Jacobson v. Bayview Loan Servicing, LLC

Jacobson v. Bayview Loan Servicing, LLC, 2016 MT 101 (May 4, 2016) (Wheat, J.; Rice, J., concurring) (5-0, aff’d)

Issue: (1) Whether the district court erred in holding that Bayview violated the Fair Debt Collections Practices Act; (2) whether the district court erred in holding that Bayview violated the Montana Consumer Protection Act; (3) whether the district court erred in awarding damages to the Jacobsons; and (4) whether the Jacobsons should be awarded costs and fees on appeal.

Short Answer: (1) No; (2) no; (3) no; and (4) yes.

Affirmed

Facts: Jacobsons borrowed money and bought a home in October 2007, executing a promissory note and trust indenture for $391,400 as security. The original lender was CitiMortgage, Inc. and the “nominee” beneficiary of the trust indenture was Mortgage Electronic Registration Systems, Inc. (MERS).

Jacobsons missed a mortgage payment in December 2008, and CitiMortgage entered into an extension agreement to defer the delinquent payment and interest to the end of the loan. In March 2009, CitiMortgage transferred the loan servicing to Bayview. On March 24, 2009, Bayview sent the Jacobsons a default letter demanding payments of all past due amounts within 30 days or the loan would be accelerated and foreclosed. The letter also said that once the loan was accelerated, it could be reinstated if all past due installments and late charges were paid at least five days before a scheduled foreclosure sale. Bayview did not send a notice of acceleration with a specific date by which the default must be cured, as required by the promissory note.

Jacobsons made a payment on April 30, 2009, but Bayview refused it. In May 2009, a Bayview representative told the Jacobsons to stop making loan payments as this would help qualify them for a loan modification. Bayview did not send an application for the federal Home Affordable Modification Program (HAMP) until January 2011, and on May 4, 2009, it reinitiated foreclosure proceedings with a second default letter. This letter also failed to conform to the promissory note requirements for notice of acceleration and a certain date for cure.

In July 2009, Bayview filed three documents: an assignment of the deed of trust, assigning the deed from MERS to CitiMortgage; a substitution of trustee substituting Peterson in place of First American Title; and a notice of trustee’s sale scheduled for Nov. 23, 2009, and incorrectly identifying Bayview as the beneficiary of the trust indenture.

In September 2009, Bayview told Jacobsons they were not qualified for HAMP, although Jacobsons had never applied. Jacobsons complained to the Better Business Bureau, after which Bayview cancelled the trustee’s sale and offered to lower the interest rate and extend the loan term. The Jacobsons rejected the offer, and complained to Sen. Tester. In a conference call with the Senator’s office, Bayview, and the Jacobsons, Bayview offered to dismiss the foreclosure action, waive late charges, remove the negative credit reporting, dismiss legal fees and costs, and reduce the interest rate to 7.5% if the loan was brought current. Jacobsons accepted, but Bayview refused to put the offer in writing and no agreement was finalized.

Bayview again sent notice of default letters to Jacobsons in December 2009. In January 2010 CitiMortgage executed a power of attorney naming Bayview its attorney-in-fact but the document did not ratify past actions of Bayview. In February 2010 Peterson executed a second notice of trustee’s sale for June 2010, which erroneously identified Bayview as the beneficiary. In March 2010 Bayview assigned the trust indenture to US Bank as trustee, and then again to an entity that did not exist at the time, CBO-6 REO Corp. Bayview falsely represented to Jacobsons that it was servicing their loan on behalf of US Bank, and that Jacobsons’ loan was transferred to CBO-6 REO Corp. Bayview recorded the March 2010 assignment in September 2010, and at the time of recording CBO-6 REO Corp. still did not exist.

In June 2010 Jacobsons filed suit to enjoin the trustee’s sale, and the district court canceled the sale. Jacobsons amended their complaint to add FDCPA and MCPA claims.

Bayview moved for summary judgment in June 2012. The court held a hearing in August 2013 and denied Bayview’s motion at the hearing. A bench trial was held in November 2013, and in March 2014 the court issued findings, conclusions and an order holding that Bayview engaged in deceit, negligent misrepresentation and intentional violations of the FDCPA and the MCPA. It awarded $226,408.14 in damages under those statutes plus costs and attorney fees of $109,108.50.

After trial Jacobsons moved for additional damages because Bayview contacted them while they were represented by counsel to tell them it was adding $33,696 to their loan for attorney fees and expenses from trial. The district court held a hearing in August 2014 and found that Bayview’s actions violated the FDCPA, the MCPA, and the district court’s order prohibiting debt collection during the pendency of the action. It imposed an additional $50,000 of damages under § 30-14-133(1), MCA.

On the day of the hearing, Bayview sent a mortgage statement to Jacobsons, with $13,565.84 in attorney fees added to their mortgage. The district court held a hearing in October 2014, at which Bayview asserted its claim for attorney fees and costs but produced no authority for that claim. The district court issued additional findings, conclusions and an order finings Bayview in contempt, but allowing it to purge its contempt through strict compliance with the court’s orders, and ordering Bayview to pay Jacobsons’ attorneys’ fees and costs in bringing the motions, plus $10,000 to deter Bayview’s unlawful conduct. The court also ordered additional attorney fees but Bayview does not appeal those orders.

Procedural Posture & Holding: Bayview appeals from all of the district court’s orders but not the attorney fees awarded pursuant to the orders. The Supreme Court affirms.

Reasoning: (1) The district court made several factual findings in support of its conclusion that Bayview violated the FDCPA. Bayview argues that conduct related to foreclosure proceedings is not an attempt to collect a debt, and is therefore outside the scope of the FDCPA and the MCPA. Bayview did not make this argument to the district court, and the district court specifically found that neither Bayview nor Peterson alleged any affirmative defenses under the FDCPA, or argued that they are not debt collectors under that statute. The Court declines to address Bayview’s theory newly raised on appeal.

The district court relied on substantial evidence in making its findings and conclusions that Bayview violated the FDCPA.

(2) The district court’s findings under the FDCPA establish state law grounds for violation of the MCPA.

(3) The district court awarded money damages, emotional distress damages, statutory damages, and additional damages for Bayview’s post-trial actions under the MCPA. The Supreme Court concludes that the Jacobsons suffered financial detriment as a result of Bayview’s unfair practices, and that these injuries as alleged under the FDCPA and MCPA have a proper remedy in actual damages. It also finds that the district court did not abuse its discretion in awarding emotional distress damages, and that the district court properly awarded $1,000 in statutory damages to each of the Jacobsons, as each of them had an individual stake in the lawsuit. Finally, the district court’s post-trial damages awards were supported by substantial evidence and demonstrate a well-reasoned remedy for Bayview’s improper conduct.

(4) Under the MCPA, attorney fees and costs are allowed upon successful defense of a verdict on appeal. Bayview has not objected, and the Court remands to the district court for determination of a reasonable award to the Jacobsons.

Justice Rice’s Concurrence: Justice Rice emphasizes that, for procedural reasons, the Court did not consider Bayview’s argument that the FDCPA does not apply as a matter of law to foreclosure of secured interests. If the issue had been properly raised and preserved, it would be a threshold issue about which there has been “spirited debate in the federal courts.” ¶ 73. This issue will have to be resolved at another time.