Filed Proposed Findings of Fact and Conclusions of Law

Case 5:10-cv-03118-JS Document 58
Filed 03/09/11 Page 1 of 44
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA WMC MORTGAGE LLC, Plaintiff, v. SARAH E. BAKER and ERIC G. BAKER Defendants. ) ) ) ) ) ) ) ) )
C.A. No.: 10-3118
DEFENDANTS PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW FINDINGS OF FACT 1. Plaintiff WMC Mortgage LLC (WMC) commenced this action, alleging federal
jurisdiction based solely on diversity of citizenship, on June 28, 2010. See D.E. 1 (Complaint 8). 2. WMC is the successor in interest to WMC Mortgage Corporation, which had
entered into a loan transaction with the Sarah E. Baker dated June 3, 2005. See id. at unnumbered 1 and numbered 1. 3. The June 3, 2005 loan transaction (the Loan) was designed to refinance the
Bakers then-existing mortgage on their personal residence. Id. Only Mrs. Baker signed the Adjustable Rate Note (Note) relating to the transaction, but both Sarah Baker and Eric Baker (the Bakers) signed the Mortgage securing the loan. 4. Plaintiffs Complaint alleges, and the Bakers have admitted, that [t]he Bakers
have not made, in whole or in part, any of their required payments of principal, interest or other items under the Loan. The Bakers have taken the position that, pursuant to Section 1635 of the Truth in Lending Act (Section 1635), they rescinded the Loan within three business days of the
Loan closing and therefore are not obligated to make any payments under the Loan. Id. at 2; see also D.E. 28 (Sec. Am. Ans. at 2). 5. Paragraph 16 of WMCs Complaint alleges, and the Bakers have admitted, that
[t]he Defendants failed to make the first payment due under the Loan on August 1, 2005, and have failed to make each required payment thereafter. D.E. 1 at 16; D.E. 28 at 16. 6. The Complaint further alleges that Deutsche Bank National Trust Company
(Deutsche Bank) owned the loan for a period of time after its origination. D.E. 1 at 2. In this regard, WMC alleges, and the Bakers have admitted, that Deutsche Bank commenced a foreclosure proceeding against the Bakers on May 1, 2006 in the Northampton County Court of Common Pleas. See id. at 18. Deutsche Bank voluntarily discontinued the Foreclosure Proceeding on or about May 19, 2010. Id. at 21. 7. The Complaint does not allege when or how Plaintiff WMC [LLC] came to own
the loan, or whether Deutsche Bank still holds the mortgage. Although unclear, the Complaint implies that Deutsche Bank still holds the mortgage: Deutsche Bank has not foreclosed on any collateral pursuant to the Loan as a result of the Foreclosure Proceeding or otherwise. Id. at 22. 8. On December 17, 2010, the Bakers filed their Second Amended Answer to
Complaint, Affirmative Defenses and Counterclaims (Second Amended Answer). 1 D.E. 28. In that pleading, the Bakers state that they rescinded the loan transaction by mailing a signed cancellation notice to WMC Mortgage Corp. on June 7, 2005. See D.E. 28 (Counterclaim 6 & 7).
The Courts Order of December 16, 2010 granted the Bakers leave to file the amended pleading. D.E. 27. 2
9.
The Bakers have produced a copy of the signed cancellation notice together with
a copy of the postmarked envelope (bearing a June 7, 2005 postmark) that they sent to WMC Mortgage Corp. See Dfts Exh. 1; Donovan Decl. Exh. A. 10. Plaintiff WMC has admitted that WMC Mortgage Corp. received the signed
Notice of Right to Cancel sometime after June 7, 2005. See Dfts Exh. 2; Donovan Decl. Exh. B (Plaintiffs Responses to Requests to Admit). 11. The Notice of Right to Cancel is a pre-printed form that was provided by WMC
Mortgage Corp.s agent to the Bakers on June 3, 2005. See Dfts Exh. 1; Donovan Decl. Exh. A. Among other things, the form states as follows: If you cancel the transaction, the mortgage/lien/security interest is also cancelled. Within 20 CALENDAR DAYS after we receive your notice, we must take the steps necessary to reflect the fact that the mortgage/lien/security interest on your home has been cancelled, and we must return to you any money or property you have given us or to anyone else in connection with this transaction. You may keep any money or property we have given you until we have done the things mentioned above, but you must then offer to return the money or property. If it is impractical or unfair for you to return the property, you must offer its reasonable value. You may offer to return the property at your home or at the location of the property. Money must be returned to the address below. If we do not take possession of the money or property within 20 CALENDAR DAYS of your offer, you may keep it without further obligation. Id. 12. It appears from the testimony that the lender did not cancel the transaction and has
not cancelled the mortgage on the Bakers home. See Tr. Trsc. 2/8/11 p. 228:1621. 13. Mrs. Baker testified that the mortgage loan closing occurred in the Bakers home
on Friday evening, June 3, 2005. See Tr. Trsc. 2/9/11 p. 160:1820. 14. The closing agent for the Loan was Mr. Ralph Lewis, who the Bakers believed to
be affiliated with the loan broker, First Guarantee Mortgage Corp. (First Guarantee). See Tr. Trsc. 2/9/11 p. 160:1824. 3
15.
Based on testimony from the Bakers expert, Irv Ackelsberg, Esquire, however, it
is more likely than not that Mr. Ralph Lewis was a contract employee of the title company, Industry Partners Title, LLC (Industry Title) of Saratoga Springs, NY. See Tr. Trsc. 2/9/11 p. 9:46. 16. Industry Title was the escrow/title agent retained on behalf of the lender to hold
and disburse the loan funds, provide lender title insurance and record the mortgage securing the loan. See Tr. Trsc. 2/9/11 pp. 81:14 82:12 (Ackelsberg); Tr. Trsc. 2/8/11 pp. 100:20 101:19 (Taylor). 17. Apart from the mailing of the cancellation notice, the Bakers believed that all of
their communications in 2005 were with persons at the mortgage broker, First Guarantee. The Bakers did not interact with any person at Industry Title except for Mr. Ralph Lewis, who they believed, mistakenly, to be working for First Guarantee. See Tr. Trsc. 2/8/11 p. 200:2324; 201:16. 18. The Notice of Cancellation form provided to the Bakers at the closing did not
include or provide a phone number for WMC Mortgage Corporation or Industry Title, nor did it reference First Guarantee. See Tr. Trsc. 2/9/11 p. 160:59. 19. Mrs. Baker testified that after the closing she and her husband read through the
stack of loan documents over the weekend and decided that the Loan was not something they wanted to proceed with. See Tr. Trsc. 2/9/11 p. 161:524. As a result, Mrs. Baker signed and mailed the cancellation notice as instructed on the Notice of Right to Cancel form provided at the closing within three (3) business days of the closing. See Tr. Trsc. 2/9/11 p. 162:19; Dfts Exh. 1.
20.
Plaintiff admits that WMC Mortgage Corp. received the signed cancellation form
and that it is in the loan file for this transaction. See Tr. Trsc. 2/8/11 p. 190:518. The Bakers therefore indisputably cancelled the transaction within the three (3) day cooling off period. 21. The Bakers expert, Irv Ackelsberg, opined that the Loan reflected in the
transaction documents was a classic predatory loan because of its high fees, the fact that it could adjust to as high as 13.5% and the embedded yield spread premium, which demonstrated in his opinion that the same loan at more favorable terms would have been available to and could have been obtained by the Bakers. See Tr. Trsc. 2/9/11 p. 116:1418. 22. Mrs. Baker testified that about two weeks after sending the Notice of Right to
Cancel form to the lender she called First Guarantee because the July payment on the Bakers mortgage loan with USAA would be coming due and because the Bakers had received a federal express package containing checks from Industry Title. See Tr. Trsc. 2/9/11 p. 163:1324. Mrs. Baker spoke to a woman named Stacey at First Guarantee, told her about the rescission and offered to return the checks that had been sent by Industry Title. See Tr. Trsc. 2/9/11 p. 164:16 17; see also Tr. Trsc. 2/9/11 p. 176:812. 23. The Bakers received the following checks from Industry Title, all dated June 15,
2005 and drawn on the escrow account of Industry Title, which Mrs. Baker testified they did not cash, negotiate or send on to the payees listed on the checks: No. 227736 payable to American Express for $8,228.00; No. 227737 payable to Bangor Area School District for $733.08; No. 227738 payable to CBUSASEARS for $59.00; No. 227742 payable to Kohls for $95.00; No. 227743 payable to MBNA America for $23.00; and No. 227747 payable to Sarah Baker for $18,383.75. See Tr. Trsc. 2/9/11 p. 176:47; Pltfs Exh. 8c. 24. The checks to pay-off the Bakers USAA mortgage for $91,947.42, a home equity
line of credit with Equity One for $15,919.00, and for property taxes owed to Northampton 5
County for $4,327.41 and $791.97 apparently had been sent directly to these lienholders by Industry Title so Industry Title could record the new mortgage for WMC Mortgage Corp. 25. In order to try to get the cancellation effectuated and to sort out the confusing
situation regarding the cancellation generally, Mrs. Baker testified that there were between seven and fifteen phone calls made between the Bakers and First Guarantee. See Tr. Trsc. 2/9/11 p. 176:1924. 26. Mrs. Baker testified that she had a conversation with a Mr. David Skinner at First
Guarantee, and faxed him the Notice of Cancellation in the context of trying to receive an answer to the reinstatement of their mortgage with USAA. See Tr. Trsc. 2/9/11 p. 177:522. 27. First Guarantee proceeded to give the Bakers the impression that a lockbox would
be installed on their home, prohibiting the Bakers from entering their residence. See Tr. Trsc. 2/9/11 pp. 178:2425, 179:117. 28. Plaintiff presented two witnesses at trial: Timothy Mitchell, a Collections
Manager for the Collections Department from Litton Loan Servicing, and Diane Taylor, a Vice President of Operations at WMC Mortgage, LLC. 29. Mr. Mitchell testified that Litton Loan Servicing (Litton) began servicing the
Baker loan in or around September 2005, having been assigned the loan from another loan servicer. See Tr. Trsc. 2/8/11 p. 27:1214. 30. As part of servicing, Mr. Mitchell explained that Litton would send out a debt
validation notice which would ask whether the debtor disputed the debt. See Tr. Trsc. 2/8/11 p. 61:57, 2423; 62:12. It states, in relevant part, that Within thirty days of receipt of this notice, you may dispute in writing the validity of the debt or any portion thereof. See Tr. Trsc. 2/8/11 p. 62:1116.
31.
He said that Littons records revealed that such a communication was sent to the
Bakers on September 26, 2005, but that Litton did not receive any communication back from the Bakers. See Tr. Trsc. 2/8/11 p. 68:1418. 32. Mr. Mitchell also testified that Littons call center records revealed that Litton had
called the Bakers home over 50 times but that the call center codes indicated that Litton never spoke with any one at the home. See Tr. Trsc. 2/8/11 pp. 25-27. 33. Both Mr. and Mrs. Baker testified that they did not communicate with Litton
because they did not have any business with that company. See Tr. Trsc. 2/9/11 p. 23:47. 34. Mrs. Baker testified that many of the calls had a long pause after she answered so
she just hung up. See Tr. Trsc. 2/8/11 pp. 218-220. To the extent the calls left a message, it was a request to return a call to an 800 number about an important matter, and the Bakers decided not to return the call. See 2/8/11 pp. 121-122. 35. Mr. Baker testified that he kept the written communications from Litton in a file
at their home but did not respond to the communications because they had no business with Litton. See Tr. Trsc. 2/8/11 p. 252:1419; Tr. Trsc. 2/9/11 p. 23:47. 36. Ms. Taylor testified that it was the policy and practice of WMC Mortgage Corp.
not to fund a loan if the company had received a signed cancellation notice from the borrower. She said WMC Mortgage Corp. had this policy and practice because the borrower did not want the loan. Tr. Trsc. 2/8/11 pp. 132 & 152. 37. Ms. Taylor acknowledged that the Bakers loan file contained the signed
cancellation form received from Mrs. Baker. She said that while this form was in the hardcopy file, it was not in the scanned electronic file. Tr. Trsc. 2/8/11 p. 180:28.
38.
Ms. Taylor stated that WMC Mortgage Corp. had reason to believe that the
Bakers had changed their mind about cancelling the loan transaction. Tr. Trsc. 2/8/11 pp. 91:23 25; 92:1. 39. Ms. Taylor testified that it was WMC Mortgage Corp.s practice to communicate
with the loan broker concerning the borrowers intentions. See Tr. Trsc. 2/8/11 p. 152:915. 40. Ms. Taylor did not testify about or produce any document, note or other
admissible business record dated or created in or around the June 2005 time period reflecting, evidencing or indicating that the Bakers had changed their minds about cancelling the Loan. 41. Mrs. Baker testified emphatically that neither she nor her husband ever changed
their minds about cancelling the loan transaction. She said that they just wanted to go back to the USAA loan, which they had had before the June 3 closing, and that that is what she expected to happen after she sent in the signed Notice of Right to Cancel. See Tr. Trsc. 2/9/11 p. 161:12 24. 42. The conduct of the Bakers post-cancellation of the transaction was and remains
consistent with their belief that the transaction had in fact been cancelled. They offered to return the checks to the broker; they paid their own bills without using the checks; and they did not respond to Litton. See Tr. Trsc. 2/8/11 p. 226:113. 43. Mrs. Baker testified that she eventually cashed a replacement check payable to
Sarah Baker for $18,383.76 sent to her by Industry Title in 2006 on the advice of the Bakers foreclosure lawyer, Peter J. Quigley, Esquire, because Deutsche Bank had already started the Foreclosure Action. See Tr. Trsc. 2/9/11 pp. 221:19 222:18. Mrs. Baker never cashed or presented Industry Title check No. 227747 payable to Sarah Baker for $18,383.76 and dated June 15, 2005. See Pltfs Exh. 8C.
44.
Ms. Taylor testified that WMC Mortgage Corporation funded the Loan on June
15, 2005. See Tr. Trsc. 2/8/11 pp. 14:710; 190:1617. 45. Sometime after June 15, 2005, the records indicate that WMC Mortgage Corp.
sold the Loan as part of a package of loan sales to a securitization trust created by Goldman Sachs and named GSAMP Trust 2005-WMC, as to which Deutsche Bank was the securitization trustee. In filings with the Securities & Exchange Commission, Litton Loan Servicing is
identified as the servicer for the loans in the GSAMP Trust. See Tr. Trsc. 2/9/11 p. 102:1825. 46. Ms. Taylor testified that WMC Mortgage Corp. sold the Baker loan to Goldman
Sachs on July 29, 2005, and received $159,999.47 upon its sale. See Tr. Trsc. 2/8/11 p. 154:24; see also Tr. Trsc. 2/8/11 pp. 106-107. 47. Ms. Taylor further testified, based on business records, that WMC Mortgage
Corp. bought the Loan back from the GSAMP Trust on April 22, 2006, for $164,985.57. See Tr. Trsc. 2/8/11 pp. 108-109. 48. No explanation was provided as to why Deutsche Bank filed the Foreclosure
Action against the Bakers on May 1, 2006, if WMC Mortgage Corp. had, in fact, repurchased the Loan on April 22, 2006. Nor is there any record explanation for the Foreclosure Action
proceeding for over four (4) years if the GSAMP Trust no longer owned the Loan and Mortgage, as Diane Taylor testified. 49. Even more curious is the fact that Industry Title issued new checks directly to the
Bakers creditors over nine (9) months after it had sent the Bakers the checks they did not cash or deliver to the payees. See Pltfs Exh. 8D. The checks, all dated March 27, 2006, are as follows: No. 243169 payable to American Express for $8,228.06; No. 243170 payable to CBUSASEARS for $59.00; No. 243171 payable to Kohls for $95.00; No. 243172 payable to MBNA America for $23.00. Id. As noted, in 2006 Industry Title also apparently sent to Mrs. 9
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Baker a check in the amount of $18,383.76, which she did not cash until advised to do so by the Bakers foreclosure attorney. 50. Mrs. Baker testified that the gratuitous delivery of these checks directly to the
Bakers creditors long after the fact resulted in the Bakers having credit balances at the creditors. See Tr. Trsc. 2/9/11 pp. 205:5 206:3. This fact is confirmed by another check Industry Title issued long after the fact. Mrs. Baker testified that the Bakers paid from their own funds their property taxes, including the 2005 school taxes to Bangor Area School District in the amount of $733.08 and did not use the Industry Title check, No. 277737, dated June 15, 2005. The evidence indicates that Industry Title attempted to pay these same taxes again over a year later, but that its check was returned by the School District. As a result, over a year after the Foreclosure Action was commenced against the Bakers and nearly two years from the rescinded loan transaction, Industry Title sent to Mrs. Baker a check, No. 278472, payable to her in the amount of $733.08 dated May 17, 2007, bearing the notation 2005 school taxes pd. Pltfs Exh. 8D. Mrs. Baker cashed this check. 51. Hence, Industry Title, as the agent for WMC Mortgage Corp. voluntarily paid
sums to or for the Bakers when the principal, WMC Mortgage Corp., knew that the transaction had been cancelled. 52. Ms. Taylor testified, based on business records, that WMC Mortgage Corp. sold
the Loan to GMAC Rescap on June 2, 2006 for $156,705. See Tr. Trsc. 2/8/11 p. 162:1416; see also 166:116; Pltf. Exhs. 16A-I. Again, no explanation was provided as to why the Foreclosure Action against the Bakers continued to be prosecuted in the name of the GSAMP Trust if, as Ms. Taylor testified, that entity did not own the cancelled Loan.
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53.
According to Ms. Taylor, WMC Mortgage Corp. then repurchased the loan from
GMAC Rescap on October 5, 2007, purportedly for 182,193.45. See Tr. Trsc. 2/8/11 pp. 111112; see also Tr. Trsc. 2/8/11 pp. 164-169. 54. Plaintiff did not introduce any evidence that any notice had been provided to the
Bakers reflecting or showing that the Loan had been sold to other parties, repurchased, resold and then purportedly repurchased again. Plaintiff did not produce any evidence reflecting the various assignments on the Loan Note or on the Mortgage records. There is no evidence that Plaintiff WMC Mortgage LLC has been assigned the Loan, or has purchased the Loan, from any party. The records only indicate that WMC Mortgage Corp. sold and repurchased the Loan. 55. Ms. Taylor testified that WMC Mortgage LLC came to own the Loan as a result
of a corporate restructuring in which WMC Mortgage Corp. was combined into its parent company, WMC Financial, and then WMC Mortgage LLC was created to conduct the business of WMC Mortgage Corp. See Tr. Trsc. 2/8/11 pp. 117:2-18; 122:11 - 123:10 (Taylor). There is no evidence reflecting any assignment of the Loan from WMC Mortgage Corp. to WMC Mortgage LLC. 56. Defendants offered for judicial notice pursuant to Fed R. Evid. 201, without
objection, records from the Delaware Department of State, Division of Corporations, showing that WMC Mortgage Corp. was and is a California corporation incorporated on July 26, 1988; that WMC Mortgage, LLC was and is a Delaware Limited Liability Company established on February 5, 1997; and that WMC Financial Corporation was and is a Delaware corporation incorporated on May 2, 2007. See Defts Exh. 13A-C. The Court takes judicial notice of these public records and observes that WMC Mortgage LLC pre-existed the creation of WMC Financial Corp., so that Ms. Taylors explanation of events appears to be mistaken.
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57.
Mrs. Baker testified that they incurred thousands of dollars in expenses to defend
against the Foreclosure Action; that their credit has been ruined as a result, and that they have had difficulty finding new jobs as a result of the adverse credit reports. See Tr. Trsc. 2/8/11 pp. 229:4-8; 179:18 180:2; see also p. 236:20-24. Mrs. Baker explained that they expected to be returned to the USAA loan once they had cancelled the transaction, and that their efforts and attempts to accomplish this were disregarded. See Tr. Trsc. 2/8/11 p. 226:14-21; see also p. 230:12-22. Mrs. Baker testified that they were put through hell by the foreclosure and the whole process. CONCLUSIONS OF LAW Burden of Proof 58. Although this was a bench trial, it is nonetheless useful to start with the burden of
proof. Plaintiff WMC has and had the burden of proving its case by . . . the preponderance of the evidence. Third Circuit Model Jury Instruction 1.10. In other words, WMC has to prove what it claims is more likely so than not so. Id. This same burden applies to Defendants with respect to their counterclaims. See id. Rescission 59. A central issue in this case is whether the Bakers cancelled/rescinded the Loan
within the three (3) day cooling off period. This issue is controlled by the Truth in Lending Act, 15 U.S.C. 1635, as well as by the terms of the Notice of Right to Cancel provided by WMCs agent at the loan closing. 60. Section 1635 provides, in relevant part, as follows:
(a) Disclosure of obligors right to rescind Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation 12
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of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section. (b) Return of money or property following rescission When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court. 61. This right of rescission was enacted to give the consumer the opportunity to
reconsider any transaction which would have the serious consequence of encumbering the title to his home. S. Rep. No. 368, 96th Cong., 2d Sess. 29, reprinted in 1980 U.S.C.C.A.N. 236, 265. Congress added the language authorizing courts to modify the procedures in 1980, making it clear that any modified procedures may apply only after the creditor has performed his obligations as required under the Act. Id. In other words, a court cannot nullify, abridge or disregard a consumers right to rescind, but once a creditor has reversed the transaction and 13
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terminated the security interest, a court has discretion to change the procedures for the return of money or property to the creditor where, for example, the consumer is in bankruptcy or wage earner proceedings and may be prohibited from returning any money or property. See id. Where a consumer has exercised the three (3) day right to rescind, the plain words of Section 1635 make it the creditors obligation to take the first steps to reverse the transaction and terminate the security interest. In this way, the statute is self-enforcing because a creditors failure to comply means that ownership of the property vests in the obligor without obligation on his part to pay for it. 15 U.S.C. 1635(b). 62. Here, Plaintiff WMC conceded that it received a signed three (3) day Notice of
Cancellation from Mrs. Baker. It argued at trial, however, that it had reason to believe that the Bakers had changed their minds about cancelling the Loan. Apart from this vague statement, Plaintiff did not produce any admissible evidence tending to provide any basis for such a belief. It did not produce any written evidence from the Bakers. It did not produce any recordings. It did not produce any admissible facsimile, email, notation or other record tending to show that WMC Mortgage Corp. in fact had such a belief in June 2005. 63. By contrast, Mrs. Baker testified emphatically that they never changed their
minds about cancelling the transaction and that she just wanted to go back to the USAA loan. In addition, the fact that the Bakers did not cash any of the checks delivered by Industry Title, offered to return the checks to First Guarantee, did not interact with Litton, called and sent facsimiles to First Guarantee, and endured and defended the Foreclosure Action brought by Litton and the GSAMP Trust, all show a course of conduct and performance tending to prove that the Bakers cancelled the transaction and did not change their minds. 64. To the extent Plaintiff WMC relies on testimony or evidence from Mr. Mitchell of
Litton to imply a different course of conduct and performance by the Bakers, the Court must 14
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reject all such inferences. Under the Fair Debt Collection Practices Act, 15 U.S.C. 1692g(c), The failure of a consumer to dispute the validity of a debt under this section [relating to validation notices] may not be construed by any court as an admission of liability by the consumer. Id.; see McCabe v. Crawford & Co., 272 F. Supp. 2d 736, 744-45 (N.D. Ill. 2003) (same). As a matter of law, the Bakers failure to respond to the communications from Litton, which came months after the loan closing, does not indicate anything about the Bakers rescission of the transaction or the validity of the alleged debt. 65. Hence, the Court finds and concludes that Plaintiff has not satisfied its burden of
proof that the Loan is valid and has not been rescinded. Parol Evidence 66. This conclusion is further supported by the Parol Evidence Rule and 12 C.F.R.
226.23(e). Despite its name, the parol evidence rule is not a discretionary rule of evidence, but rather an element of substantive contract law. Advanced Medical, Inc. v. Arden Medical
Systems, Inc., 955 F.2d 188, 195 (3d Cir. 1992). The rule is designed to facilitate commerce by enabling contracting parties to rely on the written word to define their rights and obligations. Id. 67. Under Pennsylvania substantive law, parol evidence is inadmissible to contradict
the terms of a written contract. 1726 Cherry Street v. Bell Atlantic Properties, Inc., 439 Pa, Super. 141, 145, 643 A.2d 663, 665 (1995); see also Sunbeam Corp v. Liberty Mutual Ins. Co., 566 Pa. 494, 781 A.2d 1189 (2001); Restatement (Second) of Contracts 202 (1981); Crompton v. Smith, 253 F. Supp. 980 (E.D. Pa. 1977). 68. Similarly, 12 C.F.R. 226.23(e) requires that any waiver or modification of a
consumers right to rescind must be in a written statement that bears the signature of all the consumers entitled to rescind. Id. 15
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69.
This provision and the parol evidence rule compel the Court to reject the oral
testimony by Ms. Taylor that there was reason to believe the Bakers had changed their minds about rescinding the transaction. Because the signed Notice of Cancellation was itself a contract and was an integral part of the loan transaction, it rescinded the transaction when it was signed and mailed within the three (3) day cooling off period. Any waiver, modification or contradiction of that document had to be in writing under the parol evidence rule and 226.23(e). WMCs reliance on vague oral testimony is insufficient to overcome the signed and delivered Notice of Cancellation as a matter of law. See Roman Mosaic & Tile v. Thomas P. Carney, Inc., 729 A.2d 73, 77 (Pa. Super. 1999) (The interpretation and construction of a contract is a matter of law to be decided by the court.). 70. That WMC Mortgage Corp. funded the Loan by sending funds to the title agent,
Industry Title, does not change the analysis. In the absence of written documentation waiving or nullifying Mrs. Bakers signed cancellation, WMC was required to delay all performance and to cancel the transaction. See 12 C.F.R. 226.23(c) (Unless a consumer waives the right of rescission under paragraph (e) of this section, no money shall be disbursed other than in escrow . . .); Official Staff Commentary to Regulation Z, 12 C.F.R. 226.23(c) (The creditor must wait until it is reasonably satisfied that the consumer has not rescinded. For example, the creditor may satisfy itself by doing one of the following: * Waiting a reasonable time after expiration of the rescission period to allow for delivery of mailed notice; * Obtaining a written statement from the consumer that the right has not been exercised.). 71. WMCs funding of the Loan while in possession of the signed cancellation and
the disbursing of the Loan amounts by its escrow agent, Industry Title, violated 12 C.F.R. 226.23(c). As a result, these amounts constitute voluntary payments by WMC that cannot be recovered under Pennsylvania law. See In re Kennedys Estate, 321 Pa. 225, 183 A. 798, 802 16
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(1936) (one who has voluntarily paid money with full knowledge, or means of knowledge of all the facts, without any fraud having been practiced upon him . . . cannot recover it back by reason of the payment having been made under a mistake or error as to the applicable rules of law.). 72. Therefore, because the Loan was timely rescinded, there is no valid Note on
which Plaintiff may base its claims. Both the Note and the Mortgage are void as a matter of law. Automatic Rescission Versus Conditional Rescission 73. The parties have disagreed throughout this case as to the sequence of obligations
and its impact on Mrs. Bakers right to rescind and the effects of that rescission. Plaintiff WMC has argued that Mrs. Bakers rescission was not effective until the Bakers returned the proceeds of the Loan. In support of this position, WMC has relied on the following cases: Palmer v. Ameribanq Mortg. Group, LLC, No. 05-2023, 2010 WL 3933273 (E.D. Pa. Oct. 6, 2010); Jobe v. Argent Mortgage Co., No. 06-0697, 2009 WL 2461168 (M.D. Pa. Aug. 11, 2009), affd 373 Fed. Appx. 260, 2010 WL 1255683 (3d Cir. 2010); Gianduso v. U.S. Bank Natl Assn, No. 091971, 2010 WL 4536986 (M.D. Pa. Nov. 2, 2010); and Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 820 (4th Cir. 2007).2 74. In response, the Bakers have argued that all of these cases are distinguishable
because they involved the conditional, extended right of rescission within three (3) years, not the
Plaintiff has also cited an unpublished New Jersey state foreclosure case, Avelo Mortgage v. Jeffery, 2010 WL 2795050 (N.J. Super. A.D. July 15, 2010). In that case, the appellate court reversed a dismissal of a mortgage foreclosure action due to a timely three (3) day rescission, holding that the trial court should have considered reformation of the mortgage to a 30 year 6% fixed-rate mortgage instead of the mortgage the borrowers received, with the goal of restoring the parties to the status quo ante. See id. at *5; see also Mayfield v. Vanguard S&L Assn, 710 F. Supp. 143, 149 (E.D. Pa. 1989) (in view of the Congressional purpose of restoring the parties to the status quo ante, I will order plaintiff to repay such amount to defendant at $171.00 per month, which was the amount of her monthly mortgage payments prior to the two loan transactions.). Had Plaintiff proceeded in a more timely fashion or intervened in the Foreclosure Action in Northampton County, these options may have been appropriate. However, they are not appropriate now. 17
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automatic, statutory and contractual right to three (3) day cancellation exercised here. See Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992). The sequence of rescission and tender set forth in 1635(b) is a reordering of common law rules governing rescission. . . . Thus, rescission under 1635 place[s] the consumer in a much stronger bargaining position than he enjoys under the traditional rules of rescission. . . . Furthermore, because rescission is such a painless remedy under the statute (placing the burdens on the creditor), it acts as an important enforcement tool, insuring creditor compliance with TILAs disclosure requirements. Id. (citations omitted). This difference is significant, they say,
because 1635(a) provides an obligor with a substantive right to rescind up until midnight of the third business day following [the closing]. See Eveland v. Star Bank, N.A., 976 F. Supp. 721 (S.D. Ohio 1997) (creditor bears risk); Aquino v. Public Fin. Consumer Discount Co., 606 F. Supp. 504 (E.D. Pa. 1985) (same). 75. At least two authorities and TILAs plain language indicate the Bakers have the
better position in this case. First, in Porter v. Mid-Penn Consumer Discount Co., 961 F.2d 1066, 1073 (3d Cir. 1992), the Third Circuit noted the significant differences between the automatic, statutory right to rescind and the conditional right of rescission: Under the statute and
regulations, if the lenders [cancellation] notice is proper, the borrowers right to rescind lasts for three days, but the rescission period extends to three years if the required notice and material disclosures (the annual percentage rate, finance charge, amount financed, total of payments, and payment schedule) are not delivered. Id. (citations omitted). The court explained that because the borrowers rescission in Porter came after three days, it would be timely only if [the lenders] notice was deficient. Id. Thus, for extended rescission requests, there is a preceding issue that must be decided before a consumer has an actual right of rescission did the lender deliver the required notice and material disclosures? See id. In other words, an extended right of 18
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rescission is conditional and will not arise unless and until a borrower first proves that the lenders notice violated TILA. Because this issue gives rise to contested proceedings between the borrower and the lender, a court ordinarily must first determine whether a borrower has a right to rescind, whether other TILA damages apply and how that right may be exercised after those determinations. 76. Second, the Official Staff Commentary of the Board of Governors of the Federal
Reserve System concerning 12 C.F.R. 226.23, Regulation Z, suggests a similar result. See 69 Fed. Reg. 16769-03, 2004 WL 624657 (FR) (2004). That commentary states as follows: Modifications. The procedures outlined in 226.23(d) and (3) may be modified by a court. For example, when a consumer is in bankruptcy proceedings and prohibited from returning anything to the creditor, or when the equities dictate, a modification might be made. The sequence of procedures under 226.23(d)(2) and (3), or a courts modification of those procedures under 226.23(d)(4), does not affect a consumers substantive right to rescind and to have the loan amount adjusted accordingly. Where the consumers right to rescind is contested by the creditor, a court would normally determine whether the consumer has a right to rescind and determine the amounts owed before establishing the procedures for the parties to tender any money or property. Id. at *16774. 77. As in the Porter decision, this commentary indicates that a modification of
procedures should apply only where a borrowers substantive right to rescind is contested by the creditor. See id. The commentary also makes clear that any modification of the procedures or the sequence of events does not affect a consumers right to rescind and to have the loan amount adjusted accordingly. Id. 78. Next, the express language of 1635(b) sets forth both a borrowers substantive
rights following his rescission as well as a sequence of procedures that the lender and the borrower must follow after the rescission. The statute makes clear that a timely rescission voids the transaction and the security interest, which is part and parcel of a borrowers substantive rescission right. The sections final sentence states: 19 The procedures prescribed by this
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subsection shall apply except when otherwise ordered by a court. 15 U.S.C. 1625(b). Thus, where a borrowers right to rescind and the timeliness of his cancellation notice are not contested by the lender, a court cannot modify any procedure that would un-void the transaction or restore the security interest. It is only where the right to rescind or its timeliness is contested that a court may modify the procedures. See 69 Fed. Reg. 16774 (Official Staff Commentary to 12 C.F.R. 226.239d)(4)); see also S. Rep. No. 368, 96th Cong., 2d Sess. 29, reprinted in 1980 U.S.C.C.A.N. 236, 265 (any modified procedures may apply only after the creditor has performed his obligations as required under the Act.). 79. Here, there was and is no legitimate contest as to Mrs. Bakers substantive right to In the absence of any written
rescind or the timeliness of her Notice of Cancellation.
documentation establishing that Mrs. Baker waived her previously signed and delivered Notice of Cancellation, the rights and procedures set forth in 1635(b) applied. To the extent WMC or its assignees wanted a court to modify those procedures, they were required to commence suit seeking such modifications within the applicable statute of limitations, discussed below. Otherwise, WMC was required to follow the sequence of obligations and procedures set forth in 1635(b), which it did not do. 80. It is also noteworthy that had WMC Mortgage Corp. and its escrow agent,
Industry Title, complied with the delayed performance rule of Regulation Z and the Official Staff Commentary, 12 C.F.R. 226.23(c), no funds would have been disbursed to the Bakers or their creditors, so all parties would have been returned to the status quo easily and without any argument concerning the tender of loan proceeds. That the creditor here and its third party violated this rule cannot change, modify or alter the Bakers substantive rescission rights. A contrary holding would destroy the three (3) day cooling off period, as creditors would have every incentive to ignore a cancellation notice and then insist that the rescinding borrower repay 20
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a massive lump sum to unwind the transaction. Congress clearly did not intend such an absurd result. Plaintiffs Specific Claims And The Statute of Limitations 81. Anticipating the foregoing analysis, in Count I of its Complaint WMC seeks a
declaration that if the Bakers rescinded the Loan within three (3) business days as provided by the Notice of Right to Cancel and the Truth in Lending Act (TILA), 15 U.S.C. 1635(b), the Bakers are obligated to repay to Plaintiff the principal of the Loan minus any fees, costs and interest charges. See D.E. 1 (Complaint, 23 27). 82. In Algrant v. Evergreen Valley Nurseries Ltd. Partnership, 126 F.3d 178 (3d Cir.
1997), the Court of Appeals held that a claim for declaratory relief based on a common law legal claim is subject to the same statute of limitations as the common law legal claim. See id. at 184185. The Court explained that, when plaintiffs claims are barred by a statute of limitations applicable to a concurrent legal remedy, then a court will withhold declaratory judgment relief in an independent suit essentially predicated upon the same cause of action. Id. 83. This Court has followed Algrant in applying Pennsylvania substantive law in
subsequent cases, including a case seeking equitable relief. See Appel v. Kaufman, --- F. Supp. 2d ---, 2010 WL 2991756 *14 (E.D. Pa. July 29, 2010) (finding plaintiffs legal and equitable claims to be time-barred under Pennsylvania law). 84. In the present case, Count I of WMCs Complaint seeks a declaratory judgment See D.E. 1
predicated on a common law contract, implied contract or assumpsit claim.
(Complaint, 2327). The statute of limitations applicable to such a claim at law is four (4) years. 42 Pa. C.S. 5525.
21
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85.
A breach of contract claim, like that alleged in Count II of WMCs Complaint,
accrues when the breach occurs. D.E. 1 (Complaint, 28). See Keen v. Lockheed Martin Corp., 486 F. Supp. 2d 481, 494-495 (E.D. Pa. 2007). 86. A claim for unjust enrichment, like that alleged in Count III of WMCs
Complaint, accrues, for limitations purposes, when the defendant receives and retains the alleged benefits. D.E. 1 (Complaint, 29). See Harry Miller Corp. v. Mancuso Chemicals Ltd., 469 F. Supp. 2d 303, 319 (E.D. Pa. 2007). 87. According to WMCs own Complaint, all of its claims here accrued in August
2005, which is when the Bakers failed to make the first payment on the Loan. D.E. 1 at 16. Because WMC did not file the present action until June 2010 nearly five (5) years after its alleged claims accrued and because the Complaint provides definitive proof of the August 2005 accrual date, all of WMCs claims are time-barred under 42 Pa. C.S. 5525. 88. WMC argued at trial, however, that its claims are governed by the twenty-year
statute of limitations for an instrument under seal. See 42 Pa. C.S. 5529(b)(1); see also Marcucci v. H&L Developers, Inc., No. 08-5560, 2009 WL 5177767 *6 (E.D. Pa. Dec. 31, 2009). 89. The Note, but not any of the other documents signed by Sarah Baker, contains the
following immediately above her signature: WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED. Pltfs Exh. 1, Exhibit A (Adjustable Rate Note). 90. If the Loan had not been cancelled/rescinded by Mrs. Baker, WMC may have had
a plausible argument that its claims fall under the twenty-year statute of limitations in 5529(b)(1). But the transaction was rescinded, so WMCs claims do not arise under the Note, which is void, but instead under principles of promissory estoppel, implied contract or unjust enrichment. 22
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91.
As a matter of law and WMCs own representations, the so-called instrument
reflected in the Adjustable Rate Note is void. See, e.g., 15 U.S.C. 1635(b); 12 C.F.R. 226.23(a)(2) & (d)(1) (Regulation Z) (When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge); FRB Official Staff Commentary to Regulation Z 226.23(d), 66 Fed. Reg. 17,340 (Mar. 30, 2001) (The security interest is automatically negated regardless of its status and whether or not it has been recorded or perfected). Indeed, WMCs own form of the Notice of Right to Cancel, Defts Exh. 1, itself promises: If you cancel the transaction, the mortgage/lien/security interest is also cancelled. See also D.E. 29 at 15 of 34 (emphasis added). Because there is no existing instrument on which WMC may predicate its breach of contract claim within the meaning of 42 Pa. C.S. 5529(b)(1), that statute of limitations is irrelevant. 92. Because the Note is void, WMCs claims necessarily arise under principles of
promissory estoppel, implied contract or unjust enrichment. Under Pennsylvania law, traditional equity and common law contract claims are subject to the four (4) year statute of limitations set forth in 42 Pa. C.S. 5525. See Sevast v. Kakouras, 591 Pa. 44, 53-55, 915 A.2d 1147, 11531154 (2007) (unjust enrichment claim is controlled by 5525, so because any right to restitution arose when the contract between the parties ceased, the action is barred as untimely); Crouse v. Cyclops Industries, 560 Pa. 394, 745 A.2d 606 (2000) (Thus, as promissory estoppel makes otherwise unenforceable agreements binding, the doctrine sounds in contract law and we hold that, like other contract actions, the statute of limitations for a cause of action in promissory estoppel is governed by 5525). 93. In other words, Pennsylvania law required WMC to bring its claims for a
declaratory judgment of restitution, for breach of implied contract and for unjust enrichment 23
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within four (4) years of August 2005, and most certainly within four (4) years of May 1, 2006, which is when the Foreclosure Action was filed against the Bakers. Inasmuch as WMC did not file this suit until June 28, 2010, all of its claims are time-barred under 5525. 94. WMC contended at one point that the Foreclosure Action, which was voluntarily
discontinued by Deutsche Bank in May 2010, tolled the running of the statute of limitations on its claims. Pennsylvania and federal law make clear, however, that a voluntary discontinuance does not toll the running of the statute of limitations. See, e.g., Williams Studio Div. of
Photography by Tallas, Inc. v. Nationwide Mutual Fire Ins. Co., 550 A.2d 1333, 1335-1338 (Pa. Super. 1988) (the statute of limitations is not tolled by the filing of a complaint subsequently dismissed without prejudice); Willard v. Wood, 164 U.S. 502, 523 (1896) (the general rule in respect of statute of limitations [is that] . . . where, from any cause, a plaintiff becomes a nonsuit, or the action abates or is dismissed, and during the pendency of the action, the limitation runs, the remedy is barred); American Continental Properties, Inc. v. Lynn, 2003 WL 21524879 *10 (Pa. Com. Pl. (Phila.) Apr. 16, 2003) (same). As the Pennsylvania Superior Court explained in Williams Studio, Pennsylvania Rule 231(a) does not and cannot expand the limitations period set forth by the legislature. See 550 A.2d at 1338. 95. WMC also contended at trial that its claims were subject to the installment debt
doctrine, so that the statute of limitations did not start to run. But WMC is mistaken for two reasons. First, that doctrine assumes a valid, non-rescinded contract, which is not the case here. Second, it only extends the accrual date for any claims by WMC to May 1, 2006 under the facts here and controlling law. 96. The key undisputed facts are: (1) that the loan transaction was rescinded by an
unequivocal and absolute expression of cancellation on June 7, 2005 (D.E. 29 at Exh. A); and (2) that WMCs assignee, Deutsche Bank, elected to treat that rescission/repudiation/breach as a 24
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present and total breach on May 1, 2006, when it filed the foreclosure complaint in Northampton County. D.E. 1 at 18; see also Donovan Decl. Exh. A (Foreclosure Complaint). Under all law, the filing of the foreclosure case accelerated the accrual date, meaning that WMCs claims are still time-barred. 97. Controlling precedent of the Supreme Court of the United States compels and
confirms this analysis. See Franconia Associates v. United States, 536 U.S. 129, 122 S. Ct. 1993 (2002). In Franconia Associates, the Court considered when breach of contract claims accrued for limitation purposes after Congress passed a law eliminating the contractual right to prepay certain mortgage loans extended by the Farmers Home Administration (FmHA). The
borrowers argued their claims accrued when the FmHA rejected their attempted mortgage prepayments. The Government argued, and the lower courts held, that the claims accrued when Congress passed the statute nullifying the contractual prepayment rights. The Supreme Court reversed, relying upon established contract-law principles of repudiation, installment performance and accrual. 98. The Court first observed that the promisors renunciation of a contractual duty
before the time for performance is a repudiation. 536 U.S. at 143, 122 S. Ct. at 2002 (quoting 4 A. Corbin, Contracts 959, p. 855 (1951)); see also Restatement (Second) of Contracts 250. Such a repudiation ripens into a breach prior to the time for performance only if the promisee elects to treat it as such. Id., 122 S. Ct. at 2002, citing Roehm v. Horst, 178 U.S. 1, 13 (1900) (parenthetical omitted). Summarizing these principles, the Court said: To recapitulate, [t]he time of accrual . . . depends on whether the injured party chooses to treat the . . . repudiation as a present breach. 1 C. Corman, Limitation of Actions 7.2.1, p. 488 (1991). If that party [e]lects to place the repudiator in breach before the performance date, the accrual date of the cause of action is accelerated from [the] time of performance to the date of such election. Id. at 488-489. But if the injured party instead opts to await performance, the cause of 25
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action accrues, and the statute of limitations commences to run, from the time fixed for performance rather than from the earlier date of repudiation. Id. at 488. 436 U.S. at 144, 122 S. Ct. at 2002. Based on these principles, the Court held that Unless [the borrowers] treated [the statute] as a present breach by filing suit, the breach and their causes of action would not accrue until the FmHA rejected their attempted prepayments. See id. at 143, 122 S. Ct. at 2002. 99. Given these principles, it is clear the Third Circuits dicta in Bd. of Trustees of
Dist. No. 15 Machinists Pension Fund v. Kahle Engg. Corp., 43 F.3d 852, 858 (3d Cir. 1994), relied on by WMC, is inapplicable. Here, in contrast with the ordinary installment-debt rule, Deutsche Bank, the assigned promisee, elected to place [the Bakers] in breach by filing suit on May 1, 2006, which means the accrual date of the cause of action is accelerated from the time of performance to the date of such election. See Franconia Associates, 436 U.S. at 144, 122 S. Ct. at 2002. Because that foreclosure proceeding accelerated all of WMCs claims, if any, and because the voluntary discontinuance of that action did not toll the statute of limitations, all claims filed by WMC after May 1, 2010 four (4) years after Deutsche Banks election are time barred. 3 100. While WMC may view this time-bar as harsh, there are many compelling public
policy reasons to support the entry of judgment against Plaintiff in this case. First, as the court in
3
Decisions in both the Court of Appeals for the Second Circuit and the Third Circuit hold that a non-repudiating party, like WMC, cannot have its cake and eat it too under the accrual rules. See, e.g., Lucente v. IBM Corp., 310 F.3d 243, 258-259 (2d Cir. 2002) (holding installment contract action time-barred because [o]nce a party has elected a remedy for a particular breach, his choice is binding with respect to that breach and cannot be changed.); R.C. Beeson, Inc. v Coca Cola Co., 337 Fed. Appx. 241, 244, 2009 WL 3008424 at *2 (3d Cir. 2009) (holding installment contract action time-barred because a combination of an act deliberately repudiating the agreement and an act indicating to a non-breaching party that any future performance either will not occur or will not be in compliance with the contract terms commences the running of the statute of limitations.). Here, WMCs assignee, Deutsche Bank, elected to treat the rescission as a total breach on May 1, 2006, so WMC was required to file any claim it might have no later than May 1, 2010, which it did not do. 26
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Williams Studio emphasized by quoting the Pennsylvania Supreme Courts decision in Schmucker v. Nagle, 231 A.2d 121, 123 (Pa. 1967): Statutes of limitation are vital to the welfare of society and are favored in the law. They are founded in all systems of enlightened jurisprudence. They promote repose by giving security and stability to human affairs. An important public policy lies at their foundation. They stimulate to activity and punish negligence. While time is constantly destroying the evidence of rights, they supply the place by a presumption which renders proof unnecessary. Mere delay, extended to the limit prescribed, is itself a conclusive bar. The bane and the antidote go together. Williams Studio, 550 A.2d at 1338 (quoting Schmucker, 231 A.2d at 123, quoting United States v. Oregon Lumber Co., 260 U.S. 290, 299-300 (1922)). 101. Second, the three (3) day rescission period set forth in Section 1635(b) is
unconditional and automatic. See Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992). The sequence of rescission and tender set forth in 1635(b) is a reordering of common law rules governing rescission. . . . Thus, rescission under 1635 place[s] the consumer in a much stronger bargaining position than he enjoys under the traditional rules of rescission. . . . Furthermore, because rescission is such a painless remedy under the statute (placing the burdens on the creditor), it acts as an important enforcement tool, insuring creditor compliance with TILAs disclosure requirements. Id. (citations omitted). 102. As this Court has recognized in an analogous context, When a contract is voided
for illegality under Pennsylvania law, a court generally leaves the parties in the position that it found them. Siner v. American General Finance, Inc., No. 03-06247, 2004 WL 2441185 (E.D. Pa. Oct. 28, 2004). 103. Unlike extended rescission, both Section 1635 and WMCs own representations
in the Notice of Right to Cancel, mandated that, within 20 days, the creditor shall cancel the security interest. 15 U.S.C 1635(b); Donovan Decl. Exh. A. If the creditor fails to perform its 27
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obligations within 20 days, the statute states and WMC promised, in relevant part, that ownership vests in the obligor without obligation on his part to pay for it. See id. In this respect, the TILA and WMCs own Notice are self-enforcing, so that creditors are scrupulous about honoring the three (3) day rescission right, and the parties may be returned expeditiously to their respective positions immediately before the rescinded transaction. More importantly, the provision protects the secondary market from the improper sale, as here, of an illegitimate and rescinded transaction. 104. While Plaintiff may perceive this statutory result to be harsh, in truth it protects
all market participants by shifting the risk of a reversed transaction to the initial creditor, so that creditor will make sure it has the appropriate procedures and back-office mechanisms to reverse the transaction and exercise critical due diligence to ensure the proper functioning and basic integrity of the primary and secondary mortgage markets. This forfeiture is the financial filter or incentive designed by Congress to prevent pollution of the mortgage market by careless originators. 105. Unlike extended rescission, the three (3) day rescission here was not equitable or
conditional. It was statutory and mandatory. The order of obligations set forth in 1635(b) is the essence of the protection provided by TILAs three (3) day rescission right, and a critical component for the protection of borrowers and secondary mortgage purchasers alike. In short, a creditor who fails to cancel the security interest after receiving a three (3) day rescission notice, and instead sells the rescinded loan into the secondary market, by statute forfeits its right to collect any amount on the rescinded transaction. See Siner, 2004 WL 2441185. 106. Third, and most importantly, the Bakers have been severely prejudiced by
WMCs inexcusable delay in commencing this suit and otherwise complying with its statutory and promissory duties to rescind. For example, it appears that the originator of this loan, WMC 28
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Mortgage Corp., is a discontinued operation, and that all of the employee witnesses who could otherwise explain what happened are no longer available. See Tr. Trsc. 2/8/11 p. 178:911. 107. Likewise, it appears that the mortgage broker, First Guarantee, no longer exists,
so the witnesses from that entity are also unavailable. 108. More significantly, important evidence relevant to the action has been doctored, P.E. 1
conflated or spoilated, which is reflected in Exhibit B to Plaintiffs Complaint. (Complaint, Exh. B, page 8). 109.
Therefore, it appears WMCs own inexcusable neglect has resulted in the very
evidence decay the statutes of limitation are designed to avoid. 110. Accordingly, judgment will be entered against Plaintiff and in favor of
Defendants on all of Plaintiffs claims. Defendants Counterclaims 111. With respect to Defendants counterclaims, WMC argues that the first
counterclaim lacks merit, because (1) plaintiff is not a debt collector or (2) is otherwise exempt from the FDCPA under the originator/servicer exemption of 15 U.S.C. 1692a(6)(F)(ii). WMC is mistaken on both grounds. 112. Plaintiff concedes in the first line of its Complaint that it is the successor in
interest to WMC Mortgage Corp., (D.E. 1, p.1, emphasis added). WMC Mortgage Corp. is the lender identified in the exhibits attached to Plaintiffs Complaint. D.E. 1, exhibits A-C. Despite the similarity in names, Plaintiff, WMC Mortgage LLC, is a different entity and person from WMC Mortgage Corp. In fact, the previously submitted filing with the Securities & Exchange Commission (SEC) by the GSAMP Trust 2005-WMC 1 (referenced in 3 of the Complaint), states as follows:
29
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Pursuant to a Form 8-K filed on July 13, 2007, General Electric Company, the parent of WMC Mortgage Corp., announced that it has decided to exit its WMC Mortgage business. Pursuant to a Form 8-K filed on October 12, 2007, General Electric Company reported WMC Mortgage Corp. as a discontinued operation. D.E. 26 (Declaration of Michael D. Donovan, Exhibit A, page 6 of 8). 113. Although Defendants do not dispute that Plaintiff is the successor in interest to
WMC Mortgage Corp., the facts and public filings establish that Plaintiff is not and was not the person who originated the mortgage loan at issue. WMC Mortgage Corp. originated the mortgage loan. WMC [LLC] acquired that Loan after it was in default and is a statutory debt collector as explained below. 114. Whether WMC [LLC] collects debts itself or indirectly through mortgage loan
servicers makes no difference, because the key point is that it purchased the loan here after default, which makes it a debt collector as a matter of law. Because Plaintiff does not originate mortgage loans (even assuming it ever did so), the principal purpose of its business now is to repurchase and collect on defaulted loans sold to mortgage securitization trusts and others by its predecessor, WMC Mortgage Corp., or to regularly collect[] or attempt[] to collect, directly or indirectly, debts owed or due or asserted to be owed or due another, e.g. mortgage securitization trusts such as GSAMP 2005-WMC 1 or its predecessor. Indeed, WMCs Assistant Vice President, Diane Taylor, has admitted the indirect debt collection activities through loan servicers, Litton, for loans acquired after default by WMC. See D.E. 32 at 4 of 14 (Taylor Aff. 10). 115. For purposes of applying the FDCPA to a particular alleged debt, two categories
of payees generally are mutually exclusive debt collectors and creditors. However, for debts that did not originate with the one attempting collection, but are acquired from another, the collection activity related to that debt could logically fall into either category. If the one who 30
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acquired the debt continues to service it, it is acting much like the original creditor that created the debt. On the other hand, if the debt-buyer simply acquires the debt for collection, it is acting more like a debt collector. To distinguish between these two possibilities, the FDCPA uses the status of the debt at the time of the assignment: 1692a(6) The term debt collector means any person who ... regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.... The term does not include (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity ... (iii) concerns a debt which was not in default at the time it was obtained by such person. 15 U.S.C. 1692a (emphasis added). 116. In other words, the Act treats assignees and successors in interest as debt
collectors if the debt sought to be collected was in default when acquired by the assignee or successor, and as creditors if it was not. See Bailey v. Security Nat'l Servicing Corp., 154 F.3d 384, 387 (7th Cir. 1998); Whitaker v. Ameritech Corp., 129 F.3d 952, 958 (7th Cir. 1997); see also Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 403-04 (3d Cir. 2000); Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 106-07 (6th Cir. 1996); Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985). 117. In Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003), the
court explained the principle: Focusing on the status of the obligation asserted by the assignee is reasonable in light of the conduct regulated by the statute. For those who acquire debts originated by others, the distinction drawn by the statute-whether the loan was in default at the time of the assignment-makes sense as an indication of whether the activity directed at the consumer will be servicing or collection. If the loan is current when it is acquired, the relationship between the assignee and the debtor is, for purposes of regulating communications and collection practices, effectively the same as that between the originator and the debtor. If the loan is in default, no ongoing relationship is likely and the only activity will be collection. But if the parties to the assignment are mistaken about the true status, that status will not determine the nature of the activities directed at the consumer. It makes little 31
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sense, in terms of the conduct sought to be regulated, to exempt an assignee from the application of the FDCPA based on a status it is unaware of and that is contrary to its assertions to the debtor. The assignee would have little incentive to acquire accurate information about the status of the loan because, in the context of the mistake in this case, its ignorance leaves it free from the statute's requirements.
Id. at 538. 118. Here, there is no dispute that Plaintiff acquired the Loan after it was in default.
Although Plaintiff may be a successor in interest to WMC Mortgage Corp., Plaintiff is not and was not the originator of this Loan, as Plaintiff is not mentioned on any of the loan documents. Indeed, all assignees, including debt buyers and many debt collectors, are successors in interest, which is why the FDCPA focuses on the status of the alleged debt at the time it is acquired. See Federal Trade Commission v. Check Investors, Inc., 502 F.3d 159, 168-169 (3d Cir. 2007) (the focus must be on whether a debt was in default to determine the status of creditor vs. debt collector.). Because Plaintiff acquired the alleged Loan after it was in default, and because Plaintiff is not and was not the originator of the Loan, WMC is a debt collector. 119. Plaintiffs related argument that the FDCPA does not apply to WMCs litigation
activities is wholly without merit. First, the Supreme Court expressly rejected this argument in Heintz v. Jenkins, 514 U.S. 291, 115 S. Ct. 1489 (1995). Second, the Third Circuit has ruled definitively that there is no litigation immunity or litigation privilege for statements made by a debt collector in litigation communications or litigation pleadings. See Allen v. LaSalle Bank, N.A., No. 09-1466 slip op. 7-10 (3d Cir. Jan. 12, 2011). Hence, WMCs Complaint here, which was served directly on the Bakers, is a communication by a debt collector that violates the FDCPA because it asserts time-barred and other unfair claims to attempt to collect an alleged debt. 32
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The FDCPA Counterclaim Is Timely 120. Defendants FDCPA counterclaims are not barred by the statute of limitations.
The FDCPA period is one year, and the collection activity described in the counterclaims took place within the year prior to the filing of the counterclaim. The counterclaims are premised not only on WMCs time-barred lawsuit but also on the indirect collection attempts, such as the derogatory credit reporting and failure to report the disputed nature of the alleged debt (Sec. Am. Ans. 16), that took place (and continue to take place) within the year prior to the filing of the lawsuit. See, e.g., Todd v. Weltman, Weinberg & Reis, 434 F.3d 432 (6th Cir. 2006) (debt collector violated FDCPA by signing and filing false affidavits in post-judgment garnishment proceedings); Purnell v. Arrow Fin. Servs., L.L.C., 2008 WL 5235827 (6th Cir. Dec. 16, 2008) (periodic monthly collection attempts each a separate act which violate the FDCPA and start new statute of limitations period); Wesley v. Calvary Investments, LLC, 2006 WL 1285020 (E.D. Pa. May 9, 2006) (defendant is required to report a collection account as disputed, and may violate FDCPA by failing to report the account as disputed); Sullivan v. Equifax, Inc., 2002 WL 799856 (E.D. Pa. April 19, 2002) (same). Hence, the FDCPA counterclaim is not time-barred. See also Solomon v. HSBC Mortgage Corp., No. 09-6293, 2010 WL 3069699 (10th Cir. Aug. 6, 2010) (discrete violations of the FDCPA must be analyzed on an individual basis for statute of limitations purposes). Plaintiffs Filing Of A Time-Barred Suit Violates The FDCPA 121. Congress has expressly included legal pleadings within the ambit of the FDCPA.
15 U.S.C. 1692i (making it a violation of the Act for an attorney to file suit in the wrong venue). 122. The most recent binding decision in this jurisdiction is the Third Circuits opinion
in Piper v. Portnoff Law Associates, 396 F.3d 227 (3d Cir. 2005). In that case, the plaintiff 33
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alleged, among other things, that a collection law firm and its individual attorneys filed legal pleadings in the process of obtaining liens on residential property, whereby the defendants collected and attempted to collect attorney fees not permitted by law. 396 F.3d at 231. The court held the defendants were debt collectors and were required to comply with the FDCPA. The court stated: We have already noted that if a communication meets the Acts definition of an effort by a debt collector to collect a debt from a consumer, it is not relevant that it came in the context of litigation. Heintz v. Jenkins, 514 U.S. 291 (1995). The same is true where the communication comes in the context of in rem litigation. 396 F.3d at 234. Accord, Pollice v. National Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000) (collection of water/sewer fees by filing legal actions under Pennsylvania municipal lien law subject to FDCPA). There is no difference between the state court litigation the Third Circuit held in both Piper and Pollice was within the ambit of the FDCPA and the federal litigation commenced by Plaintiff here. See Allen v. LaSalle Bank, N.A., No. 09-1466 slip op. at 8-9 (even communications by a debt collector with a consumers attorney can violate the FDCPA). 123. Other cases from this Court have ruled similarly in applying the FDCPA to legal
pleadings. In Richburg v. Palisades Collection, LLC, 2007 WL 2745807 (E.D. Pa. Sept. 7, 2007), this Court held FDCPA 1692e and 1692f applicable to a debt collectors service of a Municipal Court complaint beyond the applicable statute of limitations. Id. at *1, nn.1 & 2. In a subsequent decision on the merits, the Court ruled that service of the time-barred complaint violated the Act. Richburg v. Palisades Collection, LLC, 2008 WL 223416, *4-5 (E.D. Pa. Jan. 28, 2008) (denying defendants motion for summary judgment). See also Martsolf v. JBC Legal Group, P.C., 2008 WL 275719, *4-5, n.7 (M.D. Pa. Jan. 30, 2008) (summary judgment granted to plaintiff on claim that defendant threatened litigation after expiration of limitations period); Ehsanuddin v. Wolpoff & Abramson, 2007 WL 543052, *2-3 (W.D. Pa. Feb. 16, 2007); Goins v. 34
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JBC & Assocs., P.C., 352 F. Supp. 2d 262, 272 (D. Conn. 2005); Walker v. Cash Flow Consultants, Inc., 200 F.R.D. 613, 616 (N.D. Ill. 2001). All these cases hold that the filing of legal pleadings beyond the statute of limitations is an action subject to the FDCPA and violative of section 1692e or section 1692f. 124. Plaintiffs reliance on cases such as Shivone v. Washington Mut. Bank, F.A., 2008
WL 3154702 (E.D. Pa. Aug. 5, 2008), and Harvey v. Great Seneca Fin. Corp., 453 F.3d 324 (6th Cir. 2006), is misplaced. Unlike here, neither of those cases involved allegations of an improper attempt to collect a time-barred debt, or failure to verify a debt sued upon as required by 1692g(b). See D.E. 28 (Sec. Am. Ans. 3, 11 & Counterclaim 5(f)). More significantly, both decisions fail to address the Supreme Courts controlling decision in Heintz v. Jenkins, 514 U.S. 291 (1995). 125. Before the decision in Shivone, the Sixth Circuit held in Harvey that the filing of a
lawsuit did not amount to an abusive act under the FDCPA. 453 F.3d at 330-31. The plaintiff alleged that defendant's debt collection lawsuit without the immediate means of proving the existence, amount, or true owner of the debt constituted harassment and a deceptive practice under the FDCPA. Id. at 330-31. The court disagreed, finding that [e]ven when viewed from the perspective of the unsophisticated consumer, the filing of a debt collection lawsuit ... does not have the natural consequence of harassing, abusing or oppressing the debtor. Any attempt to collect a defaulted debt will be unwanted ... but employing the court system ... cannot be said to be an abusive tactic under the FDCPA. Id. However, the court took care to point out that the plaintiff did not deny owing the debt or allege that defendant misstated or misrepresented the debt amount, failed to undertake a reasonable investigation into whether or not her debt existed or made false representations about the continued vitality of the debt. Id. at 332.
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126.
By contrast, a recent decision by the Court of Appeals for the Ninth Circuit relied
on Heintz v. Jenkins to hold that a complaint served directly on a debtor, as here, to facilitate a debt collection is a communication subject to the requirements of the FDCPA. Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1031-32 (9th Cir. 2010). In Donohue, the debtor claimed the creditor's complaint violated the FDCPA because it contained a false representation about the way it had calculated the interest owed on her debt. Id. at 1031. Although the creditor, like Plaintiff here, contended the complaint was not a communication subject to the FDCPA, the court rejected that argument. The court said that [c]oncluding otherwise would put our decision in tension with the Supreme Court's reasoning in Heintz. Id. at 1032. The court explained: The Supreme Court held that the FDCPA applies to attorneys who regularly engage in consumer-debt-collection activity, even when that activity consists of litigation. Id. at 299, 115 S. Ct. 1489. The Supreme Court reasoned that the plain language of the [FDCPA] itself says nothing about an exemption [for lawyers] in respect to litigation. Id. at 297, 115 S. Ct. 1489. Nor did it make sense to differentiate between lawyers acting in the capacity of debt collectors and those litigating: The line ... between legal activities and debt collection activities was not necessarily apparent to those who debated the legislation, for litigating, at first blush, seems simply one way of collecting a debt. Id. 592 F.3d at 1032. Thus, to the extent Plaintiffs cases and arguments insinuate a litigation exception based on Shivone and Harvey, such an exception is contrary to Heintz, Donohue and the controlling Third Circuit decisions discussed above. Plaintiff Violated The FDCPA 127. Because Plaintiffs action is time-barred, and because the service of this suit on
the Bakers constitutes a communication within the coverage of the FDCPA, Plaintiff has violated the FDCPA. 128. Defendants have sustained actual damages in the amount of the costs and
expenses they have incurred in connection with responding to and defending against the claims
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asserted by Plaintiff. Defendants shall submit a Certification of the expenses they have incurred in connection with responding to the claims herein. 129. In accordance with 15 U.S.C. 1692k(a)(2)(A), the Court shall award to each of
the Defendants $1,000 as statutory damages. The FCEUA Counterclaim 130. Plaintiffs argument as to the merit of Defendants FCEUA Counterclaim appears
to be wholly derivative of its FDCPA arguments. As noted, however, the communication and pursuit of a time-barred claim to attempt to collect a time-barred debt is, in fact, an FDCPA violation and an FCEUA violation. See, e.g., Gigli v. Palisades Collection, L.L.C., 2008 WL 3853295 *11 & n.10 (M.D. Pa. Aug. 18, 2008) (holding that creditor who filed suit in its name based on allegedly false information could be held liable under the FCEUA); Richburg v. Palisades Collection, LLC, 2008 WL 223416, *4-5 (E.D. Pa. Jan. 28, 2008) (denying defendants motion for summary judgment where debtor alleged that the debt was time-barred). 131. Under the FCEUA, damages are awarded under the Unfair Trade Practice and
Consumer Protection Law (UTPCPL), 73 P.S. 201-9.2, but they may not be cumulative of remedies awarded under the FDCPA, 73 P.S. 2270.5(c). Inasmuch as Plaintiff is a debt collector and remedies have been awarded under the FDCPA to Defendants, an additional award will not be made under this counterclaim. If, however, Plaintiff is held not to be a debt collector, then the damages awarded under counterclaim one will be awarded in favor of Defendants as against Plaintiff as a creditor under the FCEUA and the UTPCPL for this counterclaim. The TILA Counterclaim
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132.
As set forth above, Plaintiff violated several requirements of TILA and,
specifically, violated 15 U.S.C. 1635. The damages for such violations are controlled by 1640. 133. Mrs. Baker testified that they sustained actual damages in the amount of $6,500
for the expenses incurred in defending against the Foreclosure Action. These actual damages will be awarded to the Defendants on this counterclaim in accordance with 1640(a)(1). 134. In accordance with 1640(a)(2)(A), the Court will also award $2000 to each of
the Bakers for Plaintiffs violations of TILA. The UTPCPL Counterclaim 135. Defendants Fourth Cause of Action alleges that Plaintiff has failed and/or
refused to comply with its written warranty promise of a right to rescind, (subsection xiv), and has engaged in other deceptive conduct which creates a likelihood of confusion (subsection xxi), such as stating and promising that the transaction was subject to a right to rescind by written notice. The counterclaim further alleges that Plaintiff violated 73 P.S. 201-7 by failing to rescind the transaction in accordance with the door-to-door sales rule. 136. As set forth above, Plaintiff violated the UTPCPL, and the Court will award treble
damages arising from the actual damages Defendants suffered. The Court therefore awards $13,000 to the Bakers under this counterclaim, which will treble the actual damages award above. The Court specifically finds and holds that Plaintiffs violations were avoidable and, in turn, knowing violations or in reckless disregard of Defendants rights. The Quiet Title Counterclaim 137. In arguing against this counterclaim and in support of its own claims, Plaintiff
again relies on the opinions in Palmer v. Ameribanq Mortg. Group, LLC, No. 05-2023, 2010 WL 3933273 (E.D. Pa. Oct. 6, 2010); Jobe v. Argent Mortgage Co., No. 06-0697, 2009 WL 2461168 38
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(M.D. Pa. Aug. 11, 2009), affd, 373 Fed. Appx. 260, 2010 WL 1255683 (3d Cir. 2010); Gianduso v. U.S. Bank Natl Assn, No. 3:CV-09-1971, 2010 WL 4536986 (M.D. Pa. Nov. 2, 2010); and Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 820 (4th Cir. 2007). As discussed above, all of these cases are distinguishable because they involved the conditional, extended right of rescission within three (3) years, not the automatic, statutory and contractual right to three (3) day cancellation exercised here. This difference is significant because 1635(a) provides an obligor with a substantive right to rescind up until midnight of the third business day following [the closing]. See Eveland v. Star Bank, N.A., 976 F. Supp. 721 (S.D. Ohio 1997) (creditor bears risk); Aquino v. Public Fin. Consumer Discount Co., 606 F. Supp. 504 (E.D. Pa. 1985) (same). 138. TILAs express language reflected in 1635(b), the implementing regulation at
12 C.F.R. 226.23, the Official Staff Commentary of the Federal Reserve Board, and the lenders own promise and warranty in the Notice of Cancellation signed by Mrs. Baker, all make clear that Congress and the lender intended and agreed that the lender would commence termination of [the] security interest within 20 days after receipt of [the] notice of rescission or ownership of the property vests in the obligor without obligation on his part to pay for it. 15 U.S.C. 1635(b). As a matter of contract, the Notice of Cancellation here was an exchange of promises, expressly conditioning performance of any duty to tender by the Bakers on WMCs termination of the mortgage. See Basnight v. Diamond Developers, Inc., 146 F. Supp. 2d 754, 763 (M.D.N.C. 2001); Aquino, 606 F. Supp. at 509 (the burden of first performance [is] on the creditor, the party who has violated the law). Because WMC failed to comply with its statutory and contractual duties, the conditional performance by the Bakers was excused and discharged. 139. Unlike here, the borrowers in Palmer, Jobe, Gianduso and Shelton all sought to
exercise their extended rescission right (within three (3) years) based on the alleged failure of the 39
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lenders to provide them with required TILA disclosures. See Palmer, 2010 WL 3933272 at *4*10; Jobe, 2009 WL 2461168 at *2; Gianduso, 2010 WL 4536986 at *1; Shelton, 486 F.3d at 820. Having found the borrowers were, at best, entitled to a conditional extended right of rescission, and that the lenders properly denied automatic rescission, the courts nevertheless analyzed the procedures for extended rescission. It was in this context that the courts observed they had discretion to condition rescission on the borrowers tender of loan proceeds. See Palmer, 2010 WL 3933272 at *21; Jobe, 2009 WL 2461168 at *6-*7; Gianduso, 2010 WL 4536986 at *3; Shelton, 486 F.3d at 820-21. 4 140. Unlike the facts above, the three (3) day rescission here was not equitable or
conditional; it was statutory. See Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992). The order of obligations set forth in 1635(b) is the essence of the protection provided by TILAs three (3) day rescission right, and a critical component for the protection of borrowers and secondary mortgage purchasers alike. A creditor who fails to cancel the security interest after receiving a three (3) day rescission notice, and instead sells the rescinded loan into the secondary market, by statute forfeits its right to collect any amount on the rescinded
For extended rescission requests, courts, including those in Palmer, Jobe and Shelton, have found discretionary authority to vary the statutory order based on the last sentence of 1635(b), which reads: The procedures prescribed by this subsection shall apply except when otherwise ordered by a court. 15 U.S.C. 1635(b). At most, this language authorizes a change in procedures, not a change in the substantive rights of the consumer and the secondary market to have confidence that a rescinded security interest is immediately void upon such a rescission. See In re Giza, 428 B.R. 266, 274-275 (Bankr. D. Mass. Apr. 15, 2010) (a court may modify procedures surrounding the rescission process not to alter the voiding of the security interest itself). Because WMCs claim to vary the procedures is time-barred and inappropriate for automatic three (3) day rescission, and because any variance at this late date would vitiate the Bakers substantive rights under 1635(b), WMC cannot invoke the last sentence of 1635(b) here. After all, Congresss clear directive that ownership of the property vests in the obligor without obligation on his part to pay for it must have some meaning and must necessarily reflect Congresss clear intent that a dilatory lender that fails to follow the TILA rescission rules will confront the moral and financial hazard of forfeiture where it engages in the reckless practice WMC engaged in here. 40
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transaction, particularly where, as here, it fails to proceed in a timely manner. See Siner v. American General Finance, Inc., No. 03-06247, 2004 WL 2441185 (E.D. Pa. Oct. 28, 2004) (court will leave parties where it found them where a contract is void); Aquino, 606 F. Supp. at 509 (same). 141. Because the mortgage encumbering the Bakers property is void as a matter of
law, the Court will enter a judgment discharging all liens related to the Loan on Defendants property at 6370 Del Haven Road, Bangor, PA, and direct Plaintiff to file with the Northampton County Recorder of Deeds a cancellation, surrender and discharge of the mortgage. SUBMITTED BY DEFENDANTS COUNSEL ALONG WITH A FORM OF FINAL JUDGMENT
Respectfully submitted,
Date: March 9, 2011
s/Michael D. Donovan DONOVAN SEARLES, LLC Michael D. Donovan David A. Searles 1845 Walnut Street, Suite 1100 Philadelphia, PA 19103 Telephone: (215) 732-6067 Facsimile: (215) 732-8060 mdonovan@donovansearles.com dsearles@donovansearles.com
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA WMC MORTGAGE LLC, Plaintiff, v. SARAH E. BAKER and ERIC G. BAKER Defendants ) ) ) ) ) ) ) ) )
C. A. NO. 10-3118
FINAL JUDGMENT AND NOW, this _____ day of _____________, 2011, for the reasons set forth in the Findings of Fact and Conclusions of Law entered this date, it is hereby ORDERED, ADJUDGED AND DECREED that FINAL JUDGMENT is hereby entered against Plaintiff on all of Plaintiffs claims, and such claims are dismissed with prejudice. It is further ORDERED, ADJUDGED AND DECREED that Judgment is entered against Plaintiff and in favor of Defendants on Defendants First Counterclaim for statutory damages of $1,000 payable to each Defendant. Defendants shall submit a certification of the expenses they incurred in connection with responding to Plaintiffs claims herein so the Court can assess actual damages. It is further ORDERED, ADJUDGED AND DECREED that Judgment is entered against Plaintiff and in favor of Defendants on Defendants Third Counterclaim in the amount of $6,500 in actual damages suffered by Defendants and $2,000 in statutory damages payable to each Defendant. It is further ORDERED, ADJUDGED AND DECREED that Judgment is entered against Plaintiff and in favor of Defendants on Defendants Fourth Counterclaim for treble actual damages, or $13,000 payable by Plaintiff to Defendants. 1
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It is further ORDERED, ADJUDGED AND DECREED that Judgment is entered against Plaintiff and in favor of Defendants on Defendants Fifth Counterclaim. All liens related to the Mortgage arising from the June 3, 2005 loan transaction are discharged. Plaintiff is ordered and directed to file with the Northampton County Recorder of Deeds a cancellation, surrender and discharge of the Mortgage by ______________, 2011. Defendants counsel shall file with the Court a petition for attorney fees and reimbursement of expenses by ____________, 2011. Plaintiff shall file a response to the petition on or before ____________, 2011. BY THE COURT:
____________________________ JUAN R. SNCHEZ, U.S.D. J.
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CERTIFICATE OF SERVICE I hereby certify that the foregoing was sent by e-mail on the date below to the following: David A. Scheffel Eric B. Epstein DORSEY & WHITNEY LLP 250 Park Avenue New York, NY 10177 scheffel.david@dorsey.com epstein.eric@dorsey.com Eric Schnabel DORSEY & WHITNEY LLP 300 Delaware Ave. Wilmington, DE 19801 schnabel.eric@dorsey.com
Dated: March 9, 2011
Michael D. Donovan___________ Michael D. Donovan

Filed Proposed Findings of Fact and Conclusions of Law

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C.A. No.: 10-3118

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rescind or the timeliness of her Notice of Cancellation.

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predicated on a common law contract, implied contract or assumpsit claim.

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A breach of contract claim, like that alleged in Count II of WMCs Complaint,

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As a matter of law and WMCs own representations, the so-called instrument

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