Mack v. ResCap Borrower Claims Trust, case no. 16-304-bk (2nd Cir. 2017) (summary order)

Summarized by Jin Kim , Allen & Overy LLP
9 years 3 weeks ago

Case Type:

Business

Case Status:

Affirmed

Citation:

16-304-bk (2nd Circuit, Jan 31,2017) Published

Tag(s):

Ruling:

The 2nd Cir. (a) held that res judicata, based on FL law, barred claim against bankrupt trust for malicious prosecution by loan servicer relating to the trust where plaintiff had previously won slander of title claim against mortgage holder on whose behalf loan servicer had brought underlying foreclosure action and loan servicer was required to indemnify mortgage holder and (b) declined to modify prior 2014 holding (Roth v CitiMortgage Inc.) that under RESPA, the duty to respond to a qualified written request (QWR) is triggered only if the QWR is sent to the designated address for QWRs.

Procedural context:

Residential Capital LLC's borrower claims trust (the "Trust") filed for bankruptcy in 2012. Plaintiffs filed claims against the Trust for money damages due to claim for malicious prosecution arising out of a 2009 foreclosure action and violations of the Real Estate Settlement Procedures Act (RESPA) requiring that loan servicer respond to Qualified Written Requests ("QWR"). The Trust objected to both claims. In 2014, the Bankruptcy Court upheld the Trust's objection that the malicious prosecution claim was barred due to res judicata but overruled the Trust's objection that the RESPA claim was barred. In 2015, after a conducting a trial on the RESPA claim, the Bankruptcy Court found that RESPA was not violated because the QWR was mailed to the wrong address. The plaintiff appealed both Bankruptcy Court decisions to the District Court, and the District Court affirmed both orders. Plaintiff then filed an appeal with the 2nd Circuit.

Facts:

In 2006, plaintiff and his wife (the "Macks") bought a home in Florida. In 2009, the Macks realized they could no longer afford the mortgage payments and contacted their loan servicer, GMAC Mortgage LLC ("GMACM"), which was the loan servicing unit of Residential Capital LLC, to obtain a loan modification. GMACM did not provide relief but instead initiated a foreclosure action against the Macks in Florida state court on behalf of Deutsche Bank ("DB"), the holder of the mortgage; however, the Macks were not in default on the mortgage. GMACM contacted local counsel to withdraw the lawsuit, but the withdrawal did not occur until 3 months later. While the foreclosure action was pending, the Macks filed counterclaims against DB, seeking damages for slander of title and a violation of RESPA based on a transfer of title without notifying the Macks. DB did not respond, and the Macks received a default judgment. DB became aware of the default judgment and moved to set it aside. Ultimately in 2013, the state court granted DB's motion to vacate the judgment as to the RESPA claim but confirmed the judgment with respect to the slander of title claim and awarded damages of $320,000. In the meantime, in October 2009, shortly after GMACM brought its foreclosure action, the Macks wrote a letter to GMACM asking why the foreclosure action was pending even though the Macks were not in default (the "QWR"). The Macks did not, however, send the QWR to the address designated by GMACM for receipt of QWRs. Instead, they sent it to the address designated by GMACM for "General Inquiries". GMACM never responded to or acknowledged receipt of the Macks' QWR.

Judge(s):

Circuit Judges Ralph K. Winter, Jose A. Cabranes and Gerard E. Lynch

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