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Sims v. New Penn Financial LLC

United States District Court, N.D. Indiana, South Bend Division

November 8, 2016


          OPINION & ORDER

         Mario and Tiffiny Sims bought a home in South Bend, Indiana from John Tiffany pursuant to a land-sale contract. A year later, they discovered that Tiffany had stopped paying the mortgage and that the home was in foreclosure. The bank foreclosed on the home in 2012, and it was set for a sheriffs sale in 2015, which led the Simses to file this case against the mortgage servicer. At bottom, they allege that Shellpoint would not allow them to assume Tiffany's mortgage without first bringing it current because they are African-American. I dismissed their previous complaint, which alleged 12 counts under federal and state law, but gave them an opportunity to amend it. They have now filed a Verified Third Amended Complaint, which retools several of the prior claims and articulates three new ones. Shellpoint has moved to dismiss for failure to state a claim. For the reasons below, the motion is granted in part and denied in part.


         The facts are essentially the same as alleged in the Verified Second Amended Complaint. Mario Sims and his wife bought a home in South Bend, Indiana from John Tiffany for $185, 000 via a land-sale contract in October 2008. (DE 29-1 at 3-9.) The contract stated that Tiffany would provide evidence of "a merchantable title to the Real Estate ..., except as to ... the real estate mortgage held by 1st Source Bank." (Id. at 5.) All seemed well for about a year, when the Simses discovered a second mortgage on the property that Tiffany had stopped paying and learned that the mortgagee, Bank of New York, had initiated foreclosure proceedings. (DE 29 ¶¶ 5, 7.) By that time the Simses had paid Tiffany more than $26, 000 for the home. (Id. ¶ 5.)

         On January 28, 2010, the Simses wrote to the attorney for Resurgent, defendant's predecessor and the mortgage servicer, and offered to assume the mortgage. (DE 29 at ¶ 7; DE 29-1 at 13.) In his reply, counsel explained that, although "[t]he language contained in the Note does not preclude an assumption, but that would have to be initiated by Mr. Tiffany[.]" (DE 29-1 at 14; DE 29 ¶ 8.) Tiffany and the Simses subsequently agreed to move forward, and Tiffany's attorney wrote to Resurgent's counsel on March 17, 2010, to indicate that Tiffany was amenable to an assumption and asking what paperwork was needed. (DE 29-1 at 17; DE 29 ¶ 12.) It's unclear what, if any, correspondence passed between Resurgent and Tiffany or the Simses after that. The complaint alleges that Resurgent never sent the assumption paperwork, but says nothing about whether Tiffany or the Simses made additional inquiries before 2014. (DE 29 ¶¶ 14-15.) In the meantime, the foreclosure ostensibly continued.

         In June 2011, Tiffany filed for chapter 7 bankruptcy protection, which had the effect of staying the foreclosure proceedings and led the Simses to file a related case against Tiffany. See In re Tiffany, No. 3:11-32492 (Bankr. N.D. Ind. June 22, 2011); Sims v. Tiffany (In re Tiffany), No. 3:11-03045 (Bankr. N.D. Ind. July 20, 2011). The Simses ultimately settled their case against Tiffany, and Tiffany executed a quitclaim deed in the Simses' favor on March 13, 2012. (DE 29-1 at 11; DE 29 ¶ 15.) Neither the lender nor Resurgent/Shellpoint was a party to the deed, even though the mortgage on the home was still outstanding. (DE 29-1 at 11.)

         In October 2012, the bankruptcy court lifted the stay, allowing the foreclosure proceedings to resume. In re Tiffany, No. 3:11-32492 (Bankr. N.D. Ind. Oct. 31, 2012) (DE 82). Summary judgment was granted the following year in favor of the bank, and the court ruled that "[t]he mortgage ... is hereby foreclosed as a valid and paramount lien and the equity of redemption of... Tiffany Sims [and] Mario Sims is hereby foreclosed with respect to the described real property[.]" (DE 19-1 at 49.) The court further provided for the property to be sold by the sheriff with proceeds going to satisfy the sum due to the bank and that, at the bank's request "the Sheriff shall evict any Defendants, and any person ... found occupying the premises[.]" (Id. at 50.)

         On December 10, 2014, Shellpoint sent a letter to the Simses, stating that the unpaid principal on the loan was $126, 257.96 and "that Shellpoint has made contact with [Tiffany] and will begin the process of a mortgage assumption[.]"(DE 29-1 at 32.) The letter also provided a list of documents Shellpoint needed to begin its review. (Id.) The Simses allege they submitted the paperwork within five days and that, if it didn't already know, Shellpoint would have learned from that paperwork that the Simses are African-American. (DE 29 ¶ 16.)

         In the meantime, a sheriff's sale of the property was scheduled for January 8, 2015. (DE 29 ¶ 28; see also DE 2-1 at 33.) The Simses' attorney asked Shellpoint to postpone the auction for 30 days to allow them to complete the assumption process, and he filed a complaint with the Consumer Financial Protection Bureau with the same request. (DE 29 ¶¶ 28-29; DE 2-1 at 35.) Shellpoint responded on January 30, 2015, agreeing to postpone the foreclosure sale "in an effort to allow you to submit the documentation that we previously requested ... [on] December 10, 2014." (DE 29 ¶ 30; DE 2-1 at 37.) Shellpoint's letter also included the following caution:

Please be advised that Shellpoint is not responsible for any written or verbal agreement and or monetary exchanges between yourself and the mortgagor, John Tiffany, as we solely service the referenced loan in accordance with the original loan agreement and all applicable state laws and federal regulations until such time as the loan has been paid in full, settled for less than the total amount, or foreclosed and liquidated.

(Id.) The Simses say they then resubmitted the paperwork they'd sent in December 2014. (DE 29 ¶¶ 32, 34.)

         On March 6, 2015, Shellpoint responded to the Simses' consumer complaint, stating that Shellpoint could not disclose certain information about the mortgage including "the total amount required to reinstate the mortgage obligation" until it received authorization from Tiffany and that the Simses would "be required to reinstate the loan by paying the total amount due prior to assuming the rights and obligations under the promissory note and security instrument." (DE 2-1 at 41; DE 29 ¶ 32.) The March 6th letter also asked the Simses to provide updated financial paperwork and the executed quitclaim deed for the property. (DE 2-1 at 41.) Finally, the letter warned the Simses that Shellpoint could reschedule and complete a foreclosure sale consistent with the terms of the original agreement and applicable law, if it did not receive the requested documentation within 30 days. (Id. at 42.)

         The Simses then lodged a second complaint with the Indiana Consumer Financial Protection Bureau, which requested a postponement of the sale, asked that "some portion of the funds we paid Mr. Tiffany to be credited to the loan's remaining balance[, ]" and alleged violations of Dodd-Frank Wall Street Reform and Consumer Protection Act. (DE 29 ¶ 38; DE 2-1 at 51.) After this second consumer complaint, the Simses say Shellpoint really started giving them a hard time-for example, by refusing to discuss the mortgage with the Simses without further information, hanging up on them, and failing to return calls, emails, and letters. (DE 29 ¶ 39.)

         Shellpoint formally responded to the Simses' second consumer complaint on June 24, 2015, stating that "[i]n order for Shellpoint to allow you to assume the mortgage, you will be required to reinstate the loan" and that "Shellpoint does not allow third party assumptions on loans reflecting a delinquent status." (DE 2-1 at 51; DE 29 ¶ 38.) The June 24th letter also stated that the sheriff's sale was set for July 23rd and that it would not be canceled. (DE 2-1 at 51.)

         All of this led the Simses to file this cause of action pro se and to seek a temporary restraining order to stall the sheriff's sale. (DE 1; DE 2; DE 9.) The sheriffs sale was subsequently cancelled, and I denied the request for a TRO. (See DE 13.) At that time, I advised the Simses that they could refile their TRO request if the sheriffs sale were reset. (Id.) Nothing in the pleadings suggests that ever happened, ...

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