Brigitte Nelson v. Acre Mortgage & Financial Inc ( 2022 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 20-3126
__________
BRIGITTE NELSON,
Appellant
v.
ACRE MORTGAGE & FINANCIAL INC; CLASSIC QUALITY HOMES
____________________________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 3-17-cv-01050)
Magistrate Judge: Honorable Joseph F. Saporito, Jr. (by consent)
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
June 17, 2021
Before: MCKEE, SHWARTZ and RESTREPO, Circuit Judges
(Opinion filed: January 12, 2022)
___________
OPINION*
___________
PER CURIAM
Pro se appellant Brigitte Nelson appeals from the United States District Court for
the Middle District of Pennsylvania’s order granting summary judgment to defendant
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
Acre Mortgage & Financial Inc. (“Acre”) on Nelson’s federal claims and dismissing
without prejudice Nelson’s state-law claims against Acre and Classic Quality Homes
(“Classic”) pursuant to 28 U.S.C. § 1367(c)(3). For the following reasons, we will vacate
the District Court’s judgment and remand for further proceedings.
I.
As we write primarily for the parties, who are familiar with the facts, we will
discuss the details only as they are relevant to our analysis. Essentially, Nelson, a retired,
disabled military veteran, contracted with Classic to purchase a house and used Acre to
obtain a mortgage, which was later transferred to a servicing company, The Money
Source. In her amended complaint, Nelson brought one federal count alleging violations
of the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA)
against Acre and six state-law counts, some against Classic and some against both
defendants.1 Acre moved for summary judgment on all of Nelson’s claims against it.
The District Court granted Acre’s motion in part, entering summary judgment with
respect to Nelson’s federal claims against Acre described in Count One of the amended
complaint, but dismissing her remaining state-law claims against both Acre and Classic
1
Nelson initially filed her complaint through counsel in the United States District Court
for the Eastern District of Pennsylvania. The action was subsequently transferred to the
United States District Court for the Middle District of Pennsylvania, where the parties
consented to the jurisdiction of a Magistrate Judge pursuant to 28 U.S.C. § 636(c). ECF
Nos. 24-25. The District Court later permitted counsel to withdraw and Nelson to
proceed pro se. ECF No. 60 & 66.
2
without prejudice pursuant to 28 U.S.C. § 1367(c)(3).2 ECF Nos. 82-84. Nelson
appeals.3
II.
We have jurisdiction under 28 U.S.C. § 1291.4 We exercise plenary review over a
grant of summary judgment, applying the same standard that the District Court applies.
Barna v. Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877 F.3d 136, 141 (3d Cir. 2017).
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). “A factual dispute is ‘genuine’ if the ‘evidence is such that a reasonable
jury could return a verdict for the nonmoving party.’” Razak v. Uber Techs., Inc., 951
F.3d 137, 144 (3d Cir. 2020) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986)). A factual dispute is “material” if it “might affect the outcome of the suit
under the governing law.” Id. The evidence presented is thus viewed “through the prism
2
The court noted that Nelson would be able to transfer those state-law claims to state
court pursuant to 42 Pa. Cons. Stat. § 5103(b). Nelson already filed such an action in the
Court of Common Pleas of Monroe County.
3
The District Court construed Nelson’s notice of appeal as also a motion for
reconsideration, which the District Court has since denied. Nelson did not file a new or
amended notice of appeal to challenge that order, so that decision is not before us. Fed.
R. App. P. 4(a)(4)(B)(ii).
4
Nelson, relying on venue provisions in the Pennsylvania Rules of Civil Procedure and
Pennsylvania Rules of Criminal Procedure, argues that the District Court lacked
jurisdiction. See Pa. R. Civ. P. § 2179; Pa. R. Crim P. § 584. Those rules do not apply in
federal court. The District Court had jurisdiction under 28 U.S.C. § 1331 and § 1367(a)
(and venue was appropriate under 28 U.S.C. § 1391(b)).
3
of the substantive evidentiary burden” to determine “whether a jury could reasonably find
either that the plaintiff proved his case by the quality and quantity of the evidence
required by the governing law or that he did not.” Anderson v. Consol. Rail Corp., 297
F.3d 242, 247 (3d Cir. 2002) (quoting Anderson, 477 U.S. at 254). We “must view the
facts and evidence presented in the light most favorable to the nonmoving party.” Razak,
951 F.3d at 144.
III.
In Count One of the amended complaint, Nelson alleged that Acre violated TILA
and implementing Regulation Z and RESPA and implementing Regulation X.5
Specifically, she alleged that Acre failed to make all required disclosures of material
terms, improperly represented that Nelson would not have to pay property taxes, failed to
make a reasonable and good faith determination of Nelson’s ability to pay, and failed to
provide notice of the transfer of servicing rights to The Money Source. See 15 U.S.C.
§§ 1638, 1639c; 12 U.S.C. § 2605. Nelson alleged that Acre’s disclosures were improper
because they used outdated documents. Pursuant to a statutory mandate, the Consumer
Finance Protection Bureau (“CFPB”) revised the regulations governing mortgage
disclosures with an effective date of October 3, 2015. See 12 C.F.R. pt. 1026, supp. I,
5
As the District Court noted, the amended complaint cites the version of Regulation Z
issued by the Board of the Governors of the Federal Reserve System, 12 C.F.R. § 226,
and the Department of Housing and Urban Development version of Regulation X, 24
C.F.R. § 3500. But the rulemaking authorities under TILA and RESPA relevant to this
case were transferred in 2011 to the CFPB, which issued substantially identical versions
of Regulation Z, 12 C.F.R. pt. 1026, and Regulation X, 12 C.F.R. pt. 1024.
4
cmt. 1(d)(5). In her amended complaint, Nelson alleged that Acre improperly used the
pre-October 3 disclosure forms with her application.
In support of its motion for summary judgment, Acre cited depositions of Nelson,
an Acre owner, an Acre employee, and a Classic employee, along with documents
including an application and disclosure forms signed by Nelson. ECF No. 72. In
response, Nelson filed a memorandum of law and a statement of disputed material facts.
ECF Nos. 76, 77. She also submitted 31 exhibits. ECF No. 75. She later submitted a
sur-reply brief with a further 15 exhibits. ECF No. 79.6 Acre argued that the District
Court should not consider Nelson’s exhibits because she produced no documents in
discovery. ECF No. 78 at 2-7.
The District Court ruled that, on the record presented, no reasonable jury could
return a verdict for Nelson on her TILA and RESPA claims. Viewing the record in the
light most favorable to Nelson, we conclude instead that Acre failed to meet its initial
burden to show no genuine dispute as to any material fact. Acre submitted and cited
Nelson’s deposition testimony, and the District Court considered it. Mem. on Summ. J.,
ECF No. 82 at 9, 14. Nelson testified regarding several of the key factual questions
underlying her federal claim. While Acre provides testimony and documentary evidence
6
On appeal, Nelson submits an additional exhibit, a December 2020 email exchange with
a Monroe County employee regarding her case. 3d Cir. ECF No. 11 at 212-14. This
exhibit was obviously not part of the record before the District Court, as it postdates the
District Court’s ruling, so we do not consider it. See In re Capital Cities/ABC, Inc.’s
Application for Access to Sealed Transcripts, 913 F.2d 89, 96 (3d Cir. 1990) (“This Court
has said on numerous occasions that it cannot consider material on appeal that is outside
of the district court record.”).
5
to support its own version of events, these materials do not foreclose a reasonable jury
from crediting Nelson’s testimony over Acre’s account and finding Acre liable.
First, Nelson alleged that Acre improperly provided disclosures under the pre-
October 3, 2015 regulatory regime. The CFPB’s interpretive guidance provides that the
relevant disclosure changes generally apply only where “the creditor or mortgage broker
receives an application on or after October 3, 2015.” 12 C.F.R. pt. 1026, supp. I, cmt.
1(d)(5).7 A broker receives an application when it receives “the consumer’s name, the
consumer’s income, the consumer’s social security number to obtain a credit report, the
property address, an estimate of the value of the property, and the mortgage loan amount
sought.” 12 C.F.R. pt. 1026, supp. I, cmt. 2(a)(3). Acre argues that the record shows it
received this information from Nelson on September 24, 2015, and so properly provided
disclosures under the previous requirements. An Acre employee testified that Classic
initially referred Nelson to Acre in September regarding a mortgage for a newly
constructed home. After speaking to Nelson by phone, Acre began preparing an
application. Classic and Nelson later agreed that she would instead purchase a
refurbished home and Acre restarted the application process, again by phone. After Acre
prepared the second application, Nelson came to the office in person. Suppl. Appx. 273-
76, 3d Cir. ECF No. 70. The record contains a loan application form in which Acre’s
loan originator attests that she collected the information supporting the second
7
Nelson’s claims do not involve the few exceptions that came into force on October 3
regardless of when an application was received. See 12 C.F.R. pt. 1026, supp. I, cmt.
1(d)(5).
6
application by phone on September 24 and a Good Faith Estimate with that same date.
Id. at 303, 310.8 It also contains disclosure forms signed by Nelson with a September 24
date. Id. at 307-08, 318.
Nelson argues that the September 24 call never occurred and that Acre deliberately
backdated her application to avoid the new disclosure requirements. At her deposition,
Nelson testified that Classic did not suggest the refurbished home to her until October,
and that she first contacted Acre only after that. Suppl. Appx. 196-99.9 Without the
address of the refurbished home, Acre could not receive the mortgage application for that
property. See 12 C.F.R. pt. 1026, supp. I, cmt. 2(a)(3). She also testified that, at Acre’s
request, she later backdated certain documents to September 24. Suppl. Appx. 212, 214.
While Acre cited testimony and exhibits that support its account of events and
contradict Nelson’s, these materials are not so compelling as to prevent a reasonable jury
from disagreeing.10 None of Acre’s documentary evidence addresses any developments
8
Acre and the District Court also cited the deposition testimony of one of Acre’s owners
in support of the September 24 date, but in the cited passage it appears he merely reads
the date from the loan originator’s attestation. Mem. on Summ. J. at 9 fn. 4; Suppl.
Appx. 171-72.
9
In the first amended complaint, filed through her then-counsel, Nelson alleged that
Classic introduced her to Acre in August 2015. ECF No. 2 ¶ 15. But the complaint does
not specifically allege that Nelson reached out to Acre at that time and, in any case, this
potential discrepancy does not so undermine her testimony that a reasonable jury could
not rule for her on this point.
10
On the record submitted by Acre, a reasonable jury could also accept portions of each
account, such as finding that Nelson and Acre interacted in September, but only
concerning the newly constructed property.
7
prior to September 24. There is no testimony from the loan originator who allegedly
spoke to Nelson by phone on that day. The originator’s attestation was signed at the
November closing. Nothing in the record forecloses Nelson’s testimony that she signed
the other documents with a September 24 date in October at Acre’s request.11 Even in
Acre’s account, these forms were not signed in person on September 24, and Acre does
not cite evidence of how or when they were signed. Viewing this evidence in the light
most favorable to Nelson, a reasonable jury could credit her testimony even absent
additional evidence and find that Acre did not receive an application within the meaning
of the applicable regulation until after October 3. See Anderson, 477 U.S. at 255(“Credibility determinations, the weighing of the evidence, and the drawing of legitimate
inferences from the facts are jury functions.”). This genuine dispute of fact is material to
Nelson’s claim that Acre failed to make the disclosures required by TILA and Regulation
Z. See 15 U.S.C. § 1638; 12 C.F.R. § 1026.19(e) & (f).
Next, Nelson alleged that Acre misled her regarding property taxes and conducted
a deficient investigation of Nelson’s ability to pay. In Pennsylvania, disabled veterans
may receive a property tax exemption if their income falls below a certain maximum.
During the mortgage application process, the parties believed Nelson would be eligible
for an exemption, but she was ultimately denied an exemption because education benefits
11
In her opposition to Acre’s summary judgment motion, Nelson attached an October 13
email from Acre’s loan originator to Nelson asking Nelson to sign some forms with a
September 24 date. Suppl. Appx. at 449; ECF No. 75-6 at 2. As we find that Acre did
not meet its initial burden, we do not consider or rely on this exhibit.
8
that she received as a veteran brought her income over the maximum. Regulation Z
requires mortgage lenders to make “good faith estimates” of certain disclosures,
including, where an escrow account is established, “an estimate of the amount of taxes
and insurance . . . payable with each periodic payment.” 12 C.F.R.
§§ 1026.18(s)(3)(i)(C), 1026.19(a)(1)(i) (2011)).12 Where exact information is unknown,
lenders are to estimate, acting in good faith and exercising due diligence, by using “the
best information reasonable available,” which can include relying on the representations
of other parties. 12 C.F.R. § 1026.17(c)(2) (2014); 12 C.F.R. pt. 1026, supp. I, cmt.
17(c)(2)(i) (2014).
Acre argues that the record shows it did not include property taxes in Nelson’s
estimated monthly payments based on her own representations and an appropriate
investigation. Acre witnesses testified that Nelson did not disclose her education benefits
while applying for the mortgage. They relied on her disclosed income, which they
verified against her tax returns. Suppl. Appx. 165-66, 279. Nelson signed a mortgage
application which describes her monthly income as consisting solely of her pension,
Social Security benefits, and “VA Benefits Non Educational.” Id. at 299. The Acre
witnesses also testified that they contacted county and federal Veterans Affairs officials
as part of their investigation and were told, based on Nelson’s declared income, that she
should be eligible for an exemption. Id. at 165-66, 277-80. One Acre employee testified
12
While the applicable version of these regulations would hinge on when Acre received
an application from Nelson, no amendments are materially relevant here.
9
that Nelson gave him contact information of someone with Monroe County, and that
contact told him that Nelson had herself consulted with the County regarding the tax
exemption. Id. at 278.
At her deposition, Nelson testified that she in fact disclosed her education benefits
to an Acre employee but that employee told her that she should not include it in her
application because it was not permanent income. Id. at 201, 225. Nelson also denied
that she consulted with the county regarding the tax exemption prior to closing or told
Acre that she did so. Id. at 201, 203-06, 217, 223-5. The Acre employee denies that
Nelson ever disclosed her educational benefits. Id. at 275.
Viewing this evidence in the light most favorable to Nelson, a reasonable jury
could accept Nelson’s testimony that she disclosed her education benefits and disbelieve
the Acre employee’s contrary testimony. See Anderson, 477 U.S. at 255. Nothing in the
remaining relevant evidence is inconsistent with the Acre employee telling Nelson she
need not include the education benefits in income and then either inadvertently or
deliberately concealing that fact from his colleagues. And if the Acre employee so
instructed Nelson, a jury could find that Acre provided faulty disclosures under TILA and
Regulation Z by misleading Nelson and inadequately investigating her ability to pay. See
15 U.S.C. § 1638; 12 C.F.R. § 1026.19(e) & (f).
Finally, Nelson alleged that Acre transferred her mortgage for servicing to The
Money Source without requisite notice. See 12 C.F.R. § 1024.33. Acre responds that it
properly provided notice, pointing to two documents. First, Nelson signed and dated
September 24 a servicing disclosure statement advising that Acre would be transferring
10
the mortgage for servicing, but not specifying the details of the transfer or the identity of
the transferee. Suppl. Appx. 318. Second, Acre produced a notice of servicing transfer
dated November 9 advising that Acre would transfer the mortgage to the Money Source
effective January 1, 2016. Suppl. Appx. 319. This form, if provided to Nelson, would
meet the requirements of the disclosure regulation. Acre represents that it was given to
Nelson at closing, but the document is not signed and Acre did not provide any evidence
of delivery or receipt, or argue that it is entitled to any presumption of delivery.
At her deposition, Nelson testified that she never received the notice of servicing
transfer and did not learn about The Money Source until after closing. Suppl. Appx. 211.
She testified that she sent a December email to Acre about sending payments to The
Money Source. Suppl. Appx. 211.
Nelson’s claim turns on whether she received the notice of servicing transfer. She
may have signed the prior disclosure statement and became aware of the Money Source’s
involvement in December, but still not received the required notice. Nelson testified that
she did not receive the document and, on the evidence submitted by Acre, a reasonable
jury could accept that testimony, which is material to her claim that Acre failed to comply
with the notice provisions of RESPA and Regulation X, see 12 U.S.C. § 2605(b); 12
C.F.R. § 1024.33, and rule in her favor on this point. See Anderson, 477 U.S. at 255.
We thus conclude that Acre failed to show that there was no genuine dispute as to
any material fact based on the materials submitted in support of its motion for summary
judgment. We thus do not assess the evidentiary value of the exhibits Nelson submitted
in opposition. To the extent that any of those exhibits would, if considered, undermine
11
Nelson’s deposition testimony, a reasonable jury could still find for Nelson on the
decisive factual questions.
IV.
For these reasons, we conclude that the District Court erred in granting summary
judgment in favor of Acre on the record before it, and we will vacate the judgment and
remand for further proceedings.13 Because the District Court declined to exercise
supplemental jurisdiction over the state law claims in light of its ruling on the federal
claim, we will also vacate the District Court’s ruling as to supplemental jurisdiction and
remand to give the District Court an opportunity to consider exercising its jurisdiction
over Nelson’s state law claims. See United States v. Omnicare, Inc., 903 F.3d 78, 94 (3d
Cir. 2018). 14
13
Nelson challenges the District Court’s ruling on several procedural grounds. As the
resolution of these issues is unnecessary to the outcome, we do not reach them. We note
nonetheless that Classic had no obligation to file for summary judgment or participate in
this appeal, see Fed. R. Civ. P. 56; the District Court had discretion to rule without oral
argument, see Fed. R. Civ. P. 78(b); M.D. Pa. L.R. 7.9; and Nelson could not raise, or
expect the District Court to discern, new claims in her opposition to the motion for
summary judgment. See Shanahan v. City of Chicago, 82 F.3d 776, 781 (7th Cir. 1996)
(“A plaintiff may not amend his complaint through arguments in his brief in opposition to
a motion for summary judgment.”); cf. Gilmore v. Gates, McDonald & Co., 382 F.3d
1312, 1315 (11th Cir. 2004) (“Liberal pleading does not require that, at the summary
judgment stage, defendants must infer all possible claims that could arise out of facts set
forth in the complaint.”). While Nelson may now wish her then-counsel had framed her
claims differently, she is “deemed bound by the acts of [her] lawyer,” and may only
amend her claims in accordance with Federal Rule of Civil Procedure 15. Link v.
Wabash R.R. Co., 370 U.S. 626, 634 (1962); see Mala v. Crown Bay Marina, Inc., 704
F.3d 239, 245 (3d Cir. 2013) (Pro se litigants “must abide by the same [procedural] rules
that apply to all other litigants.”).
14
We deny Nelson’s motion to disqualify one of Acre’s counsel. 3d Cir. ECF No. 12.
Counsel’s entry of appearance lacks the certificate of service attached to the entries of
12
counsel, so Nelson may not have received notice. See 3d Cir. ECF Nos. 3, 5, 15. But
neither this nor anything else in Nelson’s motion is grounds for disqualification.