upon different events of default.”); see also Star
Funding Solutions, LLC v. Krondes, 101 So. 3d 403, 403 (Fla. 4th DCA
2012) (“A new default, based on a different act or date of default not alleged
in the dismissed action, creates a new cause of action.”).

Consequently, the trial court did not abuse its broad discretion in
striking the Bank’s witness and involuntarily dismissing the bank’s action
without prejudice. We find no legitimate reasons to second guess the trial
judges involved in dealing with this non-compliance of an unequivocal
judicial order. Thus, we affirm.

Affirmed.

GERBER, J., concurs in result only with opinion.

WARNER, J., dissents with opinion.

GERBER, J., concurring in result only.

I think that both Chief Judge Ciklin and Judge Warner raise excellent
points in their respective opinions. However, I base my decision on the
standard of review alone. Because I cannot say that “no reasonable [judge]
would take the view adopted by the trial court,” Canakaris v. Canakaris,
382 So. 2d 1197, 1203 (Fla. 1980) (citation omitted), I concur with Chief
Judge Ciklin that the trial court did not abuse its broad discretion in
striking the Bank’s witness and involuntarily dismissing the bank’s action
without prejudice.

WARNER, J., dissenting.

I dissent. The bank did disclose this witness in its witness list well
before trial, albeit the entire pretrial list was filed late. The homeowner
could have taken the witness’s deposition. Moreover, the homeowner
sought a continuance as an alternative to striking the witness. The court
also could have allowed the homeowner to take the deposition of the
witness immediately before the trial started. There were thus many
options, short of striking the bank’s sole witness, which would have
eliminated prejudice to the homeowner. After all, this was a mortgage
foreclosure. The bank’s witness was there to offer proof of the mortgage
documents and the amount owed. None of this would come as a surprise.
I think the court abused its discretion in striking the bank’s only witness.

* * *

Not final until disposition of timely filed motion for rehearing.

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DeGiacomo v. First Call Mortgage Company (In re Reznikov) | Recording Requirements: When “Duly Acknowledged” Is Not Enough

DeGiacomo v. First Call Mortgage Company (In re Reznikov) | Recording Requirements: When “Duly Acknowledged” Is Not Enough

BANKRUPTCY REALESTATE INSIGHT

DeGiacomo v. First Call Mortgage Company (In re Reznikov), 548 B.R. 606 (Bankr. D. Mass. 2016)

A chapter 7 trustee sought to avoid a recorded mortgage based on a defective acknowledgment and then to preserve the lien of the mortgage for the benefit of the bankruptcy estate. The mortgagee objected – arguing that the acknowledgment was sufficient, and the debtor objected – claiming a homestead exemption in the property.

The chapter 7 trustee proposed to use the “strong-arm” powers in section 544 of the Bankruptcy Code to avoid the mortgage. Specifically he relied on section 544(a)(3), which allows the trustee to avoid any transfer that would be voidable by a hypothetical bona fide purchaser of real property.

[BANKRUPTCY REALESTATE INSIGHT]

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Posted in STOP FORECLOSURE FRAUD0 Comments

LIBERTY MORTGAGE CORPORATION v. Fiscus, Colo: Supreme Court 2016 | Here, the purported maker possesses a valid forgery defense, his negligence did not contribute to the forgery, and he did not ratify the forged documents.

LIBERTY MORTGAGE CORPORATION v. Fiscus, Colo: Supreme Court 2016 | Here, the purported maker possesses a valid forgery defense, his negligence did not contribute to the forgery, and he did not ratify the forged documents.

 

Liberty Mortgage Corporation, a Georgia corporation; BB&T Corporation, a North Carolina corporation; and Branch Banking and Trust Company, a North Carolina corporation; Petitioners,
v.
Raymond L. Fiscus, a/k/a Ray Fiscus. Respondent.

Supreme Court Case No. 14SC586.
Supreme Court of Colorado, En Banc.
May 16, 2016.
Dufford, Waldeck, Milburn & Krohn, LLP, Christopher G. McAnany, Grand Junction, Colorado, Attorneys for Petitioner Branch Banking and Trust Company.

Hoskin Farina & Kampf, P.C., David M. Dodero, Nicholas H. Gower, Grand Junction, Colorado, Attorneys for Respondent.

No appearance by or on behalf of Liberty Mortgage Corporation, a Georgia corporation; or BB&T Corporation, a North Carolina corporation.

JUSTICE EID delivered the Opinion of the Court.

JUSTICE COATS joins with the majority and specially concurs.

JUSTICE HOOD concurs in part and dissents in part, and JUSTICE MÁRQUEZ joins in the concurrence in part and dissent in part.

JUSTICE GABRIEL does not participate.

Justice EID delivered the Opinion of the Court.

¶1 Petitioner Branch Banking and Trust Company asks us to decide whether a deed of trust securing a promissory note is a negotiable instrument under Article 3 of Colorado’s Uniform Commercial Code (“UCC”). The court of appeals held that deeds of trust are not negotiable instruments within the meaning of Article 3, and therefore the bank was not a holder in due course with respect to the deed at issue here. Fiscus v. Liberty Mortg. Corp., 2014 COA 79, ¶¶ 47-49, ___ P.3d ___.

¶2 We affirm the judgment of the court of appeals, but on different grounds. In this case, the deed and other documents were forged. We hold that, even assuming a deed of trust qualifies as a negotiable instrument, holder-in-due-course status does not preclude a purported maker from asserting a forgery defense. Here, the purported maker possesses a valid forgery defense, his negligence did not contribute to the forgery, and he did not ratify the forged documents. As such, we need not and do not reach the issue of the negotiability of deeds of trust under Article 3.

I.

¶3 Respondent Ray Fiscus (“Husband”) married Vickie Casper-Fiscus (“Wife”) in 1985. In 1987, he purchased property in Grand Junction, Colorado, and titled it solely in his name. He financed the purchase with a mortgage loan, and the couple used the property as their marital home. Throughout their marriage, Wife managed their finances, which included the payment of household bills as well as mortgage and credit card debts. Husband neither confirmed these payments nor reviewed the couple’s bank statements or tax returns, and so he had little knowledge of their precise finances. ¶4 In June 2008, without his knowledge or authorization, Wife signed Husband’s name on a General Power of Attorney, a Limited Power of Attorney, and a Power of Attorney (Real Estate) (collectively, the “forged POAs”), which together purported to appoint her as Husband’s lawful attorney. Her daughter from a previous marriage notarized the documents. Using the forged POAs, Wife closed on a promissory note for approximately $220,000 with Liberty Mortgage Corporation and secured it with a deed of trust (the “2008 deed”) purporting to encumber the property. She signed the 2008 deed as “Raymond Fiscus by Vickie L. Casper-Fiscus as Attorney in Fact.” The couple’s 2008 tax return, signed by both spouses, included a mortgage interest deduction in the amount of $1,722. This was consistent with the amount Husband would have expected to have paid on the original 1987 mortgage loan. At no time in 2008 did Husband become aware of the note Wife executed.

¶5 In early 2009, Wife began making inquiries about refinancing the 2008 note. While doing so, she sent an email to a mortgage broker informing him that Husband “is out of town a lot so I have power of attorney” and asking if proceeding with the refinancing by power of attorney would be a problem. In February and March, she signed Husband’s name to several loan application documents, and, on March 30, she executed another note in the amount of $220,000 with Liberty Mortgage, once again using the forged POAs, securing the note with a deed of trust purporting to encumber the property (the “2009 deed”), and signing both documents as “Raymond Fiscus by Vickie L. Casper-Fiscus as Attorney in Fact.” Husband never authorized her to execute the 2009 note or deed in his name and had no knowledge of them at the time. Wife paid off the 2008 note with the proceeds from the 2009 note, and the 2008 note was released. Liberty Mortgage subsequently assigned the 2009 note and deed to BB&T Corporation, which, in turn, assigned them to petitioner Branch Banking and Trust.

¶6 The mortgage interest deduction on the couple’s 2009 tax return was $12,323, an amount much higher than Husband would have expected to claim on the original mortgage loan from 1987. Wife signed his name on the tax return without his knowledge, and, when he asked about it, she told him he did not need to sign it because he had authorized electronic filing. Husband never saw the tax return.

¶7 Wife hid all the documents evidencing the 2008 and 2009 transactions in the crawl space of their home. Husband did not learn of the transactions until 2011 when his broker contacted him to authorize an attempted withdrawal from his IRA account in the amount of $5,000. During that conversation, Husband learned that Wife had made an unauthorized withdrawal from his account earlier for $10,000 with the help of her son-in-law, who had impersonated Husband on the phone. Husband then performed a credit check and discovered the 2009 note. After discovering the note, he checked the county property records and uncovered the 2008 and 2009 deeds as well as the forged POAs. He filed an identity theft report with the sheriff’s office and an identity theft statement with Branch Banking and Trust. He also sued Liberty Mortgage, BB&T, and Branch Banking and Trust under the spurious lien statute, §§ 38-35-201 to -204, C.R.S. (2015), seeking to have the 2009 deed invalidated.

¶8 The district court held a show cause hearing in August 2012 at which Husband, Wife, Wife’s daughter, and a BB&T representative, among others, testified. In a detailed order, the district court held that the 2009 deed was spurious because it was not created, suffered, assumed, or agreed to by Husband, the property’s sole owner, and contained a material misstatement, that is, Husband’s signature.

¶9 The court also rejected Branch Banking and Trust’s defenses. As relevant here, the bank argued that, under Article 3 of the UCC, it qualified as a holder in due course and took the 2009 deed free from any forgery defense. In the alternative, it contended that Husband’s negligence contributed to the making of the forged deed and that he ratified the deed. The trial court, however, held that the 2009 deed was not a “negotiable instrument” but a “security instrument,” and therefore the bank could not assert a holder-in-due-course or negligent-contribution defense under Article 3. It also rejected Branch Banking and Trust’s ratification argument, concluding instead that Husband lacked knowledge of the facts relating to the documents’ creation until December 2011 and took no action at that time to approve them. Consequently, the court invalidated the 2009 deed and ordered its release.

¶10 The court of appeals affirmed. Fiscus, ¶ 1. It agreed with the trial court that a deed of trust is a security instrument, not a negotiable instrument, and therefore held that the Article 3 defenses did not apply. Id. at ¶ 47. It further concluded that there was record support for the trial court’s finding that Husband lacked knowledge of the material facts relating to the 2009 deed until December 2011. Id. at ¶ 41. Correspondingly, it affirmed the lower court’s holding that Husband did not ratify the note. Id. at ¶¶ 41, 43.

¶11 Branch Banking and Trust petitioned this court to review the court of appeals’ holding, and we granted certiorari to determine whether a lender in possession of a promissory note secured by a deed of trust on real property may assert a holder-in-due-course defense under section 4-3-305, C.R.S. (2015), to a claim that the deed of trust was forged. We conclude, however, that Husband has a valid forgery defense, not barred by negligence or ratification, and thus decline to address this issue. We therefore affirm the judgment of the court of appeals, but on other grounds.

II.

¶12 Branch Banking and Trust argues that the 2009 deed is a negotiable instrument under Article 3 because it secures the promise to pay contained in the 2009 note, which plainly qualifies as a negotiable instrument. But even assuming (without deciding) that Branch Banking and Trust is correct, we conclude that, on these facts, Husband has a valid forgery defense to any claim the bank might assert as a holder in due course, and that this defense is not precluded by any negligence or ratification on Husband’s part. As such, we need not and do not address the negotiability of a deed of trust under Article 3.

¶13 Article 3 of the UCC governs the issuance, transfer, enforcement, and discharge of negotiable instruments. Under Article 3, a holder in due course of a negotiable instrument takes it free of most defenses. § 4-3-305(b) (enumerating the defenses that do and do not apply to holders in due course); see also 2A Cathy Stricklin Krendl et al., Colorado Methods of Practice § 83:11 (6th ed. 2012) (“A holder in due course takes the instrument free from all claims of any party and of all defenses of any party with whom he has not dealt except for `real’ defenses. . . . A person who is not a holder in due course (including both a transferee and a holder) has much more limited rights.” (footnotes omitted)). Nevertheless, some defenses, such as infancy, duress, lack of legal capacity, and “fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms,” still apply to holders in due course. § 4-3-305(a)(1), (b). On the other hand, other defenses enumerated in Article 3 and those provided by contract law may not be used to challenge the enforcement of an instrument. § 4-3-305(a)(2), (b).

¶14 Branch Banking and Trust asserts that, under section 4-3-305(b), holders in due course are only subject to the defenses outlined in subsection (a)(1). Because subsection (a)(1) does not include forgery, the bank argues that it is a contract defense to which holders in due course are not subject under subsection (a)(2). We disagree.

¶15 By its plain terms, the statute only identifies the defenses that apply to “[t]he right of a holder in due course to enforce the obligation of a party to pay the instrument.” § 4-3-305(b) (emphasis added); see also § 4-3-305(a) (listing the defenses to which “the right to enforce the obligation of a party to pay an instrument is subject”) (emphasis added). This language presupposes that an obligation exists and that the holder in due course has a right to enforce it.

¶16 When a purported maker raises a forgery defense, however, he is challenging the very existence of the obligation itself, not its enforcement. For an instrument to bind a person under Article 3, that person must either personally sign the instrument or be represented by an agent who signs it on his behalf. § 4-3-401, C.R.S. (2015); see also § 4-3-401 cmt. 1 (“Obligation on an instrument depends on a signature that is binding on the obligor. The signature may be made by the obligor personally or by an agent authorized to act for the obligor.”). This requirement is plainly not satisfied where his name is signed without authorization. Indeed, section 4-3-403(a), C.R.S. (2015), specifically provides that an “unauthorized signature” does not bind the person whose name is signed absent ratification, and section 4-1-201(b)(41), C.R.S. (2015), specifies that the term “unauthorized signature” includes a forgery.

¶17 The omission of forgery from section 4-3-305(a)(1) thus makes sense because it is not a defense to enforcement and therefore falls outside the scope of subsections (a) and (b). See § 4-3-302 cmt. 2, C.R.S. (2015) (“Notice of forgery or alteration is stated separately [in section 4-3-302(a)(1)] because forgery and alteration are not technically defenses under subsection (a) of Section 3-305.”). It follows that, despite this omission, a party may still assert forgery against a holder in due course. See Real Defense, Black’s Law Dictionary (10th ed. 2014) (listing “forgery of a necessary signature” as a “defense that is good against any possible claimant, so that the maker or drawer of a negotiable instrument can raise it even against a holder in due course”).

¶18 Article 3’s requirements for proving the validity of signatures on a negotiable instrument bolster this conclusion. In general, when a party files suit to enforce an instrument, the court presumes that signatures are valid unless specifically contested by the purported maker. § 4-3-308(a), C.R.S. (2015). Holder-in-due-course status becomes relevant only after the validity of the signatures has been established. § 4-3-308(b); see also § 4-3-308 cmt. 2 (“Once signatures are proved or admitted a holder, by mere production of the instrument, proves `entitlement to enforce the instrument’. . . . Until proof of a defense or claim in recoupment is made, the issue as to whether the plaintiff has rights of a holder in due course does not arise.”). In this way, Article 3 provides for the assertion of a forgery defense even against holders in due course.

¶19 Therefore, consistent with other jurisdictions interpreting their versions of Article 3, we hold that a purported maker may raise forgery as a defense to an obligation on an instrument held by a party claiming holder-in-due-course status. See, e.g., Ingersoll-Rand Fin. Corp. v. Anderson, 921 F.2d 497, 503 (3d Cir. 1990) (“[U]nder New Jersey law, when a negotiable instrument is claimed to be a forgery, until such time as its status as a genuine instrument is established, even a holder in due course takes subject to the forgery defense.”); Fed. Fin. Co. v. Chiaramonte, No. CV 950148828, 1998 WL 727768, at *2 n.2 (Conn. Oct. 5, 1998) (“[The defense of forgery] is available to the defendants whether the holder is a holder in due course or not, since an unauthorized signature is ineffective. . . .”); Southtrust Bank of Ga. v. Parker, 486 S.E.2d 402, 404-06 (Ga. Ct. App. 1997) (reversing grant of summary judgment where questions of material fact remained as to forgery, even though holder was holder in due course).

¶20 On the facts as found by the district court, Husband has a valid forgery defense. The district court found that he never appointed Wife as his attorney or authorized her to sign his name on the forged POAs, any of the notes or deeds, or the loan applications. She thus was not an “an agent or representative” of Husband within the meaning of section 4-3-401. Yet she fraudulently signed his name on all of these documents, had her daughter from a prior marriage notarize them, and represented herself as his attorney. Husband therefore has a valid forgery defense.

¶21 Furthermore, although Article 3 bars a person whose signature was forged from asserting forgery as a defense if his own negligence contributed to the forgery, § 4-3-406(a), C.R.S. (2015), the district court’s detailed factual findings preclude any finding of negligence on Husband’s part here. Given that the interest deduction on the 2008 tax return was in the amount he expected, the district court concluded that the earliest Husband could or should have discovered the 2009 deed by the exercise of reasonable diligence was in April 2010, when he could have reviewed the 2009 tax returns. But when he asked Wife about the returns, she deliberately misled him, telling him that he did not need to sign them. We decline to declare him negligent for trusting his wife. And the next time he detected suspicious activity—in December 2011—he exercised “ordinary care” under section 4-3-406 by performing a credit check and filing identity theft reports with the police and the bank.

¶22 This was not a case where a purported maker failed to exercise reasonable control over his checks or signing devices. See § 4-3-406 cmt. 3. Rather, it was an active effort on Wife’s part to encumber the property without Husband’s knowledge. She forged his signature on three powers of attorney by signing his name without his permission; had her daughter from a previous marriage fraudulently notarize them; encumbered the property without his consent using the forged POAs; falsely advised the mortgage broker that he was unavailable and that they therefore had to proceed using powers of attorney; hid the documents evidencing the transactions in the crawl space of their home; and lied when he asked her about the 2009 tax returns. In short, Wife went to great lengths to defraud Husband, and he was not negligent for falling victim to her elaborate scheme.

¶23 We also agree with the court of appeals that the record supported the district court’s finding on ratification. While a purported holder may ratify an unauthorized signature, and thus make it binding on him, § 4-3-403(a), “ratification can never exist unless it is clearly shown that the party charged with ratification has full knowledge of all material facts, and thereafter knowingly accepts and approves the contract,” Colo. Mgmt. Corp. v. Am. Founders Life Ins. Co. of Denver, 359 P.2d 665, 669 (Colo. 1961). The party alleging ratification—here, Branch Banking and Trust—carries the burden of proof. Film Enters., Inc. v. Selected Pictures, Inc., 335 P.2d 260, 265 (Colo. 1959). Husband testified, however, that he never knew of the 2008 or 2009 loan transactions or their resulting deeds of trust, and the district court credited that testimony. The record therefore supports the district court’s conclusion that he lacked “full knowledge of all material facts” about the transactions required for ratification, Colo. Mgmt. Corp., 359 P.2d at 669, and we affirm the court of appeals’ holding on this point, see C.R.C.P. 52 (“Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.”); Amos v. Aspen Alps 123, LLC, 2012 CO 46, ¶ 25, 280 P.3d 1256, 1262 (“In an appeal of a judgment entered after a trial to the court, we defer to the trial court’s credibility determinations and will disturb its findings of fact only if they are clearly erroneous and are not supported by the record.”).

¶24 Overall, then, the facts as found by the district court indicate that Husband has a valid forgery defense, did not negligently contribute to the forgery, and never ratified the notes or the deeds of trust securing them. On these facts, even assuming without deciding that Article 3 applies to the 2009 deed of trust, Husband prevails.

¶25 Because Husband has a valid forgery defense, not precluded by any negligence or ratification on his part, we need not and do not reach the question of whether a deed of trust is a negotiable instrument under Article 3. Correspondingly, we hold that it was unnecessary for the court of appeals to address this issue, and affirm its judgment on other grounds.

III.

¶26 We affirm the judgment of the court of appeals on other grounds.

JUSTICE COATS joins with the majority and specially concurs.

JUSTICE HOOD concurs in part and dissents in part, and JUSTICE MÁRQUEZ joins in the concurrence in part and dissent in part.

Justice COATS, specially concurring.

¶27 While I concur in the majority opinion and fully agree that we need not reach the issue of the negotiability of deeds of trust under Article 3 or Colorado’s Uniform Commercial Code, in light of Justice Hood’s alternate opinion urging the treatment of the deed of trust in this case as a negotiable instrument, I write separately to explain my own understanding of the controlling statutes.

¶28 I emphasize “controlling statutes” because I think it clear that the question whether a deed of trust referenced by, and securing a promise to pay contained in, a negotiable instrument is therefore to be treated as inseparable from that negotiable instrument itself, is first and foremost a matter of statutory interpretation. By contrast, Justice Hood would resolve the question on the basis of ancient interpretations of the common law and principles of equity, and the decisions of two intermediate appellate courts still relying on pre-Uniform Commercial Code precedent in their respective states. See Carnegie Bank v. Shalleck, 606 A.2d 389, 400 (N.J. Super. Ct. App. Div. 1992) (citing Magie v. Reynolds, 26 A. 150 (N.J. Ch. Div. 1893)); Pitman Place Dev., LLC v. Howard Invs., LLC, 330 S.W.3d 519, 536 (Mo. Ct. App. 2010) (citing Bellistri v. Ocwen Loan Serv., LLC, 284 S.W.3d 619, 623 (Mo. Ct. App. 2009) (relying in turn on George v. Surkamp, 76 S.W.2d 368, 371 (Mo. 1934))). Justice Hood relies primarily on the authority of an 1882 decision of the United States Supreme Court, sitting as an appellate court for one of its territories—the Territory of Colorado—rather than as the highest constitutional court in our federal system of government, and interpreting then-controlling principles of law and equity. See Carpenter v. Longan, 83 U.S. (16 Wall.) 271 (1872). While the view expressed in Carpenter had become accepted by a majority of the jurisdictions of this country by some point in the first half of the twentieth century, prior to the widespread adoption of the Uniform Commercial Code, a substantial minority of states offered compelling objections and remained unwilling to adopt it. See W. W. Allen, Annotation, Right of Holder of Negotiable Paper Secured by Mortgage or of Trustee in Mortgage to Protection as Regards Defenses Against Mortgage, 127 A.L.R. 190 (1940). Since the widespread adoption of the Commercial Code, the two examples cited by the majority appear to be isolated examples of states unselfconsciously continuing to rely on their pre-Code precedents.

¶29 Although we have previously made clear that our adoption of the Uniform Commercial Code allows for the continued vitality of preexisting principles of law and equity only to the extent that they have not been displaced by the Code, and that “displacement,” as that term appears in the Code, contemplates the abrogation of common law rules without requiring unequivocal, explicit reference to the doctrine in question, see Clancy Sys. Int’l, Inc. v. Salazar, 177 P.3d 1235, 1237 (Colo. 2008), Justice Hood offers no explanation why the rule of Carpenter, even if we were to find it useful as a matter of policy, has not been displaced by the statutory scheme of the Code. And although the Code treats the age-old problem of the bona fide purchaser in its own way, through its own scheme of tightly interlocking concepts like the “negotiable instrument” and the “holder in due course,” Justice Hood offers no explanation how the Code can be interpreted to allow for the treatment of a security document as a negotiable instrument, or how the legislature’s distinctly separate treatment of real property interests, including mortgages and deeds of trust, can be reconciled with their conversion into commercial paper.

¶30 In perhaps the only case decided by this court concerning the effect of referencing a deed of trust in a promissory note, we addressed the converse question: whether the note lost its character as a negotiable instrument by being collateralized by the mortgage. In Haberl v. Bigelow, 855 P.2d 1368 (Colo. 1993), we answered that question with a resounding “no.” Although, as the court of appeals noted below, we did not directly answer the question whether a deed of trust can, nevertheless, become a negotiable instrument by partaking in the character of the promissory note, our reasoning in Haberl could hardly be considered favorable. In fact, our rationale in Haberl necessarily implied that it cannot. For the very reason that a deed of trust, by definition, includes undertakings other than simply an unconditional promise or order to pay a fixed amount of money on demand or at a definite time, it cannot, in and of itself, be a negotiable instrument, a proposition with which Justice Hood clearly agrees. If the deed of trust were treated as an integral part of, or inseparable from, a promissory note for which it provided security, as Justice Hood would have it, the effect would necessarily be to strip the note of its character as a negotiable instrument rather than to turn the deed into a negotiable instrument. In combination with the deed of trust, the note would necessarily state additional undertakings or instructions, and for that reason, if no other, fail to meet the statutory definition of a “negotiable instrument.”

¶31 Apart from the fact that the Code’s definition of “negotiable instrument” therefore necessarily displaces the “equitable” solution carved out in Carpenter, the legislature’s choice to separately define “spurious liens,” without including the defenses applicable to negotiable instruments, and to provide a specific, expedited process for having such liens declared invalid and removed further demonstrate its intent to draw a clear demarcation between negotiable instruments and liens. Part 2 of title 38, article 35 of the revised statutes, entitled “Spurious Liens and Documents,” defines, in pertinent part, a “[s]purious lien” to mean “a purported lien or claim of lien that . . . [i]s not created, suffered, assumed, or agreed to by the owner of the property it purports to encumber.” § 38-35-201(4), (4)(c), C.R.S. (2015). The legislature similarly provides for an expedited procedure by which any person whose property is affected by a recorded lien he believes to be spurious may petition the district court for an order to show cause why the lien should not be declared invalid and ordered released. § 38-35-204, C.R.S. (2015). Although easily lost sight of in Justice Hood’s discussion of negotiable instruments and holders in due course under the Commercial Code, the action at issue here is one brought by Fiscus pursuant to this Part 2.

¶32 A lien is an encumbrance on property. For the foregoing reasons, the Uniform Commercial Code simply cannot be construed to include a lien within the definition of a negotiable instrument or intend that one can be a holder in due course of a lien. In light of the legislature’s express provision for the removal of any lien that is “spurious,” however, even if a deed of trust collateralizing a promissory note could be considered a combination lien and negotiable instrument, the lien would nevertheless be subject to removal, as long as it was “not created, suffered, assumed, or agreed to by the owner of the property it purports to encumber.” The trier of fact in this spurious lien action expressly found from the evidence that Fiscus did not create, suffer, assume, or agree to Liberty’s lien on his property.

¶33 Justice Hood’s contention that the reasoning of cases pre-dating our adoption of the commercial code remains valid today seems to me best explained as an attempt to substitute a court-devised solution to the dilemma of the bona fide purchaser for the one chosen by the legislature. With regard to the class of which this case stands as a good example, it is a mystery to me how one could find greater equities to lie with a trader in commercial paper than with a homeowner who has been victimized by forgery.

¶34 Notwithstanding my doubts about the position taken by Justice Hood’s alternate opinion, I concur in the majority opinion and fully concur with its determination that we need not reach the negotiability of deeds of trust in this case.

Justice HOOD, concurring in part and dissenting in part.

¶35 I agree with the majority that the purported maker of a negotiable instrument may raise forgery as a defense to an obligation held by a party claiming holder-in-due-course status. As the majority correctly notes, when a purported maker raises a forgery defense, he challenges the existence of the obligation, not its enforcement. Maj. op. ¶ 16. On the facts found by the trial court, I likewise agree that Husband has a valid forgery defense not barred by ratification.

¶36 I respectfully part company with the majority regarding whether remanding on negligence would amount to idle ceremony. Section 4-3-406, C.R.S. (2015), precludes a person from asserting that his signature was forged on a negotiable instrument if his own negligence contributed to the alleged forgery. Because the trial court concluded that the 2009 deed was not a negotiable instrument, it rejected Branch Banking and Trust’s section 4-3-406 negligence argument on its face. The majority deems further consideration of Husband’s alleged negligence unnecessary due to Wife’s highly deceptive conduct and his understandable faith in his spouse. Maj. op. ¶ 21 (“We decline to declare him negligent for trusting his wife.”). But Wife’s undeniably egregious behavior and the trust implicit in most marital relationships do not allow us to resolve a fact-intensive defense that the factfinder has yet to address.

¶37 Of course, if the deed of trust is not a negotiable instrument, then asking the trial court to examine Husband’s alleged negligence truly would be inviting idle ceremony. After all, any defenses under the UCC would then be unavailable. Therefore, I first address the threshold legal matter on which we granted certiorari: “Whether a lender in possession of a promissory note secured by a deed of trust on real property may assert a holder-in-due-course defense under section 4-3-305, C.R.S. (2014), to a claim that the deed of trust was forged.”

¶38 UCC Article 3 governs the issuance, transfer, enforcement, and discharge of negotiable instruments. A promissory note, such as the one Wife executed in this case, is a negotiable instrument governed by Article 3. A deed of trust is a “security instrument containing a grant to a public trustee together with a power of sale,” § 38-38-100.3(7), C.R.S. (2015), and is generally governed by real property law.

¶39 Jurisdictions are split on whether a deed of trust securing a promissory note is, like the note itself, a negotiable instrument subject to the UCC’s provisions and protections. Compare Hogan v. Wash. Mut. Bank, N.A., 277 P.3d 781, 783 (Ariz. 2012) (concluding trustee seeking to commence non-judicial foreclosure on deed of trust was not required to comply with UCC provisions, though compliance would have been required to collect on the accompanying note), and You v. JP Morgan Chase Bank, N.A., 743 S.E.2d 428, 433 (Ga. 2013) (stating that a security deed is not a negotiable instrument and is not governed by UCC Article 3), with Pitman Place Dev., LLC v. Howard Invs., LLC, 330 S.W.3d 519, 536 (Mo. Ct. App. 2010) (holding that a deed of trust shares the negotiable characteristics of the note it secures), and Carnegie Bank v. Shalleck, 606 A.2d 389, 400 (N.J. Super. Ct. App. Div. 1992) (explaining that upon assignment of negotiable instrument and accompanying mortgage to holder in due course, assignee may enforce both mortgage and note free of personal defenses mortgagor may have had against assignor).

¶40 On the one hand, because a deed of trust provides a security interest in real property, guaranteeing a remedy in the event of a default on a promise to pay, it may be considered to exist separately from the promise to pay itself; accordingly, it would not be subject to negotiable-instrument law. But on the other hand, the promissory note and accompanying deed of trust are functionally interdependent: a default on the note triggers rights under the deed of trust. Consequently, one could argue, the deed shares the note’s negotiability, and both must be governed by the UCC.

¶41 This latter notion that a deed of trust shares a promissory note’s negotiability dates back to the United States Supreme Court’s opinion in Carpenter v. Longan, 83 U.S. (16 Wall.) 271 (1872), an appeal from the Supreme Court of Colorado Territory. In Carpenter, the Court held that the assignee of a mortgage and negotiable note takes the mortgage as he takes the note, “free from the objections to which it was liable in the hands of the mortgagee.” Id. at 273. The Court explained the inseparability of the mortgage and the note: the note, as debt, is the principal thing, and the mortgage is an accessory that is carried with an assignment of the note. Id. at 274-75. It considered this dependence necessary to honor the bargain made between the parties that formed the mortgage, as well as the parties that agreed to its assignment. See id. at 273.

¶42 Early Colorado cases in the years following Carpenter emphasized the close relationship between a note and the mortgage securing it. E.g., Coler v. Barth, 48 P. 656, 659 (Colo. 1897) (“It is stated as a general rule, and it is unquestionably correct, that the note secured by a mortgage, or a deed of trust in the nature of a mortgage, is the principal thing, and the security but an incident. . . .”); Fassett v. Mulock, 5 Colo. 466, 469 (1880) (“It is a familiar principle that a mortgage is but an incident of the debt it secures, and an assignment of the debt carries the mortgage with it.”); accord McGovney v. Gwillim, 65 P. 346, 347 (Colo. App. 1901) (holding that where action upon note was barred by statute of limitations, action to foreclose on deed of trust securing note was also barred).

¶43 Though these cases pre-date the adoption of the UCC, I believe their reasoning remains valid today. Indeed, decades after Colorado’s 1965 codification of the UCC, this court observed the synergetic relationship between a promissory note and a deed of trust. See Columbus Invs. v. Lewis, 48 P.3d 1222, 1226 & n.4 (Colo. 2002) (“The transfer or assignment of a negotiable promissory note carries with it, as an incident, the deed of trust or mortgage upon real estate or chattels that secure[s] its payment.”). Given this court’s steadfast acknowledgement that a deed of trust is incidental to the note it secures, I would join those jurisdictions that have held that a deed of trust securing a promissory note takes on the note’s negotiable character.

¶44 In the briefing, Husband relies on Upson v. Goodland State Bank & Trust Co., 823 P.2d 704 (Colo. 1992), for a contrary result. That reliance is misplaced. In Upson, we held that when the release of a deed is obtained through fraud, that release is invalid. Id. at 706. We reached this result in part by analogizing to cases from other jurisdictions stating that a forged deed cannot pass title. Id. at 705-06. We also concluded that without a valid release, even a subsequent bona fide purchaser for value is not protected against a claim by the original beneficiary of the deed of trust. Id. at 706. Husband argues that, following Upson, the 2009 deed of trust executed using the forged POAs is void, and thus unenforceable by Branch Banking and Trust. But Upson held only that the release of a deed based on a forged request has no legal effect. Id. Although we indicated that a forged deed is void, we did not consider whether the UCC applies to a deed of trust securing a promissory note, which is the question we face here. Furthermore, the UCC displaces conflicting common law provisions. Clancy Sys. Int’l, Inc. v. Salazar, 177 P.3d 1235, 1237 (Colo. 2008); see also § 4-1-103(b), C.R.S. (2015). Consequently, Upson must yield to the UCC and its holder-in-due-course provisions to the extent that the two might conflict. Thus, Upson is distinguishable and not controlling.

¶45 Similarly, Haberl v. Bigelow, 855 P.2d 1368 (Colo. 1993), which the court of appeals used to reject Branch Banking and Trust’s argument that a deed of trust is a negotiable instrument, is of limited relevance. In Haberl, this court considered whether the silence of a holder of a deed of trust securing a promissory note was sufficient to establish his consent to subordinate the instrument to another deed of trust. See id. at 1372. As a preliminary matter, we stated that the note secured was a negotiable instrument governed by UCC Article 3, and we supported that statement with a string of citations from other jurisdictions establishing that a promissory note is a negotiable instrument even when secured by a deed of trust. Id. at 1372-73. But while we acknowledged this general principle, it was not a focal point of our analysis. Moreover, we did not address the issue before the court today. Haberl therefore has minimal significance here.

¶46 Additionally, holding a deed of trust to be a negotiable instrument would further a fundamental policy of the UCC’s holder-in-due-course doctrine by encouraging the use of commercial paper to facilitate the flow of capital. See Georg v. Metro Fixtures Contractors, Inc., 178 P.3d 1209, 1212 (Colo. 2008). Such a result would ensure that Branch Banking and Trust is able to enforce the deed of trust that was “conditioned to secure the fulfilment of [the promissory note],” Carpenter, 83 U.S. (16 Wall.) at 273, to the same extent as it is able to enforce the note itself, protecting Branch Banking and Trust and other similarly situated parties’ bargained-for expectations and promoting commercial transactions.

¶47 Accordingly, I would hold that because a deed of trust is fundamentally interdependent with the note it secures, the deed takes on the note’s negotiable character and is governed by Article 3. And because the trial court initially held to the contrary and rejected Branch Banking and Trust’s section 4-3-406 negligence defense on the grounds that Article 3 did not apply, I would remand to the trial court for a full consideration of that defense.[1]

¶48 For these reasons, I concur with the majority’s conclusions regarding forgery and ratification, but I respectfully dissent from its holding that Husband was not negligent and Branch Banking and Trust may not raise section 4-3-406 as a defense to Husband’s forgery claim.

I am authorized to state that JUSTICE MÁRQUEZ joins in the concurrence in part and dissent in part.

[1] I also respectfully disagree with the majority’s implication that the negligence defense should be confined to “checks or signing devices.” Maj. op. ¶ 22. The comments to section 4-3-406 explain that the current version of that section was expanded from its former iteration “to apply not only to drafts but to all instruments.” § 4-3-406 cmt. 1.

 

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Foreclosure crisis worsens in Massachusetts, spurring cries of state inaction

Foreclosure crisis worsens in Massachusetts, spurring cries of state inaction

MassLive-

The effects of the Great Recession may be receding, but many Massachusetts homeowners remain underwater. The number of foreclosures is rising, and that trend is expected to continue.

The reason, experts say, is a backlog of old foreclosures that were stalled due to a state law that are only now proceeding. But advocates for homeowners say the state is also not doing enough to help struggling homeowners.

Elyse Cherry, CEO of Boston Community Capital, which invests in affordable housing in low-income communities, was part of a 2014 task force that made recommendations to state government to address foreclosure impacts. “The fact that they haven’t been implemented at all speaks to the current interest of state government in terms of dealing with it, and the fact that as a country we have moved on,” Cherry said.

[MASS LIVE]

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Why Subprime Mortgages Lend Themselves to Securitization

Why Subprime Mortgages Lend Themselves to Securitization

National Mortgage News-

There’s no shortage of banks making large mortgages to borrowers with pristine credit and plenty of liquid assets. Yet very few of these loans get bundled into collateral for mortgage bonds, putting them in the hands of capital markets investors.

Contrast this with loans to borrowers with shaky or damaged credit, which many lenders are reluctant to make, but which are far more likely to be securitized.

Overall, mortgage loan originations remained steady in the second quarter, with one- to four-family home originations up 4.5% from the prior quarter, according to the Mortgage Bankers Association.

[NATIONAL MORTGAGE NEWS]

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SEC and Revolving Doors: Q&A with Eric Ben-Artzi, the Deutsche Bank Whistleblower Who Rejected a Multimillion Dollar Award

SEC and Revolving Doors: Q&A with Eric Ben-Artzi, the Deutsche Bank Whistleblower Who Rejected a Multimillion Dollar Award

ProMarket-

“Revolving Doors,” the habit of executives and regulators going back and forth between government jobs and regulated industries, has attracted increasing attention since the financial crisis.

The incestuous relationship between regulators and the industry they are tasked with supervising is considered by many as one of the main reasons for “regulatory capture”–the failure of regulation in addressing market failures, and, in many cases, the designing of regulation that benefits incumbents and subverts competition.

Eric Ben-Artzi, a whistleblower who exposed a major case of accounting fraud by one of the biggest financial institutions in the world, chose a very unique way bring attention to the revolving door. Last week he announced, in the pages of the Financial Times, that he is renouncing his share of a $16.5 million SEC whistleblower award because of what he describes as corrupt behavior by the SEC’s senior leadership in deciding not to go after the executives, but rather charge only the bank itself.

[PROMARKET.ORG]

image: ProMarket.org

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Look Who’s Getting That Bank Settlement Cash

Look Who’s Getting That Bank Settlement Cash

WSJ-

Imagine if the president of the United States forced America’s biggest banks to funnel hundreds of millions—and potentially billions—of dollars to the corporations and lobbyists who supported his agenda, all while calling it “Main Street Relief.” The public outcry would rightly be deafening. Yet the Obama administration has used a similar strategy to enrich its political allies, advance leftist pet projects, and protect its legacy—and hardly anyone has noticed.

The administration’s multiyear campaign against the banking industry has quietly steered money to organizations and politicians who are working to ensure liberal policy and political victories at every level of government. The conduit for this funding is the Residential Mortgage-Backed Securities Working Group, a coalition of federal and state regulators and prosecutors created in 2012 to “identify, investigate, and prosecute instances of wrongdoing” in the residential mortgage-backed securities market. In conjunction with the Justice Department, the RMBS Working Group has reached multibillion-dollar settlements with essentially every major bank in America.

The most recent came in April when the Justice Department announced a $5.1 billion settlement with Goldman Sachs. In February Morgan Stanley agreed to a $3.2 billion settlement. Previous targets were Citigroup ($7 billion), J.P. Morgan Chase ($13 billion), and Bank of America, which in 2014 reached the largest civil settlement in American history at $16.65 billion. Smaller deals with other banks have also been announced.

[WALL STREET JOURNAL]

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S&A CAPITAL PARTNERS, INC. v JPMORGAN CHASE BANK, N.A et al| Breach of Contract…Plaintiffs purchased 3,529 first lien residential mortgage loans and approximately 1000 first lien and second lien residential mortgage loans from the Defendants

S&A CAPITAL PARTNERS, INC. v JPMORGAN CHASE BANK, N.A et al| Breach of Contract…Plaintiffs purchased 3,529 first lien residential mortgage loans and approximately 1000 first lien and second lien residential mortgage loans from the Defendants

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

S&A CAPITAL PARTNERS, INC.,
MORTGAGE RESOLUTION SERVICING,
LLC; and 1ST FIDELITY LOAN
SERVICING, LLC,
Plaintiffs

v.

JPMORGAN CHASE BANK, N.A.,
JP MORGAN CHASE & COMPANY, and
CHASE HOME FINANCE LLC
Defendants.

No. 1 :15-cv-00293-LTS-JCF

THIRD AMENDED COMPLAINT
JURY TRIAL DEMANDED

Plaintiffs S&A Capital Partners, Inc. (“S&A”), Mortgage Resolution Servicing, LLC
(“MRS”), and 1st Fidelity Loan Servicing, LLC (“1st Fidelity”)(together, the “Plaintiffs”), for
their third amended complaint against JPMorgan Chase Bank, N.A., JPMorgan Chase &
Company, and Chase Home Finance LLC (together “JPMC” or the “Defendants”), allege as
follows:

NATURE OF THIS ACTION

1. This action arises out of the breach by the Defendants of various contracts entered
into with the Plaintiffs including a mortgage loan purchase agreement dated February 25, 2009
between MRS and Chase Home Finance LLC (the “MLPA”).

THE PARTIES

Plaintiffs:

2. S&A is a Florida corporation located at 6810 N. State Rd. 7, Coconut Creek,
Florida 33073, whose President is Laurence Schneider. S&A has been acquiring mortgaged
loans and pools of loans from numerous lenders, servicers and mortgage insurance companies
since 2003. From 2005 -2010, S&A purchased approximately 650 first lien and second lien
residential mortgage loans from the Defendants.

3. MRS is a Florida limited liability company located at 6810 N. State Road 7,
Coconut Creek, Florida 33073, whose managing member is Real Estate and Finance, Inc., a
Florida corporation whose President is Laurence Schneider. On February 25, 2009, MRS entered
into a purchase agreement to purchase a pool of 3,529 first lien residential mortgage loans from
the Defendants and paid full consideration for the loans.

4. 1st Fidelity is a Florida limited liability company located at 6810 N. State Rd. 7,
Coconut Creek, Florida 33073, whose managing member is Real Estate and Finance, Inc., a
Florida corporation whose President is Laurence Schneider. 1st Fidelity has been acquiring
mortgage loans and pools of loans from numerous lenders, servicers and mortgage insurance
companies since 2008. From 2008 to 2010, 1st Fidelity purchased approximately 350 first lien
and second lien residential mortgage loans from the Defendants.
Defendants:

5. JPMorgan Chase Bank, N.A. (the “Bank”) is a national banking association and a
wholly-owned subsidiary of JPMorgan Chase & Company. The Bank’s principal place of
business is at 270 Park Avenue, New York, New York. On September 25, 2008, the Bank
purchased substantially all of the assets and assumed substantially all of the liabilities of
Washington Mutual Bank, F.S.B. pursuant to a Purchase and Assumption Agreement with the
FDIC as Receiver for Washington Mutual Bank, F.S.B.

6. JPMorgan Chase & Company (“JPMC”) is a Delaware corporation with its
principal place of business at 270 Park Avenue, New York, New York. In July 2004, JPMC                                     merged with Bank One. One or more of the Plaintiffs acquired from JPMC residential mortgage
loans that JPMC had acquired from Bank One loans. As owner of the loans sold to the Plaintiffs,
JPMC is liable for all of the damages sought herein.

7. Chase Home Finance, LLC (“Chase”) was a Delaware limited liability company
that offered mortgage and loan services, with its principal place of business at 343 Thornall
Street, Edison, New Jersey 08837. Prior to May 1, 2011, Chase was qualified to do business in
New Jersey. Effective May 1, 2011, Chase merged into the Bank which now owns and services
the residential mortgage loans previously owned by Chase. The Bank stands in the shoes of
Chase and is liable for all of the damages sought herein.

[…]

12. The Plaintiffs’ goal is to work out reasonable and sustainable payment plans with
the borrowers so that they can retain their homes.

[…]

Down Load PDF of This Case

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Michigan sets parole for ‘Linda Green’ robo-signer

Michigan sets parole for ‘Linda Green’ robo-signer

The Detroit News-

The only person jailed in connection with a foreclosure forgery scandal that swept through Michigan and the rest of the country after the collapse of the housing bubble spends her days confined to the Women’s Huron Valley Correctional Facility in Pittsfield Township.

But not for long.

Sentenced in May 2013 to serve up to 20 years on racketeering charges, Lorraine Brown, now 55, will be paroled sometime this week, according to the Michigan Department of Corrections, after serving her 40-month minimum sentence. Brown will then be transferred to federal custody to serve the remainder of a 58-month federal sentence after pleading guilty to a single charge of conspiracy to commit mail and wire fraud.

[THE DETROIT NEWS]

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Dubin Law Offices Amazing Response to Nationwide Title Clearing’s “Signers” Attorney re: Bly, Moore, and Doko Videotaped Depositions

Dubin Law Offices Amazing Response to Nationwide Title Clearing’s “Signers” Attorney re: Bly, Moore, and Doko Videotaped Depositions

55 Merchant Street, Suite 3100
Harbor Court, Honolulu, Hawaii 96813
Honolulu (808) 537-2300 Facsimile (808) 523-7733
San Francisco (415) 659-9855 Los Angeles (213) 947-6262
San Diego (619) 677-6200 Toll Free: (888) dubinlaw
Writer’s E-Mail: gdubin@dubinlaw.net
www.dubinlaw.net
ATTORNEYS LICENSED IN HAWAII, CALIFORNIA AND NEVADA

August 27,2016

Chris A. Barker, Esq.
Barker & Cook
501 East Kennedy Blvd., Suite 790
Tampa, Florida 33602

Re: Bly, Moore, and Doko

Dear Mr. Barker:

I am in receipt of your letter dated July 29,2016, expressing your concern with
regard to my posting of video depositions of the above-referenced individuals on my
Foreclosure Hour Website, upon receipt of which I gave your inquiry to independent
counsel for review.

As you know, those videos were posted on my website in conjunction with my
radio show, for which I claim a media freedom of the press First Amendment
privilege, further rendering my sources confidential under the reporters’ shield law.
Thank you nevertheless for bringing to my attention Circuit Judge Haworth’s
earlier Order, for I of course recognize the importance of adhering strictly to all
relevant court orders no matter which jurisdiction they may issue from.

However, I have been advised that Circuit Judge Haworth’s Order does not apply
to me for the following reasons:

1. I did not secure the videos from a source listed in his restraining order, as the
only individuals covered by the Order are the enjoined disseminators. You are surely
familiar with the decision of the United States Supreme Court in the Pentagon
Papers case.

2. I was furthermore not a part of the referenced Florida litigation, nor do I reside
or have I ever resided in Florida, as a result of which Circuit Judge Haworth had no
jurisdiction over me at the time that Order was issued nor presently.

3. As you know, sometimes it is not easy to identify in one’s legal research
judicial statements supporting the obvious, but even had I secured the videos from
an enjoined disseminator and even had the Court had personal jurisdiction over me
to enforce the Order, neither of which is however true, research nonetheless does
occasionally support the obvious, that when a case is dismissed, as was yours many
years ago before Circuit Judge Haworth, and voluntarily with prejudice I am advised,
the Court lost jurisdiction of the case and “the effect of the filing of a notice of
dismissal . . . is to leave the parties as though no action had been brought,” Janssen
v. Harris,321 F.3d 998 (1Oth Cir.2003).

Finally, Ms. Moore in particular, for instance, has even very recently cost several
of my clients their real property as the result of not only her dishonest robo-signing
under oath, but in one instance due to her belated declaration, deliberately
dishonestly filed in Court in reply papers in Hawaii in the Third Circuit Court in Kona,
that resulted in an unfair $825,000 deficiency judgment, at a time that I understand
contrary to her Declaration testimony in that relatively recent case she did not even
any longer work for that company, which was filled with other false statements under
oath in that same case.

That affected client of mine in particular has continually asked me to sue Ms.
Moore for fraud on the Court in Hawaii, so it would seem that if you persist in
continuing to threaten me and interfering with my website, getting my attention you
may be doing your clients a great disservice.

If, for instance, your threats and interference were to continue, please expect a
countersuit against your clients to be forthcoming in Hawaii, including perhaps in the
form of a class action, long overdue, especially since your clients’ false filings are still
to this day flooding foreclosure courts, including in Hawaii, which incidentally makes
their videos not only still timely, but their viewing, especially in court proceedings,
one, in the public interest, two, their submission in court as material evidence fully
protected, and three, privileged in the exercise of freedom of the press.

Very truly yours,
Gary Victor Dubin
GVD/o

Read both letters below

20160827183009_1_1 by DinSFLA on Scribd

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TFH 8/28 | Foreclosure Workshop #20: Bank of America v. Nash — A Case Study on Challenging Standing Where Your Listed Original Lender Was a Non-Existent Entity Such as “America’s Wholesale Lender, Inc.,” “Washington Mutual Bank, F.A.,” or “American Brokers Conduit.”

TFH 8/28 | Foreclosure Workshop #20: Bank of America v. Nash — A Case Study on Challenging Standing Where Your Listed Original Lender Was a Non-Existent Entity Such as “America’s Wholesale Lender, Inc.,” “Washington Mutual Bank, F.A.,” or “American Brokers Conduit.”

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)

ALSO AVAILABLE ON KHVH-AM ON THE iHEART APP ON THE INTERNET

.

.

Sunday – August 28, 2016

Foreclosure Workshop #20: Bank of America v. Nash — A Case Study on Challenging Standing Where Your Listed Original Lender Was a Non-Existent Entity Such as “America’s Wholesale Lender, Inc.,” “Washington Mutual Bank, F.A.,” or “American Brokers Conduit.”


Our Special Guest will be Linda Nash, whose original lender was “America’s Wholesale Lender.”

Linda will reveal her personal ongoing struggle tirelessly to secure justice in the Florida State Courts akin to riding on a roller coaster and a merry-go-round both at the same time.

It has been estimated that more than 25 million mortgage loans in the United States were made by non-existent entities.

 

.
Host: Gary Dubin Co-Host: John Waihee

.

CALL IN AT (808) 521-8383 OR TOLL FREE (888) 565-8383

Have your questions answered on the air.

Submit questions to info@foreclosurehour.com

The Foreclosure Hour is a public service of the Dubin Law Offices

Past Broadcasts

EVERY SUNDAY 3:00 PM HAWAII 6:00 PM PACIFIC 9:00 PM EASTERN ON KHVH-AM (830 ON THE DIAL) AND ON iHEART RADIO

The Foreclosure Hour 12

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Former Goldman Sachs Trader Settles Fraud Charges

Former Goldman Sachs Trader Settles Fraud Charges

FOR IMMEDIATE RELEASE
2016-163

Washington D.C., Aug. 16, 2016 —The Securities and Exchange Commission today announced that the former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.

An SEC investigation found that Edwin Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS, then re-selling them at higher prices to the buying customer with Goldman keeping the difference.  On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.

“With no public exchange showing the price for each RMBS trade as it occurs, investors purchasing these securities rely on dealers to be honest about the purchase price they paid,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.  “Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation.”

The SEC’s order finds that Chin’s misconduct began in 2010 and continued until he left Goldman in 2012.  Without admitting or denying the findings, Chin agreed to the entry of the order finding that he violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5.  He agreed to pay $200,000 in disgorgement, $50,000 in prejudgment interest, and a $150,000 penalty.

The SEC’s continuing investigation has been conducted by Andrew Feller, David London, and Heidi Mitza, and the case has been supervised by Celia Moore and Michael Osnato.  The SEC appreciates the assistance of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

###

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SEC Settles Case With Former Fannie Mae Chief Exec

SEC Settles Case With Former Fannie Mae Chief Exec

Fortune-

In one of the biggest cases stemming from the financial crisis.

In one of the U.S. Securities and Exchange Commission’s biggest cases tied to the 2008 financial crisis, former Fannie Mae Chief Executive Daniel Mudd has reached a settlement with regulators, according to court papers filed on Monday.

The deal with the SEC, detailed in papers filed in Manhattan federal court, resolves a 2011 lawsuit accusing Mudd of misleading investors about Fannie’s exposure to risky mortgages before the crisis.

Mudd had denied wrongdoing and he did not admit any in the Monday agreement. The deal concludes one of the SEC’s few remaining cases tied to the housing downturn.

[FORTUNE]

image: Bloomberg

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QUI TAM| Schneider v. JP Morgan Chase Bank National Association et al – case asserts that JP Morgan Chase improperly took credits for loans hidden in a secret system of records known as RCV1, which were not being properly serviced as federally related mortgages

QUI TAM| Schneider v. JP Morgan Chase Bank National Association et al – case asserts that JP Morgan Chase improperly took credits for loans hidden in a secret system of records known as RCV1, which were not being properly serviced as federally related mortgages

SUMMARY

Laurence Schneider, principal investor in three companies, Mortgage Resolution Servicing LLP, S&A Capital Partners, Inc., and 1st Fidelity Loan Servicing, filed a False Claims Act case against JPMorgan Chase for fraudulent claims of consumer relief and the nation’s largest bank’s failure to comply with mortgage loan servicing requirements, under the National Mortgage Settlement, HAMP and Making Home Affordable Program.  The case asserts that JP Morgan Chase improperly took credits for loans hidden in a secret system of records known as RCV1, which were not being properly serviced as federally related mortgages.  As a result, JP Morgan Chase received credit against its multi-billion settlements with the United States Department of Justice that it never should have received.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, THE
STATES OF CALIFORNIA,
DELAWARE, FLORIDA, GEORGIA,
HAWAII, ILLINOIS, INDIANA, IOWA,
MASSACHUSETTS, MINNESOTA,
MONTANA, NEVADA, NEW
HAMPSHIRE, NEW JERSEY, NEW
MEXICO, NEW YORK, NORTH
CAROLINA, RHODE ISLAND,
TENNESSEE, VIRGINIA, AND THE
DISTRICT OF COLUMBIA.,

Plaintiffs,

Ex rel. LAURENCE SCHNEIDER,
Plaintiff-Relator,

v.

J.P. MORGAN CHASE BANK,
NATIONAL ASSOCIATION, J.P.
MORGAN CHASE & COMPANY; AND
CHASE HOME FINANCE LLC,
Defendants.

Case. No. 1:14-cv-01047-RMC

Judge Rosemary M. Collyer

SECOND AMENDED COMPLAINT

<excerpt>

I. INTRODUCTION

A. Defendant’s Fraud

3. Defendant Chase’s fraud arises out of its response to efforts by the United States
Government (“Government” or “Federal Government”) and the States (the “States”)1 to remedy
the misconduct of Chase and other financial institutions whose actions significantly contributed
to the consumer housing crisis.

4. Defendant’s misconduct resulted in the issuance of improper mortgages,
premature and unauthorized foreclosures, violation of service members’ and other homeowners’
rights and protections, the use of false and deceptive affidavits and other documents, and the
waste and abuse of taxpayer funds. Each of the allegations regarding Defendant contained
herein applies to instances in which one or more, and in some cases all, of the defendants
engaged in the conduct alleged.

5. In March 2012, after a lengthy investigation (in part due to other qui tam
plaintiffs) under the Federal False Claims Act, the Government, along with the States, filed a
complaint against Chase and the other banks responsible for the fraudulent and unfair mortgage
practices that cost consumers, the Federal Government, and the States tens of billions of dollars.
Specifically, the Government alleged that Chase, as well as other financial institutions, engaged
in improper practices related to mortgage origination, mortgage servicing, and foreclosures,
including, but not limited to, irresponsible and inadequate oversight of the banks’ quality control
standards.

6. These improper practices had previously been the focus of several administrative
enforcement actions by various government agencies, including but not limited to, the Office of
the Controller of the Currency, the Federal Reserve Bank and others. Those enforcement actions
resulted in various other Consent Orders that are still in full force and effect.

7. In April 2012, the United States District Court for the District of Columbia
approved a settlement between the Federal Government, the States, the Defendant and four other
banks, which resulted in the NMSA. The operative document of this agreement was the Consent
Judgment (“Consent Judgment” or “Agreement”). The Consent Judgment contains, among other
things, Consumer Relief provisions. The Consumer Relief provisions required Chase to provide
over $4 billion in consumer relief to their borrowers. This relief was to be in the form of, among
other things, loan forgiveness and refinancing. Under the Consent Judgment, Chase received
“credits” towards its Consumer Relief obligations by forgiving or modifying loans it maintained
as a result of complying with the procedures and requirements contained in Exhibits D and D-1
of the Consent Judgment.

8. The Consent Judgment also contains Servicing Standards in Exhibit A that were
intended to be used as a basis for granting Consumer Relief. The Servicing Standards were
tested through various established “Metrics” and were designed to improve upon the lack of
quality control and communication with borrowers. Compliance was overseen by an
independent Monitor.

9. The operational framework for the Servicing Standards and Consumer Relief
requirements of the NMSA was based on a series of Treasury Directives that were themselves
designed as part of the Making Home Affordable (MHA) program. The MHA program was a
critical part of the Government’s broad strategy to help homeowners avoid foreclosure, stabilize
the country’s housing market, and improve the nation’s economy by setting uniform and industry
wide default servicing protocols, policies and procedures for the distribution of federal and
proprietary loan modification programs.

10. Before the Consent Judgment was entered into, Chase sold a significant amount
of its mortgage obligations to individual investors. Between 2006 and 2010, the Relator bought
the rights to thousands of mortgages owned and serviced by Chase. Unbeknownst to the Relator,
these mortgages were saturated with violations of past and present regulations, statutes and other
governmental requirements for first and second federally related home mortgage loans.

11. After both the Consent Judgment was signed and the MHA program was in effect,
numerous borrowers, whose 2nd lien mortgages had been sold by Chase to the Relator, received
debt-forgiveness letters from Chase that were purportedly sent pursuant to the Consent
Judgment.

12. Relator, through his contacts at Chase, was made aware that 33,456 letters were
sent by Chase on September 13, 2012 to second-lien borrowers. On December 13, 2012 another
approximately 10,000 letters were sent, and on January 31, 2013 another approximately 8,000
letters were sent, for a total of over 50,000 debt-forgiveness letters. These letters represented to
the recipient borrowers that, pursuant to the terms of the NMSA, the borrowers were discharged
from their obligations to make further payments on their mortgages, which Chase stated, it had
forgiven as a “result of a recent mortgage servicing settlement reached with the states and federal
government.” None of these borrowers made an application for a loan modification as required
by the Consent Judgment. These letters were not individually reviewed by Chase to ensure that
Chase actually owned the mortgages or to ensure the accuracy and integrity of the borrower’s
information but instead were “robo-signed”; each of the letters sent out was signed by “Patrick
Boyle” who identified himself as a Vice President at Chase.

13. Relator’s experience with Chase’s baseless debt-forgiveness letters was not
unique. Several other investors were also affected by Chase choosing to mass mail the “robo-
signed” debt-forgiveness letters to thousands of consumers from its system of records in order to
earn credits under the terms of the Consent Judgment and to avoid detection of its illegal and
discriminatory loan servicing policies and procedures.

14. In addition to the debt forgiveness letters sent, and after both the Consent
Judgment was signed and the MHA program was in effect, numerous borrowers, whose 1st
mortgages had been sold by Chase to the Relator, had their 1st mortgages liens quietly released.

15. Relator, through his third party servicer, which was handling normal and
customary default mortgage servicing activities, was made aware that several lien releases were
filed in the public records on mortgage loans that were owned by Relator in the fall of 2013.
Through Relator’s subsequent investigation of the property records for 1st mortgage loans that
Chase had previously sold to Relator, scores of additional lien releases were also discovered.

16. During the course of Relator’s investigation of Chase’s servicing practices, he
discovered that Chase maintains a large set of loans outside of its primary System of Records
(“SOR”), which is known as the Recovery One population (“RCV1” or “RCV1 SOR”). RCV1
was described to the Monitor by Chase as an “application” for loans that had been charged off
but still part of its main SOR. However, once loans had been charged off by Chase, the accuracy
and integrity of the information pertaining to the borrowers’ accounts whose loans became part
of the RCV1 population was and is fatally and irreparably flawed. Furthermore, the loans in the
RCV1 were not serviced according to the requirements of Federal law, the Consent Judgment,
the MHA programs or any of the other consent orders or settlements reached by Chase with any
government agency prior to the NMSA.2

17. Chase’s practice of sending unsolicited debt-forgiveness letters to intentionally
pre-selected borrowers of valueless loans did not meet the Servicing Standards set out in the
Consent Judgment to establish eligibility for credits toward its Consumer Relief obligations.
This practice enabled Chase to reduce its cost of complying with the Consent Judgment and
MHA program, while at the same time enhancing its own profits through unearned Consumer
Relief credits and MHA incentives. Chase sought to take credit for valueless charged-off and
third-party owned loans instead of applying the Consumer Relief under the NMSA and MHA
2 By letter dated September 16, 2015 to Schneider’s counsel, in reference to Relator’s claim that
“Chase concealed from the Monitor and MHA-C both the existence of the RCV1 charged-off
and the way those loans were treated for purposes of HAMP solicitations and NMS metrics
testing”, Chase’s counsel stated that “Those allegations are wholly incorrect. Chase repeatedly
disclosed the relevant facts to both the Monitor and MHA-C.”

Schneider’s counsel requested that Chase provide all documents demonstrating the “relevant
facts” to support Chase’s statement. Chase has refused to provide said documents, citing
Chase‘s concerns with providing documents that it had previously provided to the U.S.
Government. While Chase has offered to allow Chase’s counsel to read such documents
“verbatim” to Schneider’s counsel, Schneider knows of no supportable reason why documents
previously disclosed to the U.S. Government should not be shared with Schneider in his capacity
as a Relator under the FCA. No privilege exists for such a claim and therefore Schneider has
rejected this limitation. Such documents, if they in fact exist, should be produced before such a
defense can be raised, particularly because Chase’s counsel has raised the issue of Rule 11
responsibilities.

18. The Servicing Standards and the Consumer Relief Requirements of the Consent
Judgment are set forth in Exhibits A and D of that document. The Consent Judgment is
governed by the underlying Servicer Participation Agreements of the MHA program, which
required mandatory compliance with the Treasury Directives under the MHA Handbook
(“Handbook”). Chase is required to demonstrate compliance with the Handbook’s guidelines in
the form of periodic certifications to the government. Chase ignored the requirements of
Exhibits A and D of the Consent Judgment, especially with respect to the RCV1 population of
loans. Therefore, Chase has been unable to service with any accuracy the charged-off loans it
owns and to segregate those loans that it no longer owns. As such, any certifications of
compliance with the Consent Judgment or the Services Participation Agreement (“SPA”) are
false claims.

19. Relator conducted his own investigations and found that the Defendants sent loan
forgiveness letters to consumers for mortgages that Chase no longer owns or that were not
eligible for forgiveness credit. Further, Chase continues to fail to meet its obligations to service
loans and to prevent blight as required by both the Consent Judgment and SPA. Chase’s
intentional failure to monitor, report and/or service these loans, and its issuance of invalid loan
forgiveness letters and lien releases, evidence an attempt to thwart the goal of the Consent
Judgment and the MHA program. The purpose of this scheme was to quickly satisfy the
Defendant’s Consumer Relief obligations as cheaply as possible, without actually providing the
relief that Chase promised in exchange for the settlement that Chase reached with the Federal
Government and the States. In addition, Chase applied for and received MHA incentive
payments without complying with the MHA mandatory requirements. In short, Chase decreased
its liabilities, increased its revenues, avoided its obligations, and provided little to no relief to
consumers.

20. The mere existence of RCV1 makes all claims by Chase that it complied with the
Servicing Standards and the Consumer Relief Requirements of the Consent Judgment false.
Likewise, the existence of RCV1 makes all claims by Chase that it complied with the SPA of the
MHA program false.

B. Damages to the Government Related to the NMSA

21. Exhibit E of the Consent Judgment provides for penalties of up to $5 million for
failure to meet a prescribed Metric of the Servicing Standards. Exhibit E, ¶ J.3(b) at E15.

22. Exhibit D of the Consent Judgment provides:

If Servicer fails to meet the commitment set forth in these Consumer Relief
Requirements within three years of the Servicer’s Start Date, Servicer shall pay an
amount equal to 125% of the unmet commitment amount, except that if Servicer
fails to meet the two year commitment noted above, and then fails to meet the
three year commitment, the Servicer shall pay an amount equal to 140% of the
unmet three-year Commitment amount.

Exhibit D, ¶10.d. at D-11.

23. The required payment set out in Exhibit D, ¶10.d is made either to the United
States or the States that are parties to the Consent Judgment. Fifty percent of any payment is
distributed to the United States. Consent Judgment, Exhibit E, ¶ J.c.(3)c. at E-16.

24. As explained in more detail below, Chase was required to certify that it was in
compliance with the Servicing Standards and the Consumer Relief Requirements. Many, if not
all, of the loans that Chase identified for credits against the $4 billion Consumer Relief
provisions were not eligible for the credit, because Chase did not comply with the Servicing
Standards or the Consumer Relief Requirements. Specifically, all loan modification programs
must be made available to all borrowers, who may then apply to determine eligibility. Hundreds
of thousands of borrowers’ accounts, in the RCV1 system of records, were not considered for all
eligible loss mitigation options (even though they could likely have qualified). Due to this
omission none of the loan modification programs qualified for Consumer Relief Credit. Thus,
Chase did not and does not qualify for any of the Consumer Relief Credit for which it applied.

25. For these reasons, each of Chase’s certifications to the Federal Government of
compliance represents a “reverse” false claim to avoid paying money to the Government.

26. Under the FCA a person is liable for penalties and damages who:

[k]nowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to the
Government, or knowingly conceals or knowingly and improperly avoids or
decreases an obligation to pay or transmit money or property to the Government.

31 U.S.C. § 3729(a)(1)(G).

27. Under the FCA, “the term ‘obligation’ means an established duty, whether or not
fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee
relationship, from a fee-based or similar relationship, from statute or regulation, or from the
retention of any overpayment.” 31 U.S.C. § 3729(b)(3).

28. Thus, under the FCA, Chase is liable for its false claims whether or not the
government fixed the amount of the obligation owed by Chase.

29. Under the FCA, “the term ‘material’ means having a natural tendency to
influence, or be capable of influencing, the payment or receipt of money or property.” U.S.C. §
3729(b)(3).

30. Under the “natural tendency” test Chase is liable for its false statements so long as
they reasonably could have influenced the government’s payment or collection of money. A
statement is false if it is capable of influencing the government’s funding decision, not whether it
actually influenced the government.

31. Each of Chase’s false certifications is actionable under 31 U.S.C. §
3729(a)(1)(G), because they represent a false record or statement that concealed, avoided or
decreased an obligation to transmit money to the Government.

32. The Federal Government and the States agreed to the NMSA with Chase, with the
understanding that Chase would meet its obligations under the Consent Judgment.

33. As set out in the Consumer Relief Requirements, the measure of the Federal and
State Governments’ damages is up to 140 percent of the credits that Chase falsely claimed met
the requirements of the Consent Judgment and up to $5 million for each Metric the Chase failed
to meet.

34. These damages are recoverable under the Federal Civil False Claims Act, 31
U.S.C. § 3729 et seq. (the “FCA”), and similar provisions of the State False Claims Acts of the
States of California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Minnesota,
Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina,
Rhode Island, Tennessee, the Commonwealths of Massachusetts and Virginia, and the District of
Columbia.

35. The Federal Government and the States are now harmed because they are not
receiving the benefit of the bargain for which they negotiated with Chase due to the false claims
for credit that have been made by the Defendant.

C. Damages to the Government Related to the HAMP

36. The Amended and Restated Commitment to Purchase Financial Instrument and
Servicer Participation Agreement between the United States Government and Chase provided for
the implementation of loan modification and foreclosure prevention services (“HAMP
Services”).

37. The value of Chase’s SPA was limited to $4,532,750,000 (“Program Participation
Cap”).

38. The value of EMC Mortgage Corporation’s (“EMC”) SPA (Chase is successor in
interest) was limited to $1,237,510,000.

39. As explained in more detail below, Chase must certify that it is in compliance
with the SPA and the MHA program and must strictly adhere to the guidelines and procedures
issued by the Treasury with respect to the programs outlined in the Service Schedules (“Program
Guidelines”). The Program Guidelines pursuant to the Treasury Directives are cataloged in the
MHA Handbook (“Handbook”). None of the loans that Chase and EMC identified and
submitted for payment against their respective Participation Caps were eligible for the incentive
payment, because neither Chase nor EMC complied with the SPA and Handbook guidelines.
Specifically, all loan modification programs must be made available to all borrowers, who must
then apply to determine eligibility. Hundreds of thousands of borrowers’ mortgage loan
accounts in the RCV1 system of records were not offered and thereby unable to be considered
for all eligible loss mitigation options (even though they likely could have qualified). Due to the
omission of the RCV1 population for any loss mitigation options, none of the modifications that
Chase provided qualified for HAMP incentives. Thus, Chase does not qualify for any of the
HAMP incentives for which it applied and received funds.
40. Therefore, Chase’s certifications of compliance and its creation of records to
support those certifications represent both the knowing presentation of false or fraudulent claims
for a payment and the knowing use of false records material to false or fraudulent claims.

41. Under the FCA, a person is liable for penalties and damages who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval;

31 U.S.C. § 3729(a)(1)(A)
and
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.

31 U.S.C. § 3729(a)(1)(G).

42. Each of Chase’s false certifications is actionable under either 31 U.S.C. §
3729(a)(1)(A) and (B), because they represent a false or fraudulent claim for payment or
approval of a false record or statement material to a false or fraudulent claim.
43. Under HAMP, the Federal Government entered into the Commitment with Chase,
with the understanding that Chase would meet its obligations under the SPA and related Treasury
directives. The Federal Government is now harmed because it is not receiving the benefit of the
bargain for which it negotiated with Chase due to the false claims for payment that have been
made by the Defendant.

[…]

Down Load PDF of This Case

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Deutsche Bank Natl. Trust Co. v. Cunningham | Moreover, since the plaintiff failed to establish its standing and that it complied with RPAPL 1304, the Supreme Court should have denied those branches of the plaintiff’s motion…

Deutsche Bank Natl. Trust Co. v. Cunningham | Moreover, since the plaintiff failed to establish its standing and that it complied with RPAPL 1304, the Supreme Court should have denied those branches of the plaintiff’s motion…

 

Deutsche Bank Natl. Trust Co. v. Cunningham (N.Y. App. Div. 2016)

View original: From the court   |   Our backup
Moreover, since the plaintiff failed to establish its standing and that it complied with RPAPL 1304, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against the defendant

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Deutsche Bank Natl. Trust Co. v. Webster | Thus, the plaintiff failed to establish, prima facie, that it had standing to commence this action.

Deutsche Bank Natl. Trust Co. v. Webster | Thus, the plaintiff failed to establish, prima facie, that it had standing to commence this action.

Deutsche Bank Natl. Trust Co. v. Webster (N.Y. App. Div. 2016)

View original: From the court   |   Our backup

Here, although the plaintiff appended a copy of the note to the complaint, the plaintiff’s submission of two different copies of the note with different endorsements in support of its motion for summary judgment fails to eliminate a triable issue of fact as to whether the plaintiff was in possession of the original note at the time the action was commenced,.   Thus, the plaintiff failed to establish, prima facie, that it had standing to commence this action.

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Wells Fargo told staff to keep quiet about missing papers: lawsuit

Wells Fargo told staff to keep quiet about missing papers: lawsuit

Reuters-

A former employee accused Wells Fargo & Co of instructing workers at a call center to refrain from telling customers about lost deeds or other missing documents, and of firing the worker who called the policy unethical, according to a lawsuit made public this week.

Duke Tran, who was a customer service specialist at the bank, says that his supervisor berated him for telling a husband and wife that their loan contract was missing from an internal system.

Tran and others later received an email instructing them not to tell customers about situations “where we have a lost contract, deed, any type of document, really, but especially when it relates to securing a property,” according to a copy of the email filed with the lawsuit.

[REUTERS]

 

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CFPB Takes Action Against Wells Fargo for Illegal Student Loan Servicing Practices

CFPB Takes Action Against Wells Fargo for Illegal Student Loan Servicing Practices

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Wells Fargo Bank for illegal private student loan servicing practices that increased costs and unfairly penalized certain student loan borrowers. The Bureau identified breakdowns throughout Wells Fargo’s servicing process including failing to provide important payment information to consumers, charging consumers illegal fees, and failing to update inaccurate credit report information. The CFPB’s order requires Wells Fargo to improve its consumer billing and student loan payment processing practices. The company must also provide $410,000 in relief to borrowers and pay a $3.6 million civil penalty to the CFPB.

“Wells Fargo hit borrowers with illegal fees and deprived others of critical information needed to effectively manage their student loan accounts,” said CFPB Director Richard Cordray. “Consumers should be able to rely on their servicer to process and credit payments correctly and to provide accurate and timely information and we will continue our work to improve the student loan servicing market.”

The CFPB’s order can be found at: http://files.consumerfinance.gov/f/documents/2016-CFPB-0013Wells_Fargo_Bank_N.A.–_Consent_Order.pdf

Wells Fargo is a national bank headquartered in Sioux Falls, S.D. Education Financial Services is a division of Wells Fargo that is responsible for the bank’s student lending operations. Education Financial Services both originates and services private student loans, and currently serves approximately 1.3 million consumers in all 50 states.

Student loans make up the nation’s second largest consumer debt market. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe roughly $1.3 trillion. Last year, the CFPB found that more than 8 million borrowers are in default on more than $110 billion in student loans, a problem that may be driven by breakdowns in student loan servicing. Private student loans comprise approximately $100 billion of all outstanding student loans. While private student loans are a small portion of the overall market, the Bureau found that they are generally used by borrowers with high levels of debt who also have federal loans.

According to the CFPB’s order, Wells Fargo failed to provide the level of student loan servicing that borrowers are entitled to under the law. Because of the breakdowns throughout Wells Fargo’s servicing process, thousands of student loan borrowers encountered problems with their loans or received misinformation about their payment options. The CFPB found that the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair and deceptive acts and practices, as well as the Fair Credit Reporting Act. Specifically, the CFPB found that the company:

  • Impaired consumers’ ability to minimize costs and fees: Wells Fargo processed payments in a way that maximized fees for many consumers. Specifically, if a borrower made a payment that was not enough to cover the total amount due for all loans in an account, the bank divided that payment across the loans in a way that maximized late fees rather than satisfying payments for some of the loans. The bank failed to adequately disclose to consumers how it allocated payments across multiple loans, and that consumers have the ability to provide instructions for how to allocate payments to the loans in their account. As a result, consumers were unable to effectively manage their student loan accounts and minimize costs and fees.
  • Misrepresented the value of making partial payments: Wells Fargo’s billing statements made misrepresentations to borrowers that could have led to an increase in the cost of the loan. The bank incorrectly told borrowers that paying less than the full amount due in a billing cycle would not satisfy any obligation on an account. In reality, for accounts with multiple loans, partial payments may satisfy at least one loan payment in an account. This misinformation could have deterred borrowers from making partial payments that would have satisfied at least one of the loans in their account, allowing them to avoid certain late fees or delinquency.
  • Charged illegal late fees: Wells Fargo illegally charged certain consumers late fees even though the consumers had made timely payments. Specifically, the bank charged illegal late fees to certain consumers who made payments on the last day of their grace periods. It also charged illegal late fees to certain students who elected to pay their monthly amount due through multiple partial payments instead of one single payment.
  • Failed to update and correct inaccurate information reported to credit reporting companies: Wells Fargo failed to update and correct inaccurate, negative information reported to credit reporting companies about certain borrowers who made partial payments or overpayments. These errors could damage a consumer’s ability to access credit or make borrowing more expensive.

Enforcement Action

Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions engaging in unfair or deceptive practices. Among the terms of the consent order filed today, Wells Fargo must:

  • Pay $410,000 in consumer refunds: Wells Fargo must provide at least $410,000 to compensate consumers for illegal late fees. This includes refunding illegal fees due to the bank’s failure to disclose its payment allocation practices across multiple loans within a borrower’s account as well as the bank’s failure to inform consumers that they could instruct the bank to allocate payments in a different way. This also includes refunding illegal fees charged because of the bank’s failure to combine partial payments made in the same billing cycle, and fees improperly charged when borrowers made a payment on the last day of the grace period.
  • Improve student loan servicing practices: Wells Fargo must allocate partial payments made by a borrower in a manner that satisfies the amount due for as many of the loans as possible, unless the borrower directs otherwise. This can help reduce the number of delinquent loans in an account as well as the number of late fees. Last month, the Department of Education, in consultation with the CFPB, released new policy guidance calling for federal student loan servicers to implement a similar standard for handling partial payments.
  • Improve consumer billing disclosures: Wells Fargo must provide consumers with enhanced disclosures with their billing statements. The disclosures must explain how the bank applies and allocates payments and how borrowers can direct payments to any of the loans in their student loan account.
  • Correct errors on credit reports: Wells Fargo must remove any negative student loan information that has been inaccurately or incompletely provided to a consumer reporting company.
  • Pay $3.6 million civil penalty: Wells Fargo will pay $3.6 million to the CFPB’s Civil Penalty Fund.

The consent order can be found at: http://files.consumerfinance.gov/f/documents/2016-CFPB-0013Wells_Fargo_Bank_N.A.–_Consent_Order.pdf

This order comes as the Bureau takes steps to ensure that all student loan borrowers have access to adequate student loan servicing. Last year, the Bureau released a report outlining widespread servicing failures reported by both federal and private student loan borrowers and published a framework for student loan servicing reforms. As part of this work, the Bureau has continually raised concerns around, as well as taken enforcement and supervisory actions against, illegal student loan servicing practices related to the handling of partial payments. Building on this, earlier this year, the Bureau called for market-wide reforms and announced that it was prioritizing taking action against companies that engage in illegal servicing practices. Today’s action is an important part of this ongoing work.

Students and their families can find help on how to tackle their student debt on the CFPB’s website.

###
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov

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Shaw v. CitiMORTGAGE, INC., Dist. Court, D. Nevada | Thus, trebling this amount, the court shall enter judgment in the amount of $719,550.00+ in favor of Shaw and against CMI for punitive damages.

Shaw v. CitiMORTGAGE, INC., Dist. Court, D. Nevada | Thus, trebling this amount, the court shall enter judgment in the amount of $719,550.00+ in favor of Shaw and against CMI for punitive damages.

 

LESLIE J. SHAW, Plaintiff,
v.
CITIMORTGAGE, INC.; et al., Defendants.

No. 3:13-CV-0445-LRH-VPC.
United States District Court, D. Nevada.
August 17, 2016.
Leslie Shaw, Esq., Plaintiff, represented by John Ohlson, John Ohlson.

CitiMortgage, Inc., Defendant, represented by Andrew A. Bao, Wolfe & Wyman LLP & Colt B. Dodrill, Wolfe & Wyman LLP.

ORDER

LARRY R. HICKS, District Judge.

This is a breach of contract action arising from an alleged residential loan modification agreement between plaintiff Leslie J. Shaw (“Shaw”) and defendant CitiMortgage, Inc. (“CMI”). Shaw alleges that in mid-2011, the parties executed a loan modification agreement on his residential home loan, but CMI breached the agreement prompting Shaw to stop making payments on his modified loan. Shaw then fell into default and CMI initiated non-judicial foreclosure proceedings in early 2013.

On July 26, 2013, Shaw filed a complaint against CMI and defendant Northwest Trustee Services, Inc. (“NTS”), the trustee identified on the recorded notice of default. ECF No. 1, Exhibit A, p. 8-19. On April 3, 2014, Shaw filed an amended complaint adding defendant Bank of New York Mellon (“BNY”), as trustee for SASCO Fund 2003-37A, as a defendant to this action. ECF No. 52. Subsequently, on August 25, 2014, Shaw filed a second amended complaint against defendants alleging eight causes of action: (1) declaratory relief against defendant BNY; (2) declaratory relief against defendant CMI; (3) breach of contract; (4) breach of the implied covenants of good faith and fair dealing; (5) fraudulent misrepresentation and concealment; (6) negligent misrepresentation; (7) interference with prospective economic advantage; and (8) violation of the Real Estate Settlement Procedures Act (“RESPA”). ECF No. 109.

On January 14, 2015, the court granted defendant NTS’ motion to dismiss (ECF No. 110) and dismissed NTS as a defendant in this action. ECF No. 124. Three weeks later, on February 5, 2015, the court granted defendants BNY and CMI’s motion to dismiss (ECF No. 113). ECF No. 128. In that order, the court dismissed BNY as a defendant and dismissed Shaw’s fifth cause of action for fraudulent misrepresentation and sixth cause of action for negligent misrepresentation. Id.

A bench trial was held on Shaw’s remaining claims[1] against sole-remaining defendant CMI from May 3 through May 5, 2016. See ECF Nos. 203-05. The court, having heard the testimony of all witnesses at trial[2] and having considered all exhibits accepted into evidence, renders the following findings of fact and conclusions of law:[3]

I. Findings of Fact

1. Plaintiff Shaw is a resident of the State of Nevada. Shaw is also an attorney duly licensed to practice law in the States of Nevada and California. Shaw practices primarily in the areas of family and divorce law and during the relevant time period had a practice at Lake Tahoe that moved to Reno, Nevada.

2. In 2001, Shaw purchased a vacant lot located in Zephyr Cove, Nevada, and built a singlefamily residence commonly known as 251 McFaul Court (“the McFaul Court property”), the underlying residential property at issue in this action.

3. On October 8, 2003, Shaw executed a promissory note for a residential home loan on the McFaul Court property in favor of non-party Lehman Brothers Bank, FSB (“Lehman Brothers”), a federal savings bank, in the amount of $875,000.00 with an adjustable interest rate starting at 5.125%. The residential loan was secured by a first deed of trust recorded against the McFaul Court property on October 14, 2003, in the official records of Douglas County, Nevada (Doc. No. 0593479). Def. Trial Ex. 501-B, CMI000001-22.

4. Immediately following the execution of the residential home loan, non-party Aurora Loan Services (“Aurora”), a servicing branch of Lehman Brothers, began servicing Shaw’s residential loan and accepted all mortgage payments on behalf of non-party Lehman Brothers. In June 2005, Aurora ceased servicing the loan and transferred the servicing rights to CMI.

5. At some point prior to the relevant time period, Lehman Brothers sold Shaw’s residential home loan as part of an investment mortgage package to an unknown party.

6. Defendant CMI, a foreign corporation duly qualified to conduct business in the State of Nevada, is a mortgage servicing company. CMI is owned by non-party CitiBank and is part of the Citi Group corporate organization. Since June 2005, CMI has been servicing Shaw’s residential home loan and has collected all payments on behalf of the various owners of the loan. On June 20, 2012, CMI became the beneficiary under the first deed of trust pursuant to an assignment of deed of trust recorded in the official records of Douglas County, Nevada (Doc. No. 0804389). Def. Trial Ex. 504-B, CMI000038-39.

7. Each mortgage account serviced by CMI is assigned an electronic account file. The electronic account file, identified by a specific numerical identifier (the mortgage account number), is accessible to CMI employees and contains information about each particular account including payment information, loan terms, account notes, and other relevant account information. As part of its servicing of Shaw’s residential home loan, CMI maintained such an electronic account file for Shaw’s loan. It is in this electronic account that CMI booked the terms of Shaw’s residential loan and all payments made under that agreement.

8. In August 2006, Shaw and his then wife, non-party Janice Shaw, separated. As part of their eventual divorce — as evidenced by the divorce decree issued in July 2007 — Shaw was awarded the McFaul Court property as his sole and separate property.

9. On or about January 19, 2007, Shaw obtained a loan from non-party Katherine Barkley in the amount of $225,000.00 at an annual interest rate of 10%. This loan was secured by a second deed of trust recorded against the McFaul Court property on January 23, 2007, in the official records of Douglas County, Nevada (Doc. No. 0693296). Def. Trial Ex. 502-B, CMI000023-27.

10. On September 20, 2007, a third deed of trust was recorded in the amount of $77,123.50 against the McFaul Court property in favor of non-party Janice Shaw, Shaw’s ex-wife, in the official records of Douglas County, Nevada (Doc. No. 0709512). Def. Trial Ex. 503-B, CMI000028-37.

11. In 2010, Shaw began experiencing financial difficulties. On or about the fall of 2010, while still current on his monthly mortgage payments, Shaw contacted CMI to request a modification of his residential mortgage loan. At that time, Shaw’s monthly mortgage obligation was approximately $4,300.00.

12. During the relevant time period, CMI had a company policy that it would not consider any application for the modification of an existing loan unless a borrower was at least three (3) months in arrears on the borrower’s monthly mortgage obligations. This policy was communicated to Shaw during one of the telephonic conversations in the fall of 2010.

13. Beginning October 2010, and continuing through December 2010, Shaw withheld his monthly mortgage payments from CMI. Def. Trial Ex. 510-B, CMI000067. Shaw then contacted CMI and received a loan modification application. Shaw completed and submitted the application to CMI in early December 2010.

14. CMI reported Shaw’s mortgage account as delinquent to the various credit reporting agencies for the months that Shaw withheld payment on his account: October, November, and December 2010.

15. At the time he submitted his loan modification application Shaw had never, in memory, been denied an application for credit and was current on all credit obligations except for his mortgage account.

16. On December 24, 2010, Shaw received an e-mail from CMI. Pl. Trial Ex. 1, P00001. The e-mail advised Shaw that his “mortgage assistance request [had] been approved” and he could expect a “mortgage solution package within the next 5-7 business days.” Id.

17. On December 28, 2010, four days after receiving CMI’s approval e-mail, Shaw received a letter from CMI denying his request for a loan modification. Pl. Trial Ex. 2, P00002-5. The letter specifically stated that CMI could not “approve a mortgage modification under the government’s Home Affordable Modification Program (“HAMP”)” and that Shaw’s “mortgage terms [would] remain unchanged.” Id. at P00002. At the time Shaw received this letter from CMI, he had not applied for a specific HAMP loan modification. Rather, Shaw had only applied for a general loan modification with defendant CMI.[4]

18. Commencing on or about December 28, 2010, and continuing through February 2011, Shaw began near daily telephonic efforts with CMI to resolve the inconsistent and contradictory written communications of December 24 and December 28, 2010. Despite repeated phone calls with CMI employees in various departments, including Loss Mitigation, Shaw never received an explanation as to why he received two separate communications from CMI about his loan modification application, or why he had been denied a modification after already receiving notification that his application had been approved.[5] Further, Shaw did not receive an answer from CMI as to which of the two communications constituted CMI’s final determination of his loan modification application.

19. Shaw did not make either of his monthly mortgage payments for January or February 2011. Def. Trial Ex. 510-B, CMI000067. Subsequently, CMI reported Shaw’s mortgage account as delinquent to the various credit reporting agencies for those months.

20. Between December 28, 2010, and early February 2011, Shaw did not receive any written communication from CMI concerning his loan modification application.

21. On February 15, 2011, Shaw received another e-mail from CMI. Pl. Trial Ex. 3, P00006. This e-mail again advised Shaw that his “mortgage assistance request [had] been approved” and that he could expect a “mortgage solution package within the next 5-7 business days.” Id.

22. On or about February 16, 2011, after receiving CMI’s second approval e-mail, Shaw received another letter from CMI again denying his request for a loan modification. Pl. Trial Ex. 4, P00007-10. The letter specifically stated that CMI could not “approve a mortgage modification under the government’s Home Affordable Modification Program (“HAMP”)” and that Shaw’s “mortgage terms [would] remain unchanged.” Id. at P00007.

23. Commencing February 16, 2011, Shaw again contacted CMI to resolve the inconsistent and contradictory written communications concerning his loan modification application. Despite repeated calls with CMI employees, Shaw never received an explanation why he had received new communications regarding his application,[6] or why he had once again been denied mortgage assistance after receiving notification that his loan modification application had been approved. Further, Shaw did not receive an answer from CMI as to which of the four communications constituted CMI’s final determination of his loan modification application.

24. On or about February 23, 2011, Shaw received a mortgage solution package from CMI. Def. Trial Ex. 505-A, CMI000051-56. The mortgage solution package advised Shaw that he had been “approved to enter into a trial period plan” modifying his residential loan for a period of ninety (90) days. Id. at CMI000051. The package further advised Shaw that in order to qualify for a permanent modification, Shaw must comply with two requirements. First, Shaw was required to timely make three modified monthly mortgage payments of $3,079.30 starting March 2011. Id. Second, Shaw was required to submit various documents to CMI. Id. If Shaw complied with both requirements, CMI advised Shaw that his residential home loan would be “permanently modified” and it would send him “a modification agreement detailing the terms of the modified loan.” Id. at CMI000052.

25. Shaw timely made all three required trial payments of $3,079.30 under the trial period plan for the months of March, April, and May 2011. Def. Trial Ex. 510-B, CMI000067.

26. CMI reported Shaw delinquent on his mortgage account to the various credit reporting agencies for the months of March, April, and May 2011, despite granting Shaw a trial modification plan and having received all three modified payments in a timely manner. By this time, Shaw had been reported delinquent on his mortgage account for eight months.

27. During the time period after submitting his loan modification application through the time of the trial modification plan, Shaw received various collection calls from CMI seeking payment on his delinquent account. Approximately April 2011, Shaw registered for CMI’s no-call list, thereby precluding CMI from initiating telephonic contact with Shaw. Since that time, Shaw has received no telephonic attempts to collect on his mortgage account.

28. On May 11, 2011, having submitted all trial plan payments, Shaw received an e-mail from CMI advising him that his “mortgage assistance documents [had] been sent” the previous day, May 10, 2011. Pl. Trial Ex. 5, P00011. The e-mail further directed Shaw to “review and sign the documents as instructed.” Id.

29. On May 18, 2011, Shaw received a letter from CMI authored by CMI employee Kim Vukovich (“Vukovich”). Pl. Trial Ex. 6, P00014-20. The letter advised Shaw that he was “eligible for a Citi Affordable Modification” and directed him to complete and return the enclosed modification agreement (also prepared by Vukovich) no later than May 20, 2011. Id. at P00014. The enclosed proposed modification agreement, titled “Citi Affordable Modification Agreement” (“May 2011 Modification Agreement”), outlined the various terms of the proposed loan modification. Id. at P00016-20. Those terms included, in relevant part to this action, that: (1) permanent modified payments in the amount of $3,079.30[7] would commence starting June 1, 2011; (2) the new principal balance under the modified loan would be set at $910,110.34 and include all past due amounts, including the difference between the original monthly payment amount (approximately $4,300) and the payment amount made under the three months of the trial modification plan ($3,079.30); (3) $85,777.89 of the new principal balance was deferred from interest charges during the life of the modification and would be due as a balloon payment; (4) the effective date of the properly executed agreement would be May 1, 2011; and (5) the maturity date under the modified loan would be November 1, 2033. Id.

30. Also on May 18, 2011, Shaw promptly executed, by notarized signature, the May 2011 Modification Agreement and submitted the signed agreement to CMI via an enclosed Next Day Air envelope. Pl. Trial Ex. 6, P00013; Def. Trial Ex. 506-A, CMI000061.

31. On May 19, 2011, CMI received the executed May 2011 Modification Agreement. Pl. Trial Ex. 7, P00021.

32. On May 23, 2011, CMI entered and booked the terms of the May 2011 Modification Agreement into Shaw’s electronic mortgage account. Def. Trial Ex. 510-B, CMI000066. At the time CMI booked the terms of the modification, CMI misentered the length of the loan, extending the loan from three hundred and sixty (360) months to four hundred and eighty (480) months. Id. This administrative booking error extended the loan maturity date and subsequent due date of the $85,777.89 balloon payment from November 1, 2033, to November 1, 2045.

33. Shaw timely made his modified mortgage payments of $3,079.30 for the months of June and July 2011. Def. Trial Ex. 510-B, CMI000066.

34. On June 30, 2011, Larry Bauman, Vice-President for CMI, executed, by notarized signature, the May 2011 Modification Agreement. Def. Trial Ex. 506-A, CMI000061; Pl. Trial Ex. 18, P00055-56.

35. From May 20, 2011, through mid-July 2011, Shaw did not receive any communication from CMI concerning the May 2011 Modification Agreement and was not informed that the agreement had been executed by CMI.

36. Prior to July 2011, Shaw maintained, in good standing, a Diners Club Charge Card credit account and had sufficient credit to qualify as a cosigner on his daughter’s student loans obtained through non-party Wells Fargo Bank. At that time, Shaw was also at the tail end of a thirty-six (36) month lease agreement with non-party Audi Financial Services on a 2008 Audi A-4 automobile.

37. Approximately early-July 2011, Loss Mitigation reviewed Shaw’s mortgage account and unilaterally determined that there was an issue with the modified terms of his residential loan booked pursuant to the May 2011 Modification Agreement documents. Loss Mitigation then, without consultation or communication with Shaw, unbooked the May 2011 Modification Agreement from Shaw’s electronic mortgage account. Def. Trial Ex. 510-B, CMI000065-66. This action automatically unbooked Shaw’s timely made modified mortgage payments under both the trial and permanent modification periods, and placed his account in default. Id. As Shaw’s account then showed that no payment had been made on his account for the months of June and July 2011, CMI reported Shaw’s account as delinquent to the various credit reporting agencies for those months.

38. On July 15, 2011, non-party BMO Financial Group sent Shaw a letter advising him that his Diners Club Charge Card account, a credit account with Citicorp Credit Services, Inc., was going to be closed effective July 20, 2011. Pl. Trial Ex. 50, P00022.

39. On July 16, 2011, non-party U.S. Bank, National Association sent Shaw a letter advising him that his credit application for an auto loan to purchase his leased 2008 Audi A-4 automobile had been denied. Pl. Trial Ex. 51, P00023.

40. On July 18, 2011, CMI sent Shaw a letter advising him that his mortgage account was in default and that monthly mortgage payments had not been made as required under his residential home loan. Pl. Trial Ex. 10, P00035-36. In that letter, CMI further demanded Shaw pay, in full, the past due amount of $31,684.34 by August 18, 2011, or the McFaul Court property could be sold in accordance with the terms of the first deed of trust. Id. at P00035.

41. On July 19, 2011, CMI sent Shaw a letter authored by CMI employee Juan Mayorga (“Mayorga”).[8] Pl. Trial Ex. 9, P00025-33. This letter again advised Shaw that he was “eligible for a Citi Affordable Modification” and directed him to complete and return the new “corrected” modification agreement (separately prepared by Mayorga) no later than August 2, 2011. Id. at P00025. The enclosed “corrected” modification agreement, again titled “Citi Affordable Modification Agreement” (“July 2011 Modification Agreement”), outlined the various terms and provisions of the new agreement. Id. at P00027-33. The majority of the terms in the July 2011 Modification Agreement were similar, or even identical, to the terms and provisions of the May 2011 Modification Agreement, including that: (1) permanent modified payments of $3,079.30 would commence starting June 1, 2011;[9] (2) the modified principal balance was set at $910,110.34; (3) $85,777.89 of the principal balance was deferred from interest charges and would be due as a balloon payment; (4) the effective date of the properly executed agreement would be May 1, 2011; and (5) the maturity date under the modified residential loan would be November 1, 2033. Id. However, the July 2011 Modification Agreement also included specific language establishing the due date of the deferred principal balloon payment that was not in the May 2011 Modification Agreement. Compare Pl. Trial Ex. 6 at P00018 (no date) with Pl. Trial Ex. 9 at P00028 (establishing the maturity date of the modified loan (November 1, 2033) as the due date). Further, the “corrected” agreement contained several additional provisions that were not in the May 2011 Modification Agreement, including Section 5(G). Id. at P00032. Section 5(G) required, in pertinent part, that under the July 2011 Modification Agreement Shaw would be required to execute any and all other documents requested by CMI or forfeit all his rights under the modified agreement. Id. (“If I elect not to sign any such corrected documentation, the terms of the original Loan Documents shall continue in full force and effect, such terms will not be modified by this Agreement, and I will not be eligible for a modification . . . .”).

42. On July 20, 2011, Shaw received an e-mail from CMI advising him that “mortgage assistance documents” had been sent on July 19, 2011. Pl. Trial Ex. 8, P00024. The communication further directed Shaw to “review and sign the documents as instructed.” Id. On the same day, Shaw received CMI’s communications dated July 18 and July 19, 2011. Shaw immediately contacted CMI, including a conversation with Mayorga, but was never provided an explanation why his mortgage account was placed in default, or why a new modification agreement had been sent only two months after he executed and submitted the May 2011 Modification Agreement. Instead, Shaw was directed to review and sign the July 2011 Modification Agreement.[10]

43. On July 21, 2011, Shaw sent a letter to Mayorga objecting to CMI’s handling of his mortgage account, including CMI’s unilateral decision to unbook the May 2011 Modification Agreement and place his mortgage account in default, as well as the additional material terms in the July 2011 Modification Agreement not present in the May 2011 Modification Agreement. Pl. Trial Ex. 13, P00040.

44. Shaw did not execute the July 2011 Modification Agreement.

45. On July 22, 2011, Shaw received a letter from CMI dated July 20, 2011, advising him that CMI had reviewed his loan modification application and could not approve a modification at that time. Pl. Trial Ex. 11, P00037-38. CMI sent the letter to Shaw even though it had already executed the May 2011 Modification Agreement and sent the separate July 2011 Modification Agreement.

46. Also on July 22, 2011, Shaw received an e-mail from CMI advising Shaw that his “mortgage assistance documents [had] been received by [CMI.]” Pl. Trial Ex. 12, P00039. However, Shaw had not submitted any mortgage assistance documents to CMI and had refused to execute the July 2011 Modification Agreement.

47. Commencing late July 2011, Shaw again contacted CMI to resolve the inconsistent and contradictory communications received during the previous weeks including why he had received a loan modification denial letter after having just received the July 2011 Modification Agreement. Once again, Shaw did not receive any explanation from CMI for these contradictory communications.

48. Approximately July 2011, in response to Shaw’s near daily communications with CMI, CMI deemed Shaw’s mortgage account an Escalated Case and turned his account over to the Executive Response Unit, a CMI department dedicated to addressing customer account issues. Shaw’s account was placed with Chris Gabbert (“Gabbert”), a Homeowner Support Specialist in the Executive Response Unit. Shaw contacted Gabbert to outline and discuss his ongoing mortgage and modification issues. At that time, Gabbert advised Shaw that the July 2011 Modification Agreement was the only modification agreement that CMI would accept, directed him to execute the agreement, and informed him that there was not a prior modification of his residential loan under the May 2011 Modification Agreement.

49. As a result of CMI’s repeated inconsistent communications and complete lack of any explanation for CMI’s conduct in handling his mortgage account and loan modification, Shaw experienced increasing confusion, frustration, stress, and a general feeling of worthlessness over not being able to resolve his issues with CMI. This frustration and stress caused Shaw to suffer occasional sleeplessness during this time. Further, Shaw spent significant amounts of time and energy, sometimes as much as eight (8) hours in a single day, contacting CMI and dealing with various CMI employees that were unable to address his concerns or help with his mortgage and modification issues.

50. Due to Shaw’s ongoing frustration in dealing with CMI, Shaw sought the identity of the owner/beneficiary of his loan in the hopes of resolving his problems directly with the loan’s owner.

51. Between July 25 and July 28, 2011, Shaw contacted Gabbert several times. In those telephonic conversations, Shaw requested information about the current owner of his loan. Gabbert advised Shaw that the current owner of his loan was Lehman Brothers through Structured Asset Security Corporation (“SASCO”) Mortgage Pass-Through Certificates.

52. On July 31, 2011, Shaw again e-mailed Gabbert. Pl. Trial Ex. 15, P00044-45. In that email, Shaw specifically requested information related to the owner of his loan, as Shaw had determined on his own that Lehman Brothers had previously gone bankrupt and the SASCO Mortgage Pass-Through Certificates that included his residential loan had been transferred to a new, unknown owner. Id.

53. Shaw requested contact information for the current owner of his loan in order to seek a modification directly from the owner and to make sure that he was receiving credit from the owner for payments made on the mortgage.

54. Shaw timely made a modified mortgage payment in the amount of $3,079.30 for the month of August 2011. Def. Trial Ex. 510-B, CMI000065. CMI did not book Shaw’s payment into his electronic mortgage account.

55. Approximately August 2011, Shaw applied for and was denied credit with non-party Audi Financial Services to purchase his Audi automobile which he had been leasing from Audi for approximately four (4) years.

56. On August 2, 2011, CMI sent Shaw another letter again advising Shaw that his mortgage account was in default and demanded Shaw pay, in full, the past due amount of $31,697.84 by September 2, 2011, or the McFaul Court property could be sold in accordance with the terms of the first deed of trust. Pl. Trial Ex. 16, P00046-47.

57. On August 9, 2011, CMI sent Shaw a letter from the Document Processing Modification Unit that included a copy of the completed and executed May 2011 Modification Agreement signed by CMI Vice-President Bauman. Pl. Trial Ex. 18, P00049-56. The letter advised Shaw that the copy of the agreement executed by both parties was solely for his records and that “no further action [was] necessary.” Id.

58. Upon receiving his copy of the executed May 2011 Modification Agreement, Shaw immediately contacted Gabbert who initiated the involvement of Dana Ross (“Ross”), Assistant General Counsel of CMI, to resolve Shaw’s mortgage account and loan modification.

59. On August 12, 2011, after reviewing Shaw’s account and the May 2011 Modification Agreement, Ross advised Shaw that he would be receiving a letter outlining CMI’s resolution of Shaw’s mortgage account and loan modification. Pl. Trial Ex. 22, P00061.

60. On August 15, CMI rebooked the terms of the May 2011 Modification Agreement into Shaw’s electronic mortgage account. Def. Trial Ex. 510-B, CMI000064. As of that date, Shaw’s account reflected all of the modification terms outlined in the May 2011 Modification Agreement, including principal amount, deferred principal amount, and modified payment amounts. See Pl. Trial Ex. 19, P00057-58. CMI also rebooked all payments Shaw made under the trial period plan and the May 2011 Modification Agreement to date. These actions brought Shaw’s mortgage account current and removed his account from default.

61. On August 23, 2011, Ross sent Shaw an e-mail advising him that CMI had resolved the issues on his account and directed him to access a document on his online mortgage account constituting CMI’s resolution. Pl. Trial Ex. 20, P00059. The aforementioned document was a letter signed by Gabbert explaining the actions CMI took on Shaw’s mortgage account in July 2011, and outlining CMI’s resolution of his account and modification. Pl. Trial Ex. 21, P00060. The resolution document advised Shaw that although the May 2011 Modification Agreement did not have clear balloon payment language (as no due date was specifically mentioned in that provision), the agreement correctly identified the appropriate maturity date for the loan (November 1, 2033), and thus, “there [was] nothing legally deficient with the [May 2011 Modification Agreement.]” Id. Further, the resolution document advised Shaw that CMI had already rebooked the May 2011 Modification Agreement and that his account was permanently modified under that agreement going forward. Id.

62. Shaw believed that he had a binding loan modification with CMI and that all his account issues had been resolved. Thereafter, Shaw timely made all modified monthly payments of $3,079.30 pursuant to the May 2011 Modification Agreement through December 2011. Def. Trial Ex. 510-B, CMI000063-64.

63. Beginning in September and continuing through December 2011, Shaw received sporadic written collection notices from CMI that consisted of formal collection notices and informal door hangers left in plain view at the McFaul Court property, demanding payment on past due amounts. Whenever he received a collection notice, Shaw contacted the telephone number on that notice. However, Shaw was repeatedly told by various CMI employees that because Shaw’s account had been transferred to the Executive Response Unit, only his dedicated Homeowner Support Specialist was allowed to deal with, discuss, and handle his account issues. Shaw would then contact and advise Gabbert that he was still receiving collection notices from CMI despite the rebooking of the May 2011 Modification Agreement and the inclusion of all past due amounts into his new principal balance.

64. Sometime in the fall of 2011, Shaw applied for and was denied credit as a cosigner on his daughter’s student loans through non-party Wells Fargo Bank for the 2011-12 school year.

65. Throughout the fall of 2011, Shaw repeatedly sought the identity and contact information for the owner of his residential home loan from CMI. Shaw’s efforts consisted of various telephonic and written requests to Gabbert. In response to these requests, Gabbert advised Shaw of different owners at different times. Lehman Brothers through SASCO Mortgage Pass-Through Certificates was identified, non-party Aurora Loan Services was identified, and even CMI itself was identified as the owner.

66. On December 5, 2011, Shaw attempted to e-mail Gabbert requesting specific information about his loan — including copies of the original note, deed of trust, and any assignment of rights — as well as contact information for the current owner of his loan as Shaw had previously received such inconsistent information about the owner from CMI. See Def. Trial Ex. 512-A. At that time, Shaw was informed that Gabbert was no longer employed with CMI. Shaw then forwarded the email directly to Ross, CMI’s Assistant General Counsel. Def. Trial Ex. 512-A.

67. On December 8, 2011, CMI sent Shaw a letter advising him that his account had been transferred to a new Homeowner Support Specialist in the Executive Response Unit, Jennifer Butler (“Butler”). Pl. Trial Ex. 23, P00062-63. Shaw contacted Butler to outline his account history and discuss CMI’s ongoing collection efforts despite his resolved loan modification. Butler informed Shaw that Shaw did not have any loan modification with CMI because he had not yet signed the July 2011 Modification Agreement. Shaw provided Butler all prior communications allegedly resolving his modification, but was then informed that CMI’s Loss Mitigation and underwriting departments had confirmed that Shaw did not have a loan modification with CMI at that time, and would not have any modification with CMI unless and until he executed and submitted the July 2011 Modification Agreement.

68. Upon now being informed that he did not have a binding loan modification with CMI under the May 2011 Modification Agreement, Shaw did not make his modified mortgage payment of $3079.30 for the month of January 2012. Def. Trial Ex. 510-B, CMI000063. Since January 2012, Shaw has not made any payments on his mortgage account. See Def. Trial Ex. 510-B, CMI000062-63; Def. Trial Ex. 511-B.

69. On January 3, 2012, Shaw again e-mailed Ross, CMI’s Assistant General Counsel, requesting information related to his loan and informing Ross that he was withholding all mortgage payments until CMI officially and finally resolved his account under the May 2011 Modification Agreement. Pl. Trial Ex. 24, P00064-65. Ross responded and informed Shaw that she had reached out to CMI Senior Management for the information Shaw had requested. Id.

70. On January 9, 2012, CMI sent Shaw a letter in response to his recent request advising him that non-party Aurora was the owner of his mortgage. Pl. Trial Ex. 25, P00066. Shaw then contacted Aurora and was informed by Aurora that it was not the owner of his mortgage and had no involvement in either his mortgage account or his loan modification since transferring the servicing rights to CMI. See Pl. Trial Ex. 26, P00067-69.

71. On January 20, 2012, Shaw sent Ross a formal letter outlining the information obtained from Aurora that it was not the owner of his residential home loan and requested correct ownership information, as well as all documents related to his mortgage account. Pl. Trial Ex. 26, P00067-69.

72. Approximately February 2012, Shaw’s mortgage account was placed in default.

73. On February 13, 2012, CMI sent Shaw another letter again identifying the owner of his loan as non-party Aurora. Pl. Trial Ex. 31, P00099.

74. On February 23, 2012, Shaw e-mailed Butler after receiving another collection notice requesting she contact him to resolve his loan modification issues. Pl. Trial Ex. 26, P00070.

75. On March 12, 2012, Shaw received an e-mail from Butler outlining CMI’s final position concerning his loan modification. Pl. Trial Ex. 27, P00068. The e-mail informed Shaw that he did not have a loan modification with CMI under the May 2011 Modification Agreement and would not have any modification of his residential loan unless and until Shaw executed the July 2011 Modification Agreement. Id. Butler then sent Shaw another copy of the July 2011 Modification Agreement. Pl. Trial Ex. 29, P00074-85.

76. On March 16, 2012, Shaw e-mailed Butler requesting confirmation that it was CMI’s final position that the May 2011 Modification Agreement executed by both parties was not in force. Pl. Trial Ex. 30, P00086. Butler responded and confirmed that CMI was not recognizing the May 2011 Modification Agreement and was not changing its position that Shaw had to sign the July 2011 Modification Agreement. Id. at P00088. Further, Butler advised Shaw that because he refused to sign the July 2011 Modification Agreement, his Escalated Case file with the Executive Response Unit was closed and she would no longer communicate with Shaw about his mortgage account. Id. at P00088; P00093. At that point, Shaw’s Escalated Case with the Executive Response unit was closed and he received no further communication from Butler.

77. Two months later, on May 30, 2012, CMI sent Shaw a letter advising him that his mortgage account had again been deemed an Escalated Case and had been transferred to a new Homeowner Support Specialist in the Executive Response Unit, Robert Orcutt (“Orcutt”). Pl. Trial Ex. 33, P00101-02. Shaw contacted Orcutt and outlined the history of his mortgage account and CMI’s inconsistent positions on his loan modification. Orcutt advised Shaw that he would review Shaw’s mortgage account and contact him to resolve his account issues.

78. On June 13, 2012, Orcutt sent Shaw an e-mail outlining a proposed reinstatement of Shaw’s mortgage account. Pl. Trial Ex. 35, P00104-06. The reinstatement offer provided that if Shaw paid a past due amount of $18,534.34 by June 30, 2012, CMI would reinstate Shaw’s mortgage account and remove his account from default. Id. at P00105. However, the reinstatement offer made no mention of any loan modification or the terms of Shaw’s loan going forward after reinstatement. Shaw contacted Orcutt and asked whether CMI would recognize the May 2011 Modification Agreement if he made the reinstatement payment but was not given any assurance that CMI would rebook the modification agreement or not require him to execute the July 2011 Modification Agreement documents at some time in the future. Shaw refused the reinstatement offer and did not make any reinstatement payment.

79. On June 20, 2012, Shaw e-mailed Orcutt and requested contact information for the representative or trustee of the SASCO 2003-37A Mortgage Pass-Through Certificates, the bundled mortgage investment that included Shaw’s residential home loan. Pl. Trial Ex. 36, P00107. In response, Orcutt provided Shaw with the e-mail contact of non-party Deborah Lenhart, a representative of the bondholders of the SASCO Mortgage Pass-Through Certificates 2003-37A.

80. On June 21, 2012, Shaw sent an e-mail to Deborah Lenhart at the contact information provided by Orcutt, but the e-mail was returned as undeliverable. Pl. Trial Ex. 37, P00110-111.

81. On June 22, 2012, Shaw again contacted Orcutt to request correct contact information for Lenhart, or another representative, as the information Orcutt provided was incorrect. Pl. Trial Ex. 37, P00112-114. Orcutt informed Shaw that he did not have any other contact information for Lenhart. Pl. Trial Ex. 37, P00115.

82. On June 26, 2012, Shaw received an e-mail from CMI stating that his online account had been suspended and that he would no longer be able to receive online statements or access his online account. Pl. Trial Ex. 37, P00117.

83. In August 2012, Shaw moved out of the McFaul Court property.

84. At the end of 2012, CMI began foreclosure proceedings on the McFaul Court property. In response, Shaw placed the McFaul Court property up for sale as a short sale with nonparty Pinnacle Realty.

85. On January 3, 2013, dismissed defendant NTS recorded a Notice of Default and Election to Sell Under Deed of Trust in the official records of Douglas County, Nevada (Doc. No. 0815587). Def. Trial Ex. 505-B, CMI000042-47.

86. On January 29, 2013, Shaw sent a letter to CMI objecting to the pending foreclosure of the McFaul Court property and again requesting information and documents pertaining to his residential loan. Pl. Trial Ex. 38, P00120-22.

87. On February 5, 2013, Shaw received an e-mail from attorney Joseph E. Bleeker on behalf of both CMI and dismissed defendant NTS. Pl. Trial Ex. 39, P00123-24. The e-mail informed Shaw that attorney Bleeker was in receipt of Shaw’s January 29, 2013 letter and was treating that letter as a “Qualified Written Request” pursuant to RESPA. Id. Attorney Bleeker then advised Shaw that CMI would respond to his letter within sixty days as required under RESPA. Id.

88. On February 8, 2013, Shaw received and accepted an offer on the McFaul Court property from non-parties Jeff and Cathy Knapp (“the Knapps”). Pl. Trial Ex. 40, P00125-135. The offer was a contingent short sale offer with a purchase price of $857,000.00 (“the Knapp Offer”).

89. At the time of the Knapp Offer, Shaw owed approximately $900,000.00 to CMI on the residential loan and approximately $250,000.00 on the two junior liens for a total liability on the McFaul Court Property of approximately $1,150,000.

90. On February 14, 2013, Shaw forwarded to CMI, through his real estate agent, the accepted Knapp Offer. Pl. Trial Ex. 44, P00202.

91. On February 25, 2013, Shaw received a letter from CMI advising him that pursuant to the terms of the May 2011 Modification Agreement, Shaw’s modified payments would be increasing from $3079.30 to $3,539.22 starting June 1, 2013. Pl. Trial Ex. 42, P00138. Shaw received this letter despite CMI repeatedly informing Shaw as early as December 2011, that he did not have a loan modification with CMI under the May 2011 Modification Agreement.

92. On March 6, 2013, Shaw received a package from Kristin Dennis, a Default Research Specialist at CMI, in response to Shaw’s January 29, 2013 “Qualified Written Request.” Pl. Trial Ex. 43, P00139-87. The package included copies of Shaw’s account history with CMI from February 2006 through March 2013 (Id. at P00140-49); CMI’s transaction codes for its electronic mortgage accounts (Id. at P00150-51); Shaw’s adjustable rate note dated October 8, 2013 (Id. at P00152-60); the recorded first deed of trust (Id. at P00161-82); and the June 20, 2012 assignment of deed of trust to CMI (Id. at P00183-87). The letter further advised Shaw that CMI had determined that Shaw had been eligible for a modification of his residential loan, but that his application was closed for lack of documentation because he did not sign and return the July 2011 Modification Agreement. Id. at P00139.

93. On or about March 19, 2013, Maria Mejia (“Mejia”), an employee in CMI’s Homeowner Assistance Department, was assigned as the short sale advisor to review the Knapp Offer. Def. Trial Ex. 26.

94. On March 26, 2013, Mejia contacted Shaw’s real estate agent and advised Shaw, through his real estate agent, that in order for CMI to review the Knapp Offer, Shaw had to submit several documents including: (1) a hardship letter; (2) a signed purchase agreement (as the original offer had expired in late February 2013); (3) Shaw’s tax returns for the tax years 2011 and 2012; (4) all payoffs for the junior liens on the property within the last sixty days, if any; or, (5) if the junior liens still needed to be paid off, then approval letters of the short sale by each junior lien holder and releases of their junior liens; (6) the 2011 real estate tax bill for the McFaul Court property; and (7) a hazard insurance policy on the property. Def. Trial Ex. 525-A.

95. In mid-March 2013, Shaw and the Knapps signed an agreement to extend the Knapp Offer for an additional thirty (30) days.

96. On April 3, 2013, an appraisal of the McFaul Court property was conducted at the request of CMI as part of the evaluation of the Knapp Offer. Pl. Trial Ex. 49, P00283. At that time, the McFaul Court property was appraised at a value of $1,082,000.00. Id.

97. In mid-April 2013, after no response to the Knapp Offer by CMI, Shaw and the Knapps executed a second thirty (30) days extension on the Knapp Offer.

98. On May 6, 2013, dismissed defendant NTS recorded a Notice of Trustee’s Sale on the McFaul Court property in the official records of Douglas County, Nevada (Doc. No. 0823028) setting the trustee’s sale for June 5, 2013. Def. Trial Ex. 507-B, CMI000049-50.

99. On May 16, 2013, Shaw received an e-mail from Mejia informing him that CMI had not received all required documentation for CMI to review and consider the Knapp Offer. Shaw resubmitted most of the documentation but did not provide, at any point during the relevant time period, payoff information on the junior liens or a release of liens from the junior lien holders.

100. On May 23, 2013, CMI denied the short sale of the McFaul Court property under the Knapp Offer for lack of documentation related to the junior lien holders. However, by that point, the Knapp Offer had already expired under the terms of the second extension.

101. On June 5, 2013, dismissed defendant NTS sent Shaw a letter advising him that the trustee’s sale set for June 5, 2013, was postponed until August 7, 2013. Pl. Trial Ex. 45 P00204.

102. In July 2013, Shaw and the Knapps revived the Knapp Offer to purchase the McFaul Court property as a short sale for the purchase price of $857,000.00. Shaw submitted the revived Knapp Offer to CMI. Along with the revived Knapp Offer, Shaw submitted all documents originally requested by CMI for consideration of the short sale except for releases from the junior lien holders.

103. On July 26, 2013, Shaw filed his initial complaint against CMI initiating the present action. ECF No. 1, Exhibit 1, p.8-19.

104. In mid-August 2013, after no response to the revived Knapp Offer by CMI, Shaw and the Knapps executed a thirty (30) day extension on the offer.

105. In mid-September 2013, again after no response to the revived Knapp Offer by CMI, Shaw and the Knapps executed a second thirty (30) day extension on the offer.

106. In October 2013, Shaw applied for and was denied credit as a cosigner for his son on a thirty-six (36) month lease of a Kia automobile.

107. In mid-October 2013, after still no response to the revived Knapp Offer by CMI, Shaw and the Knapps executed a third and final thirty (30) day extension on the offer.

108. In mid-November 2013, the revived Knapp Offer expired under the terms of the last extension. At that point, Shaw ended his listing agreement with non-party Pinnacle Realty and the McFaul Court property was no longer listed for sale.

109. On December 11, 2013, and in response to developments in the litigation, dismissed defendant NTS recorded a rescission of the notice of default in the official records of Douglas County, Nevada (Doc. No. 0835262). Def. Trial Ex. 508-B.

110. During the infancy of the litigation, defendant CMI was represented by Attorney Colt Dodrill (“Attorney Dodrill”). While the litigation was proceeding, Shaw contacted and met with Attorney Dodrill several times. In December 2013, after a court hearing, Attorney Dodrill and Shaw had a discussion about the possible short sale of the McFaul Court property. As part of that conversation, Attorney Dodrill advised Shaw that if he was to re-list the property for sale and accept any short sale offers, those offers should be submitted directly to Attorney Dodrill as counsel of record for CMI, rather than to CMI’s Homeowner’s Assistance department.

111. After the discussion with Attorney Dodrill, Shaw listed the McFaul Court property as a short sale with non-party Chase International Realty, at a listing price of $1,082,000.00, the appraised value of the property in April 2013.

112. On April 3, 2014, Shaw filed an amended complaint in this litigation. ECF No. 52.

113. On April 8, 2014, Shaw received a short sale offer on the McFaul Court property from non-parties Darin and Lisette Smith (“the Smiths”) to purchase the property for $785,000.00. Pl. Trial Ex. 48A.

114. On April 11, 2014, Shaw submitted a counter-offer to the Smiths for the same purchase price which they accepted (“the first Smith Offer”). Pl. Trial Ex. 48A. The terms of the accepted counter-offer included that: (1) CMI had until April 30, 2014, to approve the short sale; (2) Katherine Barkley and Janice Shaw, the second and third junior lien holders, would be paid in full on their junior liens from the sale proceeds of the McFaul Court property; (3) Shaw would receive $75,000.00 from the sale proceeds of the property; and (4) CMI would receive the remaining sale proceeds as full and final satisfaction of Shaw’s residential loan and the first deed of trust. Id.

115. On April 14, 2014, Shaw forwarded the first Smith Offer to Attorney Dodrill and demanded a response on the offer by April 28, 2014. Pl. Trial Ex. 48A.

116. On April 30, 2014, the first Smith Offer lapsed pursuant to its terms without any action by CMI on the short sale offer.

117. On June 2, 2014, CMI denied the first Smith Offer. However, by that point, the offer had already expired under its terms more than a month earlier.

118. On July 11, 2014, Shaw received another short sale offer from the Smiths to purchase the McFaul Court property for $825,000.00 (“the second Smith Offer”). Pl. Trial Ex. 48B. The terms of the second Smith Offer included: (1) approval of the short sale by CMI within 5 business days of acceptance by Shaw; (2) Katherine Barkley and Janice Shaw, the second and third junior lien holders, would be paid in full on their junior liens from the sale proceeds; (3) Shaw would receive $75,000.00 from the sale proceeds; and (4) CMI would receive the remaining proceeds as full and final satisfaction of Shaw’s residential loan and the first deed of trust. Id. Shaw accepted and forwarded the second Smith Offer to Attorney Andrew Bao (“Attorney Bao”), CMI’s new counsel of record in the litigation. Pl. Trial Ex. 48B. Attorney Bao advised Shaw that the second Smith Offer had been submitted to CMI and that if any further information was required to consider the offer he would contact Shaw. Id.

119. On July 19, 2014, the second Smith Offer lapsed without any action by CMI.

120. During Shaw’s attempts to sell the property in 2013 and 2014, junior lien holder Katherine Barkley did not have any conversations with Shaw regarding the various short sale offers on the McFaul Court property, had not agreed to any short sale offers on the property, and had not agreed to release her junior lien.

121. Similarly, junior lien holder Janice Shaw did not have any conversations with Shaw regarding the various short sale offers on the McFaul Court property, had not agreed to any short sale offer on the property, and had not agreed to release her junior lien.[11]

122. On August 25, 2014, Shaw filed his second amended complaint in this action. ECF No. 109. The second amended complaint is the operative complaint in this litigation.

123. By the time trial began in May 2016, Shaw’s mortgage account with CMI showed a total amount due of $1,162,304.95. Pl. Trial Ex. 57. This amount was calculated as the combination of the remaining principal balance of $891,467.07; $221,350.69 in accrued interest; $43,110.45 in advanced escrow charges;[12] $186.90 in fees; and $7963.83 in past-due fees and late charges. Id.

124. Throughout the history of this action, Shaw sought contact information from CMI for the current owner of his residential loan. However, prior to trial in June of 2016, CMI never provided contact information for, or identified the actual current owner of Shaw’s residential loan.

125. Throughout the history of this action Shaw suffered a loss of personal and business reputation as a direct consequence of CMI’s conduct, collection activities, and eventual initiation of foreclosure proceedings on the McFaul Court property.

II. Conclusions of Law

In his second amended complaint, Shaw has alleged five causes of action against CMI that are currently before the court: declaratory relief, breach of contract, breach of the implied covenants of good faith and fair dealing, interference with prospective economic advantage, and violation of the Real Estate Settlement Procedures Act. ECF No. 109. Shaw has the burden of proof on all his claims and must prove each claim by a preponderance of the evidence. See, e.g., Cal. State Bd. of Equilization v. Renovisor’s Inc., 282 F.3d 1233 (9th Cir. 2002) (stating the basic premise that civil claims must be proven by a preponderance of the evidence). Along with contract and tort damages, Shaw also seeks punitive damages for CMI’s conduct in this action. See ECF No. 109. In order to be eligible for an award of punitive damages, Shaw must prove by clear and convincing evidence that CMI engaged in oppression, fraud, or malice. See NRS §42.005(1). The court addresses each of Shaw’s remaining causes of action below.

A. Declaratory Relief

Pursuant to Section 2201 of the Declaratory Judgment Act, “any court of the United States. . . may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. §2201. Further “[a]ny such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.” Id. In his claim for declaratory relief, Shaw seeks a declaration from the court that the May 2011 Modification Agreement was a fully executed, valid, and binding loan modification agreement between the parties and that such agreement was, pursuant to its terms, effective May 1, 2011. See ECF No. 109. Shaw also seeks an order from the court declaring the parties’ obligations and financial relationship under that agreement. Id.

The existence of a contract is a question of law. May v. Anderson, 119 P.3d 1254, 1257 (Nev. 2005); Kabil Developments Corp. v. Mignot, 566 P.2d 505, 577 (Or. 1977). “Formation of a valid contract requires that there be a meeting of the minds as evidenced by a manifestation of mutual intent to contract.” Ridenour v. Bank of Am., N.A., 23 F. Supp. 3d 1201, 1208 (D. Idaho 2014). This manifestation can take the form of an offer by one party and acceptance by the other. Id.; see also Erection Co. v. W&W Steel, LLC, 2011 U.S. Dist LEXIS 121581, at *19 (D. Or. 2011) (citing Ken Hood Construction Co. v. Pacific Coast Construction, Inc., 120 P.3d 6 (Or. 2005) (“Manifestation of mutual assent ordinarily occurs through an offer or proposal by one party followed by acceptance of the other party.”); Integrated Storage Consulting Servs. v. NetApp, Inc., 2013 U.S. Dist. LEXIS 107705, at *19 (N.D. Cal. 2013) (“The formation of a contract is properly shown through evidence of an offer and acceptance of definite terms.”). The party asserting the existence of a contract has the burden to establish the contract’s existence and its terms. Erection Co., 2011 U.S. Dist. LEXIS 121581, at *20.

Here, the undisputed evidence presented at trial establishes that defendant CMI offered to modify Shaw’s residential home loan in May 2011. CMI sent Shaw a letter written by CMI employee Kim Vukovich along with a copy of the May 2011 Modification Agreement. CMI’s letter specifically advised Shaw that he was eligible for a loan modification as outlined by the terms of the enclosed agreement. The letter further advised Shaw that if he accepted the terms of that agreement, he should execute and submit the agreement to CMI. Shaw properly executed, by notarized signature, the May 2011 Modification Agreement and submitted the agreement to CMI on May 18, 2011, pursuant to CMI’s instructions. CMI then accepted the executed May 2011 Modification Agreement by booking the terms of the modification into Shaw’s electronic mortgage account on May 23, 2011. After that date, Shaw’s mortgage account showed that his residential loan had been modified pursuant to the terms of the May 2011 Modification Agreement.

Additionally, on June 30, 2011, after having already booked the May 2011 Modification Agreement into Shaw’s mortgage account and having accepted Shaw’s first timely made modified payment under the agreement, CMI Vice-President Larry Bauman separately executed, by notarized signature, the May 2011 Modification Agreement on behalf of CMI. CMI then sent a copy of the completed May 2011 Modification Agreement, executed by both parties, to Shaw on August 9, 2011. Moreover, CMI, through its Assistant General Counsel, Dana Ross, and Homeowner Support Specialist Chris Gabbert, recognized both the validity and the legality of the May 2011 Modification Agreement in a separate letter to Shaw sent on August 23, 2011. Finally, it is undisputed that CMI accepted Shaw’s timely made modified monthly payments of $3079.30 from June through December 2011.

The court finds that this record of activity is sufficient to establish an offer of a modification by CMI and acceptance of that offer by Shaw. Such conduct establishes the formation of a contract as a matter of law. See Erection Co., 2011 U.S. Dist. LEXIS 121581, at *19. Further, this record of activity unequivocally established “a manifestation of mutual intent” between the parties to modify Shaw’s residential home loan. Ridenour, 23 F. Supp. 3d at 1208. Therefore, the court finds that the undisputed evidence in this action establishes that the parties executed a valid and binding loan modification agreement known as the May 2011 Modification Agreement that defines the financial relationship, duties, and obligations between Shaw and CMI, the terms of which are outlined in the agreement. See Pl. Trial Ex. 6, P00016-20. The court makes this finding concerning the formation and validity of the May 2011 Modification Agreement nunc pro tunc.

As the court has found that the May 2011 Modification Agreement is a valid contract between the parties, the court finds that due to the long history of this action it is necessary to define the obligations and financial relationship of the parties under the May 2011 Modification Agreement and going forward from this order. In that regard, the court makes these additional findings. First, the modification of Shaw’s residential loan pursuant to the May 2011 Modification Agreement became effective May 1, 2011. See Pl. Trial Ex. 6, P00017, Section 4. Second, pursuant to the contract, Shaw’s modified monthly payments for the first two years of the agreement were set at $3,079.30, with the first payment having been due on June 1, 2011. Id. at P00018, Section 4(C). It is undisputed that Shaw timely made modified monthly payments under the May 2011 Modification Agreement from June through December 2011, for a total of seven (7) modified payments. As addressed in depth below when analyzing Shaw’s breach of contract claim, the court finds that Shaw’s breach of the May 2011 Modification Agreement — by withholding his modified monthly mortgage payments beginning in January 2012 — was reasonable and excused because of CMI’s anticipatory repudiation of the May 2011 Modification Agreement in December 2011. See Infra Section II(B)(ii). Accordingly, the court considers the time period from January 2012, through the date of this order tolled and excluded under the agreement. The court finds that this tolling of the modification agreement is equitable based on CMI’s continued refusal to recognize the existence of the May 2011 Modification Agreement until the filing of the pretrial order in late 2015, four-and-a-half years after the May 2011 Modification Agreement was executed by both parties. Therefore, going forward from this order, Shaw’s modified monthly payment under the May 2011 Modification Agreement remains $3,079.30 for the next seventeen (17) months, after which the monthly payment will increase pursuant to the staggered payment plan outlined in the agreement with the date the staggered payments begin commencing from the date of this order and excluding the tolled period. See Pl. Trial Ex. 6, P00018, Section 4(C). Similarly, the maturity date of Shaw’s modified loan is extended from November 1, 2033, until approximately August 1, 2038, to account for the time tolled in this action.

Third, as specified in the May 2011 Modification Agreement, Shaw’s principal balance on the loan was set at $910,110.34, $85,777.89 of which was deferred from interest charges and is due as a balloon payment at the end of Shaw’s loan. See Pl. Trial Ex. 6, P00017-18, Section 4(B) & 4(C). Since that time, Shaw made seven modified payments of $3,079.30 under the agreement and reduced the principal balance on his residential loan. According to Shaw’s April 2016 mortgage statement admitted at trial, his current remaining principal balance under his loan is $891,467.07. Pl. Trial Ex. 57. Thus, going forward, the court finds that the remaining principal balance on Shaw’s loan is $891,467.07, and that Shaw’s mortgage account with CMI should reflect this amount.

Fourth, the court recognizes that beginning in January 2012, CMI advanced $43,100.45 in escrow funds to Shaw’s mortgage account in order to protect its security interest in the McFaul Court property during the parties’ dispute and this litigation. See Pl. Trial Ex. 57; Def. Trial Ex. 513-B. These advanced escrow funds included quarterly property tax payments on the McFaul Court property, monthly Homeowner’s Insurance premiums, and other escrow expenses for which Shaw was responsible under the terms of his original residential loan, first deed of trust, and the May 2011 Modification Agreement. CMI made all escrow payments on Shaw’s account since January 2012, even though Shaw’s escrow account had insufficient funds to make these payments. Though it was in CMI’s interest to advance these funds in order to protect its security interest in the McFaul Court property, Shaw directly benefited from CMI’s conduct as no property tax liens were recorded on the McFaul Court property during the parties’ dispute and his Homeowner’s Insurance policy did not lapse. Accordingly, the court finds that in the interest of equity between the parties, Shaw is liable for, and CMI is entitled to recover from Shaw, the $43,100.45 in advanced escrow charges. Therefore, going forward from this order, Shaw’s mortgage account should reflect that he continues to owe $43,100.45 to CMI in advanced escrow charges.

Finally, the court finds that any other fees charged by CMI against Shaw’s mortgage account since January 2012, are invalid and improper. As the court has found the time between January 2012 and this order is tolled and excluded from the May 2011 Modification Agreement, all interest charges, late payment fees, and any other fees or past due amounts charged against Shaw under either his original residential loan or the May 2011 Modification Agreement are excluded. The court’s finding specifically extends to and includes the $221,350.89 in accrued interest, $189.90 in fees, and $7,963.83 in past-due fees and late charges reflected on Shaw’s April 2016 mortgage statement, as well as any and all other expenses and fees that have accumulated since January 2012, except for the aforementioned advanced escrow charges. See Pl. Trial Ex. 57. Accordingly, the court shall issue judgment on Shaw’s claim for declaratory relief as outlined above.

B. Breach of Contract

To prevail on a breach of contract claim, a plaintiff must prove: (1) the existence of a valid contract; (2) a breach of that contract by the defendant; and (3) damages resulting from defendant’s breach. Saini v. Int’l Game Tech., 434 F. Supp. 2d 913, 919-20 (D. Nev. 2006); Brown v. Kinross Gold U.S.A., Inc., 531 F. Supp. 2d 1234, 1240 (D. Nev. 2008). A breach of contract can occur in one of two ways. See Nev. Power Co. v. Calpine Corp., 2006 U.S. Dist. LEXIS 36135, at *22 (D. Nev. 2006). The first is an actual breach of the specific terms and obligations of the contract. Brown, 531 F. Supp. 2d at 1240. The second is an anticipatory breach, or repudiation, of the contract. Nev. Power Co., 2006 U.S. Dist. LEXIS 36135, at *23.

In this action, Shaw has alleged both an actual breach of contract claim and an anticipatory breach of contract claim against CMI. See ECF No. 109; ECF No. 168. As each type of breach permits different relief and requires proof of separate and distinct elements, the court shall evaluate CMI’s conduct for each type of breach separately.

i. Actual Breach

As addressed above, the court has found that the May 2011 Modification Agreement constitutes a valid and binding contract. Supra Section II(A). Thus, the remaining issues for the court to determine are (1) whether CMI breached the terms of the May 2011 Modification Agreement, and (2) if there was a breach of that agreement, the damages Shaw incurred as a result of that breach, if any. See Saini, 434 F. Supp. 2d at 920.

Under the terms of the May 2011 Modification Agreement, CMI had a duty to correctly book and apply all of Shaw’s timely made modified payments throughout the life of the modified loan. Further, CMI had a duty to keep correct records of Shaw’s mortgage account so that his account was not improperly placed in default. However, in direct contravention of its obligations and duties under the May 2011 Modification Agreement, CMI unbooked the modified loan terms from Shaw’s electronic mortgage account, unbooked Shaw’s timely made mortgage payments for the months of June and July 2011; placed Shaw’s account into default at a time that he was current on all his mortgage obligations under the express terms of the May 2011 Modification Agreement; and refused to book Shaw’s timely made mortgage payment for the month of August 2011. Further, CMI sent Shaw collection notices demanding payment on over $30,000.00 in past due amounts in both July and August 2011, even though pursuant to the terms of the May 2011 Modification Agreement, all amounts that were previously past due (including the unpaid monthly payments from October 2010, through February 2011, as well as the difference between Shaw’s prior monthly payments and the modified payments under the trial modification period) were specifically included in the new principal balance of $910,110.34, and thus, there was no past due balance on Shaw’s mortgage account at the time.

The court finds that CMI’s undisputed conduct was a direct breach of the May 2011 Modification Agreement. Further, the court finds that CMI’s unilateral actions were made without justification. As recognized by CMI, there was nothing legally deficient with the May 2011 Modification Agreement. Pl. Trial Ex. 21, P00060. Thus, CMI was not justified in unbooking both the modification’s terms and Shaw’s monthly payments from his electronic mortgage account simply because the May 2011 Modification Agreement lacked a payment date for the balloon payment.

As the court has found that CMI breached the May 2011 Modification Agreement, the court now turns to the issue of damages. Damages for a breach of contract claim are limited to those specifically outlined in the contract, if any, and those expectation damages sufficient to put the nonbreaching party in the position it would have been in had the breach not occurred. See, e.g., Keife v. Metro. Life Ins. Co., 931 F. Supp. 2d 1100, 1108-09 (D. Nev. 2013); Midwest Precision Services, Inc. v. PTM Indus. Corp., 887 F.2d 1128, 1136-37 (1st Cir. 1989). Here, the May 2011 Modification Agreement does not set forth any damages for a breach of that agreement by CMI. See Pl. Trial Ex. 6, P00016-20. As such, Shaw’s damages claim is limited to being placed in the same position under the May 2011 Modification Agreement as if the agreement had not been breached by CMI, which is a modification of his residential loan under the terms of that agreement. Shaw has already achieved this position as addressed above in the court’s analysis of Shaw’s declaratory relief claim. See Supra Section II(A). Further, it is undisputed that after CMI breached the May 2011 Modification Agreement it resolved and cured its breach of that agreement on August 15, 2011, when it rebooked the modification terms and Shaw’s payments into his electronic mortgage account. See Def. Trial Ex. 510-B, CMI000064. At the same time, CMI removed Shaw’s account from default and corrected the delinquent payment reports it had made to the various credit reporting agencies during its breach. Finally, CMI waived all late fees and other charges that it had charged to Shaw’s account during its breach. Thus, Shaw was already placed in the same position under the May 2011 Modification Agreement in late August 2011, as if CMI’s breach had not occurred. And, Shaw has failed to prove any other consequential damages resulting from CMI’s one-month breach of the May 2011 Modification Agreement. Accordingly, the court finds that Shaw is not entitled to contract damages for CMI’s breach.

ii. Anticipatory Breach

An anticipatory breach is a breach of a contract that occurs when one party to the contract, without justification and prior to a breach by the other party, makes a statement or engages in conduct indicating that it will not or cannot substantially perform its duties under the contract. Nev. Power Co., 2006 U.S. Dist. LEXIS 36135, at *28. An anticipatory breach, or repudiation, of a contract may be express or implied. Id. An express repudiation occurs when one party demonstrates “a definite unequivocal and absolute intent not to perform a substantial portion of the contract.” Kahle v, Kostiner, 455 P.2d 42, 44 (Nev. 1969); see also Stratosphere Litigation, LLC v. Grand Casinos, 298 F.3d 1137, 1147 (9th Cir. 2002) (holding that an “[a]nticipatory repudiation occurs when a party through conduct or language makes a clear, positive and unequivocal declaration of an intent not to perform.”). An implied repudiation occurs when one party acts in such a manner as to make its future performance under the contract impossible. Covington Bros. v. Valley Plastering, Inc., 566 P.2d 814, 817 (Nev. 1977). If one party anticipatorily breaches the contract, a repudiation of the contract has occurred and the non-breaching party is excused from performing its obligations under the contract. Kahle, 455 P.2d at 44; see also Cleverley v. Ballantyne, 2013 U.S. Dist. LEXIS 177416, at *13 (D. Nev. 2013) (stating that an anticipatory repudiation of a contract excuses the necessity for the non-breaching party to tender performance).

The court has reviewed the evidence presented at trial and finds that CMI expressly repudiated the May 2011 Modification Agreement. The evidence in this action establishes that CMI made repeated, unambiguous, and unequivocal statements to Shaw that the May 2011 Modification Agreement was not a binding modification agreement between the parties, that Shaw did not have any modification agreement with CMI, and that CMI would not recognize any modification agreement until Shaw executed the July 2011 Modification Agreement. CMI began making these statements to Shaw in July 2011, when Chris Gabbert, Shaw’s Homeowner Support Specialist, told Shaw that CMI would only grant him a modification of his loan if he signed the July 2011 Modification Agreement. And CMI continued making similar statements about the need for Shaw to execute the July 2011 Modification Agreement even after CMI had rebooked the May 2011 Modification Agreement in August 2011. For example, Shaw’s next Homeowner Support Specialist, Jennifer Butler, unequivocally advised Shaw in December 2011, and repeatedly through early 2012, that he would not have any modification of his residential loan unless he signed the July 2011 Modification Agreement and that this decision was confirmed by CMI’s Loss Mitigation and underwriting departments. Although Gabbert’s statement concerning the validity of the May 2011 Modification Agreement was prior to CMI curing its breach in August 2011, Butler’s statements regarding the validity of the May 2011 Modification Agreement occurred in December 2011, over four months after CMI rebooked that agreement. And still no explanation was ever provided to Shaw for CMI’s change in position between August 23, 2011, and early December 2011.

Based on this conduct, especially all conduct that occurred after CMI’s “resolution” of Shaw’s mortgage account in August 2011, the court finds that CMI expressly repudiated the May 2011 Modification Agreement. CMI’s conduct constituted “a definite unequivocal and absolute intent not to perform” under the contract. Kahle, 455 P.2d at 44. In fact, this court cannot imagine a more unequivocal and absolute intent to not perform under the May 2011 Modification Agreement than stating that the agreement executed by the parties simply did not exist, and would not be honored. Moreover, as addressed above in Shaw’s actual breach of contract claim, the court finds that CMI was not justified in its conduct simply because the May 2011 Modification Agreement did not contain a specific due date for the balloon payment. See Supra Section II(B)(i). Therefore, the court finds that because CMI repudiated the May 2011 Modification Agreement, Shaw was excused from his performance under that agreement beginning in January 2012. Further, the court finds that Shaw was reasonable in withholding his payments after being told by Butler in December 2011, that the May 2011 Modification Agreement was not in force and that there would be no modification unless and until he executed the July 2011 Modification Agreement based on CMI’s prior conduct in both breaching and repudiating the contract in July 2011, and its history of inconsistent and contradictory statements. Thus, because Shaw’s non-performance under the May 2011 Modification Agreement was excused, all interest, late fees, and past due charges accrued on Shaw’s loan since January 2012, are not recoverable by CMI and the court finds that these charges shall be excluded from Shaw’s mortgage account.[13]

C. Breach of the Implied Covenants of Good Faith and Fair Dealing

Under Nevada law, “[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and execution.” A.C. Shaw Constr. v. Washoe Cty., 784 P.2d 9, 9 (Nev. 1989) (quoting Restatement (Second) of Contracts §205); see also Nelson v. Heer, 163 P.3d 420, 427 (Nev. 2007) (“It is well established that all contracts impose upon the parties an implied covenant of good faith and fair dealing, which prohibits arbitrary or unfair actions by one party that work to the disadvantage of the other.”). “The implied covenants of good faith and fair dealing impose a burden that requires each party to a contract to `refrain from doing anything to injure the right of the other to receive the benefits of the agreement.'” Integrated Storage Consulting Servs., 2013 U.S. Dist. LEXIS 107705, at *23 (quoting San Jose Prod. Credit Ass’n v. Old Republic Life Ins. Co., 723 F.2d 700, 703 (9th Cir. 1984).

To establish a claim for breach of the implied covenants of good faith and fair dealing, a plaintiff must prove: (1) the existence of a contract between the parties; (2) that defendant breached its duty of good faith and fair dealing by acting in a manner unfaithful to the purpose of the contract; and (3) the plaintiff’s justified expectations under the contract were denied. See Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995) (citing Hilton Hotels Corp. v. Butch Lewis Prod. Inc., 808 P.2d 919, 922-23 (Nev. 1991). Generally, the remedy for a breach of the implied covenants of good faith and fair dealing is limited to contractual remedies. Mundy v. Household Fin. Corp., 885 F.2d 542, 544 (9th Cir. 1989); see also Nev. Power Co., 2006 U.S. Dist. LEXIS 36135, at *26 (“As a contract concept, breach of duty leads to the imposition of contract damages determined by the nature of the breach and contract principles.”). However, in limited circumstances, a breach of the implied covenants can give rise to tort liability. See, e.g., State v. Sutton, 103 P.3d 8, 19 (Nev. 2004) (holding that in special circumstances, a breach of the implied covenants of good faith and fair dealing can give rise to tort liability).

In his second amended complaint, Shaw has alleged a breach of the implied covenants of good faith and fair dealing arising from CMI’s repeated refusal to accept the May 2011 Modification Agreement and continued demands for both payment on past due amounts and the execution of the July 2011 Modification Agreement. ECF No. 109. As part of this claim, Shaw has requested both contract and tort damages. Id. Because Shaw is requesting both contract and tort damages, the court shall evaluate Shaw’s breach of the implied covenants claims separately for both a contractual and tortious breach.

i. Contractual Breach of Implied Covenants

A contractual breach of the implied covenants of good faith and fair dealing occurs “[w]here the terms of a contract are literally complied with but one party to the contract deliberately countervenes the intention and spirit of the contract.” Hilton Hotels Corp., 808 P.2d at 923-24. “Establishing such a breach of the implied covenant depends upon the `nature and purposes of the underlying contract and the legitimate expectations of the parties arising from the contract.'” Integrated Storage Consulting Servs., 2013 U.S. Dist. LEXIS 107705, at *23 (quoting Mundy, 885 F.2d at 544) As such, a breach of the implied covenants of good faith and fair dealing is “limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.” McKnight v. Torres, 563 F.3d 890, 893 (9th Cir. 2009)

At trial, Shaw testified that under the terms of the May 2011 Modification Agreement he expected to receive a modification of his loan as outlined by the express terms of that agreement and that his mortgage account would no longer be in default as a result of the modification. However, after the parties executed the May 2011 Modification Agreement, CMI engaged in a pattern of conduct specifically designed to thwart the purpose of the contract and Shaw’s reasonable expectations[14] of a modification of his residential home loan.

Initially, the court notes that some of CMI’s conduct which Shaw contends establishes a breach of the implied covenants cannot support his claim as a matter of law. It is well established that a claim alleging breach of the implied covenants of good faith and fair dealing cannot be based on the same conduct establishing a separately pled breach of contract claim. Daly v. United Healthcare Ins. Co., 2010 U.S. Dist. LEXIS 116048, at *4 (N.D. Cal. 2010); see also Guz v. Betchel Nat. Inc., 8 P.3d 1089 (Cal. 2010) (holding that when both a breach of contract and breach of implied covenants claim are based on the same conduct, the implied covenants claim is superfluous). Thus, CMI’s conduct that was a direct actual breach of the May 2011 Modification Agreement in July 2011, cannot support Shaw’s implied covenants claim. As such, the court cannot, and shall not, consider CMI’s conduct in unbooking the May 2011 Modification Agreement and all payments made under that agreement from Shaw’s electronic mortgage account in determining whether CMI breached the implied covenants.

Nonetheless, the court finds that Shaw has proven by a preponderance of the evidence that CMI breached the implied covenants of good faith and fair dealing. First, it is undisputed that within two weeks after CMI executed the May 2011 Modification Agreement, CMI sent Shaw an entirely new modification agreement, the July 2011 Modification Agreement. This new agreement was identified by CMI employee Juan Mayorga as a “corrected” agreement that had to be signed by Shaw before CMI would modify Shaw’s residential loan even though it contained new material terms. No explanation was ever provided to Shaw for why the new modification agreement had been sent. Even Mayorga, the CMI employee who sent the July 2011 Modification Agreement, was unable to inform Shaw as to why the new agreement had been drafted. Shaw was given similar unresponsive answers from Chris Gabbert, who also directed Shaw to sign the new agreement if he wanted a loan modification. The court finds that within the context of the confusing signals to Shaw, CMI’s conduct of executing a loan modification agreement and then insisting upon a new agreement with materially different terms without explanation to Shaw “deliberately contravenes the intention and spirit” of the properly executed and valid May 2011 Modification Agreement. Hilton Hotels Corp., 808 P.2d at 923-24. CMI’s conduct was completely unfaithful to the purpose of the May 2011 Modification Agreement which was to provide Shaw with a modification of his residential home loan.[15]

Further, CMI engaged in a similar pattern of conduct after resolving Shaw’s account in August 2011. For example, Shaw timely made all modified monthly payments of $3,079.30 under the May 2011 Modification Agreement through December 2011. Def. Trial Ex. 510-B, CMI000063-64. However, during that same time, Shaw received written collection notices from CMI demanding payment on non-existent past due amounts. Further, after his account was transferred to Jennifer Butler in December 2011, CMI reversed its position on the May 2011 Modification Agreement and once again claimed that Shaw did not have any modification with CMI because he had not yet signed the July 2011 Modification Agreement. Moreover, even after being informed that CMI had previously determined that there was nothing legally deficient in the May 2011 Modification Agreement, CMI’s Loss Mitigation and underwriting departments confirmed that Shaw did not have a loan modification with CMI in December 2011, and would not have a recognized loan modification with CMI unless and until he signed the July 2011 Modification Agreement. The court finds that this post August 2011 conduct likewise “deliberately contravenes the intention and spirit” of the May 2011 Modification Agreement. Hilton Hotel Corp., 808 P.2d at 923-24. Based on all of CMI’s conduct in this action, the court finds that CMI breached the implied covenants of good faith and fair dealing.

As the court has found that CMI breached the implied covenants of good faith and fair dealing, the court now turns to the issue of damages. Damages under a contractual breach of the implied covenants are limited to regular contract damages. Munly, 885 F.2d at 544. As addressed above in the court’s analysis of Shaw’s actual breach of contract claim, Shaw is not entitled to contract-based damages. See Supra Section II(B)(i). Shaw has already been placed in the position that he would have been under the May 2011 Modification Agreement absent CMI’s breach of the implied covenants. Id. Further, Shaw has not proven any other contract damages that could be awarded under this claim. Therefore, the court finds that Shaw is not entitled to any damages for CMI’s contractual breach of the implied covenants.

ii. Tortious Breach of Implied Covenants

Generally, a breach of the implied covenants is a contract-based claim. Hilton Hotels Corp., 808 P.2d at 923. However, a breach of the implied covenants can give rise to tort liability when there is a special relationship between the contracting parties. Id. (stating that a tort action for an implied covenants claim requires a special element of reliance or fiduciary duty); see also Sutton, 103 P.3d at 19 (Tort liability for breach of the implied covenants of good faith and fair dealing is appropriate where “the party in the superior or entrusted position has engaged in grievous and perfidious misconduct.”); Max Baer Prods., Ltd. v. Riverwood Partners, LLC, 2010 U.S. Dist. LEXIS 100325, at *14 (D. Nev. 2010) (“Although every contract contains an implied covenant of good faith and fair dealing, an action in tort for breach of the covenant arises only `in rare and exceptional cases’ when there is a special relationship between the victim and tortfeasor.”). A special relationship is “characterized by elements of public interest, adhesion, and fiduciary responsibility.” Id. Under a tortious breach, “a successful plaintiff is entitled to compensation for all of the natural and probable consequences of the wrong, including injury to the feelings from humiliation, indignity and disgrace to the person.” Sutton, 103 P.3d at 19.

Here, the court finds that there is a special relationship between the parties sufficient to support tort liability in this action. First, the parties are in drastically different and unequal bargaining positions. Max Baer Prods., Ltd., 2010 U.S. Dist. LEXIS 100325, at *9 (holding that courts allow tort liability where one party holds “vastly superior bargaining power”). CMI, as the servicer of Shaw’s residential loan, held all of the bargaining power as it controlled the decision of whether to offer Shaw a loan modification, as well as the terms of that agreement. In contrast, Shaw had limited bargaining power as a financially strapped borrower seeking a modification to a loan agreement that he agreed to years earlier and for which CMI held a protected security interest. Although it was in CMI’s interest to grant Shaw a modification so that Shaw would continue making payments, CMI was under no obligation to offer Shaw the May 2011 Modification Agreement or any modification agreement at all. Further, the loan modification agreement is an adhesion contract as CMI completely dictated the terms of the modification with no input by Shaw and offered that agreement to Shaw with his only option to agree to or refuse the agreement. The parties’ relationship necessarily shares “a special element of reliance” sufficient for the court to find a special relationship between the parties for tort liability. Id. at *15. In such relationships, courts have routinely recognized that “there is a need to `protect the weak from the insults of the stronger’ that is not adequately met by ordinary contract damages.” Id.

Further, the same conduct that supports a claim for contractual breach of the implied covenants also supports a claim for tortious breach of the implied covenants. See Supra Section II(C)(i). The court now turns to the issue of compensable damages under this claim. In his complaint, Shaw seeks general tort damages pursuant to NRS §41.334.[16] See ECF No. 109. NRS §41.334 allows for a party to receive compensation for “loss of reputation, shame, mortification and hurt feelings.” Further, under a tortious breach of the implied covenants claim, “a successful plaintiff is entitled to compensation for all of the natural and probable consequences of the wrong, including injury to the feelings from humiliation, indignity and disgrace to the person.” Sutton, 103 P.3d at 19.

The court has reviewed all the testimony and documents admitted at trial and finds that Shaw has proven by a preponderance of the evidence that he suffered a loss of reputation, shame, mortification, indignity and disgrace as a direct result of CMI’s tortious breach of the implied covenants. Shaw testified that he suffered both a loss in personal and business reputation as a proximate result of CMI’s improper collection efforts after executing the May 2011 Modification Agreement. For example, Shaw testified that door hanger collection notices were placed on the door of the McFaul Court property in plain sight and were visible to his neighbors and guests to the property. Further, Shaw testified that he received various e-mails, letters, and comments from former clients and former spouses of former clients. In those various communications, Shaw was chastised and his professional skills as an attorney were questioned as he, himself, was suffering financial difficulties and facing potential foreclosure upon his personal residence. Further, Shaw’s prior business partner in his legal practice used Shaw’s lack of creditworthiness, as a result of CMI’s pending foreclosure, in a separate legal dispute regarding the partnership’s assets (which included another property) which eventually led to Shaw leaving the business and starting a new practice in Reno, Nevada. Additionally, Shaw testified that he suffered from increasing feelings of frustration, worthlessness, shame and sleeplessness in not being able to resolve or even confront his financial difficulties because of the dispute with CMI. The court finds that Shaw has proven by a preponderance of the evidence that he suffered a loss of reputation, shame, indignity and disgrace, and other general damages as a proximate cause of CMI’s conduct.

As the court has determined that Shaw has proven that he suffered general damages as a result of CMI’s conduct, the next significant issue for the court is to quantify Shaw’s general damages. A second issue is to determine the time frame for Shaw’s damages arising from CMI’s tortious conduct. At trial, Shaw presented no evidence related to any monetary figure for his general damages. In fact, the only number offered for Shaw’s general damages was presented by Shaw’s counsel in closing. In Shaw’s closing, Shaw’s counsel asked the court to award Shaw damages in the amount of $2,700 per day from the date of the execution of the May 2011 Modification Agreement by both parties through the date of trial for compensation in an amount of approximately $5,000,000.00. However, there is no testimony or evidence to support that number and the $2,700 per day figure has no relation to anything specific in this action.

The court has reviewed the documents and evidence admitted at trial and finds that an appropriate award of compensatory damages to Shaw is $500 per day during the critical time periods from May 23, 2011, through December 31, 2011, subject to tolling from August 23, 2011, to December 7, 2011, during which the May 2011 Modification Agreement was being recognized by CMI; $250 per day during the period commencing in January 2012 (when Shaw discontinued further house payments) through August 2012 (when Shaw vacated the home); and a reduced amount of $100 per day from August 2012 through the close of trial on May 5, 2016.

The court reaches the $500 per day figure based upon the reasonable amount of time spent by Shaw in the many contacts, conversations, and other uneventful communications he had with CMI concerning the properly executed and “not legally deficient” May 2011 Modification Agreement. These uneventful contacts resulted in great stress and frustration to Shaw as well as adverse effects upon Shaw’s standing in the community, business reputation and credit worthiness. In support of the damages amount, the court takes judicial notice that the hourly billing rate for an experienced attorney of similar skills as Shaw in this district would have been a minimum of $300 per hour and there is no question that Shaw spent at least one to two hours a day, and on some days much longer, either directly responding to or communicating with CMI and its representatives, or attempting to understand CMI’s inconsistent and contradictory positions concerning his mortgage account and loan modification. The court also takes into consideration that any homeowner whose home represented his or her most significant asset and also greatest debt, in this case over $900,000.00, would undergo such frustration, feelings of worthlessness and shame which should be reasonably and fairly compensable at a daily rate of $500.00 per day during this critical time period. Calculating Shaw’s damages during this period at a rate of $500 per day, the court finds that Shaw is entitled to compensation in the amount of $57,000.00 ($500 per day for 114 days).

With regard to the period commencing January 2012, when Shaw stopped making his monthly payments, through August 2012, when he voluntarily vacated the McFaul Court property, the court finds that Shaw’s decision to terminate payments for lack of reasonable treatment by CMI and to ultimately vacate the house eight months later and move to Reno, Nevada, is reflective in part of the continuation of Shaw’s frustration, bitterness and shame imposed upon him by CMI prior to January 2012. Thus the court finds that Shaw is entitled to receive compensation for the harm he suffered during this time period. However, the court finds that Shaw’s damages during this period should be adjusted to $250 per day. Calculating Shaw’s damages for this period, the court finds that Shaw is entitled to compensation in the amount of $60,750.00 ($250 per day for 243 days).

Finally, with regard to the period commencing in August 2012 through the close of trial on May 5, 2016, the court finds that the tortious conduct inflicted upon Shaw prior to this time continued to cause him to suffer similarly compensable harm at an average rate of $100 per day. The reduction in this amount of compensation is reflective of the fact that Shaw was no longer paying his monthly mortgage payment and was no longer living in the McFaul Court property, although he continued to suffer from the compensable harm previously imposed upon him by CMI as previously set forth. Calculating Shaw’s damages for this period, the court finds that Shaw is entitled to compensation in the amount of $122,100.00 ($100.00 per day for 1,221 days).

D. RESPA

The Real Estate Settlement Procedures Act, found at 12 U.S.C. §2601 et seq., places certain duties and restrictions on mortgage lenders, services, and other entities that deal with residential mortgages. Pertinent to this action is Section 2605 of RESPA which requires a loan servicer, like CMI, to respond to inquires from a borrower. See 12 U.S.C. §2605(e). Pursuant to Section 2605(e), if a loan servicer receives a “qualified written request from the borrower” for information relating to the servicing of the borrower’s loan, “the servicer shall provide a written response” appropriately responding to the borrower’s request and providing any requested documentation. 12 U.S.C. §2605(e)(1)(A) & (2)(C). Similarly, pursuant to Section 2605(k), a loan servicer shall provide “the identity, address, and other relevant contact information about the owner or assignee of the loan” when requested by the borrower. 12 U.S.C. §2605(k)(1)(D). For purposes of triggering a servicer’s duty under RESPA, a Qualified Written Request must (1) be a written communication, and (2) include “the name and account of the borrower,” and “a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.” 12 U.S.C. §2605(e)(1)(B)(i)-(ii).

If a servicer receives a Qualified Written Request from a borrower, then the servicer has sixty (60) days to conduct an investigation into the borrower’s account, make any appropriate corrections to that account, and respond to the borrower’s request “with production of the requested information or an explanation of why the information is unavailable.” Pettie v. Saxon Mortg. Servs., 2009 U.S. Dist. LEXIS 4149, at *7 (W.D. Wash. 2009); see also 12 U.S.C. §2605(e)(2). Further, the servicer shall provide the contact information for an employee who can provide assistance to the borrower. 12 U.S.C. §2605(e)(2). During the servicer’s sixty day investigation and response period, a servicer is precluded from providing “information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency.” 12 U.S.C. §2605(e)(3). If a servicer fails to comply with its duties under RESPA, the servicer may be liable for (1) any actual damages the borrower suffered as a result of the servicer’s failure to comply with its duties, and/or (2) statutory damages not to exceed $2,000.00. 12 U.S.C. §2605(f).

In his second amended complaint, Shaw has alleged that he sent several Qualified Written Requests to CMI requesting contact information for the owner of his loan and copies of various loan documents, but that CMI failed to respond to his requests in violation of RESPA. ECF No. 109. The initial step for the court under Shaw’s RESPA claim is to determine whether Shaw submitted Qualified Written Requests to CMI. At trial, Shaw testified that he requested information from CMI about his mortgage and the owner of his loan immediately after CMI unbooked the May 2011 Modification Agreement and placed his account into default and continued to request this information throughout this litigation. In particular, Shaw alleged that he made the following Qualified Written Requests to CMI: (1) a July 31, 2011 e-mail request to Chris Gabbert; (2) a December 5, 2011 e-mail request to Dana Ross; (3) a January 3, 2012 e-mail request to Ross; (4) a January 20, 2012 formal letter to Ross; (5) a June 20, 2012 e-mail request to Robert Orcutt; (6) a January 29, 2013 formal letter to CMI; and (7) multiple written requests to Gabbert, Jennifer Butler, and Orcutt beginning in the fall of 2011 and continuing until Shaw initiated this litigation. The court shall address each alleged Qualified Written Request below.

To constitute a Qualified Written Request under RESPA, a letter must include the name and account of the borrower as well as a statement of reasons for believing the account is in error. Pettie, 2009 U.S. Dist. LEXIS 4149, at *5. Initially, the court notes that Shaw’s generally identified written requests to Gabbert, Butler, and Orcutt beginning in the fall of 2011 are not sufficient to constitute Qualified Written Requests. First, Shaw failed to provide any evidence of the dates of these various communications or what information was requested or included in these communications sufficient for the court to determine whether these communications met the requirements of RESPA. Therefore, the court finds that Shaw has not met his burden to prove these communications were Qualified Written Requests under RESPA.

As to the remaining alleged Qualified Written Requests, the court finds that Shaw did proffer copies of these communications at trial. These admitted exhibits contain sufficient information for the court to determine whether these communications meet the requirements for Qualified Written Requests under RESPA. First, the court has reviewed the July 31, 2011 e-mail request to Gabbert and finds that it does not constitute a Qualified Written Request. Although the email (and all of Shaw’s communications) appropriately identified Shaw and his mortgage account, the e-mail does not contain a statement for why Shaw believes that his mortgage account is in error. See Pl. Trial Ex. 15. Rather, the e-mail only complains of CMI’s failure to previously identify the current owner of his residential loan. These statements are insufficient to trigger CMI’s RESPA duties because they do not mention or discuss his default or mortgage account. See Pettie, 2009 U.S. Dist. LEXIS 4149, at *6 (finding that RESPA “clearly requires that a disputing party give specific `reasons’ for claiming that an account it in error.”); Banayan v. OneWest Bank F.S.B., 2012 U.S. Dist. LEXIS 35301, at *15 (S.D. Cal. 2012) (finding that a qualified written request must seek information “relating to the servicing of a loan.”). Thus, because this e-mail did not provide any statement of reasons for Shaw’s dispute with CMI regarding his mortgage account, the July 31, 2011 e-mail does not constitute a Qualified Written Request. Pettie, 2009 U.S. Dist. LEXIS 4149, at *7. Similarly, the court finds that Shaw’s June 20, 2012 e-mail to Orcutt likewise did not constitute a Qualified Written Request. That e-mail only complains of Orcutt’s failure to provide information about CMI’s reinstatement offer and references several telephonic conversations. See Pl. Trial Ex. 36. But, like Shaw’s July 31, 2011 e-mail, the June 20, 2012 e-mail does not provide any statement of the reasons for Shaw’s dispute with CMI or the ongoing problems with his mortgage account. Thus, as with the July 31, 2011 e-mail to Gabbert, the court finds that Shaw’s June 20, 2012 e-mail to Orcutt does not constitute a Qualified Written Request.

As for Shaw’s remaining alleged Qualified Written Requests — the December 5, 2011 email; January 3, 2012 e-mail; January 20, 2012 letter to Dana Ross; and the January 29, 2013 formal letter to CMI — the court finds that these document did constitute Qualified Written Requests sufficient to trigger CMI’s investigation and response duties under RESPA. In his December 5, 2011 e-mail to Ross, Shaw specifically laid out in detail the parties’ dispute over his mortgage account and also requested various documents from CMI including contact information for the current owner of his loan, a copy of the original mortgage note and deed of trust, and copies of any assignment of the mortgage note and deed of trust, if any. See Def. Trial Ex. 512-A. Similarly, the January 3, 2012 e-mail to Ross references CMI’s lack of response to the December 5, 2011 e-mail, and again details the parties’ dispute including CMI’s ongoing collection attempts, and requests relevant loan documents and owner information. Pl. Trial Ex. 24. Likewise, the formal letter Shaw sent to Ross on January 20, 2012, contained similar information about the parties’ dispute and requested loan documents and contract information for the owner of his loan. Pl. Trial Ex. 26, P00067-69. Finally, the January 29, 2013 e-mail contained similar dispute information and demanded documentation from CMI. Such communications constitute Qualified Written Requests under RESPA. Pettie, 2009 U.S. Dist. LEXIS 4149, at *6; Banayan v. OneWest Bank F.S.B., 2012 U.S. Dist. LEXIS 35301, at *15 (finding that a letter which contained “an extremely detailed account of various communications between the two parties” constitutes a qualified written request).

Now that the court has found that four of Shaw’s written communications were Qualified Written Requests sufficient to trigger CMI’s investigation and response duties under RESPA, the court must determine whether CMI’s response to those requests, if any, was in accordance with its duties under RESPA. Initially, the court finds that CMI did not even respond to or acknowledge Shaw’s December 5, 2011 Qualified Written Request. This lack of acknowledgment of the request is, itself, a violation of RESPA. See 12 U.S.C. §2605(e)(1)(A) (stating that a loan servicer “shall provide a written response acknowledging receipt of the correspondence . . . .”). CMI’s failure to acknowledge receipt of Shaw’s Qualified Written Request, as evidenced by the January 3, 2012 email to Ross which references CMI’s lack of response, was a direct violation of its duties under RESPA.

The court finds that CMI likewise violated its duties under RESPA as it relates to the January 3, 2012 Qualified Written Request. Although Dana Ross properly acknowledged this request in a January 5, 2012 e-mail to Shaw, CMI did not appropriately respond to the request after the investigation period. The evidence establishes that CMI’s only response to Shaw’s January 3, 2012 Qualified Written Request was a January 9, 2012 letter advising Shaw that non-party Aurora was the current owner of his residential loan and provided contact information for Aurora. Pl. Trial Ex. 25, P00066. However, at no point within sixty (60) days after receiving Shaw’s request did CMI provide any of the loan documents that had been requested. CMI’s failure to provide these documents to Shaw is a direct violation of RESPA. Pettie, 2009 U.S. Dist. LEXIS 4149, at *7.

After receiving CMI’s January 9, 2012 letter identifying Aurora as the current owner of his loan, Shaw contacted Aurora at the contact information provided by CMI. Aurora advised Shaw that it was not the owner of his loan at which point Shaw again contacted CMI as outlined in his January 20, 2012 Qualified Written Request. See Pl. Trial Ex. 26, P00067-69. Similar to Shaw’s December 3, 2011 request, CMI did not acknowledge receipt of Shaw’s January 20, 2012 request. As addressed above, this failure by CMI is a violation of its duties under RESPA. 12 U.S.C. §2605(e)(1)(A). Further, the only response to Shaw’s request was a February 13, 2012 letter from CMI again identifying non-party Aurora as the owner of Shaw’s residential loan. Pl. Trial Ex. 31, P00099. However, by that point Shaw had already informed CMI that Aurora was not the owner of his residential loan. Thus, the information CMI provided, stating that Aurora was the current owner of his loan, was false information. CMI’s failure to provide Shaw correct contact information for the owner of his loan is an express violation of RESPA. See 12 U.S.C. §2605(k)(1)(D) (stating that a loan servicer shall provide “the identity, address, and other relevant contact information about the owner of assignee of the loan” when requested by the borrower). Further, once again, at no point did CMI provide Shaw with any of the loan documents that he had been requesting since December 5, 2011. As addressed above, this is also a violation of RESPA. Pettie, 2009 U.S. Dist. LEXIS 4149, at *7.

Shaw’s last Qualified Written Request was his January 29, 2013 Qualified Written Request. Attorney Joseph Bleeker, CMI’s counsel of record at that time, acknowledged Shaw’s request within the twenty day time period and stated that CMI would be responding to Shaw’s request within the requisite sixty (60) days time period. See Pl. Trial Ex. 39, P00123-124. Further, in contrast to CMI’s prior responses, or lack of responses to Shaw’s requests, CMI sent Shaw a package on March 6, 2013, from Kristin Dennis, a Default Research Specialist at CMI. Pl. Trial Ex. 43, P00139-187. The court has reviewed CMI’s response and finds that it properly and appropriately complied with its duties under RESPA. The package included copies of all of the documents that Shaw requested, provided a detailed explanation for CMI’s actions on Shaw’s mortgage account, and explained the reasons for any lacking information. As such, the court finds that CMI did not violate RESPA as it relates to Shaw’s January 29, 2013 Qualified Written Request. See, e.g., Pettie, 2009 U.S. Dist. LEXIS 4149, at *7.

Based on the evidence presented at trial, the court has found that CMI violated RESPA on three separate occasions when dealing with Shaw’s various Qualified Written Requests. A plaintiff who establishes that a servicer violated RESPA is entitled to recover “any actual damages” that the plaintiff suffered as a result of the defendant’s violation and statutory damages. 12 U.S.C. §2605(f)(1)(A) & (1)(B). RESPA’s “actual damages” are limited to pecuniary damages. Zeich v. Select Portfolio Servicing, Inc., 2015 U.S. Dist. LEXIS 151519, at *5 (D. Or. 2015). Here, Shaw has not proven any actual damages as a result of CMI’s violations of RESPA. In contrast to Shaw’s claim for tortious breach of the implied covenants, under RESPA a plaintiff “cannot recover for worry, concern, or frustration.” Id. Thus, the court finds that Shaw is not entitled to any actual damages. Instead, Shaw’s damages award for CMI’s violations is limited to statutory damages. Under RESPA, statutory damages may not exceed $2,000.00. 12 U.S.C. §2605(f)(1)(B). Here, the court finds that such a statutory maximum is warranted based on the repeated pattern of CMI’s failure to appropriately respond to Shaw’s Qualified Written Requests and the fact that Shaw was never once provided correct contact information for the owner of his residential loan. Accordingly, the court shall enter judgment in the amount of $6,000.00 favor of Shaw and against CMI on Shaw’s claims for violation of RESPA.

E. Intentional Interference

In Nevada, a claim for intentional interference with prospective economic advantage requires a plaintiff establish: “(1) a prospective contractual relationship between the plaintiff and a third party; (2) knowledge by the defendant of the prospective relationship; (3) intent to harm the plaintiff by preventing the relationship; (4) the absence of privilege or justification by the defendant; and (5) actual harm to the plaintiff as a result of the defendants’ conduct.” Fagin v. Doby George, LLC, 2011 U.S. Dist. LEXIS 86389, at *15 (D. Nev. 2011) (citing Wichinsky v. Mosa, 847 P.2d 727, 729-30 (Nev. 1993)); see also Barket v. Clarke, 2012 U.S. Dist. LEXIS 88097 (D. Nev. 2012).

The court has reviewed the evidence submitted at trial in this matter and finds that Shaw has failed to prove his claim for intentional interference with prospective economic advantage by a preponderance of the evidence. Shaw’s claim for intentional interference with prospective economic advantage relates solely to CMI’s alleged failure to approve a short sale of the McFaul Court property in a timely manner, which stigmatized the property for potential buyers and caused a devaluation of the property. Although it is undisputed that Shaw had entered into four (4) separate short sale contracts on the McFaul Court property with two different parties, the Knapps and the Smiths, and that CMI had knowledge of these short sale agreements because Shaw had forwarded all four accepted short sale offers to CMI, the court finds that Shaw has not proven that CMI intended to harm Shaw by either denying the short sale offers or not responding to the short sale offers in a timely manner. At trial, Shaw only established that CMI did not respond to any of the four short sale offers in a timely manner thereby causing all four offers to expire under their terms. However, Shaw failed to provide any evidence that CMI’s delay was specifically intended to cause the proposed buyers to walk away from the McFaul Court property or to cause harm to Shaw.

Further, the court finds that Shaw has not proven that CMI, as the servicer of his loan who had final approval on all short sales of the property, was not justified in its conduct. Initially, the court notes that CMI was justified in any delay in its responses to the two Knapp Offers because Shaw did not provide all necessary documents to CMI for it to properly evaluate and respond to these offers. It is undisputed that after receiving the first Knapp Offer, CMI requested various documentation from Shaw including: (1) a hardship letter; (2) a signed purchase agreement (as the original offer had expired in late February 2013); (3) Shaw’s tax returns for the tax years 2011 and 2012; (4) all payoffs for the junior liens on the property within the last sixty days, if any; or, (5) if the junior liens still needed to be paid off, then approval letters of the short sale by each junior lien holder and releases of their junior liens; (6) the 2011 real estate tax bill for the McFaul Court property; and (7) a hazard insurance policy on the property. Def. Trial Ex. 525-A. Shaw submitted, and re-submitted, all requested documents except for signed releases from the junior lien holders. Shaw testified at trial that he had prepared appropriate junior lien holder releases including a consent to judgment in favor of non-party Katherine Barkley and a stipulated monetary judgment in favor of non-party Janice Shaw so that CMI could evaluate the Knapp Offers. However, both Katherine Barkley and Janice Shaw testified that they did not have any conversations with Shaw regarding the various short sale offers on the McFaul Court property, had not agreed to any short sale offers on the property, and had not agreed to release their junior liens or signed any paperwork releasing their junior liens. Further, Shaw did not provide the “judgment” documents to CMI and CMI never received any release documents signed by the junior lien holders. Accordingly, the court finds that CMI did not have any duty to approve, or even respond to, the Knapp Offers in a timely manner as Shaw failed to provide all required documents.

As to the first and second Smith Offers, the court finds that Shaw was not required to provide any releases from the junior lien holders for CMI to consider these short sale offers because under both offers, the junior lien holders were being paid in full. However, the court finds that because CMI had final authority to approve the short sales, Shaw has not established that under the short sales he had reasonable expectations of any economic advantage under these offers. Generally, a loan servicer like CitiMortgage has no duty to approve a short sale. See Blanford v. Suntrust Mortgage, Inc., 2012 U.S. Dist. LEXIS 141666, at *11 (D. Nev. 2012). Further, as the servicer of Shaw’s loan, all short sale offers had to be approved by CMI, thus, even though Shaw accepted the short sale offers, he did not have any true prospective economic benefit from these offers. For example, if CMI declined both Smith Offers, then Shaw would not have received any economic benefit as a matter of law because the McFaul Court property could not be sold at an amount less than Shaw’s remaining indebtedness without CMI’s permission. The court cannot now say that simply because CMI took no action on the offers, rather than deny them outright, that Shaw would have received an economic benefit. As CMI had no duty to respond,[17] a lack of response which caused the offers to lapse would constitute the same action as a denial and thus, not be actionable for an intentional interference with prospective economic advantage. As CMI has no duty to approve, act on, or even acknowledge any short sale offers Shaw received on the McFaul Court property, the court finds that Shaw has failed to prove he had a prospective economic advantage under the contracts as the determination of whether to allow the property to be sold at short sale was solely within CMI’s control. Further, the testimony at trial establishes that the two Smith Offers were not reasonable short sale offers, such that the court cannot find that CMI’s lack of response on these offers was designed to intentionally cause harm to Shaw or was not justified. At trial, Attorney Dodrill testified that CMI would not have approved either Smith Offer as both offers proposed to pay off both junior lien holders in full and give Shaw $75,000 while CMI lost roughly $500,000 in the sale of the McFaul Court property. Attorney Dodrill further testified that CMI had never approved a short sale in such a situation and that no short sale offer which allowed for the borrower to receive money would be approved. Therefore, the court finds that CMI was justified in not responding to these short sale offers as such offers were not reasonable offers for the purchase of the property. Accordingly, based on all of the evidence presented at trial, the court finds that Shaw has not established by a preponderance of the evidence that CMI engaged in conduct that intentionally interfered with any prospective economic advantage. The court shall enter judgment in favor of CMI and against Shaw on this claim.

F. Punitive Damages

In his second amended complaint, Shaw seeks punitive damages for CMI’s conduct outlined in this action. ECF No. 109. Punitive damages are not available in contract-based claims. See NRS §42.005(1) (stating that punitive damages are available in any action “for the breach of an obligation not arising from contract”). Thus, the only claim for which punitive damages could be awarded in this action is Shaw’s claim for tortious breach of the implied covenants of good faith and fair dealing.

Under Nevada law, in order to recover punitive damages, a plaintiff must show the defendant acted with oppression, fraud or malice. Pioneer Chlor Alkali Co. v. National Union Fire Ins. Co., 863 F.Supp. 1237, 1250 (D. Nev. 1994). Oppression is a conscious disregard for the rights of others constituting cruel and unjust hardship. Id. at 1251 (citing Ainsworth v. Combined Ins. Co. of America, 763 P.2d 673, 675 (Nev. 1988)). “Conscious disregard” is defined as “the knowledge of the probable harmful consequences of a wrongful act and a willful and deliberate failure to act to avoid those consequences.” NRS §42.001(1). Malice is conduct which is intended to injure a person or despicable conduct which is engaged in with a conscious disregard of the rights and safety of others. See NRS §42.005(1). In order to establish that a defendant’s conduct constitutes conscious disregard, the conduct must at a minimum “exceed mere recklessness or gross negligence.” Pioneer Chlor Alkali Co., 863 F.Supp. at 1251; see also Countrywide Home Loans, Inc. v. Thitchener, 192 P.3d 243, 255 (Nev. 2008) (holding that conscious disregard requires a “culpable state of mind” and therefore “denotes conduct that, at a minimum, must exceed mere recklessness or gross negligence.”).

Based upon the substantial factual history in this action, and recognizing that CMI is a large home loan servicing company, the court finds by clear and convincing evidence that CMI’s business practices and its specific conduct toward Shaw constituted oppression and a conscious disregard for Shaw’s rights warranting punitive damages. Given the fact that Shaw’s debt of over $900,000 was for his home, that a home is most Americans greatest asset and also greatest liability and is such an integral part of any homeowner’s personal well being, the court finds that a homeowner is particularly vulnerable as a result of a tortious breach of the implied covenant of good faith and fair dealing oppressively committed by a large corporate servicing company such as CMI.

Here, there was a willful and unconscionable failure to avoid needless and harmful consequences in refusing to honor or recognize the May 2011 Modification Agreement (executed by CMI’s Vice-President in May 2011). CMI’s conduct in recognizing then continuously disavowing that agreement — despite a resolving document from CMI’s Assistant General Counsel — was made with a conscious disregard for the harm that it was causing Shaw. Further, there was a willful and deliberate failure by CMI to avoid these consequences. Accordingly, the court finds that this is an appropriate case for punitive damages.

The court has already cited many of the factors that support the court’s finding within the findings of fact and tortious breach of the implied covenants section of this order and those factors find equal weight here. But, the court now highlights several factors which particularly stand out in support of punitive damages and which have not been more specifically addressed. These include CMI’s lack of policies, procedures, practices and management oversight in handling mortgage account issues such as Shaw’s. The lack of company policies and management oversight in this action allowed CMI, through its Loss Mitigation, underwriting, and Executive Response Unit departments, to take the offensive position that CMI was entitled to require Shaw to abandon the fully executed May 2011 Modification Agreement in favor of the proposed July 2011 Modification Agreement despite upper management and assistant general counsel taking inconsistent and contrary positions. In essence, CMI chose to ignore its own agreement (and its own corporate counsel) because the company was aware that a financially strapped homeowner who was in default on a home loan during the post-recession economic downturn was in no position to hold CMI to the agreement it had unilaterally chosen to ignore. Given the obvious effects such a position would have upon any borrower/homeowner and the lack of any bargaining position to challenge CMI’s position, it is clear that there would be dramatic and harmful consequences to a borrower which would cause feelings of utter frustration, worthlessness, and shame — shame and fear over losing a home — at the very time that the borrower was likely experiencing an insurmountable burden of debt. A non-attorney borrower would likely have caved in to CMI while an attorney like Shaw chose instead to rely upon his contract, though not without obvious compensable injury.

Beyond the above, the court also finds that there was a serious lack of practices, policies and procedures to deal with and explain the company’s positions and actions to the borrower/homeowner. Here, despite repeated requests for information as to why Shaw received contradictory and inconsistent communications, CMI never provided any meaningful explanations. Moreover, CMI’s responses to Shaw’s requests for identification of his loan holder, including both those that qualified under RESPA and those that did not qualify, show a lack of policy and procedure to identify to a borrower/homeowner the creditor (whom CMI was representing) who owned the loan and how the creditor might be contacted. These are just a few examples of CMI’s lack of centralized management policy and speak to the very core of CMI’s conscious disregard of Shaw’s rights. Significantly, even after going through a full trial, there has been no identification by CMI of the owner of Shaw’s loan.

CMI’s failures in this action are exacerbated by the frustration and unexplained revolving door of CMI personnel with whom Shaw was required to deal. Just during the time period from May 2011 through July 2012 when CMI effectively stopped communication with Shaw concerning his mortgage account, Shaw had dealt with two different individuals who had drafted separate modification agreements (Kim Vukovich and Juan Mayorga), three separate Homeowner Support Specialists (Chris Gabbert, Jennifer Butler, and Robert Orcutt), and CMI’s Assistant General Counsel, Dana Ross, not to mention the myriad of unnamed employees Shaw contacted in 2011 through 2012. And there was commonly no meaningful explanation of why a new person, new department, or some other representative was being identified as the person with whom Shaw was now required to deal. Moreover, the evidence established that Shaw informed each new CMI representative of the history of his mortgage account and rather than investigate the matter further — an investigation readily available through Shaw’s electronic mortgage account and the documents in Shaw’s and CMI’s possession — these representatives continued to push forward with CMI’s untenable position that there was no valid and binding loan modification under the May 2011 Modification Agreement. CMI willfully ignored the harm it was causing to Shaw despite clear warning signs from Shaw that its conduct was improper.

Another failure, previously mentioned, was CMI’s inexcusably delayed recognition of the May 2011 Modification Agreement. An agreement executed by its Vice-President but then rejected by some employee in the Loss Mitigation department only to be honored by CMI’s own assistant general counsel and then rejected again by an employee in the Executive Response Unit without any meaningful explanation to the borrower/homeowner and without any regard for the financial burden, frustration and stress such inconsistency placed on the borrower/homeowner is strong evidence of oppression. After three plus years of litigation and a three-day bench trial, an explanation for CMI’s behavior is still unknown.

Also significant to the court in finding that punitive damages are warranted in this action is the effect of CMI’s actions and lack of actions concerning Shaw’s credit status. While it is clear that he was in default on his original loan, it is also clear that he cured the default through the execution of the May 2011 Modification Agreement which subsumed all past due amounts into a new principal balance, made all payments under that agreement in a timely fashion through December 2011, and yet Shaw received negative and unreliable credit reporting by CMI throughout much of this period and afterward. Although the evidence could not show the reasons for the revocation of Shaw’s credit card, and the denial for Shaw’s credit applications for his daughter’s student loans, the rejection of the credit application for the purchase of his son’s automobile, and the rejection of Shaw’s own automobile purchase, it is a reasonable conclusion that CMI’s negative reporting during the periods of time when the default had been cleared contributed to Shaw’s credit problems, particularly when his only negative credit issues were related to his mortgage, and would have been a factor in the shame, embarrassment, stress and frustration suffered by Shaw over the relevant time period. Taking all of these factors together, they demonstrate that CMI acted with conscious disregard of Shaw’s rights and support an award of punitive damages.

In Nevada, an award of punitive damages is limited to “[t]hree times the amount of compensatory damages awarded to the plaintiff if the amount of compensatory damages is $100,000 or more.” NRS §42.005(a). Here, the compensatory damages under Shaw’s tortious breach of the implied covenants claim is $239,850.00 and the court finds that an appropriate amount of punitive damages for the conduct outlined above is the statutory limit. Thus, trebling this amount, the court shall enter judgment in the amount of $719,550.00 in favor of Shaw and against CMI for punitive damages.

G. Attorney’s Fees

Although not presently before the court, the court notes for the benefit of the parties that it would consider a motion for attorney’s fees filed by Shaw pursuant to NRS §18.010 and 12 U.S.C. §2605(f)(3), as Shaw is the prevailing party in this action under his declaratory relief, tortious breach of the implied covenants, and RESPA claims. Therefore, the court shall grant Shaw leave to file a motion for attorney’s fees, if any, within twenty (20) days of entry of this order. Such motion shall comply with Local Court Rule 54-14.

IT IS THEREFORE ORDERED that the clerk of court shall enter judgment in favor of plaintiff Leslie Shaw and against defendant CitiMortgage, Inc. on Shaw’s claim for declaratory relief and breach of contract in accordance with this order.

IT IS FURTHER ORDERED that the clerk of court shall enter judgment in the amount of $239,850.00 in favor of plaintiff Leslie Shaw and against defendant CitiMortgage, Inc. on plaintiff’s claim for breach of the implied covenants of good faith and fair dealing.

IT IS FURTHER ORDERED that the clerk of court shall enter judgment in the amount of $6,000.00 in favor of plaintiff Leslie Shaw and against defendant CitiMortgage, Inc. on plaintiff’s claims for violation of the Real Estate Settlement Procedures Act.

IT IS FURTHER ORDERED that the clerk of court shall enter judgment in favor of defendant CitiMortgage, Inc. and against plaintiff Leslie Shaw on plaintiff’s claim for intentional interference with prospective economic advantage.

IT IS FURTHER ORDERED that the clerk of court shall enter judgment in the amount of $719,550.00 in favor of plaintiff Leslie Shaw and against defendant CitiMortgage, Inc. for punitive damages.

IT IS FURTHER ORDERED that plaintiff shall serve a copy of this order upon junior lien holders Katherine Barkley and Janice Shaw within (10) days of entry of this order.

IT IS FURTHER ORDERED that plaintiff shall have twenty (20) days from entry of this order to file a motion for attorney’s fees in accordance with this order, if any.

IT IS SO ORDERED.

[1] Shaw’s remaining claims are his second cause of action for declaratory relief, third cause of action for breach of contract, fourth cause of action for breach of the implied covenants of good faith and fair dealing, seventh cause of action for interference with prospective economic advantage, and eighth cause of action for violation of RESPA.

[2] At trial the court heard the live testimony of plaintiff Leslie Shaw; Attorney Colt Dodrill, counsel of record for defendant CMI; Jill Hackman, business operations analyst and corporate representative of CMI; Dan Leck, Shaw’s real estate expert; and Michael Brunson, CMI’s real estate expert. The court also heard the testimony by deposition of Travis Nurse, CMI’s designated Rule 30(b)(6) witness; Christopher Gabbert, a CMI employee in the Executive Response Unit; Attorney Dana Ross, Assistant General Counsel for CMI; Katherine Barkley, junior lien holder; and Janice Shaw, Shaw’s ex-wife and junior lien holder.

[3] If any finding of fact herein is considered to be a conclusion of law, or any conclusion of law is considered to be a finding of fact, it is the court’s intention that it be so considered.

[4] During the relevant time period, CMI had a policy that when a borrower submitted a completed loan modification application, Loss Mitigation would review the application for all available modification options — from company modification options to government supported modification programs like HAMP. However, it was not CMI’s policy to advise or disclose to applicants that an application would be reviewed by Loss Mitigation for all possible modification options including government programs. Nor was it CMI’s policy to advise or disclose to applicants that they may receive several responses from CMI concerning the outcome of an application and that such responses could differ in whether an application was approved or denied.

In accordance with CMI’s policies, Loss Mitigation reviewed Shaw’s application and determined, through an underwriter, that Shaw was eligible for a modification of his existing residential loan but was ineligible for a HAMP modification. But Shaw was never advised that his application would be considered for all available modification options, that he would receive multiple responses from CMI about his application, that those responses could be contradictory (as they were in this case), and which of those responses would constitute CMI’s final determination of his application.

[5] At trial, it was explained for the first time that Shaw had received a separate response on his loan modification application relating specifically to the government’s HAMP program because any denial of a modification under HAMP must be directly communicated to the buyer and contain the reasons for the denial along with information related to other loan modification programs and credit counseling. This simple explanation was never provided to Shaw throughout the history of this action.

[6] At trial, it was explained that Shaw had received two separate sets of written communications, first in December 2010 and then again in February 2011, because of the amount of principal remaining on his residential loan. In December 2010, an underwriter for CMI approved Shaw for a modification of his existing loan obligations. Based on that decision, the first set of communications was sent to Shaw in December 2010.

However, because Shaw’s remaining principal obligation was substantial (over $800,000), the original underwriter did not have final authority on Shaw’s application and a manager-level underwriter had to separately review Shaw’s application and make a final determination on whether to approve or deny the application. Upon review, this manager-level underwriter approved Shaw’s application and another set of communications was sent to Shaw in February 2011. Once again, this simple explanation was never provided to Shaw throughout the history of this action.

[7] The proposed modification agreement contained a staggered payment and interest rate schedule that increased the monthly payment on Shaw’s modified loan over the course of several years. See Pl. Trial Ex. 6, P000018. However, for purposes of this order and the relevant time period, Shaw’s modified payment was $3,079.30. Id.

[8] No mention was made during the course of trial as to why Mayorga had been assigned to Shaw’s account to draft the “corrected” modification agreement or what happened to Vukovich during that two month period.

[9] This June 1, 2011 date was still established as the first due date for modified payments even though the July 2011 Modification Agreement was not drafted until some time in July 2011, and sent to Shaw on July 19, 2011.

[10] At trial, it was established that the May 2011 Modification Agreement was missing language in the balloon payment provision setting a specific due date for the balloon payment, although the agreement contained the correct loan maturity date of November 1, 2033. Thus, when CMI received the executed agreement and booked the modification terms into Shaw’s electronic mortgage account, CMI mistakenly entered a 480 month term for the balloon payment, thereby extending Shaw’s loan past the maturity date. When Loss Mitigation audited Shaw’s mortgage account in July 2011, it determined that a “corrected” modification agreement should be sent to Shaw containing a specific due date for the balloon payment, that of the maturity date of November 1, 2033. This “corrected” agreement was sent to Shaw in order to correct CMI’s own mistake. However, no explanation was ever provided at trial as to why the July 2011 Modification Agreement, if all it was supposed to do was correct the balloon payment language error, contained additional material terms like Section 5(G), which placed additional duties and obligations on Shaw.

[11] Due to their status as junior lien holders on the McFaul Court property and beneficiaries under Shaw’s obligations in their favor, the court will order that copies of this order be served upon them by Shaw’s counsel.

[12] Since January 2012, CMI has advanced and paid all taxes, Homeowner’s Insurance premiums, and other escrow expenses on the McFaul Court property in order to protect its security interest under the first deed of trust. Def. Trial Ex. 513-B.

[13] The court has previously addressed the impact of CMI’s anticipatory breach and how it affects the parties going forward from the court’s order in the court’s analysis of Shaw’s declaratory relief claim. See Supra Section II(A).

[14] The court has reviewed the May 2011 Modification Agreement and finds that Shaw’s expectations under that agreement were reasonable and justified.

[15] The court recognizes that this aforementioned conduct occurred prior to Shaw receiving his copy of the fully executed May 2011 Modification Agreement and the involvement of CMI’s Assistant General Counsel, Dana Ross. Once Ross got involved with Shaw’s mortgage issues, CMI resolved Shaw’s account by determining that the May 2011 Modification Agreement was a valid agreement which constituted a modification of Shaw’s residential home loan. However, CMI’s conduct prior to this resolution in August 2011 is still relevant to Shaw’s claim as it constitutes a breach of the implied covenants until that resolution.

[16] At trial, Shaw specifically stated that he was not seeking any damages for lost income, lost rent on the McFaul Court property, or emotional distress within the context of a emotional distress claim. Thus, Shaw’s damages are limited to those under NRS §41.334.

[17] At trial, Shaw argued that CMI created a duty to respond to the Smith Offers in a timely manner by specifically requesting that Shaw re-list the McFaul Court property for sale and forward all accepted short sale offers directly to Attorney Colt Dodrill, CMI’s counsel of record at that point. However, the court has reviewed the evidence submitted at trial and finds that it does not support Shaw’s argument or interpretation of the December conversation that Shaw had with Attorney Dodrill. Attorney Dodrill testified that he told Shaw that if he accepted any short sale offers on the McFaul Court property that such offers should be submitted directly to him as counsel of record for CMI, but did not tell Shaw to put the property back up for sale or that he would be able to handle any short sale offers. Instead, Attorney Dodrill testified that Shaw needed to submit any offers to him directly because by that point in time, Shaw had initiated litigation against CMI and was not allowed to directly contact CMI as an adverse party. Thus, the court finds that based on this testimony, CMI did not create a specific duty to respond to the Smith Offers.

 

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JPMorgan ends WaMu disputes with FDIC, to receive $645 million

JPMorgan ends WaMu disputes with FDIC, to receive $645 million

Reuters-

JPMorgan Chase & Co (JPM.N) on Friday said it will receive $645 million in a settlement of litigation with the Federal Deposit Insurance Corp and Deutsche Bank AG (DBKGn.DE) arising from its purchase of Washington Mutual Inc’s banking operations during the financial crisis in 2008.

According to a regulatory filing, JPMorgan will collect the cash payment from the estate of Washington Mutual Bank, for which the FDIC acts as receiver.

In exchange, JP Morgan, the largest U.S. bank by assets said it will drop its more than $1 billion in claims related to the Washington Mutual (WaMu) purchase.

[REUTERS]

 

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