B A C Home Loans Servicing LP v. Cunningham

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
B A C HOME LOANS SERVICING LP )
F/K/A COUNTRYWIDE HOME LOANS )
SERVICING LP, )
)
Plaintiff, )
v. ) C.A. No. N10L-01-106 ALR
)
DIANA P. CUNNINGHAM AND )
ANDRE CUNNINGHAM, )
)
Defendants. )
Submitted: April 25, 2017
Decided: May 1, 2017
ORDER
Upon Plaintiff’s Petition for Writ of Possession
GRANTED
This is a case arising from Defendants’ default on their mortgage and the
subsequent foreclosure proceedings. After sheriff’s sale of the subject property
was complete and in response to Plaintiff’s Petition for Writ of Possession,
Defendants appeared for the first time and made argument regarding a claimed
modification of their loan. Defendants asserted that their communications with the
various loan servicers in this case were inconsistent with Plaintiff’s representations
to the Court, and there was some concern that the actual dealings between the
parties diverged from the legal posture presented during the proceedings.
Accordingly, by Order dated October 11, 2016, this Court denied Plaintiff’s
Petition for Writ of Possession pending an evidentiary hearing.1 Several hearings
were held and the parties supplemented the record with written submissions. The
Court is now satisfied that the record is fully developed and the issue of
Defendants’ alleged loan modification can be decided as a matter of law.
Upon consideration of the Petition for Writ of Possession filed by Plaintiff;
statutory and decisional law; the Superior Court Civil Rules; the facts, arguments,
and legal authorities set forth by the parties; and the entire record in this case, the
Court hereby finds as follows:
1. Plaintiff is a Delaware limited partnership that operates as a subsidiary
of Bank of America, N.A. (“Bank of America”). Defendants are individuals and
citizens of Delaware who are self-represented litigants.
2. On June 13, 2007, Defendants executed a promissory note (“Note”)
for a $600,619.00 loan in favor of the Note’s original holder, Countrywide Bank,
FSB, a subsidiary of Countrywide Financial Corp. (collectively “Countrywide”).
On the same day, Defendants executed and delivered a mortgage (“Mortgage”) on
a single-family residential property located in Middletown, Delaware (“Property”)
as security for the Note.
1
BAC Home Loans Serv. LP v. Cunningham, 2016 WL 5937805 (Del. Super. Oct.
11, 2016).
2
3. Defendants have lived at the Property since June 2007, and currently
reside at the Property with their family.
4. By their terms, the Note and Mortgage are transferable without notice
to the borrower. Moreover, the Mortgage provides that a sale or transfer of the
Note or Mortgage may result in a change in the borrower’s loan servicer. The loan
servicer assumes certain rights under the Mortgage, including the collection of
periodic payments from the borrower. The Mortgage permits the holder of the
Note to foreclose on the Property if Defendants fail to make timely payments at the
contract rate.
5. In July 2008, Bank of America acquired Countrywide and obtained
substantially all of Countrywide’s home mortgage business. Countrywide became
a wholly owned subsidiary of Bank of America. Bank of America ceased using the
Countrywide name in April 2009. As a Bank of America home mortgage
subsidiary, Plaintiff is the current owner of the Note.
6. Defendants have had three separate loan servicers since 2008.
Bayview Loan Servicing, LLC was Defendants’ first loan servicer. OCWEN Loan
Servicing, LLC was Defendants’ second loan servicer. Caliber Home Loans, Inc.
is Defendants’ third and current loan servicer.
7. On January 13, 2010, Plaintiff filed a complaint in Superior Court
seeking entry of judgment against Defendants for the principal sum owed on the
3
Note. According to the complaint, Defendants failed to pay required monthly
installments pursuant to the Mortgage when due. The complaint does not specify
exactly when Defendants stopped making monthly payments pursuant to the
Mortgage. However, Plaintiff’s review of Defendants’ payment history as
reflected in Plaintiffs’ Statement of Amount Due indicates that Defendants owed
$112,554.04 in late charges and unpaid interest at the time Plaintiff filed the
complaint. Defendants concede that they are currently in default of payment on
the Mortgage, and have been for several years.
8. The Sheriff’s Office made numerous attempts to serve process on
Defendants at the Property. Service of process was eventually successful on May
28, 2010. Nevertheless, Defendants failed to file an answer or otherwise respond
to Plaintiff’s complaint.
9. In the meantime, also in 2010, Plaintiff sent a letter to Defendants
offering a trial loan modification pursuant to the federal Home Affordable
Modification Program (“Trial Modification Offer”). Defendants made payments
pursuant to the Trial Modification Offer at a reduced mortgage rate for a six-month
period. After accepting payments for six months, Plaintiff rejected the loan
modification and returned all payments received during the six-month period.
10. By letter dated April 21, 2011, after the case docket reflected an
extended period of inactivity, the Court requested that Plaintiff provide a status
4
update. In response, Plaintiff requested that the Court transfer the case to the
dormant docket pending the outcome of an agreement between Plaintiff and
Defendants whereby Plaintiff allowed Defendants additional time to cure their
default. The Court moved the case to the dormant docket as requested.
11. On May 11, 2011, only two weeks later, Plaintiff requested that the
case be returned to active status. On the same day, Plaintiff moved for default
judgment against Defendants for the amount owed under the Note and Mortgage.
12. On January 12, 2016, Plaintiff purchased the Property as the highest
bidder at sheriff’s sale.2 Defendants received notice of the completed sale but did
not object or otherwise seek to have the sale set aside.
13. On April 19, 2016, Plaintiff filed the Petition for Writ of Possession
that is currently before the Court.
14. After sheriff’s sale of the Property was finalized and in response to
Plaintiff’s Petition for Writ of Possession, Defendants appeared and contended that
Defendants’ payments pursuant to the Trial Modification Offer constituted a
contractual modification to the original loan.3 The parties presented
2
Plaintiff assigned its bid to LSF9 Master Participation Trust on or about March
14, 2016. Accordingly, Plaintiff requests that the Writ of Possession currently
before the Court be awarded to LSF9 Master Participation Trust.
3
During a hearing regarding Plaintiff’s Petition for Writ of Possession on
September 27, 2016, Defendants presented an incomplete version of the Trial
Modification Offer. At that time, Plaintiff represented that Plaintiff could not
locate the Trial Modification Offer nor ascertain the validity of Defendants’
5
inconsistencies in their communications and Plaintiff could not access relevant
documents or respond to the Court’s inquiries regarding the alleged modification.
However, Plaintiff’s counsel did not challenge Defendants’ representations.
Moreover, Plaintiff’s 2011 request to move the case to the dormant docket in a
purported effort to allow Defendants to cure their default, followed by Plaintiff’s
reinitiating of foreclosure proceedings just two weeks later, created further
confusion.4 Accordingly, by Order dated October 11, 2016, this Court denied
Plaintiff’s Petition for Writ of Possession pending an evidentiary hearing.5
15. On February 2, 2017, the Court conducted an evidentiary hearing
regarding Plaintiff’s Petition for Writ of Possession and the parties supplemented
the record.
16. On April 25, 2017, the evidentiary hearing was resumed and the Court
considered additional argument and testimony. Upon conclusion of the April 25,
allegations. Plaintiff explained that it was unable to locate pertinent records of the
mortgage mediation process due to the numerous changes in loan servicers and
Plaintiff’s counsel of record. Although Plaintiff has undergone multiple changes in
counsel of record over the course of this litigation, no substitutions of counsel are
reflected on the case docket.
4
Plaintiff could not respond to the Court’s inquiry as to why the case was on the
dormant docket for only a two-week period. Plaintiff’s current counsel contacted
Plaintiff’s former attorney, who had no recollection as to why the case was on the
dormant docket for such a short time and no access to relevant records or
documents. However, the timing and change in Plaintiff’s position appeared to the
Court to reflect the alleged timing and change in the loan servicer’s position
regarding a potential modification.
5
BAC Home Loans Serv. LP v. Cunningham, 2016 WL 5937805 (Del. Super. Oct.
11, 2016).
6
2017 hearing, the Court closed the evidentiary record and took the matter under
advisement.
17. This Court finds that Defendants’ objection to Plaintiff’s Petition for
Writ of Possession is untimely. Superior Court Civil Rule 69(d) provides:
Return of sheriff’s sale of real estate shall be made on the third
Monday of the month succeeding the date of the sale and applications
to set aside such sales shall be made on or before the first Thursday
succeeding said return date, and all such sales not objected to on or
before the first Thursday, shall on the first Friday, be confirmed as a
matter of course.
Delaware courts have repeatedly recognized that an objection to a foreclosure sale
after the applicable confirmation period has elapsed is untimely unless the Court
finds lack of notice, excusable neglect, or a defect in the sale procedures.6
18. In this case, Defendants received notice of a completed sheriff sale of
the Property on March 16, 2016. Plaintiff filed the Petition for Writ of Possession
on April 19, 2016. The record reflects that Defendants did not object to Plaintiff’s
Petition for Writ of Possession or otherwise seek to have the sale set aside until
July 26, 2016, when Defendants appeared in response to this Court’s Rule to Show
Cause.7 By that time, the sale of the Property was finalized and the time period
6
Deutsche Bank Nat. Trust Co. v. Goldfelder, 2014 WL 644442, at *3 (Del. Feb.
14, 2014) (citing Deibler v. Atl. Props. Grp., 652 A.2d 553, 556 (Del. 1995));
Shipley v. New Castle Cnty., 975 A.2d 764, 771 (Del. 2009) (citing Swiggett v.
Kollock, 1866 WL 949, at *2–3 (Del. Super. Oct. 1, 1866)); Mortg. Electr. Reg.
Sys., Inc. v. Charalambous, 2012 WL 1409630, at *2 (Del. Super. Jan 13, 2012).
7
See 10 Del. C. § 5012.
7
under Rule 69(d) had elapsed. Moreover, this Court does not find that Defendants
lacked notice of the sale, that the sale procedures were defective, or that excusable
neglect is applicable. To the contrary, Defendants did have notice of the sale, the
sale procedures were not defective, and there is no excusable neglect.
Accordingly, this Court finds that Defendants request to set aside the foreclosure
sale of the Property is untimely and procedurally barred.
19. Even if this Court accepted Defendants’ objection as a timely attempt
to set aside the Property’s sale, Defendants are not entitled to the requested relief.
Upon consideration of the Trial Modification Offer and the supplemented
evidentiary record, this Court finds that Defendants have not presented sufficient
evidence to establish that Defendants entered into a valid and finalized
modification of the original loan. The record supports Plaintiff’s position that the
Mortgage and Note are the controlling contract between the parties and that the
Petition for Writ of Possession must be granted. Moreover, there is no dispute that
Defendants are in default of payments.
20. In analyzing the validity of an alleged mortgage modification, the
Court must differentiate between finalized contractual amendments to the original
loan agreement and post-default negotiations.8 While a valid modification may be
8
See Wells Fargo Bank, N.A. v. Williford, 2011 WL 5822630, at *3 (Del. Super.
Nov. 17, 2011).
8
asserted by a mortgagor under the affirmative defense of avoidance,9 post-default
negotiations are considered irrelevant to the validity or legality of the mortgage
documents.10
21. The Trial Modification Offer contains certain conditions for
Defendants to become eligible for a permanent modification of their loan.11 In
addition to requiring a series of initial mortgage payments at a revised rate,12 the
Trial Modification Offer requires Defendants to submit various financial
documents and income statements so that the loan servicing entity can assess
Defendants’ eligibility for a finalized modification.13 Moreover, the Trial
Modification Offer provides that a permanent loan modification is conditioned
upon an independent modification agreement that is to be executed by the parties
9
Id. (citing Gordy v. Preform Bldg. Components, 310 A.2d 893, 893–94 (Del.
Super. 1973)); see also United States v. Golden Acres, Inc., 520 F. Supp. 1073,
1079 (D. Del. 1981) (recognizing that parties to a mortgage may make enforceable
agreements modifying the terms of payment, and that in some circumstances a
mortgagee’s conduct may create an estoppel that bars foreclosure).
10
Christiana Falls, L.P. v. First Fed. Savs. & Loan Ass’n of Norwalk, 1986 WL
18356, at *1 (Del. Dec. 30, 1986).
11
Pl. Ex. 2 at 15 (“I understand that the Plan is not a modification of the Loan
Documents and that the Loan Documents will not be modified unless and until (i) I
meet all the conditions required for modification, (ii) I receive a fully executed
copy of a Modification Agreement, and (iii) the Modification Effective Date has
passed. I further understand and agree that the Servicer will not be obligated or
bound to make any modification of the Loan Documents if I fail to meet any one of
the requirements under this Plan.”).
12
Id. at 1–2, 14.
13
Id. at 1–4, 13–15.
9
after Plaintiff verifies Defendants’ eligibility.14 The Trial Modification Offer
certifies that Defendants “provided documentation for all income that
[Defendants’] receive”15 and reiterates that “[t]he Trial Period Plan is the first step.
Upon approval of the return documentation, we will finalize your modified loan
terms and send you a loan modification agreement . . . you will need to sign and
promptly return to us both copies of the Modification Agreement before your loan
can be permanently modified.”16 The Trial Modification Offer required
Defendants to complete and return all documentation by April 1, 2010.17
22. This Court finds that Defendants have not demonstrated that
Defendants fulfilled the necessary conditions for a permanent loan modification
pursuant to the Trial Modification Offer. Specifically, the record does not
establish that Defendants submitted the required financial documents in a timely
fashion, and it is undisputed that the parties never entered into an independent
modification agreement as required by the Trial Modification Offer for a finalized
amendment to the loan.
23. This Court understands Defendants’ frustration with the troubling
post-default negotiation process in this case. Indeed, the confusing
communications between the parties and inconsistent presentations to this Court
14
Id. at 13, 15, 20.
15
Id. at 13 (emphasis in original).
16
Id. at 20.
17
Id. at 1–4, 14.
10
are reflected in the case docket and necessitated the expansion of the evidentiary
record. However, other than the payments that were returned after the trial
modification period as noted, Defendants have resided at the Property since June
2007 and have made no payments towards their indebtedness since before the
initiation of these foreclosure proceedings. Upon consideration of the
supplemented evidentiary record, this Court finds that Defendants are not entitled
to relief as a matter of law or equity.
NOW, THEREFORE, this 1st day of May, 2017, Plaintiff’s Petition for
Writ of Possession is hereby GRANTED. The Writ of Possession is hereby
STAYED until July 5, 2017.
IT IS SO ORDERED.
Andrea L. Rocanelli
_____________________________
The Honorable Andrea L. Rocanelli
11