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Ortiz v. Wilmington Savings Fund Society

United States District Court, S.D. West Virginia, Charleston

August 1, 2019




         Pending are a motion for summary judgment, filed May 8, 2019 by defendants Wilmington Savings Fund Society, FSB (“Wilmington”), and FCI Lender Services, Inc. (“FCI”), and the Motion for Leave to File Amended Answer to Amended Complaint, filed May 30, 2019 by Wilmington and FCI. Wilmington acquired the mortgage loan in issue in 2017. FCI services the loan.

         I. Background

         In 2003, the husband of the plaintiff, Barbara Ortiz (“Ortiz”), owed approximately $88, 000 in real estate debt and about $15, 000 on a judgment lien that constituted a second lien on the same real estate. Amended Compl. ¶ 8. Late that year, Ortiz decided to refinance both debts, along with an unspecified amount of unsecured debt, in an “overarching, refinancing debt” (the “Loan”) with Fremont Investment & Loan Company (“Fremont”). Plaintiff sought the Loan “primarily to enable negotiation of a settlement of the second judgment lien” of approximately $15, 000. Id. ¶ 9. ECF No. 14 at 2 (citing Amended Compl. ¶ 14).

         Plaintiff entered into the Loan on January 26, 2004, which amounted to $115, 545, pursuant to an adjustable rate note (“Note”) secured by a deed of trust in the same real estate (“Deed of Trust”). See Note, ECF No. 5-1; Deed of Trust, ECF No. 5-2; Ex. 1, Ortiz Dep. 50:1-4, 59:15-23. Under the terms of the Note and Deed of Trust, plaintiff owed regular monthly payments. See, e.g., Note § 3, ECF No. 5-1; Deed of Trust § 1, ECF No. 5-2.

         Plaintiff claims she was subjected to the practice of “predatory lending” and was exploited by Fremont and Dana Capital Group Inc. (“Dana Capital”), the Loan broker, and wrongly persuaded into entering into an “unaffordable refinancing secured by [her] home.” Amended Compl. 1. Plaintiff claims to have requested a “fixed rate” loan, which, according to her, “was accurately depicted on the loan application.” Id. ¶ 22. However, the Loan she entered into was an adjustable rate loan which provided that plaintiff's interest rate would not decrease below 8.99 percent, but could increase to as much as 15.99 percent. Id. ¶ 36. Plaintiff paid monthly installments on her Loan for fourteen years that varied in amounts from month to month. ECF No. 33, Ex. 1, Ortiz Dep. 62:18-63:18; 103:5-12, attached as ex. 1.

         Plaintiff further alleges that the settlement statement allocated $8, 000 to pay off the judgment lien of $15, 000, and Fremont and Dana Capital prepared a closing document titled “Creditors to be paid off, ” listing $8, 000 as an amount required to be paid off. Id. ¶ 42. Dana Capital negotiated a settlement with the judgment creditor to pay $8, 000 in exchange for a release of the judgment lien. Id. ¶ 43. She asserts that the judgment lien was not paid with the Loan proceeds until January 2006, but instead held in a trust account for those two years. Id. ¶¶ 44-45. Plaintiff also alleges that the failure to furnish the $8, 000 to the judgment creditor caused the judgment lien to take primary lien status over the Fremont home loan. Id. ¶ 45.

         As a result of the aforementioned events, the judgment creditor began collecting on the debt in May 2004. Id. ¶ 47. In April 2005, the judgment creditor sought to utilize what had become its primary lien status to foreclose on plaintiff's property. Id. ¶ 48. Plaintiff quickly retained an attorney, at a cost of $2, 000.00, to negotiate the payoff of the judgment lien for the original amount of the judgment. Id. ¶ 48. Plaintiff paid $7, 262.02 of the settlement in August 2005 to the judgment creditor; however, “defendant continued to refuse to release the remaining $8, 000.00 to pay off the judgment lien.” Id. ¶ 49. The judgment creditor brought suit against plaintiff and lender in January 2006, and lender “finally relented and released the $8, 000.00 to the judgment creditor.” Id. ¶ 50.

         Approximately thirteen years later on May 31, 2017, Wilmington became the owner of the Note, Deed of Trust, and Ortiz's debt through a series of assignments. Id. ¶ 5; Countercl. ¶ 5-7; Assignments of Deed of Trust, ECF Nos. 5-4 to 5-5. Although Ortiz owed regular monthly payments under the Note and Deed of Trust, she failed to furnish some of them timely. ECF No. 32 at Aff. of Ron McMahan; Countercl., Ex. A, B. According to the defendants, “it has been approximately sixteen months since Plaintiff last made a full, timely payment” - since May 18, 2017. ECF No. 13 at Aff. of Ron McMahan ¶ 9. She has been in default on the Loan since at least December 11, 2017. Id. at Aff. of Ron McMahan ¶ 10. As a result, she breached the terms of the Note and Deed of Trust, triggering the Loan's acceleration and the lender's option to exercise its power of sale. Countercl., Ex. 2 at 15; Deed of Trust § 22, ECF No. 5-2.

         On December 14, 2017, Wilmington served notice to execute a foreclosure sale of the property. See, e.g., Aff. of Ron McMahan ¶ 11, ECF No. 13-1; Demand, ECF No. 13-8. Thereafter on April 9, 2018, Ortiz instituted a lawsuit in Fayette County Circuit Court, alleging various contractual defenses of unconscionability and fraud and affirmative claims of fraud and excessive late fees. See Amended Compl. The claims “were variously pleaded against Wilmington [holder] as well as Defendants FCI (servicer) and Dana Capital Group, Inc. (broker).” ECF No. 33 (citing Amended Compl.).

         The complaint consists of six counts:

Count I, Contract Defense - Unconscionable Broker Agreement (as to Broker Dana Capital only);
Count II, Fraud as a Contract Defense - Loan Agreement (Loan Servicer/Holder);
Count III, Unconscionability as a Contract Defense to the Loan Agreement (Loan Servicer/Holder);
Count IV, Fraud as a Contract Defense and for Damages (as to all defendants); and
Count VI, Excessive Late Fees (Loan Servicer/Lender). The court notes that Count V has been voluntarily dismissed by the plaintiff.

         Defendants Wilmington and FCI removed the action to this court on July 9, 2018, and Wilmington brought counterclaims of breach of contract and declaratory judgment, seeking to exercise its power of sale. See Countercl. Wilmington moved for summary judgment on the counterclaim which sought foreclosure. The motion is denied by order entered contemporaneously herewith.

         Wilmington and FCI now seek summary judgment on the claims made against them, asserting that Counts II, III, and IV are time barred, and that plaintiff has failed to create a genuine issue of material fact ...

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