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Stanley v. CitiMortgage, Inc.

United States District Court, S.D. Ohio, Western Division

January 22, 2018

SHAWN M. STANLEY, et al., Plaintiffs,
v.
CITIMORTGAGE, INC., Defendants.

         MICHAEL J. NEWMAN MAGISTRATE JUDGE

         DECISION AND ENTRY SUSTAINING PLAINTIFFS SHAWN M STANLEY AND REBECCA STANLEY'S FILING OF SUPPLEMENTAL AUTHORITY (DOC. #23) AND ADOPTING REPORT AND RECOMMENDATIONS OF UNITED STATES MAGISTRATE JUDGE (DOC. #19), AND OVERRULING OBJECTIONS OF PLAINTIFFS (DOC #21) TO SAID JUDICIAL FILING; MOTION TO DISMISS OF DEFENDANT CITIMORTGAGE, INC. (DOC. #10) IS SUSTAINED CLAIMS ONE THROUGH SIX OF PLAINTIFFS COMPLAINT (DOC #1) ARE DISMISSED WITH PREJUDICE; CLAIM SEVEN AS RAISED BY SHAWN STANLEY IS DISMISSED WITHOUT PREJUDICE SUBJECT TO REFILING IN A STATE COURT OF COMPETENT JURISDICTION-JUDGMENT SHALL ENTER IN FAVOR OF DEFENDANT AND AGAINST PLAINTIFFS ON CLAIMS ONE THROUGH SIX; TERMINATION ENTRY

          WALTER H. RICE, UNITED STATES DISTRICT JUDGE

         Plaintiffs, Shawn M. Stanley ("Shawn") and Rebecca Stanley ("Rebecca") (collectively "Plaintiffs"), allege that Defendant CitiMortgage, Inc. ("Defendant" or "Citi"), in foreclosing on a mortgage and promissory note held by Defendant as to Plaintiffs' domicile in Jamestown, Ohio ("the Property"), breached the mortgage and violated the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2601 et seq. Doc. #1. Defendant filed a Motion to Dismiss, arguing that Plaintiffs' claims were barred by res judicata. Doc. #10. On October 30, 2017, Magistrate Judge Michael J. Newman issued a Report and Recommendations, recommending that all claims in Plaintiffs' Complaint be dismissed with prejudice, and that the captioned cause be terminated on the Court's docket. Doc. #19. Plaintiffs filed Objections to the Report and Recommendations, Doc. #21, and Defendant filed a response thereto. Doc. #22. Plaintiffs subsequently filed a Notice of Supplemental Authority ("Notice"), bringing to the Court's attention Sandaler v. Wells Fargo Bank, N.A., Case No. 6:16-cv-1919-Orl-41GJK (M.D. Fla. Nov. 14, 2017), which was decided after the filing of the Report and Recommendations, and which, Plaintiffs argued, "pertain[ed] to the issues at the heart of their Objections. Doc. #23; Doc. #23-1. Defendant filed a response to Plaintiffs' Notice, Doc. #24, to which Plaintiffs did not reply.

         For the reasons set forth below, the Court SUSTAINS Plaintiffs' filing of Notice, Doc. #23, ADOPTS IN FULL the Report and Recommendations of the Magistrate Judge, Doc. #19, and OVERRULES Plaintiffs' Objections thereto. Doc. #21. In so ruling, the Court SUSTAINS Defendant's Motion to Dismiss. Doc. #10.

         I. FACTUAL BACKGROUND[1]

         Plaintiffs reside on the Property, which was subject to a non-recourse mortgage and secured by a promissory note, to which Shawn was the only signatory. Defendant was the holder of the promissory note and servicer of the mortgage at all times relevant to Plaintiffs' claims. Doc. #1, ¶¶ 1, 4-5, PAGEID#1, 2; Doc. #10-2, PAGEID #186-216. From 2008 through early 2015, Shawn attempted to modify the terms of his mortgage with Defendant, individually and through the Department of Veterans Affairs ("VA"), by submitting numerous loan modification applications to Defendant. Id., ¶¶ 29-30, 32, PAGEID #6. Shawn submitted an application on or about January 7, 2015, which he believed "was a 'full and complete application' as those terms are defined under RESPA." Id., ¶ 30. Defendant allegedly accepted Shawn's January 7, 2015, application and "persistently advised Plaintiffs that a foreclosure proceeding would not take place while they were being considered for a loan modification pursuant to 12 C.F.R. § 1024.41." Id. Despite Defendant's representation, however, Defendant filed a Complaint for Foreclosure ("Foreclosure Action") in the Greene County, Ohio, Court of Common Pleas ("State Court") against Plaintiffs on April 9, 2015. Id., ¶ 31; Doc. #10-2, PAGEID #179.

         Plaintiffs did not answer or otherwise defend the Foreclosure Action in the Greene County Court. Rather, Plaintiffs and their VA Representative, Ryan Vesall ("Vesall"), submitted a new loss mitigation packet and "request[ed] the [loan] forbearance originally purportedly offered [by Defendant] back in 2012." Doc. #1, ¶ 36, PAGEID #7. Plaintiffs and Vesall continued to correspond and submit new loss mitigation packages to Defendant, id., ¶¶ 37-45, PAGEID #7-8, and Defendant sent notices to Shawn "dated September 8th, 2015, November 17th, 2015, December 22nd, 2015, and January 12th, 2016, respectively, which all acknowledge; (a) Citi has received a packet and it is being processed; and, (b) if the packet is complete, Citi will stop all foreclosure activity." Id., ¶ 45, PAGEID #8 (citing Doc. #1-2). Nonetheless, on August 27, 2015, Defendant filed a Motion for Default Judgment against Plaintiffs. Doc. #10-2, PAGEID #217. Plaintiffs, allegedly in reliance on representations made by Defendant's employee Timothy Kovath, believed that their continued attempts to modify their loan were sufficient to avoid foreclosure; thus, they did not respond to the Motion for Default Judgment. Doc. #1, ¶¶ 39, 41, 47, PAGEID #7-8, 8-9. On September 17, 2015, the State Court entered Judgment in Rem in favor of Defendant and against Plaintiffs. Doc. #10-2, PAGEID #219. In so doing, the State Court ordered that, unless Plaintiffs paid off the remaining balance on the note, Defendant was entitled to:

[I]ssue an order of sale directed to the Sheriff of Greene County, [Ohio, ] directing him to appraise, advertise in a paper of general circulation within the County, and sell said premises as upon execution and according to law, free and clear of the interest of all parties to this action.

Id., PAGEID #223-24.

         Plaintiffs did not pay off the remaining balance on the mortgage. Rather, on March 15, 2016, they filed in State Court an Emergency Motion to Stay the Sheriff Sale and to Vacate Judgment Entry. Doc. #10-2, PAGEID #229. On April 11, 2016, Plaintiffs filed suit in this Court against the Defendant, "asserting five causes of action based on the actions of Citi detailed in the paragraphs above and in an attempt to stay the pending sheriff sale." Doc. #1, ¶ 55, PAGEID #10 (citing Case No. 3:16-cv-133). That same day, Defendant agreed to stay the sheriff sale and to review, again, Plaintiffs' application for loan modification, and Plaintiffs voluntarily dismissed their suit against the Defendant. Id., ¶ 56. Nonetheless, Defendant again denied Plaintiffs' loan modification application on or about July 8, 2016. Id., ¶ 58 (citing Doc. #1-3, PAGEID #74-75). Plaintiffs appealed the denial, pursuant to their rights under RESPA, on August 4, 2016, id., ¶ 59, PAGEID #11, but on December 7, 2016, having heard nothing from the Defendant regarding their appeal, "submitted a new packet for loss mitigation." Id., ¶ 62 (citing Doc. #1-4). Defendant again denied the loan modification on January 18, 2017, id., ¶¶ 64-65, PAGEID #11-12 (citing Doc. #1-6), and after mediation efforts ordered by the State Court proved unsuccessful, Plaintiffs filed the instant lawsuit. Id., ¶¶ 66-67, PAGEID #12. In this lawsuit, Plaintiffs raised six claims under RESPA and the law's administrative provisions, and one claim of breach of contract under Ohio common law, against Defendant. Id., ¶¶ 74-149, PAGEID #14-27.

         II. LEGAL STANDARDS

         A. Rule 72(b)

         Under the Federal Magistrates Act of 1968, 28 U.S.C. § 636, the Magistrate Judge may, upon reference, file a Report and Recommendations as to any potentially dispositive motion. "Within 14 days after being served with a copy of the recommended disposition, a party may serve and file specific written objections to the proposed findings and recommendations." Fed.R.Civ.P. 72(b)(2). The [D]istrict [J]udge must determine de novo any part of the [Magistrate [J]udge's disposition that has been properly objected to. The [D]istrict [J]udge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the [M]agistrate [J]udge with instructions." Fed.R.Civ.P. 72(b)(3). "Generally, the failure to file specific objections to a [Magistrate's report constitutes a waiver of those objections." Cowherd v. Million, 380 F.3d 909, 912 (6th Cir. 2004).

         B. Rule ...


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