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Baxa v. Seterus, Inc.

United States District Court, E.D. Louisiana

March 25, 2019

JOHN BAXA ET AL.
v.
SETERUS, INC.

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant Seterus, Inc.'s Motion for Summary Judgment (Doc. 48). For the following reasons, the Motion is GRANTED.

         BACKGROUND

         This dispute arose after the home of Plaintiffs John and Linda Baxa was sold at a tax sale because of a property tax delinquency. Plaintiffs allege that their mortgage required their mortgage servicer, Defendant Seterus, Inc. (“Seterus”), to pay the property taxes on Plaintiffs' home but that Defendant failed to do so, which resulted in the tax sale.

         Plaintiffs filed their initial Complaint against Defendant on May 31, 2017 alleging state claims for breach of contract, negligence, and conversion and federal claims under the Fair Credit Reporting Act (“FCRA”) and the Real Estate Settlement Procedures Act (“RESPA”). Plaintiffs filed a First Amended Complaint on June 7, 2017 and a Second Amended Complaint on December 4, 2017. The Second Amended Complaint sought to turn Plaintiffs' suit into a class action.

         On January 4, 2018, Defendant filed a 12(b)(6) Motion to Dismiss Plaintiffs' Second Amended Complaint. The Court granted Defendant's Motion in part on July 31, 2018. Plaintiffs' state law negligence and conversion claims were dismissed with prejudice on prescription grounds, Plaintiffs' fraud claim was dismissed without prejudice, and Plaintiffs' breach of contract claim survived. Plaintiffs' FCRA and RESPA claims also were dismissed without prejudice. In response to this ruling, Plaintiffs filed their Fourth Amended Class Action Complaint on August 21, 2018.[1] This Fourth Amended Complaint maintained Plaintiffs' breach of contract claim and re-urged RESPA and fraud claims.

         On September 11, 2018, Defendant filed a 12(b)(6) Motion to Dismiss Plaintiffs' Fourth Amended Complaint. Because Defendant attached several relevant mortgage records to its Motion that had not been a part of any of Plaintiffs' complaints, the Court on January 24, 2019 converted Defendant's Motion to Dismiss to a Motion for Summary Judgment. The Court gave the parties additional time to respond to the conversion order, and the parties responded accordingly.

         LEGAL STANDARD

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[2] “As to materiality . . . [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”[3] Nevertheless, a dispute about a material fact is “genuine” such that summary judgment is inappropriate “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[4]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[5] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[6] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[7]

         “In response to a properly supported motion for summary judgment, the nonmovant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial.”[8] The Court does “not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[9] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[10]

         LAW AND ANALYSIS

         I. Breach of contract claim

         “To prevail on a breach of contract claim, a plaintiff must prove “(1) the obligor's undertaking an obligation to perform, (2) the obligor failed to perform the obligation (the breach), and (3) the failure to perform resulted in damages to the obligee.”[11] Thus, to ultimately prevail on their claim, Plaintiffs must prove that Seterus undertook an obligation to perform, that Seterus failed to perform that obligation, and that Seterus' failure to perform resulted in damages to the Plaintiffs.

         Although Plaintiffs have shown that Seterus undertook an obligation to pay their property taxes, Plaintiffs cannot show that Seterus breached that obligation. The mortgage between the parties requires Seterus to “pay Escrow Items no later than the time specified under RESPA.”[12] “Escrow items” included “taxes and assessments.”[13] RESPA specifies that Seterus shall make escrow payments “in a timely manner as such payments become due.”[14] Federal regulations further define “in a timely manner” as “on or before the deadline to avoid a penalty, as long as the borrower's payment is not more than 30 days overdue.”[15] Thus, the mortgage agreement obligated Seterus to pay Plaintiffs' property taxes on or before deadlines to avoid a penalty such as a tax sale-but only if the Plaintiffs were not more than 30 days late on their mortgage payments.

         Here, the record is clear that Plaintiffs were more than 30 days late on their mortgage payments at the end of 2015 when Seterus failed to pay Plaintiffs' property taxes. Plaintiffs' December 31, 2015 Account Statement included a “delinquency notice” informing Plaintiffs that at that time they were “delinquent on [their] mortgage loan by 152 days.”[16] The Account Statement further specifies that Plaintiffs at that time owed more than $11, 000 in past due payments.[17]

         Plaintiffs nonetheless argue that they were timely on their mortgage payments as of December 31, 2015. In support, they cite to two documents- one appears to be a credit report, and the other is a Customer Account Activity Statement.[18] Plaintiffs argue that page 7 of the credit report “shows the mortgage account as current.”[19] In fact, page 7 of the credit report notes under the “account history” subheading that Plaintiffs' mortgage payments were “150 days past due as of Jan 2016, Dec 2015.”[20] Plaintiffs further argue that pages 9 through 12 of the Customer Account Activity Statement show that Plaintiffs made payments toward their mortgage loan that Seterus failed to properly credit toward Plaintiffs' account.[21] What the Customer Account Activity Statement actually shows is that Plaintiffs were behind on their mortgage payments for months leading up to December 2015, and that Seterus on multiple occasions credited Plaintiffs' account with advanced payments in order to keep the escrow account funded.[22] Plaintiffs have failed to produce any evidence suggesting that they were current on their mortgage payments as of December 31, 2015. Indeed, the record shows that Plaintiffs were more than 30 days behind on their mortgage loan payments in December 2015 and early 2016 when Seterus failed to pay Plaintiffs' property taxes. Under the terms of the mortgage, Seterus was not obligated to pay Plaintiffs' property taxes under those circumstances. Because there is no genuine dispute of material fact underlying this claim, Defendant is entitled to summary judgment on Plaintiffs' breach of contract claim.

         II. RESPA claims

         Plaintiffs allege that Seterus violated RESPA in two ways. First, Plaintiffs allege that Seterus violated 12 U.S.C. § 2605(g) by failing to timely pay Plaintiffs' property taxes. Section § 2605(g) provides, in relevant part:

If the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due.[23]

         As previously discussed, federal regulations provide that a servicer need not make tax payments that they would otherwise be required to make when borrowers are more than 30 days late on their mortgage payments. Accordingly, for the same reasons that Plaintiffs' breach of contract claim fails, so too does their claim under § 2605(g).

         Second, Plaintiffs allege that Seterus violated 12 U.S.C. § 2605(e) by failing to timely respond to an account-related inquiry. Under the statute, a loan service provider must take certain actions after receiving a “qualified written request” (“QWR”) from a borrower.[24] The statute defines the elements that an inquiry must contain to qualify as a QWR.[25] To prevail on a ยง 2605(e) claim, a plaintiff must show that: (1) the relevant correspondence sent to the loan provider meets the requirements of ...


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