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Firefighters Community Credit Union v. Woodside Mortgage Services, Inc.

Court of Appeals of Ohio, Eighth District, Cuyahoga

August 22, 2019

FIREFIGHTERS COMMUNITY CREDIT UNION, Plaintiff-Appellant,
v.
WOODSIDE MORTGAGE SERVICES, INC., Defendant-Appellee.

          Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-16-858763

         JUDGMENT: AFFIRMED

          Weltman, Weinberg & Reis Co., L.PA., and Daniel A. Friedlander, for appellant.

          Walter Haverfield L.L.P., Mark S. Fusco, and Sara Ravas Cooper, for appellee.

          JOURNAL ENTRY AND OPINION

          SEAN C. GALLAGHER, PRESIDING JUDGE.

         {¶ 1} Firefighters Community Credit Union (the "Credit Union") appeals from the summary judgment entered in favor of defendant-appellee Woodside Mortgage Services, Inc. ("Woodside") on its counterclaim for declaratory judgment, the denial of the Credit Union's motion for summary judgment on its claims for breach of contract and conversion, and the trial court's declaration that Woodside had the right to service all loans originating from the Credit Union through April 4, 2018. For the following reasons, we affirm.

         {¶ 2} Woodside is a mortgage origination and servicing company that began originating mortgage loans for the Credit Union on a probationary basis in late 2007. On September 18, 2007, the Credit Union and Woodside entered into a "Letter of Agreement" (the "letter agreement") formalizing their arrangement. The mortgage loans Woodside originated for the Credit Union's members could either be retained by the Credit Union for its own loan portfolio or sold to the secondary mortgage market, wherein the servicing would be handled by the purchaser. Initially, all mortgage loans originated by Woodside were sold to the secondary mortgage market. At some point in early 2008, the Credit Union decided to begin funding certain loans Woodside originated for its members and asked Woodside if it would service these loans. The letter agreement, entitled "Mortgage Loan Servicing," provided in pertinent part that a "separate servicing agreement may be executed between the Parties and/or their affiliates to service these loans on an ongoing basis."

         {¶ 3} The parties did not sign a separate, written mortgage loan servicing agreement. On May 20, 2008, William Keller, who was then Woodside's vice president, sent an email to Terrance Corrigan, the Credit Union's chief lending officer, that included "a summary of proposed terms for servicing loans on behalf of the Credit Union." The email stated that the "[compensation items noted reflect your current arrangements" (emphasis added), with three exceptions unrelated to the parties' dispute here. Corrigan acknowledged that the fee schedule reflected the compensation that the Credit Union was then paying to other mortgage loan services. Keller asked that Corrigan "review" the proposed terms and "let me know how to proceed." Attached to the email was a "Mortgage Loan Servicing Agreement Term Sheet" (the "May 2008 term sheet"). The May 2008 term sheet stated in relevant part Woodside "shall own the servicing rights to any and all loans" and also stated that Woodside "shall bear all costs to service the mortgage loans" and "shall be compensated for providing this service" based on the "annual servicing fees" as specified in the term sheet.

         {¶ 4} The Credit Union was Woodside's first client. Between 2008 and 2012, Woodside was originating and servicing mortgage loans only for the Credit Union. In 2012, Woodside began originating and servicing mortgage loans for other financial entities.

         {¶ 5} In 2012, Keller sent Corrigan a draft "Mortgage Loan Origination and Servicing Agreement" (the "2012 proposed loan servicing agreement"). Keller forwarded the draft agreement to the Credit Union because Woodside had "paid an attorney to put * * * a new agreement together," that "this is what we were now submitting to our new credit union clients" and that Woodside was "trying to standardize the contracts across all clients." Woodside never discussed the draft agreement with the Credit Union, and it was never signed.

         {¶ 6} On June 11, 2013, Keller, who was now Woodside's president and CEO, sent an email to Corrigan regarding a discrepancy in the fees Woodside had been collecting from the Credit Union on certain files. He attached a copy of the May 2008 term sheet and indicated that it was "the servicing term sheet we have on file for the Credit Union." The Credit Union did not object to Keller's representation that the May 2008 term sheet represented the parties' agreement. Keller further stated:

This should match up with your copy; let me know if it does not. The terms list a per loan $240 minimum per year ($20/month). Some of the Credit Union files were set up incorrectly without the minimum. Accordingly, the servicing fee collected was less than the minimum $20 for loans affected. No big deal but wanted to let you know for the future.

         There is no evidence Corrigan responded to the email; however, there appears to be no dispute that from at least May 20, 2008, the Credit Union compensated Woodside for loan servicing according to the amounts specified in the May 2008 term sheet.

         {¶ 7} In November 2015, the Credit Union decided to terminate its servicing relationship with Woodside and begin servicing the mortgage loans "in-house." Corrigan indicated that the Credit Union expected to be ready to service its mortgage loan portfolio by March or April 2016 and that the Credit Union would need Woodside's assistance in compiling and transferring data files for this transition to occur. In response, Keller informed Corrigan that, because Woodside owned the servicing rights to the loans, if the Credit Union wanted to begin servicing the existing mortgage loans, the Credit Union would have to purchase the rights to service those loans. Keller claimed that it was "industry standard" for the servicer of the loan to retain the servicing rights. Woodside did not make any claims intending to preclude the Credit Union from servicing its loans prospectively. Despite the parties' dispute regarding the servicing rights, the Credit Union continued to use Woodside to originate and service its mortgage loans through 2018.

         {¶ 8} On February 10, 2016, the Credit Union filed a complaint asserting claims of breach of contract and conversion against Woodside. The Credit Union alleged that Woodside breached the letter agreement by "fail[ing] to terminate as agreed to" in the letter agreement, by refusing to return accounts and to assist in the transition of servicing to allow the Credit Union to properly service its mortgage loans. The Credit Union further alleged that Woodside's failure to return the mortgage loan portfolio to the Credit Union for servicing constituted a conversion of the Credit Union's property. The Credit Union sought to recover compensatory damages in excess of $25, 000 plus punitive damages, its attorney fees, and costs.

         {¶9} Woodside filed an answer and a counterclaim for declaratory judgment. In its answer, Woodside admitted that the parties had entered into the letter agreement and had not signed the 2012 proposed loan servicing agreement, but otherwise denied the material allegations of the complaint. It also asserted various affirmative defenses. With respect to its counterclaim, Woodside alleged that the parties had been operating pursuant to the May 2008 term sheet since 2008 and that pursuant to the terms of the May 2008 term sheet, Woodside "owned the servicing rights" to all loans it originated from the Credit Union. Woodside requested that the court enter a declaratory judgment, declaring that it "shall maintain the right to service all loans originating from [the Credit Union] through the date of any decision by this Court" and awarding Woodside its costs and attorney fees.

         {¶ 10} The parties filed cross-motions for summary judgment on the Credit Union's claims and Woodside's counterclaim, both claiming the matter was ripe for adjudication under Civ.R. 56. In its motion for summary judgment, the Credit Union argued that the material facts were not in dispute and that (1) the May 2008 term sheet was not a contract, (2) it had a right to terminate Woodside's servicing of its mortgage loan portfolio at any time under the terms of the letter agreement, (3) there was no evidence of any enforceable agreement pursuant to which the Credit Union agreed "to give Woodside the non-terminable and irrevocable right to service its mortgages for the duration of the life of those mortgages," and (4) Woodside's retention of the Credit Union's mortgage data constituted a breach of the letter agreement and conversion. In support of its motion, the Credit Union attached copies of the letter agreement, the May 2008 term sheet, the 2012 proposed loan servicing agreement and the correspondence between the parties, Keller's deposition transcript, and an affidavit from the Credit Union's president and CEO Ben Laurendeau.

         {¶ 11} In his affidavit, Laurendeau averred that the Credit Union had never agreed to transfer the servicing rights to its mortgage loan portfolio to Woodside, that due to its "close relationship" with its members, the Credit Union would never enter into a relationship with a vendor in which it could not "hold that vendor accountable or otherwise terminate the relationship at will for poor service, cost savings, or any other similar issue potentially benefitting it[s] members" and that the "anticipated savings associated with transitioning servicing from Woodside" would have been $107, 824.18 from December 15, 2015, through January 17, 2017. The Credit Union requested (1) that the court order Woodside to transfer the mortgage-portfolio data to the Credit Union; (2) that the Credit Union be awarded damages "based upon the difference between [the Credit Union's] cost for servicing the mortgages 'in-house' and Woodside's servicing fees during the period that the servicing was terminated"; and (3) "indemnification" for its "costs and expenses incurred in this action."

         {¶ 12} In its motion for summary judgment, Woodside argued that, based upon the undisputed evidence in the record, reasonable minds could only conclude that (1) Woodside had performed all of its obligations under the letter agreement and the loan servicing agreement; (2) Woodside retained the servicing rights for all loans under the parties' agreements; (3) that the Credit Union was not entitled to assume servicing responsibilities for any loans originated by Woodside; and (4) the Credit Union had produced no evidence that it had sustained any damages as a result of Woodside's actions. In support of its motion, Woodside attached excerpts from the depositions of Corrigan, Laurendeau, and Keller; the Credit Union's responses to Woodside's discovery requests and copies of the letter agreement; the May 2008 term sheet; the 2012 proposed loan servicing agreement; and the correspondence between the parties. Woodside requested that the trial court enter summary judgment in its favor on the Credit Union's claims and Woodside's counterclaim, that it issue a declaration that Woodside "shall maintain the right to service all loans originating from [the Credit Union] through the date of any decision by [the trial court]," and that it hold the Credit Union "responsible for all costs incurred relative to Woodside's [counterclaim."

         {¶ 13} On April 4, 2018, the trial court concluded as follows:

Although the loan servicing agreement was not signed by the parties, it is undisputed that since 2008, the credit union has compensated Woodside for mortgage loan servicing pursuant to the loan servicing agreement. * * * This court finds that the credit union accepted the loan servicing agreement without objection and assented to the fee schedule set forth therein for eight years. The parties here are both sophisticated business entities who knowingly entered into this agreement. The language of the agreement is clear that Woodside owns the servicing rights to any serviced loans and that the servicing rights remain throughout the life of the loan.

         Based on this reasoning, the trial court granted Woodside's motion for summary judgment on its counterclaim, denied the Credit Union's motion for summary judgment, and ordered that Woodside "shall maintain the right to service all loans originating from [the Credit Union] through the date of this order."[1]

         {¶ 14} The Credit Union appealed, claiming that the trial court erred in holding that the continuing payment of mortgage servicing fees conveyed ownership of the servicing rights to the mortgage servicer and that the trial court erred by failing to grant summary judgment in favor of the Credit ...


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