Rawlings v. Dovenmuehle Mortgage, Inc.

Citations: 64 F. Supp. 2d 1156; 1999 U.S. Dist. LEXIS 14353; 1999 WL 731739Docket: Civ.A. 97-D-1581-N

Court: District Court, M.D. Alabama; June 23, 1999; Federal District Court

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Two motions for summary judgment were presented to the court in the case of Rawlings v. Dovenmuehle Mortgage, Inc. The plaintiffs filed a Motion for Summary Judgment on April 8, 1999, and the defendant responded on April 28, 1999. Subsequently, the defendant filed a Motion for Partial Summary Judgment on May 10, 1999, supported by a memorandum, to which the plaintiffs responded on May 26, 1999, followed by the defendant's reply on June 2, 1999. The court analyzed the arguments, applicable law, and the entire record, concluding that both motions would be granted in part and denied in part.

The court confirmed its jurisdiction under 12 U.S.C. § 2605 and 28 U.S.C. § 1331, with no disputes regarding personal jurisdiction or venue. The standard for summary judgment requires the court to view evidence favorably towards the nonmoving party and to grant summary judgment only when there is no genuine issue of material fact. The Supreme Court's interpretation of this standard asserts that summary judgment is appropriate if the nonmoving party fails to demonstrate an essential element of their case, rendering other facts immaterial. The trial court's role is to identify whether a genuine issue exists for trial, rather than to weigh evidence or ascertain truth. The initial burden lies with the party seeking summary judgment, which must present sufficient evidence to show the absence of a genuine issue of material fact, with procedures for fulfilling this burden varying depending on which party holds the burden of proof.

After the initial demonstration required under Rule 56(c), the burden of production shifts to the nonmoving party, who must provide specific facts indicating a genuine issue for trial. This is achieved through affidavits, depositions, interrogatories, or admissions, as established in Celotex and further clarified in Matsushita, which states that mere metaphysical doubt about material facts is insufficient. The nonmoving party must produce evidence that could lead a rational trier of fact to favor them; otherwise, the action lacks a material issue for trial.

In the factual background, Plaintiffs Ray Rawlings and Christopher Powers purchased a home on October 4, 1991, initially financed by Molton, Allen, Williams, with loan servicing transferred to GE Capital Mortgage Services, Inc. in 1994. On March 12, 1997, GE Capital notified the Plaintiffs of a transfer of servicing rights to Defendant, effective April 1, 1997. Subsequently, on April 14, 1997, Defendant requested a mortgage payment for March and April. Plaintiff Rawlings asserted that he timely made the March payment to GE Capital and sent a letter to Defendant on April 25, 1997, with canceled checks as proof. Defendant disputed receiving this letter. On June 6, 1997, Defendant informed the Plaintiffs of late charges and a Notice of Default. In response, Rawlings sent a letter on June 25, 1997, including payment proof and requested correction of the payment record. However, when seeking a loan history, Rawlings received incorrect information from Defendant. Following additional correspondence and default notices from Defendant throughout August 1997, Plaintiffs' attorney sent a letter reiterating their previous claims and including supporting documentation.

Plaintiffs' attorney requested that Defendant rectify a matter or face a lawsuit. On September 3 and September 8, 1997, Defendant notified Plaintiffs of their loan default. Further notices were sent on October 6, October 7, and November 6, 1997, along with a letter detailing late charges. On October 24, 1997, Plaintiff Rawlings asked GE Capital to confirm timely payments for early 1997, leading to GE Capital's November 7 letter acknowledging a misapplication of funds that were subsequently sent to Defendant, restoring the account to current status. Plaintiff Rawlings incurred $75 in secretarial fees and $40 in travel expenses for registered mail, while Plaintiff Powers incurred work-related expenses. On June 12, 1998, Plaintiffs filed a three-count Amended Complaint against Defendant and GE Capital, alleging violations of the Real Estate Settlement Procedures Act (RESPA), negligence, and defamation of credit, seeking compensatory damages and costs. Both parties filed for summary judgment on the RESPA claim, with Plaintiffs asserting six violations due to Defendant's failure to respond to qualified written requests dated April 25, June 25, and August 26, 1997. The court must resolve whether these requests were sent, if Defendant acknowledged them properly, and whether Plaintiffs suffered damages as a result. The first point of contention is the validity of the April 25, 1997 correspondence, which is not referenced in the Amended Complaint but is mentioned in Rawlings' affidavit.

Plaintiffs are unable to produce a letter dated April 25, 1997, citing a computer crash as the reason for its unavailability. On June 25, 1997, Plaintiff Rawlings sent a second letter to the Defendant, noting it was his second correspondence regarding the issue, but did not specify the date of the first letter. The Defendant claims it did not receive the April letter and argues that the June letter is the only qualified correspondence presented. The court identifies a genuine issue of material fact regarding whether the April letter was sent and received, which is significant for determining the number of violations of the Real Estate Settlement Procedures Act (RESPA).

It is established that Plaintiffs sent letters on June 25 and August 26, 1997, which the Defendant received. The court must now evaluate if these letters qualify as "qualified written requests" under 12 U.S.C. § 2605(e)(1). A "qualified written request" must include the borrower’s name and account information and state the reason for believing the account is in error. The court concludes both letters meet these criteria: they contain the necessary identification and sufficiently articulate the reasons for believing there are errors in the account.

The June 25 letter specifically addresses a notice of default, references payments made to GE Capital, and requests prompt correction of the matter, warning of potential legal action if not addressed. The August 26 letter, authored by Plaintiffs' attorney, indicates ongoing issues with the mortgage servicing, notes discrepancies in the records provided by Defendant, and threatens legal action if the matter is not resolved. Consequently, both letters are deemed "qualified written requests" under § 2605(e).

A servicer is required by 12 U.S.C. § 2605(e)(1) to acknowledge a borrower's qualified written request within twenty days. Plaintiffs allege that the Defendant did not comply regarding communications dated April 25, June 25, and August 26, 1997. The court identifies a factual issue concerning the April 25 letter but focuses on the latter two. Defendant claims it acknowledged the June 25 inquiry within the legal timeframe, but its response on July 26 lacks clarity on whether it addressed the June 25 letter specifically, which raises questions about potential RESPA violations. The court finds that the Defendant did not appropriately respond to the August 26 request, as subsequent letters regarding a default did not acknowledge this correspondence, constituting a violation of § 2605(e)(1).

Under § 2605(e)(2), a servicer must act on a qualified written request within 60 days. The Defendant admitted it could not resolve the matter until November 26, 1997, thereby violating this requirement for both the June 25 and August 26 requests, resulting in two violations as a matter of law.

Regarding damages, Plaintiffs assert they experienced actual damages from their efforts related to the correspondence, including mental anguish and time lost from work. The Defendant disputes any claim of actual damages. Under § 2605(f), failure to comply with these provisions can lead to liability for actual damages and potential additional damages for a pattern of noncompliance, capped at $1,000.

Plaintiff Rawlings incurred approximately $75 for secretarial services and $40 for travel to the post office, totaling $115 in actual damages, which the Defendant does not dispute. The court finds that there is insufficient evidence to determine if Plaintiffs suffered damages related to lost work time, indicating an unresolved factual issue. Regarding mental anguish, Plaintiff Rawlings expressed distress from receiving certified letters that suggested potential foreclosure, describing it as mental trauma. Plaintiff Powers also reported emotional distress from notices about defaulting on payments. The court acknowledges that the recoverability of mental anguish damages under RESPA Section 2605(f) is a novel issue in the Eleventh Circuit. Although the Defendant did not contest this, the court explores the matter and concludes that mental anguish damages are recoverable. It interprets the term 'actual damages' within RESPA, noting its lack of a consistent legal definition and emphasizing the statute's remedial intent aimed at consumer protection. The court underscores that RESPA should be interpreted liberally to fulfill Congressional intent, aligning with principles established in similar consumer protection statutes.

The court interprets the statutory language of the Real Estate Settlement Procedures Act (RESPA) as indicative of Congress' intent for the law to be both remedial and protective of consumers. Specifically, the language emphasizes the need for reforms in the real estate settlement process to ensure consumers receive timely information about costs and are shielded from excessive charges due to abusive practices. Legislative history supports that RESPA was enacted in 1974 in response to documented abuses in real estate, including kickbacks and inflated fees, highlighted by media reports and government studies.

RESPA aims to address three main issues: unreasonable practices increasing settlement costs without benefit to buyers, consumers' lack of understanding of settlement processes, and inefficiencies in land title recording. These goals demonstrate RESPA's purpose of protecting consumers from inflated costs due to abusive practices.

The court recognizes RESPA as a consumer protection statute, supported by other court interpretations that affirm its protective intent for borrowers and the necessity for liberal construction of the law to fulfill Congressional intent. Regarding damages under section 2605, the court interprets "actual damages" inclusively, allowing for claims of mental anguish, drawing parallels to other remedial consumer protection statutes that permit recovery for emotional distress.

In Smith v. Law Offices of Mitchell N. Kay, the court recognizes that the Fair Credit Reporting Act (FCRA) allows for actual damages for emotional distress, which are also permissible under the Fair Debt Collection Practices Act (FDCPA). The court notes a precedent in Bryant v. TRW, Inc., where an $8,000 award for embarrassment and humiliation under the FCRA was deemed not excessive. The court concludes that 'actual damages' under Section 2605(f) of the Real Estate Settlement Procedures Act (RESPA) includes mental anguish damages, although it finds a factual dispute regarding whether the Plaintiffs actually suffered such damages. Consequently, summary judgment is denied for both parties regarding this issue.

Regarding state law claims, the court addresses the Defendant's motion for summary judgment on the Plaintiffs' negligence and wantonness claims. It denies the motion for the negligence claim, asserting that the Defendant did indeed owe a statutory duty under RESPA, specifically duties related to responding to qualified written requests. The Plaintiffs demonstrated that the Defendant violated this duty, resulting in damages such as time lost and inconvenience. However, the court grants summary judgment concerning mental anguish damages, as Alabama law permits recovery for emotional injuries in negligence only under specific conditions: following a physical injury or immediate risk of physical harm, neither of which the Plaintiffs have alleged in this case. The motion for summary judgment is granted on the wantonness claim.

The court denies the Defendant's motion for summary judgment regarding the Plaintiffs' negligence claim, except for the claim related to mental anguish damages, which is dismissed. Regarding the wantonness claim, Plaintiffs allege that the Defendant acted willfully and oppressively by ignoring multiple requests and sending a foreclosure notice after receiving a threatening letter from an attorney. The Defendant contends it breached no duty, and the Plaintiffs suffered no physical or economic injury, asserting that its actions do not constitute wantonness. The court finds that while the Defendant breached a duty and the Plaintiffs suffered economic harm, the conduct does not meet the legal definition of wantonness as established by the Alabama Supreme Court. Specifically, the court emphasizes that the failure to provide timely notice and the sending of default notices did not likely result in injury, as no steps were taken toward actual foreclosure. Although the Defendant's actions may be deemed negligent, they do not rise to the level of wanton conduct. As a result, the court grants the Defendant's Motion for Partial Summary Judgment on the wantonness claim.

Plaintiffs' Motion for Summary Judgment and Defendant's Motion for Partial Summary Judgment regarding the Plaintiffs' RESPA claim are partially granted and partially denied. Key rulings include: 

1. Both motions are denied concerning whether the Plaintiffs' April 25, 1997 letter is a qualified written request under 12 U.S.C. 2605(e)(1) due to a material factual dispute.
2. Plaintiffs' letters dated June 25, 1997, and August 26, 1997, are deemed qualified written requests under 12 U.S.C. 2605(e)(1); thus, the Defendant's motion is denied, and the Plaintiffs' motion is granted on this issue.
3. Both motions are denied again regarding whether the Defendant violated 12 U.S.C. 2605(e)(1) concerning the June 25, 1997 letter due to another material factual dispute.
4. The Defendant is found, as a matter of law, to have violated 12 U.S.C. 2605(e)(1) regarding the August 26, 1997 letter, leading to the denial of the Defendant's motion and the granting of the Plaintiffs' motion.

The court emphasizes that RESPA is a remedial consumer-protection statute intended to address and correct abusive practices in real estate settlements, as indicated by its statutory language and legislative history. The intent of RESPA, established in 1974, was to tackle issues such as unreasonable practices increasing settlement costs, consumer confusion about the settlement process, and inefficiencies in land title recording. The court cites various legal precedents to support the interpretation of RESPA as a liberally construed statute aimed at protecting consumers from identified abuses.

RESPA is recognized as a critical tool for reducing settlement costs and addressing past abuses in the housing market. Its purpose is to protect consumers from inflated costs due to abusive practices. Courts have interpreted RESPA as a consumer protection statute aimed at safeguarding borrowers, with Congressional intent underscoring its remedial nature. The court supports a broad interpretation of "actual damages" under § 2605, including mental anguish, aligning with rulings from other consumer protection statutes such as the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. While the court affirms the potential for recovery of mental anguish damages under RESPA, it acknowledges that factual disputes remain regarding whether the plaintiffs have experienced such damages. Consequently, summary judgment on this matter is denied for both parties. Regarding state law claims, the court denies the defendant's motion for summary judgment on the plaintiffs' negligence claim, except for mental anguish damages, which is granted. The motion is granted for the plaintiffs' wantonness claim.

Defendant seeks summary judgment on Plaintiffs' negligence claims, asserting it owed no duty, that any duty was fulfilled, and that Plaintiffs suffered no damages from alleged negligence. Plaintiffs counter that Defendant had a statutory duty under § 2605 of the Real Estate Settlement Procedures Act (RESPA), which the court affirms. The court establishes that a legal duty arises from either common law or statute, and in this case, Defendant, as a mortgage loan servicer, was obligated to provide timely notice of receipt of a qualified written request and to take specific actions within designated timeframes. The court finds evidence that Defendant violated this statutory duty, resulting in damages for Plaintiffs, who incurred costs associated with registered mail and related tasks.

However, the court rules that Plaintiffs cannot recover for mental anguish damages in their negligence claim, as Alabama law permits such recovery only in cases involving actual physical injury or imminent risk of physical harm. Since Plaintiffs allege neither, their claim for mental anguish damages is dismissed, while the negligence claim proceeds.

Regarding wantonness, Plaintiffs assert that Defendant's failure to act was willful and oppressive, citing a series of ignored requests and a foreclosure notice sent after an attorney's warning. Defendant contends it breached no duty and that Plaintiffs did not suffer relevant injuries. The court finds that Defendant did breach a duty and that Plaintiffs experienced economic harm. Nonetheless, it concludes that Defendant's actions do not meet the threshold for wantonness.

The Alabama Supreme Court defines wantonness as an act or omission done with knowledge of conditions that likely lead to injury. The Alabama Code classifies wanton conduct as actions taken with reckless disregard for the rights or safety of others. In the case at hand, the Defendant failed to notify Plaintiffs within the required 20 days of their August 26, 1997 letter and did not take appropriate action within 60 days of the June 25, 1997 and August 26, 1997 letters. Although the Defendant sent several notices of default, including some after receiving a threat of suit from Plaintiffs, the court determined these actions did not amount to wantonness, as they did not lead to foreclosure. The court concluded there was insufficient evidence of reckless disregard, noting that the Defendant did respond to one of the Plaintiffs' letters, albeit incorrectly including a third party's credit information. While the Defendant's conduct was found to be negligent, it was ruled not wanton. Consequently, the court granted the Defendant's Motion for Partial Summary Judgment regarding the Plaintiffs' wantonness claim.

Regarding the motions for summary judgment on the RESPA claim, the court ruled as follows: 
1. Both parties' motions were denied concerning whether the Plaintiffs' April 25, 1997 letter was a qualified written request.
2. The Plaintiffs' June 25, 1997 and August 26, 1997 letters were deemed qualified written requests, leading to the denial of the Defendant's motion and the granting of the Plaintiffs' motion on this issue.
3. Both motions were denied on whether the Defendant violated 12 U.S.C. 2605(e)(1) regarding the June 25, 1997 letter.
4. The Defendant was found in violation of 12 U.S.C. 2605(e)(1) concerning the August 26, 1997 letter, resulting in the denial of the Defendant's motion and the granting of the Plaintiffs' motion.
5. The court ruled that the Defendant violated 12 U.S.C. 2605(e)(2) regarding the June 25 and August 26 letters, leading to similar rulings on the motions.

Plaintiffs have established that they incurred actual damages due to travel and correspondence, resulting in the denial of Defendant's motion for summary judgment and the granting of Plaintiffs' motion on this specific issue. However, both parties' motions for summary judgment regarding the amount of actual damages related to time taken away from work are denied due to the existence of a material factual dispute. Additionally, both motions are denied concerning whether Plaintiffs suffered actual damages from time away from work and mental anguish, as these issues also present material facts in dispute.

Defendant's Motion for Partial Summary Judgment regarding Plaintiffs' negligence claim is denied, except for the mental anguish damages aspect, which is granted in favor of the Defendant. Conversely, Defendant's Motion for Partial Summary Judgment on Plaintiffs' wantonness claim is granted. The court notes that Plaintiffs did not reference an April 25, 1997 letter in their Amended Complaint and have been unable to produce it due to a computer crash, creating a material issue of fact regarding whether this letter was sent to Defendant. The parties have settled claims with GE Capital as of June 10, 1999. Relevant statutory provisions indicate that servicers must respond to qualified written requests from borrowers within specified timeframes, and failure to comply results in liability for damages.

A loan servicer is required to provide a borrower with a statement detailing the reasons for the servicer's belief regarding the correctness of the borrower's account, as well as contact information for an employee who can assist the borrower. If an investigation is conducted, the servicer must provide a written explanation that includes the information requested or an explanation for its unavailability, along with contact details for assistance. The court notes that the plaintiffs did not claim damages under a specific provision of the Real Estate Settlement Procedures Act (RESPA) and thus does not address its applicability. The court contrasts its position with a prior ruling that RESPA § 2605 is not a consumer protection statute, asserting instead that it is part of a broader consumer-protection framework established by Congress in 1990 under the Affordable Housing Act. The court argues that the legislative intent does indicate a remedial purpose for § 2605. Regarding the plaintiffs' claim for mental anguish damages tied to negligence, the court finds cited cases inapposite, as they do not address negligence directly. Instead, it references more recent cases that align with its reasoning on the issue.