United States District Court, S.D. Indiana, Indianapolis Division
STEPHEN H. PERRON, CHRISTINE M. JACKSON, UNITED STATES BANKRUPTCY TRUSTEE OF THE SOUTHERN DISTRICT OF INDIANA, Plaintiffs,
JP MORGAN CHASE BANK, N.A. Formally known as Chase Home Finances, LLC, Defendant.
ENTRY ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
TANYA WALTON PRATT, District Judge.
This matter is before the Court on a Motion for Partial Summary Judgment filed by Plaintiffs Stephen H. Perron ("Mr. Perron") and the United States Bankruptcy Trustee, Southern District of Indiana, on behalf of Christine M. Jackson ("Ms. Jackson") (Filing No. 59). On January 1, 2013, Ms. Jackson filed for Chapter 7 Bankruptcy protection under Case No. 13-00743-JKC-7A. Her claims are now being pursued by the United States Bankruptcy Trustee, Southern District of Indiana. Before the Court also, is a Motion for Summary Judgment filed by Defendant JP Morgan Chase Bank, N.A. ("Chase") (Filing No. 61). Plaintiffs' Amended Complaint asserts claims against Chase for alleged violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et. seq., and for breach of good faith and fair dealing. For the reasons set forth below, Plaintiffs' motion for partial summary judgment is DENIED, and Chase's motion for summary judgment is GRANTED.
The following material facts are not in dispute and will be viewed in light most favorable to the non-moving party as it relates to each motion. On or about May 2, 2003, Mr. Perron and Ms. Jackson (collectively, the "Borrowers"), as a married couple, executed and delivered a promissory note ("Note") and mortgage ("Mortgage") on their personal residence in Indianapolis, Indiana. Chase began servicing the Note and Mortgage in 2005. As servicer, Chase agreed to disburse escrow funds to pay Borrowers' annual homeowners' insurance premium. On or about February 17, 2009, Chase forwarded payment to the Borrowers' then current insurance provider, Allstate, for the insurance premium from the Borrowers' escrow account in the amount of $1, 422.00. Sometime in early March 2009, the Borrowers canceled their Allstate policy and obtained homeowners' insurance through Homesite Insurance ("Homesite"). A few week after mailing the insurance payment to Allstate, Chase discovered that Borrowers had terminated their Allstate policy in exchange for a new homeowner policy with Homesite. On or about March 4, 2009, Chase forwarded payment to Homesite for homeowners' insurance premiums from the Borrowers' escrow account in the amount of $838.00. In a letter dated March 5, 2009, Chase notified the Borrowers that two homeowners' insurance premiums had been paid due to the change in providers and any refund received by Chase from the canceled policy would be deposited into the Borrowers' escrow account. The letter further explained that if the premium refund was sent to the Borrowers, it should be remitted to Chase so that the funds could be applied to their escrow account to prevent an escrow shortage. The letter also notified Borrowers that if Chase did not receive the refund in its office by the time of their next escrow analysis, the monthly mortgage payment amount would increase accordingly, and also provided an address to which to mail the refunded premium amount to Chase. (Filing No. 63-3). Unbeknownst to Chase, Allstate had already sent Borrowers a refund check dated March 2, 2009, for the entire $1, 422.00. Despite Chase's request in the March 5, 2009 letter, Borrowers did not send Chase the refund to replenish the escrow account, did not inform Chase of receipt of the insurance premium refund, and instead deposited the $1, 422.00 refund from Allstate into their National City Bank account on April 28, 2009.
On or about December 28, 2009, Chase sent Borrowers their Annual Escrow Disclosure Statement (the "2009 Escrow Analysis"). The 2009 Escrow Analysis reflected both the $1, 422.00 and the $838.00 insurance premiums paid in 2009, but only projected to pay an $838.00 homeowners' insurance premium in 2010. Because the $1, 422.00 refund paid to Borrowers from Allstate was not returned to Chase to be deposited back into their escrow account, the 2009 Escrow Analysis required an escrow shortage payment totaling $802.28 to be included with Borrowers' payments effective February 1, 2010 to prevent the escrow account from dropping below the reserve amount required by law. Borrowers were given the option to pay this amount in one lump sum in December 2009, or to have it spread out over their 2010 monthly mortgage payments. Because Borrowers did not pay the escrow shortage amount in a single lump sum, the escrow shortage amount was spread into monthly installments of $66.86, making the monthly mortgage payment required for 2010 $1, 499.01. If the Borrowers had paid the shortage amount in one lump sum of $802.28, their monthly mortgage payments for 2010, including principal, interest, taxes and insurance would have been $1, 432.15. Even though the 2009 Escrow Analysis stated that Borrowers' monthly mortgage payment for 2010 was $1, 499.01, Borrowers only tendered $1, 469.20 for the period of February 2010 through November 2010, thus underpaying their mortgage by $29.81 each month.
On or about December 27, 2010, Chase sent Borrowers their Annual Escrow Account Disclosure Statement ("2010 Escrow Analysis"). The 2010 Escrow Analysis reflected that in 2010, Chase paid one homeowners' insurance premium in the amount of $861.00, not the two insurance premiums as Borrowers assumed. The 2010 Escrow Analysis also reflected that the county taxes on the real estate were less than anticipated, and Chase was only required to pay $1, 306.94 for county tax despite projecting $1, 724.96 as the amount that would be payable for county taxes in 2010. As a result of the reduction in the county tax, and the Borrowers' February 2010 through November 2010 payments, the 2010 Escrow Analysis reflected a surplus in the escrow account of $250.05 and a projected monthly payment starting in February 2011 of $1, 399.23. On December 28, 2010, Borrowers received a check from Chase in the amount of $250.05, representing the amount of their 2010 escrow surplus.
On or about December 3, 2010, as Borrowers attempted to modify their automatic electronic bank transfer settings, they discovered that the amount of their 2010 scheduled mortgage payments was $1, 499.01, and the monthly mortgage payments for 2011 were scheduled to be $1, 399.23. Based upon the belief that the discrepancy in their monthly payment amount was due to the double payments made to the Borrowers' previous and current homeowners' insurance carriers, they called Chase customer service and made arrangements with a representative to make a payment of $1, 399.23 toward their December 2010 mortgage payment directly at a Chase branch, because the online payment system would not accept an amount less than the $1, 499.01, the monthly payment amount for 2010. However, this payment was not applied toward the Borrowers' mortgage, but instead was held in a "suspense account" and Chase coded their account as being in default. On or about January 10, 2011, Borrowers received eight form letters from Chase notifying them that their mortgage account was in default and that Chase intended to institute foreclosure proceedings. After receiving these letters is when Borrowers discovered that their December 2010 payment had been placed into a suspense account and had not been credited toward their December 2010 payment obligation. Borrowers did not make any additional payments on their mortgage in January 2011 or any time thereafter.
Borrowers sent Chase a letter they entitled a Qualified Written Request Letter ("QWR") on January 10, 2011, which accused Chase of improperly taking $1, 422.00 from their escrow account in February 2009 and demanded Chase return the $1, 422.00 taken from the escrow account, re-credit the account for all improper default fees, and report the account as current to the credit bureaus. Borrowers did not recall that they had received the March 9, 2009 letter from Chase explaining the double insurance premium disbursement due to the change in insurance providers, nor did they recall receiving and depositing the check from Allstate in March 2009. On January 27, 2011, Chase sent Borrowers correspondence acknowledging the receipt of the QWR and informing them that Chase was investigating the issues contained therein. On February 25, 2011, Chase sent Borrowers a letter in response to their QWR, which included Borrowers' loan history and Annual Escrow Account Disclosure Statements from 2007 through 2010, containing a line-item explanation of the double insurance premiums paid in 2009 and the resulting escrow shortage in 2010. Borrowers sent another letter to Chase on April 27, 2011, entitled second QWR, requesting the same information provided to them in the February 25, 2011 response from Chase, as well as demanding payment in the amount of $330, 000.00 for alleged damages. Chase did not respond to this second QWR letter.
Borrowers began receiving phone calls from Chase's collection department on or about January 28, 2011. When Mr. Perron answered the phone and heard that the call was from Chase, he hung up the phone. From February 2011 through the time the Borrowers' phone number was disconnected, Chase's collection department automatically dialed the Borrowers' phone at least two times per day. Most of the time, Borrowers did not answer the phone. Ms. Jackson spoke with a Chase representative on February 24, 2011, who attempted to convince Ms. Jackson to make at least one mortgage payment to keep the account from foreclosure. Ms. Jackson refused to make any additional payments because she believed their account was in error. Mr. Perron filed for divorce in March 2012, and Ms. Jackson closed her law practice on July 2, 2013. Borrowers allege that the stress resulting in their divorce and damage to their credit history were due to Chase's errors in servicing their mortgage account and failure to properly respond to their QWR.
II. LEGAL STANDARD
Summary judgment is only appropriate by the terms of Rule 56 where there exists "no genuine issue as to any material facts and... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. This notion applies equally where, as here, opposing parties each move for summary judgment in their favor pursuant to Rule 56. I.A.E., Inc. v. Shaver, 74 F.3d 768, 774 (7th Cir. 1996). Indeed, the existence of cross-motions for summary judgment does not necessarily mean that there are no genuine issues of material fact. R.J. Corman Derailment Serv., Inc. v. Int'l Union of Operating Eng'rs., 335 F.3d 643, 647 (7th Cir. 2003). Rather, the process of taking the facts in the light most favorable to the nonmovant, first for one side and then for the other, may reveal that neither side has enough to prevail without a trial. Id. at 648. "With cross-motions, [the Court's] review of the record requires that [the Court] construe all inferences in favor of the party against whom the motion under consideration is made." O'Regan v. Arbitration Forums, Ins., 246 F.3d 975, 983 (7th Cir. 2001) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).
Borrowers allege that Chase breached its duty of good faith and fair dealing in the mishandling of their escrow account, and that it violated RESPA on ten separate occasions in its failure to properly respond to their correspondence. Borrowers claim that these violations were the proximate cause of damages they sustained, including the end of their marriage, loss of credit, physical and emotional distress, loss of Ms. ...